<PAGE>
Evergreen
Balanced
Funds
September 30, 1998
Semiannual Report
[ARTWORK APPEARS HERE]
[LOGO OF EVERGREEN FUNDS/SM/ APPEARS HERE]
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Table of Contents
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Letter to Shareholders...................................................... 1
Evergreen American Retirement Fund
Fund at a Glance......................................................... 2
Portfolio Manager Interview.............................................. 3
Evergreen Balanced Fund
Fund at a Glance......................................................... 6
Portfolio Manager Interview.............................................. 7
Evergreen Foundation Fund
Fund at a Glance.........................................................11
Portfolio Manager Interview..............................................12
Evergreen Tax Strategic Foundation Fund
Fund at a Glance.........................................................16
Portfolio Manager Interview..............................................17
Financial Highlights
Evergreen American Retirement Fund.......................................21
Evergreen Balanced Fund..................................................23
Evergreen Foundation Fund................................................25
Evergreen Tax Strategic Foundation Fund..................................27
Schedule of Investments
Evergreen American Retirement Fund.......................................29
Evergreen Balanced Fund..................................................33
Evergreen Foundation Fund................................................40
Evergreen Tax Strategic Foundation Fund..................................46
Statements of Assets and Liabilities........................................53
Statements of Operations....................................................54
Statements of Changes in Net Assets.........................................55
Combined Notes to Financial
Statements..................................................................58
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Evergreen Funds
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Evergreen Funds is one of the nation's fastest growing investment companies with
approximately $50 billion in assets under management.
With over 70 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This semiannual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
---------------------------------------------------------------
Mutual Funds: ARE NOT FDIC INSURED May lose value . Are not bank guaranteed
---------------------------------------------------------------
Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
November 1998
--------
[PHOTO OF WILLIAM M. ENNIS APPEARS HERE]
William M. Ennis
Managing Director
Dear Shareholders:
We are pleased to provide you the Evergreen Balanced Funds semiannual report
covering the six-month period ended September 30, 1998.
Market Volatility
The financial markets have certainly experienced volatility in the past few
months. After a five-year period of unprecedented growth, the stock market
peaked on July 17, 1998, when prices were at historic highs relative to
benchmarks such as corporate profits and dividends. Since that point, fears of
foreign currency devaluations, political turbulence and instability abroad have
produced an uncertain market. Through September, the market all but lost its
year-to-date gains, and then in October was on the rise, nearing the levels of
July's peak. We encourage you to take this opportunity to review your investment
time horizon and ensure you are on track with your goals. We also encourage you
to consider an invaluable strategy of investing during uncertain times: Dollar
Cost Averaging./1/ By investing a little at a time in regular intervals, you can
remain focused on your investment goals and not worry about predicting market
trends. Contact your investment representative or call us at 800.343.2898 to
start your Systematic Investment Plan today.
Year 2000/2/
The year 2000 is nearly upon us, and unlike some we are looking forward to it.
We have been addressing the Year 2000 issue since February 1996 and have adopted
an industry best practices methodology for the project. Our team is on schedule
to complete the following milestones: Inventory and Assessment, Remediation,
Testing and Contingency. We believe that for Evergreen shareholders, the
transition into the next millennium should be seamless, with virtually no impact
on the products and services you receive from us.
Cost Savings
In an effort to achieve efficiencies and cost savings, we are combining your
funds' required mailings so you only receive one per household, based on the
registration last name and exact address./3/ This reduces the mailing costs, not
to mention the amount of paper needed to print, which in turn benefits your
funds by reducing the overall expenses. If you prefer to receive separate copies
of reports and prospectuses for each registered holder in your household, please
notify us by calling the number on your statement and we will adjust our records
accordingly.
Thank you for your continued investment with Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
Managing Director
Evergreen Funds
Good News!
Effective for the 1998 Tax Year, long-term capital gains taxes are reduced to
20%.
/1/ This type of plan does not assure a profit or protect against loss in a
declining market.
/2/ The information above constitutes Year 2000 readiness
disclosure.
/3/ If you purchased your shares through a financial representative,
we may not be able to consolidate your mailings
by last name and address, because that institution controls the mailings.
1
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EVERGREEN
American Retirement Fund
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Fund at a Glance as of September 30, 1998
We continue to have confidence in the Fund's long-term strategy, but our
emphasis on mid-cap value stocks and short-term government bonds contributed to
disappointing performance during the six-month period.
Portfolio
Management
------------------------------------------
[PHOTO OF IRENE D. O'NEILL APPEARS HERE]
Irene D. O'Neill, CFA
Tenure: March 1988
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CURRENT INVESTMENT STYLE/1/
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[GRAPHIC APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 9/30/98.
The Equity Style Box placement is based on a fund's price-to-earnings and price-
to-book ratio relative to the S&P 500, as well as the size of the companies in
which it invests, or median market capitalization.
[GRAPHIC APPEARS HERE]
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
/1/Source: 1998 Morningstar, Inc.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses paid by the
shareholders investing in each class. The investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The Wilshire 5000 Index and the Lehman Brothers
Government/Corporate Bond Index are unmanaged indices and do not include any
transaction costs associated with buying and selling securities or any
management fees. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
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PERFORMANCE AND RETURNS*
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Class A Class B Class C Class Y
Inception Date 1/3/95 1/3/95 1/3/95 3/14/88
................................................................................
Average Annual Returns
................................................................................
6 months with sales charge -14.62% -15.12% -11.57% n/a
................................................................................
6 months w/o sales charge -10.36% -10.71% -10.68% -10.25%
................................................................................
1 year with sales charge -7.97% -8.72% -4.98% n/a
................................................................................
1 year w/o sales charge -3.38% -4.13% -4.06% -3.14%
................................................................................
5 years -- -- -- 9.46%
................................................................................
10 years -- -- -- 10.63%
................................................................................
Since Inception 12.15% 12.17% 12.78% 10.43%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
30-day SEC yield 2.90% 2.30% 2.29% 3.30%
................................................................................
6-month income dividends
per share $0.25 $0.19 $0.19 $0.27
................................................................................
* Adjusted for maximum sales charge.
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LONG TERM GROWTH
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[LINE GRAPH APPEARS HERE]
CPI LBGCBI Wilshire 5000 Class A Shares
1/3/95 10,000 10,000 10,000 9,525
9/30/95 10,234 11,393 13,014 11,362
9/30/96 10,541 11,906 15,476 12,740
9/30/97 10,768 13,048 21,362 15,903
9/30/98 10,929 14,727 22,064 15,365
Comparison of a $10,000 investment in Evergreen American Retirement Fund Class
A, versus a similar investment in the Wilshire 5000 Index, the Lehman Brothers
Government/Corporate Bond Index, and the Consumer Price Index (CPI).
The Wilshire 5000 Index is an unmanaged index of the largest 5,000 publicly
traded U.S. stocks and is considered a broad stock market average, so it gives
more weight to smaller companies than does the S&P 500.
The Lehman Brothers Government/Corporate Bond Index is a broad measure of the
performance of government and corporate fixed-rate debt issues.
2
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EVERGREEN
American Retirement Fund
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Portfolio Manager Interview
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How did the Fund perform?
- --------------------------------------------------------------------------------
It was a difficult six-month period for investment strategies that emphasize the
types of stocks and bonds that have been the cornerstone of the American
Retirement Fund's successful long-term strategy. As a consequence, the Fund
lagged industry benchmarks. For the six months that ended on September 30, 1998,
the Fund's Class A, B, C and Y shares had total returns, of -10.36%, -10.71%,
- -10.68% and -10.25%, respectively. All returns are unadjusted for any applicable
sales charges. During the same six-month period, the average balanced fund had a
return of -5.37%, as measured by Lipper Analytical Services, Inc., an
independent monitor of mutual fund performance.
Portfolio
Characteristics
---------------
Total Net Assets $219,683,952
................................................................................
Number of Holdings 162
................................................................................
Beta 0.65
................................................................................
P/E Ratio 13.4x
................................................................................
How did the investment environment affect the Fund?
The investment environment did not favor the investments that the Evergreen
American Retirement Fund traditionally has emphasized. The Fund's equity
strategy focuses on value-oriented, mid-cap stocks because we believe they offer
superior, long-term, capital appreciation potential. In addition, the Fund's
fixed-income strategy focuses on short-term U.S. government securities because
of their historical price stability and reliability of income. Unfortunately,
during the six-month period, mid-cap value stocks and shorter-term fixed income
securities were not in favor; investors favored large-company growth stocks and
longer-maturity government bonds.
At the end of the period, for example, the median market capitalization of
stocks in the Fund's portfolio was $2.1 billion and the average maturity of
bonds was 4.6 years. In contrast, the typical balanced mutual fund owned stocks
with a median market capitalization of $16.9 billion and bonds with an average
maturity of 9.7 years. During a period of high volatility and uncertainty in the
equity market and falling interest rates in the bond market, investors preferred
large company growth stocks and longer-maturity government bonds.
We continue to have confidence in the Fund's long-term strategy, but our
emphasis on mid-cap value stocks and short-term government bonds contributed to
disappointing performance during the six-month period. We believe investors have
overlooked extremely attractive values in the mid-cap area, and these stocks
still offer superior, long-term growth opportunities. We also believe the
shorter-term government securities continue to offer stability and reliable
income that are important ingredients of our long-term approach.
Did you make any asset allocation or tactical changes during the six months?
We decreased the equity and convertible securities allocations slightly and
increased the fixed income portion of the portfolio to position the Fund more
defensively in a time of uncertainty and volatility in the equity markets.
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ASSET ALLOCATION
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March 31, 1998 September 30, 1998
Stocks 44.0% 42.5%
................................................................................
Convertible Securities 27.2% 22.9%
................................................................................
Fixed Income 26.8% 32.4%
................................................................................
Cash & Equivalents 2.0% 2.2%
................................................................................
3
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EVERGREEN
American Retirement Fund
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Portfolio Manager Interview
What were your principal equity strategies, and how did they change during the
period?
Within the equity portion of the portfolio, we increased the allocation to
utility stocks because of their defensive characteristics. We reduced our
positions in stocks and convertible securities that appeared fully valued or in
which we had concerns about the fundamental outlooks of the underlying
companies.
We continued to seek out undervalued securities of restructuring companies that
have the potential to enhance earnings. Among the companies we favored were:
Armstrong World, the flooring and building material company; Arvin Industries
and Simpson Industries, both involved in the automotive parts industry; Tenneco,
a diversified company involved in both packaging and the automotive parts
industries; and Thomas & Betts, an electrical components supplier.
We also looked for opportunities among stable earnings companies in the
consumer, non-cyclical area because these companies typically perform well in
economic downturns. Two good examples were Ruddick, which operates supermarkets
in the Southeast, and Lancaster Colony, which produces consumer products,
including food, glassware and candles.
Top 5 Industries --
Equity
------
(based on 9/30/98 net assets)
Utilities -- Electric 8.1%
................................................................................
Banks 6.9%
................................................................................
Finance & Insurance 5.5%
................................................................................
Oil / Energy 3.7%
................................................................................
Retailing & Wholesale 3.5%
................................................................................
Did any themes or areas help the performance of the Fund?
Yes. As in the past, the Fund's emphasis on value stocks led us to invest in
companies that became takeover targets. During the six months, one Fund holding
was acquired, and another three were subjects of pending acquisitions.
Mercantile Stores has been acquired by Dillard's, a larger department store
chain, providing a healthy gain for the Fund. In addition, Amoco is the subject
of a pending takeover by British Petroleum; Crestar, a bank, is expected to be
acquired by Sun Trust; and TCI Communications, a cable company, is the subject
of an acquisition offer by AT&T.
The best-performing industry group was publishing, broadcast and entertainment.
Our primary holdings were cable and entertainment companies, which continued to
enjoy strong earnings growth and which had very little exposure to foreign
problems. We expect the expansion of cable services and products to offer the
industry new opportunities for revenue growth. In addition to TCI, other
investments that performed well were Cox Communications, where we own the
convertible security, and Time Warner, where we own both the common stock and
the convertible.
Another group that did well was the electric utility industry. Electric
utilities are good defensive stocks because their earnings tend to hold up well
in downturns, they have relatively high dividend yields, and they benefit from
declining interest rates. Deregulation in this industry is producing benefits
for many companies, both in revenue growth and merger and acquisition
opportunities.
The Fund's investment in the convertible security of Air Touch, a major provider
of wireless communications service, also was very successful.
4
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EVERGREEN
American Retirement Fund
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Portfolio Manager Interview
What has been your strategy with the fixed-income allocation in the portfolio?
We have continued to focus on short-term, U.S. government agency securities,
with only a very minimal commitment to corporate bonds. Government agency
securities provide the highest credit quality, with a better yield than
Treasuries. We have been able to obtain an average yield advantage of more than
one percentage point by investing in agencies rather than Treasuries with
comparable maturities.
While shorter-term bonds tend to underperform longer-term bonds in a declining
interest rate environment, such as we have been experiencing, they offer price
stability and provide a good balance to the equities in the portfolio.
Fixed Income
Allocation
----------
(based on 9/30/98 net assets)
Government Agency-- Notes & Bonds 30.2%
................................................................................
Treasury Notes & Bonds 0.8%
................................................................................
Banks 0.5%
................................................................................
Finance & Insurance 0.5%
................................................................................
Telecommunication Services & Equipment 0.4%
................................................................................
What is your outlook?
We expect the U.S. economy to slow over the next few months as a result of
global economic problems. The Federal Reserve Board, however, is expected to
continue to lower short-term interest rates to stimulate the economy and offset
the softness created by international events.
In this environment, we will be looking for good value. Currently, we see
opportunities in many stocks with above-average dividend yields and strong
prospects for earnings growth once the economy starts to improve. We believe
this value sector has been overlooked by the market and offers investors good
potential for capital appreciation.
Top 10
Equity Holdings
---------------
(based on 9/30/98 net assets)
Marketspan Corp. 1.2%
................................................................................
Houston Industries, Inc. 1.1%
................................................................................
Sempra Energy 1.1%
................................................................................
Puget Sound Energy, Inc. 1.1%
................................................................................
Merrill Lynch & Co., Inc.
6.00% STRYPES, Due 6/1/99 (exch. for
Cox Communications, Inc. common stock) 1.1%
................................................................................
Family Golf Centers, Inc. 1.1%
................................................................................
Texas Utilities Co. 1.0%
................................................................................
Norwest Corp. 1.0%
................................................................................
U.S. West, Inc. 1.0%
................................................................................
Public Service Enterprise Group, Inc. 1.0%
................................................................................
5
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EVERGREEN
Balanced Fund
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Fund at a Glance as of September 30, 1998
We made a change in early June to take advantage of the defensive protection
that high quality bonds can provide in a period of extreme volatility in the
stock market.
Portfolio
Management
------------------------------------------
[PHOTO OF CHRIS CONKEY APPEARS HERE]
Chris Conkey
Tenure: August 1998
[PHOTO OF JUDITH WARNERS APPEARS HERE]
Judith Warners
Tenure: August 1998
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CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 9/30/98.
The Equity Style Box placement is based on a fund's price-to-earnings and price-
to-book ratio relative to the S&P 500, as well as the size of the companies in
which it invests, or median market capitalization.
[GRAPHIC APPEARS HERE]
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
/1/Source: 1998 Morningstar, Inc.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses paid by the
shareholders investing in each class. The investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The S&P 500 and the LBGCBI are unmanaged indices and do
not include transaction costs associated with buying and selling securities or
any management fees. The CPI is a commonly used measure of inflation and does
not represent an investment return. It is not possible to invest directly in an
index.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
- --------------------------------------------------------------------------------
Class A Class B Class C Class Y
Inception Date 1/20/98 9/11/35 1/22/98 1/26/98
................................................................................
Average Annual Returns
................................................................................
6 months with sales charge -7.52% -7.96% -4.14% n/a
................................................................................
6 months w/o sales charge -2.91% -3.18% -3.18% -2.71%
................................................................................
1 year with sales charge -- 1.17% -- n/a
................................................................................
1 year w/o sales charge -- 5.71% -- --
................................................................................
5 years -- 11.58% -- --
................................................................................
10 years -- 11.44% -- --
................................................................................
Since Inception** -0.99% 8.42% 3.21% 7.25%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
30-day SEC yield 2.99% 2.39% 2.39% 3.38%
................................................................................
6-month income dividends per share $0.22 $0.18 $0.18 $0.24
................................................................................
* Adjusted for maximum sales charge.
** Represents cumulative returns for Class A, C, and Y shares as these classes
opened in January 1998 and do not have annual returns yet.
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LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
CPI LBGCBI S & P 500 Class B
9/30/88 10,000 10,000 10,000 9,525
9/30/89 10,434 11,132 13,301 12,148
9/30/90 11,077 11,884 12,071 11,513
9/30/91 11,452 13,768 15,834 14,068
9/30/92 11,795 15,590 17,853 15,146
9/30/93 12,112 17,374 19,869 16,879
9/30/94 12,471 16,655 20,602 16,508
9/30/95 12,788 19,045 26,730 19,484
9/30/96 13,172 19,903 32,165 22,576
9/30/97 13,456 21,811 45,175 27,933
9/30/98 13,656 24,618 49,261 29,528
Comparison of a $10,000 investment in Evergreen Balanced Fund Class B, versus a
similar investment in the Standard & Poor's 500 Index (S&P 500), the Lehman
Brothers Government/Corporate Bond Index (LBGCBI), and the Consumer Price Index
(CPI).
The Standard & Poor's 500 Index is an unmanaged index of 500 publicly traded
U.S. stocks and is often used to indicate the performance of the overall stock
market.
The Lehman Brothers Government/Corporate Bond Index is a broad measure of the
performance of government and corporate fixed-rate debt issues.
6
<PAGE>
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EVERGREEN
Balanced Fund
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Portfolio Manager Interview
How did the Fund perform during the six months?
In a fast-changing and highly volatile environment, the Fund had negative
performance during the period, despite outperforming the industry average for
balanced funds. For the six months that ended on September 30, 1998, the
Balanced Fund's Class A, B, C and Y shares had total returns of-2.91%, -3.18%,
- -3.18% and -2.71%, respectively. These returns are unadjusted for any applicable
sales charges. During the same six-month period, the average balanced mutual
fund had a return of -5.37%, as measured by Lipper Analytical Services, Inc., an
independent monitor of mutual fund performance.
Portfolio
Characteristics
---------------
Total Net Assets $1,700,160,383
................................................................................
Number of Holdings 234
................................................................................
Beta 0.92
................................................................................
P/E Ratio 29.4x
................................................................................
What was the investment environment like during the period?
The six months actually encompassed two very different periods. As we started
the new fiscal year in early April, the market environment featured relatively
stable interest rates and rising equity prices. During this period, the
principal investment fear was that the economic growth might overheat, setting
off inflationary pressures and leading to higher interest rates. This period
continued through mid-July when the environment abruptly changed because the
Russian financial collapse made people realize that international economic
problems were much more serious and had a greater potential impact on the U.S.
economy than investors had assumed. In the U.S., we went from fear of too much
economic growth to fear of too little growth because of the ripple effects of
problems throughout the emerging markets. Both the stock and the bond markets
were affected, and the most immediate problems were created by concerns about
liquidity as well as concerns about the solvency of institutions.
The stock market, as reflected by the Standard & Poor's 500 Index, fell by
approximately 20% between mid-July and the end of September. The price losses
spanned different industries, but particularly affected financial services
companies, which began to anticipate lower earnings in July and August. In
addition, investors began to be concerned that credit quality would start to
deteriorate.
In the bond market, the global flight to quality rewarded investors in U.S.
Treasuries, which outperformed bonds carrying credit risk. As investors sought
out high quality bonds, the yields of the 30-year Treasury declined by almost a
full percentage point, to 5.10%, with yields on intermediate Treasuries
declining even more -- by 1.4%. As a consequence, the price of Treasuries
appreciated. At the end of the period, the Federal Reserve Board began to ease
monetary policy, reducing short-term interest rates by one-quarter of one
percent.
Did asset allocation between stocks and bonds change during the six months?
Yes. At the end of the fiscal period, the Fund was as conservatively positioned
as it is likely to be, with 52% of net assets in stocks and 48% in bonds. In
contrast, at the start of the period on April 1, the Fund was approximately 60%
in equities and 40% in bonds.
7
<PAGE>
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EVERGREEN
Balanced Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
We made a change in early June to take advantage of the defensive protection
that high quality bonds can provide in a period of extreme volatility in the
stock market. This reallocation helped the Fund's performance.
Over the long run, we expect stocks to outperform bonds and the Fund's
allocation will reflect that. During the current, very unusual period, however,
we believe it makes sense to have a relatively heavy weighting in bonds because
of the strong performance in the fixed income market and the greater protection
high grade bonds offer during market volatility.
Top 5 Industries --
Equity
------
(based on 9/30/98 net assets)
Healthcare Products & Services 11.2%
...............................................................................
Oil / Energy 7.2%
...............................................................................
Finance & Insurance 3.8%
...............................................................................
Utilities -- Telephone 3.5%
...............................................................................
Utilities -- Electric 3.3%
...............................................................................
What strategies did you pursue in managing the equity portion of the portfolio?
We kept the equity allocation diversified across many sectors, but we did make
some changes. At the start of the period, the Fund's largest weightings were in
the financial services and healthcare sectors. We reduced both weightings, and
cut the financial services area more significantly because we were concerned
about this sector's vulnerability to foreign problems. We also were worried
about a possible deterioration in the quality of bank loans. In healthcare, we
moved to a weighting more in line with overall market indices, but increased
diversification across the entire industry, with investments in pharmaceuticals,
hospital management companies and medical equipment companies.
One notable change was to increase the investments in industry-leading growth
companies, including companies that historically have not paid dividends,
especially in technology, which had been under-represented in the Fund. We
bought stocks in established companies that were market leaders, such as
Microsoft, EMC, Sun Microsystems and Medtronics, and we maintained a healthy
investment in IBM. We also slightly increased the investments in more defensive
industries such as food, regional telephone companies and utilities.
What companies have helped performance?
General Electric, a major investment by the Fund, continued to support
performance, although we did trim back the position somewhat to take profits.
Several pharmaceutical companies also have helped, including Schering-Plough and
Warner-Lambert, as well as the technology holdings such as IBM, EMC and Sun
Microsystems.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(based on 9/30/98 net assets)
[PIE CHART APPEARS HERE]
Common Stock -- 49.3%
Corporate Notes/Bonds -- 20.3%
Mortgage Backed Securities -- 9.7%
Asset Backed Securities -- 6.1%
Foreign Bonds* -- 5.4%
Cash and Equivalents -- 4.4%
Convertibles -- 2.7%
Treasury Notes/Bonds -- 1.6%
Government Agency/Notes Bonds -- 0.5%
* All foreign securities are high quality, with currency hedged to protect
against fluctuations.
8
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
What strategies did you pursue in managing the fixed-income portion of the
portfolio?
We have significantly increased the fixed-income allocation, but our policy in
managing the fixed income component has been very consistent. We have over-
weighted quality corporate bonds and mortgage-backed securities because of their
yield advantage over government bonds, while maintaining a very high credit
quality. Average credit quality was AA on September 30. We have focused on
structure in the fixed income portfolio, meaning we have invested in bonds that
offer protection against early redemption by their issuers. This is very
important in a declining interest rate environment, because it allows the Fund
to retain the higher yields of existing bonds. We also have concentrated on
bonds from defensive industries, including insurance, defense and utilities.
About 10% of the fixed income portfolio has been in U.S. Treasuries.
The fixed income portfolio also has a slightly longer average maturity than the
average bond fund. On September 30, average-weighted maturity was 11 years, and
duration was 5.1 years. This has helped performance as interest rates declined
and the prices of higher-rated bonds tended to rise.
Top 5 Industries --
Bonds
-----
(based on 9/30/98 net assets)
Finance & Insurance 6.5%
................................................................................
Collateralized Mortgage Obligations 6.2%
................................................................................
Asset-Backed Securities 6.1%
................................................................................
Foreign Bonds (Non-U.S. Dollars) 4.2%
................................................................................
Mortgage Pass-Through Certificates 3.5%
................................................................................
Top 5
Bond Holdings
-------------
(based on 9/30/98 net assets)
Federal National Mortgage Association
(various rates and maturities) 2.3%
................................................................................
Realkredit Danmark, 6.00% 10/1/2026 1.9%
................................................................................
U.S. Treasury Bonds (various rates and maturities) 1.6%
................................................................................
Nykredit 1.3%
................................................................................
United Kingdom Treasury, 7.25% 12/7/2007 1.0%
................................................................................
What is the outlook?
We expect the economy, as reflected by Real Gross Domestic Product, to continue
to grow in 1998; however, there is the potential of a recession in 1999. If a
recession were to occur, we would not expect it to last very long or to be very
deep. The Federal Reserve Board has lowered short-term interest rates to
stimulate the economy, and we expect further reductions in the coming months.
International economic conditions, particularly in Japan, Brazil and Europe,
will continue to have an influence on the U.S. economy. In the short term, we
expect corporate profits to flatten somewhat. An important variable will be the
ability of the financial industry to continue to provide loans to industry and
avoid a liquidity crunch.
We do not expect the present asset allocation of 52% stocks and 48% bonds to
shift more towards bonds, and we will look for the appropriate time to shift
back toward a greater emphasis on equities. In the equity portfolio, we will
continue to look for value among established, large-cap, dividend-paying
companies. We expect to continue to emphasize food companies, retailers,
utilities and other industries that offer defensive protection in times of
uncertainty. We also expect to maintain a representation among industry-leading
growth companies, including technology companies, because of their superior
long-term prospects.
9
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
In the fixed-income portfolio, we plan to focus on high quality bonds as the
economy slows, and take advantage of the yield advantage of highly rated
corporate bonds and mortgage-backed securities over Treasuries. We will continue
to try to protect the Fund's income by looking for bonds with call protection,
which allow the Fund to receive the higher yields of yesterday during today's
lower-interest-rate environment.
Top 10
Equity Holdings
---------------
(based on 9/30/98 net assets)
Johnson & Johnson 1.7%
................................................................................
Merck & Co., Inc. 1.6%
................................................................................
General Electric Co. 1.5%
................................................................................
Texaco, Inc. 1.4%
................................................................................
Monsanto Co. 1.3%
................................................................................
Schering-Plough Corp. 1.2%
................................................................................
Mobil Corp. 1.2%
................................................................................
Bristol-Myers Squibb Co. 1.2%
................................................................................
Warner-Lambert Co. 1.1%
................................................................................
Ameritech Corp. 1.1%
................................................................................
10
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Foundation Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of September 30, 1998
The investment policy strategy adopted early in the fiscal year assumed that the
markets would show considerable volatility and contained numerous examples of
overpriced issues.
Portfolio
Management
--------------------------------------------------
[PHOTO OF STEPHEN A. LIEBER APPEARS HERE]
Stephen A. Lieber
Tenure: January 1990
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 9/30/98.
The Equity Style Box placement is based on a fund's price-to-earnings and price-
to-book ratio relative to the S&P 500, as well as the size of the companies in
which it invests, or median market capitalization.
[GRAPHIC APPEARS HERE]
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
/1/Source: 1998 Morningstar, Inc.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses paid by the
shareholders investing in each class. The investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The S&P 500 Index and the Lipper Balanced Funds Average
are unmanaged indices and do not include transaction costs associated with
buying and selling securities or any management fees. The CPI is a commonly used
measure of inflation and does not represent an investment return. It is not
possible to invest directly in an index.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
- --------------------------------------------------------------------------------
Class A Class B Class C Class Y
Inception Date 1/3/95 1/3/95 1/3/95 1/2/90
................................................................................
Average Annual Returns
................................................................................
6 months with sales charge -9.73% -10.26% -6.51% n/a
................................................................................
6 months w/o sales charge -5.23% -5.57% -5.57% -5.12%
................................................................................
1 year with sales charge -0.12% -0.94% 3.06% n/a
................................................................................
1 year w/o sales charge 4.87% 4.06% 4.06% 5.09%
................................................................................
5 years -- -- -- 12.77%
................................................................................
Since Inception 15.97% 16.06% 16.55% 16.03%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
30-day SEC Yield 2.03% 1.39% 1.39% 2.38%
................................................................................
6-month income dividends
per share $0.21 $0.13 $0.13 $0.23
................................................................................
*Adjusted for maximum sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
CPI LBFA S&P 500 Class A
1/3/95 10,000 10,000 10,000 9,525
9/30/95 10,234 12,042 12,977 11,743
9/30/96 10,541 13,539 15,615 12,763
9/30/97 10,768 16,814 21,931 16,610
9/30/98 10,929 17,343 23,915 17,416
Comparison of a $10,000 investment in Evergreen Foundation Fund Class A, versus
a similar investment in the S&P 500 Index, the Lipper Balanced Funds Average
(LBFA), and the Consumer Price Index (CPI).
The S&P 500 Index is an unmanaged index of 500 publicly traded U.S. stocks and
is often used as an indicator of performance of the overall stock market.
The Lipper Balanced Funds Average measures the average performance of balanced
funds excluding sales charges.
11
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
What was the performance of the Evergreen Foundation Fund in the first half of
the fiscal year?
For the six months ended September 30, 1998, the Evergreen Foundation Fund's
Class A, B, C, and Y shares returned -5.23%, -5.57%, -5.57% and -5.12%,
respectively, compared with the -6.97% of the Standard and Poor's 500 Index and
the -5.37% return of the Lipper Balanced Funds Average. Since inception on
January 2, 1990, the Fund's Class Y shares have provided a return of 267.26%,
with an average annual return of 16.03%.
Portfolio
Characteristics
---------------
Total Net Assets $2,776,465,795
................................................................................
Number of Holdings 358
................................................................................
Beta 0.63
................................................................................
