<PAGE>
Evergreen
Balanced
Funds
March 31, 1998
Annual Report
(picture of two businessmen shaking
hands)
(Evergreen Funds(SM) logo appears here)
<PAGE>
Table of Contents
<TABLE>
<S> <C>
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 ............................ 10
Portfolio Manager Interview ................. 11
Evergreen Tax Strategic Foundation
Fund
Fund at a Glance ............................ 14
Portfolio Manager Interview ................. 15
</TABLE>
<TABLE>
<S> <C>
Financial Highlights
Evergreen American Retirement Fund .......... 18
Evergreen Balanced Fund ..................... 21
Evergreen Foundation Fund ................... 24
Evergreen Tax Strategic Foundation Fund ..... 27
Schedules of Investments
Evergreen American Retirement Fund .......... 29
Evergreen Balanced Fund ..................... 34
Evergreen Foundation Fund ................... 40
Evergreen Tax Strategic Foundation Fund ..... 45
Statements of Assets and Liabilities ........... 52
Statements of Operations ....................... 53
Statements of Changes in Net Assets ............ 54
Combined Notes to Financial
Statements .................................... 57
Independent Auditors' Report:
KPMG Peat Marwick LLP ....................... 65
Additional Information ......................... 66
</TABLE>
- --------------------------------------------------------------------------------
Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies
with more than $47 billion in assets under management.
With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broader range of quality investment products
and services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This annual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
<TABLE>
<S> <C>
Mutual Funds: ARE NOT FDIC INSURED May lose value o Are not bank guaranteed
</TABLE>
Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
Copyright 1998.
<PAGE>
Letter to Shareholders
May 1998
Dear Shareholders:
(picture of Wiiliam M. Ennis The Evergreen Balanced Funds enjoyed an
appears here) exceptional year during the 12-month period
that ended on March 31, 1998, each
delivering healthy returns, consistent with
the goals and strategies of each portfolio.
Each fund has been designed for a specific
William M. Ennis investor need, with its own distinct
Managing Director strategy and risk profile.
Over the full 12 months, the funds and the financial markets weathered some
significant short-term volatility, including the onset of a currency and
financial crisis in Asia that contributed to a significant stock market
correction in October 1997. Over the full 12 months, however, both the domestic
stock and bond markets overcame short-term worries to post exceptional returns.
The Standard & Poor's 500 Index had a return of 48% for the 12 months. Bonds
also had above-average performance, although certainly not as spectacular as
the stock market. To illustrate, the Lehman Aggregate Bond Index had a return
of 11.99% for the 12 months.
Balanced Strategies
It is not common for both the stock and bond markets to post strong relative
returns at the same time. For that reason, the Evergreen Balanced Funds were
designed to have the ability to take advantage of different
investment opportunities and to reduce overall portfolio risk by pursuing
diversified strategies.
We believe these balanced strategies have a place in the portfolios of most
investors, particularly for the longer-term investor who plans to follow a
consistent, diversified strategy through the ups and downs of market cycles.
Evergreen Funds
At Evergreen Funds, we are committed to providing a broad array of funds with
complementary objectives and strategies to help investors and their financial
advisors assemble personal portfolios that make sense for their needs and risk
tolerances. We recommend shareholders periodically review their portfolios with
professional investment advisors to make sure their allocations continue to be
in line with their financial plans.
If you have any questions about the Evergreen Balanced Funds or other Evergreen
Funds, we encourage you to consult your financial advisor or call us at
800-343-2898.
Sincerely,
/s/ William M. Ennis
William M. Ennis
Managing Director
Evergreen Funds
1
<PAGE>
EVERGREEN
American Retirement Fund
Fund at a Glance as of March 31, 1998
We manage the Fund to participate in the growth opportunities in the stock
market, while seeking to protect investors' principal and avoid taking too much
risk.
Portfolio
Management
- ----------------------------------------
(Photo of Irene D. O'Neill)
Irene D. O'Neill, CFA
Tenure: March 1988
-------------------------------------------------------
CURRENT INVESTMENT STYLE
(Graphic appears Morningstar's Style Box is based on a portfolio date as
here) of 3/31/98.
(Graphic appears The Equity Style Box placement is based on a fund's
here) 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.
The Fixed-Income Style Box placement is based on a fund's
average effective maturity or duration and the average
credit rating of the bond portfolio.
Source: 1998 Morningstar, Inc.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Inception Date 1/3/95 1/3/95 1/3/95 3/14/88
Average Annual Returns
One year with sales charge 21.94% 22.06% 26.08% n/a
One year w/o sales charge 28.02% 27.06% 27.08% 28.34%
3 years 17.39% 17.68% 18.42% 19.51%
5 years - - - 13.59%
10 years - - - 12.25%
Since Inception 18.07% 18.32% 18.97% 12.18%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC Yield 3.30% 2.72% 2.72% 3.71%
12-month income dividends
per share $ 0.48 $ 0.36 $ 0.36 $ 0.52
12-month capital gain
distributions per share $ 0.34 $ 0.34 $ 0.34 $ 0.34
</TABLE>
*Adjusted for maximum sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
(Chart appears here. See the table below for plot points.)
<TABLE>
<CAPTION>
1/95 3/95 9/95 3/96 9/96 3/97 9/97 3/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares 9,525 10,099 11,362 12,294 12,740 13,390 15,903 17,140
Consumer Price
Index (CPI) 10,000 10,113 10,234 10,389 10,541 10,688 10,768 10,835
Lehman Brothers
Government/Corporate
Bond Index 10,000 10,498 11,393 11,645 11,906 12,164 13,048 13,673
Wilshire 5000 10,000 10,906 13,014 14,415 15,476 16,651 21,362 26,405
</TABLE>
Comparison of a $10,000 investment in Evergreen American Retirement Fund, Class
A shares, versus a similar investment in the Wilshire 5000 Index, the Lehman
Brothers Government/Corporate Bond Index, and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. The Wilshire 5000 Index and the Lehman Brothers
Government/Corporate Bond Index are unmanaged indices. These indices do not
include transaction costs associated with buying and selling securities nor any
management fees. The Consumer Price Index, a measure of inflation, is through
March 31, 1998.
2
<PAGE>
EVERGREEN
American Retirement Fund
Portfolio Manager Interview
- --------------------------------------------------------------------------------
How did the Fund perform during the
year?
The Fund had very good performance. For the 12 months ended March 31,
1998, the Fund's Class A shares had a total return of 28.02%, while B and
C shares had returns of 27.06% and 27.08%, respectively. The Fund's Class
Y shares had a total return of 28.34% for the 12 months. These returns are
unadjusted for any applicable
sales charges.
Portfolio Characteristics
Total Net Assets $233,819,342
Number of Holdings 184
Beta 0.48
P/E Ratio 16.5x
- --------------------------------------------------------------------------------
What was the investment environment like during the 12 months, and how did
that affect strategy?
Clearly, over the 12-month period, we had strong markets in both stocks
and bonds. The Asian financial and currency crisis caused a great deal of
turmoil in the stock market during the fourth quarter of 1997. After the
end of the year, however, the tone of the market changed and the growth
stocks that had led the market for most of 1997 took over again. In
general, the large-capitalization, low-yielding stocks of companies like
General Electric, IBM and the growth stocks selling at high multiples of
earnings outperformed the value stocks on which we focus.
We remained true to our long-term strategy, emphasizing the stocks of
undervalued, higher-yielding companies as well as convertible preferred
stocks and bonds. The fixed-income strategy focuses on high quality issues
that add stability to the portfolio. We manage the Fund to participate in
the growth opportunities in the stock market, while seeking to protect
investors' principal and avoid taking too much risk.
At the end of the fiscal year on March 31, 1998, 44% of the Fund's assets
were invested in common stocks, 27.2% in convertible securities, and 26.8%
in bonds, with the remainder in cash.
- --------------------------------------------------------------------------------
ASSET ALLOCATION AS OF MARCH 31, 1998
(Pie chart appears with the following values.)
Common Stocks--44.0%
Fixed Income--26.8%
Convertible Preferred Stocks--16.7%
Convertible Debentures--10.5%
Cash/Cash Equivalents--2.0%
- --------------------------------------------------------------------------------
What were your primary strategies during
the year?
We continued to invest in convertible securities as a way to participate
in growth opportunities while also receiving income and reducing overall
volatility. In particular, we invested in a number of companies that
issued convertible stocks or bonds as a means of raising capital to make
acquisitions to drive stronger earnings growth. Four investments that
illustrate this emphasis are: Ingersoll Rand, a heavy equipment
manufacturer; Pioneer Standard, a distributor of electronics and computer
equipment; EVI, a company involved in oil field services; and Family Golf
Centers, an operator of golf driving ranges.
We also invested in the common stocks of a number of companies that were
attempting to increase their earnings growth through restructurings. These
included J.C. Penney, the retailer; Echlin and Dana, two auto
3
<PAGE>
EVERGREEN
American Retirement Fund
Portfolio Manager Interview
parts companies; Stride Rite, a shoe company; and Union Pacific, the
railroad company. These were all companies that recognized the need to
improve their rate of earnings growth and are taking action to
achieve it.
