<PAGE>
Annual Report
as of June 30, 1999
[GRAPHIC APPEARS HERE]
E v e r g r e e n
Intermediate Term
Government Securities Fund
[GRAPHIC APPEARS HERE]
[LOGO OF EVERGREEN FUNDS APPEARS HERE]
<PAGE>
Table of Contents
Letter to Shareholders ................................................. 1
Evergreen Intermediate Term
Government Securities Fund
Fund at a Glance ..................................................... 2
Portfolio Manager Interview .......................................... 3
Financial Highlights
Evergreen Intermediate Term Government
Securities Fund ...................................................... 5
Schedule of Investments
Evergreen Intermediate Term Government
Securities Fund ...................................................... 7
Statementof Assets and Liabilities ..................................... 8
Statementof Operations ................................................. 9
Statements of Changes in Net Assets .................................... 10
Notes to Financial Statements .......................................... 11
Independent Auditors'Report ............................................ 16
Other Information ...................................................... 17
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Evergreen Funds
- --------------------------------------------------------------------------------
Evergreen Funds is one of the nation's fastest growing investment companies with
over $70 billion in assets under management.
With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
- --------------------------------------------------------------------------------
This annual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
----------------------------------------------------------------
Mutual Funds: ARE NOT FDIC INSURED May lose value . Are not bank guaranteed
----------------------------------------------------------------
Evergreen Distributor,Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services,Inc.
<PAGE>
Letter to Shareholders
----------------------
August 1999
[PHOTO OF WILLIAM M. ENNIS APPEARS HERE]
William M. Ennis
President and CEO
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Intermediate Term Government Securities
Fund annual report, which covers the twelve-month period ended June 30, 1999.
Shift in the Interest Rate Environment
Following the Russian financial crisis in August 1998, there was a "flight to
quality" worldwide. Investors fled from risk-related securities, interest rates
fell sharply and the prices of high grade and U.S. government securities rose.
During the final six months of the period the flight to quality was reversed as
a result of actions to lower interest rates by the governments of the major
industrialized nations. Investors returned to more risky fixed income
securities, such as lower quality corporate bonds, international bonds and
emerging market bonds.
Going forward, we anticipate the possibility of one or more interest-rate hikes
by the Federal Reserve in the last half of 1999. The moderately growing domestic
economy and the solid, long-term fundamentals underlying the market lead us to a
cautiously optimistic outlook.
Year 2000 Preparation/(1)/
At Evergreen, we continue to prepare ourselves to provide uninterrupted service
and communication with all our shareholders throughout the end of 1999 and right
through the date change into the year 2000 and beyond. As of the end of August,
when this report was finalized, we have completed the testing of internal
systems. In March, we successfully participated in industry-wide testing with
the Securities Industry Association. We are confident that our efforts will
enable shareholders to receive the same Evergreen products and services after
December 1999 that we deliver today.
As always, we encourage all shareholders to diversify their mutual fund
portfolios and we suggest you consult with your financial advisor for an
allocation strategy that helps you meet your investment goals and objectives.
Evergreen Funds offers a wide range of funds that includes multiple investment
styles to help you find one that is appropriate in your portfolio.
Thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President andCEO
Evergreen Investment Company
/(1)/ This information constitutes Year 2000 readiness disclosure.
1
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Government Securities Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of June 30, 1999
The U.S.economy remained in overdrive throughout the fiscal period,evidenced by
stronger-than-expected economic growth and relatively low inflation.
Portfolio
Management
- --------------------------------------------------------------------------------
[PHOTO OF L. ROBERT CHESHIRE APPEARS HERE]
L.Robert Cheshire
Tenure:January 1994
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS(1)
- --------------------------------------------------------------------------------
Portfolio Inception Date: 11/1/91 Class A Class B Class C Class Y
Class Inception Date 5/2/95 2/9/96 4/10/96 11/1/91
- --------------------------------------------------------------------------------
Average Annual Returns*
- --------------------------------------------------------------------------------
1 year with sales charge -0.45% -2.91% 1.00% N/A
- --------------------------------------------------------------------------------
1 year w/o sales charge 2.86% 1.97% 1.97% 2.99%
- --------------------------------------------------------------------------------
3 years 4.28% 3.59% 4.51% 5.55%
- --------------------------------------------------------------------------------
5 years 5.08% 4.78% 5.15% 5.83%
- --------------------------------------------------------------------------------
Since Portfolio Inception 5.19% 5.22% 5.25% 5.69%
- --------------------------------------------------------------------------------
Maximum Sales Charge 3.25% 5.00% 1.00% N/A
Front End CDSC CDSC
- --------------------------------------------------------------------------------
30-day SEC Yield 5.08% 4.50% 4.53% 5.50%
- --------------------------------------------------------------------------------
12-month distributions per share $0.54 $0.45 $0.45 $0.56
- --------------------------------------------------------------------------------
* Adjusted for maximum applicable sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Class A CPI LBIGBI
Period End Value Value Value
10/91 9,675 10,000 10,000
6/92 10,262 10,204 10,652
6/93 11,200 10,509 11,721
6/94 11,135 10,772 11,699
6/95 12,092 11,099 12,840
6/96 12,570 11,401 13,473
6/97 13,323 11,667 14,409
6/98 14,329 11,863 15,608
6/99 14,739 12,096 16,311
Comparison of a $10,000 investment in Evergreen Intermediate Term Government
Securities Fund, Class A shares, versus a similar investment in the Lehman
Brothers Intermediate Government Bond Index (LBIGBI) and the Consumer Price
Index (CPI).
