<PAGE>
Semiannual
Report
as of December 31, 1998
Evergreen
Short and Intermediate Term Bond Funds
[LOGO OF EVERGREEN FUNDS APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
Letter to Shareholders.................................................. 1
For Your Information.................................................... 2
Evergreen Capital Preservation and
Income Fund
Fund at a Glance...................................................... 3
Portfolio Manager Interview........................................... 4
Evergreen Intermediate Term
Bond Fund
Fund at a Glance...................................................... 6
Portfolio Manager Interview........................................... 7
Evergreen Intermediate Term
Government Securities Fund
Fund at a Glance...................................................... 10
Portfolio Manager Interview........................................... 11
Evergreen Short Intermediate Bond Fund
Fund at a Glance...................................................... 13
Portfolio Manager Interview........................................... 14
Financial Highlights
Evergreen Capital Preservation and
Income Fund........................................................... 16
Evergreen Intermediate Term Bond Fund................................. 19
Evergreen Intermediate Term Government Securities Fund................ 23
Evergreen Short Intermediate Bond Fund................................ 25
Schedule of Investments
Evergreen Capital Preservation and
Income Fund........................................................... 27
Evergreen Intermediate Term Bond Fund................................. 29
Evergreen Intermediate Term Government Securities Fund................ 34
Evergreen Short Intermediate Bond Fund................................ 35
Statements of Assets and Liabilities.................................... 38
Statements of Operations................................................ 39
Statements of Changes in Net Assets..................................... 40
Combined Notes to Financial
Statements.............................................................. 42
- --------------------------------------------------------------------------------
Evergreen Funds
- --------------------------------------------------------------------------------
Evergreen Funds is one of the nation's fastest growing investment companies with
over $50 billion in assets under management.
With over 70 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to 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.
--------------------------------------------------------------
Mutual Funds: ARE NOT FDIC INSURED May lose value . Are not bank guaranteed
--------------------------------------------------------------
Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
February 1999
[PICTURE OF
WILLIAM M. ENNIS
MANAGING DIRECTOR
APPEARS HERE]
Dear Shareholders:
We are pleased to provide you the Evergreen Short and Intermediate Term Bond
Funds semiannual report covering the six months ended December 31, 1998.
Increased Market Volatility in 1998
During the year, interest rates declined while inflation remained low and
investors became concerned about a possible slowdown in economic growth.
Despite the volatility which started in July, the market ended on a positive
note, as indicated by the Dow Jones Industrial Average posting a 16.1% gain and
the S&P 500 returning 28.7% for the 12 months ended December 31, 1998. The
financial markets have certainly experienced increased volatility this year
compared to the smoother ride of the past few years, and we anticipate the
volatility will continue. We encourage you to take this opportunity to talk to
your financial representative and review your investment time horizon to ensure
you are on track with your goals.
Introduction of the Euro
On January 1, 1999, eleven European countries adopted the euro as their
currency. Currently, the wholesale markets and government and financial sectors
have converted to the euro, and new securities will be issued in euro
denomination only. Full conversion to the new currency will not be completed
until 2002.
At this point it is still unclear how the euro conversion will affect foreign
exchange rates, interest rates and the value of European securities, but we
believe the potential benefits to globally oriented investors are significant.
They include changes in currency risk, increased competition, and a central
bank. Foreign exchange risk may decrease for the countries participating in the
European Union; however, currency risk associated with rises and declines of the
value of the euro versus the dollar will still exist. Most noticeable for
investors will be the ability to compare the value of companies across the
European Union member countries without having to factor in the effect of
fluctuating currencies. Increased competition resulting from deregulation and
economic unification may produce a wave of merger and acquisition activity,
which could present attractive investment opportunities for those able to
identify the companies most inclined to benefit from restructuring. Finally, the
European Central Bank, comparable to the U.S. Federal Reserve, will provide
European Union countries with a unified monetary policy for the first time.
If you have any questions about the funds in this report or any other Evergreen
Funds, please contact your financial representative or call us at 800.343.2898,
and we will be happy to assist you.
Thank you for your continued investment with Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
Managing Director
Evergreen Funds
1
<PAGE>
For Your Information
--------------------
New Evergreen Funds
Evergreen introduces three new funds:
Evergreen Tax Strategic Equity Fund: seeks to maximize the after-tax total
return on its portfolio of investments by using a combination of stock selection
strategies and trading techniques.
Evergreen Select Equity Index Fund: seeks investment results that achieve price
and yield performance similar to the S&P 500 Index.
Evergreen Masters Fund: blends growth and value, large- and mid-cap stocks into
one convenient portfolio. Diversification is taken one step further by
employing four management teams, Evergreen, MFS, Oppenheimer and Putnam.
Talk to your financial representative or call us at 800-343-2898 for a
prospectus and more information.
Good News!
Effective for the 1998 Tax Year, long-term capital gains taxes are reduced to
20%.
Year 2000/1/
We have been addressing the Year 2000 issue since February 1996 and have adopted
an industry best practices methodology for the project. Our team is on schedule
to complete the following milestones: Inventory and Assessment, Remediation,
Testing and Contingency. Although Evergreen Funds is striving to identify and
correct every issue under our control related to the Year 2000, it would be
impossible to guarantee a problem-free transition into the next millennium. Our
goal, however, is that our shareholders experience virtually no impact on the
products and services we deliver.
/1/ The information above constitutes Year 2000 readiness disclosure.
2
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Capital Preservation and Income Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of December 31, 1998
It was a favorable period for the government bond market, although not as
favorable for adjustable rate mortgage securities (ARMs).
Portfolio
Management
- ----------
[PICTURE OF
GARY E. PZEGEO
APPEARS HERE]
Gary E. Pzegeo
Tenure: April 1997
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[ARTWORK
APPEARS
HERE]
Morningstar's Style Box is based on a portfolio date as of 12/31/98.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
/1/Source: 1998 Morningstar, Inc.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses paid by the
shareholders investing in each class. Historical performance for Classes A and
C prior to inception reflects that of Class B, the original class offered, the
inception date of which is 7/1/91, and includes appropriate 12b-1 fees for Class
B.If appropriate fees were reflected, returns for Class A would have been
higher. 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 and does not include
transaction costs associated with buying and selling securities nor any
management fees. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Average Annual Returns
- --------------------------------------------------------------------------------
6 months with sales charge -1.25% -3.26% 0.61%
- --------------------------------------------------------------------------------
6 months w/o sales charge 2.10% 1.70% 1.60%
- --------------------------------------------------------------------------------
1 year with sales charge 0.95% -1.36% 2.58%
- --------------------------------------------------------------------------------
1 year w/o sales charge 4.36% 3.57% 3.57%
- --------------------------------------------------------------------------------
3 years 4.57% 4.06% 4.97%
- --------------------------------------------------------------------------------
5 years 4.40% 4.16% 4.52%
- --------------------------------------------------------------------------------
Since Inception 4.36% 4.43% 4.42%
- --------------------------------------------------------------------------------
Maximum Sales Charge 3.25% 5.00% 1.00%
Front End CDSC CDSC
- --------------------------------------------------------------------------------
30-day SEC Yield 5.24% 4.42% 4.42%
- --------------------------------------------------------------------------------
6-month distributions per share $ 0.27 $ 0.23 $0.23
- --------------------------------------------------------------------------------
*Adjusted for maximum applicable sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE)
Cap Pres and Income SBr 6-Mth Treas Bill Consumer Price Index-US
07/91 10000 10000 10000
12/91 10428 10283 10140
12/92 10665 10693 10431
12/93 11111 11041 10721
12/94 11124 11522 11007
12/95 11968 12211 11279
12/96 12651 12869 11662
12/97 13368 13568 11860
12/98 13843 14284 12074
Comparison of a $10,000 investment in Evergreen Capital Preservation and Income
Fund Class B, versus a similar investment in a 6-Month Treasury Bill and the
Consumer Price Index (CPI).
3
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Capital Preservation and Income Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Evergreen Capital Preservation and Income Fund perform?
The Fund did relatively well in a difficult environment for adjustable rate
mortgage securities. For the six-month period ended on December 31, 1998, the
Fund's Class A shares had a total return of 2.10%, and Class B and Class C
shares had returns of 1.70% and 1.60%, respectively, unadjusted for applicable
sales charges. During the same six-month period, the average adjustable rate
mortgage fund had a return of 1.78%, as measured by Lipper Inc., an independent
monitor of mutual fund performance, and the Lehman Brothers Six-Month Treasury
Index had a return of 1.94%.
Portfolio
Characteristics
---------------
Total Net Assets $43,290,813
...................................................
Average Credit Quality AAA
...................................................
Average Maturity 4.3 years
...................................................
Average Duration 0.9 years
What was the investment environment like during the six months?
It was a favorable period for the government bond market, although not as
favorable for adjustable rate mortgage securities (ARMs). In general, this was
a period of rising prices and declining interest rates, especially for U.S.
Treasury securities and particularly among those with shorter maturities. To
illustrate, during the six months, the yield on the 30-year Treasury bond
declined from 5.63% to 5.09%. During the same time, the yield on the two-year
Treasury note declined from 5.48% to 4.53% and the yield of the 1-year Treasury
bill declined from 5.37% to 4.52%.
A global "flight-to-quality" sparked a rally among Treasury bonds, but this
rally did not extend to other parts of the bond market such as ARMs. Globally,
we witnessed a slowing of economic growth that had its start with the beginning
of the Asian financial crisis in August 1997. This crisis had caused the
devaluation of a number of Asian currencies and a general weakness in commodity
prices, which especially hurt commodity-producing, emerging economies. The
resulting problems peaked in late September and early October of 1998 as the
impact of the Russian government's default on part of its debt rippled through
the financial markets. A number of leveraged investors--who use borrowed money
with which to invest in bonds--had particularly severe problems. These included
hedge funds and Wall Street firms. Their problems accelerated an increase in
yield spreads between Treasury bonds and other bonds because these institutions
were forced to sell non-government bonds as the spreads widened. Only
Treasuries, the highest quality securities, rallied. Even though a U.S.
government agency mortgage-backed security is near the opposite end of the risk
spectrum from an emerging market bond, the market for ARMs was hurt in two
primary ways:
1. The reductions in interest rates increased investor fears about pre-payments
of home mortgages, undercutting the prices of ARMs.
2. Bond market traders, strapped for liquidity, were less likely to put capital
in any type of bond other than Treasuries.
The Federal Reserve stepped in to restore liquidity and confidence in the market
by cutting short-term interest rates three successive times during the fall.
After this easing of monetary policy, the value of ARMs recovered in the latter
part of 1998 as buyers returned to the mortgage-backed market.
4
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Capital Preservation and Income Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
What were your principal strategies?
In this environment, homeowners continued to pre-pay their adjustable rate
mortgages and take advantage of the low rates offered by fixed-rate mortgages.
While this was negative for ARMs in general, it also created the situation in
which the yields offered investors by ARMs became increasingly attractive
relative to other short-term securities. In addition, interest rates may have
declined to the point at which there is less incentive for homeowners to
refinance because their adjustable rate mortgages have reset to low rates. We
also believed that the actions of the Federal Reserve had restored stability to
the bond market, which ultimately would benefit ARMs.
Prior to June 30, we had increased our allocation of fixed-rate securities to
29% of net assets to dampen the impact of mortgage prepayments on the Fund.
During this six-month period, however, as the bond market began to stabilize we
started shifting assets back into the adjustable rate mortgage market to take
advantage of their relative value.
Asset Allocation
(as a percentage of net assets)
June 30, 1998 December 31, 1998
ARMs 69% 72%
Fixed-rate 29% 25%
Cash 2% 3%
Within the adjustable-rate allocation, we added to our emphasis in hybrid ARMs,
which decrease the prepayment risk by guaranteeing a fixed interest rate for a
specified period of time. The allocation increased from 7% to 10% of net
assets.
The Fund continued to have an average credit quality of AAA, because it invests
only in U.S. government or government agency securities or AAA-rated asset-
backed and mortgage securities.
What is your outlook?
We believe interest rates are likely to be stable and remain low. Continuing
international problems should encourage the Federal Reserve to keep rates down,
especially in light of very low inflation. In addition, other domestic factors
should keep rates from rising. Inflation remains low, and corporate profit
growth may start to slow, which would weaken capital spending and job growth.
These factors should serve as a brake on consumer confidence, which has been the
engine driving domestic economic growth. U.S. exports to other markets,
especially Latin America, also are likely to slow.
This is an environment in which short-term investments, such as adjustable rate
mortgage securities, should do very well. In addition, the relatively higher
yields of ARMs offer them a competitive advantage when compared to other short-
term government securities. With this outlook, we believe the Fund is very well
positioned for solid, competitive performance.
5
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Intermediate Term Bond Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of December 31, 1998
The Fund's traditional emphasis on corporate, investment grade securities held
back performance relative to the Lehman Brothers index during the six months,
when Treasury bonds were the best performers.
Portfolio
Management
- ----------
[PICTURE OF
CHRISTOPHER P. CONKEY
APPEARS HERE)
Christopher P. Conkey, CFA
Tenure: January 1988
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[ARTWORK
APPEARS
HERE]
Morningstar's Style Box is based on a portfolio date as of 12/31/98.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
/1/Source: 1998 Morningstar, Inc.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses paid by the
shareholders investing in each class. Historical performance for Classes B and
C prior to inception reflects that of Class A, the original class offered, the
inception date of which is 4/14/87, and includes appropriate 12b-1 fees for
Class A. If appropriate 12b-1 fees for Classes B and C were reflected, returns
for these classes would have been lower. Class Y performance includes the
historical performance of Class A, adjusted for 12b-1 fees. 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 LBIGCBI is an
unmanaged index and does not include transaction costs associated with buying
and selling securities nor any management fees. The CPI is a commonly used
measure of inflation and does not represent an investment return. It is not
possible to invest directly in an index.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
- --------------------------------------------------------------------------------
Class A Class B Class C Class Y
- --------------------------------------------------------------------------------
Average Annual Returns
- --------------------------------------------------------------------------------
6 months with sales charge 0.04% -1.83% 2.06% n/a
- --------------------------------------------------------------------------------
6 months w/o sales charge 3.45% 3.17% 3.06% 3.58%
- --------------------------------------------------------------------------------
1 year with sales charge 3.29% 1.01% 5.00% n/a
- --------------------------------------------------------------------------------
1 year w/o sales charge 6.80% 6.00% 6.00% 7.04%
- --------------------------------------------------------------------------------
3 years 5.53% 5.06% 5.92% 6.97%
- --------------------------------------------------------------------------------
5 years 5.42% 5.01% 5.31% 6.38%
- --------------------------------------------------------------------------------
10 years 7.31% 7.20% 7.19% 8.04%
- --------------------------------------------------------------------------------
Since Inception 6.46% 6.36% 6.35% 7.20%
- --------------------------------------------------------------------------------
Maximum Sales Charge 3.25% 5.00% 1.00% n/a
Front End CDSC CDSC
- --------------------------------------------------------------------------------
30-day SEC Yield 5.29% 4.54% 4.54% 5.55%
- --------------------------------------------------------------------------------
6-month distributions per share $0.27 $ 0.24 $0.23 $0.28
- --------------------------------------------------------------------------------
* Adjusted for maximum applicable sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE)
Lehman Brothers
Int Term bond Consumer Price Index - US Interm Govt/Corp
12/88 10000 10000 10000
12/89 10603 10465 11277
12/90 11228 11104 12309
12/91 13111 11444 14109
12/92 14177 11772 15121
12/93 15495 12100 16450
12/94 14994 12423 16132
12/95 17162 12730 18606
12/96 18009 13162 19360
12/97 19535 13386 20882
12/98 20860 13627 22642
Comparison of a $10,000 investment in Evergreen Intermediate Term Bond Fund
Class A, versus a similar investment in the Lehman Brothers Intermediate
Government/Corporate Bond Index (LBIGCBI) and the Consumer Price Index (CPI).
6
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Intermediate Term Bond Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform during the six-month period ended on December 31, 1998?
The Fund performed well, especially for a portfolio that focuses on corporate
bonds. For the six-month period ended on December 31, 1998, the Fund's Class A
shares had a total return of 3.45%. During the same period, the Fund's Class B
and C shares had total returns of 3.17% and 3.06%, respectively, while the Class
Y shares had a return of 3.58%. These returns are unadjusted for any applicable
sales charge. During the same six-month period, the average intermediate term
investment grade bond Fund had a return of 3.55%, according to Lipper, Inc., an
independent monitor of mutual fund performance. The Lehman Brothers
Intermediate Government/Corporate Index had a return of 4.8% during the period.
Portfolio
Characteristics
---------------
Total Net Assets $196,412,460
...................................................
Average Credit Quality A+
...................................................
Average Maturity 6.3 years
...................................................
Average Duration 4.0 years
...................................................
The Fund's traditional emphasis on corporate, investment grade securities held
back performance relative to the Lehman Brothers index during the six months,
when Treasury bonds were the best performers. The Fund's income continued to be
very attractive, and the yield was in the top-quartile among funds in the Lipper
category.
What was the investment environment like during the six months?
The U.S. economy continued to grow at a healthy pace, spurred by strong consumer
spending. The United States was, however, in Federal Reserve Chairman Alan
Greenspan's words, "an island of prosperity" amidst global economic uncertainty.
Western European economies continued to grow moderately, but problems in Russia
and Latin America and the continued recession in Asia contributed to an
environment of slowing global growth. The financial markets were less affected
by the overall economic environment than they were by specific financial events.
In August, the Russian government effectively defaulted on its external debt,
triggering a sharp decline in the prices of financial assets globally. This was
because a number of large investors, such as hedge funds, had been using
leverage--or borrowed money--to speculate in higher yielding, lower-rated
securities, including Russian bonds. Because they were using leverage, they
were hard-hit by any adverse change in prices. They were forced to start
unwinding their positions by selling securities, further contributing to a
general decline in prices. The crisis also called into question the ability of
many debt issuers to repay their debt, adding to the downward pressure on
prices.
The risk that banks and other financial institutions would be less able to lend
money grew, resulting in a credit crunch. In the U.S., the Federal Reserve
recognized this danger and reduced short-term interest rates three times in the
fall, easing the flow of money and reducing the costs of borrowing in this
country. These interest rate cuts encouraged monetary authorities in other
nations to take similar actions.
While the Federal Reserve's actions have restored some confidence in the
financial markets, problems remain. It is clear that global economic expansion
is slowing, creating a difficult environment for corporations to compete
internationally. In the financial markets, investors have flocked to the
lowest-risk assets in a "flight to quality." U.S. Treasury bonds, the highest
quality
7
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Intermediate Term Bond Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
securities, benefited the most. In the six months from June 30 through December
31, for example, the yields of five-year Treasuries declined from 5.47% to 4.54%
and prices rose. Despite the rise in Treasury bond prices, the prices of non-
government-guaranteed securities did not perform nearly as well. Yields of
investment grade corporate bonds and mortgage-backed securities tended to be
stable because of uncertainty over the economic outlook and the forced selling
of leveraged investors. Several trends affected investment performance:
. Longer-average-maturity portfolios tended to outperform shorter-maturities.
. Higher-credit-quality portfolios tended to outperform lower-credit-quality
investments.
. Bonds that offered investors call protection, and could not be called back
by their issuers prematurely, out-performed bonds without call protection.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(based on 12/31/98 net assets)
[PIE CHART APPEARS HERE]
Corporate Notes/Bonds -- 58.0%
Foreign Bonds -- 13.5%
U.S. Treasury/Agency -- 11.2%
CMO & Mortgage-Backed Securities -- 8.7%
Repurchase Agreements, other Assets and Liabilities (net) -- 4.8%
Asset-Backed Securities -- 3.8%
Within this environment, what strategies did you pursue?
We started the six-month period with a relatively long average maturity of seven
years. As interest rates came down, we shortened the average maturity to 6.3
years.
