-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V7xhdugWtDbtboFz6cP2BN1nDXLzDIMIOmTZd+WYCIwulmoEplkrJbKu8irggf8+ 6V/oQDXChfTAg/Vy6Nc4gg== 0000950168-97-003545.txt : 19971202 0000950168-97-003545.hdr.sgml : 19971202 ACCESSION NUMBER: 0000950168-97-003545 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971201 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVERGREEN INVESTMENT TRUST CENTRAL INDEX KEY: 0000757440 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046599663 STATE OF INCORPORATION: NY FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04154 FILM NUMBER: 97730568 BUSINESS ADDRESS: STREET 1: 200 BERKELEY ST CITY: BOSTON E STATE: MA ZIP: 02116 BUSINESS PHONE: 9146412305 MAIL ADDRESS: STREET 1: 2500 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION FUNDS/ DATE OF NAME CHANGE: 19940628 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION HIGH GRADE TAX FREE PORT DATE OF NAME CHANGE: 19940519 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION FUNDS DATE OF NAME CHANGE: 19921230 N-30D 1 EVERGREEN BALANCED FUND SEMI ANNUAL N-30D 63060 Evergreen Balanced Funds 1997 Annual Report (Evergreen logo appears here) Evergreen Funds (SM) SINCE 1932 (Photo of pine cones and branches appears here) EVERGREEN FUNDS TABLE OF CONTENTS Letter to Shareholders............................... 1 FUND AT A GLANCE Evergreen American Retirement Fund................. 2 Evergreen Balanced Fund............................ 5 Evergreen Foundation Fund.......................... 8 Evergreen Tax Strategic Foundation Fund............ 11 FINANCIAL HIGHLIGHTS Evergreen American Retirement Fund................. 14 Evergreen Balanced Fund............................ 17 Evergreen Foundation Fund.......................... 20 Evergreen Tax Strategic Foundation Fund............ 23 SCHEDULES OF INVESTMENTS Evergreen American Retirement Fund................. 26 Evergreen Balanced Fund............................ 31 Evergreen Foundation Fund.......................... 34 Evergreen Tax Strategic Foundation Fund............ 40 Statements of Assets and Liabilities................. 46 Statements of Operations............................. 47 Statements of Changes in Net Assets.................. 48 Combined Notes to Financial Statements............... 51
ABOUT EVERGREEN FUNDS Evergreen Funds is one of the nation's fastest growing investment companies with more than $33 billion in assets under management. With 65 mutual funds to choose among and acclaimed service and operations capabilities, investors enjoy a broader range of quality investment products and services designed to meet their needs. The Evergreen Funds employ intensive, research-driven investment strategies executed by over 90 research analysts and portfolio managers. The fund company remains dedicated to meeting the needs of investors and their advisors in a global economy. Look to the Evergreen Funds to provide a distinctive level of service and excellence in investment management. EVERGREEN FUNDS (Photo of pine cones and branches appears here) LETTER TO SHAREHOLDERS November 1997 (Photo of William M. Ennis appears here) WILLIAM M. ENNIS Dear Shareholders: We have good news to share with you in this report. The U.S. stock market delivered exceptionally strong performance during the six months that ended on September 30, 1997. Investors in the Evergreen Balanced Funds certainly had the opportunity to participate in this pleasant experience without taking the full risk of a pure stock fund investment. Riding a friendly, rising tide of moderate growth and modest inflation, the stock market rose higher and higher, with the steady ascent interrupted just briefly for pauses in the late winter and late summer of 1997. It is important to keep these returns in perspective, however, and not use the performance over the past six months as a basis for future expectations. MARKET CYCLES History has shown that the markets move in cycles, and one year's performance does not often indicate the following year's performance. History also has taught us that over longer periods of time, the winning investment strategies are those that have consistent disciplines and that remain faithful to those disciplines, even during market slumps and corrections. Indeed, we witnessed a significant market correction in late October, after the close of the fiscal period. At Evergreen Funds, we encourage you to remain focused on your long-term goals and to remain disciplined in your personal investment strategies. No one can confidently say whether next year's market or the following year's market will be as rewarding as last year's market. We can say, however, that the most likely winners in the long run are those who consistently follow long-term investment strategies. UPCOMING DEVELOPMENTS In the next few weeks and months, shareholders of Evergreen and Keystone funds will begin to notice some changes. The Evergreen Keystone Funds are becoming the Evergreen Funds. On October 31, 1997, Keystone America Funds adopted the name of Evergreen and in early 1998 the original Keystone Funds will take the Evergreen name. We believe that by putting all the funds under the umbrella name of Evergreen Funds we will be creating a simpler and more cohesive image. Importantly, we expect to create substantial cost savings for shareholders as a result of consolidating prospectuses, annual reports, legal registrations and other materials. It also will be easier for you to find all the funds of the Evergreen Family, to which you have exchange privileges, under one heading in newspapers and electronic services. What will not change will be our commitment to provide you with the finest investment products and shareholder services possible. If you should have any questions about these changes or other issues affecting your investments, we encourage you to consult your financial adviser or call Evergreen Funds at 1-800-343-2898. Sincerely, /s/ William M. Ennis WILLIAM M. ENNIS MANAGING DIRECTOR 1 (Photo of eagle EVERGREEN appears here) AMERICAN RETIREMENT FUND FUND-AT-A-GLANCE As of September 30, 1997
CLASS A CLASS B CLASS C CLASS Y INCEPTION DATE 1/3/95 1/3/95 1/3/95 3/14/88 1-YEAR PERFORMANCE 1 year w/o sales charge 24.84% 23.84% 23.86% 25.06% 1 year w/sales charge 18.91% 18.84% 22.86% 25.06% 6 month dividends per share $0.25 $0.19 $0.19 $0.27 6 month capital gains per share $0.03 $0.03 $0.03 $0.03 AVERAGE ANNUAL RETURNS 3 years -- -- -- 17.60% 5 years -- -- -- 14.04% Since Inception 18.41% 18.81% 19.62% 11.96% CUMULATIVE RETURNS 3 years -- -- -- 62.63% 5 years -- -- -- 92.89% Since Inception 59.02% 60.52% 63.54% 194.30%
OBJECTIVE Evergreen American Retirement Fund seeks to preserve capital while also earning steady current income and achieving long-term captial growth. STRATEGY The Fund generally invests in a balanced mix of corporate bonds, U.S. Government or agency obligations, dividend-paying stocks, preferred stocks and convertibles. Generally, at least half of the bonds in the portfolio are U.S. Government or agency securities. The remainder are upper-medium or high-quality corporate bonds.
PORTFOLIO CHARACTERISTICS Total Net Assets $184 million Number of issues 196 Number of industries 26 Average Duration 2.28 years
PORTFOLIO MANAGEMENT TEAM Irene D. O'Neill and Natalie Kucharski LONG-TERM GROWTH (Chart appears here with the following plot points.) Growth of an investment in Evergreen American Retirement Fund, Class A 1/95 9/95 3/96 9/96 3/97 9/97 Dividend Reinvestment 0 11362 12294 12740 13390 15902 Initial Investment 9525 10998 11676 11908 12266 14310 A $10,000 investment in Evergreen American Retirement Fund, Class A made on January 3, 1995 with all distributions reinvested was worth $15,902 on September 30, 1997. 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.
TOP 10 HOLDINGS AS A PERCENTAGE OF NET ASSETS EQUITY HOLDINGS: Proffitt's, Inc. 1.1% Corning, Inc.-- Conv. Preferred 6.00% MIPS 1.1% Hardinge Brothers, Inc. 1.0% WBK Strypes Trust-- Conv. Preferred 10% 11/15/00 1.0% Tomkins Plc, ADR 1.0% BOND HOLDINGS: Federal National Mortgage Association 7.28% 5/23/07 1.7% Federal Home Loan Bank 6.715% 4/9/03 1.6% Federal Home Loan Bank 8.00% 1/10/12 1.6% Federal Home Loan Mortgage Corp. 7.585% 9/19/06 1.1% Federal Home Loan Mortgage Corp. 7.865% 8/8/11 1.1% INDUSTRY ALLOCATION AS A PERCENTAGE OF NET ASSETS EQUITY HOLDINGS: Banks 9.4% Energy 5.8% Finance & Insurance 5.6% Utilities-- Electric 5.3% Publishing, Broadcasting & Entertainment 4.1% BOND HOLDINGS: Government Agency Notes & Bonds 24.1% Finance & Insurance 1.1% Treasury Notes & Bonds 0.9% Banks 0.6% Telecommunications Services & Equipment 0.5%
2 EVERGREEN (Photo of eagle AMERICAN RETIREMENT FUND appears here) PORTFOLIO MANAGER INTERVIEW (Photo of HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS? Irene D. O'Neill appears here) We think the Fund performed very well. For the six month period that ended on September 30, 1997, Class A Shares IRENE D. O'NEILL had a total return of 18.77%, Class B Shares had a total TENURE: MARCH 1988 return of 18.34%, Class C Shares had a total return of 18.30% and Class Y Shares had a total return of 18.92%. These returns are before deduction of any sales charges, if applicable. We think these were strong performance figures. The Fund has a conservative objective: to preserve capital, produce income, and provide some growth. ASSET ALLOCATION AS A PERCENTAGE OF NET ASSETS (Pie graph appears here with the following plot points.) Convertible Debentures 10.0% Convertible Preferred Stocks 13.8% U.S. Government and Agency Obligations 25.0% Cash and other 2.5% Corporate Bonds 2.2% Preferred Stocks 0.7% Common Stocks 45.8% HOW WOULD YOU DESCRIBE YOUR STRATEGY DURING THE PERIOD? In managing the Fund, we try to be defensive to protect investors' principal and reduce price fluctuations. The basic philosophy is to try to participate in the growth of the equity markets without taking too much risk. The Evergreen American Retirement Fund is a balanced fund and therefore owns a combination of common stocks, convertible securities and fixed income securities. At the end of the period, we had 45.8% of net assets invested in common stocks. We also placed an increased emphasis on convertible securities-- both convertible preferred stock and convertible debt-- during the period. I call this a "defensive growth" strategy that gave us some of the growth characteristics of stocks, but with more income. At the end of the period, convertible preferreds accounted for 13.8% of net assets and convertible bonds accounted for 10.0%. The bond portion of the portfolio, excluding convertible debt, accounted for 27.2% of net assets. By far, the largest concentration was in U.S. Government agency bonds, which together accounted for 25% of net assets. We believed that government agency securities offered most of the income of corporate bonds, but with less risk. In our stock selections, we tend to buy stocks that pay yields above the yield of the overall stock market, as measured by the S&P 500. In bonds, we must buy securities rated A or higher, so we remain with the higher quality segment of the fixed income market. We have been conservative in our bond investments, with an average weighted maturity of 3.01 years. WHAT AREAS HELPED CONTRIBUTE TO THE PERFORMANCE? The emphasis on convertible securities certainly helped. In our equity and convertible security investments, we also emphasized investments in consolidating industries and in companies that are restructuring. One of the best performing areas for the Fund was the oil drilling industry. Two of the best performing securities were convertible bonds in Key Energy Group, which were up 125% for the six months, and Nabors Industries, up 76% for the period. Both these 3 (Photo of eagle EVERGREEN appears here) AMERICAN RETIREMENT FUND companies benefited from the accelerated pace of oil drilling which is occurring because of both increased energy demand and the development of new technologies that increase the efficiency of drilling operations. In addition, both companies have been acquiring smaller companies, and realizing the benefits of consolidation. Another industry that helped the Fund was the cement industry. This industry has seen very little capital investment in recent years because of the slump in the late 1980s and early 1990s. Now, commercial construction is picking up, residential building remains strong and government infrastructure projects also are increasing. Two convertible preferred stocks that performed particularly well for the Fund were Southdown, Inc. and Medusa Corp. A third industry that performed well was the retailing industry. One company that stands out was Proffitt's, Inc., a retailer in the Southeast and Midwest, which has been acquiring smaller competitors. Rapid earnings growth is resulting from the consolidation of back office and merchandising operations. This also was an example of a convertible preferred stock that performed well. WHY HAVE INVESTMENTS IN CONSOLIDATING INDUSTRIES REPRESENTED SUCH GOOD OPPORTUNITIES? In the 1980s, it was often possible for companies to grow their profits by raising prices. With relatively low inflation, this is not an option now. Now, companies have found that they can grow their revenues by acquisitions, then increase earnings by reducing overhead and improving operating efficiencies. Industries that are undergoing consolidation are often those that historically have been fragmented. Now, we are seeing the emergence of a few dominant companies that are able to buy up smaller competitors, reduce operating costs, improve operating margins and grow earnings. We have witnessed this in the oil drilling and retail industries, which we have mentioned. Another example is the radio broadcasting industry, where a number of convertible securities have been very strong performers. One example is the Fund's investment in Chancellor Media Corp. (formerly Evergreen Media), which has had a total return of 68% during the six months. WHAT OTHER TYPES OF COMPANIES DO YOU FIND ATTRACTIVE? Historically, we have always looked for companies undergoing restructuring. A good example is the Fund's investment in Dana Corp., an automobile parts manufacturer and supplier. Management is in the process of selling off a group of businesses, which had not been performing well, and using the proceeds to acquire other companies in its core, auto parts business. This is an example of a company that in the past did not have fast-growing earnings. As a result of aggressive management actions, the company has been able to improve its earnings growth power, and its stock performance has improved. We often look for some catalyst for change in a company that makes it more attractive than it may have been in the past. WHAT IS YOUR OUTLOOK? We don't think the stock market will continue to go up 30% every year, and there is some risk of a pick-up of inflation, particularly because of the tight job market. However, we think the Federal Reserve Board will move aggressively if there is any sign of inflation. In general, we are optimistic, although when stock prices are relatively high, as they have been, there is always the chance of market corrections and volatility. Indeed, we saw significant volatility in the market in late October, after the end of the fiscal period. We are maintaining our conservative strategy, and we expect to continue to see investment opportunities. 4 EVERGREEN (Photo of scales of justice BALANCED FUND appears here) FUND-AT-A-GLANCE As of September 30, 1997
CLASS A CLASS B CLASS C CLASS Y INCEPTION DATE 6/6/91 1/26/93 9/2/94 4/1/91 1-YEAR PERFORMANCE 1 year w/o sales charge 24.38% 23.46% 23.69% 24.73% 1 year w/sales charge 18.47% 18.46% 22.69% 24.73% 6 month dividends per share $0.25 $0.20 $0.20 $0.27 6 month capital gains per share $0.85 $0.85 $0.85 $0.85 AVERAGE ANNUAL RETURNS 3 years 16.00% 16.28% 16.92% 18.20% 5 years 11.72% -- -- 13.10% Since Inception 12.36% 11.84% 15.47% 13.11% CUMULATIVE RETURNS 3 years 56.07% 57.22% 59.83% 65.14% 5 years 74.01% -- -- 85.10% Since Inception 108.96% 68.86% 55.78% 122.93%
OBJECTIVE Evergreen Balanced Fund seeks long-term total return through capital appreciation, dividends, and interest income. STRATEGY The Fund offers a systematic and disciplined approach to establish investment exposure in both the stock and bond markets. The basis of this approach is founded in the belief that stocks provide the greatest long-term growth opportunities while bonds provide income and less risk to principal.
PORTFOLIO CHARACTERISTICS Total Net Assets $986 million Number of issues 91 Number of industries 23 Average Duration 5.47 years
LONG-TERM GROWTH (Chart appears here with the following plot points.) Growth of an investment in Evergreen Balanced Fund, Class A 6/91 3/92 3/93 3/94 3/95 3/96 3/97 7/97 Dividend Reinvestment 0 10629 12191 12571 13476 16292 17859 20896 Initial Investment 9525 10163 11163 11078 11230 12611 12259 13268 A $10,000 investment in Evergreen Balanced Fund, Class A made on June 10, 1991 with all distributions reinvested was worth $20,896 on September 30, 1997. 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.
TOP 10 HOLDINGS AS A PERCENTAGE OF NET ASSETS TOP EQUITY HOLDINGS General Electric Co. 2.1% Bristol-Myers Squibb Co. 1.8% Texaco, Inc. 1.6% Compaq Computer 1.5% CUC International, Inc. 1.4% TOP BOND HOLDINGS U.S. Treasury Notes, 9.125%, 5/15/99 6.3% U.S. Treasury Notes, 8.125%, 2/15/98 4.8% U.S. Treasury Bonds, 6.375%, 8/15/27 4.0% U.S. Treasury Bonds, 8.875%, 8/15/17 2.7% U.S. Treasury Bonds, 8.75%, 5/15/17 2.5%
INDUSTRY ALLOCATION AS A PERCENTAGE OF NET ASSETS INDUSTRY ALLOCATION-- EQUITY Healthcare Products & Services 8.8% Information Services & Technology 5.8% Energy 4.9% Banks 4.9% Consumer Products & Services 4.0% INDUSTRY ALLOCATION-- BONDS Treasury Notes & Bonds 32.4% Finance & Insurance 2.5% Industrial Specialty Products & Services 2.0% Banks 1.9% Government Agency Notes & Bonds 1.6%
5 (Photo of scales of justice EVERGREEN appears here) BALANCED FUND PORTFOLIO MANAGER INTERVIEW (Photo of HOW DID THE FUND PERFORM DURING THE FISCAL YEAR? Dean Hawes appears here) For the six-month period ended September 30, 1997, the Fund's Class A shares had a total return of 17.01%, Class B shares had a total return of 16.55%, Class C DEAN HAWES shares had a total return of 16.73%, and Class Y shares TENURE: JUNE 1991 had a total return of 17.17%. These returns are before deduction of any sales charge, if applicable. In comparison, the S&P 500 Index, an unmanaged index generally representative of the domestic stock market, returned 26.24% and the Lehman Brothers Government/Corporate Bond Index returned 7.27% during the same period. HOW WOULD YOU DESCRIBE THE INVESTMENT ENVIRONMENT DURING THE PAST SIX MONTHS? The investment climate was extremely favorable for both equity and fixed income investors. A powerful backdrop of moderate economic growth, low interest rates and benign inflation continued to fuel corporate earnings growth. In response to these positive signals, the Federal Reserve Board affirmed their confidence in the economy by leaving interest rates unchanged during the six-month period. Lack of inflationary pressure resulted in a decline in interest rates during August and September, spurring a strong rally in the bond market. Conversely, the stock market witnessed a transition during the six-month period. Unlike the first quarter of 1997, the subsequent months were characterized by a much broader market advance in which small and mid cap companies, which had struggled early in the year, outperformed their large cap counterparts. Investors witnessed a market environment in which fundamentals and earnings growth, rather than size and liquidity, drove stock prices. ASSET ALLOCATION AS A PERCENTAGE OF NET ASSETS (Pie graph appears here with the following plot points.) U.S. Government and Agency Obligations 34.0% Cash and other 5.4% Corporate Bonds 10.9% Common Stocks 49.7% HOW WAS THE BOND PORTION OF THE PORTFOLIO MANAGED DURING THE PERIOD? Strong performance within the fixed income portion of the portfolio can be attributed to a series of timely duration adjustments as interest rates fluctuated rather dramatically. Duration measures the sensitivity of bonds and bond fund prices to changes in interest rates. A shorter duration bond fund is less subject to price risk. At the beginning of the period, our duration model indicated that the market's momentum had shifted and that a duration shift was warranted. We responded by increasing duration from 93.8% of our benchmark's duration (the Lehman Brothers Government/Corporate Index) to 108% by June 30. In response to a changing market environment, we shortened the portfolio's duration in August, reflecting our concerns about pending economic releases and their effect on the market. In our final strategic adjustment, we modestly extended duration in early September by purchasing 30-year Treasuries, and at the end of this reporting period on September 30, we stood at 5.47 years, or 106.6% of our benchmark. WHAT HAS BEEN THE STRATEGY WITHIN THE EQUITY PORTION OF THE PORTFOLIO? We maintained a strategy of investing in high quality companies that we believe have above-average, long-term growth prospects. More specifically, we emphasized 6 EVERGREEN (Photo of scales of justice BALANCED FUND appears here) companies that exhibit industry dominance, proven management and solid revenue growth. These types of companies, such as Compaq Computer Corp. and Microsoft Corp., have provided our investors with very attractive long-term returns. In addition, we maintained a strong sector weighting in areas which we believe have the best growth rates. For example, we currently favor industries benefiting from consolidation, changing demographics, and rising productivity. WHAT SECTORS DID YOU FAVOR DURING THIS PERIOD? We have maintained a strong emphasis in the healthcare, technology, and energy sectors due to the extremely positive fundamentals within those industries. Our technology weighting increased during the third quarter due to several new additions as well as exceptional price appreciation of the portfolio's existing technology holdings. "Corporate America's" quest for increased productivity via technology remains unabated, and was reflected in the group's price performance during the period. While we are cognizant of the inherent price volatility within the technology sector, we do believe that identifying and owning dominant companies will be most rewarding to investors. The search for business solutions and productivity enhancement will be increasingly centered around technology. For different, but equally valid, reasons the portfolio's healthcare weighting was increased. Demographics strongly favor the healthcare industry as seventy-six million baby-boomers march from middle-age toward retirement. Subsequently, demand for drug, medical, and healthcare products are expected to significantly increase in years to come. Bristol-Myers Squibb Co., Pfizer Inc., and Johnson & Johnson are three of the market leaders within this sector that are well positioned to benefit from the long-term "Graying of America" theme. Although we have maintained a slight overweighting in the energy sector, our emphasis is away from those companies whose price performance is most directly linked to crude oil prices, such as Diamond Offshores Drilling, Inc. and Reading & Bates Corp., both of which are engaged in the contract drilling of offshore oil and gas wells. WERE THERE ANY OTHER NOTEWORTHY CHANGES TO THE PORTFOLIO? In addition to the duration adjustments within the fixed income portfolio, we made some significant additions and deletions to our equity holdings. The Fund's exposure to utilities, an area which lagged in performance, was reduced from 5.2% to 2.7% during the third quarter. Within the telecommunications area, we sold our position in Bell Atlantic Corp., as strong performance in 1997 from a proposed merger with NYNEX allowed us to achieve our price target and lock in solid gains. We also liquidated Norfolk & Southern Corp., a freight railroad company which has enjoyed substantial appreciation. Conversely, we added Aluminum Co. of America, a company we feel is well positioned to take advantage of the low inventory levels and overall strong fundamental outlook within the aluminum industry. WHAT IS YOUR OUTLOOK? The exceptional performance by equities over the past couple of years can be attributed, in part, to a strong fundamental backdrop which has fueled corporate earnings growth. Going forward, we will maintain a focus on companies which are benefiting from positive economic fundamentals, experiencing solid revenue growth, and are the more dominant players within their industry. It should be cautioned, however, that the market's rapid advance had significantly increased stock valuations. While a market setback, or intermediate correction, is overdue, we do not believe that the end of this current bull market cycle is imminent. Although painful in the short term, a 10% to 15% market correction would be viewed as a buying opportunity, not as a signal to reduce equity exposure. 7 (Photo of brick wall EVERGREEN and stars appears here) FOUNDATION FUND FUND-AT-A-GLANCE As of September 30, 1997
CLASS A CLASS B CLASS C CLASS Y INCEPTION DATE 1/3/95 1/3/95 1/3/95 1/2/90 1-YEAR PERFORMANCE 1 year w/o sales charge 30.14% 29.22% 29.23% 30.42% 1 year w/sales charge 23.96% 24.22% 28.23% 30.42% 6 month dividends per share $0.23 $0.17 $0.17 $0.25 6 month capital gains per share $0.16 $0.16 $0.16 $0.16 AVERAGE ANNUAL RETURNS 3 years -- -- -- 20.57% 5 years -- -- -- 16.49% Since Inception 20.30% 20.74% 21.46% 17.52% CUMULATIVE RETURNS 3 years -- -- -- 75.26% 5 years -- -- -- 14.55% Since Inception 66.08% 67.75% 70.53% 249.47%
OBJECTIVE Evergreen Foundation Fund seeks reasonable income, preservation of capital and growth. STRATEGY The Fund invests in a diversified portfolio of common and preferred stocks, as well as convertible and fixed income securities. The stocks in the portfolio are chosen for their potential for captial appreciation and current income. The bonds, which are of investment grade, are managed to take advantage of changes in interest rates. The Fund's Adviser varies the allocation of the portfolio to take advantage of changing economic conditions and market opportunities.
PORTFOLIO CHARACTERISTICS Total Net Assets $2,134 billion Number of issues 306 Number of industries 26 Average Duration 8.34 years
LONG-TERM GROWTH (Chart appears here with the following plot points.) Growth of an investment in Evergreen Foundation Fund, Class A 1/95 3/95 9/95 3/96 9/96 3/97 9/97 Dividend Reinvestment 0 10180 11742 12166 12761 13727 16608 Initial Investment 9525 10061 11326 11442 11800 12770 14703 A $10,000 investment in Evergreen Foundation Fund, Class A made on January 3, 1995 with all distributions reinvested was worth $16,608 on September 30, 1997. 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.