The LBIGBI 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.
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE(1)
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 6/30/99.
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: 1999 Morningstar, Inc.
(1) Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. 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.
Historical performance shown for Classes A, B, and C prior to their inception is
based on the performance of Class Y, the original class offered. These
historical returns for Classes A, B, and C have not been adjusted to reflect the
effect of each class' 12b-1 fees. These fees are for Class A 0.25%, for Class B
1.00%, and for Class C 1.00%. Class Y does not pay a 12b-1 fee. If these fees
had been reflected, returns would have been lower.
2
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Government Securities Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform during the fiscal year?
The Evergreen Intermediate Term Government Securities Fund (class A shares)
posted a total return of 2.86% compared to a return of 4.43% for the Lehman
Brothers Intermediate Government Bond Index. Performance is before the deduction
of any applicable sales charge.This performance modestly trailed the 3.34%
average return of 96 short intermediate U.S. government funds tracked by Lipper
Analytical Services, a leading mutual fund rating company.
Portfolio
Characteristics
---------------
Total Net Assets $ 139,466,671
----------------------------------------------------
Average Credit Quality AAA
----------------------------------------------------
Effective Maturity 4.5 years
----------------------------------------------------
Average Duration 3.2 years
----------------------------------------------------
What was the investment environment like during the twelve months?
The U.S. economy remained in overdrive throughout the fiscal period, evidenced
by stronger-than-expected economic growth and relatively low inflation. In late
1998, signs of an economic slowdown began to surface, and the Federal Reserve
Board responded by lowering interest rates three times in four months. The Fed
then reversed its monetary policy toward a tightening stance in May 1999 in
response to a rapidly growing economy and potentially higher inflation; they
finally raised interest rates on June 30, the final day of the Fund's fiscal
year.
How did your duration and sector strategy impact performance?
Our duration strategy had a positive impact on performance during the first six
months, as we maintained a long duration within the declining interest rate
environment. During the final half of the year, duration was increased from 3.11
years to 3.21 years, a move which hurt relative performance as rates rose.
From a sector standpoint, we maintained a strong mortgage weighting because we
felt this area was attractively valued. From a historical perspective, mortgages
serve to increase yield as well as enhance total return and, despite
under-performance in late 1998, this sector has rebounded well in 1999.
- --------------------------------------------------------------------------------
PORTFOLIO MATURITY
- --------------------------------------------------------------------------------
(as a percentage of portfolio assets)
[PIE CHART APPEARS HERE]
1 - 5 years -- 45%
5-10 Years -- 40%
0-1 year -- 15%
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Intermediate Term Government Securities Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
Why is this Fund being merged into the Evergreen U.S. Government Fund?
The funds merged in late July, a move that was undertaken to benefit our
shareholders. Both funds are similar in objective, investment parameters and
security selection process. The Evergreen U.S. Government Fund does not have
maturity restrictions and has more freedom to take advantages of additional
opportunities due to changes in the yield or a change in the shape of the yield
curve.
Although the U.S. Government Fund will lengthen the duration/maturity for the
Intermediate Government shareholders, the U.S. Government Fund has generally
provided higher relative yields and stronger investment returns over time.
