<PAGE>
Evergreen
December 31, 1997 Short & Intermediate
Semiannual Report Term Bond Funds
------------------------------
[Graphic appears here]
[Evergreen Logo appears here]
Evergreen Funds(SM)
SINCE 1932
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter to Shareholders ........................ 1
Evergreen Capital Preservation and
Income Fund
Fund at a Glance ........................... 2
Portfolio Manager Interview ................ 3
Evergreen Intermediate Term Bond
Fund
Fund at a Glance ........................... 5
Portfolio Manager Interview ................ 6
Evergreen Intermediate Term Bond
Fund II
Fund at a Glance ........................... 8
Portfolio Manager Interview ................ 9
Evergreen Intermediate Term
Government Securities Fund
Fund at a Glance ........................... 11
Portfolio Manager Interview ................ 12
Evergreen Short Intermediate Bond
Fund
Fund at a Glance ........................... 14
Portfolio Manager Interview ................ 15
</TABLE>
<TABLE>
<S> <C>
Financial Highlights
Evergreen Capital Preservation and
Income Fund ............................. 17
Evergreen Intermediate Term Bond Fund ...... 20
Evergreen Intermediate Term Bond
Fund II ................................. 22
Evergreen Intermediate Term Government
Securities Fund ......................... 24
Evergreen Short Intermediate Bond Fund ..... 27
Schedule of Investments
Evergreen Capital Preservation and
Income Fund ............................. 30
Evergreen Intermediate Term Bond Fund ...... 32
Evergreen Intermediate Term Bond
Fund II ................................. 34
Evergreen Intermediate Term Government
Securities Fund ......................... 36
Evergreen Short Intermediate Bond Fund ..... 37
Statements of Assets and Liabilities .......... 39
Statements of Operations ...................... 40
Statements of Changes in Net Assets -
Six months ended December 31, 1997 ......... 41
Statements of Changes in Net Assets -
Prior Periods .............................. 42
Combined Notes to Financial
Statements .................................... 44
Additional Information ........................ 52
</TABLE>
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Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies with
more than $40 billion in assets under management.
With 65 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broader range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This semiannual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
<TABLE>
<S> <C>
-------------------- ----------------------------------------
Mutual Funds: ARE NOT FDIC INSURED May lose value o Are not bank guaranteed
-------------------- ----------------------------------------
</TABLE>
Evergreen Funds Distributor, Inc.
<PAGE>
Letter to Shareholders
February 1998
Dear Shareholders:
[Photograph appears here The final six months of 1997 were an
of William M. Ennis] extraordinarily opportune period to be invested
in income-oriented mutual funds. Shareholders of
the Evergreen Short and Intermediate Term Bond
Funds enjoyed the benefit of this environment,
William M. Ennis as a healthy economy, remarkably low inflation,
Managing Director and declining interest rates gave a continued
boost to the bond market.
Rising Confidence
Earlier in the year, fears that economic growth might set off an inflationary
spiral had worried the bond market, and the Federal Reserve Board had even
raised short-term rates by one-quarter of one percent in late March to put a
brake on fast economic growth. Continued reports that both consumer and producer
prices remained under control began to give new confidence to the bond market,
however. Interest rates peaked in mid-April, when the 30-year Treasury Bond had
a yield of 7.17%. For much of the remainder of the year, the bond market rallied
and bond prices appreciated as rates declined, with the 30-year Treasury ending
the year at 5.92%. Throughout the year, the bond market was also supported by
the strong U.S. dollar versus other currencies, which made the U.S. fixed income
market especially attractive to international investors. In addition, the Asian
financial crisis in the fourth quarter of the year had the twin effects of
encouraging a flight to quality, which favored the U.S. fixed income market, and
dampening fears of excessive economic growth in the U.S.
Conservative Strategies
The Evergreen Short and Intermediate Term Bond Funds are managed with
conservative strategies designed to protect principal as well as provide
competitive income. These strategies do not take as much risk as strategies that
emphasize longer-maturity bonds or high yield securities. These conservative
strategies tend not to have as high returns as riskier strategies when
conditions are favorable. We believe, however, that these more conservative
strategies have a place in most diversified portfolios, especially for those
investors who are concerned about market volatility and risk.
Evergreen Changes
As we enter 1998, investors in the Evergreen and the former Keystone fund
families will continue to see changes designed to enhance their investment
experience.
We are pleased to report that shareholders of the Evergreen Intermediate Term
Bond Fund II and the former Keystone Intermediate Term Bond Fund have approved a
proposal to reorganize these funds into a new fund, also called the Evergreen
Intermediate Term Bond Fund, effective January 23, 1998. The new fund's
investment objective is substantially the same as that of the former funds. The
fund will be managed by Christopher P. Conkey, Senior Vice President and Chief
Investment Officer, Fixed Income, Keystone Investment Management Company, in the
same style he has employed as long-time manager of the Keystone Intermediate
Term Bond Fund.
What will not change is our continued commitment to provide you with the finest
investment products and shareholder services possible. If you have any questions
about these changes or other issues affecting your investments, we encourage you
to consult your financial advisor or call Evergreen Funds at 1-800-343-2898.
Sincerely,
/s/ William M. Ennis
William M. Ennis
Managing Director
1
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
------------------------------------
Fund at a Glance as of December 31, 1997
We want to increase our allocation to fixed rate securities to offset the
falling interest rates of adjustable rate mortgages and to maintain fairly
decent yields.
Portfolio
Management
----------------------------------------
[Photograph of Gary E. Pzegeo]
Gary E. Pzegeo
Vice President
Keystone Investment Management
Company
Tenure: April 1, 1997
[Graphic of Four Stars]
4-Star by Morningstar*
* Source: Morningstar, Inc. Morningstar's proprietary ratings reflect the Fund's
historical risk-adjusted performance as of December 31, 1997. Ratings are
subject to change monthly. They are calculated based on the Fund's 3-,5-, and
10-year average annual return compared with 1,371 taxable bond funds on December
31, 1997. Ratings are not adjusted for sales charges, but are adjusted for other
fees. The top 10% of rated funds receive five stars, the next 22.5% receive four
stars, the next 35% receive three stars, the next 22.5% receive two stars, and
the bottom 10% receive one star. For the 3 year period ending December 31, 1997,
Class B shares received 3 stars. Past performance is no guarantee of future
results.
- - --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Inception Date 12/30/94 7/1/91 2/1/93
Average Annual Returns* ..
6 months with sales charge -0.39% -2.44% 1.56%
6 months w/o sales charge 2.96% 2.55% 2.55%
One year with sales charge 3.02% 0.66% 4.67%
One year w/o sales charge 6.48% 5.66% 5.67%
3 years 5.87% 5.42% 6.32%
5 years - 4.29% -
Since Inception 5.86% 4.56% 4.61%
Cumulative Total Return since
inception 18.67% 33.68% 24.81%
Maximum Sales Charge 3.25% 5.00% 1.00%
Front End CDSC CDSC
SEC Yield 5.68% 4.92% 4.93%
6 month dividends per share $ 0.30 $ 0.26 $ 0.26
</TABLE>
*Adjusted for maximum applicable sales charge
- - --------------------------------------------------------------------------------
LONG TERM GROWTH
- - --------------------------------------------------------------------------------
[Graph appears here with the following plot points]
Class B Consumer Price 6-Month
Shares Index (CPI) Treasury Bill
- - ------ ------------- -------------
10000 10000 10000
10430 10140 10300
10660 10430 10740
11110 10720 11100
11120 11010 11530
11970 11280 12290
12650 11660 12940
$13368 $11842 $13662
Comparisons of a $10,000 investment in Evergreen Capital Preservation and Income
Fund, Class B shares, versus a similar investment in a 6 Month Treasury Bill and
the Consumer Price Index.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholder
investing in the different classes. The investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The 6 Month Treasury Bill is an unmanaged, market
index. The index does not include transaction costs associated with buying and
selling securities, nor any management fees. The Consumer Price Index, a measure
of inflation, is through December 31, 1997.
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CURRENT INVESTMENT STYLE
- - --------------------------------------------------------------------------------
[Graph of Style Box Morningstar's Style Box is based on a portfolio date as of
appears here] 12/31/97. The Fixed-Income Style Box placement is based on
a fund's average effective maturity or duration and the
average credit rating of the bond portfolio.
Source: 1997 Morningstar,Inc.
2
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
- - --------------------------------------------------------------------------------
Portfolio Manager Interview
- - --------------------------------------------------------------------------------
How did the Fund perform during the six-month period that ended on December
31, 1997?
The Fund performed well in an environment that was very positive for fixed
income investors. For the six- month period, Class A Shares had a total return
of 2.96%. During the same period, Class B and Class C Shares each had total
returns of 2.55%. These returns are consistent with the Fund's long-term record.
As of December 31, all three classes of shares had four-star ratings, the second
highest ratings, from Morningstar, an independent monitor of mutual fund
performance. The Class A and B shares were rated among 1,371 Taxable Bond Funds
for the 3 years ending December 31, 1997; Class B shares were rated among 771
Taxable Bond Funds for the 5 years ending December 31, 1997.
The Fund, consistent with its objective, also was able to retain a relatively
stable net asset value. Class A Shares, for example, began the period with a net
asset value of $9.80 per share, and ended with a net asset value of $9.79 per
share.
We manage the Fund to provide above-average yield, when compared with short-term
investment alternatives, and a relatively stable net asset value. During the six
months, the Fund's yield has been reduced somewhat, but not as quickly as market
interest rates have been reduced. This is because of the lag between declines in
market interest rates and when the rates on adjustable rate mortgages are reset.
To illustrate, the standardized SEC 30-day yield for A Shares was 5.81% on June
30 and 5.68% on December 31, 1997.
Portfolio Characteristics
-------------------------
Total Net Assets $46,330,849
Average Credit Quality AAA
Average Maturity 5.2 years
Average Duration 0.6 years
- - --------------------------------------------------------------------------------
What was the investment environment like during the period?
- - --------------------------------------------------------------------------------
In general, it was a favorable environment for fixed income investors. This
environment was driven in the U.S. by the realization that inflation was low and
economic growth was moderating. There were several sources for this positive
environment. The twin currency and banking crises in Asia affected both
inflation and economic growth in the U.S. The devaluation of several foreign
currencies created an immediate decrease in the prices of Asian imports in the
U.S., and had an overall positive impact on inflation in the U.S. In addition,
many U.S. companies rely on Asian customers for their products and services. The
financial crises in Asia likely will reduce the earnings potential of these
companies.
The bottom line is that slower growth and low inflation in the United States is
good news for the bond market. Prior to the emergence of the financial crisis in
Asia, there was concern that the strength of the U.S. economy would have an
impact on the already tight labor market in the U.S. There was a fear that
inflation would re-appear and prompt the Federal Reserve Board to raise
short-term interest rates. The Asian situation has reduced this fear of an
overheating economy.
During the six-month period, the yield on 30-year Treasury Bonds declined from
6.78% on June 30 to 5.92% on December 31, causing the prices of most bonds to
increase. This was a powerful move, but it affected long-term bonds more than
short-term bonds. For example, the yield on the one-year Treasury Bill also
declined, but only from 5.65% to 5.48% during the same period. We
3
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
- - --------------------------------------------------------------------------------
Portfolio Manager Interview
- - --------------------------------------------------------------------------------
had a rallying environment, but heavily weighted toward longer maturity bonds.
- - --------------------------------------------------------------------------------
What were your principal strategies during the period?
- - --------------------------------------------------------------------------------
In this type of environment, we want to increase our allocation to fixed rate
securities to offset the falling interest rates of adjustable rate mortgages and
to maintain fairly decent yields. From June 30 to December 31, the Fund's
allocation to fixed income securities rose from 6.3% to 11.6%. This 11.6% fixed
income allocation was broken down between 5.5% in Treasury Notes and 6.1% in
fixed rate mortgages.
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PORTFOLIO COMPOSITION
- - --------------------------------------------------------------------------------
(as a percentage of net assets)
[Pie charts appear here with the following allocations]
As of 6/30/97
U.S. Treasury 3.9%
Fixed Rate Mortgages 2.4%
Repurchase Agreement 2.1%
Adjustible Rate Mortgages 91.6%
As of 12/31/97
Fixed Rate Mortgages 6.1%
U.S. Treasury 5.5%
Repurchase Agreement 2.9%
Adjustable Rate Mortgages 85.5%
The increase in fixed rate securities has had the effect of slightly extending
the average maturity of the Fund. The average weighted maturity of the Fund has
risen during the six months from 4.9 years to 5.2 years.
The Fund continues to have only securities issued by the U.S. government or
government agencies, so the average credit rating remains AAA. We also tried to
reduce the prepayment risk to the Fund. In a low interest rate environment,
homeowners tend to increase refinancing of adjustable rate mortgages and enter
into 30-year fixed rate mortgages. The benefits of this type of refinancing to
the homeowner have been well publicized.
We have tried to reduce this risk by concentrating on older, more seasoned
adjustable rate mortgages that were originated an average of more than seven
years ago. These seasoned mortgages have been through several interest rate
cycles without homeowners choosing to refinance. These are the types of
mortgages less likely to be refinanced.
We also have attempted to focus on mortgages originating in parts of the country
with slower economic growth. If property values are not increasing, refinancings
are less likely.
It is important to add, however, that the negative effects of refinancings have
been limited by the lack of new supply of adjustable rate mortgages for
institutional investors. The limitation of supply has helped support the prices
of existing adjustable rate mortgages.
- - --------------------------------------------------------------------------------
What is your outlook?
- - --------------------------------------------------------------------------------
We think there will be a continued favorable environment for fixed income
securities in the U.S. because of somewhat slower economic growth and continued
good news on the inflation front. We believe Asia will continue to dominate the
domestic bond market's attitude, and rates will remain low. In this environment,
short-term rates may fall more than long-term rates.
We expect the Fund will continue to focus on a moderate weighting of fixed
income securities to provide both yield and price protection. We also will
maintain our focus on seasoned mortgages with lower prepayment risk.
4
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
- - --------------------------------------------------------------------------------
Fund at a Glance as of December 31, 1997
- - --------------------------------------------------------------------------------
We focused on high quality corporate bonds and we lengthened the maturities of
bonds.
Portfolio
Management
----------
[Photograph of Chris Conkey]
Chris Conkey
Senior Vice President
Keystone Investment
Management Company
Tenure: January 1988
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PERFORMANCE AND RETURNS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Inception Date 2/13/87 2/1/93 2/1/93
Average Annual Returns*
6 months with sales charge 2.00% 0.02% 4.03%
6 months w/o sales charge 5.43% 5.02% 5.03%
One year with sales charge 4.95% 2.80% 6.68%
One year w/o sales charge 8.48% 7.80% 7.68%
3 years 8.02% 7.55% 8.37%
5 years 5.92% - -
10 years 7.08% - -
Since Inception 6.42% 5.18% 5.49%
Cumulative Total Return since
inception 94.98% 28.20% 30.02%
Maximum Sales Charge 3.25% 5.00% 1.00%
Front End CDSC CDSC
SEC Yield 5.43% 4.83% 4.83%
6 month dividends per share $ 0.28 $ 0.25 $ 0.25
</TABLE>
*Adjusted for maximum applicable sales charge.
- - --------------------------------------------------------------------------------
LONG TERM GROWTH
[Graph appears here with the following plot points]
Lehman Brothers Intermediate
Class A Consumer Price Government/Corporate Bond
Shares Index (CPI) Index (LBIGBI)
------ ----------- ---------------
9670 10000 10000
10110 10440 10670
10760 10930 12030
11390 11590 13130
13300 11950 15050
14380 12290 16130
15720 12630 17550
15210 12970 17210
17410 13300 19850
18270 13740 20830
$19498 $13955 $22438
Comparisons of a $10,000 investment in Evergreen Intermediate Term Bond Fund
Class A shares, versus a similar investment in the Lehman Brothers Intermediate
Government/Corporate Bond Index and the Consumer Price Index.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholder
investing in the different classes. The investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The Lehman Brothers Intermediate Government/Corporate
Bond Index is an unmanaged, market index. The index does not include transaction
costs associated with buying and selling securities, nor any management fees.
The Consumer Price Index, a measure of inflation, is through December 31, 1997.
- - --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE
[Graph of style Morningstar's Style Box is based on a portfolio date as of
box appears here] 12/31/97. The Fixed Income Style Box placement is based on
a fund's average effective maturity or duration and the
average credit rating of the bond portfolio.
Source: 1997 Morningstar, Inc.
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Portfolio Manager Interview
- - --------------------------------------------------------------------------------
How did the Fund perform during the six months?
The Fund performed well in a favorable environment for fixed income
investments. For the six months that ended on December 31, 1997, Class A
Shares had a total return of 5.43%. During the same period, Class B and C
Shares had total returns of 5.02% and 5.03%, respectively. These returns
are unadjusted for any sales charges.
Portfolio Characteristics
Total Net Assets $27,394,516
Average Credit Quality AA
Average Maturity 7.9 years
Average Duration 5.4 years
- - --------------------------------------------------------------------------------
What was the investment environment like during the six months?
It was a very good time to be invested in bonds. Economic growth was
stronger than expected, with the 1997 gross domestic product increasing at
a rate of between 3.7% and 4.0%. At the same time, utilization of resources
was high; unemployment fell to the 4.5-4.7% range, a 27-year low. Normally,
an environment of strong economic growth and low unemployment results in
inflation and rising interest rates; however, that didn't happen. Inflation
decreased, with the Consumer Price Index rising by just 1.7% for 1997. That
is remarkable for the eighth year of an economic expansion. A primary
reason is that corporate America has placed a tremendous emphasis on
productivity, on doing more with less. Business has been investing in
information technology, where there have been tremendous advances in
productivity.
Another positive factor has been the extremely strong U.S. dollar versus
foreign currencies. Real U.S. interest rates have been high, after
compensation for inflation. The strength of the dollar limited import price
inflation, which dampened overall inflation.
Interest rates peaked in mid-April, with the 30-year Treasury Bond reaching
7.17%. From that point, long-term interest rates trended down and bond
prices tended to increase, providing an exceptionally strong environment
for fixed income investors. The yield on a 30-year Treasury Bond had
declined to 5.92% by the end of the fiscal period on December 31.
Long-term rates declined much more dramatically than short-term rates, so
investors in general were rewarded for having longer maturity bonds. At the
same time, corporate profits continued to increase and the value of
corporate bonds tended to increase as investors sought out their higher
yields. For the six-month period, bond investors tended to be rewarded for
taking greater interest rate risk (longer maturities) and greater credit
risk (corporate bonds, including high yield bonds).
Top 5 Sectors
(as a percentage of net assets)
CMOs 29.9%
U.S. Treasury/Agency 13.5%
Banks 12.7%
Industrial Specialty Products & Services 9.5%
Finance and Insurance 9.0%
6
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Portfolio Manager Interview
- - --------------------------------------------------------------------------------
What strategies did you pursue in this environment?
We focused on high quality corporate bonds and we lengthened the maturities
of bonds.
We increased the weighting of corporate bonds, especially bonds from the
financial sector, which were performing very well. We decreased
mortgage-backed securities, which tend not to do well in a declining
interest rate environment. We also concentrated on the structure of
corporate bonds, preferring non-callable bonds. In a declining interest
rate environment, we try to protect the Fund's income by concentrating on
bonds that were issued when rates were higher and that cannot be called
away by the issuer.
We also decreased our foreign bond holdings, eliminating our positions in
German and Canadian bonds. Foreign bonds not denominated in the U.S. dollar
were just 6.0% of net assets at the end of the fiscal period.
During the six-month period, the average weighted maturity of the portfolio
increased from 6.3 years to 7.9 years. Average credit quality on December
31, 1997 was AA, slightly higher than the AA- at the beginning of the
period.
--------------------------------------------------------------------
PORTFOLIO QUALITY
(as a percentage of portfolio assets)
(A pie chart appears here with the following allocations.)
BBB 15%
Government/AAA 36%
A 34%
AA 15%
- - --------------------------------------------------------------------------------
What is your outlook?
The environment for bonds continues to be very positive. Going forward, we
anticipate a slower rate of growth in the U.S. economy, possibly about 2.5%
a year. We also think inflation should remain under control.
The U.S. economy continues to be strong; however, the Asian financial
crisis will have an impact on the U.S. Asian exports to the United States
are likely to be increased, helped by the devaluation of many Asian
currencies. At the same time, Asian purchases of American goods are likely
to decline, as these countries cannot afford to import as much.
In the first half of 1998, we anticipate that interest rates could decline
even further. In this environment, we will consider slightly lengthening
maturities, while upgrading overall credit quality and continuing to
concentrate on non-callable bonds.
7
<PAGE>
EVERGREEN
Intermediate Term Bond Fund II
Fund at a Glance as of December 31, 1997
Performance was enhanced
by an environment of
declining interest rates
which had an overall positive
effect on bond prices.
Portfolio
Management
----------------------------------------
(Photo of Bruce J. Besecker)
Bruce J. Besecker, C.F.A.
Vice President and
Senior Portfolio Manager
Capital Management Group
Tenure: November 1991
- - --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Inception Date 5/2/95 1/30/96 4/29/96 11/1/91
Average Annual Returns*
6 months with sales charge 2.41% 0.37% 4.37% 5.90%
6 months w/o sales charge 5.85% 5.37% 5.37% 5.90%
One year with sales charge 4.93% 2.50% 6.50% 8.58%
One year w/o sales charge 8.45% 7.50% 7.50% 8.58%
3 years - - - 8.77%
5 years - - - 6.81%
Since Inception 6.47% 1.94% 6.97% 7.52%
Cumulative Total Return
since inception 18.24% 3.76% 11.97% 56.48%
Maximum Sales Charge 3.25% 5.00% 1.00% n/a
Front End CDSC CDSC
SEC Yield 5.41% 4.65% 4.62% 5.65%
6 month dividends per share $ 0.30 $ 0.25 $ 0.25 $ 0.30
</TABLE>
*Adjusted for maximum applicable sales charge.
- - --------------------------------------------------------------------------------
LONG TERM GROWTH
[Graph appears here with the following plot points]
Lehman Brothers Intermediate
Class A Consumer Price Government/Corporate Bond
Shares Index (CPI) Index (LBIGCBI)
------ ----------- ---------------
9670 10000 10000
10090 10040 10370
10720 10100 10910
10450 10320 10890
10900 10440 11450
11170 10550 11790
$11824 $10604 $12337
Comparisons of a $10,000 investment in Evergreen Intermediate Term Bond Fund II
Class A shares, versus a similar investment in the Lehman Brothers Intermediate
Government/Corporate Bond Index and the Consumer Price Index.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholder
investing in the different classes. The investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The Lehman Brothers Intermediate Government/Corporate
Bond Index is an unmanaged, market index. The index does not include transaction
costs associated with buying and selling securities, nor any management fees.