We also maintained the Fund's average credit quality at A+, but changed the
composition somewhat as we reduced the Fund's weighting in high-yield bonds from
21% of net assets to 18%. Corporate industrial bonds were increased from 51% to
58% of net assets. Among corporate bonds, including both investment grade and
high yield, we focused on defensive bonds in non-cyclical industries, including
finance, consumer goods and cable television. We emphasized the bonds of
companies whose business orientations were predominately domestic. We de-
emphasized dominant companies facing international competition or in cyclical
industries, including energy and commodity goods. The 18% high yield allocation
was exclusively invested in the better-quality part of the market, using BB- and
B-rated bonds in defensive, non-cyclical industries.
- --------------------------------------------------------------------------------
CREDIT QUALITY ALLOCATION
- --------------------------------------------------------------------------------
(based on 12/31/98 portfolio assets)
[PIE CHART APPEARS HERE]
U.S. Government/AAA -- 29%
A -- 20%
BBB -- 17%
AA -- 16%
BB -- 12%
B -- 6%
8
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Intermediate Term Bond Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
To increase the Fund's call protection and protect income, we decreased the
emphasis on mortgage-backed bonds and callable corporate bonds. We also reduced
the Fund's weighting in Danish mortgage-backed securities from 8.5% to 3.6% of
the portfolio. Among foreign investments, in general, we reduced the Fund's
currency exposure by cutting investments in non-U.S.-dollar-denominated
securities from 12% to 6%.
What is your outlook for the bond market?
We are very positive about economic growth in the United States, although we
expect it to proceed at a slower pace in 1999 than it did in 1998. The American
consumer has been spending at a rate higher than the historical average, and we
anticipate a return to more normal spending patterns. In addition, we expect
that corporations will reduce their capital spending in the face of slowing
growth and a continued decline in U.S. exports to other nations. The inflation
outlook remains positive. While we don't anticipate any further material
declines from today's already low inflation rates, neither do we anticipate any
material increases.
With slowing growth and low inflation, we expect the Federal Reserve may lower
short-term rates further. Long-term interest rates should be stable early in
the year, although they could decline further later in 1999, although not as
fast as short-term rates.
We like the current prices of corporate bonds and expect to continue to
emphasize them. The difference between the yields of corporate bonds and of
Treasury bonds is very high. In effect, corporate bonds are priced as if the
U.S. economy already was in a recession. In fact, the U.S. economy is
experiencing solid growth. We do not expect a recession any time soon. This
means that corporate bonds are cheap--they offer good investment value--with
high yields relative to their credit risk. We expect to overweight corporate
bonds, particularly BBB- and A-rated bonds, which offer good value.
Within the mortgage-backed bond sector, we expect to emphasize commercial
mortgage-backed securities because they tend to offer greater call protection
than residential mortgages and because the supply/demand relationship in the
commercial real estate market is favorable.
The investment environment should be favorable, especially for intermediate-term
corporate bonds. We expect to maintain a portfolio that provides an attractive
income stream with a relatively stable net asset value.
Note to Shareholders: Christopher Conkey, who has managed the Intermediate Term
Bond Fund since January 1988, has been named President and Chief Investment
Officer of Evergreen Investment Management Company. On January 1, 1999, David
J. Bowers, CFA, became Portfolio Manager of the Fund. Mr. Bowers holds a
Bachelor's Degree in Business Administration from Northeastern University and a
Master's Degree in Finance from Boston College. He has been serving as a fixed
income analyst, specializing in investment grade bonds, at Evergreen Investment
Management Company. He is a member of the Association for Investment Management
and Research and of the Boston Security Analysts Society.
9
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Intermediate Term Government Securities Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of December 31, 1998
In fact, our duration strategy benefited performance during the entire year as
interest rates declined steadily throughout much of the past
twelve months.
Portfolio
Management
- ----------
[PHOTO OF
L. ROBERT CHESHIRE
APPEARS HERE]
L. Robert Cheshire
Tenure: January 1994
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[ARTWORK
APPEARS
HERE]
Morningstar's Style Box is based on a portfolio date as of 12/31/98.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
/1/Source: 1998 Morningstar, Inc.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses paid by the
shareholders investing in each class. Historical performance for Classes A, B
and C prior to inception reflects that of Class Y, the original class offered,
the inception date of which is 11/1/91, and does not include 12b-1 fees. If such
fees were reflected, returns would have been lower. 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 LBIGBI is an unmanaged index and
does not include transaction costs associated with buying and selling securities
or any management fees. The CPI is a commonly used measure of inflation and does
not represent an investment return. It is not possible to invest directly in an
index.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
- --------------------------------------------------------------------------------
Class A Class B Class C Class Y
- --------------------------------------------------------------------------------
Average Annual Returns
- --------------------------------------------------------------------------------
6 months with sales charge 0.47% -1.67% 2.33% n/a
- --------------------------------------------------------------------------------
6 months w/o sales charge 3.82% 3.33% 3.33% 3.85%
- --------------------------------------------------------------------------------
1 year with sales charge 3.49% 0.96% 4.97% n/a
- --------------------------------------------------------------------------------
1 year w/o sales charge 6.95% 5.96% 5.97% 7.03%
- --------------------------------------------------------------------------------
3 years 4.38% 3.65% 4.66% 5.62%
- --------------------------------------------------------------------------------
5 years 4.69% 4.80% 4.85% 5.43%
- --------------------------------------------------------------------------------
Since Inception 5.69% 5.79% 5.82% 6.22%
- --------------------------------------------------------------------------------
Maximum Sales Charge 3.25% 5.00% 1.00% n/a
Front End CDSC CDSC
- --------------------------------------------------------------------------------
30-day SEC Yield 4.74% 3.81% 3.81% 4.81%
- --------------------------------------------------------------------------------
6-month distributions per share $0.28 $ 0.23 $0.23 $0.28
- --------------------------------------------------------------------------------
* Adjusted for maximum applicable sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Int Gov't Consumer Price Index - US Lehman Brothers Interm Govt
04/95 10000 10000 10000
12/95 10750 10098 10858
12/96 11074 10441 11300
12/97 11821 10619 12171
12/98 12643 10810 13205
Comparison of a $10,000 investment in Evergreen Intermediate Term Government
Securities Fund Class A, versus a similar investment in the Lehman Brothers
Intermediate Government Bond Index (LBIGBI) and the Consumer Price Index (CPI).
10
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Government Securities Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform during the past six months?
The Evergreen Intermediate Term Government Securities Fund Class Y posted a six-
month total return of 3.85%. Class A shares returned 3.82%, while B and C
shares returned 3.33%, unadjusted for applicable sales charge. This performance
outpaced the 3.72% average return of short intermediate U.S. government funds
tracked by Lipper, Inc. an independent monitor of mutual fund performance. For
the 12 months ended December 31, 1998, the Fund's Class Y shares ranked 31 out
of 99, and Class A shares ranked 36 out of 99 funds in its Lipper peer group./1/
Portfolio
Characteristics
---------------
Total Net Assets $169,114,982
...................................................
Average Credit Quality AAA
...................................................
Effective Maturity 4.3 years
...................................................
Average Duration 3.1 years
...................................................
What type of economic environment did investors experience?
During the past six months, fixed income investors witnessed benign inflation
and lower-trending interest rates that served to boost domestic bond prices. The
yield on the bellwether 30-year Treasury Bond started the period at 5.63%, and
fell as low as 4.70% before rebounding to 5.09% by December 31, 1998. Amid the
global economic crisis, the Federal Reserve Board lowered interest rates three
times in the final four months of 1998 in an effort to insulate the U.S. economy
from overseas turmoil.
- --------------------------------------------------------------------------------
PORTFOLIO MATURITY
- --------------------------------------------------------------------------------
(based on 12/31/98 portfolio assets)
[PIE CHART APPEARS HERE]
1-5 Years -- 32.2%
5-10 Years -- 31.0%
10-20 Years -- 15.1%
20-30 Years -- 14.0%
0-1 Year -- 7.7%
How did your duration and sector strategy impact performance?
Strong performance versus the Fund's peer group can be attributed primarily to a
long duration stance. The portfolio's duration, currently at 3.1 years,
fluctuated between 100% and 105% of the benchmark for most of the six months.
In fact, our duration strategy benefited performance during the entire year as
interest rates declined steadily throughout much of the past twelve months.
From a sector standpoint, we maintained a strong mortgage weighting in an effort
to bolster the portfolio's income component. Although mortgages underperformed
U.S. Treasuries during the period, we feel this sector's inherent income-
orientation will benefit the Fund going forward. From a historical perspective,
mortgages serve to increase yield as well as enhance total return and, despite
recent underperformance, we will likely maintain this overweighting.
/1/Source: Lipper, Inc. an independent monitor of mutual fund performance. The
rankings are based on total return and do not include the effect of a sales
charge. For the 5-year period ending December 31, 1998, the Fund's Class Y
shares ranked 29 out of 51 short-intermediate U.S. government funds tracked by
Lipper, Inc. Past performance is no guarantee of future results.
11
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Intermediate Term Government Securities Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(based on 12/31/98 net assets)
[PIE CHART APPEARS HERE]
....U.S. Treasury Obligations -- 43.3%
....Mortgage Backed Securities -- 40.2%
....U.S. Agency Obligations -- 15.1%
....Repurchase agreements, other assets & liabilities (net) -- 1.4%
What is your outlook going forward?
Going forward, we are wary that the global economic crisis could continue to
filter back to the U.S. financial markets in the form of volatility. Although
we don't anticipate a recession in the United States, we do expect an economic
slowdown that will prompt the Federal Reserve Board to reduce interest rates at
some point over the next six months. The portfolio's duration will likely
remain modestly long in anticipation of yields trading within a certain range or
slightly lower in the coming quarters. Our strategy to emphasize mortgages will
bolster the Fund's yield component and provide a degree of price stability in
the event of market volatility.
12
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Short Intermediate Bond Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of December 31, 1998
Strong performance relative to the Fund's peer group can be attributed to our
duration strategy.
Portfolio
Management
- ----------
[PICTURE OF
THOMAS L. ELLIS
APPEARS HERE]
Thomas L. Ellis
Tenure: January 1989
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[ARTWORK
APPEARS
HERE]
Morningstar's Style Box is based on a portfolio date as of 12/31/98.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
/1/Source: 1998 Morningstar, Inc.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses paid by the
shareholders investing in each class. Historical performance for Classes B, C
and Y prior to inception reflects that of Class A, the original class offered,
the inception date of which is 1/28/89, and includes appropriate 12b-1 fees for
Class A. If appropriate fees for Class B and C were reflected, returns for
these classes would have been lower. For Class Y, if 12b-1 fees were not
reflected, returns would have been higher. 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 LBIGCBI is an unmanaged index and does not
include transaction costs associated with buying and selling securities nor any
management fees. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
- --------------------------------------------------------------------------------
Class A Class B Class C Class Y
- --------------------------------------------------------------------------------
Average Annual Returns
- --------------------------------------------------------------------------------
6 months with sales charge 0.72% -1.40% 2.60% n/a
- --------------------------------------------------------------------------------
6 months w/o sales charge 4.08% 3.60% 3.60% 4.13%
- --------------------------------------------------------------------------------
1 year with sales charge 4.12% 1.63% 5.62% n/a
- --------------------------------------------------------------------------------
1 year w/o sales charge 7.60% 6.63% 6.62% 7.71%
- --------------------------------------------------------------------------------
3 years 4.71% 3.98% 4.88% 5.96%
- --------------------------------------------------------------------------------
5 years 4.97% 4.44% 4.88% 5.77%
- --------------------------------------------------------------------------------
Since Inception 7.19% 7.03% 7.15% 7.68%
- --------------------------------------------------------------------------------
Maximum Sales Charge 3.25% 5.00% 1.00% n/a
Front End CDSC CDSC
- --------------------------------------------------------------------------------
30-day SEC Yield 5.27% 4.37% 4.37% 5.37%
- --------------------------------------------------------------------------------
6-month distributions per share $0.29 $ 0.24 $0.24 $0.29
- --------------------------------------------------------------------------------
* Adjusted for maximum applicable sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Short Int Consumer Price Index - US Lehman Brothers Interm Govt/Corp
01/93 10000 10000 10000
12/93 10622 10224 10671
12/94 10348 10498 10465
12/95 11794 10757 12070
12/96 12263 11122 12559
12/97 13003 11311 13546
12/98 13988 11515 14688
Comparison of a $10,000 investment in Evergreen Short Intermediate Bond Fund
Class A, versus a similar investment in the Lehman Brothers Intermediate
Government/Corporate Bond Index (LBIGCBI) and the Consumer Price Index (CPI).
13
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Short Intermediate Bond Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform during the fiscal period?
The Evergreen Short Intermediate Term Bond Fund's Class Y shares' six-month
return of 4.13% modestly trailed the 4.80% total return of its benchmark, the
Lehman Brothers Intermediate Government/Corporate Index. Class A shares
returned 4.08% for the period, while Class B and C shares returned 3.60%,
unadjusted for sales charges.
For the 12 months ended December 31, 1998, the Fund's Class Y shares ranked 11,
and Class A shares ranked 15, out of 95 short intermediate investment grade
funds as measured by Lipper Inc., an independent monitor of mutual funds./1/ It
is also worth noting, that the Fund's Class A and Y shares outperformed their
peer group average for the three- and five-year periods.
Portfolio
Characteristics
---------------
Total Net Assets $401,671,611
...................................................
Average Credit Quality Aa2
...................................................
Effective Maturity 4.8 years
...................................................
Average Duration 3.8 years
...................................................
What was the market environment like during the past six months?
During the past six months, fixed income investors witnessed a continuation of
market themes from the first half of 1998: low inflation, a global economic
crisis and lower-trending interest rates. The U.S. economy's fundamental health
served to boost bond prices and allowed fixed income investments to post
positive total returns.
In fact, the yield on the bellwether 30-year Treasury Bond declined from 5.63%
to 4.98% during the first three months before inching up to 5.09% by December
31. In an effort to insulate the U.S. economy from global economic turmoil, the
Federal Reserve Board lowered the Fed Funds rate three times during the final
four months of 1998.
- --------------------------------------------------------------------------------
PORTFOLIO MATURITY
- --------------------------------------------------------------------------------
(based on 12/31/98 portfolio assets)
[PIE CHART APPEARS HERE]
1-5 Years -- 61%
5-10 Years -- 24%
0-1 Year -- 15%
How did your investment strategy impact performance?
Strong performance relative to the Fund's peer group can be attributed to our
duration strategy, which stayed at 105% to 110% of the benchmark for most of the
six months. Our forecast for continued declining interest rates, which proved
accurate, prompted us to maintain this long-duration strategy. As of December
31, duration stood at 3.8 years.
From a sector standpoint, the Fund was hampered by poor performances within the
corporate and mortgage sectors, particularly during the first three months of
the fiscal period. We felt these two areas represented strong values, however,
and increased the portfolio's weighting--from 41% to 52%--during the last three
months. As these two sectors rebounded in the past couple of months, our
increased weighting benefited performance and prompted us to significantly
outperform the average of our peer group during the past three months.
/1/Source: Lipper, Inc. an independent monitor of mutual fund performance. The
rankings are based on total return and do not include the effect of a sales
charge. For the 5-year period ending December 31, 1998, the Fund's Class A
shares ranked 23 out of 46 short-intermediate investment grade funds tracked by
Lipper, Inc; Class Y shares ranked 18 out of the 46 funds for the same period.
Past performance is no guarantee of future results.
14
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Short Intermediate Bond Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
Furthermore, the corporate bonds that we did purchase typically had maturity
dates of five years or less, due to our belief that the shorter end of the yield
curve represents the greatest relative value.
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY
- --------------------------------------------------------------------------------
(based on 12/31/98 portfolio assets)
[PIE CHART APPEARS HERE]
Government/Agency -- 42.7%
A -- 25.0%
Aaa -- 20.7%
Baa -- 5.0%
Aa -- 4.0%
Ba -- 2.6%
What is your outlook going into 1999?
Going forward, current fundamentals suggest U.S. economic growth will slow
markedly in the next couple of quarters. We feel the Federal Reserve Board will
keep interest rates steady in the near term, but may need to lower the rates by
mid-1999 should the economy slow too much. Amid this backdrop, we anticipate
yields to trade within a certain range in the near term, eventually settling at
the lower end of their current range.
Consequently, duration will be kept relatively long in order to take advantage
of potentially lower rates. Purchases during the next few months will focus on
the shorter end of the yield curve, securities with maturity dates in two to
four years. From a sector standpoint, we will likely continue increasing our
corporate and mortgage positions, because we anticipate an extended rebound in
these areas.
15
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Capital Preservation and Income Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Year Ended
ended September 30,
December 31, 1998 Year Ended Period Ended ----------------------
(Unaudited) June 30, 1998 June 30, 1997(b) 1996 1995 (a)
CLASS A SHARES
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.73 $ 9.80 $ 9.74 $ 9.68 $ 9.51
======= ======= ======= ======= =======
....................................................................................................................................
Income from investment operations
....................................................................................................................................
Net investment income 0.28 0.57 0.46 0.61+++ 0.46
....................................................................................................................................
Net realized and unrealized gains or losses on
securities (0.08) (0.07) 0.03 0.01 0.14
------- ------- ------- ------- -------
....................................................................................................................................
Total from investment operations 0.20 0.50 0.49 0.62 0.60
------- ------- ------- ------- -------
....................................................................................................................................
Less distributions
....................................................................................................................................
From net investment income (0.27) (0.57) (0.43) (0.53) (0.43)
....................................................................................................................................
Returns of capital 0 0 0 (0.03) 0
------- ------- ------- ------- -------
....................................................................................................................................
Total distributions (0.27) (0.57) (0.43) (0.56) (0.43)
------- ------- ------- ------- -------
....................................................................................................................................
Net asset value, end of period $ 9.66 $ 9.73 $ 9.80 $ 9.74 $ 9.68
======= ======= ======= ======= =======
....................................................................................................................................
Total return+ 2.10% 5.24% 5.12% 6.56% 6.36%
....................................................................................................................................
Ratios/supplemental data
....................................................................................................................................
Net assets, end of period (thousands) $15,024 $18,022 $15,751 $22,684 $19,293
....................................................................................................................................
Ratios to average net assets
....................................................................................................................................
Expenses 0.88%++ 0.87% 0.92%++ 0.91% 0.86%+
....................................................................................................................................
Expenses, after fee credits 0.88%++ 0.87% 0.90%++ 0.90% 0.82%+
....................................................................................................................................
Expenses, excluding fee waivers and expense
reimbursements 1.25%++ 1.29% 1.47%++ 1.33% 1.27%+
....................................................................................................................................
Net investment income 5.51%++ 5.77% 6.24%++ 6.31% 6.37%+
....................................................................................................................................
Portfolio turnover rate 19% 88% 52% 74% 67%
....................................................................................................................................
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
+++ Calculation based on average shares outstanding.
(a) For the period from December 30, 1994 (commencement of class operations) to
September 30, 1995.
(b) For the nine months ended June 30, 1997. The Fund changed its fiscal year
end from September 30 to June 30, effective June 30, 1997.
See Combined Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Capital Preservation and Income Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended September 30,
December 31, 1998 Year Ended Period Ended --------------------------------------
(Unaudited) June 30, 1998 June 30, 1997(a) 1996 1995 1994 1993
CLASS B SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.74 $ 9.81 $ 9.75 $ 9.68 $ 9.62 $ 9.91 $ 9.88
======= ======= ======= ======= ======= ====== ========
....................................................................................................................................
Income from investment operations
....................................................................................................................................
Net investment income 0.23 0.49 0.39 0.55+++ 0.52 0.47 0.45
....................................................................................................................................
Net realized and unrealized gains or losses
on securities (0.07) (0.07) 0.04 0.01 0.03 (0.41) (0.05)
------- ------- ------- ------- ------- ------ --------
....................................................................................................................................
Total from investment operations 0.16 0.42 0.43 0.56 0.55 0.06 0.40
------- ------- ------- ------- ------- ------ --------
....................................................................................................................................
Less distributions
....................................................................................................................................
From net investment income (0.23) (0.49) (0.37) (0.46) (0.49) (0.35) (0.37)
....................................................................................................................................
Returns of capital 0 0 0 (0.03) 0 0 0
------- ------- ------- ------- ------- ------- --------
....................................................................................................................................