P/E Ratio 18.1x
................................................................................
What has been the trend of performance this year?
After providing a positive performance return in the first quarter of the fiscal
year ended June 30, 1998, and beginning the September quarter with further
gains, the Fund was affected by the severe stock market decline at the end of
August and into September. There were two impacts: declining equity prices and
rising Treasury bond prices. For the quarter, the Fund's equities showed a 12.9%
decline, while its Treasury bond position produced a gain of 7.7%. For the six
months ended September 30, the equities had a total decline of 12.9%, and the
Treasury bond position showed a gain of 12.4%. The Fund's performance was also
affected by the maintenance of an approximately 12% cash equivalent position
during this time.
What were the major impacts on performance during the six months?
The major impact was, of course, the declining stock market at the end of the
September quarter, and most markedly, the decline in stock prices of financial
institutions' common stocks during the period subsequent to the Russian ruble
collapse. Unprecedented waves of selling hit the nation's major financial
institutions, several of which are included in the Fund's holdings. Declines of
30% to 60% occurred in a number of these issues, but the Fund's diversification
permitted significant offsets which moderated the downward impact.
These same conditions focused worldwide investor attention on U.S. Treasury
obligations as the most defensive and secure investment opportunities. With the
Fund's considerable focus on long-term U.S. Treasuries, it enjoyed particular
strength during this period. In fact, the Fund's Treasury position had been
enlarged during the six months.
Positive equity performance still continued for a significant number of the
Fund's holdings. The top ten performers increased between 24.6% and 58.8% during
the six-month period. The leader was McKesson Corp., with a gain of 58.8%;
followed by Cisco Systems, Inc., up 37.5%; Lilly (Eli) & Co., up 31.2%; Cox
Communications, Inc., up 30.1%; and Tricon Global Restaurants, Inc., up 29.6%.
Pharmaceutical and technology issues provided major sources of gains, led by
Lilly (Eli) & Co., up 31.2%; and Schering-Plough Corp., up 26.3% in the
pharmaceutical group. Technology issues powering the Fund's performance were
Cisco Systems, Inc., up 37.5%; Compaq Computer Corp., up 24.6%; International
Business Machines Corp., up 23.3%; Microsoft Corp., up 22.5%; and Sun
Microsystems, Inc., up 19.5%. Some utility companies were among the top
performers, Energy East Corp., up 27.8% and Orange & Rockland Utilities, Inc.,
up 22.1%.
12
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(based on 9/30/98 net assets)
[PIE CHART APPEARS HERE]
Common Stock -- 58.6%
U.S. Treasury Notes/Bonds -- 28.2%
Cash and Equivalents -- 11.4%
Government Agency Notes/Bonds -- 0.8%
Convertibles -- 1.0%
What was the Fund's asset allocation strategy with regard to stocks, bonds, and
cash equivalents?
During the six months, the Fund maintained a generally stable asset allocation
position. Significant changes included increases in the long-term Treasury bond
position in June and July, and then, later in August and through September, the
switch of some cash equivalent reserves into equities which were purchased at
depressed prices. The investment policy strategy adopted early in the fiscal
year assumed that the markets would show considerable volatility and contained
numerous examples of overpriced issues. Our goal was to anticipate probable
declines and to be in a position to utilize the Fund's cash equivalents to take
advantage of these declines. Thus, we set about aggressively to use these
reserves, increasing the equity asset allocation in September. Purchases
included several issues new to the portfolio, and numerous increases to existing
positions, particularly when the latter were under severe pressure. New holdings
included American Express Co., American Stores Co., Mellon Bank Corp.,
Progressive Corp.(Ohio), Norwest Corp., Dollar General Corp. (Strypes), and
Philips International Realty Corp. Among the issues added to the portfolio, a
number have withstood the market volatility, and even provided substantial gains
through September 30. Amoco Corp. shares have advanced as a result of an
acquisition bid by British Petroleum Co. Plc.
American Stores Co. has moved up with the advance of Albertson's, Inc., which is
planning to acquire the company. Perkin-Elmer Corp. has had a major advance as
it is restructuring its operations, and Progressive Corp. has demonstrated an
earning power which renewed market optimism concerning its valuation. These are
but a few of the positive developments which have impacted the portfolio's new
and enlarged commitments. Even in those which had particularly sizable declines
toward the end of the quarter, we are now encountering positive investor
revaluation. Of the Fund's significant positions which were increased during the
six months, those with the greatest declines were Lehman Brothers Holdings, Inc.
and Merrill Lynch & Co., Inc.
How do the Fund's long-term strategies fare in the recent market volatility?
The Fund's long-term strategy of concentrating fixed income investments in U.S.
Treasury obligations was, as noted above, highly rewarding in the atmosphere of
financial crisis when investors chose to literally retreat into Treasuries.
The Fund's equity strategy of concentrating on the effort to select undervalued
growth opportunities was effective in the often uncertain and highly volatile
markets. There was considerable validation of this strategy in the continuing
highly favorable trend of mergers and acquisitions. During the six months, 21 of
the Fund's holdings were the subject of merger or acquisition offers,
demonstrating, in our view, both their undervaluation and the dynamism of other
companies in their industries, or interested in their industries. Financial
institutions continued to be active in this trend. The Fund's holdings in First
of America Bank Corp., purchased in July, 1995, was acquired in April at a
valuation which provided a 217.7% gain for the Fund. Other banks with such bids
included: Crestar
13
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
Financial Corp., 94.5% from May 1993 (still pending in its merger with SunTrust
Banks, Inc.); Firstar Corp., 26.1% just six months after its purchase by the
Fund (still pending with Star Banc Corp.); Beneficial Corp., 151.1%, one and
three-quarter years after its purchase; and First Chicago NBD Corp., 97.1%,
three and three-quarter years holding, the purchase by Banc One Corp. still
pending. The utility industry was involved in these holdings with Long Island
Lighting Co. being acquired by KeySpan Energy Corp., with a 48.8% gain to the
Fund in just over one year and a half; 360 (Degrees) Communications Co. acquired
by ALLTEL Corp. with a 116.7% gain in two years and five months; Orange and
Rockland Utilities, Inc., with a 51.8% gain (still pending in just over one
year) with an offer by Consolidated Edison, Inc.; and GTE Corp. with a 35.0%
gain, pending the acquisition by Bell Atlantic Corp. The diversity of this group
of acquisitions or mergers reflects the Fund's highly diversified positioning,
with Oasis Residential, Inc., a real estate investment trust; Continental Homes
Holding Corp., a home-builder; Western Atlas, Inc., an oil field services
company; Mercantile Stores Co., Inc., a retailer; Amp, Inc., an electronic
components company; and even Chrysler Corp., with a proposed acquisition by
Daimler-Benz AG.
We anticipate that as the security markets regain stability, this long-term
trend which has provided over 59 (48 completed and 11 pending) mergers and
acquisitions for the Fund portfolio, with an average gain of 67.2% on the
completed acquisitions, will continue to be a source of significant capital
appreciation.
Top 5 Industries --
Equity
------
(based on 9/30/98 net assets)
Finance and Insurance 9.1%
......................................................................
Information Services & Technology 7.0%
......................................................................
Healthcare Products and Services 6.8%
......................................................................
Banks 6.8%
......................................................................
Real Estate 4.8%
......................................................................
Did the Fund sell any securities when stock prices were near their highs for the
fiscal year?
The Fund made a number of significant sales of shares to take advantage of price
spurts during the market's trend to new highs in the spring and early summer.
The largest single profit (882.2% in five and three-quarter years) was taken in
a portion of the Fund's holdings in Intel Corp., when we judged that the shares
had amply discounted present opportunities. While still highly confident of the
long-term trend of the company, we reduced the position in order to limit the
Fund's volatility. Similar sales were made of other technology leaders,
including portions of the positions in Cisco Systems, Inc., Lucent Technologies
Inc., Hewlett-Packard Co., Honeywell, Inc., and Perkin-Elmer Corp. In the health
care industry, another area where the Fund has had great success with long-term
commitments, reductions were made in positions in Pfizer, Inc., Medtronic, Inc.,
and Monsanto Co. Among financials, positions were reduced in Dime Bancorp, Inc.,
SunTrust Banks, Inc., and Morgan (J.P.) & Co., Inc., while positions in Wachovia
Corp. and Cardinal Health, Inc. were eliminated. Sizable gains were taken in
other issues which subsequently fell quite sharply, including Household
International, Inc., Disney (Walt) Co., Avon Products, Inc., and International
Flavors & Fragrances, Inc. The fundamental motivation for the sales was asset
protection. The number of losses was minimal for the Fund; illustratively, a
28.4% loss in the shares of Nike, Inc. on a long-term basis, and one short-term
loss of 17.7% in the shares of Penney (J.C.) Co., Inc.
14
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
Top 10
Equity Holdings
---------------
(based on 9/30/98 net assets)
Intel Corp. 2.5%
................................................................................
Federal National Mortgage Association 1.7%
................................................................................
General Electric Co. 1.6%
................................................................................
Microsoft Corp. 1.5%
................................................................................
Du Pont (E.I.) De Nemours & Co. 1.2%
................................................................................
Hewlett-Packard Co. 1.0%
................................................................................
BankBoston Corp. 0.9%
................................................................................
Sprint Corp. 0.9%
................................................................................
Lilly (Eli) & Co. 0.9%
................................................................................
International Business Machines Corp. 0.8%
................................................................................
What is the outlook for the Fund at this time?
Management is optimistic that the much feared crisis of financial liquidity in
the United States, and the apprehension of recession prospects in the months
ahead has been greatly overdone. The demonstrated willingness of the Federal
Reserve to provide interest rate cuts to ensure support for the American
financial system, and to demonstrate that inflation is not feared at this time,
has already had highly positive effects for the equity markets since the October
15th rate decrease. Further, the settlement of budget disputes in the Congress,
the program to further fund the IMF, and the United States readiness to lead a
program of support for Brazil, should remove much of the fear concerning broader
financial chaos. The long effort to restimulate Japan continues, but with a more
optimistic outlook than in the last two years because that country is finally
facing the need to provide new funding for its banking system in recognition of
the huge loan losses it carries. The Asian financial difficulties remain of
deep concern, but there is already evidence of turnaround, though slow, and
perhaps halting, in several countries, including Thailand, Korea, and the
Philippines.
The profitability of American business remains intact, even taking into account
many lower than expected earning statements for the third quarter. It is already
evident that corporations are tightening their operating and financial belts for
a more competitive, more pressured environment. But, corporations are also
demonstrating their confidence in the value of their businesses and the strength
of their treasuries by an almost unprecedented wave of corporate share buybacks.
Since the Russian financial crisis came to a head, and the American markets
began to decline, the daily list of corporate buybacks has reached extraordinary
proportions. This will lend both support and confidence to the equity markets.
Our expectations are that this nation will continue to be in a period of lower,
and perhaps even declining interest rates, while a close to full employment
society will be able to sustain demand, notwithstanding a more cautious consumer
attitude. This caution could well increase saving rates and, thus, generate more
investable assets. Our policy will remain sensitive to appropriate asset
allocation, aggressive in seizing the opportunity of depressed values, and
cautious in the face of evidences of overvaluation.
15
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of September 30, 1998
The original and long-term strategy of the Fund is to take advantage of
undervalued growth opportunities, both to minimize risk through undervaluation
and to benefit by growth.
Portfolio
Management
--------------------------------------------------
[PHOTO OF STEPHEN A. LIEBER APPEARS HERE]
Stephen A. Lieber
Tenure: November 1993
[PHOTO OF JAMES T. COLBY III APPEARS HERE]
--------------------------------------------------
James T. Colby III
Tenure: November 1993
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 9/30/98.
The Equity Style Box placement is based on a fund's price-to-earnings and price-
to-book ratio relative to the S&P 500, as well as the size of the companies in
which it invests, or median market capitalization.
[GRAPHIC APPEARS HERE]
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
/1/Source: 1998 Morningstar, Inc.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses paid by the
shareholders investing in each class. The investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The S&P 500 Index and the LBMBI are unmanaged indices
and do not include transaction costs associated with buying and selling
securities or any management fees. The CPI is a commonly used measure of
inflation and does not represent an investment return. It is not possible to
invest directly in an index.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
- --------------------------------------------------------------------------------
Class A Class B Class C Class Y
Inception Date 1/17/95 1/6/95 3/3/95 11/2/93
................................................................................
Average Annual Returns
................................................................................
6 months with sales charge -11.00% -11.58% -7.90% n/a
................................................................................
6 months w/o sales charge -6.63% -6.96% -6.97% -6.49%
................................................................................
1 year with sales charge -4.48% -5.41% -1.51% n/a
................................................................................
1 year w/o sales charge 0.28% -0.53% -0.53% 0.53%
................................................................................
3 years 10.62% 10.84% 11.61% 12.78%
................................................................................
Since Inception 13.69% 14.11% 14.15% 13.46%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
30-day SEC Yield 2.13% 1.49% 1.49% 2.49%
................................................................................
6-month income dividends
per share $0.17 $0.12 $0.12 $0.19
................................................................................
*Adjusted for maximum sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
CPI LBMBI S & P 500 Class A
1/31/95 10,000 10,000 10,000 9,525
9/30/95 10,193 10,966 12,649 11,333
9/30/96 10,499 11,629 15,220 12,876
9/30/97 10,725 12,677 21,377 16,061
9/30/98 10,885 13,612 23,310 16,106
Comparison of a $10,000 investment in Evergreen Tax Strategic Foundation Fund
Class A, versus a similar investment in the S&P 500 Index, the Lehman Brothers
Municipal Bond Index (LBMBI), and the Consumer Price Index (CPI).
The S&P 500 Index is an unmanaged index of 500 publicly traded U.S. stocks and
is often used as an indicator of performance of the overall stock market.
The Lehman Brothers Municipal Bond Index is a broad measure of the municipal
bond market. To be included in this index, bonds must have a minimum credit
rating of at least BAA, and outstanding par value of at least $3 million and be
issued as part of a transaction of at least $50 million. The bonds must have
been issued after December 31, 1990, and have a remaining maturity of at least
one year. Taxable municipal bonds, bonds with floating rates, derivatives, and
certificates of participation are excluded.
16
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
What was the performance for the Evergreen Tax Strategic Foundation Fund in the
first half of the fiscal year?
Evergreen Tax Strategic Foundation Fund Classes A, B, C, and Y had performance
of -6.63%, -6.96%, -6.97% and -6.49%, respectively, for the six months ended
September 30, 1998. This performance compares with -5.37% of the fully taxable
funds in the Lipper Balanced Fund Average. The Fund's performance was negatively
impacted during the six months by two principal factors. First, the tax-exempt
bond market failed to fully reflect the interest rate performance of taxable
obligations during this period. The spread between tax-exempt bonds and U.S.
Treasuries increased to the point where index yields were nearly 100% of
Treasuries. This means that in the rush to secure the protection of Treasuries,
in a period of financial uncertainty, investors were literally overlooking the
advantages of tax-exempt income. The Fund's tax-exempt bond portfolio increased
in value only 5.5% over the last six months. The equity performance was also
negatively affected by this investor rush to security. Stocks with dividend
yields were more favored during the period of market volatility in the latter
part of August and September, than those with little or no yield. Since the tax
efficient goal of the Tax Strategic Foundation Fund focuses on issues with
little or no yield, it suffered an adverse impact from this shift. The equity
portfolio during the six months declined 18.8%.
Portfolio
Characteristics
---------------
Total Net Assets $370,600,973
...............................................................................
Number of Holdings 283
...............................................................................
Beta 0.48
...............................................................................
P/E Ratio 13.9x
...............................................................................
Were the negative trends of the last quarter indicative of new, adverse
conditions?
Your management believes that these adverse trends were temporary in nature,
aggravated by apprehensions that the U.S. financial markets were likely to
suffer from a lack of liquidity, and that American industry would be faced with
a recession. Developments since the end of the quarter have tended to counter
these impressions, as is evident from the sizable rally in stock prices in this
period. The actions of the Federal Reserve Bank to reduce interest rates twice
and its indicated policy of supporting liquidity in the financial system, have
countered the worst fears. Furthermore, its willingness to provide liquidity,
and its evident belief that inflation is not a near-term problem, suggest that
credit availability will continue to sustain economic expansion, although at
lower rates. Supportingly, the passage of the budget by Congress, the plan to
obtain U.S. support for IMF, the Administration plan to support Brazil, and the
Japanese government plan to refinance the banking system where necessary, all
suggest that the panicky conditions in the securities markets will abate.
Has the Fund sought to take advantage of these recent market conditions?
Throughout the six months, our investment policy has been very actively focused
on increasing the common stock participation, particularly of issues believed
temporarily at deflated prices, and on lengthening maturities of the tax-exempt
portfolio.
Outstanding purchase opportunities were seen in a large number of issues,
particularly at the end of August and early in September. Examples of the Fund
taking advantage of these opportunities are numerous, given the 143 issues
purchased for the Fund, both
17
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
stock and bond, during this period. As examples of undervaluation, we would note
that during, and subsequent to, the major sell-off on August 31, the Fund bought
shares of Intel Corp., which provided a gain of 16.6% to September 30;
Progressive Corp. (Ohio), which provided a gain of 13.8% to September 30; Coca-
Cola FEMSA S.A. de CV, which provided a gain of 7.3% to September 30; and
Citicorp, now Citigroup Inc., which provided a gain of 2.0% to September 30. In
the tax-exempt bond position, the strategy during this entire period was to
lengthen maturities to take maximum advantage of the overall decline in interest
rates. The selection was again limited to the highest quality, either insured or
triple-A rated bonds.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(based on 9/30/98 net assets)
[PIE CHART APPEARS HERE]
Municipal Bonds -- 52.6%
Common Stock -- 45.5%
Cash and Equivalents -- 1.1%
Convertibles -- 0.8%
Is the Fund still focused on undervalued equities?
The original and long-term strategy of the Fund is to take advantage of
undervalued growth opportunities, both to minimize risk through undervaluation
and to benefit by growth. One of the clearest proofs that we have indeed
selected undervalued issues is through the merger and acquisition offers which
many of these companies receive. During the six months, twelve of the Fund's
holdings were the subject of mergers or acquisitions. The average return to
September 30 on the completed acquisitions was 95.8%. The largest indicated gain
was in the shares of First of America Bank Corp., which were purchased in July,
1995, and the merger was completed in April, 1998, with a 224.9% gain. Other
financial institutions with sizable gains through mergers and acquisitions were
Beverly Bancorporation, Inc., up 92.4%, and Crestar Financial Corp., up 29.4%
(based on the September 30 closing price of SunTrust Banks, Inc.). A diverse
group of companies was included in this listing, including two hotel groups;
Interstate Hotels Co., which recorded a 61.5% appreciation, and La Quinta Inns
Inc., with an 18.1% gain. Others with bids for the companies now pending
include: Amp, Inc., Amoco Corp., GTE Corp., Monsanto Co., and Citicorp. This
merger and acquisition activity confirms the continuing validity of our
undervaluation strategy. Looking ahead, we anticipate that as a result of the
recent sharp price declines of the shares of many attractive companies, the
merger and acquisition activity will re-accelerate, and provide appreciation
opportunities for the Fund's holdings.
Top 5 Industries --
Equity
------
(based on 9/30/98 net assets)
Finance & Insurance 8.2%
................................................................................
Banks 8.1%
................................................................................
Real Estate 4.2%
................................................................................
Electrical Equipment & Services 3.7%
................................................................................
Healthcare Products & Services 3.3%
................................................................................
Top 5 Industries --
Bonds
-----
(based on 9/30/98 net assets)
Housing 8.9%
................................................................................
Hospitals 6.6%
................................................................................
Electric Power 5.3%
................................................................................
Higher Education 5.2%
................................................................................
Government -- Local 5.2%
................................................................................
18
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
What were the strongest and weakest sectors for the Fund's investments during
the six months?
The strongest were technology and health care. The best performer in technology
was International Business Machines Corp., up 25.5%; followed by Sun
Microsystems, Inc., up 19.5%; and Gateway 2000, Inc., up 11.0%. In health care,
the leaders were Abbott Laboratories, up 11.6%; American Home Products Corp., up
9.9%; Monsanto Co., up 8.2%; and Pfizer, Inc., up 6.2%. The weakest sector was
financial, with Frontier Insurance Group, Inc., declining 47.1%; Mercury General
Corp., down 44.7%; and Republic New York Corp., with a 42.9% loss.
Did the Fund sell any stocks when the market was high in the spring and early
summer?
A number of sales were made for the Fund taking advantage of the market run-up.
The largest percentage recorded was in the shares of Lucent Technologies Inc.,
sold with a gain of 498.2% in a 26-month holding period; followed by 181.8% in
the shares of MacDermid, Inc., held 15 months; followed by a 152.3% gain in the
shares of Cisco Systems, Inc. Others with gains between 75% and 90% included
Payless ShoeSource, Inc., Interstate Hotels Co., and Dime Bancorp, Inc.
Mercantile Stores Co., Inc. was eliminated with the acquisition of the company,
providing a gain of 44.3%, with a 42-month holding period from original
purchase. The only loss recorded on an equity transaction was in the shares of
Amp, Inc. The original high cost shares were sold after an acquisition bid was
made for the company at a loss of 8.4%, while the position had been doubled up
in anticipation of taking the loss, and the newly purchased stock has since
appreciated.
Top 10
Equity Holdings
---------------
(based on 9/30/98 net assets)
Perkin Elmer Corp. 1.0%
...............................................................................
Du Pont (E. I.) De Nemours & Co. 0.9%
...............................................................................
Intel Corp. 0.8%
...............................................................................
MGIC Investment Corp. 0.8%
...............................................................................
Beckman Coulter Inc. 0.8%
...............................................................................
W.W. Grainger, Inc. 0.8%
...............................................................................
Union Pacific Corp. 0.8%
...............................................................................
CitiCorp 0.7%
...............................................................................
Legg Mason, Inc. 0.7%
...............................................................................
Paine Webber Group, Inc. 0.7%
...............................................................................
How is the Fund maintaining its tax-efficiency?
The tax-exempt bond portfolio is, by definition, tax-efficient. The equity
portfolio is tax-efficient in two ways. First, our purchases consist of issues
which either have no or little taxable income paid out, or tax-deferred
payments. Preference in selection of stocks for investment is given to companies
which use their retained earnings to buy back shares, and thereby increase the
participation in the company's profits for the remaining shares. Second, tax
strategies are employed in order to minimize the consequences of taxable gains.
The example noted in the foregoing of a doubling up in order to both retain the
position in a company considered of intrinsic merit, and yet realize a gain when
the market had declined, is typical. Losses may also be realized, with
replacement positions substantially duplicated in the tax-exempt bond market.
When losses appear, they may be taken, and replaced with comparable issues. In
the recent strong bond market, no such moves were appropriate or necessary.
19
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
Top 5
Bond Holdings
-------------
(based on 9/30/98 net assets)
Metropolitan Washington DC Arpts. Auth. 1.6%
................................................................................
Chicago Illinois Skyway Toll Bridge 1.5%
................................................................................
New York St. Urban Dev. Corp. Rev. 1.5%
................................................................................
Intermountain Power Agency Utah Power 1.4%
................................................................................
Illinois Educ. Facs. Auth. Rev. 1.3%
................................................................................
What is the outlook for the Fund, and for its tax-efficient investment strategy?
Management is optimistic that the much feared crisis of financial liquidity in
the United States and the apprehension of recession prospects in the months
ahead has been greatly overdone. The demonstrated willingness of the Federal
Reserve to provide interest rate cuts to ensure support for the American
financial system, and to demonstrate that inflation is not feared at this time,
has already had highly positive effects for the equity markets since the October
15th rate decrease. Further, the settlement of budget disputes in the Congress,
the program to further fund the IMF, and the United States readiness to lead a
program of support for Brazil, should remove much of the fear concerning broader
financial chaos. The long effort to restimulate Japan continues, but with a more
optimistic outlook than in the last two years because that country is finally
facing the need to provide new funding for its banking system in recognition of
the huge loan losses it carries. The Asian financial difficulties remain of deep
concern, but there is already evidence of turnaround, though slow, and perhaps
halting, in several countries, including Thailand, Korea, and the Philippines.
The profitability of American business remains intact, even taking into account
many lower than expected earning statements for the third quarter. It is already
evident that corporations are tightening their operating and financial belts for
a more competitive, more pressured environment. But, corporations are also
demonstrating their confidence in the value of their businesses and the strength
of their treasuries by an almost unprecedented wave of corporate share buybacks.
Since the Russian financial crisis came to a head, and the American markets
began to decline, the daily list of corporate buybacks has reached extraordinary
proportions. This will lend both support and confidence to the equity markets.
Our expectations are that this nation will continue to be in a period of lower,
and perhaps even declining interest rates, while a close to full employment
society will be able to sustain demand, notwithstanding a more cautious consumer
attitude. This caution could well increase saving rates and, thus, generate more
investable funds. Our policy will remain sensitive to appropriate asset
allocation, aggressive in seizing the opportunity of depressed values, and
cautious in the face of evidences of overvaluation.
20
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
American Retirement Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31, Year Ended December 31,
September 30, 1998 ----------------------- -----------------------
(unaudited) 1998 1997** 1996 1995*
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD $ 16.70 $ 13.74 $ 13.86 $ 12.82 $ 10.65
------- ---------- ---------- ------------ -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.25 0.49 0.11 0.45 0.41
Net realized and unrealized gains or losses on securities (1.97) 3.29 (0.12) 1.12 2.22
------- ---------- ---------- ------------ -----------
Total from investment operations (1.72) 3.78 (0.01) 1.57 2.63
------- ---------- ---------- ------------ -----------
LESS DISTRIBUTIONS
From net investment income (0.25) (0.48) (0.11) (0.42) (0.46)
From net realized gains 0 (0.34) 0 (0.11) 0
------- ---------- ---------- ------------ -----------
Total distributions (0.25) (0.82) (0.11) (0.53) (0.46)
------- ---------- ---------- ------------ -----------
NET ASSET VALUE END OF PERIOD $ 14.73 $ 16.70 $ 13.74 $ 13.86 $ 12.82
------- ---------- ---------- ------------ -----------
TOTAL RETURN+ (10.36%) 28.02% (0.10%) 12.50% 24.90%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD (THOUSANDS) $27,808 $ 29,005 $ 14,590 $ 11,116 $ 1,335
RATIOS TO AVERAGE NET ASSETS:
Total expenses 1.29%++ 1.40% 1.37%++ 1.30% 1.37%++
Total expenses, excluding fee waivers and expense
reimbursements N/A N/A 1.68%++ 1.33% 10.96%++
Net investment income 3.18%++ 3.21% 3.43%++ 3.53% 3.73%++
PORTFOLIO TURNOVER RATE 20% 34% 9% 16% 49%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31, Year Ended December 31,
September 30, 1998 ----------------------- --------------------------
(unaudited) 1998 1997** 1996 1995*
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD $ 16.61 $ 13.67 $ 13.80 $ 12.80 $ 10.65
------- ---------- ---------- ------------ -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.19 0.38 0.09 0.36 0.35
Net realized and unrealized gains or losses on securities (1.96) 3.26 (0.13) 1.09 2.20
-------- ---------- --------- ------------ -----------
Total from investment operations (1.77) 3.64 (0.04) 1.45 2.55
-------- ---------- --------- ------------ -----------
LESS DISTRIBUTIONS
From net investment income (0.19) (0.36) (0.09) (0.34) (0.40)
From net realized gains 0 (0.34) 0 (0.11) 0
-------- ---------- --------- ------------ -----------
Total distributions (0.19) (0.70) (0.09) (0.45) (0.40)
-------- ---------- --------- ------------ -----------
NET ASSET VALUE END OF PERIOD $ 14.65 $ 16.61 $ 13.67 $ 13.80 $ 12.80
-------- ---------- --------- ------------ -----------
TOTAL RETURN+ (10.71%) 27.06% (0.30%) 11.50% 24.10%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD (THOUSANDS) $153,721 $ 158,252 $ 76,791 $ 57,622 $ 4,839
RATIOS TO AVERAGE NET ASSETS:
Total expenses 2.04%++ 2.15% 2.11%++ 2.06% 2.12%++
Total expenses, excluding fee waivers and expense
reimbursements N/A N/A 2.43%++ 2.09% 4.20%++
Net investment income 2.43%++ 2.46% 2.68%++ 2.79% 2.97%++
PORTFOLIO TURNOVER RATE 20% 34% 9% 16% 49%
</TABLE>
+ Excluding sales charges.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** For the three-month period ended March 31, 1997. The Fund changed its fiscal
year end from December 31 to March 31, effective March 31, 1997.
See Combined Notes to Financial Statements.