Top 10 Equity Holdings
(as a percentage of net assets)
Central Garden & Pet Co. 1.4%
Family Golf Centers, Inc. 1.3%
Nabors Industries, Inc. 1.2%
Proffits, Inc. 1.1%
Pioneer Standard Financial Trust 1.1%
Carpenter Technology Corp. 1.0%
Shared Medical System Corp. 1.0%
Thomas & Betts Corp. 1.0%
Houston Industries, Inc. 1.0%
Equitable Companies, Inc. 0.9%
- --------------------------------------------------------------------------------
What was the best performing industry
for the Fund during the year?
Four industries stood out: broadcasting and entertainment; banks and
thrifts; healthcare; and retailing. The best performing group was
broadcasting and entertainment, particularly the stocks of radio and cable
television companies. In most cases, we owned the convertible security,
rather than the common stock. The best performing investment for the Fund,
however, was the common stock of Chancellor Media, a company that owns a
group of radio stations. This stock, which was originally purchased as a
convertible, was up 212.9% during the year. The entire group of radio
company stocks performed very well, benefiting from stable audience trends
and robust pricing power. Consolidation of station ownership has reduced
competition, thereby driving strong revenue and cash flow growth of the
stations.
In the same industry category, we owned the convertible securities of a
number of cable television companies, which performed well. Investors are
expecting these companies to enjoy faster revenue growth by offering
digital cable TV with expanded channel offerings and by raising prices.
These companies are also beginning to offer interactive services, such as
Internet access, which will drive future growth.
Industry Allocation-Equity
Banks 7.5%
Utilities - Electric 5.8%
Finance & Insurance 5.5%
Oil Field Services 5.1%
Publishing, Broadcasting & Entertainment 4.4%
- --------------------------------------------------------------------------------
What was responsible for the good
performance of banks and thrifts,
healthcare and retailing companies?
In banks and thrifts, we emphasized regional institutions benefiting from
a growing economy coupled with low inflation. These factors, combined with
low interest rates are supporting earnings for the industry by reducing
credit quality problems. These companies should continue to have good
earnings growth, reflecting improvements in their operational efficiencies
and modest loan growth. Stock prices of banks and thrifts also have been
rising because ongoing consolidation of the industry has been driving
valuations higher.
The healthcare industry also enjoyed double-digit sales and earnings
growth. Pharmaceutical stocks in particular performed very well, although
the best-performing stock within the group was Shared Medical Systems,
which provides information systems for hospitals and large healthcare
networks. This company is experiencing strong growth as healthcare
providers seek ways to cope with the pressures of managed care by reducing
costs.
The retailing industry was supported by strong gains in the disposable
income of consumers. Two companies in particular drove the performance of
this group:
J.C. Penney, the national department store chain; and
4
<PAGE>
EVERGREEN
American Retirement Fund
Portfolio Manager Interview
Proffitt's, a regional department store chain that is growing through
acquisitions.
It is interesting to note that all four of these industries - broadcasting
and entertainment, banks and thrifts, healthcare and retailing - were
relatively untouched by the market uncertainty brought on by the Asian
crisis.
Industry Allocation-Bonds
Government Agency Notes & Bonds 24.4%
Finance & Insurance 0.9%
Treasury Notes & Bonds 0.7%
Banks 0.4%
Telecommunication Services & Equipment 0.4%
- --------------------------------------------------------------------------------
Were there any disappointing areas?
The weakest area was energy, which we still believe has good long-term
prospects. The performance of this group was directly tied to the price of
crude oil, which started declining in the fall of 1997. The performance of
the entire energy industry was influenced by fear of expanding energy
supplies from OPEC combined with weaker energy demand caused by the Asian
crisis, and the mild winter in the United States related to the El Nino
effect.
We are optimistic, however, that energy prices will recover. Weather
effects are never permanent. Globally, demand for energy is growing at
about 2% a year and this should continue. As emerging economies work
through their current problems, demand will start increasing again. We
think that energy is one of the more undervalued areas in the stock market
today.
- --------------------------------------------------------------------------------
How is the fixed income portion of the
portfolio invested?
We continue to emphasize very high credit quality, with the great majority
of the bonds in U.S. government or agency securities. The average credit
quality is AAA. We also have kept average maturity relatively short. We
manage the fixed income portfolio to seek healthy yields while trying to
reduce the overall volatility of the portfolio by maintaining high credit
quality and short maturities.
Top 5 Bond Holdings
(as a percentage of net assets)
Federal National Mortgage Association 10.1%
Federal Home Loan Bank 9.4%
Federal Home Loan Mortgage Corp. 3.9%
U.S. Treasury Bond 0.7%
American General Finance Corp. 0.4%
- --------------------------------------------------------------------------------
What is your outlook?
We will continue to look for undervalued situations and good investment
opportunities we believe haven't been recognized by the market. The Fund
is managed conservatively, emphasizing companies with relatively higher
yields so that no matter what the market condition, the Fund will continue
to seek the stability we think shareholders expect.
5
<PAGE>
EVERGREEN
Balanced Fund
Fund at a Glance as of March 31, 1998
In the equity portion of the portfolio, we have emphasized large-
capitalization, dividend-paying stocks, consistent with our long-term strategy.
In the fixed income portion of the portfolio, we emphasized higher quality
bonds.
Portfolio
Management
----------------------------------------
(Photo of Walter McCormick)
Walter McCormick, CFA
Tenure: January 1984
-------------------------------------------------------
CURRENT INVESTMENT STYLE
(Graphic appears Morningstar's Style Box is based on a portfolio date as
here) of 3/31/98.
(Graphic appears The Equity Style Box placement is based on a fund's
here) 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.
The Fixed-Income Style Box placement is based on a fund's
average effective maturity or duration and the average
credit rating of the bond portfolio.
Source: 1998 Morningstar, Inc.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
<TABLE>
<CAPTION>
Class A** Class B Class C** Class Y**
<S> <C> <C> <C> <C>
Inception Date 1/20/98 9/11/35 1/22/98 1/26/98
Average Annual Returns
One year with sales charge - 21.77% - -
One year w/o sales charge - 26.77% - -
3 years - 19.91% - -
5 years - 13.24% - -
10 years - 12.29% - -
Since Inception 2.28% 8.55% 5.58% 7.79%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC yield 2.76% 2.16% 2.16% 3.15%
12-month income dividends
per share $ 0.12 $ 0.34 $ 0.09 $ 0.09
12-month capital gain
distributions per share $ 0.26 $ 1.59 $ 0.26 -
</TABLE>
*Adjusted for maximum sales charge.
**The Fund's Class A, C, and Y shares have new inception dates due to the
reorganization of the Keystone Balanced Fund and the Evergreen Balanced Fund
in January 1998.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
(Graph appears here. See the table below for the plot points.)
<TABLE>
<CAPTION>
3/88 3/90 3/92 3/94 3/96 3/98
<S> <C> <C> <C> <C> <C> <C>
Class B Shares 10,000 12,478 15,255 17,045 22,292 31,862
Consumer Price
Index (CPI) 10,000 11,047 11,957 12,635 13,350 13,923
Lehman Brothers
Government/Corporate
Bond Index 10,000 11,729 14,696 17,263 20,025 23,511
S&P 500 10,000 14,091 17,903 20,933 31,957 56,672
</TABLE>
Comparison of a $10,000 investment in Evergreen Balanced Fund, Class A shares,
versus a similar investment in the S & P 500 Index, the Lehman Brothers
Government/Corporate Bond Index, and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The S & P 500 Index and the Lehman Brothers
Government/Corporate Bond Index are unmanaged indices. These indices do not
include transaction costs associated with buying and selling securities nor any
management fees. The Consumer Price Index, a measure of inflation, is through
March 31, 1998.
6
<PAGE>
EVERGREEN
Balanced Fund
Portfolio Manager Interview
- --------------------------------------------------------------------------------
How did the Fund perform?
The Fund had a good year. For the 12 months ended March 31, 1998, the
Fund's Class B shares had a total return of 26.77%, unadjusted for any
sales charges. This is a healthy return, especially considering the
conservative nature of the Fund. The Fund's assets grew by $214,923,155
with the merger between the former Keystone Balanced Fund and the
Evergreen Balanced Fund on January 23, 1998.
Portfolio Characteristics
-------------------------
Total Net Assets $1,897,153,741
Number of Holdings 741
Beta 0.66
P/E Ratio 21.0x
- --------------------------------------------------------------------------------
How would you describe the investment
environment during the 12 months?
It was a spectacular year, especially for the stock market. The underlying
conditions were good corporate earnings with low and declining inflation
and interest rates. The markets also were supported by strong cash flows
into mutual funds and institutional portfolios from investors who saw the
best relative returns coming from financial assets.
Within the equity market, the large-company stocks the Fund emphasizes
were the market leaders. The healthcare and financial sectors were
particularly strong contributors to market performance, as were individual
dominant companies such as General Electric, Proctor
& Gamble and Microsoft.
Within the bond market, longer-maturity bonds tended to outperform
shorter-maturity bonds as long-term rates declined substantially. The
yield on the 30-year Treasury bond, for example, declined from 7.07% to
5.93% during the 12 months. Corporate bonds also turned in solid
performance, supported by the same factors that helped the
stock market.