The Consumer Price Index, a measure of inflation, is through December 31, 1997.
- - --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE
[Graph of style Morningstar's Style Box is based on a portfolio date as of
box appears here] 12/31/97. The Fixed-Income Style Box placement is based on
a fund's average effective maturity or duration and the
average credit rating of the bond portfolio.
Source: 1997 Morningstar, Inc.
8
<PAGE>
EVERGREEN
Intermediate Term Bond Fund II
Portfolio Manager Interview
We are pleased to report that shareholders of the Evergreen Intermediate
Term Bond Fund II and the Evergreen Intermediate Term Bond Fund (formerly
Keystone Intermediate Term Bond Fund) approved a proposal to reorganize
these funds into a new fund, the Evergreen Intermediate Term Bond Fund. The
new fund's investment objective is substantially the same as that of the
former funds. The reorganization of these funds took place on January 23,
1998. Chris Conkey will be the portfolio manager of the new Fund.
- - --------------------------------------------------------------------------------
How did the Fund perform during the fiscal period?
The Evergreen Intermediate Term Bond Fund II
performed well during the six-month period ended December 31, 1997 posting
a total return of 5.90% for Class Y shares. Class A shares returned 5.85%
for the period, unadjusted for sales charges. Performance was enhanced by
an environment of declining interest rates which had an overall positive
effect on bond prices. The Fund slightly under-performed the 6.83% return
of its benchmark, the Lehman Brothers Intermediate Government/Corporate
Bond Index.
Portfolio Characteristics
Total Net Assets $172,142,646
Average Credit Quality AAA
Average Maturity 11.3 years
Average Duration 5.4 years
- - --------------------------------------------------------------------------------
What was the investment environment like during this period?
The main story during the fiscal period was the financial crisis in
Southeast Asia. Prompted by currency devaluations in many Asian countries,
the region's volatility spilled into U.S. financial markets. After some
initial turbulence, many pundits felt the net result would be lower
inflation in the U.S. (from cheaper imports) and slower economic growth
(from lower demand in Asia). These two factors drove interest rates lower
throughout the fiscal period, in turn boosting bond prices higher. The
turmoil caused a "flight to quality" into Treasury securities which also
contributed to declining interest rates.
--------------------------------------------------------------------
PORTFOLIO MATURITY
(as a percentage of portfolio assets)
[A pie chart appears here with the following allocations.]
0-1 year 13%
1-3 years 12%
3-5 years 6%
5-10 years 33%
10-20 years 8%
20+ years 28%
- - --------------------------------------------------------------------------------
What was your strategy in managing the Fund?
The Fund's performance was most impacted by two specific strategies: the
decisions to increase duration and maintain the portfolio's "barbell"
structure. Duration was increased 20%, from 4.5 years to 5.4 years, during
the six-month period. As the period progressed, we expected low inflation
and the fallout from the Asian crisis to push interest rates lower. This
decision to lengthen duration proved timely and positively impacted
performance as rates continued their steady decline. As of December 31,
duration is neutral relative to the Fund's benchmark.
The portfolio's "barbell" structure also helped returns during the period.
A "barbell" structure is distinguished by a portfolio which emphasizes
securities on both ends of the yield curve rather than in the middle. This
type of portfolio enhances returns when spreads - or the difference between
yields - narrow. This structure was actually implemented in early 1997 but
maintained throughout the year, benefiting performance especially during
the final months as spreads proceeded to tighten.
9
<PAGE>
EVERGREEN
Intermediate Term Bond Fund II
Portfolio Manager Interview
- - --------------------------------------------------------------------------------
What is your outlook going forward?
We maintain a generally positive outlook for the bond market as we enter
the second half of the fiscal year. Benign inflation, moderating economic
growth and low interest rates are all factors which bode well for the
performance of bonds going forward. In addition, we see no reason that the
Federal Reserve Board will be forced to increase interest rates in the near
term.
Due to the uncertainty surrounding the Asian markets and the potential
impact on the U.S. bond market, however, we intend to remain cautious in
the coming months. We don't feel that the current volatility justifies an
aggressive duration stance or risky sector bets. We will continue to seek
out opportunities to increase the Fund's yield while sustaining a neutral
weighting and duration which will protect investors from turbulent shifts
in the market.
--------------------------------------------------------------------
PORTFOLIO QUALITY
(as a percentage of portfolio assets)
[A pie chart appears here with the following allocations.]
A 20%
AA 5%
AAA 16%
BB 2%
Government/Agency 57%
10
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Fund at a Glance as of December 31, 1997
We have increased the
portfolio's weighting of
mortgage-backed securities
during the six month period,
from 19% to 38%, a move
designed to help bolster the
Fund's yield.
Portfolio
Management
----------------------------------------
(Photo of L. Robert Cheshire)
L. Robert Cheshire
Vice President
and Senior Portfolio Manager
Capital Management Group
Tenure: January 3, 1994
- - --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Inception Date 5/2/95 2/6/96 4/10/96 11/1/91
Average Annual Returns*
6 months with sales charge 1.01% -1.07% 2.93% 4.45%
6 months w/o sales charge 4.40% 3.93% 3.93% 4.45%
One year with sales charge 3.25% 0.78% 4.78% 6.84%
One year w/o sales charge 6.72% 5.78% 5.78% 6.84%
3 years - - - 7.43%
5 years - - - 5.50%
Since Inception 5.23% 1.61% 5.74% 6.08%
Cumulative Total Return
since inception 14.57% 3.06% 10.13% 43.96%
Maximum Sales Charge 3.25% 5.00% 1.00% n/a
Front End CDSC CDSC
SEC Yield 4.89% 4.17% 4.12% 5.13%
6 month dividends per share $ 0.28 $ 0.23 $ 0.23 $ 0.28
</TABLE>
*Adjusted for maximum applicable sales charge
- - --------------------------------------------------------------------------------
LONG TERM GROWTH
[Graph appears here with the following plot points]
Lehman Brothers Intermediate
Class A Consumer Price Government Bond
Shares Index (CPI) Index (LBIGBI)
------ ----------- ---------------
9670 10000 10000
9960 10040 10350
10420 10100 10860
10350 10320 10860
10730 10440 11300
10970 10550 11660
$11457 $10604 $12224
Comparisons of a $10,000 investment in Evergreen Intermediate Term Government
Bond Fund Class A shares, versus a similar investment in the Lehman Brothers
Intermediate Government Bond Index and the Consumer Price Index.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholder
investing in the different classes. The investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The Lehman Brothers Intermediate Government Bond Index
is an unmanaged, market index. The index does not include transaction costs
associated with buying and selling securities, nor any management fees. The
Consumer Price Index, a measure of inflation, is through December 31, 1997.
- - --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE
[Graph of Style Morningstar's Style Box is based on a portfolio date as of
Box appears here] 12/31/97.
The Fixed Income Style Box placement is based on a fund's
average effective maturity or duration and the average
credit rating of the bond portfolio.
Source: 1997 Morningstar, Inc.
11
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Portfolio Manager Interview
- - --------------------------------------------------------------------------------
How did the Fund perform during the fiscal period?
The Evergreen Intermediate Term Government Securities Fund performed well
during the six-month period ended December 31, 1997, posting a total return
of 4.45% for Class Y shares. Class A shares returned 4.40% and Class B and
C shares each returned 3.93%. These returns are unadjusted for any sales
charges. This performance compares favorably to the 4.03% average return
for the same time period for the 97 short-intermediate U.S. government
funds tracked by Lipper Analytical Services. Outperformance can be
attributed to favorable sector weightings as well as an environment of
declining interest rates during the six-month period.
Portfolio Characteristics
Total Net Assets $68,980,772
Average Credit Quality AAA
Average Maturity 4.1 years
Average Duration 2.9 years
- - --------------------------------------------------------------------------------
How did the investment environment affect your strategy?
The biggest story in the financial markets over the past six months was the
financial turmoil in Southeast Asia. Its effects have had a definite impact
on our approach to managing this Fund.
We have increased the portfolio's weighting of mortgage-backed securities
during the six-month period, from 19% to 38%, a move designed to help
bolster the Fund's yield. This sector tends to lag, however, during periods
of declining interest rates as mortgage holders "prepay" mortgages and take
advantage of lower rates. Because we anticipated the decline of interest
rates during the final months as a result of the Asian crisis, we targeted
mortgage securities which were less vulnerable to prepayment risk. The
portfolio's bulked up exposure of mortgage-backed securities with
especially low prepayment risk - increased the Fund's yield and positively
contributed to performance.
Volatility stemming from the "Asian flu" caused us to maintain a
relatively neutral duration stance. Duration remained essentially
unchanged at 2.9 years during the fiscal period. We didn't feel that the
market volatility and uncertainty regarding interest rate swings justified
an aggressive duration stance. We expect to remain at a neutral weighting
until volatility subsides and the effects of the Asian crisis become more
clear.
- - --------------------------------------------------------------------------------
What is the portfolio's current composition?
As mentioned, the weighting of mortgage-backed securities was increased.
Actually mortgage exposure doubled during the six months. This move was
primarily at the expense of Treasuries which declined substantially. As of
December 31, the Fund was comprised of 55% Treasury issues, 38%
mortgage-backed securities, 5% Government/agency, with the remaining 2% in
other assets and liabilities.
--------------------------------------------------------------------
PORTFOLIO COMPOSITION
(as a percentage of net assets)
[A pie chart appears here with the following allocations.]
Government Agency 5%
Mortgage Backed Securities 38%
Other assets and liabilities (net) 2%
U.S. Treasury 55%
12
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Portfolio Manager Interview
- - --------------------------------------------------------------------------------
What is your outlook going forward?
Looking ahead, the consensus within the market is that the Asian crisis
will slow U.S. economic growth and further contain inflation. In other
words, the crisis will have the same effect as an interest rate increase by
the Federal Reserve Board, which will likely allow the Fed to leave rates
unchanged in the near term. Strong technicals, low inflation and a
near-balanced budget should fuel bond performance in the coming quarters.
However, because these positive components seem to have already been priced
into the market, we feel there is limited upside potential.
We expect to maintain a relatively neutral - to slightly longer - duration,
thereby protecting the Fund from turbulent market fluctuations. We will
also seek to selectively add mortgage securities to the portfolio in order
to increase the Fund's yield.
--------------------------------------------------------------------
PORTFOLIO MATURITY
(as a percentage of portfolio assets)
[A pie chart appears here with the following allocations.]
0-1 year 16%
1-3 years 33%
3-5 years 9%
5-10 years 42%
13
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Fund at a Glance as of December 31, 1997
The decision to increase
duration positively impacted
returns as a direct result of
declining interest rates.
Portfolio
Management
----------------------------------------
(Photo of Thomas L. Ellis)
Thomas L. Ellis
Vice President and
Senior Portfolio Manager
Capital Management Group
Tenure: January 31, 1989
- - --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Inception Date 1/28/89 1/25/93 9/6/94 1/4/91
Average Annual Returns*
6 months with sales charge 0.22% -1.88% 2.12% 3.64%
6 months w/o sales charge 3.59% 3.12% 3.12% 3.64%
One year with sales charge 2.59% 0.17% 4.16% 6.26%
One year w/o sales charge 6.04% 5.15% 5.15% 6.26%
3 years 6.73% 6.09% 6.91% 8.03%
5 years 5.10% - - 5.95%
Since Inception 7.15% 4.39% 5.81% 7.04%
Cumulative Total Return since
inception 85.20% 23.66% 20.64% 60.93%
Maximum Sales Charge 3.25% 5.00% 1.00% n/a
Front End CDSC CDSC
SEC Yield 5.90% 5.18% 5.21% 6.20%
6 month dividends per share $ 0.31 $ 0.26 $ 0.26 $ 0.31
</TABLE>
*Adjusted for maximum applicable sales charge
- - --------------------------------------------------------------------------------
LONG TERM GROWTH
[Graph appears here with the following plot points.]
Lehman Brothers Intermediate
Class A Consumer Price Government/Corporate Bond
Shares Index (CPI) Index (LBIGCBI)
------ ----------- ---------------
9670 10000 10000
10690 10040 11160
11540 11050 12180
13130 11390 13960
13970 11710 14970
15120 12040 16280
14740 12360 15970
16800 12670 18410
17470 13090 19320
$18520 $13299 $20814
Comparisons of a $10,000 investment in Evergreen Short Intermediate Bond Fund
Class A shares, versus a similar investment in the Lehman Brothers Intermediate
Government/Corporate Bond Index and the Consumer Price Index.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholder
investing in the different classes. The investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The Lehman Brothers Intermediate Government/Corporate
Bond Index is an unmanaged, market index. The index does not include transaction
costs associated with buying and selling securities, nor any management fees.
The Consumer Price Index, a measure of inflation, is through December 31, 1997.
- - --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE
[Graph of Style Morningstar's Style Box is based on a portfolio date as of
Box appears here] 12/31/97.
The Fixed-Income Style Box placement is based on a fund's
average effective maturity or duration and the average
credit rating of the bond portfolio.
Source: 1997 Morningstar, Inc.
14
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Portfolio Manager Interview
- - --------------------------------------------------------------------------------
How did the Fund perform during the fiscal period?
The Evergreen Short Intermediate Bond Fund, Class A shares, posted a
positive total return of 3.59% during the six-month period ended December
31, 1997. This is before any deduction of sales charges. This performance
underperformed the 4.83% return for the Fund's benchmark, the Lehman
Brothers Intermediate Government/ Corporate Bond Index.
Portfolio Characteristics
Total Net Assets $395,508,489
Average Credit Quality AA
Average Maturity 4.5 years
Average Duration 3.3 years
- - --------------------------------------------------------------------------------
What was the environment like for bonds during this period?
The main event in the financial markets was the turmoil surrounding
Southeast Asia. The devaluation of Asian currencies and concern about
defaults in Southeast Asia was the major driver of interest rates. The
Asian crisis caused a "flight to quality" into Treasury securities and
further reduced inflationary fears, subsequently driving longer-term rates
lower through the final months of 1997. From September 30 to December 31,
1997 the thirty-year Treasury bond yield declined from 6.40% to 5.92%.
--------------------------------------------------------------------
PORTFOLIO QUALITY
(as a percentage of portfolio assets)
[A pie chart appears here with the following allocations.]
A 25%
AA 5%
AAA 18%
BB 2%
BBB 3%
Government/Agency 47%
- - --------------------------------------------------------------------------------
What was your investment strategy within this environment?
The portfolio's duration was increased from 2.96 years to 3.34 years during
the six-month period in order to take advantage of declining interest
rates. As a result of this duration increase, the portfolio closed the
period with a duration slightly longer than its benchmark. This move helped
performance within the positive interest rate environment.
In addition to an increased duration, the portfolio's "barbell" structure
also positively impacted performance during the fiscal period. A "barbell"
portfolio emphasizes securities on the short and long end of the yield
curve rather than in the middle. This type of portfolio structure tends to
enhance performance during periods of a flattening yield curve, which is
exactly what took place during the final months of 1997.
- - --------------------------------------------------------------------------------
How did your strategy effect performance?
As stated, the decision to increase duration positively impacted returns as
a direct result of declining interest rates. The portfolio's "barbell"
structure aided performance as well. Offsetting favorable duration and
sector decisions, however, was the portfolio's exposure to foreign
securities which underperformed as a result of the financial turmoil in
Southeast Asia.
15
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Portfolio Manager Interview
--------------------------------------------------------------------
PORTFOLIO MATURITY
(as a percentage of portfolio assets)
[A pie chart appears here with the following allocations.]
0-1 year 18%
3-5 years 18%
1-3 years 20%
5-10 years 44%
- - --------------------------------------------------------------------------------
What is your outlook?
Going forward, we expect interest rates to remain in their current - and
relatively low - trading range. With moderating economic growth, low
employment, benign inflation and favorable interest rates, no obstacles on
the horizon appear to threaten the U.S. economy or provoke a dramatic jump
in interest rates in the near term. From a duration standpoint, our
strategy is to avoid being short, while being cautious not to overextend.
As a result, we may look for opportunities to modestly lengthen duration
during the early part of 1998.
16
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Nine Months Ended
(Unaudited) June 30, 1997 (d)
<S> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 9.80 $ 9.74
========== ==========
Income from investment operations
Net investment income 0.30 0.46
Net realized and unrealized gain (loss) on investments ( 0.01) 0.03
---------- ----------
Total from investment operations 0.29 0.49
---------- ----------
Less distributions from
Net investment income ( 0.30) ( 0.42)
In excess of net investment income 0 ( 0.01)
Tax basis return of capital 0 0
---------- ----------
Total distributions ( 0.30) ( 0.43)
---------- ----------
Net asset value end of period $ 9.79 $ 9.80
========== ==========
Total return (b) 2.96% 5.12%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.84%(a) 0.92%(a)
Total expenses excluding indirectly paid expenses 0.84%(a) 0.90%(a)
Total expenses excluding waivers and reimbursements 1.34%(a) 1.47%(a)
Net investment income 5.99%(a) 6.24%(a)
Portfolio turnover rate 33% 52%
Net assets end of period (thousands) $ 13,135 $ 15,751
<CAPTION>
December 30, 1994
(Commencement of
Class Operations)
Year Ended through
September 30, 1996 September 30, 1995
<S> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 9.68 $ 9.51
========== ==========
Income from investment operations
Net investment income 0.61 (c) 0.46
Net realized and unrealized gain (loss) on investments 0.01 0.14
---------- ----------
Total from investment operations 0.62 0.60
---------- ----------
Less distributions from
Net investment income ( 0.53) ( 0.42)
In excess of net investment income 0 ( 0.01)
Tax basis return of capital ( 0.03) 0
---------- ----------
Total distributions ( 0.56) ( 0.43)
---------- ----------
Net asset value end of period $ 9.74 $ 9.68
========== ==========
Total return (b) 6.56% 6.36%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.91% 0.86%(a)
Total expenses excluding indirectly paid expenses 0.90% 0.82%(a)
Total expenses excluding waivers and reimbursements 1.33% 1.27%(a)
Net investment income 6.31% 6.37%(a)
Portfolio turnover rate 74% 67%
Net assets end of period (thousands) $ 22,684 $ 19,293
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) Calculation based on average shares
outstanding.
(d) The Fund changed its fiscal year end from September 30 to June 30.
See Combined Notes to Financial Statements.
17
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Nine Months Ended
(Unaudited) June 30, 1997 (d)
<S> <C> <C>
CLASS B SHARES
Net asset value
beginning of period $ 9.81 $ 9.75
========== ==========
Income from
investment
operations
Net investment
income 0.25 0.39
Net realized and
unrealized gain (loss)
on investments 0 0.04
---------- ----------
Total from investment
operations 0.25 0.43
---------- ----------
Less distributions
from
Net investment
income ( 0.26) ( 0.36)
In excess of net
investment income 0 ( 0.01)
Tax basis return of
capital 0 0
---------- ----------
Total distributions ( 0.26) ( 0.37)
---------- ----------
Net asset value end
of period $ 9.80 $ 9.81
========== ==========
Total return (b) 2.55% 4.53%
Ratios/Supplemental
Data
Ratios to average net
assets
Total expenses 1.65%(a) 1.67%(a)
Total expenses
excluding
indirectly paid
expenses 1.65%(a) 1.65%(a)
Total expenses
excluding waivers
and
reimbursements 2.15%(a) 2.23%(a)
Net investment
income 5.19%(a) 5.52%(a)
Portfolio turnover
rate 33% 52%
Net assets end of
period (thousands) $ 29,053 $ 32,694
<CAPTION>
July 1, 1991
(Commencement of
Class Operations)
Year Ended September 30, through
1996 1995 1994 1993 1992 September 30, 1991
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value
beginning of period $ 9.68 $ 9.62 $ 9.91 $ 9.88 $ 10.06 $ 10.00
========= ======= ======= ======= ======== ============
Income from
investment
operations
Net investment
income 0.55 (c) 0.52 0.47 0.45 0.58 0.18
Net realized and
unrealized gain (loss)
on investments 0.01 0.03 ( 0.41) ( 0.05) ( 0.21) 0.06
--------- ------- ------- -------- -------- ------------
Total from investment
operations 0.56 0.55 0.06 0.40 0.37 0.24
--------- ------- ------- -------- -------- ------------
Less distributions
from
Net investment
income ( 0.46) ( 0.48) ( 0.34) ( 0.37) ( 0.55) ( 0.18)
In excess of net
investment income 0 ( 0.01) ( 0.01) 0 0 0
Tax basis return of
capital ( 0.03) 0 0 0 0 0
--------- ------- ------- -------- -------- ------------
Total distributions ( 0.49) ( 0.49) ( 0.35) ( 0.37) ( 0.55) ( 0.18)
--------- ------- ------- -------- -------- ------------
Net asset value end
of period $ 9.75 $ 9.68 $ 9.62 $ 9.91 $ 9.88 $ 10.06
========= ======= ======= ======== ======== ============
Total return (b) 5.90% 5.81% 0.58% 4.16% 3.71% 2.43%
Ratios/Supplemental
Data
Ratios to average net
assets
Total expenses 1.63% 1.53% 1.50% 1.50% 1.36% 1.19%(a)
Total expenses
excluding
indirectly paid
expenses 1.62% 1.50% - - - -
Total expenses
excluding waivers
and
reimbursements 2.09% 2.09% 1.93% 1.94% 2.03% 3.19%(a)
Net investment
income 5.63% 5.46% 4.05% 4.44% 5.50% 6.42%(a)
Portfolio turnover
rate 74% 67% 34% 60% 41% 2%
Net assets end of
period (thousands) $ 44,096 $62,998 $95,761 $144,725 $186,742 $ 25,769
</TABLE>
(a) Annualized
(b) Excluding applicable sales charges.
(c) Calculation based on average shares
outstanding.
(d) The Fund changed its fiscal year end from September 30 to June 30.
See Combined Notes to Financial Statements.