21
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
American Retirement Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31, Year Ended December 31,
September 30, 1998 ----------------------- -----------------------
(unaudited) 1998 1997** 1996 1995*
- --------------------------------------------------------------------------------------------------
CLASS C SHARES
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $16.65 $ 13.70 $ 13.83 $ 12.81 $ 10.65
------ ---------- ---------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.19 0.38 0.09 0.36 0.36
Net realized and
unrealized gains or
losses on securities (1.96) 3.27 (0.13) 1.11 2.19
------ ---------- ---------- ----------- -----------
Total from investment
operations (1.77) 3.65 (0.04) 1.47 2.55
------ ---------- ---------- ----------- -----------
LESS DISTRIBUTIONS
From net investment
income (0.19) (0.36) (0.09) (0.34) (0.39)
From net realized gains 0 (0.34) 0 (0.11) 0
------ ---------- ---------- ----------- -----------
Total distributions (0.19) (0.70) (0.09) (0.45) (0.39)
------ ---------- ---------- ----------- -----------
NET ASSET VALUE END OF
PERIOD $14.69 $ 16.65 $ 13.70 $ 13.83 $ 12.81
------ ---------- ---------- ----------- -----------
TOTAL RETURN+ (10.68%) 27.08% (0.30%) 11.60% 24.00%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD
(THOUSANDS) $2,398 $ 2,777 $ 1,769 $ 1,487 $ 110
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 2.04%++ 2.15% 2.12%++ 2.05% 2.10%++
Total expenses,
excluding fee waivers
and expense
reimbursements N/A N/A 2.43%++ 2.08% 103.52%++
Net investment income 2.40%++ 2.46% 2.65%++ 2.80% 2.96%++
PORTFOLIO TURNOVER RATE 20% 34% 9% 16% 49%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31, Year Ended December 31,
September 30, 1998 ----------------------- -----------------------------------
(unaudited) 1998 1997** 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
CLASS Y SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $ 16.70 $ 13.74 $ 13.86 $ 12.83 $ 10.67 $ 11.60 $ 10.95
------- ---------- ---------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.27 0.55 0.14 0.48 0.47 0.60 0.56
Net realized and
unrealized gains or
losses on securities (1.97) 3.27 (0.14) 1.10 2.16 (0.93) 0.96
------- ---------- ---------- ------- ------- ------- -------
Total from investment
operations (1.70) 3.82 0.00 1.58 2.63 (0.33) 1.52
------- ---------- ---------- ------- ------- ------- -------
LESS DISTRIBUTIONS
From net investment
income (0.27) (0.52) (0.12) (0.44) (0.47) (0.60) (0.60)
From net realized gains 0 (0.34) 0 (0.11) 0 0 (0.27)
------- ---------- ---------- ------- ------- ------- -------
Total distributions (0.27) (0.86) (0.12) (0.55) (0.47) (0.60) (0.87)
------- ---------- ---------- ------- ------- ------- -------
NET ASSET VALUE END OF
PERIOD $ 14.73 $ 16.70 $ 13.74 $ 13.86 $ 12.83 $ 10.67 $ 11.60
------- ---------- ---------- ------- ------- ------- -------
TOTAL RETURN (10.25%) 28.34% 0.00% 12.60% 25.10% (2.90%) 14.10%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD
(THOUSANDS) $35,756 $ 43,786 $ 37,237 $41,243 $39,327 $37,176 $37,336
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.04%++ 1.14% 1.11%++ 1.05% 1.26% 1.28% 1.36%
Total expenses,
excluding fee waivers
and expense reimbursements N/A N/A 1.38%++ 1.09% N/A N/A N/A
Net investment income 3.40%++ 3.45% 3.56%++ 3.65% 3.96% 5.40% 5.13%
PORTFOLIO TURNOVER RATE 20% 34% 9% 16% 49% 136% 92%
</TABLE>
+ Excluding sales charges.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** For the three-month period ended March 31, 1997. The Fund changed its fiscal
year end from December 31 to March 31, effective March 31, 1997.
See Combined Notes to Financial Statements.
22
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
September 30, 1998 Period Ended
(unaudited) March 31, 1998*
- -------------------------------------------------------------------------------
CLASS A SHARES
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD $12.87 $12.36
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.20 0.08#
Net realized and unrealized gains or losses
on securities, futures contracts and
foreign currency related transactions (0.57) 0.81
------ ------
Total from investment operations (0.37) 0.89
------ ------
LESS DISTRIBUTIONS
From net investment income (0.22) (0.12)
From net realized gains 0 (0.26)
------ ------
Total distributions (0.22) (0.38)
------ ------
NET ASSET VALUE END OF PERIOD $12.28 $12.87
------ ------
TOTAL RETURN+ (2.91%) 7.38%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD (MILLIONS) $1,136 $1,277
RATIOS TO AVERAGE NET ASSETS:
Total expenses 0.97%++ 0.99%++
Total expenses, excluding indirectly paid
expenses 0.97%++ 0.99%++
Net investment income 3.12%++ 3.25%++
PORTFOLIO TURNOVER RATE 39% 76%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
September 30, 1998 Period Ended ------------------------------
(unaudited) March 31, 1998** 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------
CLASS B SHARES
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $12.88 $12.95 $11.33 $10.09 $ 9.26 $10.10
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.16 0.26# 0.30 0.29 0.31 0.28
Net realized and
unrealized gains or
losses on securities,
futures contracts and
foreign currency
related transactions (0.56) 1.53 2.07 1.42 0.96 (0.37)
------ ------ ------ ------ ------ ------
Total from investment
operations (0.40) 1.79 2.37 1.71 1.27 (0.09)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment
income (0.18) (0.27) (0.30) (0.27) (0.33) (0.35)
From tax basis return of
capital 0 0 0 0 0 (0.02)
------ ------ ------ ------ ------ ------
From net realized gains 0 (1.59) (0.45) (0.20) (0.11) (0.38)
Total distributions (0.18) (1.86) (0.75) (0.47) (0.44) (0.75)
------ ------ ------ ------ ------ ------
NET ASSET VALUE END OF
PERIOD $12.30 $12.88 $12.95 $11.33 $10.09 $ 9.26
------ ------ ------ ------ ------ ------
TOTAL RETURN+ (3.18%) 14.89% 21.95% 17.35% 14.20% (1.16%)
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD
(MILLIONS) $ 529 $ 580 $1,625 $1,481 $1,345 $1,390
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.72%++ 1.35%++ 1.70% 1.72% 1.77% 1.71%
Total expenses,
excluding indirectly
paid expenses 1.72%++ 1.35%++ 1.69% 1.71% N/A N/A
Net investment income 2.37%++ 2.66%++ 2.50% 2.71% 3.33% 2.81%
PORTFOLIO TURNOVER RATE 39% 76% 89% 96% 88% 88%
</TABLE>
+ Excluding sales charges.
++ Annualized.
* For the period from January 20, 1998 (commencement of class operations) to
March 31, 1998.
** For the nine-month period ended March 31, 1998. The Fund changed its fiscal
year end from June 30 to March 31, effective March 31, 1998.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
23
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
September 30, 1998 Period Ended
(unaudited) March 31, 1998*
- -----------------------------------------------------------------------------
CLASS C SHARES
- -----------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD $12.88 $12.43
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.14 0.05#
Net realized and unrealized gains or
losses on securities, futures contracts
and foreign currency related transactions (0.54) 0.75
------ ------
Total from investment operations (0.40) 0.80
------ ------
LESS DISTRIBUTIONS
From net investment income (0.18) (0.09)
From net realized gains 0 (0.26)
------ ------
Total distributions (0.18) (0.35)
------ ------
NET ASSET VALUE END OF PERIOD $12.30 $12.88
------ ------
TOTAL RETURN+ (3.18%) 6.58%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD (MILLIONS) $ 1 $ 1
RATIOS TO AVERAGE NET ASSETS:
Total expenses 1.72%++ 1.76%++
Total expenses, excluding indirectly paid
expenses 1.72%++ 1.76%++
Net investment income 2.42%++ 2.41%++
PORTFOLIO TURNOVER RATE 39% 76%
<CAPTION>
Six Months Ended
September 30, 1998 Period Ended
(unaudited) March 31, 1998**
- ------------------------------------------------------------------------------
CLASS Y SHARES
- ------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD $12.86 $12.01
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.22 0.08#
Net realized and unrealized gains or
losses on securities, futures contracts
and foreign currency related transactions (0.56) 0.86
------ ------
Total from investment operations (0.34) 0.94
------ ------
LESS DISTRIBUTIONS
From net investment income (0.24) (0.09)
------ ------
Total distributions (0.24) (0.09)
------ ------
NET ASSET VALUE END OF PERIOD $12.28 $12.86
------ ------
TOTAL RETURN (2.71%) 7.79%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD (MILLIONS) $ 34 $ 39
RATIOS TO AVERAGE NET ASSETS:
Total expenses 0.72%++ 0.75%++
Total expenses, excluding indirectly paid
expenses 0.72%++ 0.75%++
Net investment income 3.37%++ 3.47%++
PORTFOLIO TURNOVER RATE 39% 76%
</TABLE>
+ Excluding sales charges.
++ Annualized.
* For the period from January 22, 1998 (commencement of class operations) to
March 31, 1998.
** For the period from January 26, 1998 (commencement of class operations) to
March 31, 1998.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
24
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Foundation Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31, Year Ended December 31,
September 30, 1998 ----------------------- -----------------------
(unaudited) 1998 1997** 1996 1995*
- --------------------------------------------------------------------------------------------------
CLASS A SHARES
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $20.44 $ 16.00 $ 16.13 $ 15.12 $ 12.24
------ ---------- ---------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.23 0.44# 0.12 0.50 0.44
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (1.29) 4.87 (0.13) 1.16 3.14
------ ---------- ---------- ----------- -----------
Total from investment
operations (1.06) 5.31 (0.01) 1.66 3.58
------ ---------- ---------- ----------- -----------
LESS DISTRIBUTIONS
From net investment
income (0.21) (0.44) (0.12) (0.50) (0.47)
From net realized gains 0 (0.43) 0 (0.15) (0.23)
------ ---------- ---------- ----------- -----------
Total distributions (0.21) (0.87) (0.12) (0.65) (0.70)
------ ---------- ---------- ----------- -----------
NET ASSET VALUE END OF
PERIOD $19.17 $ 20.44 $ 16.00 $ 16.13 $ 15.12
------ ---------- ---------- ----------- -----------
TOTAL RETURN+ (5.23%) 33.88% (0.20%) 11.30% 29.70%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD
(MILLIONS) $ 340 $ 350 $ 220 $ 206 $ 107
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.28%++ 1.28% 1.25%++ 1.24% 1.33%++
Total expenses,
excluding fee waivers
and expense
reimbursements N/A N/A N/A N/A 1.34%++
Net investment income 2.25%++ 2.39% 2.83%++ 3.39% 3.73%++
PORTFOLIO TURNOVER RATE 4% 9% 2% 10% 28%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31, Year Ended December 31,
September 30, 1998 ----------------------- -----------------------
(unaudited) 1998 1997** 1996 1995*
- --------------------------------------------------------------------------------------------------
CLASS B SHARES
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $20.34 $ 15.94 $ 16.07 $ 15.07 $ 12.24
------ ---------- ---------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.15 0.30# 0.09 0.40 0.36
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (1.28) 4.84 (0.13) 1.15 3.09
------ ---------- ---------- ----------- -----------
Total from investment
operations (1.13) 5.14 (0.04) 1.55 3.45
------ ---------- ---------- ----------- -----------
LESS DISTRIBUTIONS
From net investment
income (0.13) (0.31) (0.09) (0.40) (0.39)
From net realized gains 0 (0.43) 0 (0.15) (0.23)
------ ---------- ---------- ----------- -----------
Total distributions (0.13) (0.74) (0.09) (0.55) (0.62)
------ ---------- ---------- ----------- -----------
NET ASSET VALUE END OF
PERIOD $19.08 $ 20.34 $ 15.94 $ 16.07 $ 15.07
------ ---------- ---------- ----------- -----------
TOTAL RETURN+ (5.57%) 32.81% (0.30%) 10.50% 28.70%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD
(MILLIONS) $1,213 $ 1,124 $ 606 $ 570 $ 296
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 2.03%++ 2.04% 2.00%++ 1.99% 2.07%++
Total expenses,
excluding fee waivers
and expense
reimbursements N/A N/A N/A N/A N/A
Net investment income 1.50%++ 1.63% 2.07%++ 2.64% 2.99%++
PORTFOLIO TURNOVER RATE 4% 9% 2% 10% 28%
</TABLE>
+ Excluding sales charges.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** For the three-month period ended March 31, 1997. The Fund changed its fiscal
year end from December 31 to March 31, effective March 31, 1997.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
25
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Foundation Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31, Year Ended December 31,
September 30, 1998 ----------------------- -----------------------
(unaudited) 1998 1997** 1996 1995*
- ---------------------------------------------------------------------------------------------------
CLASS C SHARES
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $20.34 $ 15.94 $ 16.06 $ 15.07 $ 12.24
------ ---------- ---------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.15 0.30# 0.09 0.40 0.34
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (1.28) 4.84 (0.13) 1.14 3.09
------ ---------- ---------- ----------- -----------
Total from investment
operations (1.13) 5.14 (0.04) 1.54 3.43
------ ---------- ---------- ----------- -----------
LESS DISTRIBUTIONS
From net investment
income (0.13) (0.31) (0.08) (0.40) (0.37)
From net realized gains 0 (0.43) 0 (0.15) (0.23)
------ ---------- ---------- ----------- -----------
Total distributions (0.13) (0.74) (0.08) (0.55) (0.60)
------ ---------- ---------- ----------- -----------
NET ASSET VALUE END OF
PERIOD $19.08 $ 20.34 $ 15.94 $ 16.06 $ 15.07
------ ---------- ---------- ----------- -----------
TOTAL RETURN+ (5.57%) 32.81% (0.30%) 10.40% 28.50%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD
(MILLIONS) $ 58 $ 50 $ 28 $ 27 $ 11
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 2.03%++ 2.04% 2.00%++ 1.99% 2.23%++
Total expenses,
excluding fee waivers
and expense
reimbursements N/A N/A N/A N/A 2.37%++
Net investment income 1.51%++ 1.63% 2.07%++ 2.64% 2.83%++
PORTFOLIO TURNOVER RATE 4% 9% 2% 10% 28%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31, Year Ended December 31,
September 30, 1998 ----------------------- -------------------------------
(unaudited) 1998 1997** 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
CLASS Y SHARES
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $20.45 $ 16.02 $ 16.14 $15.13 $12.27 $13.12 $11.98
------ ---------- ---------- ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.24 0.49# 0.13 0.54 0.51 0.42 0.31
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (1.28) 4.86 (0.13) 1.16 3.07 (0.57) 1.55
------ ---------- ---------- ------ ------ ------ ------
Total from investment
operations (1.04) 5.35 0.00 1.70 3.58 (0.15) 1.86
------ ---------- ---------- ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment
income (0.23) (0.49) (0.12) (0.54) (0.49) (0.42) (0.31)
From net realized gains 0 (0.43) 0 (0.15) (0.23) (0.28) (0.41)
------ ---------- ---------- ------ ------ ------ ------
Total distributions (0.23) (0.92) (0.12) (0.69) (0.72) (0.70) (0.72)
------ ---------- ---------- ------ ------ ------ ------
NET ASSET VALUE END OF
PERIOD $19.18 $ 20.45 $ 16.02 $16.14 $15.13 $12.27 $13.12
------ ---------- ---------- ------ ------ ------ ------
TOTAL RETURN (5.12%) 34.12% 0.00% 11.50% 29.70% (1.10%) 15.70%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD
(MILLIONS) $1,166 $ 1,117 $ 802 $ 809 $ 623 $ 332 $ 240
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.03%++ 1.03% 1.00%++ 0.99% 1.07% 1.14% 1.20%
Net investment income 2.51%++ 2.65% 3.07%++ 3.64% 3.89% 3.51% 2.81%
PORTFOLIO TURNOVER RATE 4% 9% 2% 10% 28% 33% 60%
</TABLE>
+ Excluding sales charges.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** For the three-month period ended March 31, 1997. The Fund changed its fiscal
year end from December 31 to March 31, effective March 31, 1997.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
26
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31, Year Ended December 31,
September 30, 1998 ----------------------- -----------------------
(unaudited) 1998 1997** 1996 1995*
- ---------------------------------------------------------------------------------------------------
CLASS A SHARES
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $ 16.36 $ 13.57 $ 13.50 $ 12.20 $ 10.44
------- ---------- ---------- ------------ -----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.17 0.31 0.07 0.27 0.29
Net realized and
unrealized gains or
losses on securities (1.26) 2.96 0.06# 1.59 2.24
------- ---------- ---------- ------------ -----------
Total from investment
operations (1.09) 3.27 0.13 1.86 2.53
------- ---------- ---------- ------------ -----------
LESS DISTRIBUTIONS
From net investment
income (0.17) (0.30) (0.06) (0.28) (0.31)
From net realized gains 0 (0.18) 0 (0.28) (0.46)
------- ---------- ---------- ------------ -----------
Total distributions (0.17) (0.48) (0.06) (0.56) (0.77)
------- ---------- ---------- ------------ -----------
NET ASSET VALUE END OF
PERIOD $ 15.10 $ 16.36 $ 13.57 $ 13.50 $ 12.20
------- ---------- ---------- ------------ -----------
TOTAL RETURN+ (6.57%) 24.40% 1.00% 15.40% 24.80%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD
(THOUSANDS) $82,897 $ 69,879 $ 15,039 $ 11,166 $ 2,702
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.33%++ 1.42% 1.38%++ 1.52% 1.75%++
Total expenses,
excluding fee waivers
and expense
reimbursements N/A N/A N/A 1.76% 5.02%++
Net investment income 2.30%++ 2.21% 2.30%++ 2.39% 2.79%++
PORTFOLIO TURNOVER RATE 37% 50% 29% 88% 110%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31, Year Ended December 31,
September 30, 1998 ----------------------- -----------------------
(unaudited) 1998 1997** 1996 1995*
- --------------------------------------------------------------------------------------------------
CLASS B SHARES
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $ 16.33 $ 13.56 $ 13.49 $ 12.19 $ 10.31
-------- ---------- --------- ------------ -----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.12 0.21 0.05 0.19 0.22
Net realized and
unrealized gains or
losses on securities (1.25) 2.94 0.06# 1.59 2.37
-------- ---------- --------- ------------ -----------
Total from investment
operations (1.13) 3.15 0.11 1.78 2.59
-------- ---------- --------- ------------ -----------
LESS DISTRIBUTIONS
From net investment
income (0.12) (0.20) (0.04) (0.20) (0.25)
From net realized gains 0 (0.18) 0 (0.28) (0.46)
-------- ---------- --------- ------------ -----------
Total distributions (0.12) (0.38) (0.04) (0.48) (0.71)
-------- ---------- --------- ------------ -----------
NET ASSET VALUE END OF
PERIOD $ 15.08 $ 16.33 $ 13.56 $ 13.49 $ 12.19
-------- ---------- --------- ------------ -----------
TOTAL RETURN+ (6.96%) 23.44% 0.08% 14.70% 25.60%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD
(THOUSANDS) $226,682 $ 185,042 $ 38,838 $ 28,007 $ 6,559
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 2.08%++ 2.18% 2.14%++ 2.27% 2.50%++
Total expenses,
excluding fee waivers
and expense
reimbursements N/A N/A N/A 2.51% 3.65%++
Net investment income 1.55%++ 1.46% 1.55%++ 1.64% 2.03%++
PORTFOLIO TURNOVER RATE 37% 50% 29% 2% 110%
</TABLE>
+ Excluding sales charges.
++ Annualized.
* For the period from January 17, 1995 and January 6, 1995 (commencement of
class A and class B operations, respectively) to December 31, 1995.
** For the three-month period ended March 31, 1997. The Fund changed its fiscal
year end from December 31 to March 31, effective March 31, 1997.
# The per share amount is not in accord with the net realized and unrealized
gains or losses for the period due to the timing of the sales of Fund shares
and the amount of per share realized and unrealized gains or losses at such
time.
See Combined Notes to Financial Statements.
27
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31, Year Ended December 31,
September 30, 1998 ----------------------- -----------------------
(unaudited) 1998 1997** 1996 1995*
- --------------------------------------------------------------------------------------------------
CLASS C SHARES
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $ 16.30 $ 13.53 $ 13.47 $ 12.19 $ 10.69
------- ---------- --------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.12 0.21 0.06 0.18 0.22
Net realized and
unrealized gains or
losses on securities (1.25) 2.94 0.05# 1.58 1.99
------- ---------- --------- ----------- -----------
Total from investment
operations (1.13) 3.15 0.11 1.76 2.21
------- ---------- --------- ----------- -----------
LESS DISTRIBUTIONS
From net investment
income (0.12) (0.20) (0.05) (0.20) (0.25)
From net realized gains 0 (0.18) 0 (0.28) (0.46)
------- ---------- --------- ----------- -----------
Total distributions (0.12) (0.38) (0.05) (0.48) (0.71)
------- ---------- --------- ----------- -----------
NET ASSET VALUE END OF
PERIOD $ 15.05 $ 16.30 $ 13.53 $ 13.47 $ 12.19
------- ---------- --------- ----------- -----------
TOTAL RETURN+ (6.97%) 23.49% 0.08% 14.50% 21.20%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD
(THOUSANDS) $39,082 $ 27,699 $ 5,086 $ 4,108 $ 496
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 2.08%++ 2.18% 2.13%++ 2.25% 2.50%++
Total expenses,
excluding fee waivers
and expense
reimbursements N/A N/A N/A 2.48% 18.91%++
Net investment income 1.56%++ 1.46% 1.55%++ 1.64% 2.07%++
PORTFOLIO TURNOVER RATE 37% 50% 29% 88% 110%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31, Year Ended December 31,
September 30, 1998 ----------------------- ---------------------------------
(unaudited) 1998 1997** 1996 1995 1994 1993*
- ------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD $ 16.39 $ 13.61 $ 13.54 $ 12.22 $ 10.27 $ 10.31 $10.00
------- ---------- ---------- ------- ------- ------- ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.19 0.37 0.09 0.34 0.35 0.27 0.05
Net realized and
unrealized gains or
losses on securities (1.25) 2.95 0.05 # 1.56 2.39 0.08 0.31
------- ---------- ---------- ------- ------- ------- ------
Total from investment
operations (1.06) 3.32 0.14 1.90 2.74 0.35 0.36
------- ---------- ---------- ------- ------- ------- ------
LESS DISTRIBUTIONS
From net investment
income (0.19) (0.36) (0.07) (0.30) (0.33) (0.27) (0.05)
From net realized gains 0 (0.18) 0 (0.28) (0.46) (0.12) 0
------- ---------- ---------- ------- ------- ------- ------
Total distributions (0.19) (0.54) (0.07) (0.58) (0.79) (0.39) (0.05)
------- ---------- ---------- ------- ------- ------- ------
NET ASSET VALUE END OF
PERIOD $ 15.14 $ 16.39 $ 13.61 $ 13.54 $ 12.22 $ 10.27 $10.31
------- ---------- ---------- ------- ------- ------- ------
TOTAL RETURN (6.49%) 24.73% 1.00% 15.80% 27.30% 3.40% 3.50%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF PERIOD
(THOUSANDS) $21,939 $ 19,881 $ 15,311 $15,002 $13,485 $10,575 $5,424
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.08%++ 1.15% 1.13%++ 1.30% 1.50% 1.49% 0.00%++
Total expenses,
excluding fee waivers
and expense
reimbursements N/A N/A N/A 1.56% 2.23% 2.41% 3.10%++
Net investment income 2.54%++ 2.48% 2.54%++ 2.63% 3.06% 2.87% 3.65%
PORTFOLIO TURNOVER RATE 37% 50% 29% 88% 110% 245% 60%
</TABLE>
+ Excluding sales charges.
++ Annualized.
* For the period from March 3, 1995 (commencement of class C operations) to
December 31, 1995 and November 2, 1993 (commencement of class Y operations)
to December 31, 1993.
** For the three-month period ended March 31, 1997. The Fund changed its fiscal
year end from December 31 to March 31, effective March 31, 1997.
# The per share amount is not in accord with the net realized and unrealized
gains or losses for the period due to the timing of the sales of Fund shares
and the amount of per share realized and unrealized gains or losses at such
time.
See Combined Notes to Financial Statements.
28
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
American Retirement Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 42.5%
AUTOMOTIVE EQUIPMENT &
MANUFACTURING - 1.7%
29,000 Arvin Industries, Inc. .............................. $ 1,080,250
30,000 Dana Corp. .......................................... 1,119,375
150,100 Simpson Industries, Inc. ............................ 1,510,381
------------
3,710,006
------------
BANKS - 5.6%
32,312 Banc One Corp. ...................................... 1,377,299
40,000 BancorpSouth, Inc. .................................. 720,000
40,000 Bank of New York Co., Inc. .......................... 1,095,000
32,000 Cape Cod Bank & Trust Co. ........................... 552,000
19,500 Comerica, Inc. ...................................... 1,068,844
25,050 Crestar Financial Corp. ............................. 1,421,587
47,761 First State Bancorp.................................. 904,474
8,000 First Union Corp.**.................................. 409,500
15,000 Fleet Financial Group, Inc. ......................... 1,101,562
53,000 Hibernia Corp. Cl. A................................. 765,188
60,000 Norwest Corp. ....................................... 2,148,750
36,000 Susquehanna Bancshares, Inc. ........................ 679,500
------------
12,243,704
------------
BUILDING, CONSTRUCTION & FURNISHINGS - 0.7%
10,000 Armstrong World Industries, Inc. .................... 535,000
22,530 Southdown, Inc. ..................................... 1,013,850
------------
1,548,850
------------
BUSINESS EQUIPMENT &
SERVICES - 0.2%
15,000 Dun & Bradstreet Corp................................ 405,000
------------
COMMUNICATION SYSTEMS &
SERVICES - 0.1%
5,500 * AirTouch Communications, Inc. ..................... 313,500
------------
CONSUMER PRODUCTS &
SERVICES - 1.8%
50,000 CPI Corp. ........................................... 1,184,375
11,000 International Flavors & Fragrances, Inc. ............ 363,000
50,000 Lancaster Colony Corp. .............................. 1,537,500
110,000 Stride Rite Corp. ................................... 900,625
------------
3,985,500
------------
DIVERSIFIED COMPANIES - 1.5%
10,000 Harris Corp. ........................................ 320,000
30,000 Ruddick Corp. ....................................... 510,000
30,000 Tenneco, Inc. ....................................... 986,250
80,000 Tomkins Plc, ADR..................................... 1,510,000
------------
3,326,250
------------
ELECTRICAL EQUIPMENT &
SERVICES - 2.6%
35,000 AMP, Inc. ........................................... 1,251,250
12,000 Emerson Electric Co. ................................ 747,000
56,656 Hubbell, Inc. Cl. B.................................. 2,011,288
43,000 Thomas & Betts Corp. ................................ 1,636,687
------------
5,646,225
------------
FINANCE & INSURANCE - 3.1%
36,363 Equitable Companies, Inc. ........................... 1,504,519
20,000 Hartford Financial Services Group, Inc. ............. 948,750
20,000 LaSalle Re Holdings Ltd. ............................ 532,500
15,000 Lincoln National Corp. .............................. 1,233,750
15,000 Ohio Casualty Corp. ................................. 581,250
6,000 Transamerica Corp. .................................. 636,000
46,184 Trenwick Group, Inc. ................................ 1,345,109
------------
6,781,878
------------
FOOD & BEVERAGE PRODUCTS - 1.8%
70,900 Flowers Industries, Inc. ............................ 1,546,506
18,000 H.J. Heinz Co. ...................................... 920,250
50,000 Lance, Inc. ......................................... 987,500
28,000 Tasty Baking Corp. .................................. 413,000
------------
3,867,256
------------
HEALTHCARE PRODUCTS &
SERVICES - 2.6%
30,000 Baxter International, Inc. .......................... 1,785,000
14,000 Bristol-Myers Squibb Co. ............................ 1,454,250
30,100 Shared Medical System Corp. ......................... 1,600,944
30,000 West Co., Inc. ...................................... 862,500
------------
5,702,694
------------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES - 1.6%
10,000 Bemis Co., Inc. ..................................... 350,625
45,000 Carpenter Technology Corp. .......................... 1,645,313
48,776 Flowserve Corp. ..................................... 987,714
42,000 Lindberg Corp. ...................................... 530,250
------------
3,513,902
------------
MACHINERY - DIVERSIFIED - 0.8%
82,650 Hardinge, Inc. ...................................... 1,818,300
------------
OIL/ENERGY - 3.4%
16,000 Amoco Corp. ......................................... 862,000
8,000 Atlantic Richfield Co. .............................. 567,500
34,500 Berry Petroleum Co. Cl. A............................ 444,188
15,000 Consolidated Natural Gas Co. ........................ 817,500
15,400 Exxon Corp. ......................................... 1,080,887
3,000 Kerr-McGee Corp. .................................... 136,500
10,000 Mobil Corp. ......................................... 759,375
21,550 * Seitel, Inc. ...................................... 233,009
12,000 Texaco, Inc. ........................................ 752,250
60,000 Williams Companies, Inc. ............................ 1,725,000
------------
7,378,209
------------
OIL FIELD SERVICES - 0.5%
40,000 Lufkin Industries, Inc. ............................. 1,040,000
------------
PAPER & PACKAGING - 0.1%
5,896 * Sealed Air Corp. .................................. 187,935
------------
PUBLISHING, BROADCASTING & ENTERTAINMENT - 0.2%
5,800 Time Warner, Inc. ................................... 507,863
------------
29
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
American Retirement Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
RETAILING & WHOLESALE - 1.4%
33,000 J. C. Penney Co., Inc. ............................. $ 1,482,937
70,260 *Saks, Inc. ........................................ 1,576,459
------------
3,059,396
------------
TEXTILE & APPAREL - 0.1%
10,000 Oxford Industries, Inc. ............................ 307,500
------------
THRIFT INSTITUTIONS - 1.6%
45,000 First Palm Beach Bancorp, Inc. ..................... 1,575,000
18,100 Horizon Financial Corp. ............................ 244,350
50,400 Maryland Federal Bancorp, Inc. ..................... 1,814,400
------------
3,633,750
------------
TRANSPORTATION - 0.5%
27,000 Union Pacific Corp. ................................ 1,150,875
------------
UTILITIES - ELECTRIC - 6.6%
80,000 Houston Industries, Inc. ........................... 2,490,000
31,220 Interstate Energy Corp. ............................ 1,000,991
37,000 PP&L Resources, Inc. ............................... 957,375
53,000 *Public Service Enterprise Group, Inc. ............. 2,083,563
85,000 Puget Sound Energy, Inc. ........................... 2,358,750
93,000 Sempra Energy....................................... 2,423,812
22,000 Southern Co. ....................................... 647,625
35,000 TNP Enterprises, Inc. .............................. 1,222,813
40,000 Wisconsin Energy Corp. ............................. 1,262,500
------------
14,447,429
------------
UTILITIES - GAS - 2.6%
94,000 *Marketspan Corp. .................................. 2,696,625
39,250 Northwest Natural Gas Co. .......................... 1,085,508
55,000 Peoples Energy Corp. ............................... 1,980,000
------------
5,762,133
------------
UTILITIES - TELEPHONE - 1.4%
35,000 Frontier Corp. ..................................... 958,125
40,000 U.S. West, Inc. .................................... 2,097,500
------------
3,055,625
------------
Total Common Stocks
(cost $79,204,170).................................. 93,393,780
------------
CONVERTIBLE PREFERRED - 16.4%
BANKS - 1.3%
50,000 National Australia Bank, Ltd.