TOP 10 HOLDINGS AS A PERCENTAGE OF NET ASSETS EQUITY: Intel Corp. 3.4% Hewlett-Packard Co. 1.7% General Electric Co. 1.6% BankBoston Corp. 1.6% Du Pont (E.I.) De Nemours & Co. 1.6% BONDS: U.S. Treasury Bond 6.25% 8/15/23 7.7% U.S. Treasury Bond 7.125% 2/15/23 6.3% U.S. Treasury Bond 8.125% 8/15/19 2.8% U.S. Treasury Bond 7.25% 5/15/16 2.5% U.S. Treasury Bond 6.75% 8/15/26 1.8%
INDUSTRY ALLOCATION AS A PERCENTAGE OF NET ASSETS EQUITY: Finance & Insurance 9.7% Information Services & Technology 6.8% Real Estate 6.4% Healthcare Products & Services 6.2% Banks 5.7% BONDS: Treasury Notes & Bonds 27.6% Government Agency Notes & Bonds 0.9%
8 EVERGREEN (Photo of brick wall and FOUNDATION FUND stars appears here) PORTFOLIO MANAGER INTERVIEW (Photo of Stephen A. HOW DID THE FUND PERFORM DURING THE SIX MONTHS? Lieber appears here) We are pleased to report that the Foundation Fund's Y Class Shares had a total return of 21.10% for the six month period ending September 30, 1997. For the 12 STEPHEN A. LIEBER months, the Y Class Shares had a total return of 30.42%, TENURE: JANUARY 1990 placing it 18th of 333 funds, or in the top 5%, in the Balanced Fund Category, according to Lipper Analytical Services, Inc.,1 an independent monitor of mutual fund performance. The Y Share Class is the top-performing balanced fund since its inception in January 1990, out of 58 Balanced Funds ranked by Lipper. WHAT CONTRIBUTED TO THIS STRONG PERFORMANCE? The equity holdings of the Fund continue to power performance. To illustrate, for the six months, the equity performance returned 29.96%. The fixed income portion of the portfolio provided an 11.27% return. Many of this highly diversified Fund's equity positions had very good returns, helping the performance. More than 30 equity positions had returns of more than 50% for the six months. The top performers were: Halter Marine Group, Inc., up 146.0%, Caliber System, Inc., up 104.3%; Trinity Industries, Inc., which had a return of 99.7%; Reading & Bates Corp., which returned 84.9%; and John Alden Financial Corp. up 84.8%. The Fund's real estate-related and financial stocks performed especially well during the period. HOW WOULD YOU DESCRIBE THE INVESTMENT ENVIRONMENT DURING THE PERIOD? The 12 month period ended September 30, 1997, witnessed a continuation of a remarkable rally in the stock market and impressive real returns, after inflation, in the bond market. The strength of the markets has been built upon long-term factors, including: the gradual disinflation of the 1980's and 1990's; correspondingly falling interest rates; declining unemployment; the strong dollar which has attracted foreign investors; and corporate profits growing at roughly twice the Gross Domestic Product growth rate. The strong performance in the stock market, in particular, has encouraged public confidence in the market and helped to sustain record flows from personal and 401(k) assets into common stocks. WHAT INVESTMENT STRATEGIES WERE EMPLOYED DURING THE PERIOD? We continued the long-term strategies that have worked well for the Evergreen Foundation Fund. Major new commitments were made in stocks, especially during periods of market weakness, such as the August market decline. Among the large new equity commitments was CitiCorp, a major international bank. This investment was an example of Evergreen's "value timing" strategy, in which we try to take advantage of intrinsic values notwithstanding market weakness. Other examples of positions we either added to or initiated because of market weakness were the stocks of American Home Products Corp., Boeing Co., New York St. Electric & Gas Corp. and Chubb Corp. The Fund also continues to look for opportunities among potential merger and acquisition candidates. During the first nine months of 1997, merger and acquisition activity affected 15 portfolio companies, either through announcements or completed transactions. One pending acquisition, is that of Barnett Banks, Inc., by NationsBank Corp. As of September 30, 1997, the Fund's position in Barnett Banks realized a 113.5% gain for the fiscal year. 1 Lipper Analytical Services, Inc. is an independent mutual fund rating company. The rankings are based on total return and do not include the effect of a sales charge. Class A, B, and C shares ranked 24, 31, and 30 out of 333 Balanced Funds for the one year period ending September 30, 1997. Class Y shares ranked number 10 out of 94 funds in the category for the five year period ending September 30, 1997. 9 (Photo of brick wall EVERGREEN and stars appears here) FOUNDATION FUND ASSET ALLOCATION AS A PERCENTAGE OF NET ASSETS (Pie graph appears here with the following plot points.) U.S. Government and Agency Obligations 28.5% Cash and other 10.5% Convertible Preferred Stocks 0.7% Convertible Debentures 0.4% Common Stocks 59.9% HOW WOULD YOU DESCRIBE THE FIXED INCOME STRATEGY OF THE FUND? One of the reasons we chose the name "Evergreen Foundation Fund" is that we wanted a fund meant to be the foundation of a portfolio. If you want to build the foundation of a portfolio, you put something very solid at the base. We chose United States Government Bonds. The Foundation Fund has only the highest quality bonds. As of September 30, 1997, the asset allocation was 61.0% of net assets in equities, 10.5% in cash and cash equivalents, and 28.5% in government bonds. At the close of the period, the average weighted maturity of the bonds was a relatively long 17.35 years, and average duration was 8.34 years. We invest in government bonds as part of the asset allocation decision, with a reduced allocation when we expect interest rates to rise and bond prices to decline, and an increased allocation when we expect interest rates to decline and bond prices to rise. This strategy is intended both to provide income from the bonds and to give the Fund the opportunity for capital appreciation in the interest rate cycle. WHAT IS YOUR OUTLOOK? Our research and portfolio management is dedicated to carefully selecting investments based on a detailed appraisal of the opportunities and risk in individual industries and sectors, and a thorough analysis of the dynamics of individual companies. This is our challenge looking toward the future. 10 (Photo of brick EVERGREEN wall and dollar sign TAX STRATEGIC FOUNDATION FUND appears here) - -------------------------------------------------------------------------------- FUND-AT-A-GLANCE As of September 30, 1997
CLASS A CLASS B CLASS C CLASS Y INCEPTION DATE 1/17/95 1/6/95 3/3/95 11/2/93 - --------------------------------------------------------------- 1-YEAR PERFORMANCE 1 year w/o sales charge 24.73% 23.95% 23.93% 25.14% 1 year w/sales charge 18.81% 18.95% 22.93% 25.14% 6 month dividends per share $0.15 $0.10 $0.10 $0.18 6 month capital gains per share $0.10 $0.10 $0.10 $0.10 AVERAGE ANNUAL RETURNS 3 years -- -- -- 20.51% Since Inception 19.09% 19.99% 20.40% 17.02% CUMULATIVE RETURNS 3 years -- -- -- 75.00% Since Inception 60.45% 64.68% 61.56% 85.04%
OBJECTIVE - ------------------------------------------------------------ Evergreen Tax Strategic Foundation Fund seeks to maximize an investor's after-tax total return, which consists of current income and growth of capital. STRATEGY - ------------------------------------------------------------ The Fund is designed for investors seeking to reduce taxes but looking for greather growth potential than municipal bonds alone offer. The Fund's bond portion is invested in municipal bonds, which are exempt from federal income taxes, and are of high and upper-medium quality. The stocks in the portfolio are chosen for their potential for growth and above-average yields. The Fund utilizes various strategies in equities to obtain the most tax advantage, such as: investing as much as 80% of its stock portfolio in companies that buy back their own stock, rather than pay out taxable dividends, and balancing losses with gains to reduce taxes on Fund distributions.
PORTFOLIO CHARACTERISTICS - ------------------------------------------------------------ Total Net Assets: $165 million Number of issues: 209 Number of industries: 21 Average Duration 7.06 years
PORTFOLIO MANAGEMENT TEAM - ------------------------------------------------------------ Stephen A. Lieber, James Colby III, and Gary Buesser LONG-TERM GROWTH (Chart appears here with the following plot points.) Growth of an investment in Evergreen Tax Strategic Fund, Class A 1/95 3/95 9/95 3/96 9/96 3/97 9/97 Dividend Reinvestment 0 10180 11742 12166 12761 13727 16608 Initial Investment 9525 10061 11326 11442 11800 12770 14703 A $10,000 investment in Evergreen Tax Strategic Fund, Class A made on January 17, 1995 with all distributions reinvested was worth $16,045 on September 30, 1997. 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.
TOP 10 HOLDINGS AS A PERCENTAGE OF NET ASSETS - ------------------------------------------------------------ EQUITY: - ------------------------------------------------------------ Intel Corp. 1.3% WBK Trust, 10.0% STRYPES 1.2% American Home Products Corp. 1.1% BankBoston Corp. 1.0% First Empire State Corp. 1.0% BONDS: - ----------------------------------------------------------- Pennsylvania Intergovernmental Coop. 6.80% 6/15/12; 7.00% 6/15/14 2.3% Pennsylvania Tpke Comm RB Ser. J 7.15% 12/1/11 2.1% Massachusetts Go. Prerefunded Ser. B 6.50% 8/1/11 1.6% Hanover Cnty Indl Dev. Auth. Ser. 1995 6.38% 8/15/18 1.4% Metro. Pier & Exposition Auth. 6.50%, 6/15/07 1.4%
INDUSTRY ALLOCATION AS A PERCENTAGE OF NET ASSETS - ----------------------------------------------------------- EQUITY: - ----------------------------------------------------------- Banks 7.3% Real Estate 6.8% Finance & Insurance 6.6% Healthcare Products & Services 3.7% Electrical Equipment & Services 3.5% MUNICIPAL OBLIGATIONS: - ----------------------------------------------------------- Prerefunded 20.7% Housing 5.2% Toll Roads 4.3% Water/Sewer 4.0% Electrical Power 3.7%
11 (Photo of brick wall and dollar sign EVERGREEN appears here) TAX STRATEGIC FOUNDATION FUND - -------------------------------------------------------------------------------- PORTFOLIO MANAGER INTERVIEW (Photo of Stephen A. HOW DID THE FUND PERFORM DURING THE SIX MONTHS? Lieber appears here) For the six month period that ended on September 30, 1997, for example, the total return of the Fund's Y Class Shares was 16.02%. For the year it was 25.14%. This continued the strong record of the Fund. Average STEPHEN A. LIEBER annual return of the Y Class Shares since inception TENURE: NOVEMBER 1993 in November 1993 has been 17.02%. During the six months, the Fund's other classes had parallel performance. The Fund's A Class Shares had a total return of 15.83%, B Class Shares had a total return of 15.46%, and C Class Shares had a total return of 15.49%. WHAT CONTRIBUTED TO THIS PERFORMANCE? The equity holdings of the Fund continue to power performance. To illustrate, for the six months, the equity performance returned 31.81%. The fixed income portion of the portfolio provided a 6.97% return. For the last 12 months, equities provided a 50.2% gain, and fixed income provided an 8.9% gain. More than 20 different equity holdings had total returns greater than 40% during the six months that ended on September 30.
TOP FIVE EQUITY PERFORMERS: - ----------------------------------------------------------- MacDermid, Inc. +132.2% Southern Electronics Corp. +110.3% Furon Co. +92.6% Continental Homes Holding Co. +74.1% FPIC Insurance Group, Inc. +72.1%
WHAT INVESTMENT THEMES HELPED THIS STRONG EQUITY PERFORMANCE? Merger and acquisition events provided significant gains from stocks that we purchased when we believed they were undervalued. Rhone-Poulenc Rorer, Inc., received an acquisition offer from its parent, Rhone-Poulenc, S.A. The Fund's holding in Rhone-Poulenc Rorer, Inc. had a gain of 34.0% during the fiscal year ended September 30, 1997. Barnett Banks, Inc., whose stock was purchased by the Fund in November 1994, received an acquisition offer from NationsBank Corp. The Fund's gain in its Barnett position was 104.4% for the fiscal year. The benefits of a broad-ranging investment research effort for value and growth companies continued to be evident in the sustained performance of the Fund's equity portfolio. Among the large new additions to the portfolio are stocks of: Lehman Brothers Holdings, Inc., CitiCorp, Merrill Lynch & Co., Inc., AirNet Systems, Inc., Equity Office Properties Trust, and Pfizer, Inc. HOW WOULD YOU DESCRIBE THE INVESTMENT ENVIRONMENT DURING THE PERIOD? The 12 month period ended September 30, 1997, witnessed a continuation of a remarkable rally in the stock market and impressive real returns, after inflation, in the bond market. The strength of the markets has been built upon long-term factors, including: the gradual disinflation of the 1980's and 1990's; correspondingly falling interest rates; declining unemployment; the strong dollar which has attracted foreign investors; and corporate profits growing at roughly twice the Gross Domestic Product growth rate. The strong performance in the stock market, in particular, has encouraged public confidence as indicated by record flows from personal and 401(k) assets into common stocks. 12 (Photo of brick wall EVERGREEN and dollar sign TAX STRATEGIC FOUNDATION FUND appears here) - -------------------------------------------------------------------------------- THE FUND HAS AN UNUSUAL OBJECTIVE OF TAX EFFICIENCY, IN ADDITION TO INCOME AND GROWTH. HOW IS IT MANAGED? The Tax Strategic Foundation Fund is a balanced fund that seeks to be the "foundation" of an investor's portfolio, providing the stability, income and gains potential of highest quality, tax exempt bonds and the capital appreciation potential of stocks, together with tax efficiency. It attempts to provide the most tax-efficient return to investors. It also is a balanced fund, with allocations to stocks, bonds and cash equivalents. As of September 30, 1997, the asset allocation was 55.0% in municipal bonds, 44.5% in equities, and 0.5% in cash equivalents and other assets and liabilities. The entire bond allocation is invested in insured or the highest-rated, tax-exempt bonds. In stocks, the Fund uses Evergreen's "value timing for growth" strategy. Our goal is to find exceptional growth opportunities with a reduced risk relative to the nature of the opportunity. In our basic stock selection, we are looking for growth opportunities that we consider significantly undervalued and that we believe, ultimately, will be recognized for their value either by the market, their peers or their competitors. The Tax Strategic Foundation Fund emphasizes stocks of companies with low dividends, or in companies with favorable tax treatment of dividends. The fund also invests in companies that have a policy to buy back shares in preference to paying out dividends. ASSET ALLOCATION AS A PERCENTAGE OF NET ASSETS (Pie graph appears here with the following plot points.) Short Term Municipal Obligations 0.5% Long Term Municipal Obligations 55.0% Convertible Preferred Stocks 2.0% Convertible Debentures 0.3% Common Stocks 42.2% HOW WAS THE BOND PORTION OF THE PORTFOLIO MANAGED DURING THE PERIOD? The tax-exempt portfolio remained invested in insured or AAA-rated bonds, generally of long duration, as well as short-term tax exempts used as cash equivalents. At the close of the period, average weighted maturity of the bond portfolio was 13.04 years, and average duration was 7.06 years. The cash equivalent portion was very low (0.5%) as we have used it for liquidity purposes for the opportunistic purchase of equities during periods of market weakness, consistent with the "value timing" strategy. This liquidity helped the Fund make sizable purchases in late July and in August during the market decline. WHAT IS YOUR OUTLOOK? Our research and portfolio management is dedicated to carefully selecting investments based on a detailed appraisal of the opportunities and risk in individual industries and sectors, and a thorough analysis of the dynamics of individual companies. This is our challenge looking toward the future. 13 (Photo of eagle EVERGREEN appears here) AMERICAN RETIREMENT FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995* CLASS A SHARES NET ASSET VALUE BEGINNING OF PERIOD........................... $ 13.74 $ 13.86 $ 12.82 $10.65 --------- ---------- --------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income......................................... 0.25 0.11 0.45 0.41 Net realized and unrealized gain (loss) on investments........ 2.32 (0.12) 1.12 2.22 --------- ---------- --------- ------- Total from investment operations.............................. 2.57 (0.01) 1.57 2.63 --------- ---------- --------- ------- LESS DISTRIBUTIONS FROM Net investment income......................................... (0.25) (0.11) (0.42) (0.46) Net realized gain on investments.............................. (0.03) 0 (0.11) 0 --------- ---------- --------- ------- Total distributions........................................... (0.28) (0.11) (0.53) (0.46) --------- ---------- --------- ------- NET ASSET VALUE END OF PERIOD................................. $ 16.03 $ 13.74 $ 13.86 $12.82 --------- ---------- --------- ------- Total return+................................................. 18.77% (0.09%) 12.46% 24.88% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses.............................................. 1.36%++ 1.37%++ 1.30% 1.37%++ Total expenses, excluding indirectly paid expenses.......... 1.35%++ N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements............................................ N/A 1.68%++ 1.33% 10.96%++ Net investment income....................................... 3.31%++ 3.43%++ 3.53% 3.73%++ Portfolio turnover rate....................................... 19% 9% 16% 49% Average commission rate paid per share........................ $ 0.0600 $ 0.0606 $0.0619 N/A NET ASSETS END OF PERIOD (THOUSANDS).......................... $ 22,569 $ 14,590 $11,116 $1,335
* For the period from January 3, 1995 (commencement of class operations) to December 31, 1995. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Initial sales charge or contingent deferred sales charge is not reflected. ++ Annualized.
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995* CLASS B SHARES NET ASSET VALUE BEGINNING OF PERIOD........................... $ 13.67 $ 13.80 $ 12.80 $10.65 --------- ---------- --------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income......................................... 0.20 0.09 0.36 0.35 Net realized and unrealized gain (loss) on investments........ 2.30 (0.13) 1.09 2.20 --------- ---------- --------- ------- Total from investment operations.............................. 2.50 (0.04) 1.45 2.55 --------- ---------- --------- ------- LESS DISTRIBUTIONS FROM Net investment income......................................... (0.19) (0.09) (0.34) (0.40) Net realized gain on investments.............................. (0.03) 0 (0.11) 0 --------- ---------- --------- ------- Total distributions........................................... (0.22) (0.09) (0.45) (0.40) --------- ---------- --------- ------- NET ASSET VALUE END OF PERIOD................................. $ 15.95 $ 13.67 $ 13.80 $12.80 --------- ---------- --------- ------- Total return+................................................. 18.34% (0.32%) 11.49% 24.09% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses.............................................. 2.11%++ 2.11%++ 2.06% 2.12%++ Total expenses, excluding indirectly paid expenses.......... 2.10%++ N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements............................................ N/A 2.43%++ 2.09% 4.20%++ Net investment income....................................... 2.56%++ 2.68%++ 2.79% 2.97%++ Portfolio turnover rate....................................... 19% 9% 16% 49% Average commission rate paid per share........................ $ 0.0600 $ 0.0606 $0.0619 N/A NET ASSETS END OF PERIOD (THOUSANDS).......................... $120,101 $ 76,791 $57,622 $4,839
* For the period from January 3, 1995 (commencement of class operations) to December 31, 1995. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Initial sales charge or contingent deferred sales charge is not reflected. ++ Annualized. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 14 EVERGREEN (Photo of eagle AMERICAN RETIREMENT FUND appears here) FINANCIAL HIGHLIGHTS (CONTINUED) (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995* CLASS C SHARES NET ASSET VALUE BEGINNING OF PERIOD........................... $ 13.70 $ 13.83 $ 12.81 $10.65 --------- --------- -------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income......................................... 0.20 0.09 0.36 0.36 Net realized and unrealized gain (loss) on investments........ 2.30 (0.13) 1.11 2.19 --------- --------- -------- ------- Total from investment operations.............................. 2.50 (0.04) 1.47 2.55 --------- --------- -------- ------- LESS DISTRIBUTIONS FROM Net investment income......................................... (0.19) (0.09) (0.34) (0.39) Net realized gain on investments.............................. (0.03) 0 (0.11) 0 --------- --------- -------- ------- Total distributions........................................... (0.22) (0.09) (0.45) (0.39) --------- --------- -------- ------- NET ASSET VALUE END OF PERIOD................................. $ 15.98 $ 13.70 $ 13.83 $12.81 --------- --------- -------- ------- Total return+................................................. 18.30% (0.32%) 11.63% 24.00% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses.............................................. 2.11%++ 2.12%++ 2.05% 2.10%++ Total expenses, excluding indirectly paid expenses.......... 2.10%++ N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements............................................ N/A 2.43%++ 2.08% 103.52%++ Net investment income....................................... 2.56%++ 2.65%++ 2.80% 2.96%++ Portfolio turnover rate....................................... 19% 9% 16% 49% Average commission rate paid per share........................ $ 0.0600 $ 0.0606 $0.0619 N/A NET ASSETS END OF PERIOD (THOUSANDS) $ 2,130 $ 1,769 $ 1,487 $ 110
* For the period from January 3, 1995 (commencement of class operations) to December 31, 1995. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Initial sales charge or contingent deferred sales charge is not reflected. ++ Annualized. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 15 (Photo of eagle EVERGREEN appears here) AMERICAN RETIREMENT FUND FINANCIAL HIGHLIGHTS (CONTINUED) (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995 1994 CLASS Y SHARES NET ASSET VALUE BEGINNING OF PERIOD................... $ 13.74 $ 13.86 $ 12.83 $ 10.67 $ 11.60 --------- -------- ------- -------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income................................. 0.29 0.14 0.48 0.47 0.60 Net realized and unrealized gain (loss) on investments......................................... 2.30 (0.14) 1.10 2.16 (0.93) --------- -------- ------- -------- ------- Total from investment operations...................... 2.59 0 1.58 2.63 (0.33) --------- -------- ------- -------- ------- LESS DISTRIBUTIONS FROM Net investment income................................. (0.27) (0.12) (0.44) (0.47) (0.60) Net realized gain on investments...................... (0.03) 0 (0.11) 0 0 In excess of net realized gain on investments......... 0 0 0 0 0 --------- -------- ------- -------- ------- Total distributions................................... (0.30) (0.12) (0.55) (0.47) (0.60) --------- -------- ------- -------- ------- NET ASSET VALUE END OF PERIOD......................... $ 16.03 $ 13.74 $ 13.86 $ 12.83 $ 10.67 --------- -------- ------- -------- ------- Total return.......................................... 18.92% (0.01%) 12.59% 25.06% (2.86%) RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses...................................... 1.10%+ 1.11%+ 1.05% 1.26% 1.28% Total expenses, excluding indirectly paid expenses.......................................... 1.09%+ N/A N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements.................................... N/A 1.38%+ 1.09% N/A N/A Net investment income............................... 3.55%+ 3.56%+ 3.65% 3.96% 5.40% Portfolio turnover rate............................... 19% 9% 16% 49% 136% Average commission rate paid per share................ $ 0.0600 $ 0.0606 $0.0619 N/A N/A NET ASSETS END OF PERIOD (THOUSANDS).................. $ 39,576 $ 37,237 $41,243 $39,327 $37,176
YEAR ENDED DECEMBER 31, 1993 1992 1991 1990 1989 CLASS Y SHARES (continued) NET ASSET VALUE BEGINNING OF PERIOD................................ $ 10.95 $ 10.52 $ 9.59 $ 10.41 $ 10.09 -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income.............................................. 0.56 0.66 0.60 0.60 0.57 Net realized and unrealized gain (loss) on investments............. 0.96 0.55 1.15 (0.66) 0.76 -------- -------- -------- -------- -------- Total from investment operations................................... 1.52 1.21 1.75 (0.06) 1.33 -------- -------- -------- -------- -------- LESS DISTRIBUTIONS FROM Net investment income.............................................. (0.60) (0.61) (0.60) (0.60) (0.59) Net realized gain on investments................................... (0.24) (0.17) (0.22) (0.16) (0.42) In excess of net realized gain on investments...................... (0.03) 0 0 0 0 -------- -------- -------- -------- -------- Total distributions................................................ (0.87) (0.78) (0.82) (0.76) (1.01) -------- -------- -------- -------- -------- NET ASSET VALUE END OF PERIOD...................................... $ 11.60 $ 10.95 $ 10.52 $ 9.59 $ 10.41 -------- -------- -------- -------- -------- Total return....................................................... 14.06% 11.82% 18.79% (0.47%) 13.42% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses................................................... 1.36% 1.51% 1.50% 1.50% 1.88% Total expenses, excluding indirectly paid expenses............... N/A N/A N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements................................................. N/A 1.59% 1.82% 1.95% 2.03% Net investment income............................................ 5.13% 6.23% 5.91% 6.04% 5.49% Portfolio turnover rate............................................ 92% 151% 97% 33% 152% Average commission rate paid per share............................. N/A N/A N/A N/A N/A NET ASSETS END OF PERIOD (THOUSANDS)............................... $37,336 $23,781 $15,632 $12,351 $11,610 1988*(A) CLASS Y SHARES (continued) NET ASSET VALUE BEGINNING OF PERIOD................................ $10.00 ------- INCOME FROM INVESTMENT OPERATIONS Net investment income.............................................. 0.39 Net realized and unrealized gain (loss) on investments............. 0.18 ------- Total from investment operations................................... 0.57 ------- LESS DISTRIBUTIONS FROM Net investment income.............................................. (0.36) Net realized gain on investments................................... (0.12) In excess of net realized gain on investments...................... 0 ------- Total distributions................................................ (0.48) ------- NET ASSET VALUE END OF PERIOD...................................... $10.09 ------- Total return....................................................... 5.80% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses................................................... 2.00%+ Total expenses, excluding indirectly paid expenses............... N/A+ Total expenses, excluding fee waivers and expense reimbursements................................................. N/A Net investment income............................................ 5.01%+ Portfolio turnover rate............................................ 52% Average commission rate paid per share............................. N/A NET ASSETS END OF PERIOD (THOUSANDS)............................... $9,449
* For the period from March 14, 1988 (commencement of class operations) to December 31, 1988. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Annualized. (a) Calculated based on average shares outstanding throughout the period. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 16 EVERGREEN (Photo of scales of justice BALANCED FUND appears here) FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995 CLASS A SHARES NET ASSET VALUE BEGINNING OF PERIOD................................ $ 12.87 $ 12.95 $ 13.12 $ 11.17 --------- ---------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income.............................................. 0.25 0.12 0.54 0.51 Net realized and unrealized gain (loss) on investments............. 1.91 (0.08) 0.94 2.40 --------- ---------- --------- --------- Total from investment operations................................... 2.16 0.04 1.48 2.91 --------- ---------- --------- --------- LESS DISTRIBUTIONS FROM Net investment income.............................................. (0.25) (0.12) (0.54) (0.50) Net realized gain on investments................................... (0.85) 0 (1.11) (0.46) --------- ---------- --------- --------- Total distributions................................................ (1.10) (0.12) (1.65) (0.96) --------- ---------- --------- --------- NET ASSET VALUE END OF PERIOD...................................... $ 13.93 $ 12.87 $ 12.95 $ 13.12 --------- ---------- --------- --------- Total return+...................................................... 17.01% 0.25% 11.44% 26.49% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses................................................... 0.92%++ 0.93%++ 0.89% 0.88% Total expenses, excluding indirectly paid expenses............... 0.92%++ N/A N/A N/A Net investment income............................................ 3.60%++ 3.62%++ 3.95% 4.05% Portfolio turnover rate............................................ 61% 28% 34% 37% Average commission rate paid per share............................. $ 0.0594 $ 0.0595 $0.0593 N/A NET ASSETS END OF PERIOD (THOUSANDS)............................... $ 46,014 $ 41,429 $43,169 $41,849
YEAR ENDED DECEMBER 31, 1994 1993 1992 1991* CLASS A SHARES (continued) NET ASSET VALUE BEGINNING OF PERIOD $ 12.07 $ 11.41 $ 11.02 $10.00 INCOME FROM INVESTMENT OPERATIONS ---------- --------- -------- -------- Net investment income................................................................... 0.43 0.42 0.42 0.30 Net realized and unrealized gain (loss) on investments.................................. (0.71) 0.75 0.43 1.08 ---------- --------- ------- -------- Total from investment operations........................................................ (0.28) 1.17 0.85 1.38 ---------- --------- ------- -------- LESS DISTRIBUTIONS FROM Net investment income................................................................... (0.43) (0.42) (0.42) (0.35) Net realized gain on investments........................................................ (0.19) (0.09) (0.04) (0.01) ---------- --------- ------- -------- Total distributions..................................................................... (0.62) (0.51) (0.46) (0.36) ---------- --------- ------- -------- NET ASSET VALUE END OF PERIOD $ 11.17 $ 12.07 $ 11.41 $11.02 ---------- --------- ------- -------- Total return+........................................................................... (2.41%) 10.40% 7.94% 14.10% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses........................................................................ 0.89% 0.91% 0.91% 0.92%++ Total expenses, excluding indirectly paid expenses.................................... N/A N/A N/A N/A Net investment income................................................................. 3.69% 3.61% 3.93% 4.38%++ Portfolio turnover rate................................................................. 35% 19% 12% 19% Average commission rate paid per share.................................................. N/A N/A N/A N/A NET ASSETS END OF PERIOD (THOUSANDS).................................................... $41,010 $35,032 $17,408 $ 334
* For the period from June 10, 1991 (commencement of class operations) to December 31, 1991. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Initial sales charge or contingent deferred sales charge is not reflected. ++ Annualized. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 17 (Photo of scales of justice EVERGREEN appears here) BALANCED FUND FINANCIAL HIGHLIGHTS (CONTINUED) (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995 1994 1993* CLASS B SHARES NET ASSET VALUE BEGINNING OF PERIOD... $ 12.88 $ 12.96 $ 13.13 $ 11.18 $ 12.08 $ 11.54 --------- ---------- --------- ---------- --------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income................. 0.20 0.10 0.43 0.42 0.36 0.34 Net realized and unrealized gain (loss) on investments............... 1.90 (0.08) 0.95 2.40 (0.71) 0.65 --------- ---------- --------- ---------- --------- -------- Total from investment operations...... 2.10 0.02 1.38 2.82 (0.35) 0.99 --------- ---------- --------- ---------- --------- -------- LESS DISTRIBUTIONS FROM Net investment income................ (0.20) (0.10) (0.44) (0.41) (0.36) (0.34) Net realized gain on investments...... (0.85) 0 (1.11) (0.46) (0.19) (0.09) In excess of net investment income.... 0 0 0 0 0 (0.02) --------- ---------- --------- ---------- --------- -------- Total distributions................... (1.05) (0.10) (1.55) (0.87) (0.55) (0.45) --------- ---------- --------- ---------- --------- -------- NET ASSET VALUE END OF PERIOD......... $ 13.93 $ 12.88 $ 12.96 $ 13.13 $ 11.18 $ 12.08 --------- ---------- --------- ---------- --------- -------- Total return +........................ 16.55% 0.10% 10.60% 25.55% (2.99%) 8.72% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses...................... 1.67%++ 1.68%++ 1.64% 1.62% 1.48% 1.41%++ Total expenses, excluding indirectly paid expenses..................... 1.67%++ N/A N/A N/A N/A N/A Net investment income............... 2.85%++ 2.87%++ 3.19% 3.30% 3.12% 3.09%++ Portfolio turnover rate............... 61% 28% 34% 37% 35% 19% Average commission rate paid per share............................... $ 0.0594 $ 0.0595 $ 0.0593 N/A N/A N/A NET ASSETS END OF PERIOD (THOUSANDS)......................... $119,797 $107,347 $109,591 $108,983 $100,052 $65,475
* For the period from January 26, 1993 (commencement of class operations) to December 31, 1993. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Initial sales charge or contingent deferred sales charge is not reflected. ++ Annualized.