Additionally, the ability to invest in a broader maturity range will provide the
Fund with the flexibility to invest in a wider selection of investments to the
benefit of the Fund's shareholders.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(as a percentage of net assets)
[PIE CHART APPEARS HERE]
Treasury Notes/Bonds -- 41%
Mortgage Backed
Securities -- 40%
Government Agency
Notes/Bonds -- 19%
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------- Period Ended
1999 1998 1997 1996 (a) August 31, 1995 (b)
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 10.21 $ 10.02 $ 9.99 $10.15 $ 9.95
------- ------- ------ ------ ------
Income from investment
operations
Net investment income 0.54 0.55 0.55 0.46 0.19
Net realized and
unrealized gains or
losses on securities (0.25) 0.19 0.03 (0.16) 0.20
------- ------- ------ ------ ------
Total from investment
operations 0.29 0.74 0.58 0.30 0.39
------- ------- ------ ------ ------
Less distributions from
net investment income (0.54) (0.55) (0.55) (0.46) (0.19)
------- ------- ------ ------ ------
Net asset value, end of
period $ 9.96 $ 10.21 $10.02 $ 9.99 $10.15
------- ------- ------ ------ ------
Total return* 2.86% 7.55% 6.00% 3.00% 3.90%
Ratios/supplemental data
Net assets, end of
period (thousands) $66,341 $81,034 $ 571 $ 497 $ 9
Ratios to average net
assets
Expenses# 0.94% 0.83% 0.86% 0.81%+ 0.80%+
Net investment income 5.30% 5.39% 5.47% 5.49%+ 5.42%+
Portfolio turnover rate 14% 45% 68% 28% 45%
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------
1999 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 0.45 0.46 0.45 0.18
Net realized and unrealized gains or losses
on securities (0.25) 0.19 0.04 (0.39)
------ ------ ------ ------
Total from investment operations 0.20 0.65 0.49 (0.21)
------ ------ ------ ------
Less distributions from net investment
income (0.45) (0.46) (0.46) (0.18)
------ ------ ------ ------
Net asset value, end of period $ 9.96 $10.21 $10.02 $ 9.99
------ ------ ------ ------
Total return* 1.97% 6.57% 5.03% (1.99)%
Ratios/supplemental data
Net assets, end of period (thousands) $2,470 $1,052 $ 742 $ 359
Ratios to average net assets
Expenses# 1.81% 1.82% 1.81% 1.80%+
Net investment income 4.45% 4.49% 4.53% 4.62%+
Portfolio turnover rate 14% 45% 68% 28%
</TABLE>
(a) 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.
(b) For the period from May 2, 1995 (commencement of class operations) to Au-
gust 31, 1995.
(c) For the period from February 9, 1996 (commencement of class operations) to
June 30, 1996.
* Excluding applicable sales charges.
+ Annualized.
# The ratio of expenses to average net assets excludes fee credits and in-
cludes fee waivers.
See Notes to Financial Statements.
5
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------
1999 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 0.45 0.45++ 0.40 0.11
Net realized and unrealized gains or
losses on securities (0.25) 0.20 0.09 (0.02)
------ ------ ------ ------
Total from investment operations 0.20 0.65 0.49 0.09
------ ------ ------ ------
Less distributions from net investment
income (0.45) (0.46) (0.46) (0.11)
------ ------ ------ ------
Net asset value, end of period $ 9.96 $10.21 $10.02 $ 9.99
------ ------ ------ ------
Total return* 1.97% 6.57% 5.03% 0.89%
Ratios/supplemental data
Net assets, end of period (thousands) $ 277 $ 126 $ 12 $ 32
Ratios to average net assets
Expenses# 1.81% 1.83% 1.81% 1.80%+
Net investment income 4.46% 4.54% 4.53% 4.47%+
Portfolio turnover rate 14% 45% 68% 28%
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30, Year Ended August 31,
------------------------- Period Ended ----------------------
1999 1998 1997 June 30, 1996 (b) 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 10.21 $ 10.02 $ 9.99 $ 10.15 $ 9.92 $ 10.61
------- ------- ------- ------- ---------- ----------
Income from investment
operations
Net investment income 0.56 0.56 0.56 0.46 0.55 0.54
Net realized and
unrealized gains or
losses on securities (0.25) 0.19 0.03 (0.16) 0.23 (0.64)
------- ------- ------- ------- ---------- ----------
Total from investment
operations 0.31 0.75 0.59 0.30 0.78 (0.10)
------- ------- ------- ------- ---------- ----------
Less distributions
From net investment
income (0.56) (0.56) (0.56) (0.46) (0.55) (0.54)
From capital gains 0 0 0 0 0 (0.05)
------- ------- ------- ------- ---------- ----------
Total distributions (0.56) (0.56) (0.56) (0.46) (0.55) (0.59)
------- ------- ------- ------- ---------- ----------
Net asset value, end of
period $ 9.96 $ 10.21 $ 10.02 $ 9.99 $ 10.15 $ 9.92
------- ------- ------- ------- ---------- ----------
Total return 2.99% 7.63% 6.08% 3.00% 8.16% (0.99%)
Ratios/supplemental data
Net assets, end of
period (thousands) $70,379 $99,729 $71,588 $87,004 $ 106,066 $ 106,448
Ratios to average net
assets
Expenses# 0.81% 0.82% 0.81% 0.80%+ 0.70% 0.55%
Net investment income 5.42% 5.47% 5.52% 5.47%+ 5.54% 5.22%
Portfolio turnover rate 14% 45% 68% 28% 45% 45%
</TABLE>
(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.
* Excluding applicable sales charges.
+ Annualized.
++ Calculation based on average shares outstanding.