7.875%, Series Unit................................. 1,331,250
58,000 WBK Trust
10.0%, STRYPES (exchangeable for Westpac Banking
Corp. Common Stock)................................. 1,602,250
------------
2,933,500
------------
COMMUNICATION SYSTEMS & SERVICES - 1.0%
30,000 AirTouch Communications, Inc.
6.00%, Series B..................................... 1,410,000
10,000 CBS Radio Inc.
7.00%, 12/31/49, 144A.............................. 797,500
------------
2,207,500
------------
DIVERSIFIED COMPANIES - 0.8%
80,000 Ingersoll Rand Co.
6.75%, PRIDES...................................... 1,680,000
------------
ELECTRICAL EQUIPMENT &
SERVICES - 0.7%
50,000 Pioneer Standard Financial Trust
6.75%, 144A........................................ 1,625,000
------------
FINANCE & INSURANCE - 2.4%
20,000 American General Corp. $3.00, Series A, MIPS........ 1,640,000
13,000 American Heritage Life Investment Corp.
8.50%, PRIDES...................................... 819,000
20,000 Frontier Financing Trust 6.25%, TOPRS, 144A......... 855,000
11,000 Frontier Financing Trust 6.25%, TOPRS............... 470,250
4,000 Life Re Corp.
6.00%.............................................. 297,000
125,000 Philadelphia Consolidated
Holdings, Inc. PRIDES.............................. 1,218,750
------------
5,300,000
------------
FOOD & BEVERAGE PRODUCTS - 1.4%
25,000 Ralston Purina Co.
7.00%, SAILS (exchangeable for Interstate Bakeries
common stock)...................................... 1,525,000
30,000 Wendys Financing I
5.00%, Series A, TECONS............................ 1,573,125
------------
3,098,125
------------
HEALTHCARE PRODUCTS &
SERVICES - 0.9%
50,000 Owens & Minor Trust I
TECONS, 144A....................................... 1,900,000
------------
LEISURE & TOURISM - 0.7%
50,000 *Lodgian Capital Trust I 7.00%, 144A................ 1,512,500
------------
METAL PRODUCTS & SERVICES - 0.7%
20,000 Timet Capital Trust I
6.625%, BUCS, 144A................................. 725,000
20,000 Timet Capital Trust I
6.625%, 11/01/26................................... 725,000
------------
1,450,000
------------
OIL/ENERGY - 0.3%
20,000 Callon Petroleum Co.
8.50%, Series A.................................... 590,000
------------
OIL FIELD SERVICES - 0.6%
40,000 EVI, Inc.
5.00%, 144A........................................ 1,280,000
------------
PAPER & PACKAGING - 0.4%
30,000 Crown Cork & Seal Co., Inc.
4.50%, MIPS........................................ 785,625
5,225 *Sealed Air Corp.
$2.00, Series A................................... 188,753
------------
974,378
------------
30
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
American Retirement Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED - CONTINUED
PUBLISHING, BROADCASTING & ENTERTAINMENT - 1.6%
22,000 Houston Industries, Inc.
7.00%, ACES (exchangeable for Time Warner, Inc.
common stock)....................................... $ 1,678,875
20,000 Merrill Lynch & Co., Inc.
6.00%, STRYPES due 6/1/99 (exchangeable for Cox
Communications, Inc. common stock).................. 897,500
10,000 TCI Communications, Inc.
$2.125, Series A.................................... 842,500
------------
3,418,875
------------
RETAILING & WHOLESALE - 1.3%
7,500 CVS Automatic Common Exchange Security TRACES........ 611,250
65,000 Merrill Lynch & Co., Inc. (exchangeable for
Dollar General Corp. common stock)
8.50% STRYPES....................................... 2,340,000
------------
2,951,250
------------
TRANSPORTATION - 0.8%
20,000 CNF Trust I
5.00%, Ser. A, TECONS (exchangeable for CNF
Transportation, Inc. common stock).................. 960,000
20,000 Union Pacific Capital Trust
6.25%, TIDES, 144A.................................. 890,000
------------
1,850,000
------------
UTILITIES - ELECTRIC - 1.5%
45,000 *BNDES Participacoes S.A. DECS....................... 1,057,500
40,000 Texas Utilities Co.
9.25%, PRIDES....................................... 2,250,000
------------
3,307,500
------------
Total Convertible Preferred
(cost $39,357,753).................................. 36,078,628
------------
- --------------------------------------------------------------------------------
Principal
Amount
- --------------------------------------------------------------------------------
CONVERTIBLE DEBENTURES - 6.5%
BUILDING, CONSTRUCTION & FURNISHINGS - 0.9%
$1,500,000 Eagle Hardware & Garden, Inc. 6.25%, 3/15/01......... $ 1,912,500
------------
BUSINESS EQUIPMENT &
SERVICES - 0.5%
250,000 * Interim Services, Inc.
4.50%, 6/1/05...................................... 217,500
1,000,000 Quantum Corp.
7.00%, 8/1/04....................................... 906,250
------------
1,123,750
------------
CONSUMER PRODUCTS &
SERVICES - 0.7%
2,000,000 Action Performance Companies, Inc. 4.75%,
4/1/05, 144A........................................ 1,572,600
------------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES - 0.3%
$ 600,000 Robbins & Myers, Inc.
6.50%, 9/1/03....................................... 575,250
------------
LEISURE & TOURISM - 1.1%
2,500,000 Family Golf Centers, Inc.
5.75%, 10/15/04, 144A............................... 2,331,250
------------
OIL FIELD SERVICES - 2.2%
1,000,000 Diamond Offshore Drilling, Inc. 3.75%, 2/15/07....... 935,000
500,000 Key Energy Group, Inc.
7.00%, 7/1/03, 144A................................. 552,500
2,000,000 Nabors Industries, Inc.
5.00%, 5/15/06...................................... 2,070,000
Offshore Logistics, Inc.
1,000,000 6.00%, 12/15/03, 144A................................ 891,250
500,000 6.00%, 12/15/03...................................... 445,625
------------
4,894,375
------------
RETAILING & WHOLESALE - 0.8%
Central Garden & Pet Co.
500,000 6.00%, 11/15/03, 144A................................ 437,500
1,600,000 6.00%, 11/15/03...................................... 1,400,000
------------
1,837,500
------------
Total Convertible Debentures
(cost $16,425,614).................................. 14,247,225
------------
CORPORATE BONDS - 1.4%
BANKS - 0.5%
1,000,000 NationsBank Corp.
6.50%, 8/15/03...................................... 1,041,516
------------
FINANCE & INSURANCE - 0.5%
1,000,000 American General Finance Corp. 7.125%, 12/1/99....... 1,019,728
------------
TELECOMMUNICATION SERVICES & EQUIPMENT - 0.4%
1,000,000 GTE Southwest, Inc.
5.82%, 12/1/99, Ser. A.............................. 1,007,871
------------
Total Corporate Bonds
(cost $3,010,992)................................... 3,069,115
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 31.0%
GOVERNMENT AGENCY NOTES & BONDS - 30.2%
1,000,000 Federal Farm Credit Bank
6.70%, 8/6/04....................................... 1,015,775
Federal Home Loan Bank
2,000,000 5.375%, 10/6/03...................................... 2,014,084
2,000,000 5.65%, 12/29/00...................................... 2,042,532
1,000,000 6.195%, 2/5/03....................................... 1,000,952
2,000,000 6.532%, 12/28/07..................................... 2,077,658
2,000,000 6.565%, 8/6/02....................................... 2,030,308
2,000,000 6.585%, 10/15/02..................................... 2,002,516
2,000,000 7.00% , 7/14/05...................................... 2,079,474
31
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
American Retirement Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - CONTINUED
GOVERNMENT AGENCY NOTES & BONDS - CONTINUED
Federal Home Loan Mortgage Corp.
$2,000,000 6.54%, 12/10/07...................................... $ 2,123,004
2,000,000 6.542%, 3/19/08...................................... 2,078,204
1,000,000 6.91%, 6/20/05....................................... 1,036,702
2,000,000 7.585%, 9/19/06...................................... 2,151,780
2,000,000 7.865%, 8/8/11....................................... 2,172,222
Federal National Mortgage Association
5,000,000 5.65%, 2/22/28....................................... 4,974,030
3,000,000 5.90%, 6/18/01....................................... 3,025,593
1,850,000 6.00%, 1/14/05....................................... 1,921,673
2,215,000 6.10%, 1/26/05....................................... 2,284,845
3,000,000 6.16%, 1/23/08....................................... 3,145,548
2,000,000 6.24%, 1/14/08....................................... 2,100,792
3,000,000 6.32%, 3/3/08........................................ 3,169,917
1,000,000 6.41%, 3/8/06........................................ 1,089,704
5,000,000 6.42%, 2/12/08....................................... 5,195,630
1,000,000 6.45%, 1/28/05....................................... 1,005,510
2,000,000 6.46%, 1/1/08........................................ 2,121,630
4,000,000 6.52%, 3/5/08........................................ 4,162,280
2,000,000 6.54%, 4/1/05........................................ 2,017,088
2,000,000 6.68%, 12/28/01...................................... 2,000,212
3,000,000 7.28%, 5/23/07....................................... 3,231,846
1,000,000 Student Loan Marketing Association
5.90%, 2/20/01...................................... 1,004,282
------------
66,275,791
------------
TREASURY NOTES & BONDS - 0.8%
1,500,000 U.S. Treasury Bonds
7.125%, 2/15/23..................................... 1,895,157
------------
Total U.S. Government & Agency Obligations
(cost $65,242,641).................................. 68,170,948
------------
SHORT-TERM INVESTMENTS - 2.7%
COMMERCIAL PAPER - 0.9%
$ 220,000 BMW U.S. Capital Corp.
5.52%, 10/9/98...................................... 219,730
1,250,000 Peg Managers Acceptance Corp.
5.55%, 10/27/98..................................... 1,244,990
400,000 Twin Towers, Inc.
5.55%, 10/6/98...................................... 399,692
------------
1,864,412
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 1.8%
3,000,000 Federal Home Loan Bank Discount Notes
5.12%, 10/30/98..................................... 2,987,627
1,000,000 Federal National Mortgage Association Discount
Notes 5.20%, 10/7/98................................ 999,133
------------
3,986,760
------------
Total Short-Term Investments
(cost $5,851,172)................................... 5,851,172
------------
TOTAL INVESTMENTS -
(COST $209,092,342).......................... 100.5% 220,810,868
OTHER ASSETS AND
LIABILITIES - NET............................ (0.5) (1,126,916)
----- ------------
NET ASSETS.................................... 100.0% $219,683,952
===== ============
* Non-income producing securities.
** At September 30, 1998, the Fund owned 8,000 shares of common stock of
First Union Corp. at a cost of $106,108. During the six months ended
September 30, 1998, the Fund earned $6,320 in dividend income from
this investment. These shares were purchased by the Fund prior to the
acquisition of the investment advisor.
144A Securities that may be resold to "qualified institutional buyers"
under Rule 144Aof the Securities Act of 1933. These securities have
been determined to be liquid under guidelines established by the
Fund's Board of Trustees.
SUMMARY OF ABBREVIATIONS
ACESAutomatically Convertible Equity Securities
ADRAmerican Depository Receipt
BUCSBeneficial Unsecured Convertible Securities
DECSDividend Enhanced Convertible Stock
MIPSMonthly Income Preferred Shares
PRIDESPreferred Redeemable Increased Dividend Equity Securities
SAILSStock Appreciation Income Linked Securities
STRYPESStructured Yield Product Exchangeable for Stock
TECONSTerm Convertible Shares
TIDESTerm Income Deferrable Equity Securities
TOPRSTrust Originated Preferred Securities
TRACESTrust Automatic Common Exchangeable Securities
See Combined Notes to Financial Statements.
32
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 49.3%
ADVERTISING & RELATED
SERVICES - 0.3%
93,600 Gannett Co., Inc. ................................ $ 5,013,450
--------------
AEROSPACE & DEFENSE - 0.9%
80,000 Lockheed Martin Corp. ............................ 8,065,000
102,200 United Technologies Corp. ........................ 7,811,913
--------------
15,876,913
--------------
AUTOMOTIVE EQUIPMENT & MANUFACTURING - 0.8%
100,000 Chrysler Corp. ................................... 4,787,500
153,700 Ford Motor Co. ................................... 7,214,294
25,000 General Motors Corp. ............................. 1,367,187
--------------
13,368,981
--------------
BANKS - 1.5%
200,020 BankAmerica Corp. ................................ 12,026,202
131,864 Chase Manhattan Corp. ............................ 5,703,118
100,000 Fleet Financial Group, Inc. ...................... 7,343,750
--------------
25,073,070
--------------
BUSINESS EQUIPMENT &
SERVICES - 0.7%
60,000 Automatic Data Processing, Inc. .................. 4,485,000
75,000 Xerox Corp. ...................................... 6,356,250
--------------
10,841,250
--------------
CHEMICAL & AGRICULTURAL
PRODUCTS - 3.2%
150,000 Du Pont (E. I.) De Nemours & Co. ................. 8,418,750
400,000 Monsanto Co. ..................................... 22,550,000
300,000 Morton International, Inc. ....................... 6,562,500
136,000 PPG Industries, Inc. ............................. 7,420,500
351,300 Rohm & Haas Co. .................................. 9,770,531
--------------
54,722,281
--------------
COMMUNICATION SYSTEMS & SERVICES - 1.2%
150,000 *Cisco Systems, Inc. ............................. 9,276,563
240,000 *MCI WorldCom, Inc. .............................. 11,737,500
--------------
21,014,063
--------------
CONSUMER PRODUCTS &
SERVICES - 0.3%
70,000 Procter & Gamble Co. ............................. 4,965,625
--------------
DIVERSIFIED COMPANIES - 0.9%
213,600 AlliedSignal, Inc. ............................... 7,556,100
35,000 *Owens Illinois, Inc. ............................ 875,000
121,400 Tyco International Ltd. .......................... 6,707,350
--------------
15,138,450
--------------
ELECTRICAL EQUIPMENT & SERVICES - 2.3%
158,000 Emerson Electric Co. ............................. 9,835,500
325,000 General Electric Co. ............................. 25,857,812
59,600 *Solectron Corp. ................................. 2,860,800
--------------
38,554,112
--------------
FINANCE & INSURANCE - 3.4%
166,984 Allstate Corp. ................................... 6,961,146
125,000 American International Group, Inc. ............... 9,625,000
99,353 Associates First Capital Corp. Cl. A.............. 6,482,783
150,000 Federal Home Loan Mortgage Corp. ................. 7,415,625
120,000 Federal National Mortgage Association............. 7,710,000
100,000 Lincoln National Corp. ........................... 8,225,000
120,000 Nationwide Financial Services, Inc. Cl. A......... 5,452,500
150,000 Travelers Group, Inc. ............................ 5,625,000
--------------
57,497,054
--------------
FOOD & BEVERAGE
PRODUCTS - 2.8%
93,600 Bestfoods......................................... 4,533,750
116,600 Coca Cola Co. .................................... 6,719,075
200,000 Flowers Industries, Inc. ......................... 4,362,500
79,200 H.J. Heinz Co. ................................... 4,049,100
261,500 Philip Morris Companies, Inc. .................... 12,045,344
175,000 *Safeway, Inc. ................................... 8,115,625
141,800 Sara Lee Corp. ................................... 7,657,200
--------------
47,482,594
--------------
HEALTHCARE PRODUCTS &
SERVICES - 10.8%
325,000 American Home Products Corp. ..................... 17,021,875
194,900 Bristol-Myers Squibb Co. ......................... 20,245,237
350,000 *Health Management Associates, Inc. Cl. A......... 6,387,500
370,000 Johnson & Johnson................................. 28,952,500
209,100 Medtronic, Inc. .................................. 12,101,663
213,000 Merck & Co., Inc. ................................ 27,596,812
150,000 Pfizer, Inc. ..................................... 15,890,625
150,000 Pharmacia & Upjohn, Inc. ......................... 7,528,125
204,800 Schering-Plough Corp. ............................ 21,209,600
180,000 * Tenet Healthcare Corp. ......................... 5,175,000
37,200 * Universal Health Services, Inc. Cl. B........... 1,553,100
252,000 Warner-Lambert Co. ............................... 19,026,000
--------------
182,688,037
--------------
INFORMATION SERVICES & TECHNOLOGY - 3.3%
120,000 * American Power Conversion Corp. ................ 4,518,750
90,000 * BMC Software, Inc. ............................. 5,402,813
240,000 * EMC Corp. ...................................... 13,725,000
100,000 International Business Machines Corp. ............ 12,800,000
77,200 * Microsoft Corp. ................................ 8,499,237
233,800 * Sun Microsystems, Inc. ......................... 11,653,469
--------------
56,599,269
--------------
33
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
OIL/ENERGY - 7.2%
188,200 Amoco Corp. ...................................... $ 10,139,275
191,500 Anadarko Petroleum Corp. ......................... 7,528,344
251,500 Atlantic Richfield Co. ........................... 17,840,781
130,600 Chevron Corp. .................................... 10,978,562
197,900 Exxon Corp. ...................................... 13,890,106
276,900 Mobil Corp. ...................................... 21,027,094
110,400 Royal Dutch Petroleum Co. ........................ 5,257,800
393,200 Texaco, Inc. ..................................... 24,648,725
294,400 Unocal Corp. ..................................... 10,672,000
--------------
121,982,687
--------------
OIL FIELD SERVICES - 0.2%
90,400 Halliburton Co. .................................. 2,582,050
24,800 Schlumberger Ltd. ................................ 1,247,750
--------------
3,829,800
--------------
PUBLISHING, BROADCASTING & ENTERTAINMENT - 0.5%
370,000 CBS Corp. ........................................ 8,972,500
--------------
REAL ESTATE - 1.4%
175,000 Boston Properties, Inc. REIT...................... 4,987,500
475,000 Equity Office Properties
Trust REIT....................................... 11,637,500
70,000 First Industrial Realty Trust,
Inc. REIT........................................ 1,785,000
100,000 Spieker Properties, Inc. REIT..................... 3,675,000
50,000 TriNet Corporate Realty Trust,
Inc. REIT........................................ 1,631,250
--------------
23,716,250
--------------
RETAILING & WHOLESALE - 0.8%
325,000 CVS Corp. ........................................ 14,239,063
--------------
UTILITIES - ELECTRIC - 3.3%
87,300 Cinergy Corp. .................................... 3,339,225
199,000 Consolidated Edison, Inc. ........................ 10,372,875
295,000 Dominion Resources, Inc. ......................... 13,164,375
250,000 Duke Power Co. ................................... 16,546,875
100,000 Florida Progress Corp. ........................... 4,331,250
150,000 Houston Industries, Inc. ......................... 4,668,750
90,000 Texas Utilities Co. .............................. 4,190,625
--------------
56,613,975
--------------
UTILITIES - TELEPHONE - 3.5%
383,000 Ameritech Corp. .................................. 18,144,625
164,000 AT&T Corp. ....................................... 9,583,750
116,202 Bell Atlantic Corp. .............................. 5,628,534
112,000 GTE Corp. ........................................ 6,160,000
75,480 Sprint Corp. .................................... 5,434,560
285,000 U.S. West, Inc. ................................. 14,944,688
--------------
59,896,157
--------------
Total Common Stocks
(cost $536,741,997).............................. 838,085,581
--------------
CONVERTIBLE PREFERRED - 1.6%
CONSUMER PRODUCTS &
SERVICES - 0.5%
150,000 Newell Financial Trust I
5.25%, 144A...................................... $ 8,400,000
--------------
DIVERSIFIED COMPANIES - 0.1%
40,000 Owens Illinois, Inc.
4.75%............................................ 1,430,000
--------------
FINANCE & INSURANCE - 0.4%
63,500 Conseco, Inc.
7.00%, PRIDES.................................... 6,858,000
--------------
RETAILING & WHOLESALE - 0.6%
200,000 Kmart Financing I
7.75%............................................ 10,000,000
--------------
Total Convertible Preferred
(cost $24,276,192)............................... 26,688,000
--------------
- --------------------------------------------------------------------------------
Principal
Amount
- --------------------------------------------------------------------------------
CONVERTIBLE DEBENTURES - 1.1%
HEALTHCARE PRODUCTS &
SERVICES - 0.4%
$10,000,000 HEALTHSOUTH Corp.
3.25%, 4/1/03, 144A.............................. 7,625,000
--------------
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES - 0.1%
1,100,000 Textron, Inc.
10.01%, 2/1/00................................... 1,161,732
--------------
RETAILING & WHOLESALE - 0.6%
5,250,000 Staples, Inc.
4.50%, 10/1/00, 144A............................. 9,843,750
--------------
Total Convertible Debentures
(cost $16,434,975)............................... 18,630,482
--------------
ASSET-BACKED SECURITIES - 6.1%
5,500,000 Americredit Automobile
Receivable, Series 1997-C,
Class A3,
6.30%, 7/5/03.................................... 5,650,178
1,176,139 Americredit Automobile Recreation
Trust, 1997 B Class A2
6.36%, 9/12/00................................... 1,183,143
12,500,000 Carco Auto Loan Master Trust,
Series 1997-1, Class A,
6.69%, 8/15/04................................... 12,775,375
2,500,000 CNL Funding 98 1 Lp, Series 1998 Franchise
Loan Trust Certificate
6.60%, 4/18/11................................... 2,648,438
2,750,000 Contimortgage Home Equity Loan, Series 1997-
4, Class A7 6.63%, 9/15/16....................... 2,852,245
4,000,000 Contimortgage Home Equity Loan
Trust, Series 1998-1, Class A6,
6.58%, 12/15/18.................................. 4,104,840
6,150,000 Corestates Home Equity Loan, Series 1996-1,
Class A4, 7.00%, 6/15/12......................... 6,554,670
34
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - CONTINUED
$ 1,500,000 First USA Credit Card Master Trust, Series 96
6 Class A 5.765%, 10/10/98....................... $ 1,498,125
Green Tree Financial Corp.
5,695,011 Series 1993-4, Class A3, 6.25%, 1/15/19........... 5,716,367
6,000,000 Series 1997-3, Class A5, 7.14%, 7/15/28........... 6,275,580
Merrill Lynch Mortgage Investors, Inc.
3,320,136 Series 1992-D, Class B,
8.50%, 6/15/17................................... 3,665,895
5,000,000 Series 1991-D, Class B,
9.85%, 7/15/11................................... 5,098,400
415,460 Money Store Auto Trust, 1997 2 Class A1
6.17%, 3/20/01**................................. 417,699
8,000,000 Olympic Automobile Receivables Trust, Series
1997-A, Class A5 6.80%, 2/15/05.................. 8,262,960
10,000,000 Premier Auto Trust, Series 1997 2, Class B,
6.53%, 12/6/03................................... 10,275,000
7,500,000 Southern Pacific Secured Assets Corp., Series
1996-3, Class A4 7.60%, 10/25/27................. 8,126,043
525,815 Union Acceptance Corp., Series 1995-C, Class
A,
6.40%, 10/10/02.................................. 527,618
745,000 University Support Services, Inc., Series
1992-D, 9.00%, 10/7/98........................... 742,672
8,900,000 WFS Financial Owner Trust, Series 1997-C,
Class CTFS 6.30%, 3/20/05........................ 9,027,937
7,632,267 World Omni Automobile Lease, Series 1997-A,
Class A4, 6.90%, 6/25/03......................... 7,861,235
--------------
103,264,420
--------------
Total Asset-Backed Securities
(cost $99,551,379)............................... 103,264,420
--------------
CORPORATE BONDS - 20.3%
AEROSPACE & DEFENSE - 1.0%
5,000,000 Boeing Co.
6.625%, 2/15/38.................................. 5,164,600
Northrop Grumman Corp.
5,500,000 7.00%, 3/1/06..................................... 5,818,615
5,000,000 9.375%, 10/15/24.................................. 5,829,100
--------------
16,812,315
--------------
AUTOMOTIVE EQUIPMENT & MANUFACTURING - 0.3%
5,000,000 Ford Motor Co.
6.625%, 10/1/28.................................. 5,069,550
--------------
BANKS - 0.9%
3,465,000 Amsouth Bancorp
6.75%, 11/1/25................................... 3,679,899
5,200,000 BankBoston N A
6.375%, 4/15/08.................................. 5,241,548
$ 5,000,000 Barnett Capital I
8.06%, 12/1/26................................... 5,538,400
698,000 Boatmen's Bancshares, Inc.
6.75%, 3/15/03................................... 735,057
--------------
15,194,904
--------------
BUSINESS EQUIPMENT &
SERVICES - 0.4%
6,000,000 Federal Express Corp.
6.845%, 1/15/19.................................. 6,545,310
--------------
CABLE/OTHER VIDEO
DISTRIBUTION - 0.3%
5,000,000 CSC Holdings Inc.
7.625%, 7/15/18.................................. 4,853,700
--------------
CONSUMER PRODUCTS &
SERVICES - 0.5%
3,000,000 American Greetings Corp.
6.10%, 8/1/28.................................... 3,134,970
4,000,000 Hasbro Inc.
6.15%, 7/15/08................................... 4,288,160
1,001,000 Stanley Works
7.375%, 12/15/02................................. 1,078,527
--------------
8,501,657
--------------
DIVERSIFIED COMPANIES - 1.4%
General Electric Capital Corp.
1,280,000 8.75%, 3/14/03.................................... 1,470,976
5,470,000 8.75%, 5/21/07.................................... 6,752,660
5,000,000 Grand Metropolitan Investment Corp.
7.45%, 4/15/35................................... 5,844,000
10,500,000 GS Escrow Corp.
6.75%, 8/1/01, 144A.............................. 10,579,800
--------------
24,647,436
--------------
FINANCE & INSURANCE - 6.5%
8,000,000 AMBAC, Inc.
9.375%, 8/1/11................................... 10,446,880
6,550,000 Associates Corp. North America
8.625%, 11/15/04................................. 7,656,164
5,000,000 Bear Stearns Co., Inc.
6.875%, 10/1/05.................................. 5,237,550
5,800,000 Beneficial Corp.
6.25%, 2/18/13................................... 6,029,564
4,500,000 CIT Group Holdings, Inc.
9.25%, 3/15/01................................... 4,933,305
6,400,000 Commercial Credit Group, Inc.
10.00%, 5/15/09.................................. 8,312,192
1,280,000 Dean Witter, Discover & Co.
6.75%, 10/15/13.................................. 1,301,914
6,600,000 General Motors Acceptance Corp.
8.50%, 1/1/03.................................... 7,354,842
1,750,000 International Lease Finance Corp.
5.75%, 1/15/03................................... 1,788,115
9,975,000 John Hancock Mutual Life Insurance Co.
7.375%, 2/15/24, 144A............................ 11,223,471
6,500,000 Lehman Brothers Holdings, Inc.
6.50%, 10/1/02 .................................. 6,207,305
35
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS - CONTINUED
FINANCE & INSURANCE - CONTINUED
$ 7,000,000 Liberty Mutual Insurance Co.
7.697%, 10/15/97................................. $ 7,464,100
6,000,000 Nationwide CSN Trust
9.875%, 2/15/25, 144A............................ 7,541,460
Paine Webber Group, Inc.
4,705,000 8.25%, 5/1/02..................................... 4,903,927
5,050,000 9.25%, 12/15/01................................... 5,423,397
6,200,000 Prudential Insurance Co.
7.125%, 7/1/07................................... 6,770,524
6,700,000 Sun Life Canada Capital Trust
8.526%, 5/29/49.................................. 7,248,529
--------------
109,843,239
--------------
HEALTHCARE PRODUCTS &
SERVICES - 0.5%
5,000,000 Johnson & Johnson
8.72%, 11/1/24................................... 6,041,900
3,000,000 Merck & Co., Inc.
6.40%, 3/1/28.................................... 3,158,430
--------------
9,200,330
--------------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES -
0.1%
2,000,000 USA Waste Services Inc.
6.125%, 7/15/01.................................. 2,038,800
326,000 Waste Management, Inc.
8.75%, 5/1/18.................................... 359,435
--------------
2,398,235
--------------
INFORMATION SERVICES & TECHNOLOGY - 0.4%
6,500,000 Comdisco Inc.
6.125%, 1/15/03.................................. 6,635,460
--------------
MACHINERY - DIVERSIFIED - 0.1%
2,000,000 Caterpillar, Inc.
9.375%, 7/15/01.................................. 2,216,400
--------------
OIL/ENERGY - 0.8%
4,250,000 Occidental Petroleum Corp.
9.25%, 8/1/19.................................... 5,013,555
7,500,000 Transocean Offshore, Inc.
8.00%, 4/15/27................................... 8,302,950
--------------
13,316,505
--------------
OIL FIELD SERVICES - 0.7%
931,000 Atlantic Richfield Co.