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995 1994* CLASS C SHARES NET ASSET VALUE BEGINNING OF PERIOD.................. $ 12.80 $ 12.88 $ 13.11 $11.17 $12.00 --------- --------- --------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income................................ 0.20 0.10 0.40 0.41 0.18 Net realized and unrealized gain (loss) on investments........................................ 1.91 (0.09) 0.93 2.40 (0.61) --------- --------- --------- ------- ------- Total from investment operations..................... 2.11 0.01 1.33 2.81 (0.43) --------- --------- --------- ------- ------- LESS DISTRIBUTIONS FROM Net investment income................................ (0.20) (0.09) (0.45) (0.41) (0.21) Net realized gain on investments..................... (0.85) 0 (1.11) (0.46) (0.19) --------- --------- --------- ------- ------- Total distributions.................................. (1.05) (0.09) (1.56) (0.87) (0.40) --------- --------- --------- ------- ------- NET ASSET VALUE END OF PERIOD........................ $ 13.86 $ 12.80 $ 12.88 $13.11 $11.17 --------- --------- --------- ------- ------- Total return+........................................ 16.73% 0.06% 10.24% 25.48% (3.58%) RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses..................................... 1.67%++ 1.68%++ 1.65% 1.62% 1.64%++ Total expenses, excluding indirectly paid expenses......................................... 1.67%++ N/A N/A N/A N/A Net investment income.............................. 2.86%++ 2.92%++ 3.19% 3.31% 3.23%++ Portfolio turnover rate.............................. 61% 28% 34% 37% 35% Average commission rate paid per share............... $ 0.0594 $ 0.0595 $0.0593 N/A N/A NET ASSETS END OF PERIOD (THOUSANDS)................. $ 509 $ 353 $ 355 $ 300 $ 195
* For the period from September 2, 1994 (commencement of class operations) to December 31, 1994. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Initial sales charge or contingent deferred sales charge is not reflected. ++ Annualized. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 18 EVERGREEN (Photo of scales of justice BALANCED FUND appears here) FINANCIAL HIGHLIGHTS (CONTINUED) (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED THREE MONTHS SEPTEMBER 30, 1997 ENDED (UNAUDITED) MARCH 31, 1997** CLASS Y SHARES NET ASSET VALUE BEGINNING OF PERIOD................................................ $ 12.87 $ 12.95 --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income.............................................................. 0.27 0.13 Net realized and unrealized gain (loss) on investments............................. 1.91 (0.08) --------- --------- Total from investment operations................................................... 2.18 0.05 --------- --------- LESS DISTRIBUTIONS FROM Net investment income.............................................................. (0.27) (0.13) Net realized gain on investments................................................... (0.85) 0 --------- --------- Total distributions................................................................ (1.12) (0.13) --------- --------- NET ASSET VALUE END OF PERIOD...................................................... $ 13.93 $ 12.87 --------- --------- Total return....................................................................... 17.17% 0.33% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses................................................................... 0.67%+ 0.68%+ Total expenses, excluding indirectly paid expenses............................... 0.67%+ N/A Net investment income............................................................ 3.85%+ 3.87%+ Portfolio turnover rate............................................................ 61% 28% Average commission rate paid per share............................................. $ 0.0594 $ 0.0595 NET ASSETS END OF PERIOD (THOUSANDS)............................................... $819,535 $767,747
YEAR ENDED DECEMBER 31, 1996 1995 1994 1993 1992 1991* CLASS Y SHARES (continued) NET ASSET VALUE BEGINNING OF PERIOD....................... $ 13.12 $ 11.17 $ 12.07 $ 11.41 $ 11.02 $ 10.00 --------- --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income..................................... 0.57 0.54 0.46 0.45 0.46 0.36 Net realized and unrealized gain (loss) on investments.... 0.95 2.40 (0.71) 0.75 0.42 1.03 --------- --------- --------- --------- --------- --------- Total from investment operations.......................... 1.52 2.94 (0.25) 1.20 0.88 1.39 --------- --------- --------- --------- --------- --------- LESS DISTRIBUTIONS FROM Net investment income..................................... (0.58) (0.53) (0.46) (0.45) (0.45) (0.36) Net realized gain on investments.......................... (1.11) (0.46) (0.19) (0.09) (0.04) (0.01) --------- --------- --------- --------- --------- --------- Total distributions....................................... (1.69) (0.99) (0.65) (0.54) (0.49) (0.37) --------- --------- --------- --------- --------- --------- NET ASSET VALUE END OF PERIOD............................. $ 12.95 $ 13.12 $ 11.17 $ 12.07 $ 11.41 $ 11.02 --------- --------- --------- --------- --------- --------- Total return.............................................. 11.72% 26.81% (2.15%) 10.68% 8.21% 14.22% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses.......................................... 0.64% 0.62% 0.64% 0.66% 0.66% 0.68%+ Total expenses, excluding indirectly paid expenses...... N/A N/A N/A N/A N/A N/A Net investment income................................... 4.19% 4.30% 3.93% 3.86% 4.20% 4.86%+ Portfolio turnover rate................................... 34% 37% 35% 19% 12% 19% Average commission rate paid per share.................... $ 0.0593 N/A N/A N/A N/A N/A NET ASSETS END OF PERIOD (THOUSANDS)...................... $778,641 $818,137 $778,657 $760,147 $520,232 $247,472
* For the period from April 1, 1991 (commencement of class operations) to December 31, 1991. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Annualized. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 19 (Photo of brick wall EVERGREEN and stars appears here) FOUNDATION FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995* CLASS A SHARES NET ASSET VALUE BEGINNING OF PERIOD........................... $ 16.00 $ 16.13 $ 15.12 $12.24 --------- --------- -------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income......................................... 0.23 0.12 0.50 0.44 Net realized and unrealized gain (loss) on investments........ 3.10 (0.13) 1.16 3.14 --------- --------- -------- ------- Total from investment operations.............................. 3.33 (0.01) 1.66 3.58 --------- --------- -------- ------- LESS DISTRIBUTIONS FROM Net investment income......................................... (0.23) (0.12) (0.50) (0.47) Net realized gain on investments.............................. (0.16) 0 (0.15) (0.23) --------- --------- -------- ------- Total distributions........................................... (0.39) (0.12) (0.65) (0.70) --------- --------- -------- ------- NET ASSET VALUE END OF PERIOD................................. $ 18.94 $ 16.00 $ 16.13 $15.12 --------- --------- -------- ------- Total return+................................................. 20.99% (0.16%) 11.27% 29.73% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses.............................................. 1.25%++ 1.25%++ 1.24% 1.33%++ Total expenses, excluding indirectly paid expenses.......... 1.25%++ N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements............................................ N/A N/A N/A 1.34%++ Net investment income....................................... 2.60%++ 2.83%++ 3.39% 3.73%++ Portfolio turnover rate....................................... 8% 2% 10% 28% Average commission rate paid per share........................ $ 0.0658 $ 0.0670 $0.0649 N/A NET ASSETS END OF PERIOD (MILLIONS)........................... $ 282 $ 220 $ 206 $ 107
* For the period from January 3, 1995 (commencement of class operations) to December 31, 1995. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Initial sales charge or contingent deferred sales charge is not reflected. ++ Annualized.
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995* CLASS B SHARES NET ASSET VALUE BEGINNING OF PERIOD........................... $ 15.94 $ 16.07 $ 15.07 $12.24 --------- --------- --------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income......................................... 0.16 0.09 0.40 0.36 Net realized and unrealized gain (loss) on investments........ 3.09 (0.13) 1.15 3.09 --------- --------- --------- ------- Total from investment operations.............................. 3.25 (0.04) 1.55 3.45 --------- --------- --------- ------- LESS DISTRIBUTIONS FROM Net investment income......................................... (0.17) (0.09) (0.40) (0.39) Net realized gain on investments.............................. (0.16) 0 (0.15) (0.23) --------- --------- --------- ------- Total distributions........................................... (0.33) (0.09) (0.55) (0.62) --------- --------- --------- ------- NET ASSET VALUE END OF PERIOD................................. $ 18.86 $ 15.94 $ 16.07 $15.07 --------- --------- --------- ------- Total return+................................................. 20.51% (0.32%) 10.47% 28.68% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses.............................................. 2.00%++ 2.00%++ 1.99% 2.07%++ Total expenses, excluding indirectly paid expenses.......... 2.00%++ N/A N/A N/A Net investment income....................................... 1.85%++ 2.07%++ 2.64% 2.99%++ Portfolio turnover rate....................................... 8% 2% 10% 28% Average commission rate paid per share........................ $ 0.0658 $ 0.0670 $0.0649 N/A NET ASSETS END OF PERIOD (MILLIONS)........................... $ 840 $ 606 $ 570 $ 296
* For the period from January 3, 1995 (commencement of class operations) to December 31, 1995. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Initial sales charge or contingent deferred sales charge is not reflected. ++ Annualized. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 20 EVERGREEN (Photo of brick wall FOUNDATION FUND and stars appears here) FINANCIAL HIGHLIGHTS (CONTINUED) (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995* CLASS C SHARES NET ASSET VALUE BEGINNING OF PERIOD........................... $ 15.94 $ 16.06 $ 15.07 $12.24 --------- --------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income......................................... 0.16 0.09 0.40 0.34 Net realized and unrealized gain (loss) on investments........ 3.09 (0.13) 1.14 3.09 --------- --------- -------- -------- Total from investment operations.............................. 3.25 (0.04) 1.54 3.43 --------- --------- -------- -------- LESS DISTRIBUTIONS FROM Net investment income......................................... (0.17) (0.08) (0.40) (0.37) Net realized gain on investments.............................. (0.16) 0 (0.15) (0.23) --------- --------- -------- -------- Total distributions........................................... (0.33) (0.08) (0.55) (0.60) --------- --------- -------- -------- NET ASSET VALUE END OF PERIOD................................. $ 18.86 $ 15.94 $ 16.06 $15.07 --------- --------- -------- -------- Total return+................................................. 20.51% (0.26%) 10.41% 28.49% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses.............................................. 2.00%++ 2.00%++ 1.99% 2.23%++ Total expenses, excluding indirectly paid expenses.......... 2.00%++ N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements............................................ N/A N/A N/A 2.37%++ Net investment income....................................... 1.84%++ 2.07%++ 2.64% 2.83%++ Portfolio turnover rate....................................... 8% 2% 10% 28% Average commission rate paid per share........................ $ 0.0658 $ 0.0670 $0.0649 N/A NET ASSETS END OF PERIOD (MILLIONS) $ 37 $ 28 $ 27 $ 11
* For the period from January 3, 1995 (commencement of class operations) to December 31, 1995. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Initial sales charge or contingent deferred sales charge is not reflected. ++ Annualized. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 21 (Photo of brick wall EVERGREEN and stars appears here) FOUNDATION FUND FINANCIAL HIGHLIGHTS (CONTINUED) (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995 CLASS Y SHARES NET ASSET VALUE BEGINNING OF PERIOD........................... $ 16.02 $ 16.14 $ 15.13 $12.27 ---------- ---------- -------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income......................................... 0.25 0.13 0.54 0.51 Net realized and unrealized gain (loss) on investments........ 3.10 (0.13) 1.16 3.07 ---------- ---------- -------- ------- Total from investment operations.............................. 3.35 0 1.70 3.58 ---------- ---------- -------- ------- LESS DISTRIBUTIONS FROM Net investment income......................................... (0.25) (0.12) (0.54) (0.49) Net realized gain on investments.............................. (0.16) 0 (0.15) (0.23) ---------- ---------- -------- ------- Total distributions........................................... (0.41) (0.12) (0.69) (0.72) ---------- ---------- -------- ------- NET ASSET VALUE END OF PERIOD................................. $ 18.96 $ 16.02 $ 16.14 $15.13 ---------- ---------- -------- ------- Total return.................................................. 21.10% (0.02%) 11.53% 29.69% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses.............................................. 0.99%+ 1.00%+ 0.99% 1.07% Total expenses, excluding indirectly paid expenses.......... 0.99%+ N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements............................................ N/A N/A N/A N/A Net investment income....................................... 2.85%+ 3.07%+ 3.64% 3.89% Portfolio turnover rate....................................... 8% 2% 10% 28% Average commission rate paid per share........................ $ 0.0658 $ 0.0670 $0.0649 N/A NET ASSETS END OF PERIOD (THOUSANDS).......................... $ 975 $ 802 $ 809 $ 623
YEAR ENDED DECEMBER 31, 1994 1993 1992 1991 1990* CLASS Y SHARES (continued) NET ASSET VALUE BEGINNING OF PERIOD.......................................... $13.12 $11.98 $10.75 $ 8.95 $10.00 ------- ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income........................................................ 0.42 0.31 0.27 0.33 1.23(a) Net realized and unrealized gain (loss) on investments....................... (0.57) 1.55 1.83 2.77 (0.59) ------- ------- ------- ------- ------- Total from investment operations............................................. (0.15) 1.86 2.10 3.10 0.64 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS FROM Net investment income........................................................ (0.42) (0.31) (0.24) (0.33) (1.17) Net realized gain on investments............................................. (0.28) (0.41) (0.63) (0.97) (0.52) ------- ------- ------- ------- ------- Total distributions.......................................................... (0.70) (0.72) (0.87) (1.30) (1.69) ------- ------- ------- ------- ------- NET ASSET VALUE END OF PERIOD................................................ $12.27 $13.12 $11.98 $10.75 $ 8.95 ------- ------- ------- ------- ------- Total return................................................................. (1.12%) 15.71% 19.99% 36.36% 6.60% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses............................................................. 1.14% 1.20% 1.40% 1.20% 0.00%+ Total expenses, excluding indirectly paid expenses......................... N/A N/A N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements........... N/A N/A 1.43% 2.58% 3.64%+ Net investment income...................................................... 3.51% 2.81% 2.93% 2.86% 15.07%+(a) Portfolio turnover rate...................................................... 33% 60% 127% 178% 131% Average commission rate paid per share....................................... N/A N/A N/A N/A N/A NET ASSETS END OF PERIOD (MILLIONS).......................................... $332 $240 $ 64 $ 11 $ 2
* For the period from January 2, 1990 (commencement of class operations) to December 31, 1990. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Annualized. (a) Includes receipt of a special dividend representing $0.62 per share of net investment income and 7.59% of average net assets. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 22 EVERGREEN (Photo of brick wall TAX STRATEGIC FOUNDATION FUND and dollar sign appears here) FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995* CLASS A SHARES NET ASSET VALUE BEGINNING OF PERIOD........................... $ 13.57 $ 13.50 $ 12.20 $ 10.44 ---------- --------- ---------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income......................................... 0.16 0.07 0.27 0.29 Net realized and unrealized gain (loss) on investments........ 1.98 0.06+++ 1.59 2.24 ---------- --------- ---------- --------- Total from investment operations.............................. 2.14 0.13 1.86 2.53 ---------- --------- ---------- --------- LESS DISTRIBUTIONS FROM Net investment income......................................... (0.15) (0.06) (0.28) (0.31) Net realized gain on investments.............................. (0.10) 0 (0.28) (0.46) ---------- --------- ---------- --------- Total distributions........................................... (0.25) (0.06) (0.56) (0.77) ---------- --------- ---------- --------- NET ASSET VALUE END OF PERIOD................................. $ 15.46 $ 13.57 $ 13.50 $ 12.20 ---------- --------- ---------- --------- Total return +................................................ 15.83% 0.98% 15.39% 24.82% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses.............................................. 1.39%++ 1.38%++ 1.52% 1.75%++ Total expenses, excluding indirectly paid expenses.......... 1.38%++ N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements............................................ N/A N/A 1.76% 5.02%++ Net investment income....................................... 2.29%++ 2.30%++ 2.39% 2.79%++ Portfolio turnover rate....................................... 35% 29% 88% 110% Average commission rate paid per share........................ $ 0.0657 $ 0.0656 $0.0648 N/A NET ASSETS END OF PERIOD (THOUSANDS).......................... $ 36,943 $ 15,039 $11,166 $2,702
* For the period from January 17, 1995 (commencement of class operations) to December 31, 1995. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Initial sales charge or contingent deferred sales charge is not reflected. ++ Annualized. +++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period due to the timing of the sales of fund shares and the amount of per share realized and unrealized gains and losses at such time.