Total distributions (0.23) (0.49) (0.37) (0.49) (0.49) (0.35) (0.37)
....................................................................................................................................
Net asset value, end of period $ 9.67 $ 9.74 $ 9.81 $ 9.75 $ 9.68 $ 9.62 $ 9.91
======= ======= ======= ======= ======= ======= ========
....................................................................................................................................
Total return+ 1.70% 4.42% 4.53% 5.90% 5.81% 0.58% 4.16%
....................................................................................................................................
Ratios/supplemental data
....................................................................................................................................
Net assets, end of period (thousands) $24,210 $26,056 $32,694 $44,096 $62,998 $95,761 $144,725
....................................................................................................................................
Ratios to average net assets
....................................................................................................................................
Expenses 1.65%++ 1.65% 1.67%++ 1.63% 1.53% 1.50% 1.50%
....................................................................................................................................
Expenses, after fee credits 1.65%++ 1.65% 1.65%++ 1.62% 1.50% -- --
....................................................................................................................................
Expenses, excluding fee waivers and expense
reimbursements 2.01%++ 2.10% 2.23%++ 2.09% 2.09% 1.93% 1.94%
....................................................................................................................................
Net investment income 4.73%++ 5.07% 5.52%++ 5.63% 5.46% 4.05% 4.44%
....................................................................................................................................
Portfolio turnover rate 19% 88% 52% 74% 67% 34% 60%
....................................................................................................................................
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
+++ Calculation based on average shares outstanding.
(a) For the nine months ended June 30, 1997. The Fund changed its fiscal year
end from September 30 to June 30, effective June 30, 1997.
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 Year Ended September 30,
December 31, 1998 Year Ended Period Ended --------------------------------------
(Unaudited) June 30, 1998 June 30, 1997(b) 1996 1995 1994 1993(a)
CLASS C SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.74 $ 9.80 $ 9.74 $ 9.67 $ 9.60 $ 9.90 $ 9.82
------ ------ ------ ------ ------ ------ ------
....................................................................................................................................
Income from investment operations
....................................................................................................................................
Net investment income 0.23 0.49 0.40 0.54+++ 0.52 0.40 0.23
....................................................................................................................................
Net realized and unrealized gains or losses
on securities (0.08) (0.06) 0.03 0.02 0.04 (0.35) 0.09
------ ------ ------ ------ ------ ------ ------
......................................................................................................................... ..........
Total from investment operations 0.15 0.43 0.43 0.56 0.56 0.05 0.32
------ ------ ------ ------ ------ ------ ------
....................................................................................................................................
Less distributions
....................................................................................................................................
From net investment income (0.23) (0.49) (0.37) (0.46) (0.49) (0.35) (0.24)
....................................................................................................................................
Returns of capital 0 0 0 (0.03) 0 0 0
------ ------ ------ ------ ------ ------ ------
......................................................................................................................... ..........
Total distributions (0.23) (0.49) (0.37) (0.49) (0.49) (0.35) (0.24)
------ ------ ------ ------ ------ ------ ------
....................................................................................................................................
Net asset value, end of period $ 9.66 $ 9.74 $ 9.80 $ 9.74 $ 9.67 $ 9.60 $ 9.90
------ ------ ------ ------ ------ ------ ------
....................................................................................................................................
Total return+ 1.60% 4.53% 4.53% 5.91% 5.93% 0.48% 3.28%
....................................................................................................................................
Ratios/supplemental data
....................................................................................................................................
Net assets, end of period (thousands) $4,057 $3,972 $4,105 $4,152 $2,755 $2,874 $2,077
....................................................................................................................................
Ratios to average net assets
....................................................................................................................................
Expenses 1.65%++ 1.65% 1.67%++ 1.64% 1.53% 1.50% 1.50%++
....................................................................................................................................
Expenses, after fee credits 1.65%++ 1.65% 1.65%++ 1.62% 1.50% -- --
....................................................................................................................................
Expenses, excluding fee waivers and
expense reimbursements 2.01%++ 2.09% 2.23%++ 2.09% 2.08% 1.94% 1.67%++
....................................................................................................................................
Net investment income 4.73%++ 5.05% 5.53%++ 5.60% 5.51% 4.08% 2.91%++
....................................................................................................................................
Portfolio turnover rate 19% 88% 52% 74% 67% 34% 60%
....................................................................................................................................
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
+++ Calculation based on average shares outstanding.
(a) For the period from February 1, 1993 (commencement of class operations) to
September 30, 1993.
(b) For the nine months ended June 30, 1997. The Fund changed its fiscal year
end from September 30 to June 30, effective June 30, 1997.
See Combined Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Bond Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended July 31,
December 31, 1998 Year Ended Period Ended ------------------------------------
(Unaudited) June 30, 1998 June 30, 1997(a) 1996 1995 1994 1993
CLASS A SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.08 $ 8.93 $ 8.73 $ 8.88 $ 8.84 $ 9.46 $ 9.23
======== ======== ======= ======= ======= ======= =======
....................................................................................................................................
Income from investment operations
....................................................................................................................................
Net investment income 0.27 0.57+++ 0.54 0.59 0.63 0.57+++ 0.70
....................................................................................................................................
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions 0.04 0.20 0.18 (0.16) 0.02 (0.59) 0.18
-------- -------- ------- ------- ------- ------- -------
....................................................................................................................................
Total from investment operations 0.31 0.77 0.72 0.43 0.65 (0.02) 0.88
-------- -------- ------- ------- ------- ------- -------
....................................................................................................................................
Less distributions
....................................................................................................................................
From net investment income (0.27) (0.62) (0.52) (0.58) (0.61) (0.59) (0.65)
....................................................................................................................................
Returns of capital 0 0 0 0 0 (0.01) 0
-------- -------- ------- ------- ------- ------- -------
....................................................................................................................................
Total distributions (0.27) (0.62) (0.52) (0.58) (0.61) (0.60) (0.65)
-------- -------- ------- ------- ------- ------- -------
....................................................................................................................................
Net asset value, end of period $ 9.12 $ 9.08 $ 8.93 $ 8.73 $ 8.88 $ 8.84 $ 9.46
======== ======== ======= ======= ======= ======= =======
....................................................................................................................................
Total return+ 3.45% 8.82% 8.40% 4.95% 7.76% (0.29%) 9.88%
....................................................................................................................................
Ratios/supplemental data
....................................................................................................................................
Net assets, end of period
(thousands) $119,548 $123,723 $10,341 $12,958 $14,558 $16,036 $18,032
....................................................................................................................................
Ratios to average net assets
....................................................................................................................................
Expenses 1.07%++ 1.11% 1.12%++ 1.10% 1.00% 1.00% 1.52%
....................................................................................................................................
Expenses, after fee credits 1.07%++ 1.10% 1.10%++ 1.08% -- -- --
....................................................................................................................................
Expenses, excluding fee waivers and
expense reimbursements 1.23%++ 1.44% 1.58%++ 1.54% 1.48% 1.80% 1.99%
....................................................................................................................................
Net investment income 5.84%++ 6.00% 6.43%++ 6.57% 7.13% 6.81% 7.48%
....................................................................................................................................
Portfolio turnover rate 74% 331% 179% 231% 149% 280% 160%
....................................................................................................................................
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
+++ Calculation based on average shares outstanding.
(a) For the eleven months ended June 30, 1997. The Fund changed its fiscal year
end from July 31 to June 30, effective June 30, 1997.
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 Year Ended July 31,
December 31, 1998 Year Ended Period Ended -----------------------------------------
(Unaudited) June 30, 1998 June 30, 1997(b) 1996 1995 1994 1993(a)
CLASS B SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.09 $ 8.95 $ 8.74 $ 8.89 $ 8.85 $ 9.47 $ 9.35
======= ======= ======= ======= ======= ======= ======
....................................................................................................................................
Income from investment operations
....................................................................................................................................
Net investment income 0.23 0.48+++ 0.47 0.52 0.56 0.49+++ 0.29
....................................................................................................................................
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions 0.06 0.21 0.20 (0.16) 0.02 (0.58) 0.12
------- ------- ------- ------- ------- ------- -------
....................................................................................................................................
Total from investment operations 0.29 0.69 0.67 0.36 0.58 (0.09) 0.41
------- ------- ------- ------- ------- ------- -------
....................................................................................................................................
Less distributions
....................................................................................................................................
From net investment income (0.24) (0.55) (0.46) (0.51) (0.54) (0.52) (0.29)
....................................................................................................................................
Returns of capital 0 0 0 0 0 (0.01) 0
------- ------- ------- ------- ------- ------- -------
....................................................................................................................................
Total distributions (0.24) (0.55) (0.46) (0.51) (0.54) (0.53) (0.29)
------- ------- ------- ------- ------- ------- -------
....................................................................................................................................
Net asset value, end of period $ 9.14 $ 9.09 $ 8.95 $ 8.74 $ 8.89 $ 8.85 $ 9.47
======= ======= ======= ======= ======= ======= =======
....................................................................................................................................
Total return+ 3.17% 7.89% 7.81% 4.10% 6.87% (1.05%) 4.42%
....................................................................................................................................
Ratios/supplemental data
....................................................................................................................................
Net assets, end of period (thousands) $11,788 $10,763 $11,368 $16,034 $17,985 $17,819 $8,159
....................................................................................................................................
Ratios to average net assets
....................................................................................................................................
Expenses 1.82%++ 1.86% 1.87%++ 1.85% 1.75% 1.75% 1.76%++
....................................................................................................................................
Expenses, after fee credits 1.82%++ 1.85% 1.85%++ 1.83% -- -- --
....................................................................................................................................
Expenses, excluding fee waivers and
expense reimbursements 1.98%++ 2.22% 2.35%++ 2.32% 2.21% 2.36% 2.71%++
....................................................................................................................................
Net investment income 5.09%++ 5.28% 5.68%++ 5.82% 6.38% 5.48% 5.67%++
....................................................................................................................................
Portfolio turnover rate 74% 331% 179% 231% 149% 280% 160%
....................................................................................................................................
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
+++ Calculation based on average shares outstanding.
(a) For the period from February 1, 1993 (date of initial public offering) to
July 31, 1993.
(b) For the eleven months ended June 30, 1997. The Fund changed its fiscal year
end from July 31 to June 30, effective June 30, 1997.
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 Year Ended July 31,
December 31, 1998 Year Ended Period Ended ------------------------------------
(Unaudited) June 30, 1998 June 30, 1997(a) 1996 1995 1994 1993(a)
CLASS C SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.09 $ 8.94 $ 8.74 $ 8.89 $ 8.85 $ 9.46 $ 9.35
====== ====== ====== ====== ======= ======= =======
....................................................................................................................................
Income from investment operations
....................................................................................................................................
Net investment income 0.23 0.49+++ 0.46 0.52 0.55 0.49+++ 0.29
....................................................................................................................................
Net realized and unrealized gains or losses
on securities and foreign currency
related transactions 0.05 0.21 0.20 (0.16) 0.03 (0.57) 0.11
------ ------ ------ ------ ------- ------- -------
....................................................................................................................................
Total from investment operations 0.28 0.70 0.66 0.36 0.58 (0.08) 0.40
------ ------ ------ ------ ------- ------- -------
....................................................................................................................................
Less distributions
....................................................................................................................................
From net investment income (0.23) (0.55) (0.46) (0.51) (0.54) (0.52) (0.29)
....................................................................................................................................
Returns of capital 0 0 0 0 0 (0.01) 0
------ ------ ------ ------ ------- ------- -------
....................................................................................................................................
Total distributions (0.23) (0.55) (0.46) (0.51) (0.54) (0.53) (0.29)
------ ------ ------ ------ ------- ------- -------
....................................................................................................................................
Net asset value, end of period $ 9.14 $ 9.09 $ 8.94 $ 8.74 $ 8.89 $ 8.85 $ 9.46
====== ====== ====== ====== ======= ======= =======
....................................................................................................................................
Total return+ 3.06% 8.01% 7.70% 4.10% 6.87% (0.95%) 4.31%
....................................................................................................................................
Ratios/supplemental data
....................................................................................................................................
Net assets, end of period (thousands) $5,386 $5,439 $7,259 $9,084 $10,185 $13,086 $ 7,522
....................................................................................................................................
Ratios to average net assets
....................................................................................................................................
Expenses 1.82%++ 1.86% 1.87%++ 1.85% 1.75% 1.75% 1.77%++
....................................................................................................................................
Expenses, after fee credits 1.82%++ 1.85% 1.85%++ 1.83% -- -- --
....................................................................................................................................
Expenses, excluding fee waivers and
expense reimbursements 1.98%++ 2.21% 2.35%++ 2.31% 2.23% 2.37% 2.61%++
....................................................................................................................................
Net investment income 5.09%++ 5.26% 5.68%++ 5.82% 6.37% 5.44% 5.61%++
....................................................................................................................................
Portfolio turnover rate 74% 331% 179% 231% 149% 280% 160%
....................................................................................................................................
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
+++ Calculation based on average shares outstanding.
(a) For the period from February 1, 1993 (date of initial public offering) to
July 31, 1993.
(b) For the eleven months ended June 30, 1997. The Fund changed its fiscal year
end from July 31 to June 30, effective June 30, 1997.
See Combined Notes to Financial Statements.
21
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Bond Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (a)
CLASS Y SHARES
<S> <C> <C>
Net asset value, beginning of period $ 9.08 $ 9.09
======= =======
...................................................................................................................................
Income from investment operations
...................................................................................................................................
Net investment income 0.28 0.24++
...................................................................................................................................
Net realized and unrealized gains or losses on securities and foreign currency related transactions 0.04 (0.01)
------- -------
...................................................................................................................................
Total from investment operations 0.32 0.23
------- -------
...................................................................................................................................
Less distributions from net investment income (0.28) (0.24)
------- -------
...................................................................................................................................
Net asset value, end of period $ 9.12 $ 9.08
======= =======
...................................................................................................................................
Total return 3.58% 2.58%
...................................................................................................................................
Ratios/supplemental data
...................................................................................................................................
Net assets, end of period (thousands) $59,691 $63,721
...................................................................................................................................
Ratios to average net assets
...................................................................................................................................
Expenses 0.82%+ 0.86%+
...................................................................................................................................
Expenses, after fee credits 0.82%+ 0.85%+
...................................................................................................................................
Expenses, excluding fee waivers and expense reimbursements 0.98%+ 1.10%+
...................................................................................................................................
Net investment income 6.09%+ 6.23%+
...................................................................................................................................
Portfolio turnover rate 74% 331%
...................................................................................................................................
</TABLE>
+ Annualized.
++ Calculation based on average shares outstanding.
(a) For the period from January 26, 1998 (commencement of class operations) to
June 30, 1998.
See Combined Notes to Financial Statements.
22
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Government Securities Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended June 30,
December 31, 1998 ------------------------- Period Ended
(Unaudited) 1998 1997 1996 (b) August 31, 1995 (a)
CLASS A SHARES
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.21 $ 10.02 $ 9.99 $10.15 $ 9.95
------- ------- ------ ------ ------
............................................................................................
Income from investment
operations
............................................................................................
Net investment income 0.28 0.55 0.55 0.46 0.19
............................................................................................
Net realized and
unrealized gains or
losses on securities 0.11 0.19 0.03 (0.16) 0.20
------- ------- ------ ------ ------
............................................................................................
Total from investment
operations 0.39 0.74 0.58 0.30 0.39
------- ------- ------ ------ ------
............................................................................................
Less distributions from
net investment income (0.28) (0.55) (0.55) (0.46) (0.19)
------- ------- ------ ------ ------
............................................................................................
Net asset value, end of
period $ 10.32 $ 10.21 $10.02 $ 9.99 $10.15
------- ------- ------ ------ ------
............................................................................................
Total return+ 3.82% 7.55% 6.00% 3.00% 3.90%
............................................................................................
Ratios/supplemental data
............................................................................................
Net assets, end of
period (thousands) $75,778 $81,034 $ 571 $ 497 $ 9
............................................................................................
Ratios to average net
assets
............................................................................................
Expenses 0.90%++ 0.83% 0.86% 0.81%++ 0.80%++
............................................................................................
Expenses, after fee
credits 0.90%++ 0.83% 0.86% -- --
............................................................................................
Expenses, excluding fee
waivers and expense
reimbursements 1.09%++ 1.02% 0.94% 1.06%++ 1.34%++
............................................................................................
Net investment income 5.32%++ 5.39% 5.47% 5.49%++ 5.42%++
............................................................................................
Portfolio turnover rate 3% 45% 68% 28% 45%
............................................................................................
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended Year Ended June 30,
December 31, 1998 ------------------------
(Unaudited) 1998 1997 1996 (c)
<S> <C> <C> <C> <C>
CLASS B SHARES
Net asset value, beginning of
period $10.21 $10.02 $ 9.99 $10.38
------ ------ ------ ------
.................................................................................
Income from investment operations
.................................................................................
Net investment income 0.23 0.46 0.45 0.18
.................................................................................
Net realized and unrealized gains
or losses on securities 0.11 0.19 0.04 (0.39)
------ ------ ------ ------
.................................................................................
Total from investment operations 0.34 0.65 0.49 (0.21)
------ ------ ------ ------
.................................................................................
Less distributions from net
investment income (0.23) (0.46) (0.46) (0.18)
------ ------ ------ ------
.................................................................................
Net asset value, end of period $10.32 $10.21 $10.02 $ 9.99
------ ------ ------ ------
.................................................................................
Total return+ 3.33% 6.57% 5.03% (1.99)%
.................................................................................
Ratios/supplemental data
.................................................................................
Net assets, end of period
(thousands) $3,069 $1,052 $ 742 $ 359
.................................................................................
Ratios to average net assets
.................................................................................
Expenses 1.84%++ 1.82% 1.81% 1.80%++
.................................................................................
Expenses, after fee credits 1.84%++ 1.82% 1.81% --
.................................................................................
Expenses, excluding fee waivers
and expense reimbursements 1.84%++ 1.82% 1.89% 1.91%++
.................................................................................
Net investment income 4.37%++ 4.49% 4.53% 4.62%++
.................................................................................
Portfolio turnover rate 3% 45% 68% 28%
.................................................................................
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
(a) For the period from May 2, 1995 (commencement of class operations) to Au-
gust 31, 1995.
(b) For the ten months ended June 30, 1996. The Fund changed its fiscal year
end from August 31 to June 30, effective June 30, 1996.
(c) For the period from February 9, 1996 (commencement of class operations) to
June 30, 1996.
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>
Six Months Ended Year Ended June 30,
December 31, 1998 ----------------------------
(Unaudited) 1998 1997 1996 (a)
<S> <C> <C> <C> <C>
CLASS C SHARES
Net asset value, beginning of period $10.21 $10.02 $ 9.99 $10.01
====== ====== ====== ======
....................................................................................................................................
Income from investment operations
....................................................................................................................................
Net investment income 0.23 0.45+++ 0.40 0.11
....................................................................................................................................
Net realized and unrealized gains or losses on securities 0.11 0.20 0.09 (0.02)
------ ------- ------ ------
....................................................................................................................................
Total from investment operations 0.34 0.65 0.49 0.09
------ ------ ------ ------
....................................................................................................................................
Less distributions from net investment income (0.23) (0.46) (0.46) (0.11)
------ ------ ------ ------
....................................................................................................................................
Net asset value, end of period $10.32 $10.21 $10.02 $ 9.99
====== ====== ====== ======
....................................................................................................................................
Total return+ 3.33% 6.57% 5.03% 0.89%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
....................................................................................................................................
Net assets, end of period (thousands) $ 209 $ 126 $ 12 $ 32
....................................................................................................................................
Ratios to average net assets
Expenses 1.84%++ 1.83% 1.81% 1.80%++
....................................................................................................................................
Expenses, after fee credits 1.84%++ 1.83% 1.81% --
....................................................................................................................................
Expenses, excluding fee waivers and expense reimbursements 1.84%++ 1.83% 1.90% 1.91%++
....................................................................................................................................
Net investment income 4.38%++ 4.54% 4.53% 4.47%++
....................................................................................................................................