9.00%, 4/1/21.................................... 1,227,514
5,000,000 Petroleum Geo-Services
7.50%, 3/31/07................................... 5,333,600
5,000,000 R B Falcon Corp.
6.75%, 4/15/05................................... 5,159,700
--------------
11,720,814
--------------
PAPER & PACKAGING - 0.5%
8,000,000 James River Corp.
6.75%, 10/1/99................................... 8,085,280
--------------
PUBLISHING, BROADCASTING & ENTERTAINMENT -
0.4%
7,250,000 Time Warner Inc.
6.95%, 1/15/28................................... 7,535,143
--------------
REAL ESTATE - 0.7%
7,000,000 EOP Operating Limited Partnership
6.375%, 2/15/03.................................. 6,995,660
4,000,000 Glenborough Realty Trust, Inc.
7.625%, 3/15/05, 144A............................ 4,101,000
--------------
11,096,660
--------------
RETAILING & WHOLESALE - 0.8%
8,000,000 Fred Meyer Inc.
7.15%, 3/1/03.................................... 8,287,120
4,300,000 Sears Roebuck & Co.
10.00%, 2/3/12................................... 6,069,235
--------------
14,356,355
--------------
TELECOMMUNICATION SERVICES & EQUIPMENT - 1.3%
6,750,000 Bellsouth Capital Funding Corp.
7.12%, 7/15/97................................... 7,677,045
6,550,000 TCI Communications Inc.
8.75%, 8/1/15.................................... 8,182,784
5,640,000 Worldcom, Inc.
6.40%, 8/15/05................................... 5,951,836
--------------
21,811,665
--------------
TRANSPORTATION - 0.9%
5,000,000 American Airline
8.39%, 1/2/17.................................... 5,749,000
3,000,000 Golden St. Pete Trans Corp.
8.04%, 2/1/19.................................... 3,016,875
6,250,000 Norfolk Southern Corp.
7.05%, 5/1/37.................................... 6,890,125
--------------
15,656,000
--------------
UTILITIES - ELECTRIC - 0.7%
5,000,000 Oklahoma Gas & Electric Co.
6.65%, 7/15/27................................... 5,498,700
4,000,000 Rural Electric Cooperative
8.67%, 9/15/18................................... 4,763,280
838,000 Union Electric Co.
8.00%, 12/15/22.................................. 982,136
--------------
11,244,116
--------------
UTILITIES - GAS - 0.8%
3,780,000 ANR Pipeline Co.
9.625%, 11/1/21.................................. 4,863,575
8,000,000 K N Energy Inc.
6.65%, 3/1/05.................................... 8,215,520
--------------
13,079,095
--------------
UTILITIES - TELEPHONE - 0.3%
3,500,000 GTE Florida Inc.
6.86%, 2/1/28.................................... 3,766,245
2,000,000 MCI Communications Corp.
1.00%, 4/15/12................................... 2,050,140
--------------
5,816,385
--------------
Total Corporate Bonds
(cost $332,028,394).............................. 345,636,554
--------------
36
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES - 9.7%
MORTGAGE PASS-THROUGH CERTIFICATES - 3.5%
$11,000,000 Federal Home Loan Banks
5.50%, 8/13/01................................... $ 11,244,640
Federal Home Loan Mortgage Corp.
837,587 7.411%, 3/1/21.................................... 863,242
4,622,740 7.569%, 4/1/22.................................... 4,804,783
889,489 7.609%, 3/1/19.................................... 932,852
Federal National Mortgage Association.............
16,865,208 5.50%, 7/1/09..................................... 16,992,371
4,212,809 7.00%, 5/1/24..................................... 4,332,580
1,686,775 7.30%, 5/1/22..................................... 1,733,684
2,153,541 7.332%, 2/1/27.................................... 2,187,868
9,563,205 7.414%, 9/1/21.................................... 9,871,045
1,634,198 7.472%, 12/1/23................................... 1,657,976
2,628,049 7.518%, 1/1/31.................................... 2,701,135
Government National Mortgage Association..........
438,600 8.50%, 5/15/21.................................... 465,740
247,663 8.50%, 7/15/21.................................... 262,520
556,386 8.50%, 6/15/22.................................... 588,723
310,477 9.00%, 9/15/21.................................... 333,760
458,501 9.00%, 10/15/21................................... 492,884
248,613 9.50%, 2/15/21.................................... 268,500
--------------
59,734,303
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 6.2%
10,000,000 Bear Stearns Commercial Mortgage Securities
Inc., Series 1998-C1, Class C
6.75%, 6/16/30................................... 11,078,125
Chase Commercial Mortgage Securities Corp.
2,000,000 Series 1997-2, Class B, 6.60%, 11/19/07........... 1,911,875
2,200,000 Series 1997-1, Class B, 7.37%, 4/19/07............ 2,172,162
4,720,879 Chase Mortgage Finance Corp., Series 1994-D,
Class M, 6.75%, 2/25/25.......................... 4,969,905
2,400,000 Commercial Mortgage Acceptance Corp.,
Series 1997-ML1, Class B, 6.647%, 12/15/07....... 2,485,020
7,229,087 Criimi Mae Financial Corp., Series 1, Class
A, 7.00%, 1/1/33................................. 7,222,310
4,000,000 Criimi Mae Commercial Mortgage Trust, Series
1998 C1, Class A, 144A
7.00%, 3/2/11.................................... 4,122,500
Federal National Mortgage Association
1,250,000 Series 1993-248, Class SA, 4.284%, 8/25/23........ 1,194,338
5,000,000 Series 1997-M6, Class C, 6.85%, 5/17/20........... 5,459,775
1,250,000 FFCA Secured Lending Corp., Series 1997-1,
Class B1, 7.74%, 6/18/13......................... 1,376,172
5,484,643 Financial Asset Securitization, Series 1997-
NAM 1, Class FXA2,
7.75%, 4/25/27................................... 5,696,783
3,745,000 G E Capital Mortgage Services Inc., Series
1994-27, Class A6,
6.50%, 7/25/24................................... 3,777,769
7,812,734 Independent National Mortgage Corp., 144A,
Series 1997-A, Class A,
7.81%, 12/26/26.................................. 8,030,025
415,608 KS Mortgage Capital, L. P.,144A, Series 1995-
1, Class A1, 7.23%, 4/20/02...................... 417,426
5,000,000 Merrill Lynch Mortgage Investors, Inc.,
Series 1997-C1, Class A3 7.12%, 6/18/29.......... 5,370,025
5,870,000 Merrill Lynch Trust, Series 35, Class G,
8.45%, 11/1/18................................... 6,222,200
1,786,895 Mid State Trust, Series 6, Class A3,
7.54%, 7/1/35.................................... 1,933,778
6,000,000 Morgan Stanley Capital I Inc., Series 1998
Wf1, Class C 6.77%, 1/15/08...................... 6,178,125
11,707,375 Nomura Depositor Trust Str I,
Series 1998-ST1,
Class A1, 144A
5.92%, 1/15/03................................... 11,762,253
PNC Mortgage Securities Corp.
2,472,422 Series 1997-4, Class 2PP3,
7.25%, 7/25/27.................................... 2,563,093
5,844,331 Series 1997-4, Class 2PP1,
7.50%, 7/25/27.................................... 5,944,678
1,011,178 Prudential Home Mortgage Securities Co.,
Series 1990-12, Class A1
7.98%, 11/25/20.................................. 1,017,816
4,177,710 Shearson Lehman CMO Inc., Series V, Class 5
7.50%, 5/1/19.................................... 4,453,982
--------------
105,360,135
--------------
Total Mortgage-Backed Securities
(cost $159,523,627).............................. 165,094,438
--------------
MUNICIPAL BONDS - 0.1%
2,500,000 Cook County Illinois
5.00%,11/15/22................................... 2,496,750
--------------
Total Municipal Bonds
(cost $2,455,126)................................ 2,496,750
--------------
FOREIGN BONDS (U.S. DOLLARS) - 1.2%
640,000 International Bank For Reconstruction &
Development Co.
7.95%, 5/15/16................................... 801,670
37
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
FOREIGN BONDS (U.S. DOLLARS) - CONTINUED
$ 4,000,000 National Westminster Bancorp
9.375%, 11/15/03................................ $ 4,681,920
60,000,000 Skandinaviska Enskilda
0%, 5/26/33..................................... 6,834,000
8,000,000 YPF Sociedad Anonima
7.25%, 3/15/03.................................. 7,280,000
--------------
19,597,590
--------------
Total Foreign Bonds (U.S. Dollars)
(cost $18,502,231).............................. 19,597,590
--------------
FOREIGN BONDS (NON U.S. DOLLARS) - 4.2%
142,178,000 Nykredit,
6.00%, 10/1/26.................................. 22,063,840
205,474,000 Realkredit Danmark
6.00%, 10/1/26.................................. 31,918,763
2,500,000 Republic of Colombia
8.625%, 4/1/08.................................. 1,756,250
8,200,000 United Kingdom Treasury
7.25%, 12/7/07.................................. 16,428,377
--------------
72,167,230
--------------
Total Foreign Bonds
(Non U.S. Dollars)
(cost $66,436,176).............................. 72,167,230
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 2.0%
FINANCE & INSURANCE - 0.4%
6,200,000 Federal Home Loan Banks 5.125%,
9/15/03......................................... 6,309,492
--------------
TREASURY NOTES & BONDS - 1.6%
9,935,000 U.S. Treasury Bonds
7.875%, 2/15/21................................. 13,405,991
U.S. Treasury Notes
3,000,000 5.375%, 2/15/01.................................. 3,067,980
5,000,000 5.50%, 5/31/03................................... 5,245,300
5,590,000 6.125%, 8/15/07.................................. 6,257,278
--------------
27,976,549
--------------
Total U.S. Government & Agency
Obligations
(cost $32,029,766).............................. 34,286,041
--------------
SHORT-TERM INVESTMENTS - 3.3%
COMMERCIAL PAPER - 0.2%
$ 2,735,000 Kansallis Osake Pankki
9.75%, 12/15/98................................. $ 2,758,193
--------------
REPURCHASE AGREEMENTS - 3.1%
50,000,000 Goldman Sachs Repurchase Agreement purchased
9/30/98, 5.60%, maturing 10/1/98, maturity
value $50,007,778
(cost $50,000,000) (a).......................... 50,000,000
3,167,000 Keystone Joint Repurchase Agreement.
Investments in repurchase agreements, in a
joint trading account, purchased 9/30/98,
5.60%, maturing 10/1/98, maturity value
$3,167,493
(cost $3,167,000) (b)........................... 3,167,000
--------------
53,167,000
--------------
Total Short-Term Investments
(cost $55,934,547).............................. 55,925,193
--------------
TOTAL INVESTMENTS -
(COST $1,343,914,410).................... 98.9% 1,681,872,279
OTHER ASSETS AND LIABILITIES - NET........ 1.1 18,288,104
----- --------------
NET ASSETS................................ 100.0% $1,700,160,383
===== ==============
* Non-income producing securities.
** At September 30, 1998, the Fund owned a principal amount of $415,460 of
Money Store Auto Trust at a cost of $415,136. During the six months ended
September 30, 1998, the Fund earned $1,018 in interest income from this
investment. This security was purchased by the Fund prior to the
acquisition of the Money Store by First Union.
(a) The repurchase agreements are fully collateralized by: $26,223,835 Federal
Home Loan Mortgage Corp., 6.131%, maturing 9/1/24; value including accrued
interest - $25,699,000 and $24,797,258 Federal Home Loan Mortgage Corp.,
6.131% maturing 9/1/24; value including accrued interest - $24,301,000.
(b) The repurchase agreements are fully collateralized by U.S. Government
and/or agency obligations based on market prices plus accrued interest at
September 30, 1998.
144A Securities that may be resold to "qualified institutional buyers" under
Rule 144A of the Securities Act of 1933. These securities have been
determined to be liquid under guidelines established by the Fund's Board of
Trustees.
SUMMARY OF ABBREVIATIONS
PRIDES Preferred Redeemable Increased Dividend Equity Securities
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
38
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward Foreign Currency Exchange Contracts to Buy:
<TABLE>
<CAPTION>
UNREALIZED
EXCHANGE U.S. VALUE AT IN EXCHANGE APPRECIATION
DATE CONTRACTS TO RECEIVE SEPTEMBER 30, 1998 FOR U.S. $ (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/16/98 66,483,000Danish Krone $10,471,493 $10,377,429 $ 94,064
===========
<CAPTION>
Forward Foreign Currency Exchange Contracts to Sell:
UNREALIZED
EXCHANGE U.S. VALUE AT IN EXCHANGE APPRECIATION
DATE CONTRACTS TO DELIVER SEPTEMBER 30, 1998 FOR U.S. $ (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/30/98 9,066,258British Pound Sterling 15,388,500 14,889,425 $ (499,075)
10/16/98 204,020,000Danish Krone 32,134,442 29,827,485 (2,306,957)
12/14/98 195,339,000Danish Krone 30,792,428 30,348,637 (443,791)
-----------
$(3,249,823)
===========
<CAPTION>
FUTURES CONTRACTS - LONG POSITIONS(1)
NUMBER OF INITIAL CONTRACT VALUE AT UNREALIZED
EXPIRATION CONTRACTS AMOUNT SEPTEMBER 30, 1998 (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 1998 330S&P 500 $86,394,375 $84,645,000 $(1,749,375)
===========
</TABLE>
(1) At September 30, 1998, cash of $4,455,000 was segregated at the Fund's
custodian for initial margin deposits.
See Combined Notes to Financial Statements.
39
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 58.6%
ADVERTISING & RELATED
SERVICES - 0.0%
13,000 Gannett Co., Inc. ................................. $ 696,313
--------------
AEROSPACE & DEFENSE - 0.6%
402,600 Boeing Co. ........................................ 13,814,212
5,420 Raytheon Co. Cl. A................................. 280,824
31,000 United Technologies Corp. ......................... 2,369,563
--------------
16,464,599
--------------
AUTOMOTIVE EQUIPMENT & MANUFACTURING - 1.5%
458,400 Chrysler Corp. .................................... 21,945,900
160,000 General Motors Corp................................ 8,750,000
30,000 Genuine Parts Co................................... 901,875
208,800 Goodyear Tire & Rubber Co. ........................ 10,727,100
--------------
42,324,875
--------------
BANKS - 6.8%
83,100 AmSouth Bancorp.................................... 2,835,788
50,000 Bancfirst Corp. ................................... 1,825,000
45,700 BankAmerica Corp. ................................. 2,747,713
783,600 BankBoston Corp. .................................. 25,858,800
63,000 Bankers Trust Corp. ............................... 3,717,000
140,062 BSB Bancorp, Inc................................... 3,895,474
164,000 Cape Cod Bank & Trust Co. ......................... 2,829,000
27,000 CB Bancshares, Inc. ............................... 864,000
120,700 CitiCorp........................................... 11,217,556
149,000 Crestar Financial Corp. ........................... 8,455,750
301,950 Dime Bancorp, Inc. ................................ 7,643,109
85,138 First Chicago NBD Corp. ........................... 5,831,953
16,875 First Security Corp. .............................. 282,656
117,000 First Union Corp. **............................... 5,988,938
120,000 Firstar Corp. ..................................... 6,075,000
58,000 Fleet Financial Group, Inc. ....................... 4,259,375
43,400 Hancock Holding Co. ............................... 2,072,350
70,801 Hibernia Corp. Cl. A............................... 1,022,189
281,400 KeyCorp............................................ 8,125,425
3,800 M & T Bank Corp.................................... 1,751,800
50,000 Mellon Bank Corp. ................................. 2,753,125
30,000 Mercantile Bancorp, Inc. .......................... 1,451,250
50,000 Mississippi Valley Bancshares, Inc. ............... 1,806,250
349,080 National City Corp. ............................... 23,017,462
131,825 NationsBank Corp. ................................. 7,052,638
175,000 Norwest Corp. ..................................... 6,267,188
260,500 Pacific Century Financial Corp. ................... 4,347,094
132,300 Peoples Heritage Financial Group................... 2,373,131
102,000 Seacoast Banking Corp. of Florida Cl. A............ 3,034,500
50,000 SouthTrust Corp. .................................. 1,746,875
106,200 SunTrust Banks, Inc. .............................. 6,584,400
65,000 U.S. Trust Corp.................................... 4,314,375
160,000 Webster Financial Corp............................. 3,900,000
238,300 Wilmington Trust Corp. ............................ 12,391,600
--------------
188,338,764
--------------
BUILDING, CONSTRUCTION &
FURNISHINGS - 1.8%
364,100 Armstrong World Industries, Inc. .................. 19,479,350
394,225 D.R. Horton, Inc. ................................. 6,307,600
17,857 Engle Homes, Inc................................... 253,904
205,000 Home Depot, Inc. .................................. 8,097,500
366,122 Lennar Corp........................................ 8,169,097
206,000 Lowe's Companies, Inc. ............................ 6,553,375
50,100 M/I Schottenstein Homes, Inc. ..................... 926,850
--------------
49,787,676
--------------
BUSINESS EQUIPMENT &
SERVICES - 0.2%
14,000 Automatic Data Processing, Inc. ................... 1,046,500
45,500 *Crescent Operating, Inc. ......................... 318,500
42,000 *Metamor Worldwide, Inc. .......................... 1,155,000
40,636 Paychex, Inc. ..................................... 2,095,294
20,000 *Policy Management
Systems Corp. .................................... 810,000
10,000 Xerox Corp......................................... 847,500
--------------
6,272,794
--------------
CAPITAL GOODS - 0.6%
165,000 Caterpillar, Inc. ................................. 7,352,812
321,700 Deere & Co. ....................................... 9,731,425
--------------
17,084,237
--------------
CHEMICAL & AGRICULTURAL
PRODUCTS - 2.7%
80,000 Air Products & Chemicals, Inc...................... 2,380,000
595,400 Du Pont (E. I.) De Nemours & Co. .................. 33,416,825
70,000 *Grace (W.R.) & Co. ............................... 870,625
60,000 H.B. Fuller Co. ................................... 2,272,500
245,800 Monsanto Co. ...................................... 13,856,975
170,000 Morton International, Inc. ........................ 3,718,750
75,000 Nalco Chemical Co. ................................ 2,212,500
174,000 Pioneer Hi-Bred International, Inc. ............... 4,567,500
120,800 PPG Industries, Inc. .............................. 6,591,150
45,000 Praxair, Inc....................................... 1,470,937
115,000 Schulman (A.), Inc. ............................... 1,624,375
100,560 Solutia, Inc. ..................................... 2,268,885
--------------
75,251,022
--------------
COMMUNICATION SYSTEMS &
SERVICES - 0.8%
30,000 *AirTouch Communications, Inc. .................... 1,710,000
49,800 *Ascend Communications, Inc. ...................... 2,265,900
179,100 *Cisco Systems, Inc. .............................. 11,070,619
90,000 Lucent Technologies, Inc. ......................... 6,215,625
39,900 *MCI WorldCom, Inc. ............................... 1,950,112
6,666 Nielsen Media Research, Inc. ...................... 68,327
--------------
23,280,583
--------------
CONSUMER PRODUCTS &
SERVICES - 1.1%
95,000 Black & Decker Corp................................ 3,954,375
233,150 Cendant Corp. ..................................... 2,710,369
32,052 *Consolidated Products, Inc. ...................... 562,913
20,000 H & R Block, Inc. ................................. 827,500
10,000 Harman International
Industries, Inc. ................................. 366,875
40
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
CONSUMER PRODUCTS &
SERVICES - CONTINUED
129,300 International Flavors &
Fragrances, Inc. ................................ $ 4,266,900
130,100 *Nautica Enterprises, Inc. ....................... 2,431,244
20,000 Premark International, Inc........................ 561,250
110,451 Procter & Gamble Co. ............................. 7,835,118
191,100 Stanley Works..................................... 5,685,225
118,500 Tupperware Corp. ................................. 1,392,375
---------------
30,594,144
---------------
DIVERSIFIED COMPANIES - 0.0%(A)
8,000 Cooper Industries, Inc............................ 326,000
2,800 Tyco International Ltd. .......................... 154,700
---------------
480,700
---------------
ELECTRICAL EQUIPMENT &
SERVICES - 2.8%
248,400 AMP, Inc. ........................................ 8,880,300
152,566 *Analog Devices, Inc.............................. 2,450,591
130,000 Applied Power, Inc. Cl. A......................... 3,550,625
17,300 Emerson Electric Co. ............................. 1,076,925
562,400 General Electric Co. ............................. 44,745,950
97,000 Honeywell, Inc. .................................. 6,214,063
162,000 Perkin Elmer Corp. ............................... 11,127,375
2,000 Texas Instruments, Inc. .......................... 105,500
---------------
78,151,329
---------------
FINANCE & INSURANCE - 9.1%
10,668 Aetna, Inc. ...................................... 741,426
120,000 AFLAC, Inc. ...................................... 3,427,500
274,000 Allstate Corp. ................................... 11,422,375
110,600 AMBAC Financial Group, Inc. ...................... 5,308,800
169,000 American Express Co. ............................. 13,118,625
292,212 American International Group, Inc. ............... 22,500,324
51,800 Chubb Corp........................................ 3,263,400
158,350 Countrywide Credit Industries,
Inc. ............................................ 6,591,319
95,000 *Degeorge Financial Corp.......................... 125,430
40,860 Exel Limited Hamilton............................. 2,574,180
40,000 FBL Financial Group, Inc. Cl. A................... 922,500
84,000 Federal Home Loan Mortgage Corp. ................. 4,152,750
718,000 Federal National Mortgage
Association...................................... 46,131,500
126,500 Frontier Insurance Group, Inc. ................... 1,676,125
512,055 Household International, Inc. .................... 19,202,062
32,700 Interstate/Johnson Lane, Inc. .................... 948,300
45,900 J.P. Morgan & Co., Inc. .......................... 3,884,288
142,200 John Nuveen Co. Cl. A............................. 5,065,875
177,600 Lehman Brothers Holdings, Inc..................... 5,017,200
68,000 Lincoln National Corp. ........................... 5,593,000
419,100 Marsh & McLennan Co., Inc. ....................... 20,850,225
75,000 MBIA, Inc. ....................................... 4,026,563
387,400 Merrill Lynch & Co., Inc. ........................ 18,353,075
345,200 MGIC Investment Corp. ............................ 12,729,250
155,000 NAC RE Corp. ..................................... 7,633,750
110,000 Nationwide Financial Services,
Inc. Cl. A........................................ 4,998,125
15,000 Ohio Casualty Corp. ............................... 581,250
201,100 Paine Webber Group, Inc. .......................... 6,033,000
28,000 Progressive Corp. Ohio............................. 3,157,000
305,975 Raymond James Financial, Inc. ..................... 6,425,475
13,500 Reinsurance Group Of America....................... 698,625
3,500 SLM Holding Corp. ................................. 113,531
85,000 UNUM Corp. ........................................ 4,223,437
--------------
251,490,285
--------------
FOOD & BEVERAGE
PRODUCTS - 0.7%
145,000 American Stores Co................................. 4,667,188
240,000 Bestfoods.......................................... 11,625,000
30,000 *Corn Products International, Inc. ................ 757,500
23,027 Hershey Foods Corp. ............................... 1,575,910
3,000 *Tricon Global Restaurants, Inc. .................. 117,000
--------------
18,742,598
--------------
FOREST PRODUCTS - 0.2%
88,000 Union Camp Corp. .................................. 3,465,000
90,000 Willamette Industries, Inc. ....................... 2,581,875
--------------
6,046,875
--------------
HEALTHCARE PRODUCTS &
SERVICES - 6.8%
431,400 Abbott Laboratories................................ 18,738,937
1,750 *Alza Corp. Warrants $65.00
Expiring 12/31/99................................. 656
423,800 American Home Products Corp. ...................... 22,196,525
70,000 Baxter International, Inc. ........................ 4,165,000
45,600 Beckman Coulter Inc................................ 2,354,100
101,200 Bristol-Myers Squibb Co. .......................... 10,512,150
180,900 Columbia / HCA Healthcare Corp..................... 3,629,306
23,000 *Covance, Inc...................................... 596,563
152,000 First Health Group Corp. .......................... 3,686,000
29,400 Glaxo Wellcome Plc, ADR............................ 1,679,475
68,550 Guidant Corp. ..................................... 5,089,838
64,000 HBO & Co. ......................................... 1,848,000
88,500 *Health Management Associates,
Inc. Cl. A ....................................... 1,615,125
20,000 IMS Health, Inc.................................... 1,238,750
114,500 Johnson & Johnson.................................. 8,959,625
312,524 Lilly (Eli) & Co. ................................. 24,474,536
130,000 *Lincare Holdings, Inc. ........................... 5,037,500
81,666 *Maxxim Medical, Inc. ............................. 2,097,795
160,000 McKesson Corp. .................................... 14,660,000
151,750 *MedPartners, Inc. ................................ 493,188
96,600 Medtronic, Inc. ................................... 5,590,725
167,758 Merck & Co., Inc. ................................. 21,735,146
89,500 Pfizer, Inc........................................ 9,481,406
11,500 *Quest Diagnostics, Inc. .......................... 189,750
157,000 Schering-Plough Corp. ............................. 16,259,312
9,200 Shared Medical System Corp. ....................... 489,325
32,400 Warner-Lambert Co. ................................ 2,446,200
--------------
189,264,933
--------------
41
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
INDUSTRIAL SPECIALTY
PRODUCTS & SERVICES -
1.1%
155,970 Autoliv, Inc....................................... $ 4,289,175
40,000 Bemis Co., Inc. ................................... 1,402,500
147,000 Corning, Inc. ..................................... 4,327,312
64,600 *Halter Marine Group, Inc. ........................ 734,825
91,000 Parker Hannifin Corp. ............................. 2,701,563
30,000 Pittston Brink's Group............................. 1,050,000
190,000 Snap-on, Inc. ..................................... 5,854,375
6,000 *Strattec Security Corp. .......................... 159,000
35,000 Sundstrand Corp. .................................. 1,623,125
378,000 Timken Co. ........................................ 5,717,250
50,000 Trinity Industries, Inc. .......................... 1,621,875
55,000 *UCAR International, Inc. ......................... 990,000
38,000 *Unova, Inc. ...................................... 624,625
--------------
31,095,625
--------------
INFORMATION SERVICES &
TECHNOLOGY - 7.0%
35,000 America Online, Inc. .............................. 3,893,750
38,000 *BMC Software, Inc. ............................... 2,282,375
154,133 Compaq Computer Corp. ............................. 4,874,456
37,500 Computer Associates
International, Inc................................ 1,387,500
49,000 Computer Sciences Corp. ........................... 2,670,500
40,000 *Dell Computer Corp................................ 2,630,000
40,000 *EMC Corp. ........................................ 2,287,500
524,800 Hewlett-Packard Co................................. 27,781,600
809,600 Intel Corp. ....................................... 69,423,200
180,000 International Business
Machines Corp. ................................... 23,040,000
370,000 *Microsoft Corp. .................................. 40,723,125
30,190 *Peoplesoft, Inc. ................................. 984,949
224,000 *Sun Microsystems, Inc. ........................... 11,158,000
--------------
193,136,955
--------------
LEISURE & TOURISM - 0.1%
127,479 Disney Walt Co. ................................... 3,226,812
--------------
MACHINERY -
DIVERSIFIED - 0.1%
79,900 W.W. Grainger, Inc. ............................... 3,365,787
--------------
OIL / ENERGY - 1.4%
189,000 Amoco Corp. ....................................... 10,182,375
113,500 Consolidated Natural Gas Co. ...................... 6,185,750
289,000 Equitable Resources, Inc. ......................... 7,351,437
102,400 Exxon Corp. ....................................... 7,187,200
91,800 Mobil Corp......................................... 6,971,063
900 Pennzoil Co. ...................................... 31,556
86,206 *Seitel, Inc....................................... 932,102
1,200 Sonat, Inc......................................... 35,850
33,877 Union Pacific Resource
Group, Inc. ...................................... 417,111
--------------
39,294,444
--------------
OIL FIELD SERVICES - 0.5%
83,430 Baker Hughes, Inc. ................................ 1,746,816
23,600 Halliburton Co. ................................... 674,075
47,200 *R & B Falcon Corp................................. 566,400
217,800 Schlumberger Ltd................................... 10,958,062
--------------
13,945,353
--------------
PAPER & PACKAGING - 0.2%
85,000 Kimberly-Clark Corp. .............................. 3,442,500
37,520 *Sealed Air Corp................................... 1,195,950
--------------
4,638,450
--------------
PUBLISHING, BROADCASTING
& ENTERTAINMENT - 0.6%
80,000 Belo (A.H.) Corp. Ser. A .......................... 1,600,000
128,620 CBS Corp........................................... 3,119,035
20,000 *Cox Communications,
Inc. Cl. A........................................ 1,092,500
99,400 Time Warner, Inc. ................................. 8,703,712
3,000 Washington Post Co., Cl. B......................... 1,533,000
--------------
16,048,247
--------------
REAL ESTATE - 4.7%
38,000 *Alexander's, Inc. REIT............................ 2,916,500
111,992 Archstone Communities Trust........................ 2,281,837
24,100 Arden Realty Group, Inc. REIT...................... 537,731
50,000 Avalon Bay Community, Inc. REIT.................... 1,703,125
73,100 Berkshire Realty Co., Inc. REIT.................... 762,981
150,000 Boston Properties, Inc. REIT....................... 4,275,000
50,009 Bradley Real Estate, Inc. REIT..................... 1,050,189
140,000 Brandywine Realty Trust REIT....................... 2,677,500
28,917 Camden Property Trust REIT......................... 807,869
800,000 Canadian Hotel Properties REIT..................... 4,772,362
280,400 Capstead Mortgage Corp. REIT....................... 1,016,450
171,900 CarrAmerica Realty Corp. REIT...................... 3,921,469
110,000 Chelsea GCA Realty, Inc. REIT...................... 3,767,500
376,700 Crescent Real Estate Equities, Inc. REIT........... 9,511,675
305,300 Crown American Realty Trust REIT................... 2,614,131
200,000 Entertainment Properties Trust REIT................ 3,700,000
42,500 Equity Residential
Properties Trust REIT............................. 1,792,969
105,200 Essex Property Trust, Inc. REIT.................... 3,261,200
115,000 FelCor Lodging Trust Inc. REIT..................... 2,795,937
10,700 Gables Residential Trust REIT...................... 286,894
174,000 Glimcher Realty Trust REIT......................... 2,979,750
28,000 Highwoods Properties, Inc. REIT.................... 777,000
72,419 *Homestead Village Properties, Inc. ............... 620,088
16,068 Horizon Group Properties, Inc. REIT................ 38,162
50,300 Indymac Mortgage Holdings, Inc. REIT............... 1,018,575
140,000 Innkeepers USA Trust REIT.......................... 1,662,500
111,500 Kilroy Realty Corp. REIT........................... 2,564,500
199,700 *Konover Property Trust, Inc. REIT................. 1,397,900
132,000 Kranzco Realty Trust REIT.......................... 2,153,250
45,000 Liberty Property Trust REIT........................ 1,071,563
175,000 Mack-Cali Realty Corp. REIT........................ 5,250,000
250,000 Marriott International, Inc. Cl. A................. 5,968,750
115,000 Meditrust Co. REIT................................. 1,962,187
42
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
REAL ESTATE - CONTINUED
117,783 Patriot American Hospitality, Inc. REIT............ $ 1,501,733
200,000 Philips International Reality Corp. REIT........... 3,062,500
268,713 Post Property, Inc. REIT........................... 10,362,245
166,500 Prentiss Properties Trust REIT..................... 3,975,187
229,436 Prime Retail, Inc. ................................ 2,251,341
76,817 Prologis Trust..................................... 1,737,985
90,000 Public Storage, Inc. REIT.......................... 2,413,125
31,250 *Sodexho Marriott Services, Inc. .................. 937,500
100,000 Sovran Self Storage, Inc. REIT..................... 2,625,000
70,000 Spieker Properties, Inc. REIT...................... 2,572,500
262,750 Starwood Hotels & Resorts Trust REIT............... 8,013,875
14,000 Storage USA, Inc. REIT............................. 484,750
140,000 Sunstone Hotel Investors, Inc. REIT................ 1,268,750
43,500 Tanger Factory Outlet Centers, Inc. REIT........... 986,906
2,200 TriNet Corporate Realty Trust, Inc. REIT........... 71,775
135,000 Trizec Hahn Corp................................... 2,531,250
75,705 Vornado Realty Trust REIT.......................... 2,507,728
30,000 Western Investment Real Estate Trust REIT.......... 384,375
--------------
129,606,069
--------------
RETAILING & WHOLESALE - 0.7%
120,000 *Autozone, Inc. ................................... 2,955,000
236,511 Avnet, Inc. ....................................... 8,706,561
35,000 *Costco Companies, Inc. ........................... 1,658,125
46,400 Dayton Hudson Corp. ............................... 1,658,800
54,834 Dollar General Corp. .............................. 1,459,949
77,186 Family Dollar Stores, Inc. ........................ 1,215,679
21,000 Gap, Inc. ......................................... 1,107,750
30,000 *Whole Foods Market, Inc. ......................... 1,263,750
--------------
20,025,614
--------------
TELECOMMUNICATION SERVICES & EQUIPMENT - 0.2%
55,000 *ICG Communications, Inc. ......................... 928,125
36,000 *Intermedia Communications, Inc. .................. 884,250
60,000 *Qwest Communications International, Inc. ......... 1,878,750
106,000 *Telephone Save Holdings, Inc. .................... 1,185,875
33,165 *Univision Communications, Inc. Cl. A.............. 986,659
--------------
5,863,659
--------------
TEXTILE & APPAREL - 0.0% (A)
34,900 Superior Uniform Group, Inc. ...................... 431,888
--------------
THRIFT INSTITUTIONS - 0.5%
176,300 Golden West Financial Corp. ....................... 14,423,544
--------------
TRANSPORTATION - 1.1%
75,000 Burlington Northern Santa Fe Corp. ................ 2,400,000
27,200 *FDX Corp. ........................................ 1,227,400
163,600 GATX Corp. ........................................ 5,409,025
17,000 Roadway Express, Inc. ............................. 187,000
58,410 Southwest Airlines Co. ............................ 1,168,200
469,000 Union Pacific Corp. ............................... 19,991,125
--------------
30,382,750
--------------
UTILITIES - ELECTRIC - 1.2%
403,700 Central Hudson Gas &
Electric Corp. ................................... 16,904,937
138,400 Energy East Corp. ................................. 7,058,400
33,300 Orange & Rockland
Utilities, Inc. .................................. 1,827,338
40,000 *PP&L Resources, Inc. ............................. 1,035,000
100,000 *Public Service Enterprise
Group, Inc. ...................................... 3,931,250
32,000 TNP Enterprises, Inc. ............................. 1,118,000
--------------
31,874,925
--------------
UTILITIES - GAS - 0.3%
276,636 *Marketspan Corp. ................................. 7,935,995
--------------
UTILITIES - TELEPHONE - 3.2%
72,766 ALLTEL Corp........................................ 3,447,289
2,000 Ameritech Corp. ................................... 94,750
10,000 AT&T Corp.......................................... 584,375
348,080 Bell Atlantic Corp. ............................... 16,860,125
1,600 BellSouth Corp. ................................... 120,400
110,000 Cincinnati Bell, Inc. ............................. 2,860,000
65,500 Compania de Telecom de
Chile SA, ADR..................................... 1,252,688
592,300 Frontier Corp. .................................... 16,214,212
376,400 GTE Corp. ......................................... 20,702,000
34,000 *McLeod USA, Inc., Cl. A........................... 743,750
2,400 SBC Communications, Inc. .......................... 106,650
351,000 Sprint Corp........................................ 25,272,000
--------------
88,258,239
--------------
Total Common Stocks
(cost $1,219,215,696)............................. 1,627,826,083
--------------
CONVERTIBLE PREFERRED - 0.8%
CONSUMER PRODUCTS &
SERVICES - 0.1%
70,000 Cendant Corp. 7.50%................................ 1,750,000
--------------
FINANCE & INSURANCE - 0.0%
3,557 Aetna, Inc.