--------------------------------------------------------------------
PORTFOLIO COMPOSITION
(as a percentage of net assets)
(Pie chart appears here with the following values.)
Common Stock--56.3%
Corporate Notes/Bonds--18.2%
Mortgage-Backed Securities--7.8%
Asset-Backed Securities--5.2%
Foreign Bonds--5.1%
Convertibles--3.9%
Government Agency/Notes Bonds--2.0%
Cash/Short-Term Investments--1.5%
- --------------------------------------------------------------------------------
What were your primary strategies during
the 12 months?
Throughout the fiscal year, we kept a consistent asset allocation target
of 60% stocks and 40% bonds. At the close of the year, stocks comprised
60.2% of net assets, bonds accounted for 38.3% of net assets, with the
remaining 1.5% in cash and cash equivalents.
In the equity portion of the portfolio, we have emphasized
large-capitalization, dividend-paying stocks, consistent with our
long-term strategy. In the fixed income portion of the portfolio, we
emphasized higher quality bonds.
7
<PAGE>
EVERGREEN
Balanced Fund
Portfolio Manager Interview
Top 10 Equity Holdings
(as a percentage of net assets)
General Electric Co. 3.9%
Johnson & Johnson 2.5%
Pfizer, Inc. 1.7%
BankBoston Corp. 1.6%
American Home Products Corp. 1.5%
Merck & Co., Inc. 1.4%
Mobil Corp. 1.3%
Philip Morris Companies, Inc. 1.3%
Fleet Financial Group, Inc. 1.2%
Atlantic Richfield Co. 1.2%
Industry Allocation-Equity
Healthcare Products & Services 11.6%
Banks/Finance & Insurance 10.6%
Oil/Energy 6.2%
Electrical Equipment & Services 4.5%
Chemical & Agricultural Products 3.7%
Consumer Products & Services 3.6%
- --------------------------------------------------------------------------------
What industries did you emphasize in
equities?
During the year, our largest concentrations were in healthcare and finance
stocks. Both these sectors performed very well for the Fund, as did the
Fund's largest holding, General Electric, which had another terrific year,
substantially outperforming the market.
Healthcare stocks accounted for 11.6% of the portfolio at the end of the
fiscal year, while Banks and Finance stocks accounted for 10.6%.
Pharmaceutical companies are benefiting from strong secular trends as the
aging population increases the demand for drugs. In addition, a strong
flow of important new drugs continues to move into the market. Four of the
top 10 holdings in the Fund at the end of the year were pharmaceutical
companies: Johnson & Johnson, Pfizer, American Home Products and Merck &
Co.
The finance sector was helped by the strong performance of the capital
markets, the combination of the healthy economy, declining interest rates
and industry consolidation. The two finance stocks among the top 10
holdings, BankBoston Corp., and Fleet Financial Group, both are potential
candidates for acquisitions.
The largest disappointment among the top ten stock holdings was Philip
Morris, whose performance has been hurt by the continuing uncertainty and
controversy over the proposed tobacco settlement.
Energy stocks also did not do as well as the overall market during the
year, as the price of crude oil has declined from the relatively high
levels of a year ago. Over the longer term, we think the price of crude
will migrate somewhat higher. We have representation in this industry
because of its relative stability, the dividend income and the
consideration that energy stocks can serve as a potential hedge against
inflation.
Top 5 Bond Holdings
(as a percentage of net assets)
Federal National Mortgage Association 2.9%
Realkredit Danmark 1.5%
Nykredit 1.4%
U.S. Treasury Bonds 0.9%
Green Tree Financial Corp. 0.6%
Industry Allocation-Bonds
Finance & Insurance 7.3%
Asset-Backed Securities 5.2%
Collateralized Mortgage Obligations 5.2%
Mortgage Pass-Through Certificates 2.7%
Oil/Energy 1.2%
8
<PAGE>
EVERGREEN
Balanced Fund
Portfolio Manager Interview
- --------------------------------------------------------------------------------
What was the principal strategy in the
Fund's bond portfolio?
The bond portion of the portfolio is managed by
Christopher Conkey, Senior Vice President and Chief Investment Officer,
Fixed Income. In bonds, the Fund continued to concentrate on relatively
high credit quality. We actively manage the bond portfolio in terms of
maturity and duration. The primary purpose of the
bond portion of the portfolio is to produce income for the Fund.
At the end of the fiscal year, the average credit quality of bonds
remained at AA. Maturities were gradually lengthened during the year to
take advantage of the declining interest rate environment. On March 31,
the average weighted maturity of the bond portion of the portfolio was
10.6 years.
- --------------------------------------------------------------------------------
What is your outlook?
We remain optimistic as long as conditions continue in the current
favorable balance of low inflation, low interest rates and strong
corporate balance sheets and earnings. We think growth in the first half
of the year may be somewhat slower than occurred in the first half of
1997, influenced by lower energy profits. We believe the outlook for the
second half of 1998 looks stronger. We would not be surprised, however, if
some consolidation or market correction were to occur. In fact, we would
welcome it as a way to vent whatever steam has been building in the
market.
Right now, we think the domestic economy is strong enough to contain any
problems from the Asian financial crisis. This crisis has had its greatest
effect on industrial, commodity and technology industries. Over time,
however, we think these industries will overcome the challenges. The
biggest risk to the markets would be if all the economies of the world
were to move together into a period of strong growth. This could lead to
inflationary pressures, which would force the Federal Reserve to respond
by increasing short-term interest rates. We don't see signs of this
happening at this time, however.
This is the most positive environment I've seen in the market in 28 years
of investing professionally. While one might be tempted to be overly
concerned about the strong recent performance and the high stock valuation
levels, the current confluence of positive factors shows no sign of
reversing any time soon. It's steady as she goes.
9
<PAGE>
EVERGREEN
Foundation Fund
Fund at a Glance as of March 31, 1998
Mergers and acquisitions once again yielded significant capital appreciation,
reflecting the fact that we had bought shares for the Fund, which other
companies considered to be undervalued.
Portfolio
Management
----------------------------------------
(Photo of Stephen A. Lieber)
Stephen A. Lieber
Tenure: January 1990
-------------------------------------------------------
CURRENT INVESTMENT STYLE
(Graphic appears Morningstar's Style Box is based on a portfolio date as
here) of 3/31/98.
(Graphic appears The Equity Style Box placement is based on a fund's
here) 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.
The Fixed-Income Style Box placement is based on a fund's
average effective maturity or duration and the average
credit rating of the bond portfolio.
Source: 1998 Morningstar, Inc.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Inception Date 1/3/95 1/3/95 1/3/95 1/2/90
Average Annual Returns
One year with sales charge 27.52% 27.81% 31.81% n/a
One year w/o sales charge 33.88% 32.81% 32.81% 34.12%
3 years 19.80% 20.15% 20.83% 22.03%
5 years - - - 15.72%
10 years - - - -
Since Inception 20.64% 20.92% 21.47% 17.83%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC Yield 1.83% 1.18% 1.18% 2.17%
12-month income dividends
per share $ 0.44 $ 0.31 $ 0.31 $ 0.49
12-month capital gain
distributions per share $ 0.43 $ 0.43 $ 0.43 $ 0.43
</TABLE>
*Adjusted for maximum sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
(Chart appears here. See the table below for the plot points.)
<TABLE>
<CAPTION>
1/95 3/95 9/95 3/96 9/96 3/97 9/97 3/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares 9,525 10,180 11,742 12,166 12,761 13,727 16,608 18,379
Consumer Price
Index (CPI) 10,000 10,113 10,234 10,389 10,541 10,688 10,768 10,835
Lipper Balanced Funds
Average 10,000 10,632 12,042 12,893 13,573 14,305 16,901 18,459
S&P 500 10,000 10,974 12,977 14,496 15,615 17,370 21,931 25,707
</TABLE>
Comparison of a $10,000 investment in Evergreen Foundation Fund, Class A
shares, versus a similar investment in the S & P 500 Index, the Lipper Balanced
Funds Average, and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The S & P 500 Index and the Lipper Balanced Funds
Average are unmanaged indices. These indices do not include transaction costs
associated with buying and selling securities
nor any management fees. The Consumer Price Index, a measure of inflation, is
through March 31, 1998.
10
<PAGE>
EVERGREEN
Foundation Fund
Portfolio Manager Interview
- --------------------------------------------------------------------------------
How did the Fund perform for the year?
The Foundation Fund had another very strong year. For the twelve month
fiscal period that ended on March 31, 1998, the Fund's original Class Y
shares had a total return of 34.12%. During the same year, the Class A
shares had a total return of 33.88%, while the B and C Classes each had
returns of 32.81%, unadjusted for any sales charges. This brings the
Foundation Fund's cumulative annual returns since inception in 1990 to
287.06%, equal to 17.83% per annum compounded (Class Y).
Portfolio Characteristics
Total Net Assets $2,641,227,612
Number of Holdings 295
Beta 0.66
P/E Ratio 18.5x
- --------------------------------------------------------------------------------
How would you describe the basic investment strategy of the Foundation
Fund?