# The ratio of expenses to average net assets excludes fee credits and in-
cludes fee waivers.
See Notes to Financial Statements.
6
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
Mortgage-Backed Securities - 39.7%
Federal Home Loan Mortgage Corp.: - 10.2%
$12,179,189 6.50%, 9/1/08 - 11/1/09........................ $ 12,088,210
2,050,668 Gold, 9.00%, 1/1/17............................ 2,195,999
------------
14,284,209
------------
Federal National Mortgage Assn.: - 17.1%
2,262,000 5.125%, 2/13/04................................ 2,169,582
2,558,914 6.00%, 2/1/08 - 5/1/11......................... 2,505,421
3,913,679 6.374%, 3/1/06................................. 3,896,627
3,500,000 6.40%, 12/1/07................................. 3,443,979
11,772,057 7.00%, 4/1/11 - 3/1/24......................... 11,809,696
------------
23,825,305
------------
Government National Mortgage Assn.: - 12.4%
7,443,234 6.00%, 2/20/29................................. 6,952,204
8,743,408 6.50%, 2/15/27................................. 8,449,804
1,531,859 7.00%, 3/15/28................................. 1,516,004
110,646 8.00%, 3/15/17................................. 115,177
169,304 9.00%, 9/15/21................................. 180,306
------------
17,213,495
------------
Total Mortgage-Backed Securities (cost
$55,557,397).................................. 55,323,009
------------
U. S. Agency Obligations - 19.0%
Federal Agricultural Mortgage Corp.: - 0.7%
993,000 MTN, 7.37%, 8/1/06............................. 1,019,106
------------
Federal Home Loan Bank: - 4.5%
5,000,000 5.50%, 4/14/00................................. 4,998,195
1,300,000 8.60%, 1/25/00................................. 1,322,549
------------
6,320,744
------------
Federal Home Loan Mortgage Corp.: - 6.2%
8,500,000 7.36%, 6/5/07.................................. 8,649,209
------------
Federal National Mortgage Assn.: - 7.6%
5,964,663 7.50%, 2/11/02 - 8/1/26........................ 6,094,736
4,480,000 MTN, 6.16%, 4/3/01............................. 4,503,905
------------
10,598,641
------------
Total U. S. Agency Obligations
(cost $26,282,316)............................ 26,587,700
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U. S. Treasury Obligations - 40.7%
U.S. Treasury Notes:
$ 2,000,000 5.625%, 11/30/00................................... $ 2,005,000
13,000,000 6.125%, 9/30/00 - 8/15/07.......................... 13,130,625
8,400,000 6.25%, 4/30/01..................................... 8,505,000
9,750,000 6.625%, 5/15/07.................................... 10,158,281
2,300,000 7.00%, 7/15/06..................................... 2,437,283
9,250,000 7.125%, 2/29/00.................................... 9,368,520
6,900,000 7.50%, 10/31/99 - 5/15/02.......................... 7,101,689
2,500,000 7.875%, 11/15/04................................... 2,730,470
1,300,000 8.50%, 11/15/00.................................... 1,352,000
------------
Total U. S. Treasury Obligations
(cost $56,829,937)................................ 56,788,868
------------
</TABLE>
<TABLE>
<S> <C> <C>
Repurchase Agreement - 0.1% (cost $103,587)
103,587 Dresdner Bank AG
4.75%, dated 06/30/1999, due 07/01/1999, maturity
value $103,600 (a) ............................... 103,587
------------
Total Investments -
(cost $138,773,237)...................... 99.5% 138,803,164
Other Assets and
Liabilities - net........................ 0.5 663,507
----- ------------
Net Assets................................ 100.0% $139,466,671
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by $109,985 U.S. Treasury
7.50%, 02/15/2005; value including accrued interest $112,781.
Summary of Abbreviations
MTN Medium Term Notes
See Notes to Financial Statements.