18
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Nine Months Ended
(Unaudited) June 30, 1997 (d)
<S> <C> <C>
CLASS C SHARES
Net asset value beginning of
period $ 9.80 $ 9.74
=========== ===========
Income from investment
operations
Net investment income 0.26 0.40
Net realized and unrealized gain
(loss) on investments ( 0.01) 0.03
----------- -----------
Total from investment operations 0.25 0.43
----------- -----------
Less distributions from
Net investment income ( 0.26) ( 0.36)
In excess of net investment
income 0 ( 0.01)
Tax basis return of capital 0 0
----------- -----------
Total distributions ( 0.26) ( 0.37)
----------- -----------
Net asset value end of period $ 9.79 $ 9.80
=========== ===========
Total return (b) 2.55% 4.53%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.65%(a) 1.67%(a)
Total expenses excluding
indirectly paid expenses 1.65%(a) 1.65%(a)
Total expenses excluding
waivers and
reimbursements 2.15%(a) 2.23%(a)
Net investment income 5.18%(a) 5.53%(a)
Portfolio turnover rate 33% 52%
Net assets end of period
(thousands) $ 4,142 $ 4,105
<CAPTION>
February 1, 1993
(Commencement of
Class Operations)
Year Ended September 30, through
1996 1995 1994 September 30, 1993
<S> <C> <C> <C> <C>
CLASS C SHARES
Net asset value beginning of
period $ 9.67 $ 9.60 $ 9.90 $ 9.82
========== ======== ======== ===========
Income from investment
operations
Net investment income 0.54 (c) 0.52 0.40 0.23
Net realized and unrealized gain
(loss) on investments 0.02 0.04 ( 0.35) 0.09
---------- -------- --------- -----------
Total from investment operations 0.56 0.56 0.05 0.32
---------- -------- --------- -----------
Less distributions from
Net investment income ( 0.46) ( 0.48) ( 0.34) ( 0.24)
In excess of net investment
income 0 ( 0.01) ( 0.01) 0
Tax basis return of capital ( 0.03) 0 0 0
---------- --------- --------- -----------
Total distributions ( 0.49) ( 0.49) ( 0.35) ( 0.24)
---------- --------- --------- -----------
Net asset value end of period $ 9.74 $ 9.67 $ 9.60 $ 9.90
========== ========= ========= ===========
Total return (b) 5.91% 5.93% 0.48% 3.28%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.64% 1.53% 1.50% 1.50%(a)
Total expenses excluding
indirectly paid expenses 1.62% 1.50% - -
Total expenses excluding
waivers and
reimbursements 2.09% 2.08% 1.94% 1.67%(a)
Net investment income 5.60% 5.51% 4.08% 2.91%(a)
Portfolio turnover rate 74% 67% 34% 60%
Net assets end of period
(thousands) $ 4,152 $ 2,755 $ 2,874 $ 2,077
</TABLE>
(a) Annualized
(b) Excluding applicable sales charges.
(c) Calculation based on average shares
outstanding.
(d) The Fund changed its fiscal year end from September 30 to June 30.
See Combined Notes to Financial Statements.
19
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended Eleven Months
December 31, 1997 Ended Year Ended July 31,
(Unaudited) June 30, 1997 (d) 1996 1995 1994
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 8.93 $ 8.73 $ 8.88 $ 8.84 $ 9.46
========= ========= ======== ======== =========
Income from investment operations
Net investment income 0.29 0.54 0.59 0.63 0.57 (c)
Net realized and unrealized gain (loss) on
investments, closed futures contracts and
foreign currency related transactions 0.19 0.18 ( 0.16) 0.02 ( 0.59)
--------- --------- --------- -------- ---------
Total from investment operations 0.48 0.72 0.43 0.65 ( 0.02)
--------- --------- --------- -------- ---------
Less distributions from
Net investment income ( 0.28) ( 0.52) ( 0.58) ( 0.57) ( 0.57)
In excess of net investment income 0 0 0 ( 0.04) ( 0.02)
Tax basis return of capital 0 0 0 0 ( 0.01)
--------- --------- --------- --------- ---------
Total distributions ( 0.28) ( 0.52) ( 0.58) ( 0.61) ( 0.60)
--------- --------- --------- --------- ---------
Net asset value end of period $ 9.13 $ 8.93 $ 8.73 $ 8.88 $ 8.84
========= ========= ========= ========= =========
Total return (b) 5.43% 8.40% 4.95% 7.76% ( 0.29%)
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.10%(a) 1.12%(a) 1.10% 1.00% 1.00%
Total expenses excluding indirectly paid
expenses 1.10%(a) 1.10%(a) 1.08% - -
Total expenses excluding waivers and
reimbursements 1.59%(a) 1.58%(a) 1.54% 1.48% 1.80%
Net investment income 6.11%(a) 6.43%(a) 6.57% 7.13% 6.81%
Portfolio turnover rate 65% 179% 231% 149% 280%
Net assets end of period (thousands) $ 9,697 $ 10,341 $ 12,958 $ 14,558 $ 16,036
</TABLE>
<TABLE>
<CAPTION>
Year Ended July 31,
1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 9.23 $ 8.64 $ 8.60 $ 9.11 $ 9.05 $ 9.61
======== ======== ======== ======== ======== ========
Income from investment operations
Net investment income 0.70 0.71 0.72 0.67 0.69 0.72
Net realized and unrealized gain (loss)
on investments, closed futures
contracts and foreign currency
related transactions 0.18 0.60 0.05 ( 0.45) 0.10 ( 0.45)
-------- -------- -------- --------- -------- ---------
Total from investment operations 0.88 1.31 0.77 0.22 0.79 0.27
-------- -------- -------- --------- -------- ---------
Less distributions from
Net investment income ( 0.65) ( 0.71) ( 0.72) ( 0.70) ( 0.73) ( 0.83)
In excess of net investment income 0 ( 0.01) ( 0.01) ( 0.03) 0 0
Tax basis return of capital 0 0 0 0 0 0
--------- --------- --------- --------- --------- ---------
Total distributions ( 0.65) ( 0.72) ( 0.73) ( 0.73) ( 0.73) ( 0.83)
--------- --------- --------- --------- --------- ---------
Net asset value end of period $ 9.46 $ 9.23 $ 8.64 $ 8.60 $ 9.11 $ 9.05
========= ========= ========= ========= ========= =========
Total return (b) 9.88% 15.65% 9.42% 2.71% 9.13% 2.95%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.52% 1.88% 2.00% 2.00% 1.92% 1.30%
Total expenses excluding indirectly
paid expenses - - - - - -
Total expenses excluding waivers
and reimbursements 1.99% 1.88% 2.06% 2.33% 2.19% 2.65%
Net investment income 7.48% 7.85% 8.42% 7.90% 7.88% 7.48%
Portfolio turnover rate 160% 90% 76% 107% 148% 208%
Net assets end of period (thousands) $ 18,032 $ 19,288 $ 20,227 $ 23,694 $ 30,337 $ 38,615
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) Calculation based on average shares
outstanding.
(d) The Fund changed its fiscal year end from July 31 to June 30.
See Combined Notes to Financial Statements.
20
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended Eleven Months
December 31, 1997 Ended
(Unaudited) June 30, 1997 (d)
<S> <C> <C>
CLASS B SHARES
Net asset value beginning of period $ 8.95 $ 8.74
========== =========
Income from investment operations
Net investment income 0.25 0.47
Net realized and unrealized gain (loss) on
investments, closed futures contracts and foreign
currency related transactions 0.20 0.20
---------- ---------
Total from investment operations 0.45 0.67
---------- ---------
Less distributions from
Net investment income ( 0.25) ( 0.46)
In excess of net investment income 0 0
Tax basis return of capital 0 0
---------- ---------
Total distributions ( 0.25) ( 0.46)
---------- ---------
Net asset value end of period $ 9.15 $ 8.95
========== =========
Total return (b) 5.02% 7.81%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.85%(a) 1.87%(a)
Total expenses excluding indirectly paid expenses 1.85%(a) 1.85%(a)
Total expenses excluding waivers and
reimbursements 2.35%(a) 2.35%(a)
Net investment income 5.38%(a) 5.68%(a)
Portfolio turnover rate 65% 179%
Net assets end of period (thousands) $ 10,290 $ 11,368
<CAPTION>
February 1, 1993
(Date of Initial
Public Offering)
Year Ended July 31, through
1996 1995 1994 July 31, 1993
<S> <C> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of period $ 8.89 $ 8.85 $ 9.47 $ 9.35
======== ======== ========== ==========
Income from investment operations
Net investment income 0.52 0.56 0.49 (c) 0.29
Net realized and unrealized gain (loss) on
investments, closed futures contracts and foreign
currency related transactions ( 0.16) 0.02 ( 0.58) 0.12
--------- -------- ---------- ----------
Total from investment operations 0.36 0.58 ( 0.09) 0.41
--------- -------- ---------- ----------
Less distributions from
Net investment income ( 0.51) ( 0.51) ( 0.49) ( 0.29)
In excess of net investment income 0 ( 0.03) ( 0.03) 0
Tax basis return of capital 0 0 ( 0.01) 0
--------- --------- ---------- ----------
Total distributions ( 0.51) ( 0.54) ( 0.53) ( 0.29)
--------- --------- ---------- ----------
Net asset value end of period $ 8.74 $ 8.89 $ 8.85 $ 9.47
========= ========= ========== ==========
Total return (b) 4.10% 6.87% ( 1.05%) 4.42%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.85% 1.75% 1.75% 1.76%(a)
Total expenses excluding indirectly paid expenses 1.83% - - -
Total expenses excluding waivers and
reimbursements 2.32% 2.21% 2.36% 2.71%(a)
Net investment income 5.82% 6.38% 5.48% 5.67%(a)
Portfolio turnover rate 231% 149% 280% 160%
Net assets end of period (thousands) $ 16,034 $ 17,985 $ 17,819 $ 8,159
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended Eleven Months
December 31, 1997 Ended
(Unaudited) June 30, 1997 (d)
<S> <C> <C>
CLASS C SHARES
Net asset value beginning of period $ 8.94 $ 8.74
========== ==========
Income from investment operations
Net investment income 0.25 0.46
Net realized and unrealized gain (loss) on
investments, closed futures contracts and foreign
currency related transactions 0.20 0.20
---------- ----------
Total from investment operations 0.45 0.66
---------- ----------
Less distributions from
Net investment income ( 0.25) ( 0.46)
In excess of net investment income 0 0
Tax basis return of capital 0 0
---------- ----------
Total distributions ( 0.25) ( 0.46)
---------- ----------
Net asset value end of period $ 9.14 $ 8.94
========== ==========
Total return (b) 5.03% 7.70%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.85%(a) 1.87%(a)
Total expenses excluding indirectly paid expenses 1.85%(a) 1.85%(a)
Total expenses excluding waivers and
reimbursements 2.34%(a) 2.35%(a)
Net investment income 5.34%(a) 5.68%(a)
Portfolio turnover rate 65% 179%
Net assets end of period (thousands) $ 7,408 $ 7,259
<CAPTION>
February 1, 1993
(Date of Initial
Public Offering)
Year Ended July 31, through
1996 1995 1994 July 31, 1993
<S> <C> <C> <C> <C>
CLASS C SHARES
Net asset value beginning of period $ 8.89 $ 8.85 $ 9.46 $ 9.35
======== ======== ========== =========
Income from investment operations
Net investment income 0.52 0.55 0.49 (c) 0.29
Net realized and unrealized gain (loss) on
investments, closed futures contracts and foreign
currency related transactions ( 0.16) 0.03 ( 0.57) 0.11
--------- -------- ---------- ---------
Total from investment operations 0.36 0.58 ( 0.08) 0.40
--------- -------- ---------- ---------
Less distributions from
Net investment income ( 0.51) ( 0.51) ( 0.49) ( 0.29)
In excess of net investment income 0 ( 0.03) ( 0.03) 0
Tax basis return of capital 0 0 ( 0.01) 0
--------- --------- ---------- ---------
Total distributions ( 0.51) ( 0.54) ( 0.53) ( 0.29)
--------- --------- ---------- ---------
Net asset value end of period $ 8.74 $ 8.89 $ 8.85 $ 9.46
========= ========= ========== =========
Total return (b) 4.10% 6.87% ( 0.95%) 4.31%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.85% 1.75% 1.75% 1.77%(a)
Total expenses excluding indirectly paid expenses 1.83% - - -
Total expenses excluding waivers and
reimbursements 2.31% 2.23% 2.37% 2.61%(a)
Net investment income 5.82% 6.37% 5.44% 5.61%(a)
Portfolio turnover rate 231% 149% 280% 160%
Net assets end of period (thousands) $ 9,084 $ 10,185 $ 13,086 $ 7,522
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) Calculation based on average shares
outstanding.
(d) The Fund changed its fiscal year end from July 31 to June 30.
See Combined Notes to Financial Statements.
21
<PAGE>
EVERGREEN
Intermediate Term Bond Fund II
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended
December 31, 1997 Year Ended
(Unaudited) June 30, 1997
<S> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 10.17 $ 10.10
=========== =========
Income from investment operations
Net investment income 0.30 0.60
Net realized and unrealized gain (loss) on investments 0.29 0.08
----------- ---------
Total from investment operations 0.59 0.68
----------- ---------
Less distributions from
Net investment income ( 0.30) ( 0.59)
Tax basis return of capital 0 ( 0.02)
----------- ----------
Total distributions ( 0.30) ( 0.61)
----------- ----------
Net asset value end of period $ 10.46 $ 10.17
=========== ==========
Total return (b) 5.85% 6.88%
Ratios/Supplemental data
Ratios to average net assets
Total expenses 0.79%(a) 0.85%
Total expenses excluding indirectly paid expenses 0.79%(a) 0.85%
Total expenses excluding waivers and reimbursements 0.98%(a) 1.04%
Net investment income 5.76%(a) 5.92%
Portfolio turnover rate 24% 86%
Net assets end of period (thousands) $ 3,180 $ 3,038
<CAPTION>
May 2, 1995
(Commencement of
Ten Months Class Operations)
Ended through
June 30, 1996 (c) August 31, 1995
<S> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 10.30 $ 9.98
=========== ==========
Income from investment operations
Net investment income 0.48 0.18
Net realized and unrealized gain (loss) on investments ( 0.20) 0.33
----------- ----------
Total from investment operations 0.28 0.51
----------- ----------
Less distributions from
Net investment income ( 0.48) ( 0.19)
Tax basis return of capital 0 0
----------- ----------
Total distributions ( 0.48) ( 0.19)
----------- ----------
Net asset value end of period $ 10.10 $ 10.30
=========== ==========
Total return (b) 2.72% 5.17%
Ratios/Supplemental data
Ratios to average net assets
Total expenses 0.82%(a) 0.80%(a)
Total expenses excluding indirectly paid expenses - -
Total expenses excluding waivers and reimbursements 1.10%(a) 1.38%(a)
Net investment income 6.30%(a) 5.53%(a)
Portfolio turnover rate 52% 73%
Net assets end of period (thousands) $ 2,943 $ 160
</TABLE>
<TABLE>
<CAPTION>
January 30, 1996
Six Months (Commencement of
Ended Class Operations)
December 31, 1997 Year Ended through
(Unaudited) June 30, 1997 June 30, 1996
<S> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of period $ 10.17 $ 10.10 $ 10.68
========== ========= ==========
Income from investment operations
Net investment income 0.25 0.50 0.20
Net realized and unrealized gain (loss) on investments 0.29 0.08 ( 0.58)
---------- --------- ----------
Total from investment operations 0.54 0.58 ( 0.38)
---------- --------- ----------
Less distributions from
Net investment income ( 0.25) ( 0.49) ( 0.20)
Tax basis return of capital 0 ( 0.02) 0
---------- ---------- ----------
Total distributions ( 0.25) ( 0.51) ( 0.20)
---------- ---------- ----------
Net asset value end of period $ 10.46 $ 10.17 $ 10.10
========== ========== ==========
Total return (b) 5.37% 5.91% ( 3.52%)
Ratios/Supplemental data
Ratios to average net assets
Total expenses 1.73%(a) 1.81% 1.80%(a)
Total expenses excluding indirectly paid expenses 1.73%(a) 1.81% -
Total expenses excluding waivers and reimbursements 1.73%(a) 1.81% 1.89%(a)
Net investment income 4.82%(a) 5.00% 5.18%(a)
Portfolio turnover rate 24% 86% 52%
Net assets end of period (thousands) $ 1,168 $ 1,013 $ 402
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The Fund changed its fiscal year end from August 31 to June 30.
See Combined Notes to Financial Statements.
22
<PAGE>
EVERGREEN
Intermediate Term Bond Fund II
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
April 29, 1996
Six Months (Commencement of
Ended Class Operations)
December 31, 1997 Year Ended through
(Unaudited) June 30, 1997 June 30, 1996
<S> <C> <C> <C>
CLASS C SHARES
Net asset value beginning of period $ 10.17 $ 10.10 $ 10.15
========== ========= ==========
Income from investment operations
Net investment income 0.25 0.51 0.08
Net realized and unrealized gain (loss) on investments 0.29 0.07 ( 0.05)
---------- --------- ----------
Total from investment operations 0.54 0.58 0.03
---------- --------- ----------
Less distributions from
Net investment income ( 0.25) ( 0.49) ( 0.08)
Tax basis return of capital 0 ( 0.02) 0
---------- ---------- ----------
Total distributions ( 0.25) ( 0.51) ( 0.08)
---------- ---------- ----------
Net asset value end of period $ 10.46 $ 10.17 $ 10.10
========== ========== ==========
Total return (b) 5.37% 5.91% 0.33%
Ratios/Supplemental data
Ratios to average net assets
Total expenses 1.73%(a) 1.80% 1.80%(a)
Total expenses excluding indirectly paid expenses 1.73%(a) 1.80% -
Total expenses excluding waivers and reimbursements 1.73%(a) 1.80% 1.88%(a)
Net investment income 4.84%(a) 4.97% 5.30%(a)
Portfolio turnover rate 24% 86% 52%
Net assets end of period (thousands) $ 54 $ 29 $ 25
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended Year Ten Months
December 31, 1997 Ended Ended
(Unaudited) June 30, 1997 June 30, 1996 (c)
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of
period $ 10.17 $ 10.10 $ 10.29
=========== ======== ===========
Income from investment
operations
Net investment income 0.30 0.61 0.48
Net realized and unrealized gain
(loss) on investments 0.29 0.08 ( 0.19)
----------- -------- -----------
Total from investment
operations 0.59 0.69 0.29
----------- -------- -----------
Less distributions from
Net investment income ( 0.30) ( 0.60) ( 0.48)
Net realized gain on
investments 0 0 0
Tax basis return of capital 0 ( 0.02) 0
----------- -------- -----------
Total distributions ( 0.30) ( 0.62) ( 0.48)
----------- -------- -----------
Net asset value end of period $ 10.46 $ 10.17 $ 10.10
=========== ======== ===========
Total return 5.90% 6.97% 2.82%
Ratios/Supplemental data
Ratios to average net assets
Total expenses 0.73%(a) 0.81% 0.80%(a)
Total expenses excluding
indirectly paid expenses 0.73%(a) 0.81% -
Total expenses excluding
waivers and
reimbursements 0.73%(a) 0.81% 0.87%(a)
Net investment income 5.82%(a) 5.97% 5.75%(a)
Portfolio turnover rate 24% 86% 52%
Net assets end of period
(thousands) $ 167,740 $156,346 $ 157,814
<CAPTION>
November 1, 1991
(Commencement of
Class Operations)
Year Ended August 31, through
1995 1994 1993 August 31, 1992
<S> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of
period $ 9.93 $ 10.99 $ 10.56 $ 10.00
======= ========= ======== ===========
Income from investment
operations
Net investment income 0.56 0.55 0.63 0.55
Net realized and unrealized gain
(loss) on investments 0.40 ( 0.86) 0.66 0.55
------- --------- -------- -----------
Total from investment
operations 0.96 ( 0.31) 1.29 1.10
------- --------- -------- -----------
Less distributions from
Net investment income ( 0.56) ( 0.55) ( 0.64) ( 0.54)
Net realized gain on
investments ( 0.04) ( 0.20) ( 0.22) 0
Tax basis return of capital 0 0 0 0
------- --------- --------- -----------
Total distributions ( 0.60) ( 0.75) ( 0.86) ( 0.54)
------- --------- --------- -----------
Net asset value end of period $ 10.29 $ 9.93 $ 10.99 $ 10.56
======= ========= ========= ===========
Total return 10.13% ( 2.91%) 12.90% 11.29%
Ratios/Supplemental data
Ratios to average net assets
Total expenses 0.69% 0.55% 0.55% 0.55%(a)
Total expenses excluding
indirectly paid expenses - - - -
Total expenses excluding
waivers and
reimbursements 0.83% 0.83% 0.83% 0.86%(a)
Net investment income 5.63% 5.32% 5.93% 6.49%(a)
Portfolio turnover rate 73% 69% 49% 65%
Net assets end of period
(thousands) $95,961 $ 91,724 $ 86,892 $ 66,695
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The Fund changed its fiscal year from August 31 to June 30.
See Combined Notes to Financial Statements.
23
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
May 2, 1995
(Commencement
Six Months Ended of Class Operations)
December 31, 1997 Year Ended Ten Months Ended through
(Unaudited) June 30, 1997 June 30, 1996 (c) August 31, 1995
<S> <C> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 10.02 $ 9.99 $ 10.15 $ 9.95
=========== ========= =========== ==========
Income from investment operations
Net investment income 0.28 (d) 0.55 0.46 0.19
Net realized and unrealized gain (loss)
on investments 0.16 0.03 ( 0.16) 0.20
----------- --------- ----------- ----------
Total from investment operations 0.44 0.58 0.30 0.39
----------- --------- ----------- ----------
Less distributions from
Net investment income ( 0.28) ( 0.55) ( 0.46) ( 0.19)
----------- ---------- ----------- ----------
Total distributions ( 0.28) ( 0.55) ( 0.46) ( 0.19)
----------- ---------- ----------- ----------
Net asset value end of period $ 10.18 $ 10.02 $ 9.99 $ 10.15
=========== ========== =========== ==========
Total return (b) 4.40% 6.00% 3.00% 3.90%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.91%(a) 0.86% 0.81%(a) 0.80%(a)
Total expenses excluding indirectly
paid expenses 0.91%(a) 0.86% - -
Total expenses excluding waivers
and reimbursements 1.10%(a) 0.94% 1.06%(a) 1.34%(a)
Net investment income 5.40%(a) 5.47% 5.49%(a) 5.42%(a)
Portfolio turnover rate 22% 68% 28% 45%
Net assets end of period (thousands) $ 516 $ 571 $ 497 $ 9
</TABLE>
<TABLE>
<CAPTION>
February 9, 1996
(Commencement
Six Months Ended of Class Operations)
December 31, 1997 Year Ended through
(Unaudited) June 30, 1997 June 30, 1996
<S> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of period $ 10.02 $ 9.99 $ 10.38
=========== ========= ===========
Income from investment operations
Net investment income 0.22 (d) 0.45 0.18
Net realized and unrealized gain (loss) on investments 0.17 0.04 ( 0.39)
----------- --------- -----------
Total from investment operations 0.39 0.49 ( 0.21)
----------- --------- -----------
Less distributions from
Net investment income ( 0.23) ( 0.46) ( 0.18)
----------- ---------- -----------
Total distributions ( 0.23) ( 0.46) ( 0.18)
----------- ---------- -----------
Net asset value end of period $ 10.18 $ 10.02 $ 9.99
=========== ========== ===========
Total return (b) 3.93% 5.03% ( 1.99)%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.85%(a) 1.81% 1.80%(a)
Total expenses excluding indirectly paid expenses 1.84%(a) 1.81% -
Total expenses excluding waivers and reimbursements 1.84%(a) 1.89% 1.91%(a)
Net investment income 4.47%(a) 4.53% 4.62%(a)
Portfolio turnover rate 22% 68% 28%
Net assets end of period (thousands) $ 835 $ 742 $ 359
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The Fund changed its fiscal year end from August 31 to June 30.