The Foundation Fund is intended to provide both investment risk reduction
and the opportunity for capital appreciation which together make for the
foundation of an investment portfolio. Assets are allocated between fixed
income, equities, and cash equivalents in varying amounts intending to
provide both opportunity for gain and risk avoidance. The fixed income
portion is invested exclusively in United States government obligations
with the goal of achieving both consistent and secure returns, as well as
capital appreciation from the appropriate positioning in interest rate
cycles. Stocks are bought for the Fund with the intention of achieving
capital growth through the careful purchase and holding of securities
believed to be undervalued, as compared with both their own potentials and
the general level of the market. With a risk avoidance focus, the equities
are principally held in companies with large market capitalizations and
high liquidity.
We believe this investment strategy has provided strong returns. For the
twelve months ended on March 31, 1998, the equity portion of the portfolio
had a return of 48.4%. Since inception of the Fund in January 1990, the
equity performance of the portfolio has surpassed the return of the S & P
500 in each year.
The fixed income portion of the portfolio provided a return of 19.9% for
the twelve months ended March 31, 1998. The emphasis has been on longer
maturity bonds, which have provided above-average returns both in
terms of current yield and in capital appreciation.
--------------------------------------------------------------------
PORTFOLIO COMPOSITION
(as a percentage of net assets)
(Pie chart appears here with the following values.)
Common Stock--60.8%
Treasury Notes/Bonds--25.7%
Government Agency Notes/Bonds--0.8%
Convertibles--0.8%
Short-Term--11.3%
Cash, other--0.6%
- --------------------------------------------------------------------------------
How do you manage the asset allocation
between stocks and bonds?
In the effort to achieve maximum opportunity and reduced risk, a principle
approach is asset allocation - having the Fund's portfolio concentrate in
the right areas at the right time. Asset allocation is not static, it
reflects a constant evaluation of the economic outlook in the effort to
have the Fund benefit from anticipated trends. Illustratively, when the
stock market was under severe pressure after the invasion of Kuwait in
1990, we perceived an excellent opportunity for the purchase of
11
<PAGE>
EVERGREEN
Foundation Fund
Portfolio Manager Interview
stocks on an undervalued basis. The allocation to equities then rose to
more than 80% of the portfolio. Recently, equities have been in the range
of just over 60% of the portfolio. A cash equivalent reserve of plus or
minus 10% was held during the latter part of the recent fiscal year in
order to be able to take advantage of volatility in the market, either
overall market declines, or temporary under-valuations of specific stocks
or sectors of the market.
Industry Allocation-Equity
Finance & Insurance 9.1%
Banks 7.7%
Information Services & Technology 6.3%
Real Estate 6.2%
Healthcare Products & Services 6.0%
Industry Allocation-Bonds
Treasury Notes & Bonds 25.7%
Government Agency Notes & Bonds 0.8%
- --------------------------------------------------------------------------------
What were some of the top performing
investments of the year?
The top spot went to Lennar Corp., which returned 212.9% during the fiscal
year. That position was established through the purchase of Pacific
Greystone Corp., a California home-builder which was acquired by Lennar
Corp. during the year. The next best performer was another home-building
corporation, Continental Homes Holding Corp., which returned 178.8% for
the fiscal year. It, in turn, had an acquisition bid from D.R. Horton,
Inc. Lucent Technologies, Inc. provided a return of 141.3% during the
year. It was originally a spin-off from American Telephone and Telegraph
Co. Healthcare related companies were major contributors: Guidant Corp.,
+137.8%, Pfizer, Inc., +137.7%, and Schering-Plough Corp., +123.6%. Others
among the top ten performers were Trinity Industries, Inc., +127.0%,
Computer Associates International, Inc., +122.1%, and First of America
Bank Corp., +116.5%.
- --------------------------------------------------------------------------------
Did corporate consolidations continue
to be a theme?
Mergers and acquisitions once again yielded significant capital
appreciation, reflecting the fact that we had bought shares for the Fund,
which other companies considered to be undervalued. During the fiscal
year, twenty-four Foundation Fund holdings received merger or acquisition
offers, or completed previously announced offers. The average return to
the end of the fiscal year on completed acquisitions was 67.57%. The
largest single gain was in the shares of First of America Bank Corp.,
which provided a gain of 215.1% from purchase to the receipt of its
acquisition bid. Other banks or thrifts acquired, or with transactions
pending at the end of the fiscal year included: Barnett Banks, Inc.,
+160.6%, Central Fidelity Banks, Inc., +158.9%, and Standard Federal
Bancorporation, Inc., +38.8%. While banks were the largest group among
these merger and acquisition issues, the variety of companies bid for was
quite large, including: Conrail, Inc., to PHH Corp., Living Centers of
America, Inc., Reading & Bates Corp., Wyle Electronics, Columbus Realty
Trust, Arbor Property Trust, Interstate Hotels Co., and 360- Communications
Co.
Top 10 Equity Holdings
(as a percentage of net assets)
Intel Corp. 2.4%
Federal National Mortgage Association 1.7%
General Electric Co. 1.7%
BankBoston Corp. 1.6%
Du Pont (E.I.) De Nemours & Co. 1.5%
Hewlett-Packard Co. 1.3%
Microsoft Corp. 1.2%
Merrill Lynch & Co., Inc. 1.0%
First of America Bank Corp. 1.0%
Marsh & Mclennan Co., Inc. 0.9%
12
<PAGE>
EVERGREEN
Foundation Fund
Portfolio Manager Interview
- --------------------------------------------------------------------------------
What significant recent acquisitions has
the Fund made?
The Fund has been an active buyer of a broad variety of issues. Reflecting
the underlying investment strategy, many commitments were made in recent
months during periods of investor apprehension either about sectors of the
market, industries, or companies. Illustratively, when the financial
difficulties of the Asian nations became a negative preoccupation of the
market, many companies directly involved in Asian commerce or perceived to
be potentially impacted saw their shares rapidly sold down. The Fund made
new commitments, or added to commitments, in a number of these companies
where we saw the market as over-emphasizing the negative and ignoring
significant growth potential. Among the issues purchased which have
subsequently shown substantial capital gains were AFLAC, Inc. (the largest
seller of cancer insurance in Japan), American International Group, Inc.
(the largest American-based company in Asian insurance activities in
Asia), Avon Products, Inc. (with substantial Asian sales), and United
Technologies Corp. (active in Asia through both the Otis and Carrier
Divisions, as well as provider of aircraft engines). By the end of the
fiscal year, these recent purchases had provided significant gains ranging
from 17% in Avon Products, Inc., to 38% in United Technologies Corp.
The same principle of the search for undervaluation due to temporary
adversities was also a factor in the Fund's purchase of major additions to
its position in Union Pacific Corp., where the railroad has been
handicapped by traffic congestion as a consequence of its integration of
the recently acquired Southern Pacific Rail Corp.
Top Bond Holdings
(as a percentage of net assets)
U.S. Treasury Bonds, Various
Coupon/Maturity 24.4%
Tennessee Valley Authority,
Various Coupon/Maturity 0.7%
Federal National Mortgage Assn. 0.1%
- --------------------------------------------------------------------------------
What is your outlook?
At the beginning of the new fiscal year, the Fund is positioned for an
outlook of sustained growth in the United States, with still minimal
inflation.
We anticipate that world commodity and manufactured goods conditions will
continue to be highly competitive, and that this will tend to restrict
price increases. This should be an environment which will continue to
support a strong bond market, particularly as the real interest rate
return remains at historically high levels, and the perception is that the
U.S. Federal Reserve will remain watchful over the need to act in a
restrictive fashion if the economy accelerates too rapidly. This should be
an environment where equity markets find particular support from increased
savings. Great investment opportunities will emerge from those
corporations which generate exceptional profits. The goal of our
investment management is to concentrate on the search for an investment in
exceptional performance among equities.
13
<PAGE>
EVERGREEN
Tax Strategic Foundation Fund
Fund at a Glance as of March 31, 1998
The Fund's equity holdings powered the performance, as evidenced by the 51.0%
return of the equity portfolio.
Portfolio
Management
----------------------------------------
(Photo of Stephen A. Lieber)
Stephen A. Lieber
Tenure: November 1993
(Photo of James Colby III)
James Colby III
Tenure: November 1993
-------------------------------------------------------
CURRENT INVESTMENT STYLE
(Graphic appears Morningstar's Style Box is based on a portfolio date as
here) of 3/31/98.
(Graphic appears The Equity Style Box placement is based on a fund's
here) 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.
The Fixed-Income Style Box placement is based on a fund's
average effective maturity or duration and the average
credit rating of the bond portfolio.
Source: 1998 Morningstar, Inc.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Inception Date 1/17/95 1/6/95 3/3/95 11/2/93
Average Annual Returns
One year with sales charge 18.49% 18.44% 22.49% n/a
One year w/o sales charge 24.40% 23.44% 23.49% 24.73%
3 years 18.43% 18.83% 19.49% 20.71%
Since Inception 18.50% 19.15% 19.40% 16.86%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC Yield 1.95% 1.31% 1.31% 2.30%
12-month income dividends
per share $ 0.30 $ 0.20 $ 0.20 $ 0.36
12-month capital gain
distributions per share $ 0.18 $ 0.18 $ 0.18 $ 0.18
</TABLE>
*Adjusted for maximum sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
(Chart appears here. See the table below for the plot points.)