7
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Statement of Assets and Liabilities
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Identified cost of securities................................... $138,773,237
Net unrealized gains on securities.............................. 29,927
- --------------------------------------------------------------------------------
Market value of securities...................................... 138,803,164
Receivable for Fund shares sold................................. 68,362
Interest receivable............................................. 1,526,535
Prepaid expenses and other assets............................... 56,552
- --------------------------------------------------------------------------------
Total assets................................................... 140,454,613
- --------------------------------------------------------------------------------
Liabilities
Distributions payable........................................... 264,661
Payable for Fund shares redeemed................................ 613,607
Advisory fee payable............................................ 70,072
Distribution Plan expenses payable.............................. 27,693
Due to other related parties.................................... 2,922
Accrued expenses and other liabilities.......................... 8,987
- --------------------------------------------------------------------------------
Total liabilities.............................................. 987,942
- --------------------------------------------------------------------------------
Net assets...................................................... $139,466,671
- --------------------------------------------------------------------------------
Net assets represented by
Paid-in capital................................................. $159,341,606
Overdistributed net investment income........................... (77,303)
Accumulated net realized losses on securities................... (19,827,559)
Net unrealized gains on securities.............................. 29,927
- --------------------------------------------------------------------------------
Total net assets................................................ $139,466,671
- --------------------------------------------------------------------------------
Net assets consists of
Class A......................................................... $ 66,340,870
Class B......................................................... 2,470,049
Class C......................................................... 277,215
Class Y......................................................... 70,378,537
- --------------------------------------------------------------------------------
Total net assets................................................ $139,466,671
- --------------------------------------------------------------------------------
Shares outstanding
Class A......................................................... 6,657,857
Class B......................................................... 247,891
Class C......................................................... 27,824
Class Y......................................................... 7,063,131
- --------------------------------------------------------------------------------
Net asset value per share
Class A......................................................... $ 9.96
- --------------------------------------------------------------------------------
Class A--Offering price (based on sales charge of 3.25%)........ $ 10.29
- --------------------------------------------------------------------------------
Class B......................................................... $ 9.96
- --------------------------------------------------------------------------------
Class C......................................................... $ 9.96
- --------------------------------------------------------------------------------
Class Y......................................................... $ 9.96
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Statement of Operations
Year Ended June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income
Interest......................................................... $10,350,465
- --------------------------------------------------------------------------------
Expenses
Advisory fee..................................................... 995,783
Distribution Plan expenses....................................... 214,929
Administrative services fees..................................... 43,319
Transfer agent fee............................................... 158,474
Trustees' fees and expenses...................................... 3,180
Printing and postage expenses.................................... 21,084
Custodian fee.................................................... 56,049
Registration and filing fees..................................... 52,425
Professional fees................................................ 18,257
Other............................................................ 6,321
- --------------------------------------------------------------------------------
Total expenses.................................................. 1,569,821
Less: Fee credits............................................... (6,260)
Fee waivers............................................... (91,036)
- --------------------------------------------------------------------------------
Net expenses.................................................... 1,472,525
- --------------------------------------------------------------------------------
Net investment income............................................ 8,877,940
- --------------------------------------------------------------------------------
Net realized and unrealized gains or losses on securities
Net realized gains or losses on securities....................... 98,133
- --------------------------------------------------------------------------------
Net change in unrealized gains or losses on securities........... (3,557,242)
- --------------------------------------------------------------------------------
Net realized and unrealized losses on securities................. (3,459,109)
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations............. $ 5,418,831
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
EVERGREEN
Intermediate Term Government Securities Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------
1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income............................ $ 8,877,940 $ 6,080,301
Net realized gains on securities................. 98,133 263,411
Net change in unrealized gains or losses on
securities...................................... (3,557,242) 1,220,668
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations..................................... 5,418,831 7,564,380
- -------------------------------------------------------------------------------
Distributions to shareholders from net investment
income
Class A.......................................... (3,991,287) (1,551,596)
Class B.......................................... (111,282) (35,699)
Class C.......................................... (8,783) (5,115)
Class Y.......................................... (4,775,468) (4,476,803)
- -------------------------------------------------------------------------------
Total distributions to shareholders............. (8,886,820) (6,069,213)
- -------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold........................ 31,899,745 19,195,384
Net asset value of shares issued in reinvestment
of distributions................................ 5,232,212 4,080,093
Payment for shares redeemed...................... (76,138,543) (49,294,072)
Net asset value of shares issued in acquisition
of Virtus U.S. Government Securities Fund....... 0 133,551,466
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from capital share transactions................ (39,006,586) 107,532,871
- -------------------------------------------------------------------------------
Total increase (decrease) in net assets........ (42,474,575) 109,028,038
Net assets
Beginning of period.............................. 181,941,246 72,913,208
- -------------------------------------------------------------------------------
End of period.................................... $139,466,671 $181,941,246
- -------------------------------------------------------------------------------
Overdistributed net investment income............ $ (77,303) $ (41,722)
- -------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
The Evergreen Intermediate Term Government Fund (the "Fund") is a diversified
series of Evergreen Fixed Income Trust (the "Trust"), a Delaware business trust
organized on September 18, 1997. The Trust is an open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act").
The Fund offers Class A, Class B, Class C and Class Y shares. Class A shares
are sold with a maximum front-end sales charge of 3.25%. Class B and Class C
shares are sold without a front-end sales charge, but pay a higher ongoing dis-
tribution fee than Class A. Class B shares are sold subject to a contingent de-
ferred sales charge that is payable upon redemption and decreases depending on
how long the shares have been held. Class B shares purchased after January 1,
1997 will automatically convert to Class A shares after seven years. Class B
shares purchased prior to January 1, 1997 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 Fund in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles, which require
management to make estimates and assumptions that affect amounts reported here-
in. Actual results could differ from these estimates.