(d) Calculation based on average shares outstanding.
See Combined Notes to Financial Statements.
24
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
April 10,1996
(Commencement
Six Months Ended of Class Operations)
December 31, 1997 Year Ended through
(Unaudited) June 30, 1997 June 30, 1996
<S> <C> <C> <C>
CLASS C SHARES
Net asset value beginning of period $ 10.02 $ 9.99 $ 10.01
============ ======= ============
Income from investment operations
Net investment income 0.22 (c) 0.40 0.11
Net realized and unrealized gain (loss) on investments 0.17 0.09 ( 0.02)
------------ ------- ------------
Total from investment operations 0.39 0.49 0.09
------------ ------- ------------
Less distributions from
Net investment income ( 0.23) ( 0.46) ( 0.11)
------------ ------- ------------
Total distributions ( 0.23) ( 0.46) ( 0.11)
------------ ------- ------------
Net asset value end of period $ 10.18 $ 10.02 $ 9.99
============ ======= ============
Total return (b) 3.93% 5.03% 0.89%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.85% (a) 1.81% 1.80%(a)
Total expenses excluding indirectly paid expenses 1.85%(a) 1.81% -
Total expenses excluding waivers and reimbursements 1.85%(a) 1.90% 1.91%(a)
Net investment income 4.59%(a) 4.53% 4.47%(a)
Portfolio turnover rate 22% 68% 28%
Net assets end of period (thousands) $ 123 $ 12 $ 32
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) Calculation based on average shares outstanding.
See Combined Notes to Financial Statements.
25
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended Ten Months
December 31, 1997 Year Ended Ended
(Unaudited) June 30, 1996 June 30, 1996 (b)
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning
of period $ 10.02 $ 9.99 $ 10.15
=========== ======= ===========
Income from investment
operations
Net investment income 0.28 (c) 0.56 0.46
Net realized and unrealized
gain (loss) on investments 0.16 0.03 ( 0.16)
----------- ------- -----------
Total from investment
operations 0.44 0.59 0.30
----------- ------- -----------
Less distributions from
Net investment income ( 0.28) ( 0.56) ( 0.46)
Net realized gain on
investments 0 0 0
----------- ------- -----------
Total distributions ( 0.28) ( 0.56) ( 0.46)
----------- ------- -----------
Net asset value end of
period $ 10.18 $ 10.02 $ 9.99
=========== ======= ===========
Total return 4.45% 6.08% 3.00%
Ratios/Supplemental Data
Ratios to average net
assets
Total expenses 0.85%(a) 0.81% 0.80%(a)
Total expenses excluding
indirectly paid expenses 0.85%(a) 0.81% -
Total expenses excluding
waivers and
reimbursements 0.85%(a) 0.89% 0.87%(a)
Net investment income 5.46%(a) 5.52% 5.47%(a)
Portfolio turnover rate 22% 68% 28%
Net assets end of period
(thousands) $ 67,506 $71,588 $ 87,004
<CAPTION>
November 1, 1991
(Commencement
of Class Operations)
Year Ended August 31, through
1995 1994 1993 August 31, 1992
<S> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning
of period $ 9.92 $ 10.61 $ 10.41 $ 10.00
======= ======== ======== ===========
Income from investment
operations
Net investment income 0.55 0.54 0.57 0.48
Net realized and unrealized
gain (loss) on investments 0.23 ( 0.64) 0.24 0.40
------- -------- -------- -----------
Total from investment
operations 0.78 ( 0.10) 0.81 0.88
------- -------- -------- -----------
Less distributions from
Net investment income ( 0.55) ( 0.54) ( 0.58) ( 0.47)
Net realized gain on
investments 0 ( 0.05) ( 0.03) 0
-------- -------- -------- -----------
Total distributions ( 0.55) ( 0.59) ( 0.61) ( 0.47)
-------- -------- -------- -----------
Net asset value end of
period $ 10.15 $ 9.92 $ 10.61 $ 10.41
======== ======== ======== ===========
Total return 8.16% ( 0.99%) 8.03% 9.04%
Ratios/Supplemental Data
Ratios to average net
assets
Total expenses 0.70% 0.55% 0.55% 0.55%(a)
Total expenses excluding
indirectly paid expenses - - - -
Total expenses excluding
waivers and
reimbursements 0.84% 0.82% 0.83% 0.86%(a)
Net investment income 5.54% 5.22% 5.48% 5.68%(a)
Portfolio turnover rate 45% 45% 31% 47%
Net assets end of period
(thousands) $106,066 $106,448 $119,172 $ 87,648
</TABLE>
(a) Annualized.
(b) The Fund changed its fiscal year end from August 31 to June 30.
(c) Calculation based on average shares outstanding.
See Combined Notes to Financial Statements.
26
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended June 30,
December 31,1997
(Unaudited) 1997 1996
<S> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 9.83 $ 9.82 $ 10.02
========== ======= ========
Income from investment operations
Net investment income 0.32 0.63 0.63
Net realized and unrealized gain (loss) on investments 0.03 0.02 ( 0.19)
---------- ------- ---------
Total from investment operations 0.35 0.65 0.44
---------- ------- ---------
Less distributions from
Net investment income ( 0.31) ( 0.64) ( 0.64)
In excess of net investment income 0 0 0
Net realized gain on investments 0 0 0
---------- ------- ---------
Total distributions ( 0.31) ( 0.64) ( 0.64)
---------- ------- ---------
Net asset value end of period $ 9.87 $ 9.83 $ 9.82
========== ======= =========
Total return (b) 3.59% 6.77% 4.45%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.77%(a) 0.72% 0.79%
Total expenses excluding indirectly paid expenses 0.77%(a) 0.72% -
Total expenses excluding waivers and reimbursements 0.77%(a) - -
Net investment income 6.17%(a) 6.37% 6.35%
Portfolio turnover rate 38% 45% 76%
Net assets end of period (thousands) $ 16,193 $17,703 $ 18,630
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30,1995 (c) 1994 1993
<S> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 9.52 $ 10.42 $ 10.41
========== ========= ========
Income from investment operations
Net investment income 0.32 0.65 0.65
Net realized and unrealized gain (loss) on investments 0.50 ( 0.91) 0.19
---------- --------- --------
Total from investment operations 0.82 ( 0.26) 0.84
---------- --------- --------
Less distributions from
Net investment income ( 0.32) ( 0.64) ( 0.65)
In excess of net investment income 0 0 0
Net realized gain on investments 0 0 ( 0.18)
---------- --------- ---------
Total distributions ( 0.32) ( 0.64) ( 0.83)
---------- --------- ---------
Net asset value end of period $ 10.02 $ 9.52 $ 10.42
========== ========= =========
Total return (b) 8.77% ( 2.57%) 8.29%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.77%(a) 0.75% 0.93%
Total expenses excluding indirectly paid expenses - - -
Total expenses excluding waivers and reimbursements - - -
Net investment income 6.58%(a) 6.46% 6.15%
Portfolio turnover rate 34% 48% 73%
Net assets end of period (thousands) $ 18,898 $ 19,127 $ 22,865
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1992 1991
<S> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 10.54 $ 9.99
======== =======
Income from investment operations
Net investment income 0.71 0.73
Net realized and unrealized gain (loss) on investments ( 0.06) 0.60
--------- -------
Total from investment operations 0.65 1.33
--------- -------
Less distributions from
Net investment income ( 0.67) ( 0.70)
In excess of net investment income 0 ( 0.01)
Net realized gain on investments ( 0.11) ( 0.07)
--------- -------
Total distributions ( 0.78) ( 0.78)
--------- -------
Net asset value end of period $ 10.41 $ 10.54
========= =======
Total return (b) 6.39% 13.74%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.90% 0.80%
Total expenses excluding indirectly paid expenses - -
Total expenses excluding waivers and reimbursements - 0.89%
Net investment income 6.79% 7.30%
Portfolio turnover rate 66% 53%
Net assets end of period (thousands) $ 21,488 $17,680
<CAPTION>
January 28,1989
(Commencement of
Nine Months Year Class Operations)
Ended Ended through
December 31,1990 (d) March 31,1990 March 31,1989
<S> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 9.72 $ 9.50 $ 9.70
========== ======== ==========
Income from investment operations
Net investment income 0.55 0.79 0.10
Net realized and unrealized gain (loss) on investments 0.24 0.20 ( 0.14)
---------- -------- ----------
Total from investment operations 0.79 0.99 ( 0.04)
---------- -------- ----------
Less distributions from
Net investment income ( 0.52) ( 0.77) ( 0.16)
In excess of net investment income 0 0 0
Net realized gain on investments 0 0 0
---------- --------- ----------
Total distributions ( 0.52) ( 0.77) ( 0.16)
---------- --------- ----------
Net asset value end of period $ 9.99 $ 9.72 $ 9.50
========== ========= ==========
Total return (b) 8.31% 10.51% ( 0.31%)
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.01%(a) 1.00% 1.78%(a)
Total expenses excluding indirectly paid expenses - - -
Total expenses excluding waivers and reimbursements 1.82%(a) 1.50% -
Net investment income 7.53%(a) 7.57% 6.10%(a)
Portfolio turnover rate 27% 32% 18%
Net assets end of period (thousands) $ 11,765 $ 6,496 $ 11,580
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The Fund changed its fiscal year end from December 31 to June 30.
(d) The Fund changed its fiscal year end from March 31 to December 31.
See Combined Notes to Financial Statements.
27
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Year Ended June 30,
Ended
December 31, 1997
(Unaudited) 1997 1996
<S> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of period $ 9.85 $ 9.84 $ 10.04
========== ======= =========
Income from investment operations
Net investment income 0.27 0.54 0.55
Net realized and unrealized gain (loss) on
investments 0.03 0.01 ( 0.19)
---------- ------- ----------
Total from investment operations 0.30 0.55 0.36
---------- ------- ----------
Less distributions from
Net investment income ( 0.26) ( 0.54) ( 0.56)
Net realized gain on investments 0 0 0
---------- ------- ----------
Total distributions ( 0.26) ( 0.54) ( 0.56)
---------- ------- ----------
Net asset value end of period $ 9.89 $ 9.85 $ 9.84
========== ======= ==========
Total return (b) 3.12% 5.78% 3.62%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.67%(a) 1.62% 1.69%
Total expenses excluding indirectly paid
expenses 1.67%(a) 1.62% -
Net investment income 5.26%(a) 5.48% 5.45%
Portfolio turnover rate 38% 45% 76%
Net assets end of period (thousands) $ 20,433 $22,237 $ 21,006
<CAPTION>
January 25, 1993
(Commencement
Six Months of Class Operations)
Ended Year Ended through
June 30,1995 (c) December 31, 1994 December 31, 1993
<S> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of period $ 9.54 $ 10.44 $ 10.57
========== ========== ===========
Income from investment operations
Net investment income 0.28 0.58 0.58
Net realized and unrealized gain (loss) on
investments 0.50 ( 0.92) 0.05
---------- ---------- -----------
Total from investment operations 0.78 ( 0.34) 0.63
---------- ---------- -----------
Less distributions from
Net investment income ( 0.28) ( 0.56) ( 0.58)
Net realized gain on investments 0 0 ( 0.18)
---------- ---------- -----------
Total distributions ( 0.28) ( 0.56) ( 0.76)
---------- ---------- -----------
Net asset value end of period $ 10.04 $ 9.54 $ 10.44
========== ========== ===========
Total return (b) 8.31% ( 3.33%) 6.08%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.67%(a) 1.50% 1.57%(a)
Total expenses excluding indirectly paid
expenses - - -
Net investment income 5.68%(a) 5.75% 5.42%(a)
Portfolio turnover rate 34% 48% 73%
Net assets end of period (thousands) $ 17,366 $ 17,625 $ 8,876
</TABLE>
<TABLE>
<CAPTION>
Six Months Year Ended June 30,
Ended
December 31, 1997
(Unaudited) 1997 1996
<S> <C> <C> <C>
CLASS C SHARES
Net asset value beginning of period $ 9.85 $ 9.84 $ 10.05
========== ======== =========
Income from investment operations
Net investment income 0.26 0.54 0.55
Net realized and unrealized gain (loss) on investments 0.04 0.01 ( 0.20)
---------- -------- ----------
Total from investment operations 0.30 0.55 0.35
---------- -------- ----------
Less distributions from
Net investment income ( 0.26) ( 0.54) ( 0.56)
---------- --------- ----------
Total distributions ( 0.26) ( 0.54) ( 0.56)
---------- --------- ----------
Net asset value end of period $ 9.89 $ 9.85 $ 9.84
========== ========= ==========
Total return (b) 3.12% 5.77% 3.51%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.67%(a) 1.62% 1.69%
Total expenses excluding indirectly paid expenses 1.67%(a) 1.62% -
Net investment income 5.28%(a) 5.47% 5.46%
Portfolio turnover rate 38% 45% 76%
Net assets end of period (thousands) $ 897 $ 1,029 $ 1,155
<CAPTION>
September 6, 1994
(Commencement
Six Months of Class Operations)
Ended through
June 30, 1995 (c) December 31, 1994
<S> <C> <C>
CLASS C SHARES
Net asset value beginning of period $ 9.55 $ 9.85
========== ==========
Income from investment operations
Net investment income 0.26 0.18
Net realized and unrealized gain (loss) on investments 0.50 ( 0.30)
---------- ----------
Total from investment operations 0.76 ( 0.12)
---------- ----------
Less distributions from
Net investment income ( 0.26) ( 0.18)
---------- ----------
Total distributions ( 0.26) ( 0.18)
---------- ----------
Net asset value end of period $ 10.05 $ 9.55
========== ==========
Total return (b) 8.23% ( 1.27)%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.67%(a) 1.65%(a)
Total expenses excluding indirectly paid expenses - -
Net investment income 5.69%(a) 5.87%(a)
Portfolio turnover rate 34% 48%
Net assets end of period (thousands) $ 527 $ 512
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The Fund changed its fiscal year end from December 31 to June 30.
See Combined Notes to Financial Statements.
28
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Year Ended June 30,
Ended
December 31, 1997
(Unaudited) 1997 1996
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value
beginning of period $ 9.83 $ 9.82 $ 10.02
========== ======= ========
Income from
investment operations
Net investment income 0.32 0.64 0.64
Net realized and
unrealized gain (loss)
on investments 0.03 0.02 ( 0.19)
---------- ------- --------
Total from investment
operations 0.35 0.66 0.45
---------- ------- --------
Less distributions from
Net investment income ( 0.31) ( 0.65) ( 0.65)
In excess of net
investment income 0 0 0
Net realized gain on
investments 0 0 0
---------- -------- --------
Total distributions ( 0.31) ( 0.65) ( 0.65)
---------- -------- --------
Net asset value end of
period $ 9.87 $ 9.83 $ 9.82
========== ======== ========
Total return 3.64% 6.88% 4.63%
Ratios/Supplemental
Data
Ratios to average net
assets
Total expenses 0.67%(a) 0.62% 0.69%
Total expenses
excluding indirectly
paid expenses 0.67%(a) 0.62% -
Net investment
income 6.28%(a) 6.48% 6.45%
Portfolio turnover rate 38% 45% 76%
Net assets end of
period (thousands) $ 357,986 $357,706 $352,095
<CAPTION>
January 4, 1991
(Commencement of
Six Months Class Operations)
Ended Year Ended December 31, through
June 30, 1995 (b) 1994 1993 1992 December 31, 1991
<S> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value
beginning of period $ 9.52 $ 10.43 $ 10.41 $ 10.54 $ 10.06
========= ======== ======== ======== ===========
Income from
investment operations
Net investment income 0.33 0.65 0.69 0.70 0.71
Net realized and
unrealized gain (loss)
on investments 0.49 ( 0.91) 0.19 ( 0.02) 0.56
--------- -------- -------- -------- -----------
Total from investment
operations 0.82 ( 0.26) 0.88 0.68 1.27
--------- -------- -------- -------- -----------
Less distributions from
Net investment income ( 0.32) ( 0.65) ( 0.68) ( 0.70) ( 0.71)
In excess of net
investment income 0 0 0 0 ( 0.01)
Net realized gain on
investments 0 0 ( 0.18) ( 0.11) ( 0.07)
--------- -------- -------- -------- -----------
Total distributions ( 0.32) ( 0.65) ( 0.86) ( 0.81) ( 0.79)
--------- -------- -------- -------- -----------
Net asset value end of
period $ 10.02 $ 9.52 $ 10.43 $ 10.41 $ 10.54
========= ======== ======== ======== ===========
Total return 8.80% ( 2.55%) 8.67% 6.64% 13.80%
Ratios/Supplemental
Data
Ratios to average net
assets
Total expenses 0.67%(a) 0.65% 0.66% 0.69% 0.69%(a)
Total expenses
excluding indirectly
paid expenses - - - - -
Net investment
income 6.68%(a) 6.56% 6.41% 6.67% 7.12%(a)
Portfolio turnover rate 34% 48% 73% 66% 53%
Net assets end of
period (thousands) $ 347,050 $345,025 $376,445 $324,068 $ 256,254
</TABLE>
(a) Annualized.
(b) The Fund changed its fiscal year end from December 31 to June 30.
See Combined Notes to Financial Statements.
29
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES - 85.5%
FHLMC - 38.6%
$ 1,445,022 FHLMC Pool #605343, Cap 13.61%,
Margin 2.75%+ WTAL, Resets
Annually,
7.80%, 3/1/19 ............... $ 1,498,308
1,817,200 FHLMC Pool #605386, Cap 12.89%,
Margin 2.75%+ WTAL, Resets
Annually,
7.76%, 9/1/17 ............... 1,907,770
666,992 FHLMC Pool #606541, Cap 13.56%,
Margin 2.79%+ WTAL, Resets
Annually,
7.69%, 3/1/21 ............... 698,988
1,301,038 FHLMC Pool #606679, Cap 12.07%,
Margin 2.88%+ WTAL, Resets
Annually,
7.74%, 10/1/21 .............. 1,365,687
429,238 FHLMC Pool #607352, Cap 13.62%,
Margin 2.75%+ WTAL, Resets
Annually,
7.87%, 4/1/22 ............... 452,043
139,454 FHLMC Pool #645062, Cap 14.14%,
Margin 2.90%+ WTAL, Resets
Annually,
8.17%, 5/1/19 ............... 144,749
359,355 FHLMC Pool #785114, Cap 13.29%,
Margin 2.75%+ WTAL, Resets
Annually,
7.91%, 7/1/19 ............... 374,178
67,057 FHLMC Pool #785147, Cap 12.78%,
Margin 2.75%+ WTAL, Resets
Annually,
7.57%, 5/1/20 ............... 69,498
2,447,164 FHLMC Pool #845039, Cap 12.47%,
Margin 2.81%+WTAL, Resets
Annually,
7.65%, 10/1/21 .............. 2,535,873
1,404,282 FHLMC Pool #845063, Cap 12.09%,
Margin 2.83%+ WTAL, Resets
Annually,
7.80%, 11/1/21 .............. 1,459,576
2,500,952 FHLMC Pool #845070, Cap 11.83%,
Margin 2.78%+ WTAL, Resets
Annually,
7.75%, 1/1/22 ............... 2,608,806
419,890 FHLMC Pool #845082, Cap 12.52%,
Margin 2.69%+ WTAL, Resets
Annually,
7.56%, 3/1/22 ............... 433,011
1,146,511 FHLMC Pool #846163, Cap 13.07%,
Margin 2.71%+ WTAL, Resets
Annually,
7.67%, 7/1/30 ............... 1,196,316
2,442,275 FHLMC Pool #846298, Cap 13.04%,
Margin 2.68%+ WTAL, Resets
Annually,
7.42%, 8/1/22 ............... 2,539,209
582,319 FHLMC Pool #865220, Cap 15.08%,
Margin 2.35%+ WTAL, Resets
Triennially,
8.37%, 4/1/20 ............... 603,975
-----------
17,887,987
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES - continued
FNMA - 46.9%
$ 299,647 FNMA Pool #062610, Cap 12.75%,
Margin 2.75%+ CMT, Resets
Annually,
8.00%, 6/1/18 ............... $ 314,021
372,980 FNMA Pool #070033, Cap 14.31%,
Margin 2.59%+ CMT, Resets
Annually,
7.38%, 10/1/17 .............. 387,433
1,554,783 FNMA Pool #070119, Cap 12.00%,
Margin 2.76%+ CMT, Resets
Annually,
7.72%, 11/1/17 .............. 1,618,918
250,576 FNMA Pool #070327, Cap 12.95%,
Margin 2.75%+ CMT, Resets
Annually,
7.60%, 6/1/19 ............... 260,246
3,475,375 FNMA Pool #090678, Cap 13.15%,
Margin 2.70%+ CMT, Resets
Annually,
7.75%, 9/1/18 ............... 3,666,520
400,448 FNMA Pool #092086, Cap 15.55%,
Margin 2.75%+ CMT, Resets
Annually,
7.88%, 10/1/16 .............. 413,339
825,195 FNMA Pool #094564, Cap 15.84%,
Margin 2.50%+ CMT, Resets
Annually,
7.55%, 1/1/16 ............... 847,756
1,117,019 FNMA Pool #095405, Cap 13.65%,
Margin 2.73%+ CMT, Resets
Annually,
7.81%, 12/1/19 .............. 1,159,605
494,557 FNMA Pool #102905, Cap 13.11%,
Margin 2.82%+ CMT, Resets
Annually,
7.74%, 7/1/20 ............... 519,824
298,771 FNMA Pool #105007, Cap 13.33%,
Margin 2.75%+ CMT, Resets
Annually,
7.82%, 7/1/19 ............... 309,369
281,931 FNMA Pool #117414, Cap 12.60%,
Margin 2.75%+ CMT, Resets
Annually,
7.39%, 3/1/19 ............... 293,076
951,937 FNMA Pool #124015, Cap 13.24%,
Margin 2.57%+ CMT, Resets
Annually,
7.50%, 11/1/18 .............. 987,787
922,195 FNMA Pool #124204, Cap 13.51%,
Margin 2.72%+ CMT, Resets
Annually,
7.62%, 1/1/22 ............... 968,452
5,970,658 FNMA Pool #124289, Cap 13.46%,
Margin 2.67%+ CMT, Resets
Annually,
7.63%, 9/1/21 ............... 6,262,682
771,491 FNMA Pool #124945, Cap 12.54%,
Margin 2.78%+ CMT, Resets
Annually,
7.39%, 1/1/31 ............... 804,881
420,733 FNMA Pool #142963, Cap 11.03%,
Margin 2.63%+ CMT, Resets
Annually,
7.45%, 1/1/22 ............... 436,708
</TABLE>
30
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES - continued
FNMA - continued
$ 2,206,490 FNMA Pool #313663, Cap 12.96%,
Margin 2.81%+ CMT, Resets
Annually,
7.59%, 5/1/22 .................... $ 2,309,224
143,066 FNMA Pool #391290, Cap 12.68%,
Margin 2.71%+ CMT, Resets
Annually,
7.66%, 2/1/17 .................... 146,464
-----------
21,706,305
-----------
Total Adjustable Rate Mortgage
Securities
(cost $39,213,957) ............... 39,594,292
-----------
FIXED RATE MORTGAGE SECURITIES - 6.1%
FHLMC - 1.0%
426,465 FHLMC Pool #B00475,
10.50%, 4/1/04 ................... 445,634
19,718 FHMLC CMO, Series 11 Class 11C,
(Est. Mat. 1998) (b),
9.50%, 4/15/19 ................... 20,236
-----------
465,870
-----------
FNMA - 2.2%
423,232 FNMA Pool #002497,
11.00%, 1/1/16 ................... 471,392
195,553 FNMA Pool #058442,
11.00%, 1/1/18 ................... 214,770
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
FIXED RATE MORTGAGE SECURITIES - continued
FNMA - continued
$ 313,546 FNMA Pool #100051,
9.50%, 4/1/05 .................... $ 329,615
-----------
1,015,777
-----------
GNMA - 2.9%
1,288,942 GNMA Pool #268164,
10.25%, 11/15/29 ................. 1,363,057
Total Fixed Rate Mortgage Securities -----------
(cost $2,838,914)................. 2,844,704
-----------
U.S. GOVERNMENT OBLIGATIONS - 5.5%
U.S. Treasury Notes:
500,000 5.88%, 11/30/01 ................. 502,030
625,000 6.25%, 8/31/02 .................. 637,794
1,400,000 5.75%, 10/31/02 ................. 1,401,316
-----------
Total U.S. Government Obligations
(cost $2,532,317) ................ 2,541,140
-----------
REPURCHASE AGREEMENT - 2.9% (cost $1,349,000)
1,349,000 Keystone Joint Repurchase Agreement,
6.60% dated 12/31/97 due 1/2/98,
maturity value $1,349,488 (a)..... 1,349,000
-----------
Total Investments
(cost $45,934,188)...... 100.0% 46,329,136
Other Assets and
Liabilities - Net ...... 0.0 1,713
----- ------------
Net Assets ............. 100.0% $46,330,849
====== ============
</TABLE>
(a) The investments in repurchase agreements are in a joint trading account. The
repurchase agreements are fully collateralized by U.S. Government and/or agency
obligations based on market prices at December 31, 1997.