<TABLE>
<CAPTION>
1/95 3/95 9/95 3/96 9/96 3/97 9/97 3/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares 9,525 9,880 11,322 11,968 12,964 13,853 16,046 17,222
Consumer Price
Index (CPI) 10,000 10,113 10,234 10,389 10,541 10,688 10,768 10,835
Lehman Brothers Municipal
Bond Index 10,000 10,707 11,280 11,604 11,961 12,237 13,040 13,547
S&P 500 10,000 10,974 12,977 14,496 15,615 17,370 21,931 25,707
</TABLE>
Comparison of a $10,000 investment in Evergreen Tax Strategic Foundation Fund,
Class A shares, versus a similar investment in the S&P 500 Index, the Lehman
Brothers Municipal Bond Index, and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The S & P 500 Index and the Lehman Brothers Municipal
Bond Index are unmanaged indices. These indices do not include transaction
costs associated with buying and selling securities nor any management fees.
The Consumer Price Index, a measure of inflation, is through March 31, 1998.
14
<PAGE>
EVERGREEN
Tax Strategic Foundation Fund
Portfolio Manager Interview
- --------------------------------------------------------------------------------
How did the Fund perform during the
fiscal year?
The Fund performed very well in achieving its primary objective of growth
with minimal taxable income or gains for shareholders. During the twelve
month period ended March 31, 1998, the Fund's original Class Y shares had
a total return of 24.73%. During the same period, the A share class had a
return of 24.32%, while the B and C share classes had returns of 23.44%
and 23.49%, respectively. These returns are unadjusted for any sales
charges. Since inception of the Fund on November 2, 1993, the original
Class Y shares had a compound annualized return of 16.86%.
Portfolio Characteristics
Total Net Assets $302,501,240
Number of Holdings 278
Beta 0.34
P/E Ratio 16.9x
- --------------------------------------------------------------------------------
The Evergreen Tax Strategic Foundation Fund has a very distinct objective
and strategy. How do you describe it?
The Fund is an outgrowth of the Evergreen Foundation Fund. We came to
realize that many investors in the Foundation Fund were tax averse, and
yet were in a Fund which was producing sizable taxable income and taxable
gains. We decided we could help meet the needs of these investors by
developing a Fund that would seek to produce the combination of defensive
and growth characteristics of the Foundation Fund in a tax efficient
manner; using tax exempt bonds and equities in the tax efficient portfolio
strategy. Up until the Tax Strategic Foundation Fund's founding in 1993,
there were no balanced funds using tax exempt bonds, and there were
virtually no equity funds with a tax efficient management strategy.
We developed this Fund with the goal of providing tax-exempt income and
aiming for long-term capital appreciation, while managing the portfolio to
reduce current taxable income and capital gains. We use a variety of
selection techniques, especially including investment in companies whose
policy is to use retained earnings to buy back stock in preference to
paying out taxable dividends.
The overall stock selection criteria are similar to those of the
Foundation Fund - the search for growth opportunities which are
comparatively undervalued. During the fiscal year, the Fund's equity
portfolio achieved a total return of 51.0%.
In the Fund's fixed income allocation, we emphasize highest quality bonds,
as we do in the Foundation Fund, aiming to avoid credit risk and to focus
on achieving the best combination of income and capital appreciation by
correct positioning within the interest rate cycles. The entire fixed
income portfolio is of the highest grade, either insured or AAA rated.
During the fiscal year, the Fund's fixed income portfolio had a return of
10.8%.
We also manage the Fund with a strategy aimed at reducing taxable income
through appropriate transactions. For example, in 1994, when there were
substantial losses in the bond market, and substantial gains by the Fund in
the stock market, we followed a policy of realizing bond losses and
repurchasing different issues or maturities of the same quality to offset
the gains the Fund earned in the stock market.
--------------------------------------------------------------------
PORTFOLIO COMPOSITION
(as a percentage of net assets)
(Pie chart appears here with the following values.)
Long-term Municipal Bonds--52.2%
Common Stock--39.8%
Short-Term Municipal Obligations & Cash Equivalents--6.7%
Convertibles--1.3%
15
<PAGE>
EVERGREEN
Tax Strategic Foundation Fund
Portfolio Manager Interview
- --------------------------------------------------------------------------------
What contributed to the strong
performance during the past fiscal year?
The equity holdings powered the performance, as evidenced by the 51.0%
return of the equity portion. A diverse list of holdings provided these
substantial returns. The one industry with the most impact was financial
services, where eight of the top fifteen performers in the portfolio were
involved in financial services. These included: First of America Bank
Corp. (+116.5%), Countrywide Credit Industries, Inc. (+115.9%), Dime
Bancorp, Inc. (+101.5%), FBL Financial Group, Inc. Class A (+94.3%), FPIC
Insurance Group, Inc. (+88.2%), Comerica, Inc. (+86.9%), Legg Mason, Inc.
(+86.9%), and NationsBank Corp. (+85.6%).
Among the diverse industry holdings, the top performers were: Continental
Homes Holding Corp. (+175.7%), Lucent Technologies Inc. (+141.3%),
MacDermid, Inc. (+131.3%), Furon Co. (+120.9%), Cisco Systems, Inc.
(+112.8%), Applied Power, Inc. Class A (+83.1%), and Gateway 2000, Inc.
(82.9%).
Industry Allocation-Equity
Banks 7.6%
Real Estate 5.8%
Finance & Insurance 5.2%
Healthcare Products & Services 2.6%
Electrical Equipment & Services 2.3%
Industry Allocation-Bonds
Prerefunded 31.9%
Housing 10.0%
Electric Power 6.3%
Hospitals 5.1%
Toll Roads 4.7%
- --------------------------------------------------------------------------------
Did mergers and acquisitions again contribute to the Fund's strong
performance?
The Fund benefited by twelve merger and acquisition transactions involving
portfolio securities. The average return to date on the eight transactions
completed was 68.9%, while the four pending at the end of the fiscal year
showed an average gain in value of 101.9% to the end of the fiscal year.
The largest single percentage increase was in the Fund's holding of
Barnett Banks, Inc., which had been bought in November, 1994 at $18.94 per
share, and received an acquisition bid from NationsBank Corp. valued at
$68.95, for a gain of 264.0%. The second largest gain was from a pending
transaction in First of America Bank Corp., which had a projected gain of
227.7% (based on the March 31 closing price of National City Corp.) from
its July, 1995 purchase. Other financials in this group included Standard
Federal Bancorporation, Inc., North American Mortgage Co., FFVA Financial
Corp., and PHH Corp. In the real estate related area, the largest gain was
in the projected gain of Continental Homes Holding Corp. (based on the
March 31 closing price of D.R. Horton, Inc.). Other real estate related
acquisitions were Interstate Hotels Co. and LaQuinta Inns Inc.
- --------------------------------------------------------------------------------
What were the top and bottom
performers in the Fund for the fiscal year?
The top eight performers in the portfolio all had gains of over 100%,
ranging from the 175.7% during the fiscal year in Continental Homes
Holding Corp., 141.3% for Lucent Technologies Inc., 131.3% for MacDermid,
Inc., 120.9% for Furon Co., 116.5% for First of America Bank Corp., 115.9%
for Countrywide Credit Industries, Inc., 112.8% for Cisco Systems, Inc.,
and 101.5% for Dime Bancorp, Inc. (reflecting its acquisition of North
American Mortgage Co.). Two of the holdings in the Fund had declines of
10% or more. They were UCAR International, Inc., -16.8%, and Hammons (John
Q) Hotels, L.P. Class A, -16.0%.
16
<PAGE>
EVERGREEN
Tax Strategic Foundation Fund
Portfolio Manager Interview
- --------------------------------------------------------------------------------
What significant recent purchases has
the Fund made?
Among the large new purchases toward the end of the fiscal year were
shares of Union Pacific Corp., purchased after the shares had declined
30%, largely because of what we believe are temporary traffic difficulties
with the system's newly acquired Southern Pacific Rail Corp. Our view is
that this is a temporary problem which will be satisfactorily overcome by
this very well-experienced railroad management with the strengths
developed in its role as a dominant transportation growth company. Another
area where we established positions for the Fund in sectors of comparative
undervaluation was the investment brokerage business. Positions were
established or increased in Legg Mason, Inc., Lehman Brothers Holdings,
Inc., and Merrill Lynch & Co., Inc. Many of the new positions acquired
during the fiscal year generated significant gains, such as Pfizer, Inc.,
+80.7%, and Countrywide Credit Industries, Inc., +58.4%.
Top 10 Equity Holdings
(as a percentage of net assets)
Boeing Co. 0.8%
Merrill Lynch & Co., Inc. 0.8%
American International Group, Inc. 0.8%
BankBoston Corp. 0.7%
WBK Trust 0.7%
Del Webb Corp. 0.7%
CitiCorp 0.7%
First Empire State Corp. 0.7%
Union Pacific Corp. 0.7%
American Home Products Corp. 0.6%
Top 5 Bond Holdings
(as a percentage of net assets)
Arapahoe County Colorado Pub. Hwy. Auth. 1.4%
University of Colorado Hospital Authority 1.3%
Philadelphia PA Hospital & Higher Ed. Facs. Auth.1.1%
Northern Penn. Water Authority 1.0%
Chicago IL Skyway Toll Bridge Refunded 0.9%
- --------------------------------------------------------------------------------
What is your outlook?