Portfolio turnover rate 3% 45% 68% 28%
....................................................................................................................................
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, Year Ended August 31,
December 31, 1998 ------------------ Period Ended ----------------------------
(Unaudited) 1998 1997 June 30, 1996 (b) 1995 1994 1993
CLASS Y SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.21 $ 10.02 $ 9.99 $ 10.15 $ 9.92 $ 10.61 $ 10.41
======= ======= ======= ======= ====== ======= =======
....................................................................................................................................
Income from investment operations
....................................................................................................................................
Net investment income 0.28 0.56 0.56 0.46 0.55 0.54 0.57
....................................................................................................................................
Net realized and unrealized gains or losses
on securities 0.11 0.19 0.03 (0.16) 0.23 (0.64) 0.24
------- ------- ------- ------- ------ ------- -------
....................................................................................................................................
Total from investment operations 0.39 0.75 0.59 0.30 0.78 (0.10) 0.81
------- ------- ------- ------- ------ ------- -------
Less distributions
....................................................................................................................................
From net investment income (0.28) (0.56) (0.56) (0.46) (0.55) (0.54) (0.58)
....................................................................................................................................
From capital gains 0 0 0 0 0 (0.05) (0.03)
....................................................................................................................................
Total distributions (0.28) (0.56) (0.56) (0.46) (0.55) (0.59) (0.61)
------- ------- ------- ------- ------ ------- -------
....................................................................................................................................
Net asset value, end of period $ 10.32 $ 10.21 $ 10.02 $ 9.99 $10.15 $ 9.92 $ 10.61
======= ======= ======= ======= ====== ======= =======
Total return 3.85% 7.63% 6.08% 3.00% 8.16% (0.99%) 8.03%
....................................................................................................................................
Ratios/supplemental data
....................................................................................................................................
Net assets, end of period (thousands) $90,058 $99,729 $71,588 $87,004 $106,066 $106,448 $119,172
....................................................................................................................................
Ratios to average net assets
Expenses 0.84%++ 0.82% 0.81% 0.80%++ 0.70% 0.55% 0.55%
....................................................................................................................................
Expenses, after fee credits 0.84%++ 0.82% 0.81% -- -- -- --
....................................................................................................................................
Expenses, excluding fee waivers and expense
reimbursements 0.84%++ 0.82% 0.89% 0.87%++ 0.84% 0.82% 0.83%
....................................................................................................................................
Net investment income 5.38%++ 5.47% 5.52% 5.47%++ 5.54% 5.22% 5.48%
....................................................................................................................................
Portfolio turnover rate 3% 45% 68% 28% 45% 45% 31%
....................................................................................................................................
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
+++ Calculation based on average shares outstanding.
(a) For the period from April 10, 1996 (commencement of class operations) to
June 30, 1996.
(b) For the ten months ended June 30, 1996. The Fund changed its fiscal year
end from August 31 to June 30, effective June 30, 1996.
See Combined Notes to Financial Statements.
24
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Short Intermediate Bond Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Six Months Ended Year Ended June 30, December 31,
December 31, 1998 ------------------------- Period Ended -----------------
(Unaudited) 1998 1997 1996 June 30, 1995 (a) 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 9.90 $ 9.83 $ 9.82 $ 10.02 $ 9.52 $ 10.42 $ 10.41
------- ------- ------- ------- ------- ------- -------
............................................................................................................
Income from investment
operations
............................................................................................................
Net investment income 0.28 0.61 0.63 0.63 0.32 0.65 0.65
............................................................................................................
Net realized and unrealized
gains or losses on
securities 0.12 0.07 0.02 (0.19) 0.50 (0.91) 0.19
------- ------- ------- ------- ------- ------- -------
............................................................................................................
Total from investment
operations 0.40 0.68 0.65 0.44 0.82 (0.26) 0.84
------- ------- ------- ------- ------- ------- -------
............................................................................................................
Less distributions
............................................................................................................
From net investment income (0.29) (0.61) (0.64) (0.64) (0.32) (0.64) (0.65)
............................................................................................................
From capital gains 0 0 0 0 0 0 (0.18)
------- ------- ------- ------- ------- ------- -------
............................................................................................................
Total distributions (0.29) (0.61) (0.64) (0.64) (0.32) (0.64) (0.83)
------- ------- ------- ------- ------- ------- -------
............................................................................................................
Net asset value, end of
period $ 10.01 $ 9.90 $ 9.83 $ 9.82 $ 10.02 $ 9.52 $ 10.42
------- ------- ------- ------- ------- ------- -------
............................................................................................................
Total return+ 4.08% 7.08% 6.77% 4.45% 8.77% (2.57%) 8.29%
............................................................................................................
Ratios/supplemental data
............................................................................................................
Net assets, end of
period (thousands) $20,086 $16,848 $17,703 $18,630 $18,898 $19,127 $22,865
............................................................................................................
Ratios to average net assets
Expenses 0.84%++ 0.80% 0.72% 0.79% 0.77%++ 0.75% 0.93%
............................................................................................................
Expenses, after fee
credits 0.83%++ 0.80% 0.72% -- -- -- --
............................................................................................................
Net investment income 5.69%++ 6.14% 6.37% 6.35% 6.58%++ 6.46% 6.15%
............................................................................................................
Portfolio turnover rate 31% 68% 45% 76% 34% 48% 73%
............................................................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended
Six Months Ended Year Ended June 30, December 31,
December 31, 1998 ------------------------- Period Ended ------------------
(Unaudited) 1998 1997 1996 June 30, 1995 (a) 1994 1993 (b)
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 9.92 $ 9.85 $ 9.84 $ 10.04 $ 9.54 $ 10.44 $10.57
------- ------- ------- ------- ------- ------- ------
............................................................................................................
Income from investment
operations
............................................................................................................
Net investment income 0.24 0.52 0.54 0.55 0.28 0.58 0.58
............................................................................................................
Net realized and
unrealized gains or
losses on securities 0.11 0.07 0.01 (0.19) 0.50 (0.92) 0.05
------- ------- ------- ------- ------- ------- ------
............................................................................................................
Total from investment
operations 0.35 0.59 0.55 0.36 0.78 (0.34) 0.63
------- ------- ------- ------- ------- ------- ------
............................................................................................................
Less distributions
............................................................................................................
From net investment
income (0.24) (0.52) (0.54) (0.56) (0.28) (0.56) (0.58)
............................................................................................................
From capital gains 0 0 0 0 0 0 (0.18)
------- ------- ------- ------- ------- ------- ------
............................................................................................................
Total distributions (0.24) (0.52) (0.54) (0.56) (0.28) (0.56) (0.76)
------- ------- ------- ------- ------- ------- ------
............................................................................................................
Net asset value, end of
period $ 10.03 $ 9.92 $ 9.85 $ 9.84 $ 10.04 $ 9.54 $10.44
------- ------- ------- ------- ------- ------- ------
............................................................................................................
Total return+ 3.60% 6.11% 5.78% 3.62% 8.31% (3.33%) 6.08%
............................................................................................................
Ratios/supplemental data
............................................................................................................
Net assets, end of
period (thousands) $25,212 $22,689 $22,237 $21,006 $17,366 $17,625 $8,876
............................................................................................................
Ratios to average net assets
Expenses 1.74%++ 1.70% 1.62% 1.69% 1.67%++ 1.50% 1.57%++
............................................................................................................
Expenses, after fee
credits 1.73%++ 1.70% 1.62% -- -- -- --
............................................................................................................
Net investment income 4.79%++ 5.23% 5.48% 5.45% 5.68%++ 5.75% 5.42%++
............................................................................................................
Portfolio turnover rate 31% 68% 45% 76% 34% 48% 73%
............................................................................................................
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
(a) For the six months ended June 30, 1995. The Fund changed its fiscal year
end from December 31 to June 30, effective June 30, 1995.
(b) For the period from January 25, 1993 (commencement of class operations) to
December 31, 1993.
See Combined Notes to Financial Statements.
25
<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, 1998 ---------------------- Period Ended Period Ended
(Unaudited) 1998 1997 1996 June 30, 1995 (b) December 31, 1994 (a)
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 9.92 $ 9.85 $ 9.84 $10.05 $ 9.55 $9.85
====== ====== ====== ====== ====== =====
............................................................................................................
Income from investment
operations
............................................................................................................
Net investment income 0.24 0.52 0.54 0.55 0.26 0.18
............................................................................................................
Net realized and
unrealized gains or
losses on securities 0.11 0.07 0.01 (0.20) 0.50 (0.30)
------ ------ ------ ------ ------ -----
............................................................................................................
Total from investment
operations 0.35 0.59 0.55 0.35 0.76 (0.12)
------ ------ ------ ------ ------ -----
............................................................................................................
Less distributions from
net investment income (0.24) (0.52) (0.54) (0.56) (0.26) (0.18)
------ ------ ------ ------ ------ -----
Net asset value, end of
period $10.03 $ 9.92 $ 9.85 $ 9.84 $10.05 $9.55
====== ====== ====== ====== ====== =====
............................................................................................................
Total return+ 3.60% 6.11% 5.77% 3.51% 8.23% (1.27%)
............................................................................................................
Ratios/supplemental data
............................................................................................................
Net assets, end of
period (thousands) $1,546 $1,143 $1,029 $1,155 $ 527 $ 512
............................................................................................................
Ratios to average net
assets
Expenses 1.74%++ 1.70% 1.62% 1.69% 1.67%++ 1.65%++
............................................................................................................
Expenses, after fee
credits 1.73%++ 1.70% 1.62% -- -- --
............................................................................................................
Net investment income 4.79%++ 5.25% 5.47% 5.46% 5.69%++ 5.87%++
............................................................................................................
Portfolio turnover rate 31% 68% 45% 76% 34% 48%
............................................................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended
Six Months Ended Year Ended June 30, December 31,
December 31, 1998 ---------------------------- Period Ended -------------------
(Unaudited) 1998 1997 1996 June 30, 1995 (b) 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 9.90 $ 9.83 $ 9.82 $ 10.02 $ 9.52 $ 10.43 $ 10.41
======== ======== ======== ======== ======== ======== ========
................................................................................................................
Income from investment
operations
................................................................................................................
Net investment income 0.28 0.62 0.64 0.64 0.33 0.65 0.69
................................................................................................................
Net realized and
unrealized gains or
losses on securities 0.12 0.07 0.02 (0.19) 0.49 (0.91) 0.19
-------- -------- -------- -------- -------- -------- --------
................................................................................................................
Total from investment
operations 0.40 0.69 0.66 0.45 0.82 (0.26) 0.88
-------- -------- -------- -------- -------- -------- --------
................................................................................................................
Less distributions
................................................................................................................
From net investment
income (0.29) (0.62) (0.65) (0.65) (0.32) (0.65) (0.68)
From capital gains 0 0 0 0 0 0 (0.18)
-------- -------- -------- -------- -------- -------- --------
................................................................................................................
Total distributions (0.29) (0.62) (0.65) (0.65) (0.32) (0.65) (0.86)
-------- -------- -------- -------- -------- -------- --------
................................................................................................................
Net asset value, end of
period $ 10.01 $ 9.90 $ 9.83 $ 9.82 $ 10.02 $ 9.52 $ 10.43
-------- -------- -------- -------- -------- -------- --------
................................................................................................................
Total return 4.13% 7.19% 6.88% 4.63% 8.80% (2.55%) 8.67%
................................................................................................................
Ratios/supplemental data
................................................................................................................
Net assets, end of
period (thousands) $354,827 $348,358 $357,706 $352,095 $347,050 $345,025 $376,445
................................................................................................................
Ratios to average net
assets
Expenses 0.74%++ 0.70% 0.62% 0.69% 0.67%++ 0.65% 0.66%
................................................................................................................
Expenses, after fee
credits 0.73%++ 0.70% 0.62% -- -- -- --
................................................................................................................
Net investment income 5.82%++ 6.25% 6.48% 6.45% 6.68%++ 6.56% 6.41%
................................................................................................................
Portfolio turnover rate 31% 68% 45% 76% 34% 48% 73%
................................................................................................................
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
(a) For the period from September 6, 1994 (commencement of class operations) to
December 31, 1994.
(b) For the six months ended June 30, 1995. The Fund changed its fiscal year
end from December 31 to June 30, effective June 30, 1995.
See Combined Notes to Financial Statements.
26
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Capital Preservation and Income Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES - 71.5%
FHLMC - 30.3%
$ 466,203 FHLMC Pool #605343, Cap 13.61%, Margin 2.75%+ WTAL,
Resets Annually,
7.33%, 3/1/19....................................... $ 483,103
1,092,680 FHLMC Pool #605386, Cap 12.87%, Margin 2.75%+ WTAL,
Resets Annually,
7.50%, 9/1/17....................................... 1,121,024
479,988 FHLMC Pool #606541, Cap 13.55%, Margin 2.79%+ WTAL,
Resets Annually,
7.29%, 3/1/21....................................... 494,537
988,259 FHLMC Pool #606679, Cap 12.08%, Margin 2.88%+ WTAL,
Resets Annually,
7.06%, 10/1/21...................................... 1,022,078
892,058 FHLMC Pool #607352, Cap 13.61%, Margin 2.75%+ WTAL,
Resets Annually,
7.50%, 4/1/22....................................... 916,732
3,023,948 FHLMC Pool #608034, Cap 14.78%, Margin 2.22%+ WTAL,
Resets Annually,
6.96%, 6/1/16....................................... 3,078,288
66,714 FHLMC Pool #645062, Cap 14.14%, Margin 2.90%+ WTAL,
Resets Annually,
7.61%, 5/1/19....................................... 68,069
279,158 FHLMC Pool #785114, Cap 13.31%, Margin 2.75%+ WTAL,
Resets Annually,
7.45%, 7/1/19....................................... 288,276
46,888 FHLMC Pool #785147, Cap 12.78%, Margin 2.75%+ WTAL,
Resets Annually,
7.35%, 5/1/20....................................... 47,577
1,163,135 FHLMC Pool #845063, Cap 12.10%, Margin 2.83%+ WTAL,
Resets Annually,
7.30%, 11/1/21...................................... 1,192,213
2,061,260 FHLMC Pool #845070, Cap 11.84%, Margin 2.78%+ WTAL,
Resets Annually,
7.38%, 1/1/22....................................... 2,128,251
1,070,644 FHLMC Pool #845082, Cap 12.58%, Margin 2.69%+ WTAL,
Resets Annually,
7.33%, 3/1/22....................................... 1,088,041
825,040 FHLMC Pool #846163, Cap 13.07%, Margin 2.71%+ WTAL,
Resets Annually,
7.28%, 7/1/30....................................... 845,154
326,690 FHLMC Pool #865220, Cap 15.08%, Margin 2.35%+ WTAL,
Resets Triennially,
7.75%, 4/1/20....................................... 336,389
-----------
13,109,732
-----------
FNMA - 41.2%
431,921 FNMA Pool #046692, Cap 12.89%, Margin 2.56%+ CMT,
Resets Annually,
6.875%, 8/1/15...................................... 434,595
235,641 FNMA Pool #062610, Cap 12.75%, Margin 2.75%+ CMT,
Resets Annually,
7.50%, 6/1/18........................................ 243,005
290,238 FNMA Pool #070033, Cap 14.31%, Margin 2.60%+ CMT,
Resets Annually,
7.05%, 10/1/17....................................... 296,316
1,128,843 FNMA Pool #070119, Cap 12.00%, Margin 2.76%+ CMT,
Resets Annually,
7.40%, 11/1/17....................................... 1,163,414
406,428 FNMA Pool #070179, Cap 12.77%, Margin 2.93%+ CMT,
Resets Annually,
7.08%, 7/1/27........................................ 414,622
245,317 FNMA Pool #070327, Cap 12.95%, Margin 2.75%+ CMT,
Resets Annually,
7.45%, 6/1/19........................................ 250,606
1,190,829 FNMA Pool #090678, Cap 13.15%, Margin 2.70%+ CMT,
Resets Annually,
7.48%, 9/1/18........................................ 1,238,271
334,875 FNMA Pool #092086, Cap 15.55%, Margin 2.75%+ CMT,
Resets Annually,
7.42%, 10/1/16....................................... 342,671
617,153 FNMA Pool #094564, Cap 15.84%, Margin 2.50%+ CMT,
Resets Annually,
7.27%, 1/1/16........................................ 631,329
788,063 FNMA Pool #095405, Cap 13.65%, Margin 2.73%+ CMT,
Resets Annually,
7.29%, 12/1/19....................................... 809,242
384,465 FNMA Pool #102905, Cap 13.11%, Margin 2.82%+ CMT,
Resets Annually,
7.33%, 7/1/20........................................ 395,818
196,268 FNMA Pool #105007, Cap 13.33%, Margin 2.75%+ CMT,
Resets Annually,
7.03%, 7/1/19........................................ 197,346
215,218 FNMA Pool #114714, Cap 12.60%, Margin 2.75%+ CMT,
Resets Annually,
7.07%, 3/1/19........................................ 219,826
723,318 FNMA Pool #124015, Cap 13.24%, Margin 2.58%+ CMT,
Resets Annually,
7.08%, 11/1/18....................................... 740,049
557,845 FNMA Pool #124204, Cap 13.51%, Margin 2.71%+ CMT,
Resets Annually,
7.36%, 1/1/22........................................ 569,526
2,292,466 FNMA Pool #124289, Cap 13.46%, Margin 2.67%+ CMT,
Resets Annually,
7.32%, 9/1/21........................................ 2,355,509
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Capital Preservation and Income Fund
- --------------------------------------------------------------------------------
Schedule of Investments(continued)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
ADJUSTABLE RATE MORTGAGE SECURITIES - continued
FNMA - continued
$ 459,108 FNMA Pool #124945, Cap 12.54%, Margin 2.78%+ CMT,
Resets Annually,
7.43%, 1/1/31....................................... $ 470,659
268,172 FNMA Pool #142963, Cap 11.03%, Margin 2.63%+ CMT,
Resets Annually,
7.40%, 1/1/22....................................... 272,865
274,048 FNMA Pool #303247, Cap 11.08%, Margin 2.71%+ CMT,
Resets Annually,
7.17%, 12/1/22...................................... 280,170
1,622,021 FNMA Pool #313663, Cap 12.96%, Margin 2.81%+ CMT,
Resets Annually,
7.25%, 5/1/22....................................... 1,657,511
813,057 FNMA Pool #313994, Cap 9.83%, 2.48%+ Six Month LIBOR,
7.42%, 12/1/23...................................... 822,504
1,222,515 FNMA Pool #331526, Cap 11.17%, Margin 2.75%+ CMT,
Resets Annually,
6.11%, 5/1/36....................................... 1,231,684
106,154 FNMA Pool #391290, Cap 12.68%, Margin 2.71%+ CMT,
Resets Annually,
7.30%, 2/1/17....................................... 107,415
1,189,504 FNMA Pool #423207, Cap 11.87%, Margin 2.75%+ CMT,
Resets Annually,
5.83%, 4/1/38....................................... 1,194,708
1,496,873 FNMA Pool #449552, Cap 11.94%, Margin 2.75%+ CMT,
Resets Annually,
5.96%, 11/1/28...................................... 1,508,803
-----------
17,848,464
-----------
Total Adjustable Rate Mortgage Securities (cost
$31,148,758)........................................ 30,958,196
-----------
ASSET-BACKED SECURITIES - 10.8%
1,000,000 Carco Auto Loan Master Trust,
Series 1997-1, Class A,
6.69%, 8/15/04...................................... 1,011,490
1,355,185 CoreStates Home Equity Trust,
Series 1994-1, Class A,
6.65%, 5/15/09...................................... 1,375,458
1,626,193 Merrill Lynch Mortgage Investors, Inc., Series 1992-
B, Class B,
8.50%, 4/15/12...................................... 1,648,960
426,000 Salomon Brothers Mortgage, Inc., Series 1998-NC7,
6.70%, 1/25/29...................................... 425,534
200,000 The Money Store Home Equity Trust, Series 1997-B,
6.64%, 1/15/17...................................... 201,091
-----------
Total Asset-Backed Securities (cost $4,645,911)...... 4,662,533
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 4.6%
6,353 FHLMC CMO, Series 11 Class 11C, 9.50%, 4/15/19....... 6,393
859,539 FHLMC Strip, Series 20, Class F,
6.33%, 7/1/29....................................... 858,464
844,743 Nomura Depositor Trust,
Series 1998-ST1, Class A1,
5.83%, 1/15/03...................................... 818,609
289,329 Prudential Home Mortgage Securities, Series 1990-12,
Class A1,
7.94%, 11/25/20..................................... 288,459
-----------
Total Collateralized Mortgage Obligations (cost
$2,007,089)......................................... 1,971,925
-----------
FIXED RATE MORTGAGE SECURITIES - 6.1%
FHLMC - 1.4%
313,882 FHLMC Pool #B00078,
10.50%, 10/1/05..................................... 324,008
267,415 FHLMC Pool #B00475,
10.50%, 4/1/04...................................... 276,042
-----------
600,050
-----------
FNMA - 1.7%
332,975 FNMA Pool #002497,
11.00%, 1/1/16...................................... 363,866
140,492 FNMA Pool #058442,
11.00%, 1/1/18...................................... 154,878
208,488 FNMA Pool #100051,
9.50%, 4/15/05...................................... 217,805
-----------
736,549
-----------
GNMA - 3.0%
1,283,706 GNMA Pool #268164,
10.25%, 11/15/29.................................... 1,315,798
-----------
Total Fixed Rate Mortgage Securities (cost
$2,703,840)......................................... 2,652,397
-----------
U. S. GOVERNMENT AGENCY OBLIGATIONS - 1.2%
(cost $510,410)
500,000 FHLB,
5.125%, 9/15/03..................................... 499,845
-----------
U. S. TREASURY OBLIGATIONS - 2.1% (cost $923,592)
900,000 U. S. Treasury Notes,
5.50%, 5/31/03...................................... 929,250
-----------
REPURCHASE AGREEMENT - 2.5% (cost $1,081,000)
1,081,000 Evergreen Joint Repurchase Agreement, (5.02% dated
12/31/98 due 1/4/99, maturity value $1,081,603)(a).. 1,081,000
-----------
Total Investments-- (cost $43,020,600)......... 98.8% 42,755,146
Other Assets and Liabilities - net............. 1.2 535,667
----- -----------
Net Assets - .................................. 100.0% $43,290,813
===== ===========
(a) The repurchase agreement is fully collateralized by U. S. Treasury and/or
federal agency obligations based on market prices plus accrued interest at
December 31, 1998.