(b) The estimated maturity of a Collateralized Mortgage Obligation (CMO) is
based on current and projected prepayment rates. Changes in interest rates can
cause the estimated maturity to differ from the listed dates.
Legend of Portfolio Abbreviations:
CMT 1, 3, or 5 year Constant Maturity Treasury Index
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Corporation
GNMA Government National Mortgage Association
WTAL 1 to 3 year Weekly Treasury Average Lookback
See Combined Notes to Financial Statements.
31
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
ASSET-BACKED SECURITIES - 6.3%
$ 200,000 California Infrastructure PG&E,
Series 1997 1 Certificate,
Class A4,
6.16%, 6/25/03 ..................... $ 200,625
Southern Pacific Secured
Assets Corp.:
1,000,000 Series 1996-3, Class A4,
7.60%, 10/25/27 .................... 1,013,750
500,000 Series 1997-4, Class A6,
6.74%, 1/25/28 ..................... 496,862
----------
Total Asset-Backed Securities
(cost $1,679,173) .................. 1,711,237
----------
CORPORATE BONDS - 41.5%
Aerospace & Defense - 1.9%
500,000 Northrop Grumman Corp., Note,
7.00%, 3/1/06 ...................... 515,775
----------
Banks - 12.7%
500,000 Amsouth Bancorporation,
Subordinated Debentures
Puttable 2005,
6.75%, 11/1/25 ..................... 512,315
1,250,000 Chase Manhattan Corp.,
Subordinated Notes,
9.38%, 7/1/01 ...................... 1,367,687
1,000,000 CIT Group Holdings Incorporated,
Medium Term Note,
Tranche Trust 00001,
9.25%, 3/15/01 ..................... 1,086,020
500,000 Southtrust Bank,
6.57%, 12/15/27 .................... 506,700
----------
3,472,722
----------
Finance & Insurance - 9.0%
500,000 International Lease Finance Corp.,
Note,
6.63%, 6/1/00 ...................... 503,875
500,000 Lehman Brothers Holdings, Inc.,
Note,
6.50%, 10/1/02 ..................... 498,715
875,000 Paine Webber Group, Inc.,
Senior Note,
8.25%, 5/1/02 ...................... 931,184
500,000 Prudential Insurance,
Note (a),
7.13%, 7/1/07 ...................... 518,460
----------
2,452,234
----------
Industrial Specialty Products &
Services - 9.5%
500,000 Apache Finance Pty. Ltd.,
Guaranteed Note,
6.50%, 12/15/07 .................... 499,780
1,000,000 Philip Morris Companies Inc.,
Senior Note,
7.20%, 2/1/07 ...................... 1,030,430
1,000,000 Transocean Offshore Inc, Note,
7.45%, 4/15/27 ..................... 1,081,640
----------
2,611,850
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
CORPORATE BONDS - continued
Transportation - 5.7%
$ 950,000 Ford Motor Co., Debenture,
9.00%, 9/15/01 ..................... $1,034,712
500,000 Norfolk Southern Corp., Note,
7.05%, 5/1/37 ...................... 528,470
----------
1,563,182
----------
Utilities - Telephone - 2.7%
750,000 Frontier Corp.,
1997-1 Pass Through Asset Trust
Securities,
6.25%, 12/15/99.................... 749,100
----------
Total Corporate Bonds
(cost $11,259,906) ................. 11,364,863
----------
COLLATERALIZED MORTGAGE OBLIGATIONS (b) - 29.9%
500,000 Atlantic Coast Airlines Corp., Series
1997-1, Class1A (a)
7.20%, 1/1/14 ...................... 508,835
500,000 Chase Commercial Mortgage
Securities Corp., 1997-1
Passthrough Certificate Class B,
7.37%, 6/19/29 ..................... 520,844
431,500 Criimi Mae Financial Corp., Series 1,
Class A,
7.00%, 1/1/33 ...................... 429,073
1,000,000 Federal National Mortgage
Association, Series 1993-248,
Class SA, REMIC (c),
3.26%, 8/25/23 ..................... 827,940
653,517 GE Capital Mortgage Services
Incorporated, Series 1994-10, Class
A14, REMIC,
6.50%, 3/25/24 ..................... 649,439
989,845 Independent National Mortgage
Corp., 2026 Series 1997,
Class A (a)
7.85%, 12/26/26 .................... 998,407
500,000 Merrill Lynch Trust, Series XXXV,
Class C,
8.45%, 11/1/18 ..................... 532,965
700,000 Morgan Stanley Capital I
Incorporated, 1997 C1 Class B,
7.69%, 1/15/07 ..................... 753,375
946,467 Paine Webber Mortgage Acceptance
Corp., Series 1993-4, Class M1,
7.50%, 5/25/23 ..................... 958,002
742,544 PNC Mortgage Securities Corp.,
Series 1997-4, Class 2PP1,
7.50%, 7/25/27 ..................... 752,057
1,250,000 Resolution Trust Corp., Series 1995-1,
Class A2C,
7.50%, 10/25/28 .................... 1,267,969
----------
Total Collateralized Mortgage
Obligations (cost $7,896,980) ...... 8,198,906
----------
</TABLE>
32
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
U.S. AGENCY OBLIGATIONS - 6.6%
Federal Home Loan Mortgage Corp.:
$ 994,432 7.08%, 1/1/98 .................. $ 1,029,535
750,000 Global Note,
6.70%, 1/5/07 ................... 783,398
-----------
Total U. S. Agency Obligations
(cost $1,768,200) ............... 1,812,933
-----------
U.S. TREASURY OBLIGATIONS - 6.9% (cost $1,879,313)
1,790,000 U.S. Treasury Notes,
6.63%, 5/15/07 .................. 1,894,608
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
FOREIGN BOND - (NON-US DOLLAR DENOMINATED) - 6.0%
Nykredit:
7,130,000
DKK 6.00%, 10/1/26 ................. $ 1,014,052
4,295,000
DKK 7.00%, 10/1/29 ................. 619,625
-----------
Total Foreign Bond-(Non-US Dollar
Denominated)
(cost $1,604,634) ............... 1,633,677
-----------
Total Investments
(cost $26,088,206)..... 97.2% 26,616,224
Other Assets and
Liabilities-Net ....... 2.8 778,292
----- -----------
Net Assets ............. 100.0% $27,394,516
====== ===========
</TABLE>
(a) Securities that may be sold to qualified institutional buyers under Rule
144A or securities offered pursuant to Section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
(b) The estimated maturity of a Collateralized Mortgage Obligation (CMO) is
based on current and projected prepayment rates. Changes in interest rates can
cause the estimated maturity to differ from the listed date.
(c) Inverse floater, resets monthly.
Legend of Portfolio Abbreviations:
DKK Danish Krone
REMIC Real Estate Mortgage Investment Conduit
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
Forward Foreign Currency Exchange Contracts
to Sell
U.S. $ Value at In Exchange Net Unrealized
Exchange Date Contracts to Deliver December 31, 1997 for U.S. $ Appreciation
- - --------------- -------------------------- ------------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
1/14/98 4,162,000 Danish Krone 607,863 626,241 $18,378
1/16/98 6,697,000 Danish Krone 978,204 1,005,103 26,899
-------
$45,277
=======
</TABLE>
See Combined Notes to Financial Statements.
33
<PAGE>
EVERGREEN
Intermediate Term Bond Fund II
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
CORPORATE BONDS - 17.3%
Banks - 4.8%
$ 500,000 Cenfed Financial Corp.,
Senior Debenture (a),
11.17%, 12/15/01 ................... $ 560,625
800,000 Harris Bancorp.,
9.38%, 6/1/01 ...................... 876,250
2,000,000 NationsBank Corp.,
8.13%, 6/15/02 ..................... 2,147,330
4,000,000 NBD Bank N.A.,
Subordinated Note,
8.25%, 11/1/24 ..................... 4,749,712
----------
8,333,917
----------
Finance & Insurance - 7.4%
6,500,000 Associates Corp. North America, Note,
5.96%, 5/15/37 ..................... 6,618,969
2,500,000 General Electric Capital Corp.,
6.72%, 12/17/07 .................... 2,508,505
1,000,000 Goldman Sachs Group L.P. (a),
6.38%, 6/15/00 ..................... 1,000,729
1,500,000 Grand Metropolitan Investment Corp.,
6.50%, 9/15/99 ..................... 1,514,306
1,000,000 KFW International Finance,
Guaranteed Note,
8.85%, 6/15/99 ..................... 1,045,202
----------
12,687,711
----------
Industrial Specialty Products &
Services - 3.0%
2,000,000 Baxter International, Inc.,
9.25%, 12/15/99 .................... 2,112,946
600,000 Deere & Co.,
8.95%, 6/15/19 ..................... 717,509
2,000,000 Jet Equipment Trust (a),
9.41%, 6/15/10 ..................... 2,407,882
----------
5,238,337
----------
Utilities - 2.1%
1,100,000 ALLTEL Corp.,
6.50%, 11/1/13 ..................... 1,104,280
2,000,000 Carolina Power & Light Co.,
8.63%, 9/15/21 ..................... 2,457,978
----------
3,562,258
----------
Total Corporate Bonds
(cost $28,290,350).................. 29,822,223
----------
MORTGAGE-BACKED SECURITIES - 33.6%
Contimortgage Home Equity
Loan Trust:
3,825,000 6.26%, 7/15/12 .................... 3,826,147
3,113,986 6.37%, 3/15/08 ................... 3,114,360
Federal Home Loan Mortgage Corp.:
1,820,207 7.50%, 5/1/09 .................... 1,870,833
1,118,623 8.00%, 10/1/25 .................... 1,159,844
2,857,320 6.47%, 10/1/07 .................... 2,891,684
1,725,875 6.55%, 3/22/98 .................... 1,786,850
Federal National Mortgage Association:
1,839,972 6.56%, 10/1/07 .................... 1,892,393
941,798 6.69%, 3/13/98 .................... 974,637
1,591,126 6.21%, 10/1/07 .................... 1,620,926
1,820,250 6.48%, 10/1/07 .................... 1,837,633
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MORTGAGE-BACKED SECURITIES - continued
$3,600,000 Federal National Mortgage
Association, MTN,
6.92%, 3/19/07 .................... $3,823,024
9,437,555 Federal National Mortgage
Association, REMIC,
5.50%, 2/25/15 .................... 9,403,391
Government National Mortgage
Association:
7,556,990 6.50%, 1/1/98 - 3/15/26 ........... 7,651,830
4,822,973 7.00%, 10/1/07 - 6/20/26 .......... 4,904,863
2,554,969 7.13%, 10/1/07 .................... 2,620,044
3,468,409 7.50%, 9/15/23 - 3/15/26 .......... 3,558,483
2,872,292 8.00%, 10/15/24 ................... 2,981,798
1,107,003 9.00%, 4/15/20 - 8/15/21 .......... 1,185,185
493,769 9.50%, 2/15/21 .................... 534,813
143,106 Paine Webber Trust P-3,
9.00%, 10/1/12 ..................... 143,101
----------
Total Mortgage-Backed Securities
(cost $57,189,450) ................. 57,781,839
----------
U. S. AGENCY OBLIGATIONS - 1.7%
(cost $2,659,683)
2,500,000 Farm Credit Systems Financial
Assistance Co.,
8.80%, 6/10/05 ..................... 2,915,815
----------
U.S. TREASURY OBLIGATIONS - 25.2%
U.S. Treasury Bonds:
24,380,000 6.88%, 8/15/25 .................... 27,183,724
1,400,000 8.75%, 5/15/17 .................... 1,835,313
3,950,000 8.88%, 8/15/17 .................... 5,242,393
U.S. Treasury Notes:
1,400,000 5.13%, 12/31/98 ................... 1,393,877
6,100,000 6.38%, 1/15/99 .................... 6,145,756
1,600,000 8.25%, 7/15/98 .................... 1,623,501
----------
Total U. S. Treasury Obligations
(cost $40,840,045) ................. 43,424,564
----------
YANKEE OBLIGATIONS - 16.4%
Bayerische Landesbank
Girozen New York:
2,500,000 Tranche Sr 00001,
6.38%, 8/31/00 ..................... 2,528,920
2,000,000 Tranche Trust 00007,
6.20%, 2/9/06 ...................... 1,991,014
3,000,000 Hydro-Quebec,
8.00%, 2/1/13 ...................... 3,382,467
3,500,000 Japan Finance Corp.
Municipal Enterprises,
Guaranteed Bond,
6.85%, 4/15/06 ..................... 3,645,093
Korea Development Bank:
2,200,000 6.63%, 11/21/03 ................... 1,771,464
2,325,000 7.13%, 9/17/01 .................... 1,980,874
2,000,000 Manitoba Province (Canada),
8.00%, 4/15/02 ..................... 2,135,880
800,000 Petro Canada Ltd.,
8.60%, 1/15/10 ..................... 957,568
5,300,000 Philips Electers N V,
Debenture,
7.13%, 5/15/25 ..................... 5,635,856
</TABLE>
34
<PAGE>
EVERGREEN
Intermediate Term Bond Fund II
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
YANKEE OBLIGATIONS - continued
Svenska Handelsbanken,
$ 2,000,000 8.13%, 8/15/07 .................. $ 2,235,422
1,000,000 8.35%, 7/15/04 .................. 1,110,531
700,000 Westpac Banking,
Subordinated Debenture,
9.13%, 8/15/01 ................... 764,371
------------
Total Yankee Obligations
(cost $27,023,148)................ 28,139,460
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
REPURCHASE AGREEMENT - 4.6% (cost $7,964,035)
$ 7,964,035 Donaldson, Lufkin & Jenrette
Securities Corp., 6.50% dated
12/31/97, due 1/02/98,
maturity value $7,966,911 (b) .... $ 7,964,035
------------
Total Investments
(cost $163,966,711) ..... 98.8% 170,047,936
Other Assets and
Liabilities - Net ....... 1.2 2,094,710
----- ------------
Net Assets .............. 100.0% $172,142,646
====== ============
</TABLE>
(a) Securities that may be sold to qualified institutional buyers under Rule
144A or securities offered pursuant to Section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
(b) Collateralized by $5,699,000 U.S. Treasury Notes, 6.00% to 6.75%, due
3/31/98 to 4/30/00, value, including accrued interest, $5,811,848; $1,760,000
U.S. Treasury Bonds, 7.125% to 8.125%, due 8/15/21 to 2/15/23, value, including
accrued interest, $2,056,690; and $255,000 U.S. Treasury Bills 01/08/98, value
$254,788.
Legend of Portfolio Abbreviations:
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
See Combined Notes to Financial Statements.
35
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MORTGAGE-BACKED SECURITIES - 38.2%
$ 5,000,000 Federal Home Loan Mortgage Corp.,
5.60%, 2/15/13 ................. $ 4,988,515
3,860,212 Federal Home Loan Mortgage Corp.
Gold,
9.00%, 1/1/17 .................. 4,171,461
Federal National Mortgage Assn.:
3,000,000 6.50%, 6/25/22 ................ 3,024,870
3,544,018 7.00%, 3/1/24 ................. 3,587,928
2,000,000 7.50%, 2/11/02 ................ 2,113,596
3,979,606 6.37%, 3/1/06 ................. 3,989,058
3,500,000 6.40%, 12/1/07 ................ 3,511,900
1,000,000 U.S. Department of Veteran
Affairs,
7.00%, 5/15/12 ................. 1,006,500
-----------
Total Mortgage-Backed Securities
(cost $25,923,245) ............. 26,393,828
-----------
U.S. AGENCY OBLIGATIONS - 5.2%
1,300,000 Federal Home Loan Bank,
8.60%, 1/25/00 ................. 1,369,755
2,000,000 Federal National Mortgage Assn.,
7.88%, 2/24/05 ................. 2,216,782
-----------
Total U. S. Agency Obligations
(cost $3,322,332) .............. 3,586,537
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 55.2%
U.S. Treasury Notes:
$ 4,500,000 5.50%, 2/28/99 ................ $ 4,492,971
5,800,000 5.88%, 1/31/99 ................ 5,814,731
3,400,000 6.00%, 9/30/98 ................ 3,411,689
1,500,000 6.13%, 12/31/01 ............... 1,520,626
2,000,000 6.25%, 7/31/98 ................ 2,008,752
4,000,000 6.38%, 7/15/99 ................ 4,043,752
2,000,000 6.63%, 5/15/07 ................ 2,118,126
1,000,000 6.75%, 4/30/00 ................ 1,023,126
2,300,000 7.00%, 7/15/06 ................ 2,484,002
4,000,000 7.50%, 10/31/99................ 4,125,004
2,000,000 7.50%, 11/15/01 ............... 2,121,876
2,500,000 7.88%, 11/15/04 ............... 2,795,315
700,000 7.88%, 4/15/98 ................ 705,032
1,300,000 8.50%, 11/15/00 ............... 1,395,470
-----------
Total U. S. Treasury Obligations
(cost $37,458,100) ............. 38,060,472
-----------
Total Investments
(cost $66,703,677)..... 98.6% 68,040,837
Other Assets and
Liabilities - Net ..... 1.4 939,935
----- -----------
Net Assets ............ 100.0% $68,980,772
====== ===========
</TABLE>
See Combined Notes to Financial Statements.