A. Valuation of Securities
Corporate bonds, U.S. government obligations, mortgage and other asset-backed
securities and other fixed-income securities are valued at prices provided by
an independent pricing service. In determining a price for normal institution-
al-size transactions, the pricing service uses methods based on market transac-
tions for comparable securities and analysis of various relationships between
similar securities which are generally recognized by institutional traders. Se-
curities for which valuations are not available from an independent pricing
service may be valued by brokers which use prices provided by market makers or
estimates of market value obtained from yield data relating to investments or
securities with similar characteristics. Otherwise, securities for which valua-
tions are not readily available from an independent pricing service (including
restricted securities) are valued at fair value as determined in good faith ac-
cording to procedures established by the Board of Trustees.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
B. Repurchase Agreements
The Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. The Fund monitors the adequacy of the collateral daily and
will require the seller to provide additional collateral in the event the mar-
ket value of the securities pledged falls below the carrying value of the re-
purchase agreement, including accrued interest. Each Fund will only enter into
repurchase agreements with banks and other financial institutions, which are
deemed by the investment advisor to be creditworthy pursuant to guidelines es-
tablished by the Board of Trustees.
C. 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.
11
<PAGE>
Notes to Financial Statements(continued)
D. Federal Taxes
The Fund qualifies as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code"). As such, the Fund will not incur any
federal income tax liability since it is expected to distribute all of its net
investment company taxable income and net capital gains, if any, to its share-
holders.
The Fund also intends to avoid any excise tax liability by making the required
distributions under the Code. Accordingly, no provision for federal taxes is
required. To the extent that realized capital gains can be offset by capital
loss carryforwards, it is the Fund's policy not to distribute such gains.
E. Distributions
Distributions from net investment income for the 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 differences between financial statement amounts avail-
able for distributions and distributions made in accordance with income tax
regulations are primarily due to differing treatment for mortgage paydown gains
or losses and certain repurchases of securities sold at a loss.
F. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. Currently, class specific expenses are limited
to expenses incurred under the Distribution Plans for each class.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
First Union National Bank, a subsidiary of First Union, serves as the invest-
ment advisor to the Fund and is paid a management fee that is computed daily
and paid monthly at an annual rate of 0.50% of the Fund's average daily net as-
sets.
Evergreen Investment Services ("EIS"), a subsidiary of First Union, serves as
the administrator and The BISYS Group, Inc. ("BISYS") serves as the sub-admin-
istrator to the Fund. As administrator, EIS provides the Fund with facilities,
equipment and personnel. As sub-administrator to the Fund, BISYS provides the
officers of the Fund. Officers of the Fund and affiliated Trustees receive no
compensation directly from the Fund.
The administrator and sub-administrator for the Fund are 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 assets of all the Funds. 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 all the Funds.
During the year ended June 30, 1999, the Fund paid or accrued to EIS and BISYS
$34,444 and $8,875 for administrative and sub-administrative services, respec-
tively.
Evergreen Service Company ("ESC"), an indirectly, wholly owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the Fund.
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of BISYS, serves
as principal underwriter to the Fund.
The Fund has adopted a Distribution Plan, as allowed by Rule 12b-1 of the 1940
Act, for each class of shares, except Class Y. Distribution plans permit a Fund
to compensate its principal underwriter for costs related to
12
<PAGE>
Notes to Financial Statements(continued)
selling shares of the Fund and for various other services. These costs, which
consist primarily of commissions and service fees to broker-dealers who sell
shares of the Fund, are paid by the Fund through "Distribution Plan expenses".
Each class, except Class Y, currently pays a service fee equal to 0.25% of the
average daily net assets of the class. Class B and Class C also pay distribu-
tion fees equal to 0.75% of the average daily net assets of the class. Distri-
bution Plan expenses are calculated daily and paid at least quarterly.
During the year ended June 30, 1999, amounts paid or accrued to EDI pursuant to
the Fund's Class A, Class B and Class C Distribution Plans were $187,950,
$25,010 and $1,969, respectively.
For the year ended June 30, 1999, EDI waived Class A distribution fees for the
Fund in the amount of $91,036, which represented 0.12% of the Fund's average
daily net assets for Class A shares.
With respect to Class B and Class C shares, the principal underwriter may pay
distribution fees greater than the allowable annual amounts the Fund is permit-
ted to pay under the Distribution Plans.
Each of the Distribution Plans may be terminated at any time by vote of the In-
dependent Trustees or by vote of a majority of the outstanding voting shares of
the respective class.