Summary of Abbreviations:
CMO Collateralized Mortgage Obligation
CMT 1, 3, or 5 year Constant Maturity Treasury Index
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
LIBOR London Interbank Overnight Rate
WTAL 1 to 3 year Weekly Treasury Average Lookback
See Combined Notes to Financial Statements.
28
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Bond Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 3.8% (b)
$ 1,000,000 California Infrastructure
PG&E, Series 1997-1
Certificate, Class A4
(Est. Maturity 2000),
6.16%, 6/25/03..................................... $ 1,017,330
2,500,000 Contimortgage Home Equity
Loan Trust,
Series 1998-1 Class A6
(Est. Maturity 2003),
6.58%, 12/15/18.................................... 2,532,800
895,953 CoreStates Home Equity Trust,
Series 1994-1 Class A
(Est. Maturity 2000),
6.65%, 5/15/09..................................... 909,356
2,000,000 Salomon Brothers Mortgage, Inc.,
Series 1998-NC7
(Est. Maturity 2003),
6.70%, 1/25/29..................................... 1,997,813
1,000,000 Southern Pacific Secured Assets Corp.,
Series 1996-3 Class A4
(Est. Maturity 2002),
7.60%, 10/25/27.................................... 1,045,023
------------
Total Asset-Backed Securities
(cost $7,386,834).................................. 7,502,322
------------
CORPORATE BONDS - 58.0%
Aerospace & Defense - 4.6%
500,000 BE Aerospace, Inc.,
Sr. Sub. Notes
9.50%, 11/1/08 (a)................................. 528,750
3,675,000 Boeing, Inc., Deb.,
8.10%, 11/15/06.................................... 4,170,574
3,000,000 Lockheed Martin Corp., Notes,
7.25%, 5/15/06..................................... 3,245,730
500,000 Northrop Grumman Corp., Notes,
7.00%, 3/1/06...................................... 520,840
500,000 Sequa Corp., Sr. Notes,
8.75%, 12/15/01.................................... 511,250
------------
8,977,144
------------
Automotive Equipment & Manufacturing - 0.9%
950,000 Ford Motor Co., Deb.,
9.00%, 9/15/01..................................... 1,035,529
750,000 Hayes Lemmerz International, Inc.,
8.25%, 12/15/08.................................... 750,000
------------
1,785,529
------------
Banks - 4.0%
1,000,000 Amsouth Bancorp.,
Sub. Deb., Puttable 2005,
6.75%, 11/1/25..................................... 1,046,670
2,500,000 Bank One Texas N. A., Sub. Notes,
6.25%, 2/15/08..................................... 2,578,600
2,000,000 NationsBank Corp., Sub. Notes,
8.125%, 6/15/02.................................... 2,162,060
2,000,000 Suntrust Banks, Inc., Sr. Bond,
6.00%, 1/15/28..................................... 2,043,760
--------------
7,831,090
--------------
Building, Construction & Furnishings - 0.1%
200,000 MDC Holdings, Inc., Sr. Notes,
8.375%, 2/1/08..................................... 197,000
--------------
Business Equipment & Services - 1.3%
1,000,000 Lucent Technologies, Inc., Notes
5.50%, 11/15/08.................................... 1,010,430
500,000 Paging Network, Inc., Sr. Sub. Notes,
8.875%, 2/1/06..................................... 455,000
500,000 United Rentals, Inc., Sr. Sub. Notes,
9.25%, 1/15/09 (a)................................. 503,750
500,000 Williams Scotsman, Inc., Sr. Sub. Notes,
9.875%, 6/1/07..................................... 510,000
--------------
2,479,180
--------------
Cable/Other Video Distribution - 1.5%
750,000 Century Communications Corp.,
Sr. Notes,
9.75%, 2/15/02..................................... 806,250
1,000,000 Comcast Cable Communications I,
Sr. Notes,
6.20%, 11/15/08.................................... 1,016,600
500,000 Jones Intercable, Inc.,
Sr. Notes,
9.625%, 3/15/02.................................... 538,750
500,000 Marcus Cable Operating Co. LP,
Gtd. Sr. Sub. Disc.
Notes, Step Bond,
(Eff. Yield 7.43%) (c),
0.00%, 8/1/04...................................... 501,250
--------------
2,862,850
--------------
Chemical & Agricultural Products - 1.1%
1,164,000 Dow Chemical Co., Deb.,
8.625%, 4/1/06..................................... 1,337,273
300,000 International Specialty
Products Holdings, Inc.,
Sr. Notes, Series B,
9.00%, 10/15/03.................................... 316,500
500,000 Polymer Group, Inc.,
Sr. Sub. Notes, Series B,
9.00%, 7/1/07...................................... 495,000
--------------
2,148,773
--------------
Communication Systems & Services - 10.4%
500,000 AT&T Credit Corp.,
Series D, MTN,
9.85%, 3/15/99..................................... 509,075
2,600,000 Bell Telephone Co. of PA, Deb.,
8.35%, 12/15/30.................................... 3,384,810
950,000 Centennial Cellular Corp.,
Sr. Notes,
8.875%, 11/1/01.................................... 1,007,000
29
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Bond Fund
- --------------------------------------------------------------------------------
Schedule of Investments(continued)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS - continued
Communication Systems & Services - continued
$ 500,000 Echostar Communications Corp.,
Step Bond,
(Eff. Yield 8.21%) (c)
0.00%, 6/1/04...................................... $ 515,000
5,000,000 GTE Corp.,
Deb.,
6.46%, 4/15/08..................................... 5,326,000
500,000 Jordan Telecommunication Products,
Sr. Notes,
9.875%, 8/1/07..................................... 500,000
400,000 K III Communications Corp.,
8.50%, 2/1/06...................................... 412,000
1,000,000 Lenfest Communications, Inc.,
Sr. Secd. Notes,
8.37%, 11/1/05..................................... 1,080,000
1,000,000 MCI Communications Corp.,
Puttable and Callable @100,
4/15/02 (Eff. Yield 6.23%) (c),
Notes,
6.12%, 4/15/02..................................... 1,015,220
1,560,000 MCI Worldcom, Inc.,
Notes,
7.75%, 4/1/07...................................... 1,762,254
500,000 Olympus Communications LP,
Sr. Notes,
10.625%, 11/15/06.................................. 546,250
500,000 Price Communications Wireless,
Sr. Secd. Notes,
9.125%, 12/15/06 (a)............................... 505,000
525,000 Qwest Communications
International, Inc.,
Sr. Notes,
7.50%, 11/1/08 (a) ................................ 548,625
1,000,000 Sprint Capital Corp.,
6.125%, 11/15/08................................... 1,021,830
2,000,000 TCI Communications, Inc.,
Sr. Notes,
8.00%, 8/1/05...................................... 2,251,580
------------
20,384,644
------------
Consumer Products & Services - 1.3%
800,000 American Greetings Corp.,
Notes,
6.10%, 8/1/28...................................... 820,368
1,164,000 General Mills, Inc.,
Series B, MTN,
9.00%, 12/20/02.................................... 1,310,815
500,000 Westpoint Stevens, Inc.,
Sr. Notes,
7.875%, 6/15/05.................................... 512,500
------------
2,643,683
------------
Environmental Services - 0.5%
1,000,000 Allied Waste North America,
Sr. Notes,
7.375%, 1/1/04 (a) ................................ 1,005,000
------------
Finance & Insurance - 10.5%
1,000,000 Beneficial Corp.,
Series I, MTN,
6.25%, 2/18/13..................................... 1,027,310
1,250,000 Chase Manhattan Corp.,
Sub. Notes,
9.375%, 7/1/01..................................... 1,362,475
1,000,000 CIT Group Holdings, Inc.,
MTN,
9.25%, 3/15/01..................................... 1,077,740
2,000,000 Fleet Financial Group, Inc.,
Notes,
6.50%, 3/15/08..................................... 2,105,780
2,000,000 General Electric Capital Corp.,
Deb.,
8.75%, 5/21/07..................................... 2,441,480
1,650,000 GS Escrow Corp.,
Sr. Notes,
6.75%, 8/1/01 (a).................................. 1,636,222
800,000 Harris BanCorp.,
Sub. Notes,
9.375%, 6/1/01..................................... 866,008
2,000,000 Mellon Financial Co.,
Sr. Notes,
5.75%, 11/15/03.................................... 2,010,820
875,000 Paine Webber Group, Inc.,
Sr. Notes,
8.25%, 5/1/02...................................... 927,185
500,000 Presidential Life Insurance Corp.,
Sr. Notes,
9.50%, 12/15/00.................................... 511,250
Prudential Insurance Co.:
2,000,000 Notes,
7.125%, 7/1/07..................................... 2,132,600
3,000,000 Sr. Notes,
6.375%, 7/23/06.................................... 3,069,420
Reliance Group Holdings, Inc.:
500,000 Sr. Sub. Deb.,
9.75%, 11/15/03.................................... 521,680
1,000,000 Sr. Notes,
9.00%, 11/15/00.................................... 1,041,550
------------
20,731,520
------------
Food & Beverage Products - 1.4%
250,000 Aurora Foods, Inc.,
Sr. Sub. Notes,
9.875%, 2/15/07.................................... 272,500
750,000 Chiquita Brands International, Inc.,
Sr. Notes,
9.625%, 1/15/04.................................... 776,250
1,000,000 Coca Cola Enterprises, Inc.,
Notes,
5.75%, 11/1/08..................................... 1,007,400
600,000 Fleming Companies, Inc.,
Sr. Notes,
10.625%, 12/15/01.................................. 618,000
------------
2,674,150
------------
Gaming - 0.3%
250,000 Grand Casino, Inc.,
Gtd. First Mtge. Notes,
10.125%, 12/1/03................................... 272,500
400,000 Station Casinos, Inc.,
Sr. Sub. Notes,
9.625%, 6/1/03..................................... 420,000
------------
692,500
------------
30
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Bond Fund
- --------------------------------------------------------------------------------
Schedule of Investments(continued)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS - continued
Healthcare Products & Services - 0.9%
$ 1,164,000 Baxter International, Inc.,
Notes,
7.25%, 2/15/08................................... $ 1,273,439
200,000 Mariner Post Acute Network, Inc.,
Sr. Sub. Notes,
9.50%, 11/1/07................................... 161,500
250,000 Tenet Healthcare Corp.,
Sr. Notes,
7.875%, 1/15/03.................................. 255,000
------------
1,689,939
------------
Information Services & Technology - 0.1%
250,000 American Radio Systems Corp.,
9.00%, 2/1/06.................................... 271,875
------------
Iron & Steel - 1.0%
850,000 Armco, Inc.,
Sr. Notes,
9.375%, 11/1/00.................................. 860,625
350,000 Bethlehem Steel Corp.,
Sr. Notes,
10.375%, 9/1/03.................................. 367,500
750,000 Wheeling Pittsburgh Corp.,
Sr. Notes,
9.375%, 11/15/03................................. 814,688
------------
2,042,813
------------
Leisure & Tourism - 1.5%
1,000,000 Caesar's World, Inc.,
Sr. Sub. Notes,
8.875%, 8/15/02.................................. 985,000
500,000 Host Marriot Hotels Properties, Inc.,
Sr. Notes, Series B,
7.875%, 8/1/08................................... 486,875
405,000 Host Marriott Travel Plazas, Inc.,
Sr. Secd. Notes, Series B,
9.50%, 5/15/05................................... 424,238
500,000 Players International, Inc.,
Sr. Notes,
10.875%, 4/15/05................................. 540,000
500,000 Prime Hospitality Corp.,
First Mtge. Notes,
9.25%, 1/15/06................................... 520,000
------------
2,956,113
------------
Metals & Mining - 0.5%
400,000 Golden Northwest Aluminum Inc.,
12.00%, 12/15/06 (a)............................. 402,000
500,000 Kaiser Aluminum & Chemical Corp.,
Sr. Notes,
9.875%, 2/15/02.................................. 495,000
------------
897,000
------------
Machinery - Diversified - 0.1%
200,000 Eagle Picher Industries, Inc.,
Sr. Sub. Notes,
9.375%, 3/1/08................................... 189,000
------------
Manufacturing - Distributing - 0.1%
250,000 Mark IV Industries, Inc.,
Sr. Sub. Notes,
7.50%, 9/1/07.................................... 237,500
Oil/Energy - 2.1%
2,000,000 KN Energy, Inc.,
Deb.,
7.35%, 8/1/26..................................... 2,102,800
2,000,000 Transocean Offshore, Inc.,
Notes,
7.45%, 4/15/27.................................... 2,037,280
------------
4,140,080
------------
Paper & Packaging - 0.7%
500,000 Container Corp. of America,
Sr. Notes, Series A,
11.25%, 5/1/04.................................... 520,000
Stone Container Corp.:
700,000 Sr. Notes,
9.875%, 2/1/01.................................... 710,500
200,000 Sr. Sub. Notes,
11.00%, 8/15/99................................... 201,000
------------
1,431,500
------------
Printing, Publishing, Broadcasting &
Entertainment - 2.7%
Comcast Corp.,
Sr. Sub. Deb.:
1,000,000 9.375%, 5/15/05................................... 1,073,010
250,000 9.50%, 1/15/08.................................... 264,375
200,000 Hollinger International Publishing,
Sr. Sub. Notes,
9.25%, 2/1/06..................................... 210,000
2,327,000 Loews Corp.,
Notes,
6.75%, 12/15/06................................... 2,362,580
200,000 Sinclair Broadcast Group, Inc.,
Sr. Sub. Notes,
10.00%, 9/30/05................................... 212,000
1,000,000 Time Warner Entertainment, Inc.,
Notes,
9.625%, 5/1/02.................................... 1,120,040
------------
5,242,005
------------
Real Estate - 1.5%
1,900,000 EOP Operating LP,
Sr. Notes,
6.375%, 2/15/03 (a)............................... 1,875,756
1,000,000 Glenborough Properties LP,
Sr. Notes,
7.625%, 3/15/05................................... 996,110
------------
2,871,866
------------
Retailing & Wholesale - 1.5%
2,000,000 Fred Meyer, Inc.,
Notes,
7.15%, 3/1/03..................................... 2,081,200
500,000 Great Atlantic & Pacific Tea, Inc.,
Sr. Notes,
7.70%, 1/15/04.................................... 516,000
500,000 Southland Corp.,
Sr. Sub. Deb.,
5.00%, 12/15/03................................... 440,000
------------
3,037,200
------------
31
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Bond Fund
- --------------------------------------------------------------------------------
Schedule of Investments(continued)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS - continued
Transportation - 2.3%
$ 2,000,000 CSX Corp.,
Notes,
6.25%, 10/15/08..................................... $ 2,029,100
1,650,000 Norfolk Southern Corp.,
Notes,
7.05%, 5/1/37....................................... 1,785,019
500,000 Sea Containers Ltd.,
Sr. Notes,
7.875%, 2/15/08 (a)................................. 480,000
200,000 U.S. Airways, Inc.,
Equipment Test Certificate
Series 88-D,
9.80%, 1/15/00...................................... 204,160
------------
4,498,279
------------
Utilities - 5.1%
1,000,000 Alabama Power Co.,
Sr. Notes,
5.375%, 10/1/08..................................... 984,945
3,000,000 Commonwealth Edison Co.,
8.00%, 5/15/08...................................... 3,400,920
1,000,000 Long Island Lighting Co.,
Deb.,
7.30%, 7/15/99...................................... 1,011,370
500,000 National Rural Utilities Cooperative Finance,
5.00%, 10/1/02...................................... 491,655
2,000,000 Oklahoma Gas & Electric Co.,
Sr. Notes,
6.65%, 7/15/27...................................... 2,188,720
2,000,000 Yorkshire Power Finance Ltd.,
6.496%, 2/25/08..................................... 2,006,180
------------
10,083,790
------------
Total Corporate Bonds
(cost $111,691,743)................................. 114,002,023
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 8.7% (b)
500,000 Chase Commercial Mtge.
Securities Corp.,
Series 1997-1 Class B
(Est. Maturity 2007),
7.37%, 4/19/07..................................... 536,887
881,733 Criimi Mae Financial Corp.,
Series 1 Class A
(Est. Maturity 2004),
7.00%, 1/1/33...................................... 902,123
2,000,000 DLJ Commercial Mtge. Corp.,
Series 1998-CF2
(Est. Maturity 2009),
6.48%, 11/12/31.................................... 2,034,375
1,000,000 FNMA,
Series 1993-248, Class SA,
REMIC (Est. Maturity 2004),
4.77%, 8/25/23 (b)(d).............................. 944,300
1,945,704 Independent National Mtge. Corp.,
Series 1997-A Class A
(Est. Maturity 2004),
7.79%, 12/26/26 (a)................................ 1,894,629
500,000 Merrill Lynch Trust,
Series 35 Class G
(Est. Maturity 2005),
8.45%, 11/1/18..................................... 521,250
Morgan Stanley Capital I, Inc.:
650,000 Series 1998-HF2
(Est. Maturity 2009),
6.71%, 11/15/30.................................... 682,731
700,000 Series 1997-C1 Class B
(Est. Maturity 2006),
7.69%, 2/15/20..................................... 761,638
Nationslink Funding Corp.