36
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
ASSET-BACKED SECURITIES - 11.6%
$ 3,754,036 Advanta Home Equity
Loan Trust,
7.20%, 11/25/08 .... $3,817,742
367,247 Bank of West Trust,
9.50%, 2/15/05 ..... 366,902
4,000,000 Carco Auto Loan Master
Trust,
6.69%, 8/15/04 ..... 4,045,960
1,750,000 Case Equipment Loan
Trust,
1995 Class B,
6.45%, 9/15/02 ..... 1,763,632
2,500,000 Continental Airlines
Pass Through Trust,
1997 1B,
7.46%, 4/1/13 ...... 2,636,000
1,764,324 EQCC Home Equity Loan
Trust,
5.82%, 9/15/09 ..... 1,759,278
1,261,166 First Bank Auto
Receivable,
8.30%, 1/15/00 ..... 1,271,545
1,942,182 First Security Auto
Grantor Trust,
6.25%, 1/15/01 ..... 1,947,232
161,710 Fleet Financial Home
Equity Trust,
6.70%, 10/15/06 .... 162,367
5,652,345 Fleetwood Credit
Grantor Trust,
4.95%, 8/15/08 ..... 5,581,973
5,000,000 Iroquois Trust,
6.68%, 11/10/03 .... 5,035,156
5,000,000 Life Financial Home
Loan Owner Trust,
6.79%, 10/25/11 .... 5,025,500
1,060,470 SCFC Recreational
Vehicle Loan Trust,
7.25%, 9/15/06 ..... 1,064,171
Western Financial
Grantor Trust,
1,599,201 6.20%, 2/1/02 .... 1,603,151
3,603,954 5.88%, 3/1/02 .... 3,598,585
6,237,535 Xerox Rental Equipment
Trust,
Series 1996 A (a),
6.20%, 3/26/97 ..... 6,239,484
----------
Total Asset-Backed
Securities
(cost $45,462,472) . 45,918,678
----------
CORPORATE BONDS - 22.4%
Banks - 6.1%
3,400,000 Abbey National PLC,
6.69%, 10/17/05 .... 3,432,038
3,350,000 Amsouth
Bancorporation,
Debenture,
6.75%, 11/1/25 ..... 3,394,157
3,000,000 Cenfed Financial
Corporation, Senior
Debenture (a),
11.17%, 12/15/01 ... 3,363,750
2,000,000 Chase Manhattan
Corporation,
Subordinated Note,
8.00%, 5/15/04 ..... 2,056,960
First Chicago
Corporation,
Subordinated Note:
4,000,000 9.00%, 6/15/99 ... 4,163,276
2,000,000 9.20%, 12/17/01 .. 2,206,458
5,000,000 First Security
Corporation,
6.40%, 2/10/03 ..... 5,013,120
500,000 Security Pacific
Corporation, Note,
10.45%, 5/8/01 ..... 562,966
----------
24,192,725
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
CORPORATE BONDS - continued
Finance &
Insurance - 12.3%
$2,000,000 American Express
Credit
Corporation, Step Up
Bond
(effective yield
5.57%) (b),
6.25%, 8/10/05 ..... $2,017,906
3,000,000 Associated P&C
Holdings, Inc.,
Guaranteed Senior Note
(a),
6.75%, 7/15/03 ..... 2,961,999
3,000,000 Bear Stearns Co.,
Inc.,
7.63%, 4/15/00 ..... 3,096,093
1,000,000 Horace Mann Educators
Corporation,
6.63%, 1/15/06 ..... 1,001,893
Lehman Brothers
Holdings, Inc.:
5,000,000 6.63%, 11/15/00 .. 5,041,225
2,500,000 6.84%, 10/7/99 ... 2,522,292
5,000,000 8.88%, 3/1/02 .... 5,426,065
Metropolitan Life
Insurance Co.,
Surplus Note (a):
5,000,000 6.30%, 11/1/03 ... 4,925,525
5,000,000 7.00%, 11/1/05 ... 5,104,715
5,000,000 Money Store, Inc.,
7.88%, 9/15/00 ..... 5,140,000
7,000,000 Salomon Incorporated,
Note,
7.20%, 2/1/04 ...... 7,249,242
4,000,000 Traveler's Group,
Inc., Note,
6.88%, 6/1/25 ...... 4,122,180
----------
48,609,135
----------
Healthcare Products &
Services - 2.6%
10,000,000 Columbia/HCA
Healthcare
Corporation,
6.88%, 7/15/01 ..... 10,023,300
----------
Industrial Specialty
Products &
Services - 1.4%
5,000,000 GTE Corporation,
10.25%, 11/1/20 .... 5,666,650
----------
Total Corporate Bonds
(cost $86,866,697).. 88,491,810
----------
FOREIGN BONDS-(US DOLLAR DENOMINATED) - 7.2%
5,000,000 Boral Limited
Australia Co., Medium
Term Notes (a),
7.90%, 11/19/99 .... 5,157,495
6,000,000 Korea Development
Bank,
7.38%, 9/17/04 ..... 4,924,836
5,000,000 Korea Development Bank
(d),
7.25%, 5/15/06 ..... 3,939,615
6,000,000 National Bank of
Canada,
8.13%, 8/15/04 ..... 6,529,920
6,500,000 Petroliam Nasional
Berhad (a),
7.13%, 10/18/06 .... 6,044,402
2,000,000 Ras Laffan Liquefied
Natural Gas (a),
7.69%, 9/15/06 ..... 1,909,421
----------
Total Foreign Bonds -
(US Dollar
Denominated)
(cost $30,983,680) . 28,505,689
----------
MORTGAGE-BACKED SECURITIES - 37.4%
3,150,000 Chase Commercial
Mortgage Security
Corporation,
6.90%, 11/19/28 .... 3,185,154
2,799,847 CMC Securities
Corporation,
10.00%, 7/25/23 .... 2,944,109
</TABLE>
37
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MORTGAGE-BACKED SECURITIES - continued
$ 2,500,000 DLJ Mortgage Acceptance Corporation,
7.95%, 6/18/03 .................... $ 2,653,125
Federal Home Loan Mortgage
Corporation:
6,050,000 6.48%, 7/10/00 ................... 6,075,779
305,337 6.75%, 2/15/04 ................... 305,190
3,977,333 6.80%, 10/15/05 .................. 3,995,311
2,000,000 6.97%, 6/16/05 ................... 2,034,164
7,743,877 7.40%, 10/15/05 .................. 7,822,501
2,200,000 7.99%, 3/23/05 ................... 2,211,044
347,976 10.50%, 9/1/15 ................... 381,360
Federal Housing Administration-
Puttable Project Loans,
GMAC 56,
3,985,254 7.43%, 11/1/22 ................... 4,114,775
Merrill Lynch 199,
4,637,998 8.43%, 2/1/20 .................... 4,834,371
Reilly 18,
2,897,234 6.88%, 4/1/15 .................... 2,868,262
Reilly 55,
1,561,250 7.43%, 3/1/24 .................... 1,625,761
Reilly 64,
10,230,187 7.43%, 1/1/24 .................... 10,666,198
USGI,
5,290,511 7.43%, 7/1/22 .................... 5,525,568
Federal National Mortgage
Association:
1,500,000 5.30%, 8/25/98 ................... 1,496,168
500,000 6.00%, 12/15/00 .................. 497,958
1,819,353 6.23%, 12/25/25 .................. 1,817,661
7,500,000 6.64%, 6/19/00 ................... 7,525,342
5,000,000 7.11%, 8/7/01 .................... 5,001,785
2,500,000 7.65%, 5/4/05 .................... 2,517,133
2,100,000 8.00%, 11/25/06 .................. 2,194,057
9,000,000 8.10%, 4/25/25 ................... 9,382,959
8,414,390 11.00%, 1/1/99 ................... 9,655,512
38,214 14.00%, 6/1/11 ................... 44,059
Federal National Mortgage Association
Medium Term Notes:
9,537,452 6.00%, 11/25/02 .................. 9,480,824
4,999,177 6.02%, 4/14/98 ................... 5,005,526
1,175,585 GCC Second Mortgage Trust,
10.00%, 7/15/05 ................... 1,185,812
4,621,736 Government National Mortgage
Association,
7.50%, 11/20/08 ................... 4,682,845
4,000,000 Kidder Peabody Acceptance
Corporation,
6.65%, 2/1/06 ..................... 4,086,920
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MORTGAGE-BACKED SECURITIES - continued
Potomac Gurnee Finance Corporation:
$ 2,465,980 6.89%, 12/21/26 .................. $ 2,531,772
2,500,000 7.00%, 12/21/26 .................. 2,565,925
Prudential Home Mortgage Securities:
2,556,469 6.30%, 10/25/99 .................. 2,554,373
4,788,537 6.50%, 10/25/08 .................. 4,779,534
3,885,216 Prudential Securities Secured
Financing
Corporation,
8.12%, 2/15/25 .................... 4,067,200
5,524,190 Saxon Mortgage Securities
Corporation,
7.38%, 9/25/23 .................... 5,585,381
------------
Total Mortgage-Backed Securities
(cost $145,559,298) ............... 147,901,418
------------
U.S. AGENCY OBLIGATIONS - 0.8% (cost $3,150,000)
3,150,000 Federal Home Loan Bank,
Consolidated Bond,
6.55%, 12/18/02 ................... 3,153,953
------------
Total U. S. Agency Obligations .... 3,153,953
------------
U.S. TREASURY OBLIGATIONS - 18.6%
U.S. Treasury Notes:
17,500,000 6.13%, 8/15/07 ................... 17,992,205
18,000,000 6.25%, 2/15/07 ................... 18,585,018
4,980,000 7.00%, 7/15/06 ................... 5,378,405
2,000,000 7.13%, 9/30/99 ................... 2,048,126
11,000,000 7.75%, 11/30/99 .................. 11,409,068
17,400,000 8.88%, 2/15/99 ................... 17,998,143
------------
Total U. S. Treasury Obligations
(cost $75,131,553) ................ 73,410,965
------------
TAXABLE MUNICIPAL BOND - 0.8% (cost $2,885,285)
2,900,000 Virginia State Housing Development
Authority,
7.00%, 1/1/14 ..................... 3,028,151
------------
COMMERCIAL PAPER - 0.9% (cost $3,658,503)
3,671,000 Broadway Capital Corporation
6.45%, 1/20/98 (e) ................ 3,658,503
------------
REPURCHASE AGREEMENT - 0.5% (cost $2,147,327)
2,147,327 Donaldson, Lufkin & Jenrette
Securities
Corp., 5.60% dated 12/30/97, due
01/02/98, maturity value
$2,147,995 (c)..................... 2,147,327
------------
Total Investments -
(cost $395,844,815)..... 100.2% 396,216,494
Other Assets and
Liabilities - Net ...... ( 0.2) (708,006)
------ ------------
Net Assets .............. 100.0% $395,508,488
====== ============
</TABLE>
(a) Securities that may be sold to qualified institutional buyers under Rule
144A or securities offered pursuant to Section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
(b) Effective yield (calculated at the time of purchase) is the yield at which
the bond accretes on an annual basis until maturity date.
(c) Collateralized by $1,773,000 U.S. Treasury Notes, 5.625% to 7.125%, due
9/30/99 to 8/15/02, maturity value, including accrued interest - $1,849,661;
$60,000 U.S. Treasury Bonds, 15,75%, due 11/15/01, maturity value,
including accrued interest - $66,775; $238,000 U.S. Treasury Bills,
2/12/98, value, including accrued interest - $231,898.
(d) Security on loan. See Note 3.
(e) Represents investment of cash collateral received for securities on loan.
See Combined Notes to Financial Statements.
38
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Assets and Liabilities
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Capital Intermediate
Preservation Bond
Fund Fund
-------------- ---------------
<S> <C> <C>
Assets
Investments at market value (identified
cost - $45,934,188, $26,088,206, $163,966,711,
$66,703,677 and $395,844,815, respectively)................. $ 46,329,136 $ 26,616,224
Cash ........................................................ 61 0
Interest receivable ......................................... 412,222 388,598
Principal paydown receivable ................................ 255,827 0
Receivable for Fund shares sold ............................. 34,328 89,647
Receivable for investments sold ............................. 0 534,194
Unrealized appreciation on forward foreign currency
contracts .................................................. 0 45,277
Receivable for closed forward foreign currency contracts..... 0 1,165
Prepaid expenses and other assets ........................... 25,269 39,773
- - -------------------------------------------------------------- ------------ ------------
Total assets .............................................. 47,056,843 27,714,878
- - -------------------------------------------------------------- ------------ ------------
Liabilities
Payable for investments purchased ........................... 505,238 0
Payable for securities on loan .............................. 0 0
Dividends payable ........................................... 88,464 56,609
Payable for Fund shares redeemed ............................ 84,301 5,331
Accrued shareholders' reports expense ....................... 22,336 26,921
Distribution fee payable .................................... 13,154 1,335
Advisory fee payable ........................................ 7,667 23,759
Due to related parties ...................................... 1,880 4,183
Accrued Trustees' fees and expenses ......................... 419 1,326
Due to custodian ............................................ 0 194,893
Accrued expenses and other liabilities ...................... 2,535 6,005
- - -------------------------------------------------------------- ------------ ------------
Total liabilities .................................. ...... 725,994 320,362
- - ------------------------------------------------------- ------ ------------ ------------
Net assets ................................................... $ 46,330,849 $ 27,394,516
============================================================== ============ ============
Net assets represented by
Paid-in capital ............................................. $ 52,939,180 $ 30,648,839
Undistributed net investment income (accumulated
distributions in excess of net investment income) .......... (94,780) 243,588
Accumulated net realized loss on investments and
foreign currency related transactions ...................... (6,908,499) (4,070,541)
Net unrealized appreciation on investments and foreign
currency related transactions .............................. 394,948 572,630
- - -------------------------------------------------------------- ------------ ------------
Total net assets .......................................... $ 46,330,849 $ 27,394,516
- - -------------------------------------------------------------- ------------ ------------
Net assets consist of
Class A ..................................................... $ 13,135,445 $ 9,696,792
Class B ..................................................... 29,053,200 10,290,198
Class C ..................................................... 4,142,204 7,407,526
Class Y ..................................................... - -
- - -------------------------------------------------------------- ------------ ------------
$ 46,330,849 $ 27,394,516
- - -------------------------------------------------------------- ------------ ------------
Shares outstanding
Class A ..................................................... 1,341,858 1,061,819
Class B ..................................................... 2,965,838 1,125,211
Class C ..................................................... 423,208 810,318
Class Y ..................................................... - -
- - -------------------------------------------------------------- ------------ ------------
Net asset value per share
Class A ..................................................... $ 9.79 $ 9.13
- - -------------------------------------------------------------- ------------ ------------
Class A - Offering price (based on sales charge
of 3.25%) .................................................. $ 10.12 $ 9.44
- - -------------------------------------------------------------- ------------ ------------
Class B ..................................................... $ 9.80 $ 9.15
- - -------------------------------------------------------------- ------------ ------------
Class C ..................................................... $ 9.79 $ 9.14
- - -------------------------------------------------------------- ------------ ------------
Class Y ..................................................... - -
- - -------------------------------------------------------------- ------------ ------------
<CAPTION>
Intermediate Intermediate Short
Bond Government Intermediate
Fund II Fund Fund
--------------- --------------- ---------------
<S> <C> <C> <C>
Assets
Investments at market value (identified
cost - $45,934,188, $26,088,206, $163,966,711,
$66,703,677 and $395,844,815, respectively)................. $170,047,936 $ 68,040,837 $ 396,216,494
Cash ........................................................ 0 45,491 0
Interest receivable ......................................... 2,247,330 972,080 5,807,232
Principal paydown receivable ................................ 0 0 0
Receivable for Fund shares sold ............................. 419,095 49,300 426,206
Receivable for investments sold ............................. 34,861 0 300,476
Unrealized appreciation on forward foreign currency
contracts .................................................. 0 0 0
Receivable for closed forward foreign currency contracts..... 0 0 0
Prepaid expenses and other assets ........................... 21,839 24,082 48,160
- - --------------------------------------------------------------- ------------ ------------ -------------
Total assets .............................................. 172,771,061 69,131,790 402,798,568
- - --------------------------------------------------------------- ------------ ------------ -------------
Liabilities
Payable for investments purchased ........................... 0 0 0
Payable for securities on loan .............................. 0 0 3,657,468
Dividends payable ........................................... 0 45,240 958,531
Payable for Fund shares redeemed ............................ 486,519 1,141 2,204,723
Accrued shareholders' reports expense ....................... 5,109 42,370 13,166
Distribution fee payable .................................... 1,195 968 16,170
Advisory fee payable ........................................ 87,649 40,263 168,410
Due to related parties ...................................... 3,576 3,909 11,506
Accrued Trustees' fees and expenses ......................... 15,308 6,461 20,717
Due to custodian ............................................ 0 0 224,862
Accrued expenses and other liabilities ...................... 29,059 10,666 14,527
- - --------------------------------------------------------------- ------------ ------------ -------------
Total liabilities .................................. ...... 628,415 151,018 7,290,080
- - ------------------------------------------------------- ------- ------------ ------------ -------------
Net assets ................................................... $172,142,646 $ 68,980,772 $ 395,508,488
- - --------------------------------------------------------------- ------------ ------------ -------------
Net assets represented by
Paid-in capital ............................................. $169,614,998 $ 69,549,589 $ 411,625,789
Undistributed net investment income (accumulated
distributions in excess of net investment income) .......... 26,139 6,419 43,731
Accumulated net realized loss on investments and
foreign currency related transactions ...................... (3,579,716) (1,912,396) (16,532,711)
Net unrealized appreciation on investments and foreign
currency related transactions .............................. 6,081,225 1,337,160 371,679
- - --------------------------------------------------------------- ------------ ------------ -------------
Total net assets .......................................... $172,142,646 $ 68,980,772 $ 395,508,488
- - --------------------------------------------------------------- ------------ ------------ -------------
Net assets consist of
Class A ..................................................... $ 3,179,900 $ 516,149 $ 16,193,072
Class B ..................................................... 1,168,402 834,805 20,433,121
Class C ..................................................... 54,074 123,373 896,687
Class Y ..................................................... 167,740,270 67,506,445 357,985,608
- - --------------------------------------------------------------- ------------ ------------ -------------
$172,142,646 $ 68,980,772 $ 395,508,488
- - --------------------------------------------------------------- ------------ ------------ -------------
Shares outstanding
Class A ..................................................... 304,033 50,708 1,640,254
Class B ..................................................... 111,686 82,012 2,065,547
Class C ..................................................... 5,168 12,121 90,658
Class Y ..................................................... 16,037,542 6,632,149 36,263,191
- - --------------------------------------------------------------- ------------ ------------ -------------
Net asset value per share
Class A ..................................................... $ 10.46 $ 10.18 $ 9.87
- - --------------------------------------------------------------- ------------ ------------- -------------
Class A - Offering price (based on sales charge
of 3.25%) .................................................. $ 10.81 $ 10.52 $ 10.20
- - --------------------------------------------------------------- ------------ ------------ -------------
Class B ..................................................... $ 10.46 $ 10.18 $ 9.89
- - --------------------------------------------------------------- ------------ ------------ -------------
Class C ..................................................... $ 10.46 $ 10.18 $ 9.89
- - --------------------------------------------------------------- ------------ ------------ -------------
Class Y ..................................................... $ 10.46 $ 10.18 $ 9.87
- - --------------------------------------------------------------- ------------ ------------ -------------
</TABLE>
See Combined Notes to Financial Statements.
39
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Operations
Six Months Ended December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Capital Intermediate
Preservation Bond
Fund Fund
-------------- ---------------
<S> <C> <C>
Investment income
Interest (net of foreign withholding taxes of $0, $1,938,
$0, $0 and $0, respectively)................................. $1,708,027 $1,001,862
- - --------------------------------------------------------------- ---------- ----------
Expenses
Distribution Plan expenses ................................... 189,641 101,495
Management fee ............................................... 158,929 89,434
Transfer agent fees .......................................... 46,005 32,282
Registration and filing fees ................................. 28,370 22,807
Shareholders reports expense ................................. 26,820 19,617
Professional fees ............................................ 11,292 13,317
Custodian fees ............................................... 9,197 1,583
Administrative services fees ................................. 4,806 3,860
Trustees' fees and expenses .................................. 2,102 1,157
Other ........................................................ 119 1,566
Fee waivers and/or expense reimbursement ..................... (124,678) (68,786)
- - --------------------------------------------------------------- ---------- ----------
Total expenses .............................................. 352,603 218,332
Less: Indirectly paid expenses ............................... (599) (290)
- - --------------------------------------------------------------- ---------- ----------
Net expenses ................................................ 352,004 218,042
- - --------------------------------------------------------------- ---------- ----------
Net investment income ........................................ 1,356,023 783,820
- - --------------------------------------------------------------- ---------- ----------
Net realized and unrealized gain (loss) on investments and
foreign currency related transactions
Net realized gain (loss) on:
Investments ................................................. 87,851 144,860
Foreign currency related transactions ....................... 0 (165,385)
- - --------------------------------------------------------------- ---------- ----------
Net realized gain (loss) on investments and foreign
currency related transactions ............................... 87,851 (20,525)
- - --------------------------------------------------------------- ---------- ----------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................. (147,060) 634,430
Foreign currency related transactions ....................... 0 8,003
- - --------------------------------------------------------------- ---------- ----------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency related transactions ....... (147,060) 642,433
- - --------------------------------------------------------------- ---------- ----------
Net realized and unrealized gain (loss) on investments and
foreign currency related transactions ....................... (59,209) 621,908
- - --------------------------------------------------------------- ---------- ----------
Net increase in net assets resulting from operations ......... $1,296,814 $1,405,728
- - --------------------------------------------------------------- ---------- ----------
<CAPTION>
Intermediate Intermediate Short
Bond Government Intermediate
Fund II Fund Fund
--------------- --------------- ---------------
<S> <C> <C> <C>
Investment income
Interest (net of foreign withholding taxes of $0, $1,938,
$0, $0 and $0, respectively)................................. $5,564,512 $2,316,276 $13,829,983
- - ---------------------------------------------------------------- ---------- ---------- -----------
Expenses
Distribution Plan expenses ................................... 10,065 4,626 121,125
Management fee ............................................... 510,150 219,052 995,999
Transfer agent fees .......................................... 9,912 1,840 110,043
Registration and filing fees ................................. 19,278 2,339 33,760
Shareholders reports expense ................................. 5,109 42,370 19,773
Professional fees ............................................ 10,315 7,774 18,616
Custodian fees ............................................... 21,832 11,547 77,763
Administrative services fees ................................. 29,005 12,396 67,623
Trustees' fees and expenses .................................. 13,246 6,649 7,430
Other ........................................................ 2,596 8,211 4,476
Fee waivers and/or expense reimbursement ..................... (2,964) (547) 0
- - ---------------------------------------------------------------- ---------- ---------- -----------
Total expenses .............................................. 628,544 316,257 1,456,608
Less: Indirectly paid expenses ............................... (1,111) (594) (4,753)
- - ---------------------------------------------------------------- ---------- ---------- -----------
Net expenses ................................................ 627,433 315,663 1,451,855
- - ---------------------------------------------------------------- ---------- ---------- -----------
Net investment income ........................................ 4,937,079 2,000,613 12,378,128
================================================================ ========== ========== ===========
Net realized and unrealized gain (loss) on investments and
foreign currency related transactions
Net realized gain (loss) on:
Investments ................................................. 903,389 260,437 (532,970)
Foreign currency related transactions ....................... 0 0 0
- - ---------------------------------------------------------------- ---------- ---------- -----------
Net realized gain (loss) on investments and foreign
currency related transactions ............................... 903,389 260,437 (532,970)
- - ---------------------------------------------------------------- ---------- ---------- -----------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................. 3,798,465 866,365 2,291,232
Foreign currency related transactions ....................... 0 0 0
- - ---------------------------------------------------------------- ---------- ---------- -----------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency related transactions ....... 3,798,465 866,365 2,291,232
- - ---------------------------------------------------------------- ---------- ---------- -----------
Net realized and unrealized gain (loss) on investments and
foreign currency related transactions ....................... 4,701,854 1,126,802 1,758,262
- - ---------------------------------------------------------------- ---------- ---------- -----------
Net increase in net assets resulting from operations ......... $9,638,933 $3,127,415 $14,136,390
- - --------------------------------------------------------------- ---------- ---------- -----------
</TABLE>
See Combined Notes to Financial Statements.