5. ACQUISITION
Effective on the close of business on February 28, 1998, the Fund acquired all
of the assets and assumed certain liabilities of Virtus U.S. Government Securi-
ties Fund ("Virtus Fund"), an open-end management investment company registered
under the 1940 Act, in an exchange of shares. The net assets were acquired
through a tax-free exchange for 8,857,360 Class A shares and 4,246,474 Class Y
shares of the Fund. The acquired net assets consisted primarily of portfolio
securities with unrealized appreciation of $1,895,706. The aggregate net assets
of the Fund immediately after the acquisition were $201,883,701.
13
<PAGE>
Notes to Financial Statements(continued)
6. CAPITAL SHARE TRANSACTIONS
The Fund has an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Fund are currently
divided into Class A, Class B, Class C and Class Y. Transactions in shares of
the Fund were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------------------ ------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 631,396 $ 6,467,034 230,309 $ 2,342,853
Shares issued in
acquisition of Virtus
U.S. Government
Securities Fund.......... 0 0 8,857,360 90,273,998
Shares issued in
reinvestment of
distributions............ 306,838 3,140,763 118,050 1,202,780
Shares redeemed........... (2,219,773) (22,700,839) (1,323,352) (13,483,204)
- ------------------------------------------------------------------------------
Net increase (decrease)... (1,281,539) $(13,093,042) 7,882,367 $ 80,336,427
- ------------------------------------------------------------------------------
Class B
Shares sold............... 367,427 $ 3,784,964 79,762 $ 811,849
Shares issued in
reinvestment of
distributions............ 7,818 79,915 2,377 24,146
Shares redeemed........... (230,440) (2,347,643) (53,064) (538,430)
- ------------------------------------------------------------------------------
Net increase.............. 144,805 $ 1,517,236 29,075 $ 297,565
- ------------------------------------------------------------------------------
Class C
Shares sold............... 22,495 $ 229,447 10,721 $ 108,822
Shares issued in
reinvestment of
distributions............ 683 6,974 496 5,037
Shares redeemed........... (7,748) (79,759) (30) (306)
- ------------------------------------------------------------------------------
Net increase.............. 15,430 $ 156,662 11,187 $ 113,553
- ------------------------------------------------------------------------------
Class Y
Shares sold............... 2,087,239 $ 21,418,300 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............ 195,861 2,004,560 280,814 2,848,130
Shares redeemed........... (4,991,038) (51,010,302) (3,469,534) (35,272,132)
- ------------------------------------------------------------------------------
Net increase (decrease)... (2,707,938) $(27,587,442) 2,628,179 $ 26,785,326
- ------------------------------------------------------------------------------
</TABLE>
7. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the year ended June 30, 1999:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
------------------------------- --------------------------------------
U.S. Non-U.S. U.S. Non-U.S.
Government Government Government Government
---------------------------------------------------------------------------------
<S> <C> <C> <C>
$22,388,903 -- $56,168,319 --
</TABLE>
On June 30, 1999, the composition of unrealized appreciation and depreciation
on securities based on the aggregate cost of securities for federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Net Unrealized
Tax Cost Appreciation Depreciation Appreciation
---------------------------------------------------------------------------
<S> <C> <C> <C>
$138,773,237 $1,240,097 $(1,210,170) $29,927
</TABLE>
As of June 30, 1999, the Fund had capital loss carryovers for federal income
tax purposes as follows:
<TABLE>
<CAPTION>
Expiration
Capital Loss ---------------------------------------------------
Carryover 2002 2003 2004 2005 2006
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$19,827,000 $9,658,000 $2,020,000 $4,450,000 $3,660,000 $39,000
</TABLE>
Included in the capital loss carryovers is $18,006,000 which was acquired as a
result of the February 28, 1998 acquisition of Virtus Fund. In accordance with
federal tax regulations, the Fund may only use an annual amount of $3,574,000
of such losses to offset future realized gains.
14
<PAGE>
Notes to Financial Statements(continued)
8. EXPENSE OFFSET ARRANGEMENTS
The Fund has entered into expense offset arrangements with ESC and its custo-
dian whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's related expenses. The assets deposited with
ESC and the custodian under these expense offset arrangements could have been
invested in income-producing assets. The Fund received fee credits of $6,260
which represented 0.00% of the Fund's average daily net assets.
9. DEFERRED TRUSTEES' FEES
Each Independent Trustee of the 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 recorded 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 AGREEMENTS
Certain Evergreen Funds, State Street Bank and Trust Company ("State Street")
and a group of banks (collectively, 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, under the terms of the financing agreement,
among the Banks. The credit facility was accessed by the Funds for temporary or
emergency purposes only and was subject to each Fund's borrowing restrictions.
Borrowings under this facility bear interest at 0.50% per annum above the Fed-
eral Funds rate. A commitment fee of 0.065% per annum will be incurred on the
unused portion of the committed facility, which was allocated to all funds. For
its assistance in arranging this financing agreement, the Capital Market Group
of First Union was paid a one-time arrangement fee of $27,500. State Street
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 aggre-
gate amount of $150 million ($125 million committed and $25 million uncommit-
ted). The remaining terms and conditions of the agreement are unaffected.