975,000 Series 1998-2 Class C
(Est. Maturity 2009),
6.80%, 7/20/30..................................... 1,022,227
3,133,030 Series 1998-2 Class B
(Est. Maturity 2007),
6.64%, 1/20/08..................................... 3,180,025
860,998 Paine Webber Mtge. Acceptance Corp.,
Series 1993-4 Class M1
(Est. Maturity 2002),
7.50%, 5/25/23..................................... 864,496
583,773 PNC Mtge. Securities Corp.,
Series 1997-4 Class 2PP1,
REMIC (Est. Maturity 2000),
7.50%, 7/25/27..................................... 589,518
Resolution Trust Corp.:
83,418 Series 1992 C Class A1
(Est. Maturity 1999),
8.80%, 8/25/23..................................... 83,223
1,080,600 Series 1992-3 Class A2,
REMIC (Est. Maturity 1999),
7.25%, 11/1/98..................................... 1,077,190
805,384 Series 1992-3 Class A3,
REMIC (Est. Maturity 1999),
6.87%, 11/1/98..................................... 802,851
1,116,311 Series 1995-1 Class A2C
(Est. Maturity 1999),
7.50%, 10/25/28.................................... 1,120,023
-----------
Total Collateralized Mortgage Obligations
(cost $16,522,807)................................... 17,017,486
-----------
FOREIGN BONDS - (Non-US Dollar Denominated) - 5.7%
5,675,000 Canada Government,
CAD 6.00%, 6/1/08........................................ 4,019,096
10,582,000 Nykredit,
DKK Series ANN,
6.00%, 10/1/26....................................... 1,664,375
34,710,000 Realkredit Danmark,
DKK 6.00%, 10/1/26....................................... 5,452,769
-----------
Total Foreign Bonds - (Non-US Dollar Denominated)
(cost $10,402,020)................................... 11,136,240
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.9%
2,500,000 Farm Credit Systems
Financial Assistance Corp.,
Bonds, Series A-05,
8.80%, 6/10/05....................................... 2,974,600
FHLB:
2,860,000 5.125%, 9/15/03...................................... 2,859,113
1,000,000 5.80%, 9/2/08........................................ 1,035,000
750,000 FHLMC,
6.70%, 1/5/07........................................ 813,045
-----------
Total U.S. Government Agency Obligations
(cost $7,321,023).................................... 7,681,758
-----------
32
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Bond Fund
- --------------------------------------------------------------------------------
Schedule of Investments(continued)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
U.S. TREASURY OBLIGATIONS - 7.3%
$ 4,350,000 U.S. Treasury Notes,
6.125%, 8/15/07.................................... $ 4,751,027
15,180,000 U.S. Treasury STRIPs,
(Eff. Yield 9.30%) (c)
0.00%, 5/15/08 .................................... 9,586,777
------------
Total U.S. Treasury Obligations
(cost $13,932,164)................................. 14,337,804
------------
YANKEE OBLIGATIONS - 7.8%
675,000 Bayerische Landesbank Girozen, New York,
Sr. Notes, Series D,
6.20%, 2/9/06...................................... 688,770
500,000 Great Central Mines Ltd.,
Sr. Notes,
8.875%, 4/1/08..................................... 498,750
1,000,000 Group Videotron Ltd.,
Sr. Notes,
10.625%, 2/15/05................................... 1,082,760
250,000 Imax Corp.,
Sr. Notes,
7.875%, 12/1/05.................................... 251,875
2,000,000 Manitoba Province, Canada,
Notes,
8.00%, 4/15/02..................................... 2,171,780
500,000 National Westminster Bancorp.,
Sub. Notes,
9.375%, 11/15/03................................... 578,495
2,000,000 Nippon Telegraph & Telephone Corp.,
Notes,
6.00%, 3/25/08..................................... 2,100,340
1,000,000 Petroleum Geo Services,
Notes,
7.50%, 3/31/07..................................... 1,035,180
1,000,000 Rogers Cablesystems Ltd.,
Notes,
9.625%, 8/1/02..................................... 1,075,000
1,000,000 Svenska Handelsbanken,
Sub. Notes,
8.35%, 7/15/04..................................... 1,112,420
2,000,000 United Utilities PLC,
Notes,
6.45%, 4/1/08...................................... 2,039,900
700,000 Westpac Banking Corp.,
Sub. Deb.,
9.125%, 8/15/01.................................... 757,162
2,000,000 YPF Sociedad Anonima,
Sr. Notes,
7.25%, 3/15/03..................................... 1,875,280
------------
Total Yankee Obligations
(cost $14,712,405)................................. 15,267,712
------------
REPURCHASE AGREEMENT - 3.1% (cost $6,043,000)
$6,043,000 Evergreen Joint Repurchase Agreement, in a joint
trading account, 5.02%, dated 12/31/98 due 1/4/99,
maturity value $6,046,371 (e)...................... 6,043,000
------------
Total Investments -(cost $188,011,996)....... 98.3% 192,988,345
Other Assets and Liabilities - net........... 1.7 3,424,115
----- ------------
Net Assets -................................. 100.0% $196,412,460
===== ============
(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 un-
der guidelines established by the Board of Trustees.
(b) The estimated maturity of a Collateralized Mortgage Obligation or Asset
Backed Security is based on current and projected prepayment rates. Changes
in interest rates can cause the estimated maturity to differ from the
listed date.
(c) Effective yield (calculated at the time of purchase) is the yield at which
the bond accretes on an annual basis until maturity date.
(d) Inverse floater, resets monthly.
(e) The repurchase agreements are fully collateralized by U.S. Treasury and/or
federal agency obligations based on market prices plus accrued interest at
December 31, 1998.
Summary of Abbreviations
CAD Canadian Dollar
DKK Danish Krone
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
STRIPs Separate Trading of Registered Interest and Principal Securities
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward Foreign Currency Exchange Contracts to Sell:
<TABLE>
<CAPTION>
Exchange U.S. Value at In Exchange Unrealized
Date Contracts to Deliver December 31, 1998 for U.S. $ Appreciation
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3/15/1999 45,000,000 Danish Krone $7,084,661 $7,162,298 $77,637
===
</TABLE>
See Combined Notes to Financial Statements.
33
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Government Securities Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES - 40.2%
FHLMC:
$ 186,595 5.60%, 2/15/13..................................... $ 186,276
8,258,272 6.50%, 9/1/08...................................... 8,408,077
5,994,065 6.50%, 11/1/09..................................... 6,102,798
49,385 7.53%, 8/1/19...................................... 51,353
25,397 7.90%, 12/1/20..................................... 25,903
2,761,554 FHLMC Gold,
9.00%, 1/1/17...................................... 2,953,096
FNMA:
2,344,513 6.00%, 2/1/08...................................... 2,356,657
648,325 6.00%, 5/1/11...................................... 651,398
3,936,476 6.37%, 3/1/06...................................... 4,044,520
3,500,000 6.40%, 12/1/07..................................... 3,666,978
3,000,000 6.50%, 6/25/22..................................... 3,037,072
2,453,589 7.00%, 12/1/99..................................... 2,477,143
2,081,925 7.00%, 8/1/01...................................... 2,126,250
10,954,526 7.00%, 4/1/11...................................... 11,210,315
2,959,883 7.00%, 3/1/24...................................... 3,025,416
5,896,387 7.50%, 8/1/26...................................... 6,062,842
48,338 7.92%, 6/1/19...................................... 50,441
177,682 8.50%, 12/1/01..................................... 182,914
GNMA:
9,296,820 6.50%, 2/15/27..................................... 9,402,897
1,591,917 7.00%, 3/15/28..................................... 1,630,728
137,477 8.00%, 3/15/17..................................... 144,297
220,195 9.00%, 9/15/21..................................... 236,519
------------
Total Mortgage-Backed Securities
(cost $66,345,290)................................. 68,033,890
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 15.1%
993,000 Federal Agricultural Mortgage Corp. MTN,
7.37%, 8/1/06...................................... 1,078,940
FHLB:
5,000,000 5.50%, 4/14/00..................................... 5,032,970
1,300,000 8.60%, 1/25/00..................................... 1,348,322
8,500,000 FHLMC,
7.36%, 6/5/07...................................... 9,028,267
FNMA:
2,000,000 7.50%, 2/11/02..................................... 2,137,396
2,000,000 7.88%, 2/24/05..................................... 2,279,462
4,480,000 FNMA MTN,
6.16%, 4/3/01...................................... 4,591,471
------------
Total U.S. Government Agency Obligations
(cost $24,297,121)................................. 25,496,828
------------
U.S. TREASURY OBLIGATIONS - 43.3%
2,500,000 U.S. Treasury Bonds,
11.75%, 11/15/14................................... 3,889,845
U.S. Treasury Notes:
1,000,000 5.50%, 2/28/99..................................... 1,001,563
2,500,000 5.63%, 12/31/02.................................... 2,582,812
5,000,000 6.13%, 9/30/00..................................... 5,125,000
3,000,000 6.13%, 8/15/07..................................... 3,279,375
8,400,000 6.25%, 4/30/01..................................... 8,699,250
4,000,000 6.38%, 7/15/99..................................... 4,038,752
10,750,000 6.63%, 5/15/07..................................... 12,093,750
1,000,000 6.75%, 4/30/00..................................... 1,026,563
2,300,000 7.00%, 7/15/06..................................... 2,619,845
12,250,000 7.13%, 2/29/00..................................... 12,586,875
4,000,000 7.50%, 10/31/99.................................... 4,091,252
2,000,000 7.50%, 11/15/01.................................... 2,150,000
4,400,000 7.50%, 5/15/02..................................... 4,778,127
2,500,000 7.88%, 11/15/04.................................... 2,896,875
1,300,000 8.50%, 11/15/00.................................... 1,388,563
1,000,000 8.88%, 2/15/99..................................... 1,005,000
------------
Total U.S. Treasury Obligations
(cost $70,659,732)................................. 73,253,447
------------
REPURCHASE AGREEMENT - 1.5% (cost $2,555,877)
2,555,877 Dresdner Kleinwort Benson N.A., LLC, 4.25% dated
12/31/98, due 01/04/99, maturity value $2,557,084
(Collateralized by $2,595,000 U.S. Treasury
Inflation Index Bonds, 3.625%, due 01/15/08,
value, including accrued interest $2,610,292)...... 2,555,877
------------
Total Investments -
(cost $163,858,020)....................... 100.1% 169,340,042
Other Assets and Liabilities - net......... (0.1) (225,060)
------ ------------
Net Assets - .............................. 100.00% $169,114,982
====== ============
Summary of Abbreviations:
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MTN Medium Term Note
See Combined Notes to Financial Statements.
34
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Short Intermediate Bond Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 14.7%
$ 2,885,126 Advanta Home Equity Loan Trust,
Series 1992-4, Class A1,
7.20%, 11/25/08..................................... $ 2,917,483
Amresco Residential
Securities Mtge. Loan Trust:
2,302,957 Series 1998-2, Class A1,
6.50%, 12/25/15...................................... 2,307,368
3,450,000 Series 1998-2, Class A2,
6.245%, 4/25/22...................................... 3,463,058
957,561 Associates Manufactured Hsg.,
Series 1997-1, Class A3,
6.60%, 6/15/28...................................... 963,962
4,000,000 Carco Auto Loan Master Trust,
Series 1997-1, Class A,
6.689%, 8/15/04..................................... 4,019,620
1,750,000 Case Equipment Loan Trust,
Series 1995-B, Class B,
6.45%, 9/15/02...................................... 1,753,281
1,999,985 Contimortgage Home Equity
Loan Trust,
Series 1996-1, Class A5,
6.15%, 3/15/11...................................... 2,006,415
2,472,705 Continental Airlines, Inc.,
Series 1997, Class 1B,
7.461%, 4/1/13...................................... 2,626,569
5,495,999 Empire Funding Home Loan
Owner Trust,
Series 1998-1, Class A4,
6.64%, 12/25/12..................................... 5,540,215
700,572 EQCC Home Equity Loan Trust,
Series 1996-1, Class A2,
5.82%, 9/15/09...................................... 702,341
291,624 First Bank Auto Receivables
Grantor Trust,
Series 1995-A, Class B,
8.30%, 1/15/00...................................... 292,197
631,088 First Security Auto Grantor Trust,
Series 1995-A, Class A,
6.25%, 1/15/01...................................... 632,151
4,133,050 Fleetwood Credit Corp. Grantor Trust, Series 1993- B,
Class A,
4.95%, 8/15/08...................................... 4,119,225
679,886 GCC Home Equity Trust,
Series 1990-1, Class A,
10.00%, 7/15/05..................................... 679,954
5,000,000 Iroquois Trust, Indexed
Amortization Note,
Series 1997-3, Class A,
6.68%, 11/10/03 (a)................................. 5,038,825
5,557,703 Life Financial Home Loan
Owner Trust,
Series 1997-3, Class A2,
6.79%, 10/25/11..................................... 5,577,739
2,877,294 Prudential Securities
Secured Financing Corp.,
Series 1994-4, Class A1,
8.12%, 2/15/25...................................... 2,972,547
2,500,000 Southern Pacific Secured
Assets Corp.,
Series 1998-1, Class A6,
7.08%, 3/25/28...................................... 2,601,771
Western Financial Grantor Trust:
1,794,338 Series 1995-5, Class A2,
5.875%, 3/1/02...................................... 1,802,619
774,984 Series 1995-4, Class A2,
6.20%, 2/1/02....................................... 780,327
4,500,000 WFS Financial Owner Trust,
Series 1997-D, Class A4,
6.25%, 3/20/03..................................... 4,569,143
3,681,641 Xerox Rental Equipment Trust,
Series 1996-A,
6.20%, 12/31/99 (a)................................ 3,688,544
------------
Total Asset-Backed Securities
(cost $58,415,622)................................. 59,055,354
------------
CORPORATE BONDS - 24.0%
Banks - 5.1%
3,350,000 Amsouth BanCorp.,
Sub. Deb.,
6.75%, 11/1/25..................................... 3,522,944
Bank One First Chicago NBD Corp.:
2,000,000 MTN, Series E,
9.20%, 12/17/01.................................... 2,188,804
4,000,000 Sub. Notes,
9.00%, 6/15/99..................................... 4,060,892
3,000,000 BB&T Corp.,
Sub. Notes,
6.375%, 6/30/05.................................... 3,088,815
2,000,000 Chase Manhattan Corp.,
Sub. Notes,
8.00%, 5/15/04..................................... 1,998,172
5,000,000 First Security Corp.,
MTN,
6.40%, 2/10/03..................................... 5,120,340
500,000 Security Pacific Corp.,
Notes,
10.45%, 5/8/01..................................... 550,097
------------
20,530,064
------------
Finance & Insurance - 10.3%
2,000,000 American Express Credit Corp.,
Step Bond (Eff. Yield 5.57%) (b),
6.25%, 2/10/99..................................... 2,035,902
3,000,000 Associated P&C Holdings, Inc.,
Gtd. Sr. Notes,
6.75%, 7/15/03 (a)................................. 3,024,258
3,000,000 Bear Stearns Co., Inc.,
Sr. Notes,
7.625%, 4/15/00.................................... 3,071,517
5,000,000 Case Credit Corp.,
Gtd. Notes,
6.125%, 2/15/03.................................... 4,927,505
1,500,000 Duke Capital Corp.,
Sr. Notes, Series A,
6.25%, 7/15/05..................................... 1,547,778
1,000,000 Horace Mann Educators Corp.,
Sr. Notes,
6.625%, 1/15/06.................................... 1,047,471
Lehman Brothers Holdings, Inc.:
2,500,000 MTN,
6.84%, 10/7/99...................................... 2,512,565
35
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Short Intermediate Bond Fund
- --------------------------------------------------------------------------------
Schedule of Investments(continued)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS - continued
Finance & Insurance - continued
Lehman Brothers Holdings, Inc.:
$ 5,000,000 Sr. Notes,
6.625%, 11/15/00.................................. $ 5,019,215
5,000,000 Notes,
8.875%, 3/1/02.................................... 5,340,250
5,000,000 Metropolitan Life Insurance Co.,
Surplus Notes,
7.00%, 11/1/05 (a)................................ 5,307,445
7,000,000 Salomon, Inc.,
Sr. Notes,
7.20%, 2/1/04..................................... 7,361,669
------------
41,195,575
------------
Healthcare Products & Services - 1.8%
7,500,000 Columbia/HCA Healthcare Corp.,
Notes,
6.875%, 7/15/01................................... 7,446,337
------------
Industrial Specialty Products & Services - 2.4%
5,000,000 Case Corp.,
Notes,
6.25%, 12/1/03 (a)................................ 4,997,960
4,375,000 Johnson Controls, Inc.,
Notes,
6.30%, 2/1/08..................................... 4,547,690
------------
9,545,650
------------
Telecommunication Services & Equipment - 1.9%
5,000,000 GTE Corp.,
Deb.,
10.25%, 11/1/20................................... 5,723,640
2,000,000 Worldcom, Inc.,
Sr. Notes,
6.125%, 8/15/01................................... 2,034,732
------------
7,758,372
------------
Transportation - 1.3%
5,000,000 U.S. Airways, Inc.,
Series 1998-1,
7.35%, 1/30/18.................................... 5,109,225
------------
Utilities - 1.2%
5,000,000 LG&E Capital Corp.,
MTN
5.75%, 11/1/01 (a)................................ 4,984,135
------------
Total Corporate Bonds
(cost $94,781,687)................................ 96,569,358
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 8.4%
3,150,000 Chase Commercial Mtge.