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995* CLASS B SHARES NET ASSET VALUE BEGINNING OF PERIOD........................... $ 13.56 $ 13.49 $ 12.19 $10.31 --------- --------- -------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income......................................... 0.11 0.05 0.19 0.22 Net realized and unrealized gain (loss) on investments........ 1.98 0.06+++ 1.59 2.37 --------- --------- -------- ------- Total from investment operations.............................. 2.09 0.11 1.78 2.59 --------- --------- -------- ------- LESS DISTRIBUTIONS FROM Net investment income......................................... (0.10) (0.04) (0.20) (0.25) Net realized gain on investments.............................. (0.10) 0 (0.28) (0.46) --------- --------- -------- ------- Total distributions........................................... (0.20) (0.04) (0.48) (0.71) --------- --------- -------- ------- NET ASSET VALUE END OF PERIOD................................. $ 15.45 $ 13.56 $ 13.49 $12.19 --------- --------- -------- ------- Total return +................................................ 15.46% 0.84% 14.65% 25.61% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses.............................................. 2.15%++ 2.14%++ 2.27% 2.50%++ Total expenses, excluding indirectly paid expenses.......... 2.14%++ N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements............................................ N/A N/A 2.51% 3.65%++ Net investment income....................................... 1.53%++ 1.55%++ 1.64% 2.03%++ Portfolio turnover rate....................................... 35% 29% 88% 110% Average commission rate paid per share........................ $ 0.0657 $ 0.0656 $0.0648 N/A NET ASSETS END OF PERIOD (THOUSANDS).......................... $ 98,086 $ 38,838 $28,007 $6,559
* For the period from January 6, 1995 (commencement of class operations) to December 31, 1995. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Initial sales charge or contingent deferred sales charge is not reflected. ++ Annualized. +++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period due to the timing of the sales of fund shares and the amount of per share realized and unrealized gains and losses at such time. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 23 (Photo of brick wall EVERGREEN and dollar sign appears here) TAX STRATEGIC FOUNDATION FUND FINANCIAL HIGHLIGHTS (CONTINUED) (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995* CLASS C SHARES NET ASSET VALUE BEGINNING OF PERIOD........................... $ 13.53 $ 13.47 $ 12.19 $10.69 --------- --------- --------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income......................................... 0.11 0.06 0.18 0.22 Net realized and unrealized gain (loss) on investments........ 1.98 0.05+++ 1.58 1.99 --------- --------- --------- ------- Total from investment operations.............................. 2.09 0.11 1.76 2.21 --------- --------- --------- ------- LESS DISTRIBUTIONS FROM Net investment income......................................... (0.10) (0.05) (0.20) (0.25) Net realized gain on investments.............................. (0.10) 0 (0.28) (0.46) --------- --------- --------- ------- Total distributions........................................... (0.20) (0.05) (0.48) (0.71) --------- --------- --------- ------- NET ASSET VALUE END OF PERIOD................................. $ 15.42 $ 13.53 $ 13.47 $12.19 --------- --------- --------- ------- Total return +................................................ 15.49% 0.77% 14.54% 21.19% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses.............................................. 2.15%++ 2.13%++ 2.25% 2.50%++ Total expenses, excluding indirectly paid expenses.......... 2.14%++ N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements............................................ N/A N/A 2.48% 18.91%++ Net investment income....................................... 1.54%++ 1.55%++ 1.64% 2.07%++ Portfolio turnover rate....................................... 35% 29% 88% 110% Average commission rate paid per share........................ $ 0.0657 $ 0.0656 $0.0648 N/A NET ASSETS END OF PERIOD (THOUSANDS).......................... $ 11,943 $ 5,086 $ 4,108 $ 496
* For the period from March 3, 1995 (commencement of class operations) to December 31, 1995. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Initial sales charge or contingent deferred sales charge is not reflected. ++ Annualized. +++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period due to the timing of the sales of fund shares and the amount of per share realized and unrealized gains and losses at such time. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 24 (Photo of brick EVERGREEN wall and dollar sign TAX STRATEGIC FOUNDATION FUND appears here) FINANCIAL HIGHLIGHTS (CONTINUED) (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED THREE MONTHS YEAR ENDED SEPTEMBER 30, 1997 ENDED DECEMBER 31, (UNAUDITED) MARCH 31, 1997** 1996 1995 1994 1993* CLASS Y SHARES NET ASSET VALUE BEGINNING OF PERIOD....... $ 13.61 $ 13.54 $ 12.22 $ 10.27 $ 10.31 $10.00 -------- -------- -------- -------- -------- ------ INCOME FROM INVESTMENT OPERATIONS Net investment income..................... 0.19 0.09 0.34 0.35 0.27 0.05 Net realized and unrealized gain (loss) on investments............................. 1.98 0.05++ 1.56 2.39 0.08 0.31 -------- -------- -------- -------- -------- ------ Total from investment operations.......... 2.17 0.14 1.90 2.74 0.35 0.36 -------- -------- -------- -------- -------- ------ LESS DISTRIBUTIONS FROM Net investment income..................... (0.18) (0.07) (0.30) (0.33) (0.27) (0.05) Net realized gain on investments.......... (0.10) 0 (0.28) (0.46) (0.12) 0 -------- -------- -------- -------- -------- ------ Total distributions....................... (0.28) (0.07) (0.58) (0.79) (0.39) (0.05) -------- -------- -------- -------- -------- ------ NET ASSET VALUE END OF PERIOD............. $ 15.50 $ 13.61 $ 13.54 $ 12.22 $ 10.27 $10.31 -------- -------- -------- -------- -------- ------ Total return.............................. 16.02% 1.03% 15.77% 27.30% 3.44% 3.55% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses.......................... 1.12%+ 1.13%+ 1.30% 1.50% 1.49% 0.00%+ Total expenses, excluding indirectly paid expenses......................... 1.11%+ N/A N/A N/A N/A N/A Total expenses, excluding fee waivers and expense reimbursements............ N/A N/A 1.56% 2.23% 2.41% 3.10%+ Net investment income................... 2.56%+ 2.54%+ 2.63% 3.06% 2.87% 3.65%+ Portfolio turnover rate................... 35% 29% 88% 110% 245% 25% Average commission rate paid per share.... $ 0.0657 $ 0.0656 $0.0648 N/A N/A N/A NET ASSETS END OF PERIOD (THOUSANDS)...... $ 17,838 $ 15,311 $15,002 $13,485 $10,575 $5,424
* For the period from November 2, 1993 (commencement of class operations) to December 31, 1993. ** The Fund changed its fiscal year end from December 31 to March 31, effective March 31, 1997. + Annualized. ++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period due to the timing of the sales of fund shares and the amount of per share realized and unrealized gains and losses at such time. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 25 - ------------------------------------------------------------------------ (Photo of eagle EVERGREEN appears here) AMERICAN RETIREMENT FUND SCHEDULE OF INVESTMENTS September 30, 1997 (Unaudited) [CAPTION]
SHARES VALUE - ------------------------------------------------------------------- COMMON STOCKS-- 45.8% AUTOMOTIVE EQUIPMENT & MANUFACTURING-- 0.8% 30,000 Dana Corp......................... $ 1,481,250 -------------- BANKS-- 7.1% 40,000 Australia & New Zealand Banking Group Ltd....................... 1,625,000 29,375 Banc One Corp..................... 1,639,492 20,000 BancorpSouth, Inc................. 705,000 20,000 Bank of New York Co., Inc. (The).. 960,000 16,000 Cape Cod Bank & Trust Co.......... 548,000 13,000 Comerica, Inc..................... 1,026,188 25,050 Crestar Financial Corp............ 1,174,219 45,000 First Palm Beach Bancorp, Inc..... 1,566,562 8,000 First Union Corp. **.............. 400,500 5,000 Fleet Financial Group, Inc........ 327,813 53,000 Hibernia Corp. Cl. A.............. 901,000 18,100 Horizon Financial Corp............ 290,731 25,200 Maryland Federal Bancorp, Inc..... 1,190,700 24,000 Susquehanna Bancshares, Inc....... 738,000 ----------- 13,093,205 ----------- BUILDING, CONSTRUCTION & FURNISHINGS-- 1.2% 30,000 Fletcher Challenge Building ADR... 988,125 13,584 Medusa Corp....................... 646,938 10,578 Southdown, Inc.................... 577,811 ---------- 2,212,874 ---------- BUSINESS EQUIPMENT & SERVICES-- 1.6% 15,000 Dun & Bradstreet Corp. (The)...... 425,625 18,000 Pitney Bowes, Inc................. 1,497,375 56,000 Reynolds & Reynolds Co. (The), Cl. A........................... 1,088,500 ---------- 3,011,500 ---------- CHEMICAL & AGRICULTURAL PRODUCTS-- 1.6% 8,000 Eastman Chemical Co............... 496,000 11,000 Grace (W.R.) & Co................. 809,875 17,000 Imperial Chemical Industrial Plc, ADR............................. 1,124,125 15,600 Stepan Co......................... 416,325 ---------- 2,846,325 ---------- COMMUNICATION SYSTEMS & SERVICES-- 0.1% 5,500 * AirTouch Communications, Inc...... 194,906 --------- CONSUMER PRODUCTS & SERVICES-- 1.0% 11,000 International Flavors & Fragrances, Inc................. 539,000 30,000 Jostens, Inc...................... 813,750 16,611 Service Corporation International................... 534,667 ---------- 1,887,417 ---------- SHARES VALUE - --------------------------------------------------------------------- COMMON STOCKS-- CONTINUED DIVERSIFIED COMPANIES-- 1.7% 10,000 Harris Corp....................... $ 457,500 19,000 Tenneco, Inc...................... 909,625 80,000 Tomkins Plc, ADR.................. 1,810,000 ---------- 3,177,125 ---------- ELECTRICAL EQUIPMENT & SERVICES-- 1.3% 15,000 AMP, Inc.......................... 803,438 2,000 Emerson Electric Co............... 115,250 11,656 Hubbell, Inc...................... 539,090 16,000 Thomas & Betts Corp............... 874,011 ---------- 2,331,789 ---------- ENERGY-- 4.9% 8,000 Amoco Corp........................ 771,000 8,000 Atlantic Richfield Co............. 683,500 60,000 Berry Petroleum Co. Cl. A......... 1,192,500 15,000 Consolidated Natural Gas Co....... 872,812 15,400 Exxon Corp........................ 986,562 3,000 Kerr-McGee Corp................... 206,438 10,000 Mobil Corp........................ 740,000 19,250 Northwest Natural Gas Co.......... 495,688 17,200 Penn Virginia Corp................ 512,775 10,775 * Seitel, Inc....................... 478,141 12,000 Texaco, Inc....................... 737,250 30,000 Williams Companies, Inc. (The).... 1,404,375 ---------- 9,081,041 ---------- FINANCE & INSURANCE-- 3.9% 36,363 Equitable Companies, Inc.......... 1,493,156 10,000 Hartford Financial Services Group, Inc. (The)...................... 860,625 8,000 HSB Group, Inc.................... 445,500 20,000 LaSalle Re Holdings, Ltd.......... 702,500 30,000 Ohio Casualty Corp................ 1,391,250 6,000 Transamerica Corp................. 597,000 46,184 Trenwick Group, Inc............... 1,743,446 ---------- 7,233,477 ---------- FOOD & BEVERAGE PRODUCTS-- 2.1% 70,900 Flowers Industries, Inc........... 1,444,587 18,000 H.J. Heinz Co..................... 831,375 50,000 Lance, Inc........................ 1,037,500 22,400 Tasty Baking Corp................. 467,600 ---------- 3,781,062 ---------- HEALTHCARE PRODUCTS & SERVICES-- 2.8% 10,000 Abbott Laboratories............... 639,375 14,000 Bristol-Myers Squibb Co........... 1,158,500 10,000 Merck & Co., Inc.................. 999,375 34,000 Shared Medical System Corp........ 1,797,750 5,000 Warner-Lambert Co................. 674,687 30,000 West Co., Inc. (The).............. 990,000 ---------- 6,259,687 ----------
(CONTINUED) 26 - ------------------------------------------------------------ EVERGREEN (Photo of eagle AMERICAN RETIREMENT FUND appears here) SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
SHARES VALUE - --------------------------------------------------------------- COMMON STOCKS-- CONTINUED INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 1.8% 48,776 Flowserve Corp.................... $ 1,457,183 55,100 Hardinge Brothers, Inc............ 1,894,062 ------------ 3,351,245 ------------ LEISURE & TOURISM-- 0.6% 45,000 Gaylord Entertainment Co. Cl. A... 1,161,563 ------------ METAL PRODUCTS & SERVICES-- 0.5% 42,000 Lindberg Corp..................... 504,000 5,000 Phelps Dodge Corp................. 388,125 ------------ 892,125 ------------ PUBLISHING, BROADCASTING & ENTERTAINMENT-- 1.7% 15,625 * Chancellor Media Corp............. 822,266 8,000 McGraw-Hill Companies, Inc........ 541,500 50,000 Reader's Digest Association., Inc. (The)........................... 1,500,000 5,800 Time Warner, Inc.................. 314,287 ---------- 3,178,053 ---------- REAL ESTATE-- 0.5% 10,000 Post Property, Inc. REIT.......... 397,500 15,000 Prentiss Properties Trust REIT.... 433,125 --------- 830,625 --------- RETAILING & WHOLESALE-- 2.1% 23,000 J. C. Penney Co., Inc............. 1,339,750 8,000 Mercantile Stores Co., Inc........ 503,500 35,129 * Proffitts, Inc.................... 2,081,381 ---------- 3,924,631 ---------- TEXTILE & APPAREL-- 0.2% 10,000 Oxford Industry, Inc.............. 338,750 ---------- TRANSPORTATION-- 0.4% 3,191 Burlington Northern Santa Fe...... 308,330 7,000 Union Pacific Corp................ 438,375 ---------- 746,705 ---------- UTILITIES-- ELECTRIC-- 5.3% 18,200 Commonwealth Energy System........ 491,400 20,000 Eastern Utilities Assocociates.... 398,750 30,000 Enova Corp........................ 757,500 80,000 Houston Industries, Inc........... 1,740,000 50,000 Illinova Corp..................... 1,078,125 50,000 Long Island Lighting Co........... 1,281,250 37,000 PP&L Resources, Inc............... 809,375 50,000 Public Service Enterprise Group, Inc............................. 1,287,500 22,000 Southern Co....................... 496,375 55,000 TNP Enterprises, Inc.............. 1,381,875 ---------- 9,722,150 ---------- SHARES VALUE - --------------------------------------------------------------------- COMMON STOCKS-- CONTINUED UTILITIES-- GAS-- 1.9% 40,500 Chesapeake Utilities Corp......... $ 744,187 25,000 CMS Energy Corp. Cl. G............ 539,063 22,000 South Jersey Industry, Inc........ 552,750 40,000 Southwest Gas Corp................ 785,000 40,400 Yankee Energy System, Inc......... 956,975 ---------- 3,577,975 ---------- UTILITIES-- TELEPHONE-- 0.7% 2,521 AT & T Corp....................... 111,712 35,000 Frontier Corp..................... 805,000 10,000 U.S. West Communications, Inc..... 385,000 ---------- 1,301,712 ---------- TOTAL COMMON STOCKS (COST $61,478,067).............. 85,617,192 ----------- PREFERRED STOCKS-- 0.7% HEALTHCARE PRODUCTS AND SERVICES-- 0.7% 5,000 Pacificare Health Systems Inc. Cl. A (cost $165,312)............... 137,500 ----------- CONVERTIBLE PREFERRED STOCKS-- 13.8% BANKS-- 1.8% 50,000 National Australia Bank Ltd. 7.875%, Series Unit............. 1,468,750 58,000 WBK Trust 10.0%, STRYPES (exchangeable for Westpac Banking Corp. Common Stock).......................... 1,834,800 ----------- 3,303,550 ----------- BUSINESS EQUIPMENT & SERVICES-- 0.3% 6,000 Microsoft Corp. $2.196, Series A, PERCS......... 526,125 ---------- COMMUNICATION SYSTEMS & SERVICES-- 0.5% 30,000 AirTouch Communications 6.00%, Series B................. 976,875 ---------- DIVERSIFIED COMPANIES-- 1.1% 26,800 Corning, Inc. 6.00%, MIPS..................... 2,008,325 ---------- ENERGY-- 0.6% 20,000 Callon Petroleum Co. 8.50%, Series A................. 847,500 5,000 Nuevo Energy Co. 5.75%, Series A, TECONS......... 256,250 ---------- 1,103,750 ----------
(CONTINUED) 27 - ------------------------------------------------------------------------- (Photo of eagle EVERGREEN appears here) AMERICAN RETIREMENT FUND SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
SHARES VALUE - --------------------------------------------------------------------------- CONVERTIBLE PREFERRED-- CONTINUED FINANCE & INSURANCE-- 1.7% 20,000 American General Corp. $3.00, Series A, MIPS........... $ 1,345,000 13,000 American Heritage Life Investment Corp. 8.50%, PRIDES................... 806,000 15,000 Merrill Lynch & Co., Inc. 7.25%, STRYPES (exchangeable for SunAmerica, Inc. Common Stock).............. 1,057,500 ---------- 3,208,500 ---------- FOOD & BEVERAGE PRODUCTS-- 1.8% 25,000 Ralston Purina Co. 7.00%, SAILS (exchangeable for Interstate Bakeries Common Stock).......................... 1,684,375 30,000 Wendys Financing I 5.00%, Series A, TECONS......... 1,563,750 ---------- 3,248,125 ---------- METAL PRODUCTS & SERVICES-- 1.3% 20,000 Timet Capital Trust I 6.625%, 144A, BUCS.............. 1,170,000 80,000 Worthington Industries, Inc. 7.25%, DECS (exchangeable for Rouge Steel Co. Common Stock)... 1,280,000 ---------- 2,450,000 ---------- PAPER & PACKAGING-- 0.7% 30,000 Crown Cork & Seal Co., Inc. 4.50%, MIPS..................... 1,335,000 ---------- PUBLISHING, BROADCASTING & ENTERTAINMENT-- 2.1% 15,000 AMC Entertainment, Inc. $1.75........................... 505,312 10,000 American Radio Systems Corp. 7.00%, 144A..................... 576,300 10,300 Granite Broadcasting Corp. $1.938.......................... 618,000 22,000 Houston Industries, Inc. 7.00%, ACES (exchangeable for Time Warner, Inc. Common Stock).......................... 1,144,000 20,000 Merrill Lynch & Co., Inc. 6.00%, STRYPES (exchangeable for Cox Communications, Inc. Common Stock).......................... 501,250 10,000 TCI Communications, Inc. $2.125, Series A................ 515,000 ----------- 3,859,862 ----------- SHARES VALUE - ---------------------------------------------------------------------------- CONVERTIBLE PREFERRED-- CONTINUED TRANSPORTATION-- 1.1% 20,000 CNF Trust I 5.00%, Series A, TECONS......... $ 1,287,500 10,000 Hvide Capital Trust 6.50%, 144A..................... 655,000 ---------- 1,942,500 ---------- UTILITIES-- 0.8% 40,000 MCN Corp. 8.75%, PRIDES................... 1,220,000 5,000 Philippine Long Distance Telephone Co., GDS 7.00%, Series III............... 258,125 ---------- 1,478,125 ---------- TOTAL CONVERTIBLE PREFERRED (COST $22,651,353).............. 25,440,737 -----------
PRINCIPAL AMOUNT - ----------------------------------------------------------------------------- CONVERTIBLE DEBENTURES-- 10.0% BANKS-- 0.5% $ 800,000 First State Bancorp. 7.50%, 4/30/17.................. 984,000 ---------- BUSINESS EQUIPMENT & SERVICES-- 2.2% 1,000,000 Adaptec, Inc. 4.75%, 2/1/04, 144A............. 1,150,000 1,000,000 HMT Technology Corp. 5.75%, 1/15/04, 144A............ 960,000 250,000 Personnel Group of America Inc. 5.75%, 7/1/04, 144A............. 294,375 250,000 Platinum Technology, Inc. 6.75%, 11/15/01................. 427,500 1,000,000 Quantum Corp. 7.00%, 8/1/04................... 1,154,166 ---------- 3,986,041 ---------- ELECTRICAL EQUIPMENT & SERVICES-- 0.8% 1,500,000 Kent Electronics Corp. 4.50%, 9/1/04................... 1,518,750 ---------- ENERGY-- 0.3% 500,000 Swift Energy Co. 6.25%, 11/15/06................. 542,500 ---------- INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 0.5% 600,000 Robbins & Myers, Inc. 6.50%, 9/1/03................... 909,000 ----------- LEISURE & TOURISM-- 0.4% 1,000,000 Marriot International, Inc. Zero Coupon, 3/25/11 (effective yield 4.27%) LYONS.............. 653,800 -----------
(CONTINUED) 28 - ---------------------------------------------------------------- EVERGREEN (Photo of eagle AMERICAN RETIREMENT FUND appears here) SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------ CONVERTIBLE DEBENTURES-- CONTINUED OIL FIELD SERVICES-- 4.2% $ 1,000,000 Key Energy Group, Inc 5.00%, 9/15/04.................. $ 1,025,000 500,000 Key Energy Group, Inc. 7.50%, 7/1/03, 144A............. 1,666,900 1,000,000 Nabors Industries, Inc. 5.00%, 5/15/06.................. 2,225,000 500,000 Offshore Logistics, Inc 6.00%, 12/15/03................. 517,500 1,000,000 Offshore Logistics, Inc. 6.00%, 12/15/03, 144A........... 1,035,000 1,000,000 Parker Drilling Co. 5.50%, 8/1/04................... 1,215,000 ---------- 7,684,400 ---------- PUBLISHING, BROADCASTING & ENTERTAINMENT-- 0.3% 1,000,000 Jacor Communications, Inc. Zero Coupon, 6/12/11 (effective yield 5.50%) LYONS.............. 635,000 ---------- RETAILING & WHOLESALE-- 0.7% Central Garden & Pet Co. 500,000 6.00%, 11/15/03, 144A............. 628,750 500,000 6.00%, 11/15/03................... 628,750 ---------- 1,257,500 ---------- TRANSPORTATION-- 0.1% 200,000 Halter Marine Group Inc. 4.50%, 9/15/04.................. 233,760 ---------- TOTAL CONVERTIBLE DEBENTURES (COST $14,246,056).............. 18,404,751 ---------- CORPORATE BONDS-- 2.2% BANKS-- 0.6% 1,000,000 NationsBank Corp. 6.50%, 8/15/03.................. 995,644 ---------- FINANCE & INSURANCE-- 1.1% 1,000,000 American General Finance Corp. 7.125%, 12/1/99................. 1,020,360 1,000,000 Ford Motor Credit Co. 5.625%, 12/15/98................ 996,038 ---------- 2,016,398 ---------- TELECOMMUNICATION SERVICES & EQUIPMENT-- 0.5% 1,000,000 GTE Southwest, Inc. 5.82%, 12/1/99, Ser. A.......... 993,944 ---------- TOTAL CORPORATE BONDS (COST $4,004,940)............... 4,005,986 ---------- PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------- U.S. GOVERNMENT & AGENCY OBLIGATIONS-- 25.0% GOVERNMENT AGENCY NOTES & BONDS-- 24.1% $ 700,000 Federal Agricultural Mortgage Corp. 7.03%, 5/26/98.................. $ 706,041 1,000,000 Federal Farm Credit Bank 6.70%, 8/6/04................... 1,001,352 Federal Home Loan Bank 2,000,000 5.65%, 12/29/00................... 1,979,160 1,000,000 6.195%, 2/5/03.................... 988,431 2,000,000 6.565%, 8/6/02.................... 2,005,480 2,000,000 6.585%, 10/15/02.................. 2,000,000 600,000 6.665%, 9/30/02................... 599,617 2,000,000 6.70%, 4/9/03..................... 1,998,750 3,000,000 6.715%, 4/9/03.................... 2,994,170 2,000,000 7.00%, 8/13/04.................... 2,010,094 2,000,000 7.00%, 7/14/05.................... 2,018,500 1,000,000 7.015%, 1/14/03................... 1,001,259 2,000,000 7.04%, 10/14/05................... 1,998,750 2,000,000 7.25%, 2/23/06.................... 2,012,258 2,000,000 7.26%, 4/3/02..................... 2,010,612 3,000,000 8.00%, 1/10/12.................... 2,982,270 Federal Home Loan Mortgage Corp. 1,000,000 6.773%, 1/7/02.................... 1,001,708 1,000,000 6.91%, 6/20/05.................... 1,014,767 2,000,000 7.00%, 3/12/02.................... 2,003,060 2,000,000 7.585%, 9/19/06................... 2,066,170 2,000,000 7.865%, 8/8/11.................... 2,064,582 Federal National Mortgage Association 1,000,000 6.25%, 8/12/03.................... 988,867 1,000,000 6.41%, 3/8/06..................... 1,007,292 2,000,000 6.68%, 12/28/01................... 2,000,890 3,000,000 7.28%, 5/23/07.................... 3,079,629 1,000,000 Student Loan Marketing Association 5.90%, 2/20/01.................. 989,647 ----------- 44,523,356 ----------- TREASURY NOTES & BONDS-- 0.9% 1,500,000 U.S. Treasury Bonds 7.125%, 2/15/23................. 1,617,656 ---------- TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (COST $45,798,844).............. 46,141,012 -----------
(CONTINUED) 29 - ----------------------------------------------------------------------------- (Photo of eagle EVERGREEN appears here) AMERICAN RETIREMENT FUND SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS-- 7.7% COMMERCIAL PAPER-- 4.3% $ 300,000 AC Acquisition Holding Co. 5.50%, 10/7/97.................. $ 299,725 American Home Food Products, Inc. 220,000 5.50%, 10/2/97.................... 219,966 700,000 5.52%, 10/17/97................... 698,283 900,000 Bell Atlantic Financial Services, Inc. 5.50%, 10/24/97................. 896,837 BIL North America, Inc. 200,000 5.51%, 10/20/97................... 199,419 150,000 5.53%, 10/21/97................... 149,539 150,000 BMW U.S. Capital Corp. 5.51%, 10/28/97................. 149,380 350,000 Eiger Capital Corp. 5.52%, 10/9/97.................. 349,571 Finova Capital Corp. 250,000 5.53%, 10/30/97................... 248,886 2,000,000 5.55%, 10/22/97................... 1,993,525 350,000 Mitsubishi International Corp. 5.53%, 10/15/97................. 349,247 250,000 Safeco Credit Co., Inc. 5.57%, 10/21/97................. 249,226 PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------ SHORT-TERM INVESTMENTS-- CONTINUED COMMERCIAL PAPER-- CONTINUED $ 1,200,000 Sonoco Products Co. 5.53%, 10/22/97................. $ 1,196,129 Tiger Managers Accept Corp. 385,000 5.53%, 10/14/97................... 384,231 300,000 5.55%, 10/7/97.................... 299,723 300,000 Triple A One Funding Corp. 5.53%, 10/6/97.................. 299,770 ---------- 7,983,457 ---------- GOVERNMENT AGENCY NOTES & BONDS-- 3.4% 500,000 Federal Home Loan Mortgage 5.41%, 10/14/97................. 499,024 5,700,000 Federal National Mortgage Association 5.47%, 10/24/97................. 5,680,080 ---------- 6,179,104 ---------- TOTAL SHORT-TERM INVESTMENTS (COST $14,162,561).............. 14,162,561 -----------
TOTAL INVESTMENTS-- (COST $162,507,133)....... 105.2% 193,909,739 OTHER ASSETS AND LIABILITIES-- NET......... (5.2) (9,533,242) ------- ------------ NET ASSETS.................. 100.0% $184,376,497 ======= ============
* Non-income producing securities. ** At September 30, 1997, the Fund owned 8,000 shares of common stock of First Union Corp. at a cost of $106,108. During the period ended September 30, 1997, the Fund earned $4,880 in dividend income from this investment. These shares were purchased by the Fund prior to the acquisition of the investment advisor and Lieber & Company by First Union. The following abbreviations are used in this portfolio: ACES Automatically Convertible Equity Securities ADR American Depository Receipts BUCS Beneficial Unsecured Convertible Securities DECS Dividend Enhanced Convertible Stock GDS Global Depositary Shares LYONS Liquid Yield Option Notes MIPS Monthly Income Preferred Shares PERCS Preferred Equity Redemption Cumulative Stock PRIDES Provisionally Redeemable Income Debt Exchangeable for Stock REIT Real Estate Investment Trust SAILS Stock Appreciation Income Linked Securities STRYPES Structured Yield Product Exchangeable for Stock TECONS Term Convertible Shares 144A Rule 144A securities are restricted as to resale to qualified institutional investors.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 30 - --------------------------------------------------- EVERGREEN (Photo of scales of justice BALANCED FUND appears here) SCHEDULE OF INVESTMENTS September 30, 1997 (Unaudited) [CAPTION]