6.25%, Ser. C..................................... 249,213
1,000 Conseco, Inc.
7.00%, PRIDES..................................... 108,000
2,500 SunAmerica, Inc.
$3.188, PERCS..................................... 128,281
--------------
485,494
--------------
INDUSTRIAL SPECIALTY
PRODUCTS & SERVICES -
0.1%
50,000 Qualcomm Financial Trust I
5.75%, 144A....................................... 2,050,000
--------------
METAL PRODUCTS &
SERVICES - 0.1%
100,000 Timet Capital Trust I
6.625%, BUCS, 144A................................ 3,625,000
--------------
43
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED - CONTINUED
OIL FIELD SERVICES -
0.1%
70,000 EVI, Inc. 5.00%, 144A.............................. $ 2,240,000
--------------
PAPER & PACKAGING - 0.1%
33,250 *Sealed Air Corp.
$2.00, Ser A...................................... 1,201,156
--------------
REAL ESTATE - 0.1%
95,000 First Union Real Estate Equity
8.40%, Ser. A..................................... 2,113,750
76,863 Prime Retail, Inc.
Ser. B. 8.50%..................................... 1,306,671
--------------
3,420,421
--------------
RETAILING & WHOLESALE - 0.2%
1,300 Kmart Financing I 7.75%............................ 65,000
160,000 Merrill Lynch & Co., Inc. 8.50%
(exchangeable for Dollar
General Corp. common stock)....................... 5,760,000
--------------
5,825,000
--------------
Total Convertible Preferred
(cost $26,544,604)................................ 20,597,071
--------------
- --------------------------------------------------------------------------------
Principal
Amount
- --------------------------------------------------------------------------------
CONVERTIBLE DEBENTURES - 0.2%
BUILDING, CONSTRUCTION &
FURNISHINGS - 0.1%
$ 500,000 Home Depot, Inc.
3.25%, 10/1/01.................................... 872,500
--------------
BUSINESS EQUIPMENT &
SERVICES - 0.0% (A)
800,000 Personnel Group Of
America, Inc.
5.75%, 7/1/04..................................... 728,000
--------------
ENVIRONMENTAL SERVICES - 0.0%
100,000 Waste Management, Inc.
4.00%, 2/1/02..................................... 121,625
--------------
INDUSTRIAL SPECIALTY
PRODUCTS & SERVICES - 0.1%
2,100,000 Robbins & Myers, Inc.
6.50%, 9/1/03..................................... 2,013,375
750,000 Simula, Inc.
8.00%, 5/1/04..................................... 767,812
--------------
2,781,187
--------------
Total Convertible Debentures
(cost $4,280,000)................................. 4,503,312
--------------
CORPORATE BONDS - 0.0% (A)
CHEMICAL & AGRICULTURAL
PRODUCTS - 0.0% (A)
210,000 Arco Chemical Co.
10.25%, 11/1/10................................... 240,500
--------------
FINANCE & INSURANCE - 0.0% (A)
500,000 Chrysler Financial Corp.
6.95%, 3/25/02.................................... 528,127
--------------
Total Corporate Bonds
(cost $764,924)................................... 768,627
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 29.0%
GOVERNMENT AGENCY NOTES & BONDS - 0.8%
$ 500,000 Federal Home Loan Mortgage Corp.
6.44%, 1/28/00................................... $ 510,745
Federal National Mortgage Association
500,000 5.94%, 12/12/05................................... 529,557
1,250,000 6.21%, 8/6/38..................................... 1,356,736
Tennessee Valley Authority
8,000,000 7.25%, 7/15/43.................................... 8,803,720
10,000,000 7.85%, 6/15/44, Ser. A............................ 10,878,850
--------------
22,079,608
--------------
TREASURY NOTES & BONDS - 28.2%
U.S. Treasury Bonds
78,000,000 6.00%, 2/15/26.................................... 87,311,328
170,000,000 6.25%, 8/15/23.................................... 194,703,210
36,340,000 6.75%, 8/15/26.................................... 44,630,099
125,000,000 7.125%, 2/15/23................................... 157,929,750
49,500,000 7.25%, 5/15/16.................................... 61,565,674
7,000,000 7.625%, 11/15/22.................................. 9,318,757
10,000,000 8.00%, 11/15/21................................... 13,750,010
50,000,000 8.125%, 8/15/19................................... 68,640,650
25,000,000 8.125%, 5/15/21................................... 34,679,700
30,000,000 8.375%, 8/15/08................................... 35,081,280
10,000,000 8.50%, 2/15/20.................................... 14,253,130
665,000 8.75%, 5/15/17.................................... 950,327
7,000,000 10.00%, 5/15/10................................... 9,150,316
1,000,000 10.625%, 8/15/15.................................. 1,634,063
U.S. Treasury Notes
30,000,000 5.75%, 8/15/03.................................... 31,846,890
2,000,000 5.875%, 11/15/99.................................. 2,028,126
350,000 5.875%, 2/15/00................................... 356,235
2,000,000 6.00%, 6/30/99.................................... 2,020,626
1,500,000 6.00%, 8/15/99.................................... 1,517,814
500,000 6.00%, 10/15/99................................... 507,188
1,000,000 6.125%, 9/30/00................................... 1,033,438
400,000 6.25%, 3/31/99.................................... 403,375
500,000 6.375%, 1/15/00................................... 511,251
900,000 6.50%, 5/31/01.................................... 947,251
1,130,000 6.50%, 8/15/05.................................... 1,273,722
1,000,000 6.625%, 3/31/02................................... 1,072,188
500,000 6.875%, 5/15/06................................... 578,125
3,235,000 7.50%, 11/15/01................................... 3,526,153
600,000 7.50%, 2/15/05.................................... 703,501
700,000 7.75%, 11/30/99................................... 724,938
1,105,000 8.875%, 11/15/98.................................. 1,110,871
110,000 8.875%, 2/15/99................................... 111,719
--------------
783,871,705
--------------
Total U.S. Government & Agency Obligations
(cost $693,509,858).............................. 805,951,313
--------------
44
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 11.0%
COMMERCIAL PAPER - 10.3%
$15,302,000 *Aon Corporation
5.40%, 11/6/98.................................... $ 15,219,369
3,895,000 Avnet, Inc.
5.53%, 10/1/98.................................... 3,895,000
17,000,000 Avon Capital Corp.
5.48%, 11/9/98.................................... 16,899,077
27,700,000 Barton Capital Corp.
5.25%, 11/20/98................................... 27,498,021
560,000 BHF Finance (De), Inc.
5.52%, 10/1/98.................................... 560,000
18,900,000 BTR Dunlop Finance, Inc.
5.48%, 10/29/98................................... 18,819,444
12,500,000 Citizens Utilities Co.
5.22%, 11/24/98................................... 12,402,125
4,800,000 Dollar Thrifty Funding Corp.
5.56%, 10/28/98................................... 4,779,984
4,970,000 Duff & Phelps Utilities Income, Inc. 5.51%,
10/13/98.......................................... 4,960,872
Duke Capital Corp..................................
7,450,000 5.53%, 10/6/98..................................... 7,444,278
6,960,000 5.53%, 10/8/98..................................... 6,952,516
15,525,000 Frigate Funding Corp.
5.55%, 10/23/98................................... 15,472,344
21,200,000 Monte Rosa Capital Corp.
5.52%, 10/16/98................................... 21,151,240
10,000,000 Oil Insurance Ltd.
5.53%, 10/27/98................................... 9,960,061
16,900,000 Old Line Funding Corp.
5.52%, 11/4/98.................................... 16,811,895
14,420,000 Park Avenue Recreation Corp. 5.52%, 10/28/98...... 14,360,301
25,000,000 Silver Tower US Funding, Llc
5.50%, 10/30/98.................................. 24,889,236
465,000 Sothebys Incorporated
5.53%, 11/6/98................................... 462,428
21,100,000 Southern Co.
5.50%, 10/15/98.................................. 21,054,869
2,800,000 Star Marketers Acceptance Corporation
5.55%, 10/27/98.................................. 2,788,777
20,400,000 Tiger Managers Acceptance Corp. 5.56%, 10/6/98.... 20,384,247
19,100,000 Toys "R" Us, Inc.
5.20%, 11/24/98.................................. 18,951,020
--------------
285,717,104
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.7%
20,600,000 Federal Farm Credit Bank
Discount Notes
5.40%, 10/7/98................................... 20,581,460
--------------
Total Short-Term Investments
(cost $306,298,564).............................. 306,298,564
--------------
TOTAL INVESTMENTS -
(COST $2,250,613,646)..................... 99.6% 2,765,944,970
OTHER ASSETS AND
LIABILITIES - NET......................... 0.4 10,520,825
----- --------------
NET ASSETS................................. 100.0% $2,776,465,795
===== ==============
* Non-income producing securities.
** At September 30, 1998, the Fund owned 117,000 shares of common stock
of First Union Corp. at a cost of $2,358,411. During the six months
ended September 30, 1998, the Fund earned $43,290 in dividend income
from this investment. These shares were purchased by the Fund prior to
the acquisition of the investment advisor.
(a) Less than one-tenth percent.
144A Securities that may be resold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933. These securities have
been determined to be liquid under guidelines by the Fund's Board of
Trustees.
SUMMARY OF ABBREVIATIONS
ADRAmerican Depository Receipt
BUCSBeneficial Unsecured Convertible Securities
PERCSPreferred Equity Redemption Cumulative Stock
PRIDESPreferred Redeemable Increased Dividend Equity Securities
REITReal Estate Investment Trust
See Combined Notes to Financial Statements.
45
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK - 45.5%
AEROSPACE & DEFENSE - 0.4%
45,000 Boeing Co. .......................................... $ 1,544,063
------------
AUTOMOTIVE EQUIPMENT & MANUFACTURING - 0.3%
65,000 * Sonic Automative, Inc. ............................ 1,287,813
------------
BANKS - 7.6%
39,200 BancorpSouth, Inc.................................... 705,600
39,000 BankBoston Corp...................................... 1,287,000
50,000 Cape Cod Bank & Trust Co. ........................... 862,500
40,000 Chase Manhattan Corp................................. 1,730,000
28,100 CitiCorp............................................. 2,611,544
30,000 * Civic Bancorp...................................... 390,000
7,500 Comerica, Inc. ...................................... 411,094
14,000 Crestar Financial Corp............................... 794,500
4,660 Dime Bancorp, Inc.................................... 117,956
3,000 First Union Corp.**.................................. 153,563
14,000 Fleet Financial Group, Inc........................... 1,028,125
60,000 Huntington Bancshares, Inc........................... 1,507,500
17,325 Interchange Financial Services Corp. ................ 271,786
41,000 KeyCorp.............................................. 1,183,875
4,000 M & T Bank Corp...................................... 1,844,000
19,800 National City Corp. ................................. 1,305,562
11,875 NationsBank Corp. ................................... 635,313
15,750 One Valley Bancorp of West Virginia, Inc. ........... 508,922
45,000 Republic New York Corp. ............................. 1,777,500
15,000 Seacoast Banking Corp. of Florida Cl. A.............. 446,250
62,255 SouthTrust Corp...................................... 2,175,034
32,000 Suntrust Banks, Inc.................................. 1,984,000
85,000 Westamerica Bancorp.................................. 2,459,687
40,000 Wilmington Trust Corp. .............................. 2,080,000
------------
28,271,311
------------
BUILDING, CONSTRUCTION & FURNISHINGS - 2.9%
36,000 Carlisle Companies, Inc. ............................ 1,401,750
55,000 Clayton Homes, Inc................................... 962,500
75,650 D.R. Horton, Inc..................................... 1,210,400
47,100 La-Z-Boy Chair Co. .................................. 924,338
32,000 Lowe's Companies, Inc. .............................. 1,018,000
55,000 Royal Group Technologies Ltd. ....................... 921,250
50,000 Ryland Group, Inc. .................................. 1,218,750
39,100 Shelby Williams Industries, Inc...................... 449,650
40,000 Standard Pacific Corp. .............................. 565,000
83,500 * Toll Brothers, Inc. ............................... 1,915,281
------------
10,586,919
------------
BUSINESS EQUIPMENT & SERVICES - 0.1%
17,500 * Crescent Operating, Inc. .......................... 122,500
10,000 First Data Corp...................................... 235,000
------------
357,500
------------
CAPITAL GOODS - 0.9%
44,600 Caterpillar, Inc..................................... 1,987,487
40,000 Deere & Co........................................... 1,210,000
------------
3,197,487
------------
CHEMICALS & AGRICULTURAL PRODUCTS - 2.1%
60,000 Du Pont (E. I.) De Nemours & Co. .................... 3,367,500
10,000 H.B. Fuller Co....................................... 378,750
35,000 Monsanto Co. ........................................ 1,973,125
11,000 Morton International, Inc. .......................... 240,625
20,000 Schulman (A.), Inc. ................................. 282,500
56,100 Sigma-Aldrich Corp. ................................. 1,619,887
------------
7,862,387
------------
CONSUMER PRODUCTS & SERVICES - 1.4%
10,000 Adidas AG ADS, 144A.................................. 568,100
77,788 Cendant Corp. ....................................... 904,285
12,000 Gucci Group.......................................... 433,500
40,000 Harman International Industries, Inc. ............... 1,467,500
32,100 Russ Berrie & Co., Inc. ............................. 611,906
51,600 St. John Knits, Inc. ................................ 832,050
10,500 Toro Co. ............................................ 217,219
------------
5,034,560
------------
ELECTRICAL EQUIPMENT & SERVICES - 3.7%
48,800 AMP, Inc. ........................................... 1,744,600
6,600 Applied Power, Inc., Cl. A........................... 180,263
14,000 General Electric Co. ................................ 1,113,875
17,000 Honeywell, Inc. ..................................... 1,089,063
54,700 Perkin Elmer Corp. .................................. 3,757,206
89,000 * SCI Systems, Inc. ................................. 2,397,437
18,500 Thomas & Betts Corp.................................. 704,156
66,000 W.W. Grainger, Inc. ................................. 2,780,250
------------
13,766,850
------------
FINANCE & INSURANCE - 8.2%
27,000 American International Group, Inc. .................. 2,079,000
16,000 Chubb Corp........................................... 1,008,000
20,000 Countrywide Credit Industries, Inc................... 832,500
6,000 Enhance Financial Services Group, Inc................ 177,375
20,000 FBL Financial Group, Inc., Cl. A .................... 461,250
21,000 Federal National Mortgage Association................ 1,349,250
20,000 * FPIC Insurance Group, Inc.......................... 555,000
33,000 Frontier Insurance Group, Inc. ...................... 437,250
62,000 Horace Mann Educators Corp........................... 1,860,000
47,100 Interstate/Johnson Lane, Inc......................... 1,365,900
95,866 Legg Mason, Inc. .................................... 2,522,474
68,000 Lehman Brothers Holdings, Inc........................ 1,921,000
8,500 Lincoln National Corp. .............................. 699,125
8,000 MBIA, Inc. .......................................... 429,500
45,000 Mercury General Corp. ............................... 1,687,500
41,500 Merrill Lynch & Co., Inc. ........................... 1,966,063
77,700 MGIC Investment Corp. ............................... 2,865,187
46
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK - CONTINUED
FINANCE & INSURANCE - CONTINUED
101,700 Morgan Keegan, Inc................................... $ 1,798,819
40,500 NAC RE Corporation................................... 1,994,625
28,000 Nationwide Financial Services, Inc. Cl. A............ 1,272,250
83,800 Paine Webber Group, Inc.............................. 2,514,000
4,500 Progressive Corp. Ohio............................... 507,375
------------
30,303,443
------------
FOOD & BEVERAGE PRODUCTS - 0.2%
40,000 Coca-Cola Co., ADR................................... 487,500
15,000 International Home Foods, Inc........................ 202,500
------------
690,000
------------
HEALTHCARE PRODUCTS & SERVICES - 3.3%
39,000 Abbott Laboratories.................................. 1,694,062
39,000 Alza Corp............................................ 1,691,625
40,000 American Home Products Corp.......................... 2,095,000
55,400 Beckman Coulter Inc.................................. 2,860,025
38,000 First Health Group Corp. ............................ 921,500
10,000 * Lincare Holdings, Inc.............................. 387,500
12,000 Medtronic, Inc....................................... 694,500
5,000 Merck & Co., Inc. ................................... 647,812
10,000 Pfizer, Inc.......................................... 1,059,375
5,000 Shared Medical System Corp. ......................... 265,938
------------
12,317,337
------------
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES - 0.9%
39,151 Autoliv, Inc......................................... 1,076,652
7,500 * Chemfab Corp....................................... 146,953
24,000 Furon Co............................................. 417,000
25,000 * Meade Instruments Corp............................. 242,188
31,700 Park Electrochemical Corp............................ 431,912
13,900 Snap-on, Inc. ....................................... 428,294
20,000 Timken Co............................................ 302,500
20,000 * UCAR International, Inc............................ 360,000
------------
3,405,499
------------
INFORMATION SERVICES &
TECHNOLOGY - 2.4%
25,000 Computer Sciences Corp............................... 1,362,500
34,000 * Etec Systems, Inc. ................................ 886,125
10,000 * Gateway 2000, Inc.................................. 521,250
24,000 Hewlett-Packard Co................................... 1,270,500
34,000 Intel Corp........................................... 2,915,500
12,000 International Business Machines Corp. ............... 1,536,000
10,000 * Sun Microsystems, Inc.............................. 498,125
------------
8,990,000
------------
METAL PRODUCTS & SERVICES - 0.2%
20,000 Precision Castparts Corp............................. 825,000
------------
OIL/ENERGY - 1.0%
10,000 Amoco Corp. ......................................... 538,750
10,000 Equitable Resources, Inc. ........................... 254,375
25,000 Transocean Offshore, Inc............................. 867,187
70,000 Williams Companies, Inc.............................. 2,012,500
------------
3,672,812
------------
OIL FIELD SERVICES - 0.3%
25,000 Schlumberger Ltd..................................... 1,257,813
------------
PAPER & PACKAGING - 0.2%
20,000 * Sealed Air Corp.................................... 637,500
------------
PUBLISHING, BROADCASTING & ENTERTAINMENT - 0.2%
30,000 Belo (A.H.) Corp., Ser. A............................ 600,000
------------
REAL ESTATE - 4.2%
17,300 * Alexander's, Inc. REIT............................. 1,327,775
60,000 AMB Property Corp. REIT.............................. 1,548,750
3,485 Archstone Cmntys Trust............................... 71,007
39,000 Boston Properties, Inc. REIT......................... 1,111,500
20,000 Brandywine Realty Trust REIT......................... 382,500
25,000 Capital Trust, Cl. A................................. 162,500
12,000 Capstead Mortgage Corp. REIT......................... 43,500
70,000 Del Webb Corp........................................ 1,474,375
52,000 Equity Office Properties Trust REIT.................. 1,274,000
45,831 * Homestead Village Properties, Inc.................. 392,428
1,480 Horizon Group Properties, Inc. REIT.................. 3,515
40,000 Indymac Mortgage Holdings, Inc. REIT................. 810,000
25,000 Inversiones y Representaciones
SA, GDR............................................. 537,500
40,000 * John Q. Hammons Hotels, Inc., Cl. A................ 180,000
66,500 Kilroy Realty Corp. REIT............................. 1,529,500
40,000 Newhall Land & Farming Co. .......................... 935,000
40,393 Patriot American Hospitality, Inc. REIT.............. 515,011
20,000 Prentiss Properties Trust REIT....................... 477,500
21,133 Prime Retail, Inc.................................... 207,368
10,000 SL Green Realty Corp. REIT........................... 210,000
45,000 Starwood Hotels & Resorts Trust REIT................. 1,372,500
95,000 Sunstone Hotel Investors, Inc. REIT.................. 860,937
15,000 Trizec Hahn Corp. ................................... 281,250
------------
15,708,416
------------
RETAILING & WHOLESALE - 1.1%
18,000 Avnet, Inc........................................... 662,625
44,700 Ethan Allen Interiors, Inc........................... 1,620,375
60,000 * Saks, Inc.......................................... 1,346,250
80,000 SED International Holdings, Inc...................... 405,000
------------
4,034,250
------------
THRIFT INSTITUTIONS - 0.8%
18,000 Bank United Corp..................................... 644,625
15,000 BankUnited Financial Corp............................ 165,000
10,000 Golden West Financial Corp........................... 818,125
47
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK - CONTINUED
THRIFT INSTITUTIONS - CONTINUED
30,000 Mech Financial, Inc................................. $ 750,000
29,298 St. Paul Bancorp, Inc............................... 639,063
------------
3,016,813
------------
TRANSPORTATION - 1.8%
47,000 * Airnet Systems, Inc............................... 778,438
35,000 GATX Corp........................................... 1,157,187
54,550 Midwest Express Holdings, Inc....................... 1,827,425
65,000 Union Pacific Corp.................................. 2,770,625
------------
6,533,675
------------
UTILITIES--ELECTRIC - 0.1%
9,900 TNP Enterprises, Inc. .............................. 345,881
------------
UTILITIES--TELEPHONE - 1.2%
50,000 Cincinnati Bell, Inc. .............................. 1,300,000
66,000 Frontier Corp....................................... 1,806,750
18,000 Sprint Corp......................................... 1,296,000
------------
4,402,750
------------
Total Common Stock (cost $175,958,202).............. 168,650,079
------------
CONVERTIBLE PREFERRED STOCKS - 0.7%
BANKS - 0.5%
63,000 WBK Trust, 10.00%, STRYPES (exchangeable for Westpac
Banking Corp. common stock)........................ 1,740,375
------------
REAL ESTATE - 0.0% (A)
7,080 Prime Retail, Inc. 8.50% Ser. B..................... 120,360
------------
TRANSPORTATION - 0.2%
20,000 CNF Trust I, 5.00%, Ser. A, TECONS (exchangeable for
CNF Transportation, Inc. common stock)............. 960,000
------------
Total Convertible Preferred Stocks
(cost $3,156,477).................................. 2,820,735
------------
CONVERTIBLE DEBENTURES - 0.1%
BUSINESS EQUIPMENT & SERVICES - 0.0%
150,000 Personnel Group Of America, Inc., 5.75%, 7/01/04.... 136,500
------------
OIL FIELD SERVICES - 0.1%
250,000 Parker Drilling Co.,
5.50%, 8/1/04...................................... 187,500
------------
Total Convertible Debentures
(cost $400,000).................................... 324,000
------------
- --------------------------------------------------------------------------------
Principal
Amount
- --------------------------------------------------------------------------------
LONG TERM MUNICIPAL OBLIGATIONS - 52.6%
ALABAMA - 2.0%
$3,000,000 Alabama Water Pollution Control Auth.
5.50%, 8/15/16..................................... $ 3,184,650
4,000,000 Jefferson County Alabama Sewer Revenue Wts Series D
5.75%, 2/1/22 (FGIC)............................... 4,375,200
------------
7,559,850
------------
ALASKA - 1.1%
935,000 Alaska Hsg. Fin. Corp.
Mtge. RB, 1996 Ser. A
6.05%, 12/1/17 (MBIA).............................. 1,002,797
1,500,000 Alaska Hsg. Fin. Corp.
Mtge. RB Ser. A-1
5.30%, 12/1/12 (MBIA).............................. 1,558,890
1,500,000 Alaska Industrial Development + Export Auth.