At the beginning of the new fiscal year, the Fund is positioned for an
outlook of sustained growth in the United States, with still minimal
inflation. We anticipate that world commodity and manufactured goods
conditions will continue to be highly competitive, and that this will tend
to restrict price increases. This should be an environment which will
continue to support a strong bond market, particularly as the real
interest rate return remains at historically high levels, and the
perception is that the U.S. Federal Reserve will remain watchful over the
need to act in a restrictive fashion if the economy accelerates too
rapidly. This should be an environment where equity markets find
particular support from increased savings. Great investment opportunities
will emerge from those corporations which generate exceptional profits.
The goal of our investment management is to concentrate on the search for
an investment in exceptional performance among equities.
17
<PAGE>
EVERGREEN
American Retirement Fund
Financial Highlights
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------
1998 1997**
<S> <C> <C>
CLASS A SHARES
Net asset value beginning of year $ 13.74 $ 13.86
============ ===========
Income (loss) from investment operations
Net investment income 0.49 0.11
Net realized and unrealized gain (loss) on investments 3.29 ( 0.12)
------------ -----------
Total from investment operations 3.78 ( 0.01)
------------ -----------
Less distributions
From net investment income ( 0.48) ( 0.11)
From net realized gain on investments ( 0.34) 0
------------ -----------
Total distributions ( 0.82) ( 0.11)
------------ -----------
Net asset value end of year $ 16.70 $ 13.74
============ ===========
Total return + 28.02 % ( 0.10 %)
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.40 % 1.37 %++
Total expenses, excluding indirectly paid expenses 1.40 % N/A
Total expenses, excluding fee waivers & expense reimbursements N/A 1.68 %++
Net investment income 3.21 % 3.43 %++
Portfolio turnover rate 34% 9%
Average commission rate paid per share $ 0.0596 $ 0.0606
Net assets end of year (thousands) $ 29,005 $ 14,590
<CAPTION>
Year Ended December 31,
--------------------------------
1996 1995*
<S> <C> <C>
CLASS A SHARES
Net asset value beginning of year $ 12.82 $ 10.65
============ ===========
Income (loss) from investment operations
Net investment income 0.45 0.41
Net realized and unrealized gain (loss) on investments 1.12 2.22
------------ -----------
Total from investment operations 1.57 2.63
------------ -----------
Less distributions
From net investment income ( 0.42) ( 0.46)
From net realized gain on investments ( 0.11) 0
------------ -----------
Total distributions ( 0.53) ( 0.46)
------------ -----------
Net asset value end of year $ 13.86 $ 12.82
============ ===========
Total return + 12.50 % 24.90%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.30 % 1.37%++
Total expenses, excluding indirectly paid expenses N/A N/A
Total expenses, excluding fee waivers & expense reimbursements 1.33 % 10.96%++
Net investment income 3.53 % 3.73%++
Portfolio turnover rate 16% 49%
Average commission rate paid per share $ 0.0619 N/A
Net assets end of year (thousands) $ 11,116 $ 1,335
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------
1998 1997**
<S> <C> <C>
CLASS B SHARES
Net asset value beginning of year $ 13.67 $ 13.80
============ ===========
Income (loss) from investment operations
Net investment income 0.38 0.09
Net realized and unrealized gain (loss) on investments 3.26 ( 0.13)
------------ -----------
Total from investment operations 3.64 ( 0.04)
------------ -----------
Less distributions
From net investment income ( 0.36) ( 0.09)
From net realized gain on investments ( 0.34) 0
------------ -----------
Total distributions ( 0.70) ( 0.09)
------------ -----------
Net asset value end of year $ 16.61 $ 13.67
============ ===========
Total return + 27.06 % ( 0.30 %)
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.15 % 2.11 %++
Total expenses, excluding indirectly paid expenses 2.15 % N/A
Total expenses, excluding fee waivers & expense reimbursements N/A 2.43 %++
Net investment income 2.46 % 2.68 %++
Portfolio turnover rate 34% 9%
Average commission rate paid per share $ 0.0596 $ 0.0606
Net assets end of year (thousands) $ 158,252 $ 76,791
<CAPTION>
Year Ended December 31,
--------------------------------
1996 1995*
<S> <C> <C>
CLASS B SHARES
Net asset value beginning of year $ 12.80 $ 10.65
============ ===========
Income (loss) from investment operations
Net investment income 0.36 0.35
Net realized and unrealized gain (loss) on investments 1.09 2.20
------------ -----------
Total from investment operations 1.45 2.55
------------ -----------
Less distributions
From net investment income ( 0.34) ( 0.40)
From net realized gain on investments ( 0.11) 0
------------ -----------
Total distributions ( 0.45) ( 0.40)
------------ -----------
Net asset value end of year $ 13.80 $ 12.80
============ ===========
Total return + 11.50 % 24.10%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.06 % 2.12%++
Total expenses, excluding indirectly paid expenses N/A N/A
Total expenses, excluding fee waivers & expense reimbursements 2.09 % 4.20%++
Net investment income 2.79 % 2.97%++
Portfolio turnover rate 16% 49%
Average commission rate paid per share $ 0.0619 N/A
Net assets end of year (thousands) $ 57,622 $ 4,839
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31,
effective March 31, 1997.
See Combined Notes to Financial Statements.
18
<PAGE>
EVERGREEN
American Retirement Fund
Financial Highlights
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------
<S> <C> <C>
1998 1997**
CLASS C SHARES
Net asset value beginning of year $ 13.70 $ 13.83
============ ===========
Income (loss) from investment operations
Net investment income 0.38 0.09
Net realized and unrealized gain (loss) on investments 3.27 ( 0.13)
------------ -----------
Total from investment operations 3.65 ( 0.04)
------------ -----------
Less distributions
From net investment income ( 0.36) ( 0.09)
From net realized gain on investments ( 0.34) 0
------------ -----------
Total distributions ( 0.70) ( 0.09)
------------ -----------
Net asset value end of year $ 16.65 $ 13.70
============ ===========
Total return + 27.08 % ( 0.30 %)
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.15 % 2.12 %++
Total expenses, excluding indirectly paid expenses 2.15 % N/A
Total expenses, excluding fee waivers & expense reimbursements N/A 2.43 %++
Net investment income 2.46 % 2.65 %++
Portfolio turnover rate 34% 9%
Average commission rate paid per share $ 0.0596 $ 0.0606
Net assets end of year (thousands) $ 2,777 $ 1,769
<CAPTION>
Year Ended December 31,
--------------------------------
<S> <C> <C>
1996 1995*
CLASS C SHARES
Net asset value beginning of year $ 12.81 $ 10.65
============ ===========
Income (loss) from investment operations
Net investment income 0.36 0.36
Net realized and unrealized gain (loss) on investments 1.11 2.19
------------ -----------
Total from investment operations 1.47 2.55
------------ -----------
Less distributions
From net investment income ( 0.34) ( 0.39)
From net realized gain on investments ( 0.11) 0
------------ -----------
Total distributions ( 0.45) ( 0.39)
------------ -----------
Net asset value end of year $ 13.83 $ 12.81
============ ===========
Total return + 11.60 % 24.00%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.05 % 2.10%++
Total expenses, excluding indirectly paid expenses N/A N/A
Total expenses, excluding fee waivers & expense reimbursements 2.08 % 103.52%++
Net investment income 2.80 % 2.96%++
Portfolio turnover rate 16% 49%
Average commission rate paid per share $ 0.0619 N/A
Net assets end of year (thousands) $ 1,487 $ 110
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31,
effective March 31, 1997.
See Combined Notes to Financial Statements.