SHARES VALUE - ----------------------------------------------------------------------------- COMMON STOCKS-- 49.7% AUTOMOTIVE EQUIPMENT & MANUFACTURING-- 0.7% 145,000 Ford Motor Co.................... $ 6,561,250 BANKS-- 4.9% ------------- 120,000 Banc One Corp.................... 6,697,500 136,800 BankBoston Corp.................. 12,098,250 60,000 Bankers Trust Corp............... 7,350,000 110,000 Chase Manhattan Corp............. 12,980,000 125,000 First Chicago NBD Corp........... 9,406,250 ----------- 48,532,000 ----------- BUILDING, CONSTRUCTION & FURNISHINGS-- 1.2% 150,000 * American Standard Companies, Inc............................ 6,018,750 135,000 Masco Corp....................... 6,184,688 ----------- 12,203,438 ----------- COMMUNICATION SYSTEMS & SERVICES-- 3.1% 125,000 * 3Com Corp........................ 6,406,250 270,000 * Adaptec, Inc..................... 12,622,500 150,000 * Cisco Systems, Inc............... 10,959,375 ----------- 29,988,125 ----------- CONSUMER PRODUCTS & SERVICES-- 4.0% 190,000 Colgate-Palmolive Co............. 13,240,625 455,000 * CUC International, Inc........... 14,105,000 300,000 Philip Morris Companies, Inc..... 12,468,750 ----------- 39,814,375 ----------- DIVERSIFIED COMPANIES-- 3.4% 305,000 AlliedSignal, Inc................ 12,962,500 300,000 General Electric Co.............. 20,418,750 ----------- 33,381,250 ----------- ENERGY-- 4.9% 175,000 * Reading & Bates Corp............. 7,273,437 250,000 Sonat, Inc....................... 12,718,750 250,000 Texaco, Inc...................... 15,359,375 380,000 Tosco Corp....................... 13,228,750 ----------- 48,580,312 ----------- FINANCE & INSURANCE-- 2.7% 175,000 Allstate Corp. (The)............. 14,065,625 125,000 American International Group, Inc............................ 12,898,437 ----------- 26,964,062 ----------- FOOD & BEVERAGE PRODUCTS-- 2.4% 220,700 American Stores Co............... 5,379,563 125,000 Coca Cola Co. (The).............. 7,617,187 200,000 Sara Lee Corp.................... 10,300,000 ----------- 23,296,750 ----------- SHARES VALUE - ----------------------------------------------------------------------------- COMMON STOCKS-- CONTINUED HEALTHCARE PRODUCTS & SERVICES-- 8.8% 220,000 Bristol-Myers Squibb Co.......... $ 18,205,000 250,000 HBO & Co......................... 9,437,500 435,000 * HEALTHSOUTH Corp................. 11,609,062 220,000 Johnson & Johnson................ 12,677,500 270,000 * Lincare Holdings, Inc............ 13,618,125 120,000 Pfizer, Inc...................... 7,207,500 150,000 SmithKline Beecham Plc ADS....... 7,331,250 160,000 * Universal Health Services, Inc............................ 6,920,000 ----------- 87,005,937 ----------- INFORMATION SERVICES & TECHNOLOGY-- 5.8% 120,000 * Cadence Design Systems, Inc...... 6,420,000 200,000 * Compaq Computer Corp............. 14,950,000 110,000 Intel Corp....................... 10,154,375 265,000 * Iomega Corp...................... 6,923,125 125,000 * McAfee Associates, Inc........... 6,625,000 50,000 * Microsoft Corp................... 6,615,625 60,000 * Sanmina Corp..................... 5,193,750 ----------- 56,881,875 ----------- MANUFACTURING-- DISTRIBUTING-- 2.6% 185,000 Case Corp........................ 12,325,625 150,000 Stanley Works.................... 6,450,000 90,000 Tyco International Ltd........... 7,385,625 ----------- 26,161,250 ----------- METAL PRODUCTS & SERVICES-- 1.7% 160,000 Aluminum Co. of America.......... 13,120,000 85,000 Crown Cork & Seal Co., Inc....... 3,920,625 ----------- 17,040,625 ----------- OIL-- 1.2% 125,000 * Diamond Offshore Drilling, Inc............................ 6,898,438 150,000 Ultramar Diamond Shamrock Corp... 4,846,875 ----------- 11,745,313 ----------- UTILITIES-- 2.3% 185,000 CINergy Corp..................... 6,185,938 170,000 CMS Energy Corp.................. 6,290,000 160,000 SBC Communications, Inc.......... 9,820,000 ----------- 22,295,938 ----------- TOTAL COMMON STOCKS (COST $374,319,170)............ 490,452,500 ------------
(CONTINUED) 31 - ---------------------------------------------------------------------------- (Photo of scales of justice EVERGREEN appears here) BALANCED FUND SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------ CORPORATE BONDS-- 10.9% BANKS-- 1.9% $ 3,000,000 Boatmen's Bancshares, Inc. 6.75%, 3/15/03................. $ 3,033,834 5,000,000 First Chicago Corp. 9.875%, 8/15/00................ 5,467,060 10,000,000 NationsBank Corp. 7.625%, 4/15/05................ 10,527,060 ----------- 19,027,954 ----------- CHEMICAL & AGRICULTURAL PRODUCTS-- 0.6% 5,000,000 Dow Chemical Co. 8.625%, 4/1/06................. 5,620,255 ---------- CONSUMER PRODUCTS & SERVICES-- 0.5% 5,000,000 Philip Morris Companies, Inc. 8.65%, 5/15/98................. 5,083,540 ---------- ENERGY-- 0.5% 4,000,000 Atlantic Richfield Co. 9.00%, 4/1/21.................. 4,911,556 ---------- FINANCE & INSURANCE-- 2.5% 5,500,000 Dean Witter, Discover & Co. 6.75%, 10/15/13................ 5,387,223 31,428 Fleet Financial Home Equity Trust 6.70%, 1/16/06................. 31,496 5,500,000 General Electric Capital Corp. 8.75%, 3/14/03................. 6,078,297 2,750,000 International Bank For Reconstruction & Development 7.95%, 5/15/16................. 3,084,153 5,000,000 Merrill Lynch, Pierce, Fenner & Smith, Inc. 7.00%, 4/27/08................. 5,113,400 5,000,000 Smith Barney Holdings, Inc. 5.50%, 1/15/99................. 4,965,610 ----------- 24,660,179 ----------- FOOD & BEVERAGE PRODUCTS-- 1.0% 5,000,000 General Mills, Inc. 9.00%, 12/20/02................ 5,582,160 4,250,000 PepsiCo, Inc. 7.625%, 11/1/98................ 4,326,445 ---------- 9,908,605 ---------- HEALTHCARE PRODUCTS & SERVICES-- 0.5% 5,000,000 Baxter International 7.25%, 2/15/08................. 5,247,640 ---------- INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 2.0% 7,000,000 Jet Equipment Trust, 144A 9.41%, 6/15/10................. 8,291,304 10,000,000 Loews Corp. 6.75%, 12/15/06................ 9,943,920 PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------- CORPORATE BONDS-- CONTINUED INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- CONTINUED $ 1,400,000 Waste Management, Inc. 8.75%, 5/1/18.................. $ 1,566,160 ----------- 19,801,384 ----------- MANUFACTURING-- DISTRIBUTING-- 0.5% 4,300,000 Stanley Works 7.375%, 12/15/02............... 4,490,929 ----------- SOVEREIGN GOVERNMENT-- 0.5% 5,000,000 Ontario Province Canada 7.75%, 6/4/02.................. 5,280,245 ---------- UTILITIES-- 0.4% 3,600,000 Union Electric Co. 8.00%, 12/15/22................ 3,775,529 ---------- TOTAL CORPORATE BONDS (COST $101,745,309)............ 107,807,816 ------------ U.S. GOVERNMENT & AGENCY OBLIGATIONS-- 34.0% GOVERNMENT AGENCY NOTES & BONDS-- 1.6% Government National Mortgage Association 2,714,674 8.50%, 5/15/21................... 2,843,621 1,675,825 8.50%, 7/15/21................... 1,755,427 3,469,750 8.50%, 6/15/22................... 3,634,563 1,821,360 9.00%, 9/15/21................... 1,942,593 3,115,868 9.00%, 10/15/21.................. 3,323,266 1,564,064 9.50%, 2/15/21................... 1,696,520 ----------- 15,195,990 ----------- TREASURY NOTES & BONDS-- 32.4% U.S. Treasury Bonds 40,000,000 6.375%, 8/15/27.................. 39,825,000 20,000,000 7.625%, 2/15/07.................. 21,087,500 20,000,000 8.75%, 5/15/17................... 25,037,500 15,000,000 8.75%, 5/15/20................... 19,003,125 21,000,000 8.875%, 8/15/17.................. 26,610,927 17,500,000 9.125%, 5/15/18.................. 22,750,000 U.S. Treasury Notes 7,000,000 5.50%, 11/15/98.................. 6,984,684 8,000,000 6.375%, 7/15/99.................. 8,080,000 10,000,000 6.50%, 4/30/99................... 10,112,500 19,000,000 7.75%, 11/30/99.................. 19,730,303 10,000,000 7.75%, 2/15/01................... 10,553,120 47,300,000 8.125%, 2/15/98.................. 47,758,195 59,000,000 9.125%, 5/15/99.................. 62,005,283 ------------ 319,538,137 ------------ TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (COST $328,381,429)............ 334,734,127 ------------
(CONTINUED) 32 - --------------------------------------------------- EVERGREEN (Photo of scales of justice BALANCED FUND appears here) SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------- REPURCHASE AGREEMENT-- 4.9% $47,921,221 Donaldson, Lufkin & Jenrette Securities Corp., 6.00%, dated 9/30/97, due 10/1/97, maturity value $47,929,198, (Cost $47,921,221) (a)......... $ 47,921,221 -------------
TOTAL INVESTMENTS-- (COST $852,367,129)..... 99.5% 980,915,664 OTHER ASSETS AND LIABILITIES-- NET....... 0.5 4,940,115 ------ ------------ NET ASSETS................ 100.0% $985,855,779 ====== ============
* Non-income producing securities. ADS American Depository Shares. (a) The repurchase agreement is fully collateralized by U.S. Government and/or agency obligations based on market prices at September 30, 1997. 144A Rule 144A securities are restricted as to resale to qualified institutional investors. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 33 - ------------------------------------------------------------------------------ (Photo of brick wall and EVERGREEN stars appears here) FOUNDATION FUND SCHEDULE OF INVESTMENTS September 30, 1997 (Unaudited) [CAPTION]
SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCKS-- 59.9% AEROSPACE & DEFENSE-- 0.8% 317,600 Boeing Co. (The).............. $ 17,289,350 1,000 United Technologies Corp...... 81,000 ----------- 17,370,350 ----------- AUTOMOTIVE EQUIPMENT & MANUFACTURING-- 1.1% 483,400 Chrysler Corp................. 17,795,162 85,000 General Motors Corp........... 5,689,688 ----------- 23,484,850 ----------- BANKS-- 5.7% 55,400 AmSouth Bancorp............... 2,683,438 50,000 Bancfirst Corp................ 1,650,000 391,800 BankBoston Corp............... 34,649,812 110,000 Barnett Banks, Inc............ 7,782,500 140,062 BSB Bancorp, Inc.............. 3,851,705 62,000 Cape Cod Bank & Trust Co...... 2,123,500 27,000 CB Bancshares, Inc............ 1,194,750 92,500 Central Fidelity Banks, Inc... 4,093,125 79,700 CitiCorp...................... 10,674,819 101,000 Crestar Financial Corp........ 4,734,375 80,138 First Chicago NBD Corp........ 6,030,384 3,600 First Empire State Corp....... 1,494,000 290,900 First of America Bank Corp.... 15,617,694 11,250 First Security Corp........... 334,688 117,000 First Union Corp. **.......... 5,857,312 45,000 Fleet Financial Group, Inc.... 2,950,312 70,801 Hibernia Corp, Cl. A.......... 1,203,617 20,000 KeyCorp....................... 1,272,500 25,000 Mississippi Valley Bancshares, Inc............. 1,225,000 1,200 NationsBank Corp.............. 74,250 66,150 Peoples Heritage Financial Group....................... 2,798,972 102,000 Seacoast Banking Corp. of Florida Cl. A............... 3,621,000 20,000 SunTrust Banks, Inc........... 1,358,750 65,000 U.S. Trust Corp............... 3,664,375 ------------ 120,940,878 ------------ BUILDING, CONSTRUCTION & FURNISHINGS-- 1.0% 175,800 Armstrong World Industries, Inc............. 11,789,588 149,300 Continental Homes Holding Corp........................ 4,376,356 20,000 * M/I Schottenstein Homes, Inc......................... 308,750 269,000 * Pacific Greystone Corp........ 5,346,375 ------------ 21,821,069 ----------- SHARES VALUE - -------------------------------------------------------------------------- COMMON STOCKS-- CONTINUED BUSINESS EQUIPMENT & SERVICES-- 1.4% 75,000 * Compaq Computer Corp.......... $ 5,606,250 35,500 * Crescent Operating, Inc....... 723,313 164,000 International Business Machines Corp............... 17,373,750 50,000 Lucent Technologies, Inc...... 4,068,750 10,000 * Policy Management Systems Corp................ 621,875 10,000 Xerox Corp.................... 841,875 ----------- 29,235,813 ----------- CHEMICAL & AGRICULTURAL PRODUCTS-- 3.5% 90,000 A. Schulman, Inc.............. 1,923,750 40,000 Air Products & Chemicals, Inc......................... 3,317,500 561,200 Du Pont (E. I.) De Nemours & Co........................ 34,548,875 70,000 Grace (W.R.) & Co............. 5,153,750 60,000 H.B. Fuller Co................ 3,251,250 217,800 Monsanto Co................... 8,494,200 170,000 Morton International, Inc..... 6,035,000 75,000 Nalco Chemical Co............. 3,004,687 58,000 Pioneer Hi-Bred International, Inc.......... 5,278,000 20,000 Praxair, Inc.................. 1,023,750 100,560 * Solutia, Inc.................. 2,011,200 ----------- 74,041,962 ----------- COMMUNICATION SYSTEMS & SERVICES-- 0.2% 70,000 * Cisco Systems, Inc............ 5,114,375 ----------- CONSUMER PRODUCTS & SERVICES-- 2.8% 30,000 American Greetings Corp. Cl. A....................... 1,106,250 95,000 Black & Decker Corp........... 3,538,750 25,642 * Consolidated Products, Inc.... 498,416 120,000 CPC International, Inc........ 11,115,000 188,800 Goodyear Tire & Rubber Co..... 12,980,000 50,000 H. & R. Block, Inc............ 1,931,250 170,300 International Flavors & Fragrances, Inc............. 8,344,700 85,000 Kimberly-Clark Corp........... 4,159,687 70,100 * Nautica Enterprises, Inc...... 1,971,563 40,000 Nike, Inc., Cl. B............. 2,120,000 114,200 Procter & Gamble Co. (The).... 7,886,937 118,500 Tupperware Corp............... 3,332,813 ----------- 58,985,366 -----------
(CONTINUED) 34 - ----------------------------------------------------------- EVERGREEN (Photo of brick wall FOUNDATION FUND and stars appears here) SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
SHARES VALUE - ----------------------------------------------------------------------------- COMMON STOCKS-- CONTINUED DIVERSIFIED COMPANIES-- 2.4% 8,000 Cooper Industries, Inc........ $ 432,500 512,200 General Electric Co........... 34,861,612 110,800 PPG Industries, Inc........... 6,945,775 135,000 Trizec Hahn Corp.............. 3,484,688 1,400 Tyco International Ltd........ 114,888 56,000 * Western Atlas, Inc............ 4,928,000 ----------- 50,767,463 ----------- ELECTRICAL EQUIPMENT & SERVICES-- 0.5% 153,400 AMP, Inc...................... 8,216,487 2,666 * Analog Devices, Inc........... 89,311 1,500 Motorola, Inc................. 107,813 1,000 Texas Instruments, Inc........ 135,125 69,500 Westinghouse Electric Corp.... 1,880,844 ----------- 10,429,580 ----------- ENERGY-- 1.8% 60,000 Amoco Corp.................... 5,782,500 1,200 Atlantic Richfield Co......... 102,525 94,400 Consolidated Natural Gas Co... 5,492,900 282,400 Equitable Resources, Inc...... 8,895,600 102,400 Exxon Corp.................... 6,560,000 1,600 Halliburton Co................ 83,200 900 Kerr-McGee Corp............... 61,931 91,800 Mobil Corp.................... 6,793,200 900 Pennzoil Co................... 75,600 40,000 * Reading & Bates Corp.......... 1,662,500 1,400 Schlumberger Ltd.............. 117,862 43,103 * Seitel, Inc................... 1,912,696 1,200 Sonat, Inc.................... 61,050 33,877 Union Pacific Resource Group, Inc.................. 887,154 ----------- 38,488,718 ----------- FINANCE & INSURANCE-- 9.7% 10,668 Aetna, Inc.................... 868,775 120,000 Allstate Corp................. 9,645,000 110,600 AMBAC, Inc.................... 4,500,038 147,675 American International Group, Inc.................. 15,238,214 178,500 Beneficial Corp............... 13,599,469 51,800 Chubb Corp.................... 3,681,038 148,350 Countrywide Credit Industries, Inc............. 5,405,503 95,000 * Degeorge Financial Corp....... 112,813 20,000 FBL Financial Group, Inc., Cl. A....................... 740,000 40,000 Federal Home Loan Mortgage Corp........................ 1,410,000 729,400 Federal National Mortgage Association................. 34,281,800 117,827 * HFS, Inc...................... 8,770,747 70,000 John Alden Financial Corp..... 2,170,000 SHARES VALUE - -------------------------------------------------------------------------- COMMON STOCKS-- CONTINUED FINANCE & INSURANCE-- CONTINUED 142,200 John Nuveen Co. (The), Cl. A.. $ 4,932,562 15,000 Lehman Brothers Holdings, Inc......................... 782,270 279,400 Marsh & McLennan Co., Inc..... 21,409,025 307,400 Merrill Lynch & Co., Inc...... 22,805,237 345,200 MGIC Investment Corp.......... 19,784,275 155,000 NAC RE Corp................... 7,963,125 110,000 * National Financial Services, Inc., Cl. A................. 3,066,250 235,000 North American Mortgage Co.... 6,756,250 35,000 Ohio Casualty Corp............ 1,623,125 142,250 Raymond James Financial, Inc......................... 5,121,000 9,470 * Security Capital Group Inc., Cl. B Warrants $28.00 Expiring 9/18/98............ 75,760 1,000 SLM Holding Corp.............. 154,500 238,300 Wilmington Trust Corp......... 13,017,137 ------------ 207,913,913 ------------ FOOD & BEVERAGE PRODUCTS-- 0.1% 1,800 Nabisco Holdings Corp. Cl. A................. 76,613 30,000 Pepsico, Inc.................. 1,216,875 ---------- 1,293,488 ---------- FOREST PRODUCTS-- 0.4% 88,000 Union Camp Corp............... 5,428,500 90,000 Willamette Industries, Inc.... 3,442,500 ---------- 8,871,000 ---------- HEALTHCARE PRODUCTS & SERVICES-- 6.2% 205,700 Abbott Laboratories........... 13,151,944 1,750 * Alza Corp. Warrants $65.00 Expiring 12/31/1999......... 328 202,900 American Home Products Corp... 14,811,700 101,200 Bristol-Myers Squibb Co....... 8,374,300 180,900 Columbia / HCA Healthcare Corp........................ 5,200,875 23,000 * Covance, Inc.................. 497,375 68,550 Guidant Corp.................. 3,838,800 30,000 * HealthCare COMPARE Corp....... 1,913,075 114,500 Johnson & Johnson............. 6,598,062 171,262 Lilly (Eli) & Co.............. 20,626,367 65,000 * Lincare Holdings, Inc......... 3,278,437 100,000 * Living Centers of America, Inc......................... 4,075,000 80,000 McKesson Corp................. 8,155,000 151,750 * MedPartners, Inc.............. 3,253,141 121,600 Medtronic, Inc................ 5,715,200 167,758 Merck & Co., Inc.............. 16,765,315 96,000 Pfizer, Inc................... 5,766,000 11,500 * Quest Diagnostics, Inc........ 194,781
(CONTINUED) 35 - --------------------------------------------------------------------------- (Photo of brick wall and EVERGREEN stars appears here) FOUNDATION FUND SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
SHARES VALUE - ---------------------------------------------------------------------------- COMMON STOCKS-- CONTINUED HEALTHCARE PRODUCTS & SERVICES-- CONTINUED 25,000 Rhone Poulenc Rorer, Inc...... $ 2,417,188 132,000 Schering-Plough Corp.......... 6,798,000 9,200 Shared Medical System Corp.... 486,450 34,900 Superior Surgical Manufacturing Co., Inc...... 549,675 1,750 * Therapeutic Discovery Corp.... 21,602 ------------ 132,488,615 ------------ INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 2.8% 65,000 Applied Power, Inc............ 4,090,937 122,970 Autoliv, Inc.................. 5,226,225 10,000 Bemis Co., Inc................ 447,500 107,000 Corning, Inc.................. 5,055,750 261,700 Deere & Co.................... 14,066,375 30,000 Genuine Parts Co.............. 924,375 17,400 * Halter Marine Group, Inc...... 841,725 30,000 Parker Hannifin Corp.......... 1,350,000 180,000 Snap-on, Inc.................. 8,291,250 6,000 * Strattec Security Corp........ 166,875 378,000 Timken Co. (The).............. 15,143,625 50,000 Trinity Industries, Inc....... 2,412,500 30,000 * UCAR International, Inc....... 1,432,500 ----------- 59,449,637 ----------- INFORMATION SERVICES & TECHNOLOGY-- 6.8% 25,000 Computer Associates International, Inc.......... 1,795,313 524,800 Hewlett-Packard Co............ 36,506,400 681,600 Intel Corp.................... 62,920,200 140,000 * Intel Corp. Warrants $41.75 Expiring 3/14/98............ 10,088,750 173,000 * Microsoft Corp................ 22,890,062 224,000 * Sun Microsystems, Inc......... 10,486,000 ------------ 144,686,725 ------------ OTHER-- 0.0% (A) 20,000 Premark International, Inc.... 640,000 ------------ PUBLISHING, BROADCASTING & ENTERTAINMENT-- 0.5% 30,000 Belo (A.H.) Corp. Ser. A...... 1,455,000 20,000 * Cox Communications, Inc. Cl. A........................... 551,250 30,993 Disney Walt Co. (The)......... 2,498,811 20,000 Gaylord Entertainment Co. Cl. A........................... 516,250 2,500 * Lin Television Corp........... 116,563 65,000 Time Warner, Inc.............. 3,522,187 3,000 Washington Post Co. (The) Cl. B....................... 1,344,375 ----------- 10,004,436 ----------- SHARES VALUE - ---------------------------------------------------------------------------- COMMON STOCKS-- CONTINUED REAL ESTATE-- 6.2% 38,000 * Alexander's, Inc.............. $ 3,125,500 23,400 Arbor Property Trust REIT..... 228,150 24,100 Arden Realty, Inc. REIT....... 756,138 50,000 Bay Apartment Communities, Inc. REIT................... 1,996,875 100,000 * Boston Properties, Inc. REIT.. 3,281,250 50,009 Bradley Real Estate, Inc. REIT........................ 1,050,189 70,000 Brandywine Realty Trust REIT.. 1,675,625 125,000 Cali Realty Corp. REIT........ 5,203,125 270,400 * Capstead Mortgage Corp. REIT.. 7,030,400 161,900 CarrAmerica Realty Corp. REIT........................ 5,180,800 40,000 Chelsea GCA Realty, Inc. REIT........................ 1,670,000 184,900 Columbus Realty Trust REIT.... 4,472,269 355,000 Crescent Real Estate Equities, Inc. REIT................... 14,244,375 305,300 Crown American Realty Trust REIT........................ 2,957,594 105,200 Essex Property Trust, Inc. REIT........................ 3,662,275 85,000 Evans Withycombe Residential, Inc. REIT................... 2,295,000 199,700 FAC Realty, Inc. REIT......... 1,684,969 90,000 FelCor Suite Hotels, Inc. REIT........................ 3,695,625 100,200 Gables Residential Trust REIT........................ 2,717,925 174,000 Glimcher Realty Trust REIT.... 3,991,125 28,000 Highwoods Properties, Inc. REIT........................ 990,500 45,076 * Homestead Village Properties, Inc............. 800,099 9,443 * Homestead Village Properties, Inc. Warrants $10.00 Expiring 10/29/97........... 76,724 377,216 Horizon Group, Inc. REIT...... 4,550,168 50,300 INMC Mortgage Holdings, Inc. REIT........................ 1,257,500 120,000 Innkeepers USA Trust REIT..... 2,062,500 30,000 * Interstate Hotels Co.......... 978,750 101,500 Kilroy Realty Corp. REIT...... 2,740,500 142,000 Kranzco Realty Trust REIT..... 2,671,375 45,000 Liberty Property Trust REIT... 1,212,187 90,000 Marriott International, Inc......................... 6,395,625 38,100 Oasis Residential, Inc. REIT.. 928,688 58,497 Patriot American Hospitality, Inc. REIT................... 1,864,592 130,000 Post Property, Inc. REIT...... 5,167,500 166,500 Prentiss Properties Trust REIT........................ 4,807,687 90,000 Public Storage, Inc. REIT..... 2,666,250 76,817 Security Capital Industrial Trust REIT.................. 1,790,796 111,992 Security Capital Pacific Trust REIT........................ 2,631,812 100,000 Sovran Self Storage, Inc...... 3,150,000 70,000 Spieker Properties, Inc. REIT........................ 2,839,375
(CONTINUED) 36 - ------------------------------------------------------ EVERGREEN (Photo of brick wall and FOUNDATION FUND stars appears here) SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
SHARES VALUE - ------------------------------------------------------------------------- COMMON STOCKS-- CONTINUED REAL ESTATE-- CONTINUED 157,750 Starwood Lodging Trust REIT... $ 9,060,766 14,000 Storage USA, Inc. REIT........ 568,750 45,000 Sunstone Hotel Investors, Inc. REIT........................ 793,125 57,900 Tanger Factory Outlet Centers, Inc. REIT................... 1,704,431 2,200 TriNet Corporate Realty Trust, Inc. REIT................... 77,275 30,000 Western Investment Real Estate Trust REIT.................. 405,000 ------------ 133,111,184 ------------ RETAILING & WHOLESALE-- 1.6% 216,511 Avnet, Inc.................... 13,761,980 82,500 Home Depot, Inc. (The)........ 4,300,313 103,000 Lowe's Companies., Inc........ 4,004,125 199,000 Mercantile Stores Co., Inc.... 12,524,562 ----------- 34,590,980 ----------- THRIFT INSTITUTIONS-- 0.6% 83,300 Golden West Financial Corp.... 7,476,175 80,000 Webster Financial Corp........ 4,700,000 ----------- 12,176,175 ----------- TRANSPORTATION-- 0.5% 25,000 Burlington Northern Santa Fe.. 2,415,625 34,000 Caliber System, Inc........... 1,844,500 20,000 KLM Royal Dutch Air Lines..... 686,250 30,000 Pittston Brink's Group........ 1,201,875 17,000 Roadway Express, Inc.......... 465,375 80,000 Union Pacific Corp............ 5,010,000 ----------- 11,623,625 ----------- UTILITIES-- ELECTRIC-- 0.6% 20,000 Central Hudson Gas & Electric Corp............... 716,250 149,700 Long Island Lighting Co....... 3,836,062 138,400 New York St. Electric & Gas Corp.................... 3,719,500 16,700 Orange & Rockland Utilities, Inc.............. 623,119 40,000 PP&L Resources, Inc........... 875,000 100,000 Public Service Enterprise Group, Inc.................. 2,575,000 32,000 TNP Enterprises, Inc.......... 804,000 ----------- 13,148,931 ----------- UTILITIES-- TELEPHONE-- 2.7% 98,333 * 360 Communications Co......... 2,052,701 30,000 * AirTouch Communications, Inc......................... 1,063,125 1,000 Ameritech Corp................ 66,500 10,000 AT&T Corp..................... 443,125 174,040 Bell Atlantic Corp............ 13,999,343 SHARES VALUE - --------------------------------------------------------------------------- COMMON STOCKS-- CONTINUED UTILITIES-- TELEPHONE-- CONTINUED 1,600 BellSouth Corp................ $ 74,000 310,000 Frontier Corp................. 7,130,000 326,400 GTE Corp...................... 14,810,400 1,200 SBC Communications, Inc....... 73,650 371,000 Sprint Corp................... 18,550,000 ----------- 58,262,844 ----------- TOTAL COMMON STOCKS (COST $809,959,662)......... 1,278,941,977 --------------