5.00%, 1/1/27...................................... 1,484,205
------------
4,045,892
------------
ARIZONA - 0.2%
500,000 City of Tucson
GO, Ser. 1995
5.70%, 7/1/08 (FGIC)............................... 550,230
------------
CALIFORNIA - 4.1%
2,500,000 California Health Facilities Fin.
5.13%, 8/15/22..................................... 2,521,650
1,000,000 California Hsg. Fin. Agcy. RB
5.30%, 8/1/28...................................... 1,014,870
700,000 California Hsg. Fin. Agcy. RB Ser. I 5.75%, 2/1/29
(MBIA)............................................. 736,869
500,000 California Hsg. Fin. Agcy.
RB Home Mtge. Ser. L
5.35%, 8/1/17...................................... 518,475
1,000,000 California St. Public Wks Board
5.25%, 12/1/13..................................... 1,069,500
1,200,000 Los Angeles Cnty. Pub. Works Fin. Auth. RB Regional
Park & Open Space Dist. A
5.00%, 10/1/16..................................... 1,237,944
1,000,000 San Francisco Bay Area Rapid Transport Dist.
Sales Tax RB
5.25%, 7/1/18...................................... 1,053,740
3,150,000 San Francisco California Int'l Arpt. Revenue
5.25%, 5/1/13...................................... 3,355,285
2,000,000 San Francisco City & Cnty. Int'l Arpt.
RB Ser. Issue 10-A, (AMT)
5.70%, 5/1/26 (MBIA)............................... 2,141,680
500,000 Simi Valley Unified Sch. Dist.
Refunding Capital Improvement Proj. Cert. Part.
5.25%, 8/1/22...................................... 536,895
1,000,000 Southern CA Pub. Pwr. Auth.
RB (Mead Adelanto Proj.) Ser. A
5.00%, 7/1/17 (AMBAC).............................. 1,019,880
------------
15,206,788
------------
48
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
LONG TERM MUNICIPAL OBLIGATIONS - CONTINUED
COLORADO - 0.7%
$1,000,000 Denver City & Cnty.
Arpt. RB Ser. D
5.50%, 11/15/25 (MBIA)............................. $ 1,061,700
1,500,000 Jefferson County Sch. Dist.
R001 (FGIC)
5.00%, 12/15/17.................................... 1,532,865
------------
2,594,565
------------
DELAWARE - 0.3%
1,000,000 Delaware Econ. Dev. Auth.
RB (The Osteopathic Hosp. Assoc. of
Delaware/Riverside Hosp.), Ser. A
6.50%, 1/1/08...................................... 1,137,720
------------
DISTRICT OF COLUMBIA - 2.1%
1,900,000 District of Columbia Revenue Carnegie Endowment
5.75%, 11/15/26 ................................... 2,014,247
5,500,000 Metropolitan DC Arpts. Auth.
RB Ser. B
5.50%, 10/1/23 (AMT)............................... 5,735,290
------------
7,749,537
------------
FLORIDA - 2.4%
300,000 Dade Cnty. Aviation
RRB, Ser. 1995A
6.10%, 10/1/11 (AMBAC)............................. 339,423
1,250,000 Florida Housing Fin. Corp. Revenue
5.35%, 1/1/21...................................... 1,272,288
2,000,000 Florida St. Board Of Education
Capital Outlay
5.50%, 6/1/15...................................... 2,132,380
2,500,000 Gainesville Florida Utilities Systems Revenue
5.50%, 10/1/13..................................... 2,648,750
2,500,000 Sunrise Florida Utilities Systems Revenue
5.00%, 10/1/28..................................... 2,570,325
------------
8,963,166
------------
ILLINOIS - 3.8%
1,000,000 Chicago Board of Ed.
GO (School Reform Proj.)
6.75%, 12/1/09 (AMBAC)............................. 1,220,410
5,315,000 Chicago Illinois Skyway Toll Bridge 5.50%, 1/1/23... 5,639,587
1,600,000 Cook County Illinois GO
5.63%, 11/15/22.................................... 1,717,936
5,000,000 Illinois Educational Facilities Auth. Revenue
5.00%, 7/1/24...................................... 4,935,450
450,000 Illinois Sales Tax RB Ser. V
6.38%, 6/15/17..................................... 511,776
------------
14,025,159
------------
INDIANA - 1.4%
2,000,000 Indiana Hsg. Fin.
Single Family Mtge. RB Ser. A-2 5.15%, 7/1/17
(FNMA/GNMA)........................................ 2,039,240
3,000,000 Marion County, Ind. In Cnvtn & Rectl
Fac. Auth. RB
5.00%, 6/1/27...................................... 2,990,730
------------
5,029,970
------------
MAINE - 0.4%
1,000,000 Maine Hlth. & High Edl. Facs. Auth. RB Ser. B
5.75%, 7/1/26 (AMBAC).............................. 1,082,110
500,000 Maine Hsg. Auth. Mtge.
Purchase RB Ser. F-1
5.50%, 11/15/29.................................... 512,945
------------
1,595,055
------------
MASSACHUSETTS - 4.8%
4,750,000 Massachusetts St. Industrial Fin. Agency
5.25%, 7/1/27...................................... 4,895,302
250,000 Massachusetts Hsg. Fin. Agcy.
Hsg. Proj. RRB, 1993 Ser. A 5.95%, 10/1/08
(AMBAC)............................................ 267,343
250,000 Massachusetts Bay Trans. Auth.
General Trans. Sys. Bonds,
Ser. 1994A
7.00%, 3/1/08...................................... 305,292
1,000,000 Massachusetts Bay Trans. Auth.
RB (Refunding Gen. Trans. Sys. A)
7.00%, 3/1/14...................................... 1,265,480
1,000,000 Massachusetts Hsg. Fin. Agcy. RB (AMT) Single Family
Ser. 59 5.40%, 6/1/20 (MBIA)....................... 1,034,070
2,500,000 Massachusetts Port. Auth.
RB Ser. A
5.00%, 7/1/27...................................... 2,492,250
2,500,000 Massachusetts St. Health Educational Facilities
5.00%, 6/1/26...................................... 2,505,375
2,500,000 Massachusetts St. Industrial Finance Agency
5.00%, 9/1/23...................................... 2,499,900
1,000,000 Massachusetts Tpke. Auth.
RB Senior Ser. A
5.13%, 1/1/23 (MBIA)............................... 1,009,850
1,300,000 Massachusetts Tpke. Auth.
RB (Western Tpke.) Ser. A 5.55%, 1/1/17 (MBIA)..... 1,332,500
------------
17,607,362
------------
MICHIGAN - 1.5%
1,030,000 Detroit Wtr. Supply Sys.
RB Sr. Lien Ser. A
5.75%, 7/1/11 (MBIA)............................... 1,160,233
300,000 Michigan Muni. Bond Auth.
RB (Local Govt. Loan Proj.), Ser 1994G
6.55%, 11/1/08 (AMBAC)............................. 344,259
2,500,000 Michigan St. Hosp. Fin. Auth.
RB (FGIC)
5.63%, 11/1/18..................................... 2,627,125
1,225,000 Paw Paw Michigan Public School District (FGIC)
5.00%, 5/1/21...................................... 1,267,091
------------
5,398,708
------------
49
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
LONG TERM MUNICIPAL OBLIGATIONS - CONTINUED
MINNESOTA - 0.6%
$2,000,000 Southern Minnesota Municipal Power Agency Supply
(MBIA) 5.75%, 1/1/18............................... $ 2,136,940
------------
MISSOURI - 3.4%
435,000 Missouri Hsg. Dev. Commission Single Family Mtge. RB
(Homeownership Loan Proj.), 1996 Ser. D 6.00%,
9/1/17 (Collaterialized by GNMA or FNMA
Certificates AMT).................................. 461,278
900,000 Missouri Hsg. Dev. Commission Single Family Mtge. RB
(Homeownership Loan Proj.), 1996 Ser. B 6.25%,
9/1/15 (Collaterialized by GNMA or FNMA
Certificates)...................................... 965,259
985,000 Missouri Hsg. Dev. Commission Mtge.
5.55%, 3/1/29...................................... 1,025,356
500,000 Missouri St. Hsg. Dev. Commission Mtge.
5.50%, 3/1/25...................................... 509,105
2,500,000 Missouri St. Health & Educational Facility Revenue
5.00%, 5/15/28..................................... 2,469,400
775,000 Sikeston Elec. RB
6.00%, 6/1/13 (MBIA)............................... 901,519
500,000 St. Louis Board of Ed.
GO Refunding
Ser. A (FGIC)
5.50%, 4/1/10...................................... 554,960
500,000 St. Louis Muni. Fin. Corp.
Leasehold Rev. Imp. Bonds (City Justice Ctr.), Ser.
1996A
5.95%, 2/15/16 (AMBAC)............................. 553,245
1,000,000 St. Louis Regl. Convention & Sports Complex Auth.
RB Facs. C
5.30%, 8/15/17 (AMBAC)............................. 1,046,770
4,000,000 University Missouri
University Revenue
5.50%, 11/1/21..................................... 4,234,760
------------
12,721,652
------------
NEBRASKA - 0.3%
1,000,000 Nebraska Investment Finance Auth. Single Family
5.60%, 9/1/20...................................... 1,018,120
------------
NEVADA - 0.3%
1,000,000 Washoe Cnty. GO
5.00%, 6/1/17 (MBIA)............................... 1,015,350
------------
NEW JERSEY - 1.2%
2,500,000 New Jersey Economic Development Pollution (MBIA)
6.40%, 5/1/32...................................... 2,783,025
1,400,000 New Jersey Tpke. Auth.
RB Ser. C
6.50%, 1/1/16 (MBIA)............................... 1,712,382
------------
4,495,407
------------
NEW YORK - 5.4%
2,250,000 Long Island Power Auth.
New York Electric RB
5.50%, 12/1/29..................................... 2,331,135
2,500,000 Metro Trans. Auth. NY Commuter Facs. RB Ser. C-2
5.38%, 7/1/27 (FGIC)............................... 2,618,050
250,000 New York St. Mtge. Agcy. Homeowner Mtge. RB,
Ser. 44 (AMT)
6.60%, 4/1/03...................................... 265,515
975,000 New York St. Mtge. Agcy. Homeowner Mtge. RB,
Ser. 56 (AMT)
5.88%, 10/1/19..................................... 1,024,374
2,500,000 New York St. Dorm. Auth.
RB (AMBAC)
5.20%, 2/15/14..................................... 2,599,625
245,000 New York St. Med. Care Facs. Fin. Agcy. RB (Mental
Hlth. Svcs. Facs.), 1992 Ser. B
6.25%, 8/15/10 (AMBAC)............................. 265,543
2,000,000 New York St. Med. Care Facs. Fin. Agcy. RB Refunding
Hosp. Insured Mtge. A
5.38%, 2/15/25 (MBIA).............................. 2,050,620
500,000 New York St. Mtge. Agcy. RB (Homeowner Mtge.)
Ser. 63, (AMT)
5.60%, 4/1/10...................................... 527,460
1,000,000 New York St. Thruway Auth.
RB Ser. B
5.00%, 1/1/20 (MBIA)............................... 1,001,130
1,700,000 New York St. Local Government Assist
5.38%, 4/1/14...................................... 1,781,702
5,000,000 New York St. Urban Development Corporation
5.50%, 7/1/16...................................... 5,374,500
250,000 Port Auth. of New York & New Jersey Consolidated
Bonds, 97th Ser. 2nd Installment (AMT)
7.00%, 7/15/05 (FGIC).............................. 293,130
------------
20,132,784
------------
NORTH CAROLINA - 0.1%
500,000 North Carolina Hsg. Fin. Agcy. Single Family Ser.
00, (Orig. Avg. Life Est.)
5.80%, 9/1/12 (FHA)................................ 535,510
------------
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).............................. 1,102,180
1,000,000 North Dakota St. Hsg. Fin. Agcy. 5.55%, 7/1/29...... 1,020,690
------------
2,122,870
------------
50
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
LONG TERM MUNICIPAL OBLIGATIONS - CONTINUED
OHIO - 1.0%
$ 500,000 Akron Econ. Dev. RB
6.00%, 12/1/12 (MBIA).............................. $ 580,775
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).............................. 864,892
1,000,000 Cleveland Arpt. Sys. RB Ser. A 5.13%, 1/1/17 (FSA
AMT)............................................... 1,011,440
1,000,000 Jefferson Cnty. GO Refunding Improvement (FSA)
5.70%, 12/1/13..................................... 1,147,750
------------
3,604,857
------------
OREGON - 1.0%
3,500,000 Marion County, Ore. School District Number 103
5.00%, 11/1/14..................................... 3,678,150
------------
PENNSYLVANIA - 1.3%
500,000 Pennsylvania Convention Ctr. Auth.
RB Ser. A, 1989 Ser. A
6.70%, 9/1/16 (FGIC)............................... 612,170
1,000,000 Pennsylvania Hsg. Fin. Agcy.
5.40%, 10/1/18..................................... 1,023,240
2,000,000 Pennsylvania St. Higher Educational Facility (MBIA)
5.75%, 5/1/22...................................... 2,205,440
1,000,000 York Cnty. Solid Waste & Refuse
Auth. Solid Waste Sys. RB
5.50%, 12/1/11 (FGIC).............................. 1,109,000
------------
4,949,850
------------
SOUTH DAKOTA - 0.6%
1,000,000 South Dakota Conservancy District (AMBAC)
5.00%, 8/1/19...................................... 1,003,790
1,235,000 South Dakota Hsg. Dev. Auth.
RB Homeownership B
5.25%, 5/1/17...................................... 1,264,035
------------
2,267,825
------------
TENNESSEE - 0.1%
300,000 Bristol Hlth. & Edl. Facs. Board
RRB (Bristol Mem. Hosp.),
Ser. 1993
6.75%, 9/1/07 (FGIC)............................... 355,428
------------
TEXAS - 2.7%
1,000,000 Cypress Fair Independent Sch. Dist.
5.13%, 2/15/12..................................... 1,046,700
2,625,000 Dallas, Tx RB
5.25%, 8/15/16..................................... 2,769,375
1,000,000 Harris Cnty. Hlth. Facs. Hosp. RB (Memorial Hermann
Hosp. Sys. Proj.) (FSA)
5.50%, 6/1/10...................................... 1,092,800
1,000,000 Houston Wtr. Conveyance Sys.
Contract COP, Ser. 1993J
6.13%, 12/15/09 (AMBAC)............................ 1,153,180
500,000 Houston Wtr. Conveyance Sys.
Contract COP, Ser.
1993H 7.50%, 12/15/10 (AMBAC)...................... 643,500
1,500,000 Irving Independent Sch. Dist. GO
5.13%, 2/15/18..................................... 1,532,385
460,000 Lubbock Elec. Light & Pwr. Sys. RB
4.25%, 4/15/16 (AMBAC)............................. 432,299
460,000 Lubbock Elec. Light & Pwr. Sys. RB
4.25%, 4/15/17 (AMBAC)............................. 431,310
1,000,000 San Antonio Elec. & Gas RB
5.25%, 2/1/10...................................... 1,073,650
------------
10,175,199
------------
UTAH - 3.6%
5,000,000 Intermountain Power Agency Utah Revenue
5.00%, 7/1/20...................................... 4,999,600
500,000 Salt Lake City Hosp. RB
(IHC Hosp., Inc.)
6.30%, 2/15/15..................................... 591,265
500,000 Utah Hsg. Fin. Agcy. RB (Single
Family Mtge.) Ser. B
6.00%, 7/1/16 (FHA)................................ 537,605
3,000,000 Utah St. Board Regents Revenue
5.00%, 4/1/20...................................... 3,000,000
2,825,000 Utah St. Hsg. Fin. Agcy.
5.35%, 7/1/18...................................... 2,865,313
1,500,000 Utah Str. Hsg. Fin. Agcy.
5.38%, 7/1/18...................................... 1,524,720
------------
13,518,503
------------
VERMONT - 0.4%
1,315,000 Burlington Elec. RB Ser. A
6.25%, 7/1/12 (MBIA)............................... 1,560,905
------------
VIRGINIA - 0.8%
2,805,000 Medical College Virginia Hosp. Authority
5.13%, 7/1/18...................................... 2,843,120
------------
WASHINGTON - 1.9%
3,000,000 Port Seattle Washington Passenger Facility
5.00%, 12/1/23..................................... 2,999,790
3,500,000 Seattle Washington Water Systems Revenue
5.50%, 6/1/18...................................... 3,638,180
500,000 Snohomish Cnty. Sch. Dist. GO
5.70%, 12/1/15 (FGIC).............................. 545,815
------------
7,183,785
------------
WEST VIRGINIA - 0.6%
1,000,000 West Virginia St. Ser. A
5.75%, 11/1/21 (FGIC).............................. 1,097,290
1,000,000 West Virginia St. Hsg. Dev. Fund RB Ser. A
6.05%, 5/1/27...................................... 1,074,950
------------
2,172,240
------------
51
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS(continued)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
LONG TERM MUNICIPAL OBLIGATIONS - CONTINUED
WISCONSIN - 1.0%
$1,000,000 Wisconsin Clean Wtr.
RB Ser. 1
6.88%, 6/1/11...................................... $ 1,242,760
2,000,000 Wisconsin Hsg. & Econ. Dev. Auth.
5.60%, 3/1/28...................................... 2,055,980
500,000 Wisconsin Hsg. & Econ. Dev. Auth.
Home Ownership RB Ser. E (AMT)
6.00%, 9/1/28...................................... 529,625
------------
3,828,365
------------
WYOMING - 0.6%
2,000,000 Wyoming Cmny Development Auth. Hsg. Revenue
5.45%, 12/1/29..................................... 2,041,420
------------
PUERTO RICO - 0.3%
500,000 Puerto Rico Elec. Pwr. Auth. RB Ser. BB
6.25%, 7/1/10 (MBIA)............................... 595,300
500,000 Puerto Rico Hsg. Bank & Fin. Agcy.
RB (Single Family Affordable Hsg.
Mtge. Subsidy Prog.) Portfolio I
(AMT)
5.85%, 4/1/09...................................... 531,710
------------
1,127,010
------------
Total Long Term Municipal Obligations
(cost $187,823,289)................................ 194,949,292
------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.7%
MUTUAL FUND SHARES - 0.7%
2,459,326 Federated Tax Free Obligations Fund (at net asset
value) (cost $2,459,326)........................... $ 2,459,326
------------
TOTAL INVESTMENTS -(COST $369,797,295)............. 99.6% 369,203,432
OTHER ASSETS AND
LIABILITIES - NET................................. 0.4% 1,397,541
------ ------------
NET ASSETS ........................................ 100.0% $370,600,973
====== ============
* Non-income producing securities.
** At September 30, 1998, the Fund owned 3,000 shares of common stock of First
Union Corp. at a cost of $57,890. During the six months ended September 30,
1998, the Fund earned $1,710 in dividend income from this investment. These
shares were purchased by the Fund prior to the acquisition of the
investment advisor.
(a) Less than one-tenth percent.
144A Securities that may be resold to "qualified institutional buyers" under
Rule 144A of the Securities Act of 1933. These securities have been
determined to be liquid under guidelines established by the Fund's Board of
Trustees.
SUMMARY OF ABBREVIATIONS
ADRAmerican Depository Receipt
AMBACInsured by American Municipal Bond Assurance Corporation
AMTSubject to Alternative Minimum Tax
FGICInsured by Federal Guaranty Insurance Corporation
FHAInsured by Federal Housing Authority
FNMAInsured by Federal National Mortgage Association
FSAInsured by Financial Security Assurance Company
GDRGlobal Depositary Receipt
GNMAInsured by Government National Mortgage Association
GOGeneral Obligations
MBIAInsured by Municipal Bond Investors Assurance Corporation
PRIDESPreferred Redeemable Increased Dividend Equity Securities
RBRevenue Bonds
RRBRefunding Revenue Bonds
REITReal Estate Investment Trust
STRYPESStructured Yield Product Exchangeable for Stock
TECONSTerm Convertible Shares
See Combined Notes to Financial Statements.
52
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
Balanced Funds
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
TAX-
AMERICAN STRATEGIC
RETIREMENT BALANCED FOUNDATION FOUNDATION
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments at value (identified cost -
$209,092,342, $1,343,914,410,
$2,250,613,646 and $369,797,295,
respectively)................................ $220,810,868 $1,681,872,279 $2,765,944,970 $369,203,432
Cash.......................................... 1,257,665 4,455,909 144,592 0
Receivable for investments sold............... 2,495,589 14,371,768 4,546,422 1,011,506
Receivable for Fund shares sold............... 291,810 895,526 5,042,724 1,038,616
Dividends and interest receivable............. 1,381,528 11,823,037 11,119,267 3,172,669
Unrealized appreciation on open forward
foreign currency exchange contracts.......... 0 94,064 0 0
Unamortized organization expense.............. 0 0 0 858
Prepaid expenses and other assets............. 42,791 241,605 14,767 37,060
- -----------------------------------------------------------------------------------------------------------
Total assets................................ 226,280,251 1,713,754,188 2,786,812,742 374,464,141
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased............. 6,220,953 5,045,026 4,585,584 2,873,619
Payable for Fund shares repurchased........... 154,305 1,696,316 3,525,154 533,386
Payable for daily variation margin on
open futures contracts....................... 0 2,598,750 0 0
Unrealized depreciation on open forward
foreign currency exchange contracts.......... 0 3,249,823 0 0
Advisory fee payable.......................... 134,800 607,173 1,692,881 264,390
Distribution fee payable...................... 30,157 206,708 305,845 127,506
Due to other related parties.................. 0 23,927 0 0
Accrued expenses and other liabilities........ 56,084 166,082 237,483 64,267
- -----------------------------------------------------------------------------------------------------------
Total liabilities........................... 6,596,299 13,593,805 10,346,947 3,863,168
- -----------------------------------------------------------------------------------------------------------
NET ASSETS.................................... $219,683,952 $1,700,160,383 $2,776,465,795 $370,600,973
- -----------------------------------------------------------------------------------------------------------
NET ASSETS REPRESENTED BY
Paid-in capital............................... $204,768,293 $1,117,040,430 $2,233,348,078 $365,519,376
Undistributed net investment income........... 279,754 (54,459) 2,274,845 30,451
Accumulated undistributed net realized gains
on securities and foreign currency related
transactions................................. 2,917,379 250,063,410 25,511,922 5,645,009
Net unrealized gains or losses on securities,
futures contracts and foreign currency
related transactions......................... 11,718,526 333,111,002 515,330,950 (593,863)
- -----------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS............................ $219,683,952 $1,700,160,383 $2,776,465,795 $370,600,973
- -----------------------------------------------------------------------------------------------------------
NET ASSETS CONSISTS OF
Class A....................................... $ 27,808,409 $1,135,759,521 $ 339,713,080 $ 82,897,461
Class B....................................... 153,720,831 529,153,770 1,212,620,999 226,681,831
Class C....................................... 2,398,489 1,457,495 57,806,154 39,082,400
Class Y....................................... 35,756,223 33,789,597 1,166,325,562 21,939,281
- -----------------------------------------------------------------------------------------------------------
$219,683,952 $1,700,160,383 $2,776,465,795 $370,600,973
- -----------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
Class A....................................... 1,888,175 92,451,286 17,716,767 5,488,092
Class B....................................... 10,492,533 43,025,280 63,555,265 15,033,660
Class C....................................... 163,329 118,484 3,029,675 2,596,304
Class Y....................................... 2,427,447 2,751,790 60,806,042 1,449,531
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
Class A....................................... $ 14.73 $ 12.28 $ 19.17 $ 15.11
- -----------------------------------------------------------------------------------------------------------
Class A - Offering price (based on sales
charge of 4.75%)............................. $ 15.46 $ 12.89 $ 20.13 $ 15.86
- -----------------------------------------------------------------------------------------------------------
Class B....................................... $ 14.65 $ 12.30 $ 19.08 $ 15.08
- -----------------------------------------------------------------------------------------------------------
Class C....................................... $ 14.69 $ 12.30 $ 19.08 $ 15.05
- -----------------------------------------------------------------------------------------------------------
Class Y....................................... $ 14.73 $ 12.28 $ 19.18 $ 15.14
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
53
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Funds
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
Six Months Ended September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
TAX-
AMERICAN STRATEGIC
RETIREMENT BALANCED FOUNDATION FOUNDATION
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding
taxes of $8,671, $52,606, $28,629 and
$1,974, respectively)......................... $ 2,554,191 $ 10,778,759 $ 16,917,525 $ 1,293,580
Interest....................................... 2,727,098 26,393,816 31,859,856 5,175,301
- -----------------------------------------------------------------------------------------------------------
Total income................................. 5,281,289 37,172,575 48,777,381 6,468,881
EXPENSES
Advisory fee................................... 886,687 3,911,010 10,394,094 1,559,854
Distribution Plan expenses..................... 864,821 4,343,232 6,771,467 1,370,629
Transfer agent fees............................ 252,288 1,656,865 2,843,040 209,365
Administrative service fees.................... 0 132,149 0 0
Trustees fees and expenses..................... 2,660 2,569 14,135 1,243
Registration fees.............................. 38,581 144,724 301,469 51,664
Custodian fees................................. 30,656 310,557 390,666 48,093
Professional fees.............................. 10,569 25,187 13,479 14,554
Printing and postage........................... 4,265 352,894 170,845 30,870
Organizational fees............................ 0 0 0 4,004
Other.......................................... 6,932 22,038 59,678 4,845
- ------------------------------------------------------------------------------------------------------------
Total expenses................................ 2,097,459 10,901,225 20,958,873 3,295,121
Less: Indirectly paid expenses................. (1,490) (12,032) (11,182) (2,918)
- ------------------------------------------------------------------------------------------------------------
Net expenses.................................. 2,095,969 10,889,193 20,947,691 3,292,203
- ------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME.......................... 3,185,320 26,283,382 27,829,690 3,176,678
- ------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS OR
LOSSES ON SECURITIES, FUTURES CONTRACTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gains or losses on:
Securities.................................... 1,101,145 208,422,618 19,961,494 5,338,234
Foreign currency related
transactions................................. 0 (2,340,266) 815 0
- ------------------------------------------------------------------------------------------------------------
Net realized gains on securities and foreign
currency related transactions................. 1,101,145 206,082,352 19,962,309 5,338,234
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized losses on
securities, futures contracts and foreign
currency related transactions................. (30,766,562) (284,825,248) (205,392,069) (35,123,130)
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized losses on
securities, futures contracts and foreign
currency related transactions................. (29,665,417) (78,742,896) (185,429,760) (29,784,896)
- ------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................... $(26,480,097) $ (52,459,514) $(157,600,070) $(26,608,218)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
54
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
TAX-
AMERICAN STRATEGIC
RETIREMENT BALANCED FOUNDATION FOUNDATION
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income............................................ $ 3,185,320 $ 26,283,382 $ 27,829,690 $ 3,176,678
Net realized gains on securities and foreign
currency related transactions................................... 1,101,145 206,082,352 19,962,309 5,338,234
Net change in unrealized losses on securities, futures
contracts and foreign currency related transactions............. (30,766,562) (284,825,248) (205,392,069) (35,123,130)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations............ (26,480,097) (52,459,514) (157,600,070) (26,608,218)
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income
Class A......................................................... (472,229) (20,831,871) (3,611,237) (922,578)
Class B......................................................... (1,966,062) (7,608,216) (8,128,272) (1,687,749)
Class C......................................................... (31,437) (17,648) (381,376) (289,447)
Class Y......................................................... (671,590) (659,995) (13,398,479) (263,904)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders............................. (3,141,318) (29,117,730) (25,519,364) (3,163,678)
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold........................................ 32,959,699 49,618,794 391,968,937 119,046,644
Payment for shares redeemed...................................... (20,431,496) (188,956,040) (236,734,715) (23,947,903)
Net asset value of shares issued in reinvestment of
distributions................................................... 2,957,822 23,921,132 23,290,844 2,772,888
Shares issued in acquisition of CoreFunds, Inc.
Balanced Fund................................................... 0 0 139,832,551 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from capital
share transactions............................................. 15,486,025 (115,416,114) 318,357,617 97,871,629
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets........................ (14,135,390) (196,993,358) 135,238,183 68,099,733
NET ASSETS
Beginning of period.............................................. 233,819,342 1,897,153,741 2,641,227,612 302,501,240
- ------------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD.................................................... $219,683,952 $1,700,160,383 $2,776,465,795 $370,600,973
- ------------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income.............................. $ 279,754 $ (54,459) $ 2,274,845 $ 30,451
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
55
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended March 31, 1998
<TABLE>
<CAPTION>
TAX-
AMERICAN STRATEGIC
RETIREMENT BALANCED FOUNDATION FOUNDATION
FUND FUND* FUND FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income............................................ $ 4,985,814 $ 35,345,751 $ 46,106,604 $ 2,888,518
Net realized gains on securities, futures contracts and
foreign currency related transactions........................... 5,840,219 127,001,668 37,733,396 1,331,487
Net change in unrealized gains on securities and foreign
currency related transactions................................... 31,534,034 84,015,495 507,820,113 28,378,750
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations............ 42,360,067 246,362,914 591,660,113 32,598,755
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income
Class A......................................................... (695,207) (12,029,418) (6,778,425) (845,312)
Class B......................................................... (2,792,552) (25,630,818) (14,304,998) (1,429,127)
Class C......................................................... (49,486) (2,502) (632,325) (189,734)
Class Y......................................................... (1,312,760) (263,102) (25,594,285) (422,361)
From net realized gains
Class A......................................................... (514,560) (25,111,250) (6,367,014) (424,397)
Class B......................................................... (2,734,907) (168,719,950) (19,081,303) (1,129,269)
Class C......................................................... (50,154) (135) (836,192) (141,334)
Class Y......................................................... (874,184) 0 (22,106,374) (207,645)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders............................. (9,023,810) (231,757,175) (95,700,916) (4,789,179)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold........................................ 86,591,263 121,903,416 691,840,878 212,133,212
Payment for shares redeemed...................................... (24,953,880) (278,715,460) (299,555,598) (15,800,328)
Net asset value of shares issued in reinvestment of
distributions................................................... 8,459,313 199,041,548 89,801,360 4,084,131
Shares issued in acquisition of Evergreen Balanced Fund II....... 0 214,923,155 0 0
Shares issued in acquisition of Keystone Balanced Fund II........ 0 0 8,490,928 0
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
capital share transactions..................................... 70,096,696 257,152,659 490,577,568 200,417,015
- -------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets................................... 103,432,953 271,758,398 986,536,765 228,226,591
NET ASSETS
Beginning of year................................................ 130,386,389 1,625,395,343 1,654,690,847 74,274,649
- -------------------------------------------------------------------------------------------------------------------------------
END OF YEAR...................................................... $233,819,342 $1,897,153,741 $2,641,227,612 $302,501,240
- -------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income.............................. $ 235,752 $ 2,779,889 $ (35,481) $ 17,451
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* For the nine-month period ended March 31, 1998. Balanced Fund changed its
fiscal year end from June 30 to March 31, effective March 31, 1998.