19
<PAGE>
EVERGREEN
American Retirement Fund
Financial Highlights
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------
1998 1997**
<S> <C> <C>
CLASS Y SHARES
Net asset value beginning of year $ 13.74 $ 13.86
============ ==========
Income (loss) from investment operations
Net investment income 0.55 0.14
Net realized and unrealized gain (loss) on
investments 3.27 ( 0.14)
------------ ----------
Total from investment operations 3.82 0
------------ ----------
Less distributions
From net investment income ( 0.52) ( 0.12)
From net realized gain on investments ( 0.34) 0
In excess of net realized gain on investments 0 0
------------ ----------
Total distributions ( 0.86) ( 0.12)
------------ ----------
Net asset value end of year $ 16.70 $ 13.74
============ ==========
Total return 28.34 % 0.00 %
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.14 % 1.11 %+
Total expenses, excluding indirectly paid
expenses 1.14 % N/A
Total expenses, excluding fee waivers &
expense reimbursements N/A 1.38 %+
Net investment income 3.45 % 3.56 %+
Portfolio turnover rate 34% 9%
Average commission rate paid per share $ 0.0596 $ 0.0606
Net assets end of year (thousands) $ 43,786 $ 37,237
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1996 1995 1994 1993
<S> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of year $ 12.83 $ 10.67 $ 11.60 $ 10.95
============ ========= ========== =========
Income (loss) from investment operations
Net investment income 0.48 0.47 0.60 0.56
Net realized and unrealized gain (loss) on
investments 1.10 2.16 ( 0.93) 0.96
------------ --------- ---------- ---------
Total from investment operations 1.58 2.63 ( 0.33) 1.52
------------ --------- ---------- ---------
Less distributions
From net investment income ( 0.44) ( 0.47) ( 0.60) ( 0.60)
From net realized gain on investments ( 0.11) 0 0 ( 0.24)
In excess of net realized gain on investments 0 0 0 ( 0.03)
------------ ---------- ---------- ----------
Total distributions ( 0.55) ( 0.47) ( 0.60) ( 0.87)
------------ ---------- ---------- ----------
Net asset value end of year $ 13.86 $ 12.83 $ 10.67 $ 11.60
============ ========== ========== ==========
Total return 12.60 % 25.10% ( 2.90%) 14.10%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.05 % 1.26% 1.28% 1.36%
Total expenses, excluding indirectly paid
expenses N/A N/A N/A N/A
Total expenses, excluding fee waivers &
expense reimbursements 1.09 % N/A N/A N/A
Net investment income 3.65 % 3.96% 5.40% 5.13%
Portfolio turnover rate 16% 49% 136% 92%
Average commission rate paid per share $ 0.0619 N/A N/A N/A
Net assets end of year (thousands) $ 41,243 $ 39,327 $ 37,176 $ 37,336
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
1992 1991 1990 1989 1988*
<S> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of year $ 10.52 $ 9.59 $ 10.41 $ 10.09 $ 10.00
========= ======== ========= ========= =========
Income (loss) from investment operations
Net investment income 0.66 0.60 0.60 0.57 0.39
Net realized and unrealized gain (loss) on investments 0.55 1.15 ( 0.66) 0.76 0.18
--------- -------- --------- --------- ---------
Total from investment operations 1.21 1.75 ( 0.06) 1.33 0.57
--------- -------- --------- --------- ---------
Less distributions
From net investment income ( 0.61) ( 0.60) ( 0.60) ( 0.59) ( 0.36)
From net realized gain on investments ( 0.17) ( 0.22) ( 0.16) ( 0.42) ( 0.12)
---------- --------- --------- ---------- ---------
Total distributions ( 0.78) ( 0.82) ( 0.76) ( 1.01) ( 0.48)
---------- --------- --------- ---------- ---------
Net asset value end of year $ 10.95 $ 10.52 $ 9.59 $ 10.41 $ 10.09
========== ========= ========= ========== =========
Total return 11.80% 18.80% ( 0.50%) 13.40% 5.80%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.51% 1.50% 1.50% 1.88% 2.00%+
Total expenses, excluding fee waivers & expense
reimbursements 1.59% 1.82% 1.95% 2.03% N/A
Net investment income 6.23% 5.91% 6.04% 5.49% 5.01%+
Portfolio turnover rate 151% 97% 33% 152% 52%
Net assets end of year (thousands) $ 23,781 $ 15,632 $ 12,351 $ 11,610 $ 9,449
</TABLE>
+ Annualized.
* For the period from March 14, 1988 (commencement of class operations) to
December 31, 1988.
** The Fund changed its fiscal year end from December 31 to March 31,
effective March 31, 1997.
See Combined Notes to Financial Statements.
20
<PAGE>
EVERGREEN
Balanced Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period Ended
March 31, 1998 *#
<S> <C>
CLASS A SHARES
Net asset value beginning of period $ 12.36
=========
Income from investment operations
Net investment income 0.08
Net realized and unrealized gain on investments, futures contracts and foreign currency 0.81
---------
related transactions
Total from investment operations 0.89
---------
Less distributions
From net investment income ( 0.12)
From net realized gain on investments, futures contracts and foreign currency related ( 0.26)
----------
transactions
Total distributions ( 0.38)
----------
Net asset value end of period $ 12.87
==========
Total return + 7.38 %
Ratios/supplemental data
Ratios to average net assets:
Total expenses 0.99 %++
Total expenses, excluding indirectly paid expenses 0.99 %++
Net investment income 3.25 %++
Portfolio turnover rate 76%
Average commission rate paid per share $ 0.0594
Net assets end of period (millions) $ 1,277
</TABLE>
* For the period from January 20, 1998 (commencement of class operations) to
March 31, 1998.
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
21
<PAGE>
EVERGREEN
Balanced Fund
Financial Highlights
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Period Ended
March 31, 1998*#
<S> <C>
CLASS B SHARES
Net asset value beginning of year $ 12.95
==========
Income (loss) from investment operations
Net investment income 0.26
Net realized and unrealized gain (loss) on investments,
futures contracts and foreign currency related
transactions 1.53
----------
Total from investment operations 1.79
----------
Less distributions
From net investment income ( 0.27)
In excess of net investment income 0
From net realized gain on investments, futures contracts
and foreign currency related transactions ( 1.59)
In excess of net realized gain on investments, futures
contracts and foreign currency related transactions 0
Tax basis return of capital 0
----------
Total distributions ( 1.86)
----------
Net asset value end of year $ 12.88
==========
Total return + 14.89 %
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.35 %++
Total expenses, excluding indirectly paid expenses 1.35 %++
Net investment income 2.66 %++
Portfolio turnover rate 76%
Average commission rate paid per share $ 0.0594
Net assets end of year (millions) $ 580
<CAPTION>
Year Ended June 30,
------------------------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of year $ 11.33 $ 10.09 $ 9.26 $ 10.10 $ 9.77
=========== =========== ======= ========= =======
Income (loss) from investment operations
Net investment income 0.30 0.29 0.31 0.28 0.31
Net realized and unrealized gain (loss) on investments,
futures contracts and foreign currency related
transactions 2.07 1.42 0.96 ( 0.37) 0.66
----------- ----------- ------- --------- -------
Total from investment operations 2.37 1.71 1.27 ( 0.09) 0.97
----------- ----------- ------- --------- -------
Less distributions
From net investment income ( 0.30) ( 0.24) ( 0.31) ( 0.28) ( 0.31)
In excess of net investment income 0 ( 0.03) ( 0.02) ( 0.07) ( 0.09)
From net realized gain on investments, futures contracts
and foreign currency related transactions 0 ( 0.20) ( 0.02) ( 0.25) ( 0.24)
In excess of net realized gain on investments, futures
contracts and foreign currency related transactions ( 0.45) 0 ( 0.09) ( 0.13) 0
Tax basis return of capital 0 0 0 ( 0.02) 0
----------- ----------- -------- --------- --------
Total distributions ( 0.75) ( 0.47) ( 0.44) ( 0.75) ( 0.64)
----------- ----------- -------- --------- --------
Net asset value end of year $ 12.95 $ 11.33 $ 10.09 $ 9.26 $ 10.10
=========== =========== ======== ========= ========
Total return + 21.95 % 17.35 % 14.20% ( 1.16%) 10.39%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.70 % 1.72 % 1.77% 1.71% 1.93%
Total expenses, excluding indirectly paid expenses 1.69 % 1.71 % N/A N/A N/A
Net investment income 2.50 % 2.71 % 3.33% 2.81% 3.07%
Portfolio turnover rate 89% 96% 88% 88% 74%
Average commission rate paid per share $ 0.0400 $ 0.0031 N/A N/A N/A
Net assets end of year (millions) $ 1,625 $ 1,481 $ 1,345 $ 1,390 $ 1,464
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------
1992 1991
<S> <C> <C>
CLASS B SHARES
Net asset value beginning of year $ 9.16 $ 9.10
======= =======
Income (loss) from investment operations
Net investment income 0.32 0.45
Net realized and unrealized gain (loss) on investments, futures contracts and
foreign currency related transactions 0.75 0.18
------- -------
Total from investment operations 1.07 0.63
------- -------
Less distributions
From net investment income ( 0.32) ( 0.50)
In excess of net investment income ( 0.14) ( 0.04)
From net realized gain on investments, futures contracts and foreign currency
related transactions 0 ( 0.03)
-------- --------
Total distributions ( 0.46) ( 0.57)
-------- --------
Net asset value end of year $ 9.77 $ 9.16
======== ========
Total return + 11.86% 7.49%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.97% 1.88%
Net investment income 3.25% 4.56%
Portfolio turnover rate 52% 60%
Net assets end of year (millions) $ 1,184 $ 902
<CAPTION>
Year Ended June 30,
-----------------------------------
1990 1989 1988
<S> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of year $ 9.12 $ 8.37 $ 9.74
======= ======= ========
Income (loss) from investment operations
Net investment income 0.50 0.46 0.47
Net realized and unrealized gain (loss) on investments, futures contracts and
foreign currency related transactions 0.20 0.83 ( 0.82)
------- ------- --------
Total from investment operations 0.70 1.29 ( 0.35)
------- ------- --------
Less distributions
From net investment income ( 0.50) ( 0.54) ( 0.60)
In excess of net investment income ( 0.04) 0 0
From net realized gain on investments, futures contracts and foreign currency
related transactions ( 0.18) 0 ( 0.42)
-------- -------- --------
Total distributions ( 0.72) ( 0.54) ( 1.02)
-------- -------- --------
Net asset value end of year $ 9.10 $ 9.12 $ 8.37
======== ======== ========
Total return + 7.99% 16.07% ( 3.37%)
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.99% 1.96% 1.91%
Net investment income 4.94% 5.48% 5.34%
Portfolio turnover rate 35% 49% 64%
Net assets end of year (millions) $ 827 $ 712 $ 685
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* 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.