40
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Changes in Net Assets
Six Months Ended December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Capital Intermediate
Preservation Bond
Fund Fund
---------------- ---------------
<S> <C> <C>
Operations
Net investment income ...................................... $ 1,356,023 $ 783,820
Net realized gain (loss) on investments and foreign
currency related transactions ............................. 87,851 (21,690)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency related transactions ..... (147,060) 643,598
- - ------------------------------------------------------------- -------------- ------------
Net increase in net assets resulting from operations ...... 1,296,814 1,405,728
- - ------------------------------------------------------------- -------------- ------------
Distributions to shareholders from
Net investment income
Class A ................................................... (444,246) (307,179)
Class B ................................................... (803,044) (291,440)
Class C ................................................... (107,700) (184,400)
Class Y ................................................... 0 0
- - ------------------------------------------------------------- -------------- ------------
Total distributions to shareholders ....................... (1,354,990) (783,019)
- - ------------------------------------------------------------- -------------- ------------
Capital share transactions
Proceeds from shares sold .................................. 7,110,867 2,651,261
Proceeds from reinvestment of distributions ................ 908,221 460,930
Payment for shares redeemed ................................ (14,449,750) (5,307,968)
- - ------------------------------------------------------------- -------------- ------------
Net increase (decrease) in net assets resulting from
capital share transactions ............................... (6,430,662) (2,195,777)
- - ------------------------------------------------------------- -------------- ------------
Total increase (decrease) in net assets .................. (6,488,838) (1,573,068)
Net assets
Beginning of period ........................................ 52,819,687 28,967,584
- - ------------------------------------------------------------- -------------- ------------
End of period .............................................. $ 46,330,849 $ 27,394,516
- - ------------------------------------------------------------- -------------- ------------
Undistributed net investment income (accumulated
distributions in excess of net investment income) .......... $ (94,780) $ 243,588
- - ------------------------------------------------------------- -------------- ------------
<CAPTION>
Intermediate Intermediate Short
Bond Government Intermediate
Fund II Fund Fund
--------------- ---------------- ---------------
<S> <C> <C> <C>
Operations
Net investment income ...................................... $ 4,937,079 $ 2,000,613 $ 12,378,128
Net realized gain (loss) on investments and foreign
currency related transactions ............................. 903,389 260,437 (532,970)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency related transactions ..... 3,798,465 866,365 2,291,232
- - -------------------------------------------------------------- ------------- -------------- -------------
Net increase in net assets resulting from operations ...... 9,638,933 3,127,415 14,136,390
- - -------------------------------------------------------------- ------------- -------------- -------------
Distributions to shareholders from
Net investment income
Class A ................................................... (88,512) (15,511) (528,070)
Class B ................................................... (28,255) (15,409) (563,495)
Class C ................................................... (1,298) (2,330) (24,877)
Class Y ................................................... (4,787,769) (1,955,847) (11,201,752)
- - -------------------------------------------------------------- ------------- -------------- -------------
Total distributions to shareholders ....................... (4,905,834) (1,989,097) (12,318,194)
- - -------------------------------------------------------------- ------------- -------------- -------------
Capital share transactions
Proceeds from shares sold .................................. 28,977,786 9,750,111 64,737,517
Proceeds from reinvestment of distributions ................ 3,171,538 1,684,753 6,375,431
Payment for shares redeemed ................................ (25,165,392) (16,505,618) (76,026,308)
- - -------------------------------------------------------------- ------------- -------------- -------------
Net increase (decrease) in net assets resulting from
capital share transactions ............................... 6,983,932 (5,070,754) (4,913,360)
- - -------------------------------------------------------------- ------------- -------------- -------------
Total increase (decrease) in net assets .................. 11,717,031 (3,932,436) (3,095,164)
Net assets
Beginning of period ........................................ 160,425,615 72,913,208 398,675,652
- - -------------------------------------------------------------- ------------- -------------- -------------
End of period .............................................. $ 172,142,646 $ 68,980,772 $ 395,508,488
- - -------------------------------------------------------------- ------------- -------------- -------------
Undistributed net investment income (accumulated
distributions in excess of net investment income) .......... $ 26,139 $ 6,419 $ 43,731
- - -------------------------------------------------------------- ------------- -------------- -------------
</TABLE>
See Combined Notes to Financial Statements.
41
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Changes in Net Assets
Prior Periods
<TABLE>
<CAPTION>
Capital Preservation Fund
-------------------------------------
Nine Months Year
Ended Ended
June 30, 1997* September 30, 1996
---------------- --------------------
<S> <C> <C>
Operations
Net investment income .......................................... $ 2,537,291 $ 4,442,259
Net realized gain (loss) on investments and foreign currency
related transactions .......................................... (101,173) (549,777)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency related transactions ......... 279,120 648,310
- - ----------------------------------------------------------------- -------------- --------------
Net increase in net assets resulting from operations .......... 2,715,238 4,540,792
- - ----------------------------------------------------------------- -------------- --------------
Distributions to shareholders from Net investment income:
Class A ....................................................... (710,409) (1,089,444)
Class B ....................................................... (1,412,040) (2,568,398)
Class C ....................................................... (160,768) (147,748)
In excess of net investment income:
Class A ....................................................... (20,595) 0
Class B ....................................................... (40,936) 0
Class C ....................................................... (4,661) 0
Tax basis return of capital:
Class A ....................................................... 0 (52,292)
Class B ....................................................... 0 (123,279)
Class C ....................................................... 0 (7,092)
- - ----------------------------------------------------------------- -------------- --------------
Total distributions to shareholders ........................... (2,349,409) (3,988,253)
- - ----------------------------------------------------------------- -------------- --------------
Capital share transactions
Proceeds from shares sold ...................................... 8,631,265 12,691,883
Proceeds from reinvestment of distributions .................... 1,854,608 2,823,494
Payment for shares redeemed .................................... (28,964,306) (30,181,809)
- - ----------------------------------------------------------------- -------------- --------------
Net decrease in net assets resulting from capital share
transactions ................................................. (18,478,433) (14,666,432)
- - ----------------------------------------------------------------- -------------- --------------
Total decrease in net assets ................................. (18,112,604) (14,113,893)
Net assets
Beginning of period ............................................ 70,932,291 85,046,184
- - ----------------------------------------------------------------- -------------- --------------
End of period .................................................. $ 52,819,687 $ 70,932,291
- - ----------------------------------------------------------------- -------------- --------------
Undistributed net investment income (accumulated
distributions in excess of net investment income) .............. $ (95,813) $ (305,808)
- - ----------------------------------------------------------------- -------------- --------------
<CAPTION>
Intermediate Bond Fund
----------------------------------
Eleven Months Year
Ended Ended
June 30, 1997** July 31, 1996
----------------- ----------------
<S> <C> <C>
Operations
Net investment income .......................................... $ 1,846,301 $ 2,540,623
Net realized gain (loss) on investments and foreign currency
related transactions .......................................... 104,018 26,604
Net change in unrealized appreciation (depreciation) on
investments and foreign currency related transactions ......... 669,755 (730,346)
- - ------------------------------------------------------------------ -------------- --------------
Net increase in net assets resulting from operations .......... 2,620,074 1,836,881
- - ------------------------------------------------------------------ -------------- --------------
Distributions to shareholders from
Net investment income:
Class A ....................................................... (666,667) (898,299)
Class B ....................................................... (719,674) (1,028,103)
Class C ....................................................... (417,078) (576,335)
In excess of net investment income:
Class A ....................................................... 0 0
Class B ....................................................... 0 0
Class C ....................................................... 0 0
Tax basis return of capital:
Class A ....................................................... 0 0
Class B ....................................................... 0 0
Class C ....................................................... 0 0
- - ------------------------------------------------------------------ -------------- --------------
Total distributions to shareholders ........................... (1,803,419) (2,502,737)
- - ------------------------------------------------------------------ -------------- --------------
Capital share transactions
Proceeds from shares sold ...................................... 3,559,906 10,120,565
Proceeds from reinvestment of distributions .................... 1,095,398 1,417,473
Payment for shares redeemed .................................... (14,580,292) (15,524,524)
- - ------------------------------------------------------------------ -------------- --------------
Net decrease in net assets resulting from capital share
transactions ................................................. (9,924,988) (3,986,486)
- - ------------------------------------------------------------------ -------------- --------------
Total decrease in net assets ................................. (9,108,333) (4,652,342)
Net assets
Beginning of period ............................................ 38,075,917 42,728,259
- - ------------------------------------------------------------------ -------------- --------------
End of period .................................................. $ 28,967,584 $ 38,075,917
- - ------------------------------------------------------------------ -------------- --------------
Undistributed net investment income (accumulated
distributions in excess of net investment income) .............. $ 242,787 $ (21,199)
- - ------------------------------------------------------------------ -------------- --------------
</TABLE>
* During the period, the Fund changed its fiscal year end from September 30 to
June 30.
** During the period, the Fund changed its fiscal year end from July 31 to June
30.
See Combined Notes to Financial Statements.
42
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Changes in Net Assets (continued)
Prior Periods
<TABLE>
<CAPTION>
Intermediate
Bond
Fund II
------------------
Year
Ended
June 30, 1997
------------------
<S> <C>
Operations
Net investment income ................................................................ $ 9,811,049
Net realized loss on investments and foreign currency related transactions ........... (1,614,828)
Net change in unrealized appreciation (depreciation) on investments and foreign
currency related transactions ....................................................... 2,782,704
- - --------------------------------------------------------------------------------------- -------------
Net increase in net assets resulting from operations ................................ 10,978,925
- - --------------------------------------------------------------------------------------- -------------
Distributions to shareholders from
Net investment income
Class A ............................................................................. (179,161)
Class B ............................................................................. (36,467)
Class C ............................................................................. (1,275)
Class Y ............................................................................. (9,653,448)
In excess of net investment income
Class A ............................................................................. 0
Class B ............................................................................. 0
Class C ............................................................................. 0
Class Y ............................................................................. 0
Tax basis return of capital
Class A ............................................................................. (1,220)
Class B ............................................................................. (248)
Class C ............................................................................. (9)
Class Y ............................................................................. (65,758)
- - --------------------------------------------------------------------------------------- --------------
Total distributions to shareholders ................................................. (9,937,586)
- - --------------------------------------------------------------------------------------- --------------
Capital share transactions
Proceeds from shares sold ............................................................ 50,138,853
Proceeds from reinvestment of distributions .......................................... 6,780,391
Payment for shares redeemed .......................................................... (58,718,452)
- - --------------------------------------------------------------------------------------- --------------
Net increase (decrease) in net assets resulting from capital share transactions ..... (1,799,208)
- - --------------------------------------------------------------------------------------- --------------
Total increase (decrease) in net assets ............................................ (757,869)
Net assets
Beginning of period .................................................................. 161,183,484
- - --------------------------------------------------------------------------------------- --------------
End of period ........................................................................ $160,425,615
- - --------------------------------------------------------------------------------------- --------------
Accumulated distributions in excess of net investment income .......................... $ (5,106)
- - --------------------------------------------------------------------------------------- --------------
<CAPTION>
Intermediate Short
Government Intermediate
Fund Fund
------------------ -----------------
Year Year
Ended Ended
June 30, 1997 June 30, 1997
------------------ -----------------
<S> <C> <C>
Operations
Net investment income ................................................................ $ 5,023,428 $ 25,626,353
Net realized loss on investments and foreign currency related transactions ........... (16,049) (2,101,788)
Net change in unrealized appreciation (depreciation) on investments and foreign
currency related transactions ....................................................... 219,766 2,666,233
- - ---------------------------------------------------------------------------------------- ------------- ---------------
Net increase in net assets resulting from operations ................................ 5,227,145 26,190,798
- - ---------------------------------------------------------------------------------------- ------------- ---------------
Distributions to shareholders from
Net investment income
Class A ............................................................................. (31,632) (1,217,283)
Class B ............................................................................. (29,748) (1,225,460)
Class C ............................................................................. (1,189) (58,085)
Class Y ............................................................................. (4,959,781) (23,369,583)
In excess of net investment income
Class A ............................................................................. (97) 0
Class B ............................................................................. (91) 0
Class C ............................................................................. (4) 0
Class Y ............................................................................. (15,207) 0
Tax basis return of capital
Class A ............................................................................. 0 0
Class B ............................................................................. 0 0
Class C ............................................................................. 0 0
Class Y ............................................................................. 0 0
- - ---------------------------------------------------------------------------------------- --------------- ---------------
Total distributions to shareholders ................................................. (5,037,749) (25,870,411)
- - ---------------------------------------------------------------------------------------- --------------- ---------------
Capital share transactions
Proceeds from shares sold ............................................................ 35,487,793 122,641,025
Proceeds from reinvestment of distributions .......................................... 3,993,534 15,137,626
Payment for shares redeemed .......................................................... (54,650,906) (132,309,835)
- - ---------------------------------------------------------------------------------------- --------------- ---------------
Net increase (decrease) in net assets resulting from capital share transactions ..... (15,169,579) 5,468,816
- - ---------------------------------------------------------------------------------------- --------------- ---------------
Total increase (decrease) in net assets ............................................ (14,980,183) 5,789,203
Net assets
Beginning of period .................................................................. 87,893,391 392,886,449
- - ---------------------------------------------------------------------------------------- --------------- ---------------
End of period ........................................................................ $ 72,913,208 $ 398,675,652
- - ---------------------------------------------------------------------------------------- --------------- ---------------
Accumulated distributions in excess of net investment income .......................... $ (5,097) $ (16,203)
- - ---------------------------------------------------------------------------------------- --------------- ---------------
</TABLE>
See Combined Notes to Financial Statements.
43
<PAGE>
Combined Notes to Financial Statements (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The Evergreen Short and Intermediate Term Bond Funds consist of Evergreen
Capital Preservation and Income Fund (formerly, Keystone Capital Preservation
and Income Fund) ("Capital Preservation Fund"), Evergreen Intermediate Term Bond
Fund (formerly, Keystone Intermediate Term Bond Fund) ("Intermediate Bond
Fund"), Evergreen Intermediate Term Bond Fund II (formerly, Evergreen
Intermediate Term Bond Fund) ("Intermediate Bond Fund II"), Evergreen
Intermediate Term Government Securities Fund ("Intermediate Government Fund")
and Evergreen Short Intermediate Bond Fund ("Short Intermediate Fund"),
(collectively, the "Funds"), all of which are registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as diversified, open-end
management investment companies. The Funds are separate series of Evergreen
Fixed Income Trust, a Delaware business trust organized on September 17, 1997.
The Funds offer Class A, Class B, Class C and/or Class Y shares. Class A shares
are sold with a maximum front-end sales charge of 3.25%. Class B and Class C
shares are sold without a front-end sales charge, but pay a higher ongoing
distribution fee than Class A. Class B shares are sold subject to a contingent
deferred sales charge that is payable upon redemption and decreases depending on
how long the shares have been held. Class C shares are sold subject to a
contingent deferred sales charge payable on shares redeemed within one year
after the month of purchase. Class B shares of Capital Preservation Fund and
Intermediate Bond Fund purchased after January 1, 1997 and all other Funds'
Class B shares will automatically convert to Class A shares after seven years.
Class B shares of Capital Preservation Fund and Intermediate Bond Fund purchased
prior to January 1, 1997 retain their existing conversion rights. Class Y shares
are sold at net asset value and are not subject to contingent deferred sales
charges or distribution fees. Class Y shares are sold only to investment
advisory clients of First Union Corporation ("First Union") and its affiliates,
certain institutional investors or Class Y shareholders of record of certain
other funds managed by First Union and its affiliates as of December 30, 1994.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect amounts
reported herein. Actual results could differ from these estimates.
A. Valuation of Securities
U.S. government obligations held by the Funds are valued at the mean between the
over-the-counter bid and asked prices. Corporate bonds, other fixed-income
securities, and mortgage and other asset-backed securities are valued at prices
provided by an independent pricing service. In determining value for normal
institutional-size transactions, the pricing service uses methods based on
market transactions for comparable securities and analysis of various
relationships between similar securities which are generally recognized by
institutional traders. Securities for which valuations are not available from an
independent pricing service (including restricted securities) are valued at fair
value as determined in good faith according to procedures established by the
Board of Trustees.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held by the custodian on the Fund's behalf. Each
Fund monitors the adequacy of the collateral daily and will require the seller
to provide additional collateral in the event the 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
advisor to be creditworthy pursuant to guidelines established by the Board of
Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange Commission,
the Capital Preservation Fund and Intermediate Bond Fund, along with certain
other funds managed by Keystone Investment Management Company ("Keystone"), a
subsidiary of First Union, may transfer uninvested cash balances into a joint
trading account. These balances are invested in one or more repurchase
agreements that are fully collateralized by U.S. Treasury and/or federal agency
obligations.
C. Reverse Repurchase Agreements
To obtain short-term financing, the Capital Preservation Fund and Intermediate
Bond Fund may enter into reverse repurchase agreements with qualified
third-party broker-dealers. Interest on the value of reverse repurchase
agreements is based upon competitive market rates at the time of issuance. At
the time the Fund enters into a reverse repurchase agreement, it will establish
and maintain a segregated account with the custodian containing qualifying
assets having a value not less than the repurchase price, including accrued
interest. If the counterparty to the transaction is rendered insolvent, the
ultimate realization of the securities to be repurchased by the Fund may be
delayed or limited.
44
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
D. Foreign Currency
The books and records of the Funds are maintained in United States (U.S.)
dollars. Foreign currency amounts are translated into U.S. dollars as follows:
market value of investments, assets and liabilities at the daily rate of
exchange; purchases and sales of investments, income and expenses at the rate of
exchange prevailing on the respective dates of such transactions. Net unrealized
foreign exchange gain (loss) resulting from changes in foreign currency exchange
rates is a component of net unrealized appreciation (depreciation) on
investments and foreign currency related transactions. Net realized foreign
currency gains and losses resulting from changes in exchange rates include
foreign currency gains and losses between trade date and settlement date on
investment securities transactions, foreign currency related transactions and
the difference between the amounts of interest and dividends recorded on the
books of the Fund and the amount actually received and is included in realized
gain (loss) on foreign currency related transactions. The portion of foreign
currency gains and losses related to fluctuations in exchange rates between the
initial purchase trade date and subsequent sale trade date is included in
realized gain (loss) on foreign currency related transactions.
E. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums.
F. Securities Lending
In order to generate income and to offset expenses, the Funds may lend portfolio
securities to brokers, dealers and other financial organizations. The Fund's
investment adviser will monitor the creditworthiness of such borrowers. Loans of
securities may not exceed 30% of a Fund's total assets and will be
collateralized by cash, letters of credit or U.S. Government securities that are
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities, including interest. While such securities
are out on loan the borrower will pay the Fund any income accruing thereon, and
the Fund may invest the collateral in portfolio securities, thereby, increasing
its return. Any gain or loss in the market price of the loaned securities, which
occur during the term of the loan would affect the Fund and its investors. A
Fund may pay reasonable fees in connection with such loans.
G. Distributions
Distributions from net investment income for each Fund, except Intermediate Bond
Fund II, are declared daily and paid monthly. Distributions from net investment
income for Intermediate Bond Fund II are declared and paid monthly.
Distributions from net realized capital gains for each Fund, if any, are paid at
least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. The significant differences between financial statement
amounts available for distributions and distributions made in accordance with
income tax regulations are primarily due to differing treatment for mortgage
paydown gains (losses) and foreign securities transactions, if any.
H. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the relative
net assets of each class. Currently, class specific expenses are limited to
expenses incurred under the Distribution Plans for each class.
I. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated
investment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable
income and net capital gains, if any, to their shareholders. The Funds also
intend to avoid any excise tax liability by making the required distributions
under the Code. Accordingly, no provision for federal taxes is required. To the
extent that realized capital gains can be offset by capital loss carryforwards,
it is each Fund s policy not to distribute such gains.