CONVERTIBLE PREFERRED STOCKS-- 0.7% FINANCE & INSURANCE-- 0.0% (A) 3,557 Aetna, Inc. 6.25%, Ser. C............... 276,779 1,000 Conseco, Inc. 7.00%, PRIDES............... 171,000 2,500 SunAmerica, Inc. $3.188, PERCS............... 114,688 ----------- 562,467 ----------- INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 0.2% 50,000 Qualcomm Financial Trust I 5.75%, 144A................. 2,681,500 115,000 Worthington Industries, Inc. 7.25%, DECS................. 1,868,750 ---------- 4,550,250 ---------- METAL PRODUCTS & SERVICES-- 0.3% 100,000 Timet Capital Trust I 6.625%, BUCS, 144A.......... 5,850,000 ----------- REAL ESTATE-- 0.2% 95,000 First Union Real Estate Equity 8.40%, Ser. A............... 4,298,750 ------------ RETAILING & WHOLESALE-- 0.0% (A) 1,300 Kmart Financing I 7.75%....................... 76,050 ------------ TOTAL CONVERTIBLE PREFERRED (COST $11,957,797).......... 15,337,517 ------------- PRINCIPAL AMOUNT CONVERTIBLE DEBENTURES-- 0.4% BUILDING, CONSTRUCTION & FURNISHINGS-- 0.1% $ 500,000 Engle Homes, Inc. 7.00%, 3/1/03............... 544,400 500,000 Home Depot, Inc. (The) 3.25%, 10/1/01.............. 611,250 ---------- 1,155,650 ----------
(CONTINUED) 37 - ------------------------------------------------------------------------- (Photo of brick wall and EVERGREEN stars appears here) FOUNDATION FUND SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------- CONVERTIBLE DEBENTURES-- CONTINUED BUSINESS EQUIPMENT & SERVICES-- 0.00% (A) $ 800,000 Personnel Group of America, Inc. 144A 5.75%, 7/1/04............... $ 942,000 ------------ ENVIRONMENTAL SERVICES-- 0.0% (A) 100,000 USA Waste Services, Inc. 4.00%, 2/1/02............... 111,000 ------------ HEALTHCARE PRODUCTS & SERVICES-- 0.0% (A) 750,000 Maxxim Medical, Inc. 6.75%, 3/1/03............... 1,083,750 ----------- INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 0.2% 2,100,000 Robbins & Myers, Inc. 6.50%, 9/1/03............... 3,181,500 750,000 Simula, Inc. 8.00%, 5/1/04............... 918,750 ----------- 4,100,250 ----------- NATURAL GAS-- 0.1% 1,328,000 Consolidated Natural Gas Co. 7.25%, 12/15/15............. 1,470,760 ----------- TOTAL CONVERTIBLE DEBENTURES (COST $7,034,665)........... 8,863,410 ----------- U.S. GOVERNMENT & AGENCY OBLIGATIONS-- 28.5% GOVERNMENT AGENCY NOTES & BONDS-- 0.9% 1,000,000 Federal National Mortgage Assn. 8.10%, 8/12/19.............. 1,148,865 Tennessee Valley Authority 8,000,000 7.25%, 7/15/43................ 8,063,944 10,000,000 7.85%, 6/15/44, Ser. A........ 10,565,330 ------------ 19,778,139 ------------ TREASURY NOTES & BONDS-- 27.6% U.S. Treasury Bonds 170,000,000 6.25%, 8/15/23................ 165,165,540 36,340,000 6.75%, 8/15/26................ 37,736,801 125,000,000 7.125%, 2/15/23............... 134,804,625 49,000,000 7.25%, 5/15/16................ 53,226,250 7,000,000 7.625%, 11/15/22.............. 7,980,000 10,000,000 8.00%, 11/15/21............... 11,825,000 50,000,000 8.125%, 8/15/19............... 59,515,600 25,000,000 8.125%, 5/15/21............... 29,898,425 30,000,000 8.375%, 8/15/08............... 33,356,250 10,000,000 8.50%, 2/15/20................ 12,362,500 7,000,000 10.00%, 5/15/10............... 8,581,559 1,000,000 10.625%, 8/15/15.............. 1,441,875 PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------- U.S. GOVERNMENT & AGENCY OBLIGATIONS-- CONTINUED TREASURY NOTES & BONDS-- CONTINUED U.S. Treasury Notes $ 30,000,000 5.75%, 8/15/03................ $ 29,550,000 350,000 5.875%, 2/15/00............... 350,219 455,000 6.125%, 8/31/98............... 456,990 400,000 6.25%, 3/31/99................ 402,875 900,000 6.50%, 5/31/01................ 916,031 630,000 6.50%, 8/15/05................ 643,781 ------------ 588,214,321 ------------ TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (COST $598,234,703)......... 607,992,460 ------------ SHORT-TERM INVESTMENTS-- 10.5% COMMERCIAL PAPER-- 8.5% 10,330,000 A.H. Robins Co., Inc. 5.52%, 11/13/97............. 10,261,891 American Home Products, Inc. 650,000 5.50%, 10/2/97................ 649,901 1,400,000 5.52%, 10/17/97............... 1,396,565 17,350,000 Bell Atlantic Financial Services, Inc. 5.52%, 11/12/97............. 17,238,266 BIL North America, Inc. 1,100,000 5.51%, 10/20/97............... 1,096,801 6,500,000 5.53%, 10/21/97............... 6,480,031 23,450,000 BMW U.S. Capital Corp. 5.51%, 10/28/97............. 23,353,093 12,000,000 Corporate Asset Funding Co., Inc. 5.50%, 11/7/97.............. 11,932,167 10,000,000 Cosmair, Inc. 5.52%, 10/7/97.............. 9,990,800 23,350,000 Daimler-Benz North America Corp. 5.51%, 11/10/97............. 23,207,046 3,700,000 Duke Capital Corp. 5.57%, 10/6/97.............. 3,697,138 1,400,000 Eiger Capital Corp. 5.52%, 10/9/97.............. 1,398,283 4,300,000 Finova Capital Corp. 5.55%, 10/22/97............. 4,286,079 12,700,000 Gannett Co. 5.49%, 10/3/97.............. 12,696,127 3,400,000 GTE Corp. 5.53%, 10/14/97............. 3,393,210 1,500,000 Koch Industries, Inc. 5.50%, 10/1/97.............. 1,500,000
(CONTINUED) 38 - ------------------------------------------------------- EVERGREEN (Photo of brick wall and FOUNDATION FUND stars appears here) SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS-- CONTINUED COMMERCIAL PAPER-- CONTINUED $ 225,000 Morgan (J.P.) & Co., Inc. 5.51%, 10/24/97............. $ 224,208 3,610,000 Safeco Corp. 5.65%, 10/23/97............. 3,597,535 4,450,000 Safeco Credit Co., Inc. 5.57%, 10/21/97............. 4,436,230 2,350,000 Sharp Electronics Corp. 5.53%, 10/31/97............. 2,339,170 100,000 Sonoco Products Co. 5.53%, 10/22/97............. 99,677 27,000,000 State Street Bank & Trust Co., 5.00%, 10/1/97.............. 27,000,000 7,950,000 Three Rivers Funding Corp. 5.57%, 10/15/97............. 7,932,779 Tiger Managers Acceptance Corp. 1,300,000 5.53%, 10/14/97............... 1,297,404 1,700,000 5.55%, 10/7/97................ 1,698,427 200,000 Toys "R" Us, Inc. 5.51%, 11/3/97.............. 198,990 ------------ 181,401,818 ------------ GOVERNMENT AGENCY NOTES & BONDS-- 2.0% 41,400,000 Federal Home Loan Bank 5.41%, 10/3/97.............. 41,387,557 ----------- TOTAL SHORT-TERM INVESTMENTS (COST $222,789,375)......... 222,789,375 ------------
TOTAL INVESTMENTS-- (COST $1,649,976,202) ..................... 100.0% 2,133,924,739 OTHER ASSETS AND LIABILITIES-- NET.... 0.0 332,446 ------- --------------- NET ASSETS............. 100.0% $2,134,257,185
======= =============== * Non-income producing securities. ** At September 30, 1997, the Fund owned 117,000 shares of common stock of First Union Corp. at a cost of $2,358,411. During the period ended September 30, 1997, the Fund earned $71,370 in dividend income from this investment. These shares were purchased by the Fund prior to the acquisition of the investment adviser and Lieber & Company by First Union. (a) Less than one-tenth of a percent. BUCS Beneficial Unsecured Convertible Securities. DECS Dividend Enhanced Convertible Stock PERCS Preferred Equity Redemption Cumulative Stock PRIDES Preferred Redeemable Increased Dividend Equity Securities. REIT Real Estate Investment Trust. 144A Rule 144A securities are restricted as to resale to qualified institutional investors.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS. (CONTINUED) 39 (Photo of brick-------------------------------------------------------------- wall and dollar EVERGREEN sign appear here) TAX STRATEGIC FOUNDATION FUND SCHEDULE OF INVESTMENTS September 30, 1997 (Unaudited) [CAPTION]
SHARES VALUE - --------------------------------------------------------------------------- COMMON STOCK-- 42.2% AEROSPACE & DEFENSE-- 0.7% 20,000 Boeing Co. (The).................... $ 1,088,750 ------------- AUTOMOTIVE EQUIPMENT & MANUFACTURING-- 0.2% 5,000 General Motors Corp................. 334,688 ------------ BANKS-- 6.1% 19,500 BankBoston Corp..................... 1,724,531 10,000 Barnett Banks, Inc.................. 707,500 26,250 Beverly Bancorporation, Inc......... 529,922 12,000 Cape Cod Bank & Trust Co............ 411,000 6,000 CitiCorp............................ 803,625 5,000 Comerica, Inc....................... 394,687 14,000 Crestar Financial Corp.............. 656,250 4,000 First Empire State Corp............. 1,660,000 16,500 First of America Bank Corp.......... 885,844 3,000 First Union Corp. **................ 150,188 5,000 Fleet Financial Group, Inc.......... 327,813 1,650 Interchange Financial Services Corp.............................. 40,425 15,000 Seacoast Banking Corp. of Florida Cl. A.................. 532,500 24,837 SouthTrust Corp..................... 1,223,222 ----------- 10,047,507 ----------- BUILDING, CONSTRUCTION & FURNISHINGS-- 1.4% 20,000 Armstrong World Industries, Inc..... 1,341,250 25,000 Clayton Homes, Inc.................. 464,062 10,700 La-Z-Boy Chair Co................... 395,900 15,000 * Southern Energy Homes, Inc.......... 158,438 ----------- 2,359,650 ----------- BUSINESS EQUIPMENT & SERVICES-- 0.6% 3,000 * Cisco Systems, Inc.................. 219,188 4,000 International Business Machines Corp.............................. 423,750 5,000 Lucent Technologies, Inc............ 406,875 ----------- 1,049,813 ----------- CHEMICALS & AGRICULTURAL PRODUCTS-- 1.6% 10,000 Du Pont (E. I.) De Nemours & Co..... 615,625 10,000 H.B. Fuller Co...................... 541,875 8,000 MacDermid, Inc...................... 697,000 11,000 Morton International, Inc........... 390,500 10,000 Sigma-Aldrich Corp.................. 329,375 ---------- 2,574,375 ---------- CONSUMER PRODUCTS & SERVICES-- 1.5% 10,000 Adidas AG ADS, 144A................. 656,900 8,000 International Flavors & Fragrances, Inc............................... 392,000 2,000 * National Processing, Inc............ 22,250 4,000 Nike, Inc. Cl. B.................... 212,000 SHARES VALUE - ---------------------------------------------------------------------------- COMMON STOCK-- CONTINUED CONSUMER PRODUCTS & SERVICES-- CONTINUED 17,100 St. John Knits, Inc................. $ 768,431 10,500 Toro Co. (The)...................... 416,063 ---------- 2,467,644 ---------- DIVERSIFIED COMPANIES-- 0.6% 10,000 General Electric Co................. 680,625 15,000 Trizec Hahn Corp.................... 387,187 ---------- 1,067,812 ---------- ELECTRICAL EQUIPMENT & SERVICES-- 3.5% 6,000 AMP, Inc............................ 321,375 8,000 Avnet, Inc.......................... 508,500 10,000 * Gateway 2000, Inc................... 314,375 30,000 Harman International Industries, Inc............................... 1,501,875 21,000 Hewlett-Packard Co.................. 1,460,812 14,300 Park Electrochemical Corp........... 414,700 60,000 * Southern Electronics Corp........... 1,170,000 ---------- 5,691,637 ---------- ENERGY-- 0.9% 5,000 Amoco Corp.......................... 481,875 10,000 Equitable Resources, Inc............ 315,000 15,000 Williams Companies., Inc. (The)..... 702,187 ---------- 1,499,062 ---------- FINANCE & INSURANCE-- 6.6% 10,000 American International Group, Inc... 1,031,875 12,000 Chubb Corp.......................... 852,750 20,000 Countrywide Credit Industries, Inc............................... 728,750 3,000 Enhance Financial Services Group, Inc. ............................. 164,250 10,000 FBL Financial Group, Inc., Cl. A.... 370,000 12,000 Federal National Mortgage Assn...... 564,000 15,000 FFVA Financial Corp................. 474,375 20,000 * FPIC Insurance Group, Inc........... 590,000 11,100 Interstate/Johnson Lane, Inc........ 345,488 13,333 Legg Mason, Inc..................... 703,333 20,000 Lehman Brothers Holdings, Inc....... 1,072,500 9,000 Mercury General Corp................ 787,500 10,000 Merrill Lynch & Co., Inc............ 741,875 28,000 Nationwide Financial Services, Inc., Cl. A............................. 780,500 18,000 North American Mortgage Co.......... 517,500 183 * Security Capital Group, Inc., Cl. B, Warrants $28.00 Expiring 9/18/98.................. 1,464 20,000 Wilmington Trust Corp............... 1,092,500 ----------- 10,818,660 ----------- HEALTHCARE PRODUCTS & SERVICES-- 3.7% 7,000 Abbott Laboratories................. 447,562 25,000 American Home Products Corp......... 1,825,000 21,200 Beckman Instruments, Inc............ 902,325
(CONTINUED) 40 - ----------------------------------------------------------------(Photo of brick EVERGREEN wall and dollar sign TAX STRATEGIC FOUNDATION FUND appear here) SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
SHARES VALUE - ------------------------------------------------------------------------------ COMMON STOCK-- CONTINUED HEALTHCARE PRODUCTS & SERVICES-- CONTINUED 8,250 * Bio-Rad Laboratories, Inc. Cl. A.... $ 247,500 5,000 * Lincare Holdings, Inc............... 252,188 2,000 Medtronic, Inc...................... 94,000 10,000 Pfizer, Inc......................... 600,625 10,000 Rhone Poulenc Rorer, Inc............ 966,875 5,000 Shared Medical System Corp.......... 264,375 15,000 U.S. Surgical Corp.................. 437,812 ---------- 6,038,262 ---------- INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 2.7% 3,300 Applied Power, Inc., Cl. A.......... 207,694 14,751 Autoliv, Inc........................ 626,917 5,000 Cadmus Communications Corp.......... 102,500 7,500 * Chemfab Corp........................ 161,250 16,000 Fisher Scientific International, Inc............................... 751,000 12,000 Furon Co............................ 492,750 25,000 Meade Instruments Corp.............. 240,625 13,900 Snap-on, Inc........................ 640,269 20,000 Timken Co. (The).................... 801,250 10,000 * UCAR International, Inc............. 477,500 ---------- 4,501,755 ---------- INFORMATION SERVICES & TECHNOLOGY-- 1.3% 24,000 Intel Corp.......................... 2,215,500 ---------- PUBLISHING, BROADCASTING & ENTERTAINMENT-- 0.3% 10,000 Belo (A.H.) Corp., Ser. A........... 485,000 ---------- REAL ESTATE-- 6.8% 8,800 * Alexander's, Inc.................... 723,800 50,000 * Boston Properties, Inc. REIT........ 1,640,625 20,000 Brandywine Realty Trust REIT........ 478,750 12,000 * Capstead Mortgage Corp.............. 312,000 31,400 Continental Homes Holding Corp...... 920,412 25,000 Equity Office Properties Trust REIT.............................. 848,437 13,500 Gables Residential Trust REIT....... 366,188 15,725 * HFS, Inc............................ 1,170,530 24,438 * Homestead Village Properties, Inc............................... 433,774 293 * Homestead Village Properties, Inc., Warrants $10.00 Expiring 10/29/97.......................... 2,381 40,000 INMC Mortgage Holdings, Inc. REIT... 1,000,000 15,000 * Interstate Hotels Co................ 489,375 2,000 * John Q. Hammons Hotels, Inc., Cl. A................................. 17,500 30,000 Kilroy Realty Corp. REIT............ 810,000 19,000 Patriot American Hospitality, Inc. REIT.............................. 605,625 20,000 Prentiss Properties Trust REIT...... 577,500 3,485 Security Capital Pacific Trust REIT.............................. 81,898 10,000 * SL Green Reality Corp. REIT......... 258,750 25,000 Sunstone Hotel Investors, Inc....... 440,625 ----------- 11,178,170 ----------- SHARES VALUE - -------------------------------------------------------------------------- COMMON STOCK-- CONTINUED RETAILING & WHOLESALE-- 1.1% 16,000 Lowe's Companies., Inc.............. $ 622,000 8,200 Mercantile Stores Co., Inc.......... 516,087 10,000 * Payless Shoesource, Inc............. 596,875 ---------- 1,734,962 ---------- THRIFT INSTITUTIONS-- 1.1% 18,000 Bank United Corp.................... 796,500 15,000 * BankUnited Financial Corp........... 196,875 10,000 Golden West Financial Corp.......... 897,500 ---------- 1,890,875 ---------- TRANSPORTATION-- 0.3% 20,500 * Airnet Systems, Inc................. 494,563 ---------- UTILITIES-- ELECTRIC-- 0.1% 9,900 TNP Enterprises, Inc................ 248,738 ---------- UTILITIES-- TELEPHONE-- 1.1% 10,000 * 360 Communications Co............... 208,750 15,000 Frontier Corp....................... 345,000 8,000 GTE Corp............................ 363,000 18,000 Sprint Corp......................... 900,000 ---------- 1,816,750 ---------- TOTAL COMMON STOCK-- (COST $51,999,830)................ 69,604,173 ----------- CONVERTIBLE PREFERRED STOCKS-- 2.0% BANKS-- 1.2% 63,000 WBK Trust, 10.0%, STRYPES (exchangeable for Westpac Banking Corp. Common Stock)............................ 1,975,050 ----------- TRANSPORTATION-- 0.8% 20,000 CNF Trust I, 6.25%, Series IGL, STRYPES (exchangeable for CNF Transportation, Inc. Common Stock)............................ 1,287,500 ----------- TOTAL CONVERTIBLE PREFERRED STOCKS (COST $2,975,050)................. 3,262,550 -----------
AMOUNT CONVERTIBLE DEBENTURES-- 0.3% ENERGY-- 0.2% Parker Drilling Co., $250,000 5.50%, 8/1/04..................... 303,750 -------- TRANSPORTATION-- 0.1% Personnel Group of America, Inc., 5.75%, 7/1/04, 144A............... TOTAL CONVERTIBLE DEBENTURES 150,000 (COST $400,000)................... 176,625 -------- 480,375 --------
(CONTINUED) 41 (Photo of brick-------------------------------------------------------------- wall and dollar EVERGREEN sign appear here) TAX STRATEGIC FOUNDATION FUND SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------- MUNICIPAL OBLIGATIONS-- 59.3% LONG TERM MUNICIPAL OBLIGATIONS-- 55.0% ALASKA-- 0.6% $1,000,000 Alaska Hsg. Fin. Corp. Mtge. RB, 1996 Ser. A 6.05%, 12/1/17 (MBIA)............ $ 1,026,790 ------------- ARIZONA-- 0.3% 500,000 City of Tucson GO RB, Ser. 1995 5.70%, 7/1/08 (FGIC)............. 538,050 ----------- CALIFORNIA-- 4.0% 500,000 California Edl. Facs. Auth. RB (Carnegie Institution of Washington), Ser. A 5.60%, 10/1/23................... 504,165 700,000 California Hsg. Fin. Agcy. RB Ser. I 5.75%, 2/1/29 (MBIA)............. 704,116 1,000,000 Los Angeles Cnty. Metro Trans. Auth. Sales Tax RB Ser. A 5.13%, 7/1/10 (MBIA)............. 1,019,390 1,200,000 Northern CA Transmission RB Ser. A 5.30%, 5/1/10 (MBIA)............. 1,257,300 1,000,000 Oakland GO Ser. C, Measure K 5.90%, 12/15/22 (MBIA)........... 1,043,250 1,000,000 San Francisco City & Cnty. Intl Aprt. RB Ser. Issue 10-A, (AMT) 5.70%, 5/1/26 (MBIA)............. 1,017,440 1,000,000 Southern CA Pub. Pwr. Auth. RB (Mead Adelanto Proj.) Ser. A 5.00%, 7/1/17 (AMBAC)............ 961,090 ---------- 6,506,751 ---------- COLORADO-- 3.0% 500,000 Arapahoe Cnty. Pub. Hwy. Auth. Capital Imp. Trust Fund Hwy. RB (E-470 Proj.) 6.15%, 8/31/26 (MBIA)............ 537,865 1,475,000 Colorado Hlth. Facs. Auth. RB (P/SL Hlthcare Sys.) Proj. A 6.88%, 2/15/23................... 1,676,632 500,000 Denver City & Cnty. Sch. Dist. # 1 GO RB, Ser. 1994A 6.50%, 6/1/10 (MBIA)............. 575,830 1,070,000 Douglas Cnty. Co. Sch. Dist. # 1 Prerefunded Imp. Ser. A 6.50%, 12/15/16.................. 1,214,611 1,000,000 E-470 Pub. Hwy. Auth. RB Ser. A 5.00%, 9/1/26 (MBIA)............. 938,970 ---------- 4,943,908 ---------- PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------- MUNICIPAL OBLIGATIONS-- CONTINUED DELAWARE-- 0.7% $1,000,000 Delaware Econ. Dev. Auth. Hosp. RB (The Osteopathic Hosp. Assoc. of Delaware/Riverside Hosp.), Ser. A 6.50%, 1/1/08..................... $ 1,116,370 ----------- DISTRICT OF COLUMBIA-- 0.9% 1,500,000 Metro Wash D.C. Aprt. Auth. RB Ser. B 5.50%, 10/1/23 (AMT).............. 1,495,875 ----------- FLORIDA-- 1.6% 300,000 Dade Cnty. Aviation RRB, Ser. 1995A 6.10%, 10/1/11 (AMBAC)............ 327,627 2,000,000 Florida Muni. Pwr Agy. RB Prefunded (Stanton II Proj.) 6.50%, 10/1/20 (AMBAC)............ 2,234,260 ---------- 2,561,887 ---------- GEORGIA-- 2.6% 1,000,000 Atlanta Wtr. & Swr. RB 5.25%, 1/1/27 (FGIC).............. 976,540 1,000,000 Cherokee Cnty. Wtr. & Swr. Auth. RB 5.20%, 8/1/25 (MBIA).............. 989,760 1,000,000 Dalton Util. RRB 6.00%, 1/1/08 (MBIA).............. 1,106,440 1,000,000 Muni. Elec. Auth. Special Obligation Bonds (5Th Crossover Proj. 1) 6.50%, 1/1/17 (MBIA).............. 1,155,510 ---------- 4,228,250 ---------- HAWAII-- 1.3% 2,000,000 Honolulu City & Cnty. GO Prerefunded Ser. A 6.60%, 8/1/04..................... 2,184,600 ---------- ILLINOIS-- 2.0% 1,000,000 Chicago Wastewater Transmission RB 5.00%, 1/1/15 (FGIC).............. 973,990 2,000,000 Metro. Pier & Exposition Auth. RB Prerefunded (McCormick Pl. Expn. A) 6.50%, 6/15/07 (FGIC)............. 2,248,580 ---------- 3,222,570 ---------- MAINE-- 0.6% 1,000,000 Maine Hlth. & High Edl. Fac. Auth. RB Ser. B 5.75%, 7/1/26 (AMBAC)............. 1,025,710 ---------- MASSACHUSETTS-- 3.4% 250,000 Massachusetts Hsg. Fin. Agcy. Hsg. Proj. RRB, 1993 Ser. A 5.95%, 10/1/08 (AMBAC)............ 261,843
(CONTINUED) 42 - ----------------------------------------------------------------(Photo of brick EVERGREEN wall and dollar TAX STRATEGIC FOUNDATION FUND sign appear here) SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
PRINCIPAL AMOUNT VALUE MUNICIPAL OBLIGATIONS-- CONTINUED MASSACHUSETTS-- CONTINUED $ 250,000 Massachusetts Bay Trans. Auth. General Trans. Sys. Bonds, Ser. 1994A 7.00%, 3/1/08..................... $ 294,442 2,335,000 Massachusetts GO Prerefunded Ser. B 6.50%, 8/1/11 (AMBAC)............. 2,563,106 1,500,000 Massachusetts Port. Auth. RB Ser. A 5.00%, 7/1/27..................... 1,407,315 1,000,000 Massachusetts Tpk. Auth. RB (Western Tpke.) Ser. A 5.55%, 1/1/17 (MBIA).............. 1,008,500 ---------- 5,535,206 ---------- MICHIGAN-- 2.9% 1,030,000 Detroit Wtr. Supply Sys. RB Sr. Lien Ser. A 5.75%, 7/1/11 (MBIA).............. 1,109,269 1,000,000 Detroit GO Ser. A 6.80%, 4/1/15..................... 1,152,930 300,000 Michigan Muni. Bond Auth. RB (Local Govt. Loan Prog.), Ser 1994G 6.55%, 11/1/08 (AMBAC)............ 338,199 2,000,000 Monroe Cnty. Econ. Dev. Corp. Ltd. Prerefunded RB (Comm. Hlth. Serv.) 7.00%, 9/1/21 (MBIA).............. 2,232,800 ---------- 4,833,198 ---------- MISSOURI-- 3.1% 480,000 Missouri Hsg. Dev. Commission Single Family Mtge. RB (Homeownership Loan Prog.), 1996 Ser. D 6.00%, 9/1/17 (Collaterialized by GNMA or FNMA Certificates)........ 491,390 935,000 Missouri Hsg. Dev. Commission Single Family Mtge. RB (Homeownership Loan Prog.), 1996 Ser. B 6.25%, 9/1/15 (Collaterialized by GNMA or FNMA Certificates)........ 970,932 2,000,000 Sikeston Elec. Prerefunded RB 6.25%, 6/1/22 (MBIA).............. 2,197,840 500,000 St. Louis Muni. Fin. Corp. Leasehold Rev. Imp. Bonds (City Justice Ctr.), Ser. 1996A 5.95%, 2/15/16 (AMBAC)............ 529,990 PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------- MUNICIPAL OBLIGATIONS-- CONTINUED MISSOURI-- CONTINUED $1,000,000 St. Louis Regl. Convention & Spts Complex Auth. RB Fac. C 5.30%, 8/15/17 (AMBAC)............ $ 992,650 ----------- 5,182,802 ----------- NEVADA-- 2.6% 1,000,000 Clark Cnty. (Las Vegas McCarran Int'l Arpt. Passenger Fac. Charge) RB, 1992 Ser. A 6.00%, 7/1/22 (AMBAC)............. 1,050,780 2,000,000 Clark Cnty. Sanitation Dist. Prerefunded Ser. A 6.80%, 7/1/12..................... 2,230,860 1,000,000 Washoe Cnty. GO 5.00%, 6/1/17 (MBIA).............. 961,190 ---------- 4,242,830 ---------- NEW JERSEY-- 1.7% 1,090,000 New Jersey GO Prerefunded 6.00%, 8/1/05..................... 1,178,693 1,400,000 New Jersey Tpke. Auth. RB Ser. C 6.50%, 1/1/16 (MBIA).............. 1,621,774 ---------- 2,800,467 ---------- NEW YORK-- 5.4% 1,245,000 Metro Trans. Auth. Fac. RB Prerefunded Ser. L 6.63%, 7/1/14..................... 1,387,366 375,000 New York GO Ser. L 5.38%, 8/1/11 (MBIA).............. 382,714 250,000 New York St. Mtge. Agcy. Homeowner Mtge. RB, Ser. 44 (AMT) 6.60%, 4/1/03..................... 262,687 1,000,000 New York St. Mtge. Agcy. Homeowner Mtge. RB, Ser. 56 (AMT) 5.88%, 10/1/19.................... 1,026,850 245,000 New York St. Med. Care Facs. Fin. Agcy. RB (Mental Hlth. Svcs. Facs.), 1992 Ser. B 6.25%, 8/15/10 (AMBAC)............ 261,831 500,000 New York St. Med. Care Facs. Fin. Agcy. RB (Mental Hlth. Svcs. Facs.), 1995 Ser. A 6.00%, 2/15/25 (MBIA)............. 525,185 500,000 New York St. Mtge. Agcy. RB (Homeowner Mtge.) Ser. 63, (AMT) 5.60%, 4/1/10..................... 509,945 1,000,000 New York St. Thruway Auth. General RB, Ser. C 6.00%, 1/1/25 (FGIC).............. 1,051,330
(CONTINUED) 43 (Photo of brick-------------------------------------------------------------- wall and dollar EVERGREEN sign appear here) TAX STRATEGIC FOUNDATION FUND SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------- MUNICIPAL OBLIGATIONS-- CONTINUED NEW YORK-- CONTINUED $1,000,000 New York St. Thruway Auth. RB Ser. B 5.00%, 1/1/20 (MBIA).............. $ 944,760 250,000 Port Auth. of New York & New Jersey Consolidated Bonds, 97th Ser. 2nd Installment (AMT) 7.00%, 7/15/05 (FGIC)............. 289,258 2,000,000 Port Auth. of New York & New Jersey Special Obligation RB (JFK Intl. Airport Terminal 6 Proj.) 6.25%, 12/1/10 (MBIA)............. 2,247,140 ---------- 8,889,066 ---------- NORTH CAROLINA-- 0.3% 500,000 North Carolina Hsg. Fin. Agy. Single Family Ser. 00, (Orig. Avg. Life Est.) 5.80%, 9/1/12 (FHA)............... 518,585 ---------- NORTH DAKOTA-- 0.6% 1,000,000 Mercer Cnty. Poll. Ctrl. RRB (Basin Elec. Pwr. Cooperative-Antelope Valley Unit 1 & Common Facs.), Second 1995 Ser. 6.05%, 1/1/19 (AMBAC)............. 1,060,200 ----------- OHIO-- 0.5% 700,000 Board of Ed. Beavercreek Local Sch. Dist. (Cnty. of Greene) Sch. Imp. Bonds (Unltd. Tax GO), Ser. 1996 6.60%, 12/1/15 (FGIC)............. 823,361 ---------- PENNSYLVANIA-- 4.9% 1,965,000 Pennsylvania Intergovernmental Coop. Auth. Spec. Tax Rev. Phil. Funding Prog., Prerefunded 6.80%, 6/15/12.................... 2,173,978 1,450,000 Pennsylvania Intergovernmental Coop. Auth. Spec. Tax Rev. Phil. Funding Prog., Prerefunded 7.00%, 6/15/14.................... 1,684,813 3,000,000 Pennsylvania Tpke. Commission RB Ser. J, Prerefunded 7.15%, 12/1/11 (FGIC)............. 3,379,320 750,000 Philadelphia Wtr. & Wastewater RB 6.25%, 8/1/11 (MBIA).............. 850,815 ---------- 8,088,926 ---------- TENNESSEE-- 0.2% 300,000 Bristol Hlth. & Edl. Facs. Board RRB (Bristol Mem. Hosp.), Ser. 1993 6.75%, 9/1/07 (FGIC).............. 347,523 -------- PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------ MUNICIPAL OBLIGATIONS-- CONTINUED TEXAS-- 6.6% $1,000,000 Dallas GO, Prerefunded 6.13%, 2/15/05.................... $ 1,085,200 1,000,000 Harris Cnty. RB (Toll Road Sr. Lien) 5.00%, 8/15/24 (MBIA)............. 944,910 1,000,000 Houston Wtr. Conveyance Sys. Contract COP, Ser. 1993J 6.13%, 12/15/09 (AMBAC)........... 1,123,230 500,000 Houston Wtr. Conveyance Sys. Contract COP, Ser. 1993H 7.50%, 12/15/10 (AMBAC)........... 627,510 500,000 Houston Wtr. & Swr. Sys. RB Jr. Lien Ser. D 5.00%, 12/1/25 (FGIC)............. 471,870 1,000,000 San Antonio Elec. & Gas RB 5.25%, 2/1/10..................... 1,017,900 1,500,000 Tarrant Cnty. Hlth. Facs. Dev. Corp. Hlth. Res. Sys. Ser. A 5.25%, 2/15/17 (MBIA)............. 1,462,530 1,000,000 Texas Muni. Pwr. Agy. RB 5.25%, 9/1/09 (MBIA).............. 1,046,000 1,000,000 Texas Wtr. Dev. Board RB Sr. Lien Ser. B 5.13%, 7/15/18.................... 971,890 2,000,000 Univ. of Texas Permanent Univ. Fund RB Prerefunded 6.50%, 7/1/11..................... 2,192,240 ----------- 10,943,280 ----------- UTAH-- 0.7% 500,000 Salt Lake City Hosp. RB (IHC Hospitals, Inc.) 6.30%, 2/15/15.................... 557,495 500,000 Utah Hsg. Fin. Agcy. RB (Single Family Mtge.) Ser. B 6.00%, 7/1/16 (FHA)............... 517,745 ---------- 1,075,240 ---------- VIRGINIA-- 2.0% 2,000,000 Hanover Cnty. Indl. Dev. Auth. (Mem. Regl. Med. Center Proj. at Hanover Med. Park), Ser. 1995 6.38%, 8/15/18 (MBIA)............. 2,288,680 1,000,000 Virginia Pub. Bldg. Auth. Facs. RB Ser. A 5.38%, 8/1/10..................... 1,040,380 ---------- 3,329,060 ---------- WASHINGTON-- 0.6% 500,000 Snohomish Cnty. Sch. Dist. GO 5.70%, 12/1/15 (FGIC)............. 520,235 500,000 Vancouver Wtr. & Swr. RB 5.25%, 6/1/17 (MBIA).............. 491,535 ---------- 1,011,770 ----------