Securities Corp.,
Series 1996-2, Class C,
6.90%, 11/19/28................................... 3,263,321
1,537,185 CMC Securities Corp.,
Series 1993-D, Class D3,
10.00%, 7/25/23................................... 1,572,214
5,000,000 Credit Suisse First Boston
Mtge. Securities Corp.,
Series 1998-C1, Class A1B,
6.48%, 5/17/08.................................... 5,176,525
FHLMC:
4,139,967 Series 1546, Class D,
5.75%, 10/15/16................................... 4,138,704
4,170,070 Series 1991, Class PA,
6.00%, 3/15/14.................................... 4,179,349
3,000,000 FNMA, REMIC,
Series 1998-W8, Class A4,
6.02%, 9/25/28.................................... 3,029,925
Potomac Gurnee Finance Corp.:
2,429,501 Series 1, Class A,
6.887%, 12/21/26 (a).............................. 2,546,979
2,500,000 Series 1, Class B,
7.003%, 12/21/26 (a).............................. 2,592,763
4,675,444 Prudential Securities
Secured Financing Corp.,
Series 1998-C1, Class A1,
6.105%, 11/15/02.................................. 4,723,578
2,502,585 RMF Commercial Mtge.,
Series 1997-1, Class A,
6.38%, 1/15/19 (a)................................ 2,525,572
------------
Total Collateralized Mortgage Obligations
(cost $33,294,716)................................ 33,748,930
------------
MORTGAGE-BACKED SECURITIES - 20.0%
2,500,000 DLJ Mtge. Acceptance Corp.,
Series 1993, Class MF7,
7.95%, 6/18/03.................................... 2,655,987
Federal Housing Administration -
Puttable Project Loans:
4,315,413 7.43%, 11/1/22.................................... 4,670,506
4,564,092 Merrill Lynch 199,
8.43%, 2/1/20..................................... 4,984,422
2,808,952 Reilly 18,
6.875%, 4/1/15.................................... 2,780,862
1,538,766 Reilly 55,
7.43%, 3/1/24..................................... 1,677,340
9,479,335 Reilly 64,
7.43%, 1/1/24..................................... 10,259,721
3,000,000 FHLB,
5.45%, 10/19/05................................... 3,039,693
FHLMC:
2,750,000 6.00%, 5/15/16.................................... 2,796,771
265,618 10.50%, 9/1/15.................................... 291,526
2,000,000 Deb.,
6.97%, 6/16/05.................................... 2,047,878
FNMA:
7,000,000 6.85%, 4/5/04..................................... 7,531,629
5,851,820 11.00%, 2/15/25................................... 6,519,699
18,694 14.00%, 6/1/11.................................... 21,658
2,952,876 Pool #252106,
6.00%, 11/1/08.................................... 2,968,172
2,100,000 REMIC Trust, Series 1992,
Class G44H,
8.00%, 11/25/06................................... 2,159,617
9,000,000 Series 1995-W1, Class A6,
8.10%, 4/25/25.................................... 9,296,815
4,000,000 Kidder Peabody Acceptance Corp.,
Series 1994-C1, Class A,
6.65%, 2/1/06..................................... 4,094,260
3,000,000 Nationslink Funding Corp.,
Commercial Mtge. Certificates,
Series 1998-C1, Class A1A1,
6.803%, 1/20/08................................... 3,014,400
2,000,000 Painewebber Mtge. Acceptance
Corp. IV, Multifamily Mtge.,
Series 1996-M1, Class E,
7.655%, 1/2/12 (a)................................ 2,071,250
36
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Short Intermediate Bond Fund
- --------------------------------------------------------------------------------
Schedule of Investments(continued)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES - continued
$ 4,672,867 Prudential Home Mtge. Securities,
Series 1993-39, Class A8,
6.50%, 10/25/08.................................... $ 4,695,927
2,756,457 Saxon Mtge. Securities Corp.,
Series 1993-8A, Class 1A2,
7.375%, 9/25/23.................................... 2,775,022
------------
Total Mortgage-Backed Securities
(cost $77,939,112)................................. 80,353,155
------------
MUNICIPAL BONDS - 0.8% (cost $2,885,285)
2,900,000 VA Hsg. Dev. Auth.,
Taxable Subseries A-4,
7.00%, 1/1/14...................................... 3,100,970
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 5.6%
FHLB:
3,000,000 6.043%, 4/28/03..................................... 3,008,400
4,105,000 6.07%, 8/28/08...................................... 4,163,320
Consolidated Bond:
1,780,590 6.47%, 9/16/02...................................... 1,785,576
3,300,000 6.54%, 12/12/07..................................... 3,410,606
9,035,000 FNMA,
MTN,
6.92%, 3/19/07..................................... 10,049,603
------------
Total U.S. Government Agency Obligations
(cost $22,353,969)................................. 22,417,505
------------
U.S. TREASURY OBLIGATIONS - 18.0%
U.S. Treasury Notes,
14,000,000 5.625%, 5/15/08..................................... 14,940,632
5,000,000 5.75%, 4/30/03...................................... 5,203,125
22,525,000 6.125%, 8/15/07..................................... 24,622,641
8,000,000 6.25%, 2/15/07...................................... 8,777,504
2,500,000 6.50%, 10/15/06..................................... 2,775,782
9,000,000 6.625%, 5/15/07..................................... 10,125,000
4,980,000 7.00%, 7/15/06...................................... 5,672,534
------------
Total U.S. Treasury Obligations
(cost $68,291,636)................................. 72,117,218
------------
YANKEE OBLIGATIONS - 5.9%
5,000,000 Boral Limited Australia Co.,
MTN,
7.90%, 11/19/99 (a)................................ 5,097,885
Korea Dev. Bank, Bond:
5,000,000 7.25%, 5/15/06..................................... 4,578,270
6,000,000 7.375%, 9/17/04.................................... 5,477,040
6,000,000 National Bank of Canada,
Yankee Notes,
Series B,
8.125%, 8/15/04.................................... 6,661,206
2,000,000 Ras Laffan Liquefied Natural Gas, Bond,
7.628%, 9/15/06 (a)................................ 1,816,684
------------
Total Yankee Obligations
(cost $24,450,580)................................. 23,631,085
------------
REPURCHASE AGREEMENT - 1.8% (cost $7,303,330)
7,303,330 Dresdner Kleinwort Benson N.A., LLC, 4.25%, dated
12/31/98, due 01/04/99, maturity value $7,306,779
(Collateralized by $7,410,000 U.S. Treasury
Inflation Index Bonds, 3.625%, due 01/15/08,
value, including accrued interest $7,453,667)...... 7,303,330
------------
Total Investments -
(cost $389,715,937)......................... 99.2% 398,296,905
Other Assets and
Liabilities - net........................... 0.8 3,374,706
------ ------------
Net Assets - ................................ 100.0% $401,671,611
====== ============
(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.
Summary of Abbreviations
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
STRIPs Separately Traded Registered Interest and Principal Securities
See Combined Notes to Financial Statements.
37
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Short and Intermediate Term Bond Funds
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Capital Intermediate Intermediate Short
Preservation Bond Government Intermediate
Fund Fund Fund Fund
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments at cost..... $43,020,600 $188,011,996 $163,858,020 $389,715,937
Net unrealized gain or
loss on securities.... (265,454) 4,976,349 5,482,022 8,580,968
- ----------------------------------------------------------------------------------
Investments at market
value.................. 42,755,146 192,988,345 169,340,042 398,296,905
Cash.................... 375 964 0 0
Receivable for
investments sold....... 0 1,006,870 0 0
Principal paydown
receivable............. 336,566 0 0 74,733
Receivable for Fund
shares sold............ 700 241,960 78,031 694,975
Interest receivable..... 322,960 2,766,415 1,818,111 4,960,134
Unrealized appreciation
on forward foreign
currency exchange
contracts.............. 0 77,637 0 0
Prepaid expenses and
other assets........... 27,363 77,045 51,133 70,467
- ----------------------------------------------------------------------------------
Total assets.......... 43,443,110 197,159,236 171,287,317 404,097,214
- ----------------------------------------------------------------------------------
Liabilities
Distributions payable... 78,315 289,861 281,788 764,606
Payable for Fund shares
redeemed............... 11,343 284,648 1,772,907 1,412,316
Advisory fees payable... 19,154 78,163 87,704 169,665
Distribution fees
payable................ 18,220 51,668 0 7,741
Due to other related
parties................ 710 2,952 6,265 8,768
Accrued expenses and
other liabilities...... 24,555 39,484 23,671 62,507
- ----------------------------------------------------------------------------------
Total liabilities..... 152,297 746,776 2,172,335 2,425,603
- ----------------------------------------------------------------------------------
Net assets.............. $43,290,813 $196,412,460 $169,114,982 $401,671,611
- ----------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital......... $50,444,358 $206,936,106 $183,631,553 $412,210,374
Distributions in excess
of net investment
income................. (89,077) (416,425) (76,748) (281,479)
Accumulated net
realized loss on
securities and foreign
currency related
transactions........... (6,799,014) (15,160,813) (19,921,845) (18,838,252)
Net unrealized gain or
loss on securities and
foreign currency
related transactions... (265,454) 5,053,592 5,482,022 8,580,968
- ----------------------------------------------------------------------------------
Total net assets...... $43,290,813 $196,412,460 $169,114,982 $401,671,611
- ----------------------------------------------------------------------------------
Net assets consist of
Class A................. $15,023,835 $119,547,860 $ 75,778,446 $ 20,086,451
Class B................. 24,209,509 11,788,312 3,068,870 25,211,516
Class C................. 4,057,469 5,385,530 209,237 1,546,485
Class Y................. -- 59,690,758 90,058,429 354,827,159
- ----------------------------------------------------------------------------------
$43,290,813 $196,412,460 $169,114,982 $401,671,611
- ----------------------------------------------------------------------------------
Shares outstanding
Class A................. 1,555,333 13,105,347 7,345,948 2,005,764
Class B................. 2,504,150 1,290,310 297,492 2,512,521
Class C................. 420,036 589,527 20,283 154,112
Class Y................. -- 6,543,645 8,730,265 35,430,952
- ----------------------------------------------------------------------------------
Net asset value per
share
Class A................. $ 9.66 $ 9.12 $ 10.32 $ 10.01
- ----------------------------------------------------------------------------------
Class A -- Offering
price (based on sales
charge of 3.25%)....... $ 9.98 $ 9.43 $ 10.67 $ 10.35
- ----------------------------------------------------------------------------------
Class B................. $ 9.67 $ 9.14 $ 10.32 $ 10.03
- ----------------------------------------------------------------------------------
Class C................. $ 9.66 $ 9.14 $ 10.32 $ 10.03
- ----------------------------------------------------------------------------------
Class Y................. -- $ 9.12 $ 10.32 $ 10.01
- ----------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
38
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Short and Intermediate Term Bond Funds
- --------------------------------------------------------------------------------
Statements of Operations
Six Months Ended December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Capital Intermediate Intermediate Short
Preservation Bond Government Intermediate
Fund Fund Fund Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income
Interest (net of foreign
withholding taxes of $0,
$4,331, $0 and $0,
respectively)........... $1,453,256 $6,965,924 $5,496,877 $13,044,723
- --------------------------------------------------------------------------------
Expenses
Advisory fee............. 142,983 615,585 534,391 996,239
Distribution Plan
expenses................. 165,299 236,045 110,013 135,484
Transfer agent fees...... 35,967 219,973 114,410 307,895
Administrative services
fees..................... 3,578 15,667 23,848 53,353
Trustees' fees and
expenses................. 69 3,932 436 5,295
Shareholder reports
expense.................. 11,411 15,259 8,089 16,692
Custodian fees........... 5,971 43,477 26,796 51,200
Registration and filing
fees..................... 19,924 57,700 29,339 28,125
Professional fees........ 11,233 12,411 8,274 12,644
Other.................... 304 1,568 262 2,464
- --------------------------------------------------------------------------------
Total expenses......... 396,739 1,221,617 855,858 1,609,391
Less: Fee credits....... (832) (4,074) (604) (17,844)
Fee waivers........ (82,647) (152,814) (75,466) 0
- --------------------------------------------------------------------------------
Net expenses........... 313,260 1,064,729 779,788 1,591,547
- --------------------------------------------------------------------------------
Net investment income.... 1,139,996 5,901,195 4,717,089 11,453,176
- --------------------------------------------------------------------------------
Net realized and
unrealized gain or loss
on securities and
foreign currency related
transactions
Realized gain or loss on:
Securities............... (15,502) (268,101) 30,548 (1,896,938)
Foreign currency related
transactions.......... 0 (251,774) 0 0
- --------------------------------------------------------------------------------
Net realized gain or loss
on securities and
foreign currency related
transactions........... (15,502) (519,875) 30,548 (1,896,938)
- --------------------------------------------------------------------------------
Net change in unrealized
gain or loss on
securities and foreign
currency related
transactions........... (332,684) 1,476,045 1,894,853 6,570,094
- --------------------------------------------------------------------------------
Net realized and
unrealized gain or loss
on securities and
foreign currency related
transactions........... (348,186) 956,170 1,925,401 4,673,156
- --------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............. $ 791,810 $6,857,365 $6,642,490 $16,126,332
- --------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
39
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Short and Intermediate Term Bond Funds
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
Six Months Ended December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Capital Intermediate Intermediate Short
Preservation Bond Government Intermediate
Fund Fund Fund Fund
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income... $ 1,139,996 $ 5,901,195 $ 4,717,089 $ 11,453,176
Net realized gain or
loss on securities and
foreign currency
related transactions... (15,502) (519,875) 30,548 (1,896,938)
Net change in unrealized
gain or loss on
securities and foreign
currency related
transactions........... (332,684) 1,476,045 1,894,853 6,570,094
- -----------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............ 791,810 6,857,365 6,642,490 16,126,332
- -----------------------------------------------------------------------------------
Distributions to
shareholders from net
investment income
Class A................ (447,822) (3,601,444) (2,116,092) (526,354)
Class B................ (602,065) (286,095) (43,329) (577,788)
Class C................ (97,617) (137,551) (3,921) (33,345)
Class Y................ 0 (1,911,160) (2,588,773) (10,398,062)
- -----------------------------------------------------------------------------------
Total distributions to
shareholders.......... (1,147,504) (5,936,250) (4,752,115) (11,535,549)
- -----------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 4,961,984 17,686,791 21,586,506 80,372,918
Proceeds from
reinvestment of
distributions.......... 820,655 3,935,896 2,796,438 6,622,207
Payment for shares
redeemed............... (10,186,325) (29,776,692) (39,099,583) (78,929,364)
- -----------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... (4,403,686) (8,154,005) (14,716,639) 8,065,761
- -----------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... (4,759,380) (7,232,890) (12,826,264) 12,656,544
Net assets
Beginning of period..... 48,050,193 203,645,350 181,941,246 389,015,067
- -----------------------------------------------------------------------------------
End of period........... $ 43,290,813 $196,412,460 $169,114,982 $401,671,611
===================================================================================
Distributions in excess
of net investment
income................. $ (89,077) $ (416,425) $ (76,748) $ (281,479)
===================================================================================
</TABLE>
See Combined Notes to Financial Statements.
40
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Short and Intermediate Term Bond Funds
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
Year Ended June 30, 1998
<TABLE>
<CAPTION>
Capital Intermediate Intermediate Short
Preservation Bond Government Intermediate
Fund Fund Fund Fund
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income... $ 2,568,924 $ 5,462,136 $ 6,080,301 $ 24,446,841
Net realized gain or
loss on securities and
foreign currency
related transactions... 162,335 93,422 263,411 (1,189,957)
Net change in unrealized
gain or loss on
securities and foreign
currency related
transactions........... (474,778) 518,784 1,220,668 3,858,427
- ------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............ 2,256,481 6,074,342 7,564,380 27,115,311
- ------------------------------------------------------------------------------------
Distributions to
shareholders from net
investment income
Class A................ (887,540) (2,960,648) (1,551,596) (1,003,205)
Class B................ (1,474,326) (654,821) (35,699) (1,108,182)
Class C................ (207,058) (410,056) (5,115) (53,200)
Class Y................ 0 (1,652,096) (4,476,803) (22,216,773)
- ------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (2,568,924) (5,677,621) (6,069,213) (24,381,360)
- ------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 19,443,143 24,366,074 19,195,384 140,518,437
Proceeds from shares
issued in connection
with the acquisition
of:
Blanchard Short-Term
Flexible Income Fund.. 0 116,766,103 0 0
Evergreen Intermediate
Term Bond Fund II..... 0 66,213,695 0 0
Virtus U.S. Government
Securities Fund....... 0 0 133,551,466 0
Proceeds from
reinvestment of
distributions.......... 1,756,964 3,396,992 4,080,093 13,099,071
Payment for shares
redeemed............... (25,657,158) (36,461,819) (49,294,072) (166,012,044)
- ------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... (4,457,051) 174,281,045 107,532,871 (12,394,536)
- ------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... (4,769,494) 174,677,766 109,028,038 (9,660,585)
Net assets
Beginning of year....... 52,819,687 28,967,584 72,913,208 398,675,652
- ------------------------------------------------------------------------------------
End of year............. $ 48,050,193 $203,645,350 $181,941,246 $ 389,015,067
====================================================================================
Distributions in excess
of net investment
income................. $ (81,569) $ (381,370) $ (41,722) $ (199,106)
====================================================================================
</TABLE>
See Combined Notes to Financial Statements.
41
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (Unaudited)
1. ORGANIZATION
The Evergreen Short and Intermediate Term Bond Funds consist of Evergreen Capi-
tal Preservation and Income Fund ("Capital Preservation Fund"), Evergreen In-
termediate Term Bond Fund ("Intermediate Bond Fund"), Evergreen Intermediate
Term Government Securities Fund ("Intermediate Government Fund") and Evergreen
Short Intermediate Bond Fund ("Short Intermediate Fund"), (collectively, the
"Funds"). Each Fund is a diversified series of Evergreen Fixed Income Trust
(the "Trust"), a Delaware business trust organized on September 18, 1997. The
Trust is an open end management investment company registered under the Invest-
ment Company Act of 1940, as amended (the "1940 Act").
The Funds offer Class A, Class B, Class C and/or Class Y shares. Class A shares
are sold with a maximum front-end sales charge of 3.25%. Class B and Class C
shares are sold without a front-end sales charge, but pay a higher ongoing dis-
tribution fee than Class A. Class B shares are sold subject to a contingent de-
ferred sales charge that is payable upon redemption and decreases depending on
how long the shares have been held. Class B shares purchased after January 1,
1997 will automatically convert to Class A shares after seven years. Class B
shares purchased prior to January 1, 1997 retain their existing conversion
rights. Class C shares are sold subject to a contingent deferred sales charge
payable on shares redeemed within one year after the month of purchase. Class Y
shares are sold at net asset value and are not subject to contingent deferred
sales charges or distribution fees. Class Y shares are sold only to investment
advisory clients of First Union Corporation ("First Union") and its affiliates,
certain institutional investors or Class Y shareholders of record of certain
other funds managed by First Union and its affiliates as of December 30, 1994.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
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 in-
stitutional-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 securi-
ties pledged falls below the carrying value of the repurchase agreement, in-
cluding 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 Commis-
sion, the Capital Preservation Fund and Intermediate Bond Fund, along with cer-
tain other funds managed by Evergreen Investment Management Company ("EIMC"),
(formerly Keystone Investment Management Company), a subsidiary of First
42
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (Unaudited) (continued)
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.
D. Foreign Currency
The books and records of the Funds are maintained in United States (U.S.) dol-
lars. Foreign currency amounts are translated into U.S. dollars as follows:
market value of investments, other assets and liabilities at the daily rate of
exchange; purchases and sales of investments, income and expenses at the rate
of exchange prevailing on the respective dates of such transactions. Net
unrealized foreign exchange gain (loss) resulting from changes in foreign cur-
rency exchange rates is a component of net unrealized gains or losses on in-
vestments and foreign currency related transactions. Net realized foreign cur-
rency gain or loss 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 differ-
ence 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 or loss
on foreign currency related transactions. The portion of foreign currency gains
or losses related to fluctuations in exchange rates between the initial pur-
chase trade date and subsequent sale trade date is included in realized gain or
loss on foreign currency related transactions.
E. Forward Foreign Currency Exchange Contracts
The Funds may enter into forward foreign currency exchange contracts ("forward
contracts") to settle portfolio purchases and sales of securities denominated
in a foreign currency and to hedge certain foreign currency assets or liabili-
ties. Forward contracts are recorded at the forward rate and marked-to-market
daily. Realized gains and losses arising from such transactions are included in
net realized gain (loss) on foreign currency related transactions. The Fund
bears the risk of an unfavorable change in the foreign currency exchange rate
underlying the forward contract and is subject to the credit risk that the
other party will not fulfill their obligations under the contract. Forward con-
tracts involve elements of market risk in excess of the amount reflected in the
statement of assets and liabilities.
F. Securities Lending
In order to generate income and to offset expenses, the Funds may lend portfo-
lio securities to brokers, dealers and other financial organizations. The
Funds' investment advisor will monitor the creditworthiness of such borrowers.
Loans of securities may not exceed 33 1/3% of a Fund's total assets and will be
collateralized by cash, letters of credit or U.S. Government securities that
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities, including accrued interest. While such
securities are on loan, the borrower will pay a Fund any income accruing there-
on, and the Fund may invest the collateral in portfolio securities, thereby in-
creasing its return. A Fund will have the right to call any such loan and ob-
tain the securities loaned at any time on five days' notice. Any gain or loss
in the market price of the loaned securities, which occurs during the term of
the loan, would affect a Fund and its investors. A Fund may pay reasonable fees
in connection with such loans.
G. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts.
43
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (Unaudited) (continued)
H. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated invest-
ment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable in-
come and net capital gains, if any, to their shareholders. The Funds also in-
tend to avoid any excise tax liability by making the required distributions un-
der the Code. Accordingly, no provision for federal taxes is required. To the
extent that realized capital gains can be offset by capital loss carryforwards,
it is each Fund's policy not to distribute such gains.
Capital losses incurred after October 31, within the Fund's fiscal year are
deemed to arise on the first business day of the Fund's following fiscal year.
The Short Intermediate Fund has incurred and will elect to defer post October
losses of $683,000.
I. Distributions
Distributions from net investment income for each Fund are declared daily and
paid monthly. Distributions from net realized capital gains, if any, are paid
at least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles. The significant differences between financial statement
amounts available for distributions and distributions made in accordance with
income tax regulations are primarily due to differing treatment for mortgage
paydown gains and losses and foreign currency related transactions. Certain
distributions paid during previous years have been reclassified to conform to
current year presentation.
J. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. Currently, class specific expenses are limited
to expenses incurred under the Distribution Plans for each class.
3. ACQUISITIONS
The Intermediate Bond Fund was organized for the purpose of combining the as-
sets of the Keystone Intermediate Term Bond Fund and Evergreen Intermediate
Term Bond Fund II (formerly, the Evergreen Intermediate Term Bond Fund).