45
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
2. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with a par
value of $0.001 authorized. Shares of beneficial interest of the Funds are
currently divided into Class A, Class B, Class C and/or Class Y. Transactions in
shares of the Funds were as follows:
- - --------------------------------------------------------------------------------
CAPITAL PRESERVATION FUND
<TABLE>
<CAPTION>
Six Months Ended Nine Months Ended
December 31, 1997 June 30, 1997
----------------------------- --------------------------------
Shares Amount Shares Amount
------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Class A
Shares sold ........................................ 561,485 $ 5,503,885 534,956 $ 5,229,171
Shares issued in reinvestment of distributions ..... 28,315 277,437 61,902 604,810
Shares redeemed .................................... (855,139) (8,382,094) (1,318,046) (12,878,080)
- - ---------------------------------------------------- ----------- ------------- ------------- --------------
Net increase (decrease) ............................ (265,339) $ (2,600,772) (721,188) $ (7,044,099)
- - ---------------------------------------------------- ----------- ------------- ------------- --------------
Class B
Shares sold ........................................ 100,378 $ 984,504 182,841 $ 1,788,928
Shares issued in reinvestment of distributions ..... 55,210 541,374 114,536 1,119,992
Shares redeemed .................................... (550,426) (5,399,003) (1,459,187) (14,270,487)
- - ---------------------------------------------------- ----------- ------------- ------------- --------------
Net decrease ....................................... (394,838) $ (3,873,125) (1,161,810) $ (11,361,567)
- - ---------------------------------------------------- ----------- ------------- ------------- --------------
Class C
Shares sold ........................................ 63,479 $ 622,478 164,962 $ 1,613,166
Shares issued in reinvestment of distributions ..... 9,126 89,410 13,283 129,806
Shares redeemed .................................... (68,242) (668,653) (185,566) (1,815,739)
- - ---------------------------------------------------- ----------- ------------- ------------- --------------
Net increase (decrease) ............................ 4,363 $ 43,235 (7,321) $ (72,767)
- - ---------------------------------------------------- ----------- ------------- -------------
<CAPTION>
Year Ended
September 30, 1996
---------------------------------
Shares Amount
--------------- -----------------
<S> <C> <C>
Class A
Shares sold ........................................ 808,295 $ 7,859,112
Shares issued in reinvestment of distributions ..... 89,475 865,840
Shares redeemed .................................... (563,085) (5,471,951)
- - ------------------------------------------------------------------ ---------------
Net increase (decrease) ............................ 334,685 $ 3,253,001
- - ------------------------------------------------------------------ ---------------
Class B
Shares sold ........................................ 282,004 $ 2,742,007
Shares issued in reinvestment of distributions ..... 187,040 1,829,883
Shares redeemed .................................... (2,455,640) (23,865,587)
- - ------------------------------------------------------------------ ---------------
Net decrease ....................................... (1,986,596) $ (19,293,697)
- - ------------------------------------------------------------------ ---------------
Class C
Shares sold ........................................ 215,390 $ 2,090,764
Shares issued in reinvestment of distributions ..... 12,718 127,771
Shares redeemed .................................... (86,982) (844,271)
- - ------------------------------------------------------------------ ---------------
Net increase (decrease) ............................ 141,126 $ 1,374,264
- - ------------------------------------------------------------------ ---------------
</TABLE>
- - --------------------------------------------------------------------------------
INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
Six Months Ended Eleven Months Ended
December 31, 1997 June 30, 1997
----------------------------- -----------------------------
Shares Amount Shares Amount
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Class A
Shares sold ................................... 51,916 $ 470,975 175,221 $ 1,566,271
Shares issued in reinvestment of distributions 20,339 184,654 45,592 404,429
Shares redeemed ............................... (167,953) (1,521,597) (547,872) (4,863,536)
- - ----------------------------------------------- ----------- ------------- ----------- -------------
Net decrease .................................. (95,698) $ (865,968) (327,059) $ (2,892,836)
- - ----------------------------------------------- ----------- ------------- ----------- -------------
Class B
Shares sold ................................... 45,953 $ 417,233 170,620 $ 1,528,256
Shares issued in reinvestment of distributions 16,715 151,917 46,270 411,336
Shares redeemed ............................... (208,283) (1,888,644) (779,593) (6,943,044)
- - ----------------------------------------------- ----------- ------------- ----------- -------------
Net decrease .................................. (145,615) $ (1,319,494) (562,703) $ (5,003,452)
- - ----------------------------------------------- ----------- ------------- ----------- -------------
Class C
Shares sold ................................... 194,135 $ 1,763,053 52,022 $ 465,379
Shares issued in reinvestment of distributions 13,680 124,359 31,491 279,633
Shares redeemed ............................... (209,156) (1,897,727) (311,128) (2,773,712)
- - ----------------------------------------------- ----------- ------------- ----------- -------------
Net decrease .................................. (1,341) $ (10,315) (227,615) $ (2,028,700)
- - ----------------------------------------------- ----------- ------------- ----------- -------------
<CAPTION>
Year Ended
July 31, 1996
-----------------------------
Shares Amount
------------- ---------------
<S> <C> <C>
Class A
Shares sold ................................... 258,497 $ 2,283,194
Shares issued in reinvestment of distributions 52,934 469,775
Shares redeemed ............................... (465,961) (4,141,580)
- - ----------------------------------------------------------- -------------
Net decrease .................................. (154,530) $ (1,388,611)
- - ----------------------------------------------------------- -------------
Class B
Shares sold ................................... 555,555 $ 4,965,806
Shares issued in reinvestment of distributions 63,537 565,232
Shares redeemed ............................... (808,199) (7,205,208)
- - ----------------------------------------------------------- -------------
Net decrease .................................. (189,107) $ (1,674,170)
- - ----------------------------------------------------------- -------------
Class C
Shares sold ................................... 318,799 $ 2,871,565
Shares issued in reinvestment of distributions 42,997 382,466
Shares redeemed ............................... (468,122) (4,177,736)
- - ----------------------------------------------------------- -------------
Net decrease .................................. (106,326) $ (923,705)
=========================================================== =============
</TABLE>
46
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
- - --------------------------------------------------------------------------------
INTERMEDIATE BOND FUND II
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1997 June 30, 1997
------------------------------- -------------------------------
Shares Amount Shares Amount
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Class A
Shares sold ................................... 25,661 $ 265,285 52,051 $ 529,465
Shares issued in reinvestment of distributions 8,369 86,287 17,590 178,344
Shares redeemed ............................... (28,772) (297,427) (62,211) (632,271)
- - ----------------------------------------------- ------------- -------------- ------------- --------------
Net increase .................................. 5,258 $ 54,145 7,430 $ 75,538
- - ----------------------------------------------- ------------- -------------- ------------- --------------
Class B
Shares sold ................................... 27,279 $ 281,071 62,610 $ 633,834
Shares issued in reinvestment of distributions 1,519 15,662 2,120 21,504
Shares redeemed ............................... (16,733) (173,750) (4,937) (50,000)
- - ----------------------------------------------- ------------- -------------- ------------- --------------
Net increase .................................. 12,065 $ 122,983 59,793 $ 605,338
- - ----------------------------------------------- ------------- -------------- ------------- --------------
Class C
Shares sold ................................... 11,646 $ 120,854 490 $ 5,000
Shares issued in reinvestment of distributions 127 1,314 126 1,282
Shares redeemed ............................... (9,439) (98,340) (249) (2,514)
- - ----------------------------------------------- ------------- -------------- ------------- --------------
Net increase .................................. 2,334 $ 23,828 367 $ 3,768
- - ----------------------------------------------- ------------- -------------- ------------- --------------
Class Y
Shares sold ................................... 2,737,599 $ 28,310,576 4,825,919 $ 48,970,554
Shares issued in reinvestment of distributions 297,586 3,068,275 649,188 6,579,261
Shares redeemed ............................... (2,378,407) (24,595,875) (5,719,188) (58,033,667)
- - ----------------------------------------------- ------------- -------------- ------------- --------------
Net increase (decrease) ....................... 656,778 $ 6,782,976 (244,081) $ (2,483,852)
- - ----------------------------------------------- ------------- -------------- ------------- --------------
</TABLE>
- - --------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT FUND
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1997 June 30, 1997
-------------------------------- ---------------------------------
Shares Amount Shares Amount
--------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Class A
Shares sold ................................... 2,710 $ 27,356 10,763 $ 107,284
Shares issued in reinvestment of distributions 1,260 12,732 2,429 24,330
Shares redeemed ............................... (10,291) (104,335) (5,953) (59,462)
- - ----------------------------------------------- ------------- -------------- ------------- ---------------
Net increase (decrease) ....................... (6,321) $ (64,247) 7,239 $ 72,152
- - ----------------------------------------------- ------------- -------------- ------------- ---------------
Class B
Shares sold ................................... 33,508 $ 339,806 49,960 $ 500,124
Shares issued in reinvestment of distributions 1,023 10,339 1,735 17,379
Shares redeemed ............................... (26,530) (267,500) (13,674) (136,147)
- - ----------------------------------------------- ------------- -------------- ------------- ---------------
Net increase .................................. 8,001 $ 82,645 38,021 $ 381,356
- - ----------------------------------------------- ------------- -------------- ------------- ---------------
Class C
Shares sold ................................... 10,719 $ 108,800 2,288 $ 22,910
Shares issued in reinvestment of distributions 225 2,273 85 967
Shares redeemed ............................... (30) (306) (4,419) (44,414)
- - ----------------------------------------------- ------------- -------------- ------------- ---------------
Net increase (decrease) ....................... 10,914 $ 110,767 (2,046) $ (20,537)
- - ----------------------------------------------- ------------- -------------- ------------- ---------------
Class Y
Shares sold ................................... 917,928 $ 9,274,149 3,476,575 $ 34,857,475
Shares issued in reinvestment of distributions 164,289 1,659,409 394,427 3,950,858
Shares redeemed ............................... (1,592,958) (16,133,477) (5,437,776) (54,410,883)
- - ----------------------------------------------- ------------- -------------- ------------- ---------------
Net decrease .................................. (510,741) $ (5,199,919) (1,566,774) $ (15,602,550)
- - ----------------------------------------------- ------------- -------------- ------------- ---------------
</TABLE>
47
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
- - --------------------------------------------------------------------------------
SHORT INTERMEDIATE FUND
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1997 June 30, 1997
------------------------------- ----------------------------------
Shares Amount Shares Amount
--------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Class A
Shares sold ................................... 97,988 $ 969,802 584,893 $ 5,786,371
Shares issued in reinvestment of distributions 41,256 407,122 93,998 924,863
Shares redeemed ............................... (299,172) (2,956,780) (775,720) (7,650,833)
- - ----------------------------------------------- ------------- -------------- -------------- ---------------
Net decrease .................................. (159,928) $ (1,579,856) (96,829) $ (939,599)
- - ----------------------------------------------- ------------- -------------- -------------- ---------------
Class B
Shares sold ................................... 265,616 $ 2,630,547 520,912 $ 5,138,212
Shares issued in reinvestment of distributions 40,125 396,754 87,527 862,791
Shares redeemed ............................... (497,652) (4,929,308) (486,579) (4,795,124)
- - ----------------------------------------------- ------------- -------------- -------------- ---------------
Net increase (decrease) ....................... (191,911) $ (1,902,007) 121,860 $ 1,205,879
- - ----------------------------------------------- ------------- -------------- -------------- ---------------
Class C
Shares sold ................................... 13,859 $ 136,656 35,729 $ 354,646
Shares issued in reinvestment of distributions 2,139 21,144 4,508 44,442
Shares redeemed ............................... (29,832) (295,662) (53,064) (524,077)
- - ----------------------------------------------- ------------- -------------- -------------- ---------------
Net decrease .................................. (13,834) $ (137,862) (12,827) $ (124,989)
- - ----------------------------------------------- ------------- -------------- -------------- ---------------
Class Y
Shares sold ................................... 6,172,053 $ 61,000,512 11,302,391 $ 111,361,796
Shares issued in reinvestment of distributions 562,537 5,550,411 1,353,407 13,305,530
Shares redeemed ............................... (6,863,614) (67,844,558) (12,121,462) (119,339,801)
- - ----------------------------------------------- ------------- -------------- -------------- ---------------
Net increase (decrease) ....................... (129,024) $ (1,293,635) 534,336 $ 5,327,525
- - ----------------------------------------------- ------------- -------------- -------------- ---------------
</TABLE>
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the six months ended December 31,
1997:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
------------------------------- -------------------------------
U.S. Government Other U.S. Government Other
----------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
Capital Preservation Fund ..... $15,835,331 $ 0 $ 18,010,581 $ 0
Intermediate Bond Fund ........ 7,623,731 9,430,422 6,802,759 11,483,817
Intermediate Bond Fund II ..... 39,862,514 14,581,174 26,479,067 711,014
Intermediate Government Fund .. 15,980,238 0 27,113,294 0
Short Intermediate Fund ....... 78,233,617 66,625,708 109,619,866 43,036,305
</TABLE>
The Short-Intermediate Fund loaned securities during the six months December 31,
1997 to certain brokers who paid the Fund a negotiated lenders' fee. These fees
are included in interest income. At December 31, 1997, the value of securities
on loan and the value of the collateral amounted to $3,939,615 and $3,656,250
respectively. During the six months ended December 31, 1997, the Fund earned
$15,901 in income from securities lending.
The average daily balance of reverse repurchase agreements outstanding for the
Capital Preservation Fund and the Intermediate Bond Fund during the six months
ended December 31, 1997 was approximately $326,500 at a weighted average
interest rate of 5.71%. The maximum amount outstanding under reverse repurchase
agreements during the six months ended December 31, 1997 for the Capital
Preservation Fund was $1,015,161 (including accrued interest). There were no
reverse repurchase agreements outstanding at December 31, 1997.
As of June 30, 1997, the Funds had capital loss carryovers for federal income
tax purposes as follows:
<TABLE>
<CAPTION>
Expiration
----------------------------------------------------------------------------
1999 2001 2002 2003 2004 2005
----------- ------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Capital Preservation Fund ........ - $5,900,000 $ 197,000 $642,000 $ 254,000 -
Intermediate Bond Fund ........... $970,000 - 2,688,000 94,000 - $ 147,000
Intermediate Bond Fund II ........ - 1,440,000 - 907,000 211,000 1,200,000
Intermediate Government Fund ..... - - - 642,000 1,140,000 -
Short Intermediate Fund .......... - - 6,021,000 - 4,049,000 4,374,000
</TABLE>
48
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. (formerly, Evergreen Keystone Distributor, Inc.)
("EDI"), a wholly-owned subsidiary of The BISYS Group Inc. ("BISYS"), serves as
principal underwriter to the Funds.
Each Fund has adopted Distribution Plans for each class of shares, except Class
Y, as allowed by Rule 12b-1 of the 1940 Act. Distribution plans permit the each
Fund to reimburse its principal underwriter for costs related to selling shares
of the Fund and for various other services. These costs, which consist primarily
of commissions and services fees to broker-dealers who sell shares of the Fund,
are paid by shareholders through expenses called Distribution Plan expenses.
Each class, except Class Y, currently pays a service fee equal to 0.25% of the
average daily net asset of the class. The service fee for Class A shares of
Short Intermediate is currently limited to 0.10% of average daily net assets.
For Capital Preservation Fund, service fees for Class A shares purchased after
December 31, 1996 were limited to 0.10% of average net assets on the respective
shares. Class B and Class C shares of each Fund also presently pay distribution
fees equal to 0.75% of the average daily net assets of each respective class.
Distribution Plan expenses are calculated daily and paid monthly.
With respect to Class B and Class C shares of the Capital Preservation Fund and
the Intermediate Bond Fund, the principal underwriter may incur costs greater
than the allowable annual amounts the Fund is permitted to pay. The Fund may
reimburse the principal underwriter for such excess amounts in later years with
annual interest at the prime rate plus 1.00%.
During the six months ended December 31, 1997, amounts accrued or paid to EDI
pursuant to each Fund's Class A, Class B and Class C Distribution Plans were as
follows:
<TABLE>
<CAPTION>
Class A Class B Class C
--------- ----------- ----------
<S> <C> <C> <C>
Capital Preservation Fund ..... $14,306 $154,568 $20,767
Intermediate Bond Fund ........ 12,054 54,524 34,917
Intermediate Bond Fund II ..... 3,900 5,902 263
Intermediate Government Fund .. 720 3,395 511
Short Intermediate Fund ....... 8,588 107,850 4,687
</TABLE>
For the six months ended December 31, 1997, the Intermediate Bond Fund II and
the Intermediate Government Fund waived Class A distribution fees in the amounts
of $2,964 and $547, respectively.
Each of the Distribution Plans may be terminated at any time by vote of the
Independent Trustees or by vote of a majority of the outstanding voting shares
of the respective class. However, for the Capital Preservation Fund and the
Intermediate Bond Funds after the termination of any Distribution Plan, and
subject to the discretion of the Independent Trustees, payments to EDI may
continue as compensation for services which had been earned while the
Distribution Plans were in effect.
EDI intends, but is not obligated, to continue to pay distribution costs that
exceed the current annual payments from the Fund. EDI intends to seek full
payment of such distribution costs from the Fund at such time in the future as,
and to the extent that, payment thereof by the Class B or Class C shares would
be within permitted limits.
5. INVESTMENT MANAGEMENT AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
Keystone is the investment adviser for the Capital Preservation Fund and the
Intermediate Bond Fund and is paid a management fee that is computed daily and
paid monthly. The management fee is computed at an annual rate of 2.00% of the
each respective Fund's gross investment income plus an amount determined by
applying percentage rates starting at 0.50% and declining to 0.25% per annum as
net assets increase, to the average daily net asset value of each Fund.
Capital Management Group ("CMG") of First Union National Bank, a subsidiary of
First Union, serves as the investment adviser to the Intermediate Bond Fund II,
Intermediate Government Fund and Short Intermediate Fund and is paid a
management fee that is computed daily and paid monthly. For the Intermediate
Bond Fund II and the Intermediate Government Fund, CMG is entitled to a fee at
an annual rate of 0.60% of each Fund's respective average daily net assets. For
the Short Intermediate Fund, CMG is entitled to a fee at an annual rate of 0.50%
of the Fund's average daily net assets.
Evergreen Investment Services, Inc. (formerly, Evergreen Keystone Investment
Services, Inc.) ("EIS"), a wholly-owned subsidiary of Keystone, is the
administrator and BISYS is the sub-administrator to the Funds. As administrator
for the Intermediate Bond Fund II, Intermediate Government Fund and Short
Intermediate Fund, EIS is entitled to an annual fee based on the average daily
net assets of
49
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
the funds administered by EIS for which First Union or its investment advisory
subsidiaries are also the investment advisors. The administration fee is
calculated by applying percentage rates, which start at 0.05% and decline to
0.01% per annum as net assets increase, to the average daily net asset value of
the respective Fund. As administrator for the Capital Preservation Fund and the
Intermediate Bond Fund, EIS also provides facilities, equipment and personnel on
behalf of the Fund's investment adviser and is reimbursed by the Fund for its
services. The sub-administrator for each Fund is entitled to an annual fee based
on the average daily net assets of the funds administered by EIS for which First
Union or its investment advisory subsidiaries are also the investment advisors.
The sub-administration fee is calculated by applying percentage rates, which
start at 0.01% and decline to .004% as net assets increase, to the average daily
net asset value of the Fund. For Capital Preservation Fund and Intermediate Bond
Fund, the sub-administration fee is paid by Keystone and is not a fund expense.
For the six months ended December 31, 1997, the advisor waived management fees
as follows:
<TABLE>
<S> <C>
Capital Preservation Fund .. $124,678
Intermediate Bond Fund ..... 68,786
</TABLE>
During the six months ended December 31, 1997, the Funds paid or accrued to EIS
the following amounts for certain administrative services:
<TABLE>
<S> <C>
Capital Preservation Fund ..... $ 4,806
Intermediate Bond Fund ........ 3,860
Intermediate Bond Fund II ..... 23,720
Intermediate Government Fund .. 10,252
Short Intermediate Fund ....... 55,601
</TABLE>
Evergreen Service Company (formerly, Evergreen Keystone Service Company)
("ESC"), a wholly-owned subsidiary of Keystone, serves as the transfer and
dividend disbursing agent for the Funds.
For certain accounts, First Union has been sub-contracted to maintain
shareholder sub-account records, take fund purchase and redemption orders and
answer inquiries. For each such account of the Intermediate Bond Fund II and
Short Intermediate Fund, First Union earned a fee which in aggregate totaled
$14,436 and $59,825, respectively for the six months ended December 31, 1997.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds. As sub-administrator, BISYS compensates the officers of the
Funds.
6. EXPENSE OFFSET ARRANGEMENT
The Funds have entered into an expense offset arrangement with their custodian.
The assets deposited with the custodian under this expense offset arrangement
could have been invested in income-producing assets.
7. DEFERRED TRUSTEES' FEES
Each Independent Trustee of the Intermediate Bond Fund II, Intermediate
Government Fund and Short Intermediate Fund may defer any or all compensation
related to performance of duties as a Trustee. Each Trustees' deferred balances
are allocated to deferral accounts which are included in the accrued expenses
for the Fund. The investment performance of the deferral accounts are based on
the investment performance of certain Evergreen Funds. Any gains earned or
losses incurred in the deferral accounts are reported in each Fund's Trustees'
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 Board of Trustees or
January 1, 2000. As of December 31, 1997, the value of the Trustees' deferral
account for the Intermediate Bond Fund II, Intermediate Government Fund and
Short Intermediate Fund was $10,763, $6,461 and $20,717, respectively.
50
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
8. FINANCING AGREEMENT
On October 31, 1996, a financing agreement between some of the Evergreen Funds,
State Street Bank & Trust ("State Street") and a group of banks (collectively,
the "Banks") became effective. Under this agreement, the Banks provided an
unsecured credit facility to certain Evergreen Funds in the aggregate amount of
$225 million ($112.5 million committed and $112.5 million uncommitted) allocated
evenly between the Banks. Borrowings under this facility bore interest at 0.75%
per annum above the Federal Funds rate. A commitment fee of 0.10% per annum was
incurred on the unused portion of the committed facility which was allocated to
all participating funds. State Street served as administrative agent for the
Banks, and as agent was entitled to a fee of $15,000 which is allocated to all
of the Evergreen Funds. This agreement was terminated on October 31, 1997.
On October 31, 1997, a temporary financing agreement between all of the
Evergreen Funds and First Union became effective. Under this agreement, First
Union provided a fully committed unsecured credit facility in the aggregate
amount of $300 million. Borrowings under this facility bore interest at 1.00%
per annum above the Federal Funds rate. State Street served as administrative
agent under this agreement, but received no compensation for its services.
On December 22, 1997, a financing agreement among all of the Evergreen Funds,
State Street and a group of Banks became effective. Under this agreement, the
Banks provide an unsecured credit facility in the aggregate amount of $400
million ($275 million committed and $125 million uncommitted). The credit
facility is allocated evenly among the Banks, except that $15 million of the
committed facility is being provided to the Funds by State Street under a swing
line facility. The credit facility is to be accessed by the Funds for temporary
or emergency purposes only and is subject to each Fund's borrowing restrictions.
Borrowings under this facility bear interest at 0.50% per annum above the
Federal Funds rate. A commitment fee of 0.065% per annum will be incurred on the
unused portion of the committed facility, which will be allocated to all
participating funds. For its assistance in arranging this financing agreement,
the Capital Market Group of First Union was paid a one time arrangement fee of
$27,500. State Street serves as administrative agent for the Banks, and as
administrative agent is entitled to a fee of $20,000 per annum which is
allocated to all of the Funds.
During the six months ended December 31, 1997, the Funds had no borrowings under
these agreements.
9. SUBSEQUENT EVENTS
At a special meeting of shareholders on January 6, 1998, the shareholders of the
Intermediate Bond Fund approved the acquisition of substantially all the assets
and certain liabilities of the Fund by Evergreen Intermediate Bond Fund
("Evergreen Intermediate"), a series of Evergreen Fixed Income Trust, a Delaware
business trust, in exchange for Class A, B and C shares of Evergreen
Intermediate. Also at a meeting on January 6, 1998, the shareholders of the
Intermediate Bond Fund II, also a series of Evergreen Fixed Income Trust,
approved the acquisition of substantially all the assets and certain liabilities
of the Fund by Evergreen Intermediate, in exchange for Class A, B, C and Y
shares of Evergreen Intermediate. The acquisitions were accomplished by a
tax-free exchange of the respective shares of each Fund.
51
<PAGE>
ADDITIONAL INFORMATION (Unaudited)
Shareholders of Intermediate Term Bond Fund and Intermediate Term Bond Fund II
considered and acted upon the proposal listed below at a special meeting of
shareholders held on January 6, 1998.
To approve the acquisition of all the assets and certain liabilities of each
Fund by a new fund, Evergreen Intermediate Bond Fund, a series of Evergreen
Fixed Income Trust. On November 10, 1997, the record date for the meeting the
Intermediate Term Bond Fund and Intermediate Term Bond Fund II had 3,057,418 and
16,417,304 shares outstanding, respectively, of which 1,654,837 shares (54.13%
of record date shares) and 13,744,006 (83.72% of record date shares),
respectively, were represented at the meeting.
The following are the results of the meeting held to vote on the reorganization:
<TABLE>
<CAPTION>
Intermediate Term Bond Fund Intermediate Term Bond Fund II
----------------------------- -------------------------------
<S> <C> <C>
Affirmative ......... 1,517,579 12,960,574
Against ............. 23,614 5,304
Abstain ............. 113,644 778,128
</TABLE>
52
<PAGE>
65751 541496 RV01
2/98
BULK RATE
U.S. POSTAGE
PAID
CHARLOTTE, NC
PERMIT NO. 136
[Evergreen Logo]
201 S. College St.
Charlotte, NC 28288
<PAGE>