During the year ended June 30, 1999, the Fund had no borrowings under these
agreements.
11. SUBSEQUENT EVENT
Effective the close of business on July 30, 1999, the net assets and liabili-
ties of the Fund were acquired by the Evergreen U.S. Government Fund ("U.S.
Government Fund"), an open-end management investment company registered under
the 1940 Act in an exchange of shares. The net assets of the Fund were acquired
through a tax-free exchange for 6,906,702 Class A shares, 264,531 Class B
shares, 29,477 Class C shares and 7,225,005 Class Y shares of U.S. Government
Fund. The acquired net assets consisted primarily of portfolio securities with
unrealized depreciation of $677,705. Aggregate net assets of the Fund and U.S.
Government Fund immediately before the acquisition were $134,184,955 and
$366,101,082, respectively. The aggregate net assets of U.S. Government Fund
after the acquisition were $500,286,037.
15
<PAGE>
Independent Auditors' Report
Board of Trustees and Shareholders
Evergreen Fixed Income Trust
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments of Evergreen Intermediate Term Government Securi-
ties Fund, a portfolio of Evergreen Fixed Income Trust, as of June 30, 1999,
and the related statement of operations for the year then ended, statements of
changes in net assets for each of the years in the two year period then ended
and the financial highlights for each of the years or periods as described on
pages to . These financial statements and financial highlights are the re-
sponsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our au-
dits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ever-
green Intermediate Term Government Securities Fund as of June 30, 1999, the re-
sults of its operations, changes in its net assets and financial highlights for
each of the years or periods described above in conformity with generally ac-
cepted accounting principles.
/s/ KPMG LLP
Boston, Massachusetts
August 6, 1999
16
<PAGE>
Other Information
YEAR 2000 (unaudited)
Like other investment companies, the Fund could be adversely affected if the
computer systems used by the Fund's investment advisors and the Fund's 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 Fund's investment advisors are taking steps
to address this potential year 2000 problem with respect to the computer sys-
tems that they use and to obtain satisfactory assurances that comparable steps
are being taken by the Fund's other major service providers. At this time, how-
ever, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Fund from this problem.
SPECIAL MEETING OF SHAREHOLDERS
On July 30, 1999 a Special Meeting of Shareholders for the Fund was held to
consider a number of proposals. On May 5, 1999, the record date for the meet-
ing, the Fund had net assets of $150,259,022 eligible to be voted, of which
$79,112,087 were voted at the meeting.
The following proposals were discussed and voted on:
1. To approve an Agreement and Plan of Reorganization whereby Evergreen U.S.
Government Fund ("U.S. Government Fund"), a series of Evergreen Fixed Income
Trust, will (i) acquire all of the assets of the Fund in exchange for shares
of U.S. Government Fund; and (ii) assume the identified liabilities of the
Fund, as substantially described in the accompanying Prospectus/Proxy State-
ment.
<TABLE>
<CAPTION>
Percentage of
record date Percentage
Net assets net assets of net
voted outstanding assets voted
-----------------------------------------
<S> <C> <C> <C>
Affirmative......... $77,295,646.90 51.442% 97.704%
Against............. 649,812.87 0.432% 0.821%
Abstain............. 1,166,627.01 0.776% 1.475%
-------------- ------ -------
Total.............. $79,112,086.78 52.650% 100.000%
============== ====== =======
</TABLE>
2. To consider and vote upon such other matters as may properly come before
said meeting or any adjournments thereof.
<TABLE>
<CAPTION>
Percentage of
record date Percentage
Net assets net assets of net
voted outstanding assets voted
-----------------------------------------
<S> <C> <C> <C>
Affirmative......... $26,342,643.54 17.531% 33.298%
Against............. 50,773,246.52 33.790% 64.179%
Abstain............. 1,996,196.72 1.329% 2.523%
-------------- ------ -------
Total.............. $79,112,086.78 52.650% 100.000%
============== ====== =======
</TABLE>
17
<PAGE>
Evergreen Funds
Money Market
Treasury Money Market Fund
Money Market Fund
Municipal Money Market Fund
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Tax Advantaged
Short Intermediate Municipal Fund
High Grade Municipal Bond Fund
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
New Jersey 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 Bond Fund
U.S. Government Fund
Diversified Bond Fund
Strategic Income Fund
High Yield Bond Fund
Balanced
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund
Growth & Income
Utility Fund
Income and Growth Fund
Equity Income Fund
Value Fund
Blue Chip Fund
Growth and Income Fund
Small Cap Value 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
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
www.evergreen-funds.com
25031 550536 08/99
--------------
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