On January 21, 1998, prior to the combination of assets into Intermediate Bond
Fund, Evergreen Intermediate Term Bond Fund II transferred substantially all of
its net assets related to its Class Y shares to Evergreen Select Core Bond
Fund, an institutional fund, through a redemption-in-kind in the amount of ap-
proximately $108,000,000.
On January 23, 1998, Intermediate Bond Fund acquired all the remaining assets
and assumed certain liabilities of Evergreen Intermediate Term Bond Fund II in
exchange for Class A, Class B, Class C and Class Y shares of the Intermediate
Bond Fund. Also, the Intermediate Bond Fund acquired all the assets and assumed
certain liabilities of the Keystone Intermediate Term Bond Fund in exchange for
Class A, Class B and Class C shares of Intermediate Bond Fund.
On February 28, 1998, Intermediate Bond Fund acquired all of the assets and as-
sumed certain liabilities of Blanchard Short-Term Flexible Income Fund, in an
exchange for Class A shares of Intermediate Bond Fund. Also, the Intermediate
Government Fund acquired all of the assets and assumed certain liabilities of
Virtus U.S. Government Securities Fund, in an exchange for Class A shares of
Intermediate Government Fund.
44
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (Unaudited) (continued)
These acquisitions were accomplished by a tax-free exchange of the respective
shares of each Fund. The value of assets acquired, number of shares issued,
unrealized appreciation acquired and the aggregate net assets of each Fund im-
mediately after the acquisition are as follows:
<TABLE>
<CAPTION>
Value of Net Number of Unrealized Net Assets
Acquiring Fund Acquired Fund Assets Acquired Shares Issued Appreciation After Acquisition
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Intermediate Bond Fund.. Evergreen Intermediate Term
Bond Fund II $ 66,213,695 7,287,484 $ 616,992 $ 93,235,040
Intermediate Bond Fund.. Blanchard Short-Term Flexible
Income Fund 116,766,103 12,856,531 2,511,574 211,601,433
Intermediate Government
Fund................... Virtus U.S. Government
Securities Fund 133,551,466 13,103,834 1,895,706 201,883,701
</TABLE>
4. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class A, Class B, Class C and/or Class Y. Transactions in shares
of the Funds were as follows:
- --------------------------------------------------------------------------------
Capital Preservation Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1998 June 30, 1998
--------------------- ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold.................. 213,243 $ 2,065,274 1,684,678 $ 16,480,670
Shares issued in reinvestment
of distributions............ 33,942 329,132 62,340 609,698
Shares redeemed.............. (543,160) (5,271,184) (1,502,907) (14,712,976)
- -------------------------------------------------------------------------------
Net increase (decrease)...... (295,975) $(2,876,778) 244,111 $ 2,377,392
- -------------------------------------------------------------------------------
Class B
Shares sold.................. 209,940 $ 2,043,260 212,637 $ 2,082,936
Shares issued in reinvestment
of distributions............ 41,886 406,325 99,464 974,126
Shares redeemed.............. (421,717) (4,094,620) (998,736) (9,785,685)
- -------------------------------------------------------------------------------
Net decrease................. (169,891) $(1,645,035) (686,635) $ (6,728,623)
- -------------------------------------------------------------------------------
Class C
Shares sold.................. 87,847 $ 853,450 89,775 $ 879,537
Shares issued in reinvestment
of distributions............ 8,790 85,198 17,696 173,140
Shares redeemed.............. (84,571) (820,521) (118,346) (1,158,497)
- -------------------------------------------------------------------------------
Net increase (decrease)...... 12,066 $ 118,127 (10,875) $ (105,820)
===============================================================================
</TABLE>
45
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
Intermediate Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1998 June 30, 1998
------------------------ ------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 998,390 $ 9,087,057 955,523 $ 8,660,565
Shares issued in
acquisition of:
Evergreen Intermediate
Term Bond Fund II....... 0 0 349,314 3,173,762
Blanchard Short-Term
Flexible Income Fund.... 0 0 12,856,531 116,766,103
Shares issued in
reinvestment of
distributions............ 340,051 3,100,037 263,979 2,392,256
Shares redeemed........... (1,857,400) (16,907,674) (1,958,558) (17,753,140)
- --------------------------------------------------------------------------------
Net increase (decrease)... (518,959) $ (4,720,580) 12,466,789 $113,239,546
- --------------------------------------------------------------------------------
Class B
Shares sold............... 223,085 $ 2,037,724 150,439 $ 1,368,742
Shares issued in
acquisition of Evergreen
Intermediate Term Bond
Fund II.................. 0 0 129,724 1,180,255
Shares issued in
reinvestment of
distributions............ 17,514 159,921 36,150 328,759
Shares redeemed........... (133,908) (1,218,552) (403,520) (3,667,231)
- --------------------------------------------------------------------------------
Net increase (decrease)... 106,691 $ 979,093 (87,207) $ (789,475)
- --------------------------------------------------------------------------------
Class C
Shares sold............... 65,919 $ 599,865 243,096 $ 2,208,772
Shares issued in
acquisition of Evergreen
Intermediate Term Bond
Fund II.................. 0 0 5,677 51,630
Shares issued in
reinvestment of
distributions............ 10,590 96,651 30,163 274,457
Shares redeemed........... (85,199) (776,710) (492,378) (4,464,809)
- --------------------------------------------------------------------------------
Net decrease.............. (8,690) $ (80,194) (213,442) $ (1,929,950)
================================================================================
</TABLE>
<TABLE>
<CAPTION>
January 26, 1998
(Commencement of
Six Months Ended Class Operations) to
December 31, 1998 June 30, 1998
------------------------ ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class Y
Shares sold................ 655,020 $ 5,962,145 1,335,378 $ 12,127,995
Shares issued in
acquisition of Evergreen
Intermediate Term Bond
Fund II................... 0 0 6,802,769 61,808,048
Shares issued in
reinvestment of
distributions............. 63,544 579,287 44,309 401,520
Shares redeemed............ (1,192,179) (10,873,756) (1,165,196) (10,576,639)
- -------------------------------------------------------------------------------
Net increase (decrease).... (473,615) $ (4,332,324) 7,017,260 $ 63,760,924
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Intermediate Government Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1998 June 30, 1998
------------------------ ------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 480,061 $ 4,922,888 230,309 $ 2,342,853
Shares issued in
acquisition of Virtus
U.S. Government
Securities Fund.......... 8,857,360 90,273,998
Shares issued in
reinvestment of
distributions............ 163,681 1,689,362 118,050 1,202,780
Shares redeemed........... (1,237,190) (12,737,999) (1,323,352) (13,483,204)
- ------------------------------------------------------------------------------
Net increase (decrease)... (593,448) $ (6,125,749) 7,882,367 $ 80,336,427
- ------------------------------------------------------------------------------
Class B
Shares sold............... 256,109 $ 2,649,688 79,762 $ 811,849
Shares issued in
reinvestment of
distributions............ 2,839 29,343 2,377 24,146
Shares redeemed........... (64,542) (665,317) (53,064) (538,430)
- ------------------------------------------------------------------------------
Net increase.............. 194,406 $ 2,013,714 29,075 $ 297,565
- ------------------------------------------------------------------------------
Class C
Shares sold............... 13,871 $ 143,430 10,721 $ 108,822
Shares issued in
reinvestment of
distributions............ 294 3,039 496 5,037
Shares redeemed........... (6,276) (64,710) (30) (306)
- ------------------------------------------------------------------------------
Net increase.............. 7,889 $ 81,759 11,187 $ 113,553
- ------------------------------------------------------------------------------
Class Y
Shares sold............... 1,344,945 $ 13,870,500 1,570,425 $ 15,931,860
Shares issued in
acquisition of Virtus
U.S. Government
Securities Fund.......... 0 0 4,246,474 43,277,468
Shares issued in
reinvestment of
distributions............ 104,144 1,074,694 280,814 2,848,130
Shares redeemed........... (2,489,893) (25,631,557) (3,469,534) (35,272,132)
- ------------------------------------------------------------------------------
Net increase (decrease)... (1,040,804) $(10,686,363) 2,628,179 $ 26,785,326
==============================================================================
</TABLE>
46
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
Short Intermediate Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1998 June 30, 1998
------------------------ --------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 807,300 $ 8,061,670 500,922 $ 4,955,344
Shares issued in
reinvestment of
distributions.......... 41,202 411,965 76,079 752,038
Shares redeemed......... (545,059) (5,424,755) (674,862) (6,681,274)
- ------------------------------------------------------------------------------
Net increase
(decrease)............. 303,443 $ 3,048,880 (97,861) $ (973,892)
- ------------------------------------------------------------------------------
Class B
Shares sold............. 1,250,520 $ 12,509,726 1,023,010 $ 10,138,464
Shares issued in
reinvestment of
distributions.......... 41,859 419,451 78,547 778,080
Shares redeemed......... (1,067,737) (10,659,115) (1,071,136) (10,623,170)
- ------------------------------------------------------------------------------
Net increase............ 224,642 $ 2,270,062 30,421 $ 293,374
- ------------------------------------------------------------------------------
Class C
Shares sold............. 50,411 $ 504,139 64,686 $ 642,818
Shares issued in
reinvestment of
distributions.......... 2,911 29,152 4,490 44,480
Shares redeemed......... (14,483) (144,772) (58,395) (579,321)
- ------------------------------------------------------------------------------
Net increase............ 38,839 $ 388,519 10,781 $ 107,977
- ------------------------------------------------------------------------------
Class Y
Shares sold............. 5,942,460 $ 59,297,383 12,608,737 $ 124,781,811
Shares issued in
reinvestment of
distributions.......... 576,419 5,761,639 1,165,985 11,524,473
Shares redeemed......... (6,283,422) (62,700,722) (14,971,442) (148,128,279)
- ------------------------------------------------------------------------------
Net increase
(decrease)............. 235,457 $ 2,358,300 (1,196,720) $ (11,821,995)
==============================================================================
</TABLE>
5. 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,
1998:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
----------------------------------- -----------------------------------
U.S. Government Non-U.S. Government U.S. Government Non-U.S. Government
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Preservation
Fund................... $ 8,043,100 $ 426,000 $ 6,672,560 $ 0
Intermediate Bond Fund.. 70,920,834 73,280,379 82,562,672 78,763,060
Intermediate Government
Fund................... 5,812,115 0 19,098,377 0
Short Intermediate
Fund................... 37,827,268 84,486,661 95,146,104 23,721,707
</TABLE>
During the six months ended December 31, 1998, the following Funds entered into
reverse repurchase agreements as follows:
<TABLE>
<CAPTION>
Average Daily
Balance Weighted Average Maximum Amount
Outstanding Interest Rate Outstanding*
---------------------------------------------
<S> <C> <C> <C>
Capital Preservation Fund..... $ 402,895 5.522% $ 500,382
Intermediate Bond Fund........ 1,015,195 5.527% 5,302,459
</TABLE>
* The Maximum Amount Outstanding under reverse repurchase agreements includes
accrued interest.
There were no reverse repurchase agreements outstanding at December 31, 1998.
As of June 30, 1998, the Funds had capital loss carryovers for federal income
tax purposes as follows:
<TABLE>
<CAPTION>
Expiration
--------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005 2006
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Preservation
Fund................... -- $5,685,000 $ 197,000 $ 642,000 $ 254,000 -- --
Intermediate Bond Fund.. $598,000 2,688,000 9,514,000 118,000 359,000 $1,200,000 --
Intermediate Government
Fund................... -- -- 9,743,000 2,020,000 4,450,000 3,660,000 $ 39,000
Short Intermediate
Fund................... -- -- 6,021,000 -- 4,049,000 4,374,000 1,743,000
</TABLE>
47
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (Unaudited) (continued)
6. DISTRIBUTION PLANS
Evergreen 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 a 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 service fees to broker-dealers who sell shares of the fund,
are paid by the Fund through expenses called "Distribution Plan expenses". Each
class, except Class Y, currently pays a service fee equal to 0.25% of the aver-
age daily net assets of the class. The Class A shares of the Capital Preserva-
tion Fund are currently incurring service fees at a rate of 0.23% of average
daily net assets. The service fee for Class A shares of the Short Intermediate
Fund is currently limited to 0.10% of average daily net assets. Class B and
Class C also pay distribution fees equal to 0.75% of the average daily net as-
sets of each respective class. Distribution Plan expenses are calculated daily
and paid monthly.
During the six months ended December 31, 1998, 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>
Distribution
fees accrued Distribution
------------------------- fees waived
Class A Class B Class C Class A
------------------------- ------------
<S> <C> <C> <C> <C>
Capital Preservation Fund....... $ 18,506 $126,305 $20,488 --
Intermediate Bond Fund.......... 153,159 55,963 26,923 --
Intermediate Government Fund.... 99,298 9,823 892 $75,466
Short Intermediate Fund......... 9,176 119,403 6,905 --
</TABLE>
The principal underwriter may pay distribution fees greater than the allowable
annual amounts each Fund is permitted to pay under the Distribution Plans. Each
Fund may reimburse the principal underwriter for such excess amounts in later
years with annual interest at prime plus 1.00%.
Each of the Distribution Plans may be terminated at any time by vote of the In-
dependent Trustees or by vote of a majority of the outstanding voting shares of
the respective class.
7. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
EIMC is the investment advisor for the Capital Preservation Fund and the Inter-
mediate Bond Fund. In return for providing investment management and adminis-
trative services to the Capital Preservation Fund and the Intermediate Bond
Fund, the Funds pay EIMC a management fee that is calculated daily and paid
monthly. The management fee is computed at an annual rate of 2.00% of each
Fund's gross investment income plus an amount determined by applying percentage
rates, starting at 0.50% and declining to 0.25% per annum as net assets in-
crease, to the average daily net asset value of each Fund.
Evergreen Investment Management ("EIM"), formerly the Capital Management Group,
a division of First Union National Bank, serves as the investment advisor to
the Intermediate Government Fund and Short Intermediate Fund and is paid a man-
agement fee that is computed daily and paid monthly. For the Intermediate Gov-
ernment Fund, EIM is entitled to a fee at an annual rate of 0.60% of the Fund's
average daily net assets. For the Short Intermediate Fund, EIM is entitled to a
fee at an annual rate of 0.50% of the Fund's average daily net assets.
For the six months ended December 31, 1998, the investment advisor of the fol-
lowing Funds waived advisory fees as follows:
<TABLE>
<S> <C>
Capital Preservation Fund..................................... $ 82,647
Intermediate Bond Fund........................................ 152,814
</TABLE>
Evergreen Investment Services ("EIS"), a subsidiary of First Union, is the ad-
ministrator and BISYS is the sub-administrator to the Funds. As administrator,
EIS provides the Funds with facilities, equipment and personnel.
48
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (Unaudited) (continued)
As sub-administrator to the Funds, BISYS provides the officers of the Funds.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
For the Intermediate Government Fund and the Short Intermediate Fund, the ad-
ministrator and 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 invest-
ment 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 in-
crease, to the average daily net asset value of each Fund. The sub-administra-
tion fee is calculated by applying percentage rates, which start at 0.01% and
decline to 0.004% per annum as net assets increase, to the average daily net
assets of each Fund.
During the six months ended December 31, 1998, the Intermediate Government Fund
and Short Intermediate Fund paid or accrued the following amounts for adminis-
trative services and sub-administration services:
<TABLE>
<CAPTION>
Administration Sub-administration
-------------- ------------------
<S> <C> <C>
Intermediate Government Fund.......... $18,968 $ 4,880
Short Intermediate Fund............... 42,381 10,972
</TABLE>
During the six months ended December 31, 1998, the Capital Preservation Fund
and Intermediate Bond Fund reimbursed EIMC $3,578 and $15,667, respectively,
for certain administration and accounting expenses.
Evergreen Service Company ("ESC"), an indirect, wholly owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the
Funds. The Funds have entered into an expense offset arrangement with ESC re-
lating to certain cash balances held at First Union for benefit of the Funds.
8. 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.
9. DEFERRED TRUSTEES' FEES
Each Independent Trustee of each Fund may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Fund's Trustees' fees and
expenses. Trustees will be paid either in one lump sum or in quarterly install-
ments 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.
10. FINANCING AGREEMENT
Certain of the Evergreen Funds, State Street and a group of banks (collective-
ly, the "Banks") entered into a financing agreement, dated December 22, 1997,
as amended on November 20, 1998. Under this agreement, the Banks provided an
unsecured credit facility in the aggregate amount of $400 million ($275 million
committed and $125 million uncommitted). The credit facility was allocated, un-
der the terms of the financing agreement, among the Banks. The credit facility
was accessed by the Funds for temporary or emergency purposes only and was sub-
ject 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 facil-
ity, which was allocated to all funds. For its assistance in arranging this fi-
nancing 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.
This agreement was amended and renewed on December 22, 1998. The amended fi-
nancing agreement became effective on December 22, 1998 among all of the Ever-
green Funds, State Street and the Bank of New York ("BONY"). Under this agree-
ment, State Street and BONY provide an unsecured credit facility in the
49
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (Unaudited) (continued)
aggregate amount of $150 million ($125 million committed and $25 million uncom-
mitted). The remaining terms and conditions of the agreement are unaffected.
During the six months ended December 31, 1998, the Funds had no borrowings un-
der this agreement.
11. YEAR 2000
Like other investment companies, the Funds could be adversely affected if the
computer systems used by the Funds' investment advisors and the Funds' other
service providers are not able to perform their intended functions effectively
after 1999 because of the inability of computer software to distinguish the
year 2000 from the year 1900. The Funds' investment advisors are taking steps
to address this potential year 2000 problem with respect to the computer sys-
tems that they use and obtain satisfactory assurances that comparable steps are
being taken by the Funds' other major service providers. At this time, however,
there can be no assurance that these steps will be sufficient to avoid any ad-
verse impact on the Funds from this problem.
50
<PAGE>
- --------------------------------------------------------------------------------
Evergreen Funds
Money Market
Treasury Money Market Fund
Money Market Fund
Municipal Money Market Fund
Florida Municipal Money Market Fund
New Jersey Municipal Money Market Fund
Pennsylvania Municipal Money Market Fund
Tax Exempt
Short Intermediate Municipal Fund
High Grade Municipal Bond Fund
Municipal Bond Fund
California Municipal Bond Fund
Connecticut Municipal Bond Fund
Florida Municipal Bond Fund
Florida High Income Municipal Bond Fund
Georgia Municipal Bond Fund
Maryland Municipal Bond Fund
Massachusetts Municipal Bond Fund
Missouri Municipal Bond Fund
New Jersey Municipal Bond Fund
New York Municipal Bond Fund
North Carolina Municipal Bond Fund
Pennsylvania Municipal Bond Fund
South Carolina Municipal Bond Fund
Virginia Municipal Bond Fund
Income
Capital Preservation and Income Fund
Short Intermediate Bond Fund
Intermediate Term Government Securities Fund
Intermediate Term Bond Fund
U.S. Government Fund
Diversified Bond Fund
Strategic Income Fund
High Yield Bond Fund
Balanced
American Retirement Fund
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund
Growth & Income
Utility Fund
Income and Growth Fund
Fund for Total Return
Value Fund
Select Equity Index Fund
Blue Chip Fund
Growth and Income Fund
Small Cap Equity Income Fund
Domestic Growth
Tax Strategic Equity Fund
Strategic Growth Fund
Stock Selector Fund
Evergreen Fund
Masters Fund
Omega Fund
Small Company Growth Fund
Aggressive Growth Fund
Micro Cap Fund
Global International
Global Leaders Fund
International Growth Fund
Global Opportunities Fund
Precious Metals Fund
Emerging Markets Growth Fund
Latin America Fund
Express Line
800.346.3858
Investor Services
800.343.2898
Retirement Plan Services
800.247.4075
www.evergreen-funds.com
36263 541496 02/99
- --------------------------------------------------------------------------------
-------------
[LOGO OF EVERGREEN BULK RATE
FUNDS(SM) APPEARS HERE] U.S. POSTAGE
PAID
200 Berkeley Street PERMIT NO. 19
Boston, MA 02116 HUDSON, MA
-------------