(CONTINUED) 44 - ----------------------------------------------------------------(Photo of brick EVERGREEN wall and dollar TAX STRATEGIC FOUNDATION FUND sign appear here) SCHEDULE OF INVESTMENTS (CONTINUED) September 30, 1997 (Unaudited)
PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------- MUNICIPAL OBLIGATIONS-- CONTINUED WEST VIRGINIA-- 0.6% $1,000,000 West Virginia St. Hsg. Dev. Fund RB Ser. A 6.05%, 5/1/27..................... $ 1,032,560 ---------- WISCONSIN-- 0.3% 500,000 Wisconsin Hsg. & Econ. Dev. Auth. Home Ownership RB Ser. E (AMT) 6.00%, 9/1/28..................... 512,670 --------- PUERTO RICO-- 1.0% 500,000 Puerto Rico Elec. Pwr. Auth. RB Ser. BB 6.25%, 7/1/10 (MBIA).............. 569,535 500,000 Puerto Rico Hsg. Bank & Fin. Agcy. RB (Single Family Affordable Hsg. Mtge. Subsidy Prog.) Portfolio I (AMT) 5.85%, 4/1/09 (Collaterialized by GNMA, FNMA & FHLMC Certificates)..................... 514,530 500,000 Puerto Rico Pub. Bldgs Auth. RB Govt. Fac. Ser. B 5.10%, 7/1/10 (MBIA).............. 509,265 ---------- 1,593,330 ---------- TOTAL LONG TERM MUNICIPAL OBLIGATIONS (COST $88,818,357)................ 90,670,835 ----------- SHORT TERM MUNICIPAL OBLIGATIONS-- 4.3% GEORGIA-- 0.9% 1,500,000 Hapeville Dev. Auth. Indl. Dev. RB (Hapeville Hotel Ltd. Partnership Proj.), Ser. 1985 3.85%-- VRDN (LOC: Swiss Bank Corp.)............................ 1,500,000 NEW YORK-- 3.4% 2,000,000 New York City GO, Fiscal 1995 Ser. B Sub-Ser. B-7 3.85%-- VRDN (AMBAC).............. 2,000,000 3,500,000 New York City Muni. Wtr. Fin. Auth.; Wtr. and Swr. Sys. RB, 1993 Ser. C 3.85%-- VRDN (FGIC)............... 3,500,000 ---------- 5,500,000 ---------- PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------- TOTAL SHORT TERM MUNICIPAL OBLIGATIONS (COST $7,000,000)................. $ 7,000,000 ----------- TOTAL MUNICIPAL OBLIGATIONS (COST $95,818,357)................ 97,670,835 ----------- MUTUAL FUND SHARES-- 0.0% (A) 67,000 Federated Tax Free Obligations Fund (COST $67,000).................... 67,000 -----------
TOTAL INVESTMENTS-- (COST $151,260,237)..... 103.8% 171,084,933 OTHER ASSETS AND LIABILITIES-- NET....... (3.8)% (6,275,691) ------- ------------- NET ASSETS-- 100.0% $164,809,242 ======= =============
THE FOLLOWING ABBREVIATIONS ARE USED IN THIS PORTFOLIO: ADS American Depository Shares AMT Subject to Alternative Minimum Tax COP Certificate of Participation FHA Federal Housing Authority FHLMC Federal Home Loan Mortgage Corp. FNMA Federal National Mortgage Corp. GO General Obligations GNMA Government National Mortgage Corp. LOC Letter of Credit RB Revenue Bonds REIT Real Estate Investment Trust RRB Refunding Revenue Bonds STRYPES Structured Yield Product Exchangeable for Stock VRDN Variable Rate Demand Notes are payable on demand at par on no more than seven calendar days' notice given by the Fund to the issuer or other parties not affiliated with the issuer. These notes normally incorporate an irrevocable letter of credit or line of credit from a major bank. Interest rates presented for these securities are those in effect as of September 30, 1997.
MUNICIPAL BOND INSURANCE COMPANIES: AMBAC American Municipal Bond Assurance Corp. FGIC Financial Guarantee Insurance Corp. MBIA Municipal Bond Insurance Association 144A Rule 144A securities are restricted as to resale to qualified institutional investors.
* Non income producing security. ** At September 30, 1997, the Fund owned 3,000 shares of common stock of First Union Corp. at a cost of $57,890. During the period ended September 30, 1997, the Fund earned $1,830 in dividend income from this investment. These shares were purchased by the Fund prior to the acquisition of the investment adviser and Lieber & Company by First Union. (a) Less than one-tenth of a percent. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 45 (Photo of pine cone and branches appears here) EVERGREEN STATEMENTS OF ASSETS AND LIABILITIES September 30, 1997 (Unaudited)
(Photo) (Photo) (Photo) (Photo) AMERICAN TAX STRATEGIC RETIREMENT BALANCED FOUNDATION FOUNDATION FUND FUND FUND FUND - ------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments, at market value (identified cost, $162,507,133, $852,367,129, $1,649,976,202, $151,260,237, respectively).............................................. $193,909,739 $ 980,915,664 $2,133,924,739 $171,084,933 Cash......................................................... 7,636 0 15,229 1,233,703 Receivable for investments sold.............................. 2,332,425 24,895,549 57,742 0 Receivable for Fund shares sold.............................. 958,171 197,221 6,234,488 3,383,429 Dividends and interest receivable............................ 981,001 9,475,994 9,507,845 1,451,496 Prepaid expenses and other assets............................ 84,898 56,172 56,166 65,780 - ------------------------------------------------------------------------------------------------------------------------------ Total assets............................................. 198,273,870 1,015,540,600 2,149,796,209 177,219,341 - ------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable for investments purchased............................ 13,463,401 26,792,553 12,000,483 12,139,771 Payable for Fund shares repurchased.......................... 174,328 2,236,096 1,497,065 27,268 Management fee payable....................................... 135,534 432,042 1,312,936 125,534 Distribution Plan expenses payable........................... 89,263 82,279 616,549 77,589 Due to affiliates............................................ 0 28,428 0 0 Accrued expenses and other liabilities....................... 34,847 113,423 111,991 39,937 - ------------------------------------------------------------------------------------------------------------------------------ Total liabilities........................................ 13,897,373 29,684,821 15,539,024 12,410,099 - ------------------------------------------------------------------------------------------------------------------------------ NET ASSETS..................................................... $184,376,497 $ 985,855,779 $2,134,257,185 $164,809,242 - ------------------------------------------------------------------------------------------------------------------------------ NET ASSETS REPRESENTED BY Paid-in capital.............................................. $149,184,528 $ 752,060,631 $1,621,677,242 $143,778,789 Undistributed net investment income.......................... 79,873 250,843 318,223 55,155 Accumulated undistributed net realized gains on investments................................................ 3,709,490 104,995,770 28,313,183 1,150,602 Net unrealized appreciation on investments................... 31,402,606 128,548,535 483,948,537 19,824,696 - ------------------------------------------------------------------------------------------------------------------------------ Total net assets......................................... $184,376,497 $ 985,855,779 $2,134,257,185 $164,809,242 - ------------------------------------------------------------------------------------------------------------------------------ NET ASSETS CONSISTS OF Class A...................................................... $22,569,457 $ 46,014,346 $ 282,258,724 $36,942,860 Class B...................................................... 120,101,008 119,797,058 840,047,090 98,085,668 Class C...................................................... 2,130,175 509,754 36,982,221 11,942,992 Class Y...................................................... 39,575,857 819,534,621 974,969,150 17,837,722 - ------------------------------------------------------------------------------------------------------------------------------ Total net assets......................................... $184,376,497 $ 985,855,779 $2,134,257,185 $164,809,242 - ------------------------------------------------------------------------------------------------------------------------------ SHARES OUTSTANDING Class A...................................................... 1,407,993 3,303,565 14,902,252 2,388,969 Class B...................................................... 7,532,121 8,598,683 44,542,417 6,349,968 Class C...................................................... 133,304 36,791 1,961,329 774,493 Class Y...................................................... 2,468,868 58,842,876 51,427,472 1,150,794 - ------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE Class A...................................................... $ 16.03 $ 13.93 $ 18.94 $ 15.46 - ------------------------------------------------------------------------------------------------------------------------------ Class A-- Offering price (based on maximum initial sales charge of 4.75%)........................................... $ 16.83 $ 14.62 $ 19.88 $ 16.23 - ------------------------------------------------------------------------------------------------------------------------------ Class B...................................................... $ 15.95 $ 13.93 $ 18.86 $ 15.45 - ------------------------------------------------------------------------------------------------------------------------------ Class C...................................................... $ 15.98 $ 13.86 $ 18.86 $ 15.42 - ------------------------------------------------------------------------------------------------------------------------------ Class Y...................................................... $ 16.03 $ 13.93 $ 18.96 $ 15.50 - ------------------------------------------------------------------------------------------------------------------------------
SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 46 (Photo of pine cones and EVERGREEN branches appears here) STATEMENTS OF OPERATIONS Six months ended September 30, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------ (Photo) (Photo) (Photo) (Photo) AMERICAN TAX STRATEGIC RETIREMENT BALANCED FOUNDATION FOUNDATION FUND FUND FUND FUND INVESTMENT INCOME Interest...................................................... $ 1,957,588 $16,322,615 $23,965,812 $ 1,598,452 Dividends (net of foreign withholding taxes of $11,085, $0, $3,933, and $587, respectively)............................. 1,707,937 5,339,110 12,506,167 429,876 - ------------------------------------------------------------------------------------------------------------------------------ Total income.............................................. 3,665,525 21,661,725 36,471,979 2,028,328 EXPENSES Management fee................................................ 590,274 2,398,336 7,364,929 499,087 Distribution Plan expenses.................................... 526,001 634,552 4,075,603 376,183 Transfer agent fees........................................... 169,068 277,501 1,613,895 73,058 Administrative services fees.................................. 0 170,177 0 0 Trustees fees................................................. 4,935 14,919 15,251 3,129 Custodian fees................................................ 23,438 193,984 187,408 13,318 Other......................................................... 81,363 146,764 269,821 40,541 - ------------------------------------------------------------------------------------------------------------------------------ Total expenses............................................ 1,395,079 3,836,233 13,526,907 1,005,316 Less: Indirectly paid expenses................................ (2,151) (2,137) (5,261) (3,909) - ------------------------------------------------------------------------------------------------------------------------------ Net expenses.............................................. 1,392,928 3,834,096 13,521,646 1,001,407 - ------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME......................................... 2,272,597 17,827,629 22,950,333 1,026,921 - ------------------------------------------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on investments.............................. 3,896,003 105,107,762 28,477,168 1,203,899 Net change in unrealized appreciation on investments.......... 20,451,552 26,720,894 300,785,397 13,674,179 - ------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments................. 24,347,555 131,828,656 329,262,565 14,878,078 - ------------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $26,620,152 $149,656,285 $352,212,898 $15,904,999 - ------------------------------------------------------------------------------------------------------------------------------
SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 47 (Photo of pine cones and branches appears here) EVERGREEN STATEMENTS OF CHANGES IN NET ASSETS Six months ended September 30, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------ (Photo) (Photo) (Photo) (Photo) AMERICAN TAX STRATEGIC RETIREMENT BALANCED FOUNDATION FOUNDATION FUND FUND FUND FUND OPERATIONS Net investment income......................................... $ 2,272,597 $17,827,629 $ 22,950,333 $ 1,026,921 Net realized gain on investments.............................. 3,896,003 105,107,762 28,477,168 1,203,899 Net change in unrealized appreciation on investments.......... 20,451,552 26,720,894 300,785,397 13,674,179 - ------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets resulting from operations........ 26,620,152 149,656,285 352,212,898 15,904,999 - ------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A..................................................... (306,948) (803,175) (3,292,493) (277,277) Class B..................................................... (1,243,406) (1,667,559) (6,887,298) (465,328) Class C..................................................... (22,372) (6,764) (302,699) (54,463) Class Y..................................................... (631,345) (15,345,823) (12,590,707) (205,154) Net realized gain on investments Class A..................................................... (50,054) (2,708,135) (2,266,859) (206,978) Class B..................................................... (268,074) (6,890,880) (6,486,778) (530,383) Class C..................................................... (5,025) (27,504) (284,153) (64,519) Class Y..................................................... (101,776) (47,382,895) (8,106,840) (114,361) - ------------------------------------------------------------------------------------------------------------------------------ Total distributions to shareholders......................... (2,629,000) (74,832,735) (40,217,827) (1,918,463) - ------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Class A..................................................... 5,140,448 1,115,063 21,403,235 18,745,144 Class B..................................................... 28,294,388 3,505,058 116,692,352 51,454,288 Class C..................................................... 82,096 123,489 3,971,685 5,969,170 Class Y..................................................... (3,517,976) (10,587,584) 25,503,995 379,455 - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from capital share transactions........................................ 29,998,956 (5,843,974) 167,571,267 76,548,057 - ------------------------------------------------------------------------------------------------------------------------------ Total increase in net assets.............................. 53,990,108 68,979,576 479,566,338 90,534,593 - ------------------------------------------------------------------------------------------------------------------------------ NET ASSETS Beginning of period........................................... 130,386,389 916,876,203 1,654,690,847 74,274,649 - ------------------------------------------------------------------------------------------------------------------------------ END OF PERIOD................................................. $184,376,497 $985,855,779 $2,134,257,185 $164,809,242 - ------------------------------------------------------------------------------------------------------------------------------ Undistributed net investment income............................. $ 79,873 $ 250,843 $ 318,223 $ 55,155 - ------------------------------------------------------------------------------------------------------------------------------
SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 48 (Photo of pine cones and EVERGREEN branches appears here) STATEMENTS OF CHANGES IN NET ASSETS Three Months Ended March 31, 1997*
- ------------------------------------------------------------------------------------------------------------------------------- (Photo) (Photo) (Photo) (Photo) AMERICAN TAX STRATEGIC RETIREMENT BALANCED FOUNDATION FOUNDATION FUND FUND FUND FUND OPERATIONS Net investment income......................................... $ 916,564 $ 8,751,104 $ 10,995,411 $ 316,568 Net realized gain on investments.............................. 274,144 56,839,210 7,808,618 865,777 Net change in unrealized appreciation (depreciation) on investments................................................. (1,782,365) (62,291,441) (22,555,700) (916,721) - ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations................................................ (591,657) 3,298,873 (3,751,671) 265,624 - ------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A..................................................... (114,069) (369,566) (1,460,563) (69,706) Class B..................................................... (485,797) (786,903) (3,012,553) (123,210) Class C..................................................... (11,029) (2,467) (138,668) (16,785) Class Y..................................................... (323,235) (7,410,252) (5,968,305) (78,613) - ------------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders......................... (934,130) (8,569,188) (10,580,089) (288,314) - ------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Class A..................................................... 3,671,829 (1,518,600) 15,311,573 3,898,394 Class B..................................................... 20,234,620 (1,586,498) 41,126,464 10,911,137 Class C..................................................... 304,125 251 1,497,047 970,077 Class Y..................................................... (3,766,017) (6,504,902) (1,068,567) 235,053 - ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from capital share transactions........................................ 20,444,557 (9,609,749) 56,866,517 16,014,661 - ------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets................... 18,918,770 (14,880,064) 42,534,757 15,991,971 - ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Beginning of period........................................... 111,467,619 931,756,267 1,612,156,090 58,282,678 - ------------------------------------------------------------------------------------------------------------------------------- End of period................................................. $130,386,389 $916,876,203 $1,654,690,847 $74,274,649 - ------------------------------------------------------------------------------------------------------------------------------- Undistributed net investment income............................. $ 11,347 $ 246,535 $ 441,087 $ 30,456 - -------------------------------------------------------------------------------------------------------------------------------
* THE FUNDS CHANGED THEIR FISCAL YEAR END FROM DECEMBER 31 TO MARCH 31. SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 49 (Photo of pine cones EVERGREEN and branches appears here) STATEMENTS OF CHANGES IN NET ASSETS Year Ended December 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------- (Logo) (Logo) (Logo) (Logo) AMERICAN TAX STRATEGIC RETIREMENT BALANCED FOUNDATION FOUNDATION FUND FUND FUND FUND OPERATIONS Net investment income......................................... $ 2,435,368 $38,768,775 $ 45,192,977 $ 858,454 Net realized gain on investments.............................. 537,906 74,563,015 21,629,530 1,133,442 Net change in unrealized appreciation (depreciation) on investments................................................. 6,223,491 (8,122,510) 96,176,448 4,531,613 - ----------------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations........ 9,196,765 105,209,280 162,998,955 6,523,509 - ----------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A..................................................... (214,502) (1,699,709) (5,718,718) (163,381) Class B..................................................... (839,295) (3,505,791) (12,786,120) (306,929) Class C..................................................... (22,543) (9,398) (568,120) (42,461) Class Y..................................................... (1,330,115) (33,878,986) (26,366,104) (342,618) In excess of net investment income Class A..................................................... 0 0 0 (121) Class B..................................................... 0 0 0 (226) Class C..................................................... 0 0 0 (31) Class Y..................................................... 0 0 0 (253) Net realized gain on investment Class A..................................................... (61,826) (3,402,462) (1,819,496) (209,265) Class B..................................................... (302,689) (8,639,808) (5,077,907) (555,359) Class C..................................................... (7,483) (28,096) (231,947) (82,045) Class Y..................................................... (321,583) (62,657,565) (7,335,097) (303,414) In excess of net realized gain in investment Class A..................................................... (3,185) 0 0 0 Class B..................................................... (15,592) 0 0 0 Class C..................................................... (385) 0 0 0 Class Y..................................................... (16,566) 0 0 0 - ----------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders......................... (3,135,764) (113,821,815) (59,903,509) (2,006,103) - ----------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Class A..................................................... 9,277,590 1,734,257 85,968,709 7,701,565 Class B..................................................... 50,421,437 1,833,803 237,036,022 19,431,340 Class C..................................................... 1,310,608 64,578 13,452,660 3,335,899 Class Y..................................................... (1,214,773) (32,534,086) 134,914,397 53,935 - ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from capital share transactions........................................ 59,794,862 (28,901,448) 471,371,788 30,522,739 - ----------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets................... 65,855,863 (37,513,983) 574,467,234 35,040,145 - ----------------------------------------------------------------------------------------------------------------------------- NET ASSETS Beginning of period........................................... 45,611,756 969,270,250 1,037,688,856 23,242,533 - ----------------------------------------------------------------------------------------------------------------------------- End of period................................................. $111,467,619 $931,756,267 $1,612,156,090 $58,282,678 - ----------------------------------------------------------------------------------------------------------------------------- Undistributed (accumulated distributions in excess of) net investment income............................................. $ 28,913 $ 115,118 $ 25,764 $ (631) - -----------------------------------------------------------------------------------------------------------------------------