See Combined Notes to Financial Statements.
56
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Balanced Funds
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended June 30, 1997
<TABLE>
<CAPTION>
BALANCED
FUND
- -------------------------------------------------------------------------------
<S> <C>
OPERATIONS
Net investment income......................................... $ 38,677,977
Net realized gains on securities, futures contracts and
foreign currency related transactions........................ 120,987,282
Net change in unrealized gains on securities and foreign
currency related transactions................................ 146,568,036
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations......... 306,233,295
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income
Class B...................................................... (38,660,044)
From net realized gains
Class B...................................................... (57,571,132)
- -------------------------------------------------------------------------------
Total distributions to shareholders.......................... (96,231,176)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold..................................... 200,987,044
Payment for shares redeemed................................... (351,020,484)
Net asset value of shares issued in reinvestment of
distributions................................................ 84,249,628
- -------------------------------------------------------------------------------
Net decrease in net assets resulting from capital share
transactions................................................ (65,783,812)
- -------------------------------------------------------------------------------
Total increase in net assets................................ 144,218,307
NET ASSETS
Beginning of year............................................. 1,481,177,036
- -------------------------------------------------------------------------------
END OF YEAR................................................... $1,625,395,343
- -------------------------------------------------------------------------------
Undistributed net investment income........................... $ 3,239,562
- -------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
57
<PAGE>
[GRAPHIC APPEARS HERE]
COMBINED NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Evergreen Balanced Funds consist of Evergreen American Retirement Fund
("American Retirement Fund"), Evergreen Balanced Fund ("Balanced Fund"),
Evergreen Foundation Fund ("Foundation Fund"), and Evergreen Tax Strategic
Foundation Fund ("Tax Strategic Fund"), which are collectively referred to
herein as the "Funds". Each of the Funds is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified, open-end
management investment company. Each Fund is a diversified series of the
Evergreen Equity Trust, a Delaware Business Trust organized on September 18,
1997.
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 a higher ongoing distribution
fee than Class A. Class B shares are sold subject to a contingent deferred sales
charge that is payable upon redemption and decreases depending on how long the
shares have been held. Class B shares purchased after January 1, 1997 will
automatically convert to Class A shares after seven years. Class B shares
purchased prior to January 1, 1997 retain their existing conversion rights.
Class C shares are sold subject to a contingent deferred sales charge payable on
shares redeemed within one year after the month of purchase. Class Y shares are
sold at net asset value and are not subject to contingent deferred sales charges
or distribution fees. Class Y shares are sold only to investment advisory
clients of First Union and its affiliates, certain institutional investors or
Class Y shareholders of record of certain other funds managed by First Union
Corporation ("First Union") and its affiliates as of December 30, 1994.
2. REORGANIZATION OF EVERGREEN BALANCED FUND
The Fund was formed for the purpose of combining the net assets of the Evergreen
Balanced II Fund (the "Evergreen Fund"), formerly the Evergreen Balanced Fund,
and the net assets of the Keystone Balanced Fund (the "Keystone Fund"), formerly
Keystone Balanced Fund K-1, through the Fund's acquisition of the net assets of
the Evergreen Fund and Keystone Fund.
On January 21, 1998, Prior to the Fund's acquisition of the Evergreen Fund's
net assets, the Evergreen Fund transferred substantially all of its net assets
related to its Class Y shares to an Evergreen Select Balanced Fund, an institu-
tional balanced fund, through a redemption-in-kind in the amount of
$737,248,788.
On January 23, 1998, the Fund acquired all of the remaining assets and certain
identified liabilities of the Evergreen Fund in exchange for Class A, Class B
Class C and Class Y shares of the Fund. Also, the Fund acquired all of the
assets and certain liabilities of the Keystone Fund in exchange for Class A,
Class B and Class C shares of the Fund. These acquisitions were accomplished
through tax-free exchanges of the respective shares of the Funds. The value of
net assets acquired, number of shares issued and unrealized appreciation
acquired were as follows:
<TABLE>
<CAPTION>
Value of Net Number of Unrealized
Acquired Fund Assets Acquired Shares Issued Appreciation
---------------------------------------------------------------
<S> <C> <C> <C>
Evergreen Fund...... $ 214,923,156 17,901,009 $ 17,787,797
Keystone Fund....... $1,616,348,537 134,623,096 $494,838,638
</TABLE>
The net assets of the Fund immediately after the acquisition were
$1,831,271,693.
Prior to the acquisition, the Keystone Fund added three classes of shares
designated as Class A and Class C and designated its existing class of shares as
Class B. Shareholders of the Keystone Fund who, on January 16, 1998, held Class
B shares purchased before January 1, 1995 and certain other non-commissionable
Class B shares had such shares converted to Class A shares having an aggregate
value equal to that of the shareholder's Class B shares prior to the conversion.
At the conclusion of the Fund's acquisition of the net assets of the Evergreen
Fund and Keystone Fund, the surviving records of the Fund for accounting and
performance purposes is the Keystone Fund and for taxation purposes is the
Evergreen Fund.
58
<PAGE>
[GRAPHIC APPEARS HERE]
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
3. ACQUISITIONS
Effective at the close of business on July 24, 1998, Foundation Fund acquired
the net assets of CoreFunds, Inc. Balanced Fund, 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 321,554, 49,982,
and 581,209 Class A, Class B and Class Y shares, respectively, of Foundation
Fund. The acquired net assets consisted primarily of portfolio securities with
unrealized appreciation of $29,739,766. The aggregate net assets of CoreFunds
Inc. Balanced Fund and Foundation Fund immediately prior to the acquisition were
$140,187,273 and $2,783,885,610, respectively. The aggregate net assets of
Foundation Fund immediately after the acquisition were $2,924,072,883.
Effective at the close of business on July 17, 1997, Foundation Fund 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 Fund. The
acquired net assets consisted primarily of portfolio securities with unrealized
appreciation of $1,216,239. The aggregate net assets of Keystone Balanced Fund
II and Foundation Fund immediately prior to the acquisition were $8,490,928 and
$1,984,767,050, respectively. The aggregate net assets of Foundation Fund
immediately after the acquisition were $1,993,257,978.
4. 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
price. U.S. government obligations held by the Funds are valued at the mean
between the over-the-counter bid and asked prices. Corporate bonds, other fixed-
income securities, and mortgage and other asset-backed securities are valued at
prices provided by an independent pricing service. In determining value for
normal institutional-size transactions, the pricing service uses methods based
on market transactions for comparable securities and analysis of various
relationships between similar securities which are generally recognized by
institutional traders. Securities for which valuations are not available from an
independent pricing service, including restricted securities, are valued at fair
value as determined in good faith according to procedures established by the
Board of Trustees. Short-term investments with remaining maturities of 60 days
or less are carried at amortized cost, which approximates market value.
B. REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held by the custodian on the Fund's behalf. Each
Fund monitors the adequacy of the collateral daily and will require the seller
to provide additional collateral in the event the market value of the securities
pledged falls below the carrying value of the repurchase agreement, including
accrued interest. Each Fund will only enter into repurchase agreements with
banks and other financial institutions which are deemed by the investment
adviser to be creditworthy pursuant to guidelines established by the Board of
Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange Commission,
Balanced Fund, along with certain other funds managed by Evergreen Investment
Management Company ("EIMCO"), a subsidiary of First Union, formerly Keystone
Investment Management Company may transfer uninvested cash balances
59
<PAGE>
[GRAPHIC APPEARS HERE]
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
into a joint trading account. These balances are invested in one or more
repurchase agreements that are fully collateralized by U.S. Treasury and/or
federal agency obligations.
C. REVERSE REPURCHASE AGREEMENTS
To obtain short-term financing, the Funds may enter into reverse repurchase
agreements with qualified third-party broker-dealers. Interest on the value of
reverse repurchase agreements is based upon competitive market rates at the
time of issuance. At the time a Fund enters into a reverse repurchase agreement,
it will establish and maintain a segregated account with the custodian
containing qualifying assets having a value not less than the repurchase price,
including accrued interest. If the counterparty to the transaction is rendered
insolvent, the ultimate realization of the securities to be repurchased by the
Fund may be delayed or limited.
D. FOREIGN CURRENCY
The books and records of the Funds are maintained in United States (U.S.)
dollars. Foreign currency amounts are translated into U.S. dollars as follows:
market value of investments, assets and liabilities at the daily rate of
exchange; purchases and sales of investments, income and expenses at the rate of
exchange prevailing on the respective dates of such transactions. Net unrealized
foreign exchange gain or loss resulting from changes in foreign currency
exchange rates is a component of net unrealized gains or losses on securities
and foreign currency related transactions. Net realized foreign currency gains
and losses resulting from changes in exchange rates include: foreign currency
gains and losses between trade date and settlement date on investment
securities, foreign currency related transactions and the difference between the
amounts of interest and dividends recorded on the books of the Funds and the
amounts actually received. Such gains and losses are included in realized gains
or losses on foreign currency related transactions. The portion of foreign
currency gains and losses related to fluctuations in exchange rates between the
initial purchase trade date and subsequent sale trade date is included in
realized gains or losses on securities transactions.
E. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Funds may enter into forward foreign currency exchange contracts ("forward
contracts") to settle portfolio purchases and sales of securities denominated in
a foreign currency and to hedge certain foreign currency assets or liabilities.
Forward contracts are recorded at the forward rate and marked-to-market daily.
Realized gains and losses arising from such transactions are included in net
realized gains or losses on foreign currency related transactions. The Fund
bears the risk of an unfavorable change in the foreign currency exchange rate
underlying the forward contract and is subject to the credit risk that the other
party will not fulfill their obligations under the contract. Forward contracts
involve elements of market risk in excess of the amount reflected in the
statements of assets and liabilities.
F. FUTURES CONTRACTS
In order to gain exposure to or protect against changes in security values, the
Funds may buy and sell futures contracts.
The initial margin deposited with a broker when entering into a futures trans-
action is subsequently adjusted by daily payments or receipts as the value of
the contract changes. Such changes are recorded as unrealized gains or losses.
Realized gains or losses are recognized on closing the contract.
Risks of entering into futures contracts include (i) the possibility of an
illiquid market for the contract, (ii) the possibility that a change in the
value of the contract may not correlate with changes in the value of the
underlying instrument or index, and (iii) the credit risk that the other party
will not fulfill their obligations under the contract. Futures contracts also
involve elements of market risk in excess of the amount reflected in the
statement of assets and liabilities.
G. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums. Dividend income is recorded on the
ex-dividend date or in the case of some foreign securities, on the date
thereafter when the Fund is made aware of the dividend.
60
<PAGE>
[GRAPHIC APPEARS HERE]
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
Foreign income may be subject to foreign withholding taxes which are accrued as
applicable. Capital gains realized on some foreign securities may be subject to
foreign taxes and are accrued as applicable.
H. FEDERAL TAXES
The Funds intend to continue to qualify as regulated investment companies under
the Internal Revenue Code of 1986, as amended (the "Code"). As such, the Funds
will not incur any federal income tax liability since they are expected to
distribute all of their net investment company taxable income and net realized
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 income taxes is required. To the extent
that realized capital gains can be offset by capital loss carryforwards, it is
each Fund's policy not to distribute such gains.
I. 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.
Certain distributions paid during previous years have been reclassified to
conform with current year presentation.
J. CLASS ALLOCATIONS
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the relative
net assets of each class. Currently, class specific expenses are limited to
expenses incurred under the Distribution Plans for each class.
K. ORGANIZATION EXPENSES
Organization expenses are amortized to operations over a five-year period on a
straight-line basis. In the event any of the initial shares of the Funds 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.
61
<PAGE>
[GRAPHIC APPEARS HERE]
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
5. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest authorized
with a $0.001 par value. 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:
American Retirement Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1998 March 31, 1998
----------------------- -----------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold................. 302,817 $ 4,972,502 776,394 $ 11,977,023
Shares redeemed............. (180,661) (2,835,734) (175,621) (2,728,081)
Shares issued in
reinvestment of
distributions.............. 29,241 453,508 73,985 1,168,200
- ------------------------------------------------------------------------------
Net increase................ 151,397 2,590,276 674,758 10,417,142
- ------------------------------------------------------------------------------
CLASS B
Shares sold................. 1,568,602 25,374,800 4,220,724 64,924,905
Shares redeemed............. (725,496) (11,337,581) (651,898) (10,105,217)
Shares issued in
reinvestment of
distributions.............. 122,619 1,890,753 340,081 5,338,212
- ------------------------------------------------------------------------------
Net increase................ 965,725 15,927,972 3,908,907 60,157,900
- ------------------------------------------------------------------------------
CLASS C
Shares sold................. 50,884 839,326 80,905 1,241,277
Shares redeemed............. (56,317) (902,957) (49,433) (711,589)
Shares issued in
reinvestment of
distributions.............. 1,952 30,200 6,217 97,713
- ------------------------------------------------------------------------------
Net increase (decrease)..... (3,481) (33,431) 37,689 627,401
- ------------------------------------------------------------------------------
CLASS Y
Shares sold................. 110,417 1,773,071 542,883 8,448,058
Shares redeemed............. (342,042) (5,355,224) (749,260) (11,408,993)
Shares issued in
reinvestment of
distributions.............. 37,567 583,361 117,732 1,855,188
- ------------------------------------------------------------------------------
Net decrease................ (194,058) (2,998,792) (88,645) (1,105,747)
- ------------------------------------------------------------------------------
Net increase................ $ 15,486,025 $ 70,096,696
- ------------------------------------------------------------------------------
</TABLE>
62
<PAGE>
[GRAPHIC APPEARS HERE]
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
- --------------------------------------------------------------------------------
Balanced Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended Year Ended
September 30, 1998 March 31, 1998* June 30, 1997
------------------------- ---------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold............. 1,216,462 $ 15,512,803 740,667 $ 9,401,463 0 $ 0
Shares redeemed......... (9,377,671) (119,515,496) (4,919,924) (61,467,813) 0 0
Shares issued in
reinvestment of
distributions.......... 1,321,725 16,749,452 2,175,164 26,275,982 0 0
Automatic conversion of
Class B shares to Class
A shares............... 0 0 97,487,277 1,205,409,703 0 0
Shares issued in
acquisition of
Evergreen Balance Fund
II..................... 0 0 3,807,586 45,716,406 0 0
- --------------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (6,839,484) (87,253,241) 99,290,770 1,225,335,741 0 0
- --------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold............. 2,431,087 30,995,280 8,761,830 111,415,080 16,959,452 200,987,044
Shares redeemed......... (4,954,969) (62,953,257) (15,656,468) (202,986,801) (29,517,723) (351,020,484)
Shares issued in
reinvestment of
distributions.......... 545,647 6,926,238 13,954,804 172,765,442 7,405,182 84,249,628
Automatic conversion of
Class B shares to Class
A shares............... 0 0 (97,487,277) (1,205,409,703) 0 0
Shares issued in
acquisition of
Evergreen Balance Fund
II..................... 0 0 9,896,507 118,815,736 0 0
- --------------------------------------------------------------------------------------------------------------
Net decrease............ (1,978,235) (25,031,739) (80,530,604) (1,005,400,246) (5,153,089) (65,783,812)
- --------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold............. 74,909 957,596 21,656 270,797 0 0
Shares redeemed......... (22,150) (282,432) (1,672) (21,003) 0 0
Shares issued in
reinvestment of
distributions.......... 1,353 17,136 10 124 0 0
Shares issued in
acquisition of
Evergreen Balance Fund
II..................... 0 0 44,378 532,825 0 0
- --------------------------------------------------------------------------------------------------------------
Net increase............ 54,112 692,300 64,372 782,743 0 0
- --------------------------------------------------------------------------------------------------------------
CLASS Y
Shares sold............. 168,457 2,153,115 65,370 816,075 0 0
Shares redeemed......... (485,419) (6,204,855) (1,167,179) (14,239,843) 0 0
Shares issued in
reinvestment of
distributions.......... 18,023 228,306 0 0 0 0
Shares issued in
acquisition of
Evergreen Balance Fund
II..................... 0 0 4,152,538 49,858,189 0 0
- --------------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (298,939) (3,823,434) 3,050,729 36,434,421 0 0
- --------------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. $(115,416,114) $ 257,152,659 $ (65,783,812)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 1998.
63
<PAGE>
[GRAPHIC APPEARS HERE]
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
- --------------------------------------------------------------------------------
Foundation Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1998 March 31, 1998
------------------------ -------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold.............. 3,111,353 $ 63,063,041 5,521,670 $ 103,759,687
Shares redeemed.......... (3,019,104) (61,130,009) (2,914,232) (53,799,294)
Shares issued in
reinvestment of
distributions........... 173,723 3,475,639 689,871 12,869,510
Shares issued in
acquisition of
CoreFunds, Inc. Balance
Fund.................... 321,554 6,566,182 0 0
Shares issued in
acquisition of Keystone
Balance Fund II......... 0 0 111,203 2,040,162
- ------------------------------------------------------------------------------
Net increase............. 587,526 11,974,853 3,408,512 64,870,065
- ------------------------------------------------------------------------------
CLASS B
Shares sold.............. 11,476,108 231,635,742 19,625,977 367,905,222
Shares redeemed.......... (3,606,952) (71,733,837) (4,438,949) (81,802,033)
Shares issued in
reinvestment of
distributions........... 393,109 7,835,234 1,744,118 32,347,483
Shares issued in
acquisition of
CoreFunds, Inc. Balance
Fund.................... 49,982 1,015,265 0 0
Shares issued in
acquisition of Keystone
Balance Fund II......... 0 0 316,984 5,790,704
- ------------------------------------------------------------------------------
Net increase............. 8,312,247 168,752,404 17,248,130 324,241,376
- ------------------------------------------------------------------------------
CLASS C
Shares sold.............. 820,689 16,571,727 1,016,989 19,227,162
Shares redeemed.......... (277,338) (5,542,917) (405,258) (7,403,302)
Shares issued in
reinvestment of
distributions........... 17,804 354,722 74,186 1,375,625
Shares issued in
acquisition of Keystone
Balance Fund II......... 0 0 36,146 660,062
- ------------------------------------------------------------------------------
Net increase............. 561,155 11,383,532 722,063 13,859,547
- ------------------------------------------------------------------------------
CLASS Y
Shares sold.............. 4,017,765 80,698,427 10,695,459 200,948,807
Shares redeemed.......... (4,882,305) (98,327,952) (8,434,531) (156,550,969)
Shares issued in
reinvestment of
distributions........... 581,209 11,625,249 2,313,662 43,208,742
Shares issued in
acquisition of
CoreFunds, Inc. Balance
Fund.................... 6,470,202 132,251,104 0 0
- ------------------------------------------------------------------------------
Net increase............. 6,186,871 126,246,828 4,574,590 87,606,580
- ------------------------------------------------------------------------------
Net increase............. $318,357,617 $ 490,577,568
- ------------------------------------------------------------------------------
Tax Strategic Fund
<CAPTION>
Six Months Ended Year Ended
September 30, 1998 March 31, 1998
------------------------ -------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold.............. 1,634,800 $ 26,463,887 3,458,299 $ 53,040,118
Shares redeemed.......... (473,234) (7,492,512) (371,701) (5,726,480)
Shares issued in
reinvestment of
distributions........... 53,905 848,665 77,658 1,200,787
- ------------------------------------------------------------------------------
Net increase............. 1,215,471 19,820,040 3,164,256 48,514,425
- ------------------------------------------------------------------------------
CLASS B
Shares sold.............. 4,358,389 70,121,082 8,736,220 134,105,426
Shares redeemed.......... (756,365) (11,906,358) (423,863) (6,502,615)
Shares issued in
reinvestment of
distributions........... 99,669 1,567,282 154,897 2,385,102
- ------------------------------------------------------------------------------
Net increase............. 3,701,693 59,782,006 8,467,254 129,987,913
- ------------------------------------------------------------------------------
CLASS C
Shares sold.............. 1,087,822 17,475,503 1,515,720 23,364,146
Shares redeemed.......... (207,097) (3,261,476) (212,250) (3,128,629)
Shares issued in
reinvestment of
distributions........... 16,558 259,796 19,807 305,243
- ------------------------------------------------------------------------------
Net increase............. 897,283 14,473,823 1,323,277 20,540,760
- ------------------------------------------------------------------------------
CLASS Y
Shares sold.............. 310,174 4,986,172 105,640 1,623,522
Shares redeemed.......... (80,145) (1,287,557) (29,733) (442,604)
Shares issued in
reinvestment of
distributions........... 6,176 97,145 12,558 192,999
- ------------------------------------------------------------------------------
Net increase............. 236,205 3,795,760 88,465 1,373,917
- ------------------------------------------------------------------------------
Net increase............. $ 97,871,629 $ 200,417,015
- ------------------------------------------------------------------------------
</TABLE>
64
<PAGE>
[GRAPHIC APPEARS HERE]
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
6. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments, were as follows for the six months ended September 30,
1998:
U.S. Government Non-U.S. Government
----------------------- -------------------------
Cost of Proceeds Cost of Proceeds
Purchases from Sales Purchases from Sales
-------------------------------------------------
American Retirement Fund..... $19,044,794 $14,500,000 $ 41,435,950 $ 31,150,749
Balanced Fund................ 6,206,758 27,183,040 691,305,939 829,791,698
Foundation Fund.............. 20,974,750 6,110,183 255,655,290 83,658,020
Tax Strategic Fund........... 581,112 0 240,318,999 126,206,814
On July 24, 1998, Foundation acquired $27,013,910 and $73,647,101 of U.S.
Government and non-U.S. Government securities, respectively, at cost, from the
Fund's acquisition of CoreFund Inc. Balanced Fund.
7. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly-owned subsidiary of The BISYS
Group Inc. ("BISYS") serves as principal underwriter to the Funds.
Each Fund has adopted Distribution Plans for each class of shares as allowed by
Rule 12b-1 of the 1940 Act. Distribution plans permit the fund to reimburse its
principal underwriter for costs related to selling shares of the fund and for
various other services. These costs, which consist primarily of commissions and
services fees to broker-dealers who sell shares of the fund, are paid by
shareholders through expenses called "Distribution Plan expenses". Each class,
except Class Y, currently pays a service fee equal to 0.25% of the average daily
net asset of the class. 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. With respect to Class B and
Class C shares, the principal underwriter may pay 12b-1 fees greater than the
allowable annual amounts the Funds are permitted to pay. The Funds may reimburse
the principal underwriter for such excess amounts in later years with annual
interest at the prime rate plus 1.00%.
During the six-months ended September 30, 1998, amounts paid to EDI and/or its
predecessor pursuant to each Fund's Class A, Class B and Class C Distribution
Plans were as follows:
Class A Class B Class C
------------------------------
American Retirement Fund........ $ 37,503 $ 813,234 $ 14,084
Balanced Fund................... 1,523,648 2,813,780 5,804
Foundation Fund................. 436,052 6,055,501 279,914
Tax Strategic Fund.............. 102,115 1,087,141 181,373
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.
Contingent deferred sales charges paid by redeeming shareholders are paid to
EDI or its predecessor.
8. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED
TRANSACTIONS
Pursuant to an agreement with American Retirement Fund's, Foundation Fund's and
Tax Strategic Fund's investment adviser, Evergreen Asset Management Corp.
("EAMC"), a wholly owned subsidiary of First Union, is entitled to an annual
fee based on each of American Retirement Fund's, Foundation Fund's and Tax
Strategic Fund's average daily net assets, respectively, in accordance with the
following schedules:
Foundation Fund and American
Tax Strategic Fund Retirement Fund
------------------------ -----------------------
First $750 million0.875% First $750 million0.75%
Next $250 million 0.750% Over $250 million 0.70%
Over $1 billion 0.700%
65
<PAGE>
[GRAPHIC APPEARS HERE]
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
Lieber & Company, an affiliate of First Union, is the investment sub-advisor to
American Retirement Fund, Foundation Fund and Tax Strategic Fund. Lieber &
Company provides these services at no additional cost to the Funds.
EIMCO is the investment adviser for Balanced Fund. In return for providing
investment management and administrative services to Balanced Fund, the Fund
pays EIMCO a management fee that is calculated daily and paid monthly. The
management fee is computed at an annual rate of 1.50% of Balanced Fund's gross
investment income plus an amount determined by applying percentage rates
starting at 0.60% and declining to 0.30% per annum as net assets increase, to
the average daily net asset value of the Fund.
Evergreen Investment Services ("EIS"), a subsidiary of First Union, and BISYS
Fund Services ("BISYS") provide Administrative and Sub-Administrative services
to the Funds at no cost to the Funds. Balanced Fund reimbursed EIMCO for certain
administrative and accounting expenses amounting to $132,149 for the period
ended September 30, 1998.
Lieber & Company also provides brokerage services to American Retirement Fund,
Foundation Fund, and Tax Strategic Fund with respect to substantially all
security transactions effected on the New York or American Stock Exchanges. For
the six months ended September 30, 1998, American Retirement Fund, Foundation
Fund and Tax Strategic Fund incurred the following brokerage commissions with
Lieber & Company:
<TABLE>
<S> <C>
American Retirement Fund................................ $ 73,666
Foundation Fund......................................... 361,187
Tax Strategic Fund...................................... 156,918
</TABLE>
Evergreen Service Company ("ESC"), an indirect, wholly-owned subsidiary of First
Union, serves as the transfer and dividend disbursing agent for the Funds. The
Funds have entered into an expense offset arrangement with ESC, relating to
certain cash balances held at First Union for the benefit of the Evergreen
Funds.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
9. 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.
10. DEFERRED TRUSTEES' FEES
Each Independent Trustee of American Retirement Fund, Balanced Fund, Foundation
Fund and Tax Strategic Fund 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
each Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in each Funds' Trustees' fees and
expenses. Trustees will be paid either in one lump sum or in quarterly
installments for up to ten years at their election, not earlier than either the
year in which the Trustee ceases to be a member of the Board of Trustees or
January 1, 2000. As of September 30, 1998, the value of the Trustees deferral
account for American Retirement Fund, Balanced Fund, Foundation Fund, and Tax
Strategic Fund was $17,716, $87,452, $41,575 and $8,066.
11. FINANCING AGREEMENT
On December 22, 1997, a financing agreement among all of the Evergreen Funds,
State Street Bank and Trust ("State Street") and a group of Banks became
effective. Under this agreement, the Banks provide an unsecured credit facility
in the aggregate amount of $400 million ($275 million committed and $125 million
uncommitted). The credit facility is allocated, under the terms of the financing
agreement, among the Banks. The credit facility is to be accessed by the Funds
for temporary or emergency purposes only and is subject to each Fund's borrowing
restrictions. Borrowings under this facility bear interest at 0.50% per annum
above the Federal Funds rate. A commitment fee of 0.065% per annum will be
incurred on the unused portion of the
66
<PAGE>
[GRAPHIC APPEARS HERE]
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
committed facility, which will be allocated to all Funds. State Street serves
as administrative agent for the Banks, and as administrative agent is entitled
to a fee of $20,000 per annum which is allocated to all of the Funds.
During the six months ended September 30, 1998, the Funds had no significant
borrowings under these agreements.
OTHER INFORMATION
YEAR 2000
Like other investment companies, the Funds could be adversely affected if the
computer systems used by the Funds' investment advisers and the Funds' other
service providers are not able to perform their intended functions effectively
after 1999 because of the inability of computer software to distinguish the year
2000 from the year 1900. The Funds' investment advisers are taking steps to
address this potential year 2000 problem with respect to the computer systems
that they use and to obtain satisfactory assurances that comparable steps are
being taken by the Funds' other major service providers. At this time, however,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Funds from this problem.
67
<PAGE>
Evergreen Funds
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Tax Free Fund
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Income
Capital Preservation and Income Fund
Short Intermediate Bond Fund
Intermediate Term Government Securities Fund
Intermediate Term Bond Fund
U.S. Government Fund
Diversified Bond Fund
Strategic Income Fund
High Yield Bond Fund
Balanced
American Retirement Fund
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund
Growth & Income
Utility Fund
Income and Growth Fund
Fund for Total Return
Value Fund
Blue Chip Fund
Growth and Income Fund
Small Cap Equity Income Fund
Domestic Growth
Tax Strategic Equity Fund
Strategic Growth Fund
Stock Selector Fund
Evergreen Fund
Omega Fund
Small Company Growth Fund
Aggressive Growth Fund
Micro Cap Fund
Global International
Global Leaders Fund
International Growth Fund
Global Opportunities Fund
Precious Metals Fund
Emerging Markets Growth Fund
Latin America Fund
Express Line
800.346.3858
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800.343.2898
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800.247.4075
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