SEE COMBINED NOTES TO FINANCIAL STATEMENTS. 50 (Photo of pine cones EVERGREEN and branches appears here) COMBINED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION The Evergreen Balanced Funds consist of Evergreen American Retirement Fund ("American Retirement"), Evergreen Balanced Fund ("Balanced"), Evergreen Foundation Fund ("Foundation") and Evergreen Tax Strategic Foundation Fund ("Tax Strategic"), each of which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as diversified, open-end management investment companies. American Retirement is a separate series of the Evergreen American Retirement Trust, a Massachusetts business trust organized in 1987. Balanced is a separate investment series of Evergreen Investment Trust, a Massachusetts business trust organized in 1984. Foundation and Tax Strategic are separate series of the Evergreen Foundation Trust, a Massachusetts business trust organized in 1989. American Retirement, Balanced, Foundation and Tax Strategic are collectively referred herein as the "Funds". The Funds offer Class A, Class B, Class C and Class Y shares. Class A shares are sold with a maximum front-end sales charge of 4.75%. Class B and Class C shares are sold without a front-end sales charge, but pay higher ongoing distribution expenses than Class A. Class B shares are sold subject to a contingent deferred sales charge that is payable upon redemption and decreases depending on how long the shares have been held. Class C shares are sold subject to a contingent deferred sales charge payable on shares redeemed within one year after the month of purchase. Class B shares 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 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. 2. ACQUISITION INFORMATION Effective at the close of business on July 17, 1997, Foundation acquired the net assets of Keystone Balanced Fund II, an open-end management investment company registered under the 1940 Act in an exchange of shares. The net assets were exchanged through a non-taxable exchange for 111,203, 316,984, and 36,146 Class A, Class B and Class C shares, respectively, of Foundation. The acquired net assets consisted primarily of portfolio securities with unrealized appreciation of $1,216,239. The aggregate net assets of Foundation and Keystone Balanced Fund II immediately prior to the acquisition were $1,984,767,050 and $8,490,928, respectively. The aggregate net assets of Foundation immediately after the acquisition were $1,993,257,978. 3. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The policies are in conformity with generally accepted accounting principles, which require management to make estimates and assumptions that affect amounts reported herein. Actual results could differ from these estimates. A. VALUATION OF SECURITIES The Funds value securities traded on a national securities exchange or included on the NASDAQ National Market System ("NMS") at the last reported sales price on the exchange where primarily traded. The Funds value securities traded on an exchange or NMS for which there has been no sale and other securities traded in the over-the-counter market at the mean between the last reported bid and asked prices. Corporate bonds, other fixed-income securities, and mortgage and other asset-backed securities are valued at prices provided by an independent pricing service. In determining value for normal institutional-size transactions, the pricing service uses methods based on market transactions for comparable securities and analysis of various relationships between similar securities which are generally recognized by institutional traders. Securities for which valuations are not available from an independent pricing service, including restricted securities, are valued at fair value as determined in good faith according to procedures established by the Board of Trustees. Short-term investments with remaining maturities of 60 days or less are carried at amortized cost, which approximates market value. B. REPURCHASE AGREEMENTS Each Fund may invest in repurchase agreements. Securities pledged as collateral for repurchase agreements are held by the custodian on each Fund's behalf. Each Fund monitors the adequacy of the collateral daily and will require the seller to provide additional collateral in the event the market value of the securities pledged falls below the carrying value of the repurchase agreement, including accrued interest. Each Fund will only enter into repurchase agreements with banks and other financial institutions which are deemed by the investment advisor to be creditworthy pursuant to guidelines established by the Board of Trustees. 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 and amortization of premiums. Dividend income is recorded on the ex-dividend date. D. FEDERAL TAXES The Funds have qualified and intend to continue to qualify as regulated investment companies under the Internal Revenue Code of 1986, as amended (the "Code"). Thus, the Funds will not incur any federal income tax liability since they are expected to distribute all of their net 51 (Photo of pine cones and branches appears here) EVERGREEN COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED) investment company taxable income, net tax-exempt income and net capital gains, if any, to their shareholders. The Funds also intend to avoid any excise tax liability by making the required distributions under the Code. Accordingly, no provision for federal taxes is required. E. DISTRIBUTIONS Distributions from net investment income for the Funds are declared and paid quarterly. 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 accordance with income tax regulations, which may differ from generally accepted accounting principles. The significant differences between financial statement amounts available for distributions and distributions made in accordance with income tax regulations are primarily due to differing treatments for realized gains from foreign currency related transactions and certain distributions received from real estate investment trusts. 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 relative net assets of each class. Currently, class specific expenses are limited to expenses incurred under the Distribution Plans for each class. G. ORGANIZATION EXPENSES Organization expenses of Tax Strategic are amortized to operations over a five-year period on a straight-line basis. In the event any of the initial shares of Tax Strategic are redeemed by any holder during the five-year amortization period, redemption proceeds will be reduced by any unamortized organization expenses in the same proportion as the number of initial shares being redeemed bears to the number of initial shares outstanding at the time of the redemption. 4. CAPITAL SHARE TRANSACTIONS The Funds have an unlimited number of shares of beneficial interest with a par value of $0.0001 authorized. Shares of beneficial interest of the Funds are currently divided into Class A, Class B, Class C and Class Y. Transactions in shares of the Funds were as follows:
- ---------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED THREE MONTHS ENDED YEAR ENDED SEPTEMBER 30, 1997 MARCH 31, 1997* DECEMBER 31, 1996 AMERICAN RETIREMENT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CLASS A Shares sold........................................ 409,427 $ 6,073,868 326,820 $ 4,608,875 762,980 $10,140,786 Shares redeemed.................................... (85,786) (1,277,382) (74,356) (1,044,019) (84,770) (1,127,903) Shares issued in reinvestment of distributions..... 22,332 343,962 7,652 106,973 19,559 264,707 - ---------------------------------------------------------------------------------------------------------------------------------- Net increase....................................... 345,973 5,140,448 260,116 3,671,829 697,769 9,277,590 - ---------------------------------------------------------------------------------------------------------------------------------- CLASS B Shares sold........................................ 2,083,865 30,766,495 1,531,877 21,511,234 3,892,133 51,648,645 Shares redeemed.................................... (264,741) (3,928,479) (124,007) (1,740,809) (175,385) (2,331,018) Shares issued in reinvestment of distributions..... 95,096 1,456,372 33,372 464,195 81,733 1,103,810 - ---------------------------------------------------------------------------------------------------------------------------------- Net increase....................................... 1,914,220 28,294,388 1,441,242 20,234,620 3,798,481 50,421,437 - ---------------------------------------------------------------------------------------------------------------------------------- CLASS C Shares sold........................................ 36,303 522,994 25,543 360,283 100,739 1,334,965 Shares redeemed.................................... (33,868) (467,693) (4,726) (66,693) (3,928) (53,590) Shares issued in reinvestment of distributions..... 1,748 26,795 755 10,535 2,161 29,233 - ---------------------------------------------------------------------------------------------------------------------------------- Net increase....................................... 4,183 82,096 21,572 304,125 98,972 1,310,608 - ---------------------------------------------------------------------------------------------------------------------------------- CLASS Y Shares sold........................................ 147,975 2,204,642 87,120 1,231,385 287,843 3,807,908 Shares redeemed.................................... (428,371) (6,323,531) (370,659) (5,263,594) (481,537) (6,415,509) Shares issued in reinvestment of distributions..... 39,114 600,913 19,041 266,192 103,943 1,392,828 - ---------------------------------------------------------------------------------------------------------------------------------- Net decrease....................................... (241,282) (3,517,976) (264,498) (3,766,017) (89,751) (1,214,773) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase resulting from Fund share transactions..................................... 2,023,094 $29,998,956 1,458,432 $20,444,557 4,505,471 $59,794,862 - ----------------------------------------------------------------------------------------------------------------------------------
* THE FUND CHANGED ITS FISCAL YEAR END FROM DECEMBER 31 TO MARCH 31, EFFECTIVE MARCH 31, 1997. 52 (Photo of pine cones EVERGREEN and branches appears here) COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED THREE MONTHS ENDED YEAR ENDED SEPTEMBER 30, 1997 MARCH 31, 1997* DECEMBER 31, 1996 BALANCED SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CLASS A Shares sold................................. 174,254 $ 2,386,143 82,428 $ 1,093,429 450,824 $ 5,988,616 Shares redeemed............................. (337,830) (4,674,848) (223,885) (2,966,293) (680,925) (9,159,435) Shares issued in reinvestment of distributions............................. 248,262 3,403,768 26,899 354,264 372,747 4,905,076 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease)..................... 84,686 1,115,063 (114,558) (1,518,600) 142,646 1,734,257 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B Shares sold................................. 274,021 3,770,254 165,348 2,196,560 529,783 7,095,087 Shares redeemed............................. (612,027) (8,507,341) (341,159) (4,533,333) (1,260,613) (16,901,766) Shares issued in reinvestment of distributions............................. 601,851 8,242,145 56,925 750,275 883,591 11,640,482 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease)..................... 263,845 3,505,058 (118,886) (1,586,498) 152,761 1,833,803 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C Shares sold................................. 9,451 126,236 3,813 50,440 19,191 256,143 Shares redeemed............................. (2,663) (35,601) (3,891) (51,872) (16,775) (220,556) Shares issued in reinvestment of distributions............................. 2,412 32,854 128 1,683 2,215 28,991 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase................................ 9,200 123,489 50 251 4,631 64,578 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS Y Shares sold................................. 6,444,462 88,579,312 3,764,660 49,606,477 16,615,288 221,340,376 Shares redeemed............................. (9,313,258) (127,376,397) (4,480,218) (59,399,461) (22,526,104) (302,083,357) Shares issued in reinvestment of distributions............................. 2,056,772 28,209,501 249,854 3,288,082 3,659,774 48,208,895 - ------------------------------------------------------------------------------------------------------------------------------------ Net decrease................................ (812,024) (10,587,584) (465,704) (6,504,902) (2,251,042) (32,534,086) - ------------------------------------------------------------------------------------------------------------------------------------ Net decrease resulting from Fund share transactions.............................. (454,293) $ (5,843,974) (699,098) $ (9,609,749) (1,951,004) $ (28,901,448) - ------------------------------------------------------------------------------------------------------------------------------------
* THE FUND CHANGED ITS FISCAL YEAR END FROM DECEMBER 31 TO MARCH 31, EFFECTIVE MARCH 31, 1997. 53 (Photo of pine cones and branches appears here) EVERGREEN COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED THREE MONTHS ENDED YEAR ENDED SEPTEMBER 30, 1997 MARCH 31, 1997* DECEMBER 31, 1996 FOUNDATION SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CLASS A Shares sold.................................. 2,138,641 $ 37,952,889 1,573,527 $ 26,044,624 8,413,021 $ 126,479,881 Shares redeemed.............................. (1,374,097) (24,058,166) (734,487) (12,146,536) (3,177,106) (47,846,922) Shares issued in reinvestment of distributions.............................. 305,776 5,468,350 85,926 1,413,485 474,763 7,335,750 Shares issued in acquisition of Keystone Balance Fund II............................ 111,203 2,040,162 0 0 0 0 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase................................. 1,181,523 21,403,235 924,966 15,311,573 5,710,678 85,968,709 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B Shares sold.................................. 7,638,579 135,299,965 3,519,353 58,129,934 18,909,215 282,822,448 Shares redeemed.............................. (2,138,489) (37,379,888) (1,205,547) (19,871,723) (4,174,149) (62,881,641) Shares issued in reinvestment of distributions.............................. 730,455 12,981,571 175,001 2,868,253 1,109,399 17,095,215 Shares issued in acquisition of Keystone Balance Fund II............................ 316,984 5,790,704 0 0 0 0 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase................................. 6,547,529 116,692,352 2,488,807 41,126,464 15,844,465 237,036,022 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C Shares sold.................................. 346,148 6,175,674 176,251 2,897,772 1,165,822 17,413,787 Shares redeemed.............................. (198,682) (3,419,487) (91,055) (1,506,028) (308,109) (4,629,756) Shares issued in reinvestment of distributions.............................. 31,260 555,436 6,429 105,303 43,393 668,629 Shares issued in acquisition of Keystone Balance Fund II............................ 36,146 660,062 0 0 0 0 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase................................. 214,872 3,971,685 91,625 1,497,047 901,106 13,452,660 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS Y Shares sold.................................. 4,272,912 75,868,202 2,229,198 37,037,547 19,300,331 290,354,485 Shares redeemed.............................. (3,903,866) (68,516,732) (2,606,400) (43,297,987) (12,328,011) (185,863,701) Shares issued in reinvestment of distributions.............................. 1,013,845 18,152,525 315,233 5,191,873 1,977,198 30,423,613 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease)...................... 1,382,891 25,503,995 (61,969) (1,068,567) 8,949,518 134,914,397 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase resulting from Fund share transactions............................... 9,326,815 $167,571,267 3,443,429 $ 56,866,517 31,405,767 $ 471,371,788 - ------------------------------------------------------------------------------------------------------------------------------------
* THE FUND CHANGED ITS FISCAL YEAR END FROM DECEMBER 31 TO MARCH 31, EFFECTIVE MARCH 31, 1997. 54 - -------------------------------------------------------(Photo of pine cones and EVERGREEN branches appears here) COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED THREE MONTHS ENDED YEAR ENDED SEPTEMBER 30, 1997 MARCH 31, 1997* DECEMBER 31, 1996 TAX STRATEGIC SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CLASS A Shares sold........................................ 1,314,390 $19,224,077 315,408 $ 4,371,432 652,149 $ 8,273,511 Shares redeemed.................................... (65,001) (946,696) (38,895) (539,727) (73,546) (929,252) Shares issued in reinvestment of distributions..... 31,215 467,763 4,842 66,689 26,949 357,306 - -------------------------------------------------------------------------------------------------------------------------------- Net increase....................................... 1,280,604 18,745,144 281,355 3,898,394 605,552 7,701,565 - -------------------------------------------------------------------------------------------------------------------------------- CLASS B Shares sold........................................ 3,576,099 52,745,827 816,857 11,299,403 1,563,566 19,725,070 Shares redeemed.................................... (153,562) (2,229,774) (36,136) (499,992) (85,378) (1,087,302) Shares issued in reinvestment of distributions..... 62,718 938,235 8,114 111,726 59,693 793,572 - -------------------------------------------------------------------------------------------------------------------------------- Net increase....................................... 3,485,255 51,454,288 788,835 10,911,137 1,537,881 19,431,340 - -------------------------------------------------------------------------------------------------------------------------------- CLASS C Shares sold........................................ 532,638 7,862,760 102,016 1,405,348 263,684 3,324,801 Shares redeemed.................................... (141,354) (2,005,186) (31,923) (445,521) (5,604) (70,810) Shares issued in reinvestment of distributions..... 7,465 111,596 745 10,250 6,172 81,908 - -------------------------------------------------------------------------------------------------------------------------------- Net increase....................................... 398,749 5,969,170 70,838 970,077 264,252 3,335,899 - -------------------------------------------------------------------------------------------------------------------------------- CLASS Y Shares sold........................................ 37,958 549,399 27,768 386,755 63,086 768,496 Shares redeemed.................................... (18,514) (267,321) (12,744) (174,602) (84,857) (1,055,874) Shares issued in reinvestment of distributions..... 6,489 97,377 1,657 22,900 26,475 341,313 - -------------------------------------------------------------------------------------------------------------------------------- Net increase....................................... 25,933 379,455 16,681 235,053 4,704 53,935 - -------------------------------------------------------------------------------------------------------------------------------- Net increase resulting from Fund share transactions..................................... 5,190,541 $76,548,057 1,157,709 $16,014,661 2,412,389 $30,522,739 - --------------------------------------------------------------------------------------------------------------------------------
* THE FUND CHANGED ITS FISCAL YEAR END FROM DECEMBER 31 TO MARCH 31, EFFECTIVE MARCH 31, 1997. 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 September 30, 1997:
COST OF PROCEEDS PURCHASES FROM SALES American Retirement............................. $ 65,990,453 $ 27,760,377 Balanced........................................ 556,122,395 637,340,406 Foundation...................................... 220,478,088 137,508,574 Tax Strategic................................... 118,289,879 38,293,361
6. DISTRIBUTION PLANS Evergreen Keystone Distributor, Inc. (formerly Evergreen Funds Distributor, Inc.) ("EKD"), 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 Shares, as allowed by Rule 12b-1 of the 1940 Act. Distribution plans permit the Funds to reimburse their 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 Funds through expenses called "Distribution Plan expenses". Each Class, except Class Y, currently pays a service fee equal to 0.25% of the average daily net assets of the class. Class B and Class C also presently pay distribution fees equal to 0.75% of the average daily net assets of the Class. Distribution Plan expenses are calculated daily and paid monthly. During the six months ended September 30, 1997, amounts paid to EKD and/or EKIS pursuant to each Fund's Class A, Class B and Class C Distribution Plans were follows:
CLASS A CLASS B CLASS C American Retirement.................................... $ 23,328 $ 493,479 $ 9,194 Balanced............................................... 56,171 576,180 2,201 Foundation............................................. 314,505 3,602,390 158,708 Tax Strategic.......................................... 30,995 309,248 35,940
Each of the Distribution Plans may be terminated at any time by vote of the Independent Trustees or by vote of a majority of the outstanding voting shares of the respective class. 55 (Photo of pine cones and branches appears here) EVERGREEN COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 7. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED TRANSACTIONS First Union serves as Balanced's investment advisor and is paid a management fee that is computed and paid monthly at an annual rate of 0.50 of 1% of Balanced's average daily net assets. Evergreen Asset Management Corp. ("Evergreen Asset"), a wholly owned subsidiary of First Union, is the investment advisor for American Retirement, Foundation and Tax Strategic Funds and is entitled to an annual fee based on each of American Retirement's, Foundation's and Tax Strategic's average daily net assets, respectively, in accordance with the following schedules:
FOUNDATION AND AMERICAN TAX STRATEGIC RETIREMENT First $750 million........... 0.875% First $750 million........... 0.75% Next $250 million............ 0.750% Next $750 million............ 0.70% Over $1 billion.............. 0.700%
Evergreen Keystone Investment Services, Inc. ("EKIS"), a subsidiary of First Union, serves as the administrator for the Funds. BISYS Fund Services, an affiliate of EKD, serves as the sub-administrator for the Funds. The administrator for the Funds is entitled to an annual fee based on the average daily net assets of the funds administered by EKIS for which First Union or its investment advisory subsidiaries are also the investment advisers. The administration fee is calculated by applying percentage rates, which start at 0.05% and decline to 0.01% per annum as net assets increase, to the average daily net asset value of each Fund. The sub-administration fee is calculated by applying percentage rates, which start at 0.01% and decline to .004% per annum as net assets increase, to the average daily net asset value of each Fund. For American Retirement, Foundation, and Tax Strategic the administration and sub-administration fee is paid by their investment advisor and is not a Fund expense. Lieber & Company, an affiliate of First Union, is the investment sub-adviser to American Retirement, Foundation and Tax Strategic and also provides brokerage services with respect to substantially all security transactions of these Funds effected on the New York or American Stock Exchanges. For the six months ended September 30, 1997, American Retirement, Foundation, and Tax Strategic incurred brokerage commissions of $38,229, $252,266, $36,546, with Lieber & Company. Lieber & Company is reimbursed by Evergreen Asset, at no additional expense to the Funds, for its cost of providing investment advisory services. Effective May 5, 1997, Evergreen Keystone Service Company ("EKSC"), a wholly-owned subsidiary of Keystone began providing transfer and dividend disbursing agent services for the Funds that were formerly provided by State Street Bank and Trust Company ("State Street"). For the six months ended September 30, 1997, EKSC received $169,068, $277,501, $1,613,895, and $73,058, in transfer agent fees from American Retirement, Balanced, Foundation, and Tax Strategic. For certain accounts in American Retirement, Balanced and Foundation, First Union was sub-contracted by EKSC, and previously State Street, to maintain shareholder sub-account records, take fund purchase and redemption orders and answer inquiries. For each account, First Union earned a fee which totaled $4,713, $131,015 and $111,436 for American Retirement, Balanced and Foundation, respectively, for the six months ended September 30, 1997. Officers of the Funds and affiliated Trustees receive no compensation directly from 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 the Funds may defer any or all compensation related to performance of duties as a Trustee. Each Trustee's deferred balances are allocated to deferral accounts which are included in the accrued expenses for the Funds. The investment performance of the deferral accounts are based on the investment performance of certain Evergreen Keystone Funds. Any gains earned or losses incurred in the deferral accounts are reported in the Fund's Trustees's fees and expenses. Trustees will be paid either in one lump sum or in quarterly installments for up to ten years at their election, not earlier than either the year in which the Trustee ceases to be a member of the Board of Trustees or January 1, 2000. As of September 30, 1997, the value of the Trustees deferral accounts was $15,634, $43,441, $16,437 and $6,067 for American Retirement, Balanced, Foundation and Tax Strategic, respectively. 10. FINANCING AGREEMENT On October 31, 1996, a financing agreement among all of the Evergreen Funds and State Street, Societe Generale and ABN Amro Bank N.V. (collectively, the "Banks") became effective. Under this agreement, the Banks provide an unsecured credit facility in the aggregate amount of $225 million ($112.5 million committed and $112.5 million uncommitted) allocated evenly among the Banks. Borrowings under this facility bear interest at 0.75% per annum above the Federal Funds rate. A commitment fee of 0.10% per annum will be incurred on the unused portion of the committed facility which will be allocated to all participating funds. State Street acts as agent for the Banks, and as agent is entitled to a fee of $15,000 which is allocated to all of the Evergreen Funds. During the six months ended September 30, 1997, the Funds had no borrowings under this agreement. 56 This brochure 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. NOT May lose value FDIC No bank guarantee INSURED Evergreen Funds Distributor, Inc. 540980 Rev. 01 63060 11/97 -----END PRIVACY-ENHANCED MESSAGE-----