22
<PAGE>
EVERGREEN
Balanced Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period Ended
March 31, 1998*#
<S> <C>
CLASS C SHARES
Net asset value beginning of period $ 12.43
==========
Income from investment operations
Net investment income 0.05
Net realized and unrealized gain on investments, futures contracts and foreign currency 0.75
----------
related transactions
Total from investment operations 0.80
----------
Less distributions
From net investment income ( 0.09)
From net realized gain on investments, futures contracts and foreign currency related ( 0.26)
----------
transactions
Total distributions ( 0.35)
----------
Net asset value end of period $ 12.88
==========
Total return + 6.58 %
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.76 %++
Total expenses, excluding indirectly paid expenses 1.76 %++
Net investment income 2.41 %++
Portfolio turnover rate 76%
Average commission rate paid per share $ 0.0594
Net assets end of period (thousands) $ 829
</TABLE>
<TABLE>
<CAPTION>
Period Ended
March 31, 1998**#
<S> <C>
CLASS Y SHARES
Net asset value beginning of period $ 12.01
=========
Income from investment operations
Net investment income 0.08
Net realized and unrealized gain on investments, futures contracts and foreign currency 0.86
---------
related transactions
Total from investment operations 0.94
---------
Less distributions
From net investment income ( 0.09)
----------
Total distributions ( 0.09)
----------
Net asset value end of period $ 12.86
==========
Total return 7.79 %
Ratios/supplemental data
Ratios to average net assets:
Total expenses 0.75 %++
Total expenses, excluding indirectly paid expenses 0.75 %++
Net investment income 3.47 %++
Portfolio turnover rate 76%
Average commission rate paid per share $ 0.0594
Net assets end of period (thousands) $ 39,231
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ 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.
23
<PAGE>
EVERGREEN
Foundation Fund
Financial Highlights
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended March 31, Year Ended December 31,
1998# 1997** 1996 1995*
<S> <C> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of year $ 16.00 $ 16.13 $ 15.12 $ 12.24
============ =========== ============ ==========
Income (loss) from investment operations
Net investment income 0.44 0.12 0.50 0.44
Net realized and unrealized gain (loss) on investments 4.87 ( 0.13) 1.16 3.14
------------ ----------- ------------ ----------
Total from investment operations 5.31 ( 0.01) 1.66 3.58
------------ ----------- ------------ ----------
Less distributions
From net investment income ( 0.44) ( 0.12) ( 0.50) ( 0.47)
In excess of net investment income 0(a) 0 0 0
From net realized gain on investments ( 0.43) 0 ( 0.15) ( 0.23)
------------ ----------- ------------ ----------
Total distributions ( 0.87) ( 0.12) ( 0.65) ( 0.70)
------------ ----------- ------------ ----------
Net asset value end of year $ 20.44 $ 16.00 $ 16.13 $ 15.12
============ =========== ============ ==========
Total return + 33.88 % ( 0.20 %) 11.30 % 29.70%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.28 % 1.25 %++ 1.24 % 1.33%++
Total expenses, excluding indirectly paid expenses 1.28 % N/A N/A N/A
Total expenses, excluding fee waivers & expense
reimbursements N/A N/A N/A 1.34%++
Net investment income 2.39 % 2.83 %++ 3.39 % 3.73%++
Portfolio turnover rate 9% 2% 10% 28%
Average commission rate paid per share $ 0.0657 $ 0.0670 $ 0.0649 N/A
Net assets end of year (millions) $ 350 $ 220 $ 206 $ 107
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, Year Ended December 31,
1998# 1997** 1996 1995*
<S> <C> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of year $ 15.94 $ 16.07 $ 15.07 $ 12.24
============ =========== ============ ==========
Income (loss) from investment operations
Net investment income 0.30 0.09 0.40 0.36
Net realized and unrealized gain (loss) on investments 4.84 ( 0.13) 1.15 3.09
------------ ----------- ------------ ----------
Total from investment operations 5.14 ( 0.04) 1.55 3.45
------------ ----------- ------------ ----------
Less distributions
From net investment income ( 0.30) ( 0.09) ( 0.40) ( 0.39)
In excess of net investment income ( 0.01) 0 0 0
From net realized gain on investments ( 0.43) 0 ( 0.15) ( 0.23)
------------ ----------- ------------ ----------
Total distributions ( 0.74) ( 0.09) ( 0.55) ( 0.62)
------------ ----------- ------------ ----------
Net asset value end of year $ 20.34 $ 15.94 $ 16.07 $ 15.07
============ =========== ============ ==========
Total return + 32.81 % ( 0.30 %) 10.50 % 28.70%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.04 % 2.00 %++ 1.99 % 2.07%++
Total expenses, excluding indirectly paid expenses 2.04 % N/A N/A N/A
Net investment income 1.63 % 2.07 %++ 2.64 % 2.99%++
Portfolio turnover rate 9% 2% 10% 28%
Average commission rate paid per share $ 0.0657 $ 0.0670 $ 0.0649 N/A
Net assets end of year (millions) $ 1,124 $ 606 $ 570 $ 296
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31,
effective March 31, 1997.
# Net investment income is based on average shares outstanding during the
period.
(a) Less than one cent per share.
See Combined Notes to Financial Statements.
24
<PAGE>
EVERGREEN
Foundation Fund
Financial Highlights
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended March 31, Year Ended December 31,
1998# 1997** 1996 1995*
<S> <C> <C> <C> <C>
CLASS C SHARES
Net asset value beginning of year $ 15.94 $ 16.06 $ 15.07 $ 12.24
============ =========== ============ ==========
Income (loss) from investment operations
Net investment income 0.30 0.09 0.40 0.34
Net realized and unrealized gain (loss) on investments 4.84 ( 0.13) 1.14 3.09
------------ ----------- ------------ ----------
Total from investment operations 5.14 ( 0.04) 1.54 3.43
------------ ----------- ------------ ----------
Less distributions
From net investment income ( 0.30) ( 0.08) ( 0.40) ( 0.37)
In excess of net investment income ( 0.01) 0 0 0
From net realized gain on investments ( 0.43) 0 ( 0.15) ( 0.23)
------------ ----------- ------------ ----------
Total distributions ( 0.74) ( 0.08) ( 0.55) ( 0.60)
------------ ----------- ------------ ----------
Net asset value end of year $ 20.34 $ 15.94 $ 16.06 $ 15.07
============ =========== ============ ==========
Total return + 32.81 % ( 0.30 %) 10.40 % 28.50%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.04 % 2.00 %++ 1.99 % 2.23%++
Total expenses, excluding indirectly paid expenses 2.04 % N/A N/A N/A
Total expenses, excluding fee waivers & expense
reimbursements N/A N/A N/A 2.37%++
Net investment income 1.63 % 2.07 %++ 2.64 % 2.83%++
Portfolio turnover rate 9% 2% 10% 28%
Average commission rate paid per share $ 0.0657 $ 0.0670 $ 0.0649 N/A
Net assets end of year (millions) $ 50 $ 28 $ 27 $ 11
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31,
effective March 31, 1997.
# 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 year)
<TABLE>
<CAPTION>
Year Ended March 31,
1998# 1997**
<S> <C> <C>
CLASS Y SHARES
Net asset value beginning of year $ 16.02 $ 16.14
============ ==========
Income (loss) from investment operations
Net investment income 0.49 0.13
Net realized and unrealized gain (loss) on investments 4.86 ( 0.13)
------------ ----------
Total from investment operations 5.35 0.00
------------ ----------
Less distributions
From net investment income ( 0.49) ( 0.12)
From net realized gain on investments ( 0.43) 0
------------ ----------
Total distributions ( 0.92) ( 0.12)
------------ ----------
Net asset value end of year $ 20.45 $ 16.02
============ ==========
Total return 34.12 % 0.00 %
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.03 % 1.00 %+
Total expenses, excluding indirectly paid expenses 1.03 % N/A
Total expenses, excluding fee waivers & expense
reimbursements N/A N/A
Net investment income 2.65 % 3.07 %+
Portfolio turnover rate 9% 2%
Average commission rate paid per share $ 0.0657 $ 0.0670
Net assets end of year (millions) $ 1,117 $ 802
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of year $ 15.13 $ 12.27 $ 13.12
============ ========= ==========
Income (loss) from investment operations
Net investment income 0.54 0.51 0.42
Net realized and unrealized gain (loss) on investments 1.16 3.07 ( 0.57)
------------ --------- ----------
Total from investment operations 1.70 3.58 ( 0.15)
------------ --------- ----------
Less distributions
From net investment income ( 0.54) ( 0.49) ( 0.42)
From net realized gain on investments ( 0.15) ( 0.23) ( 0.28)
------------ ---------- ----------
Total distributions ( 0.69) ( 0.72) ( 0.70)
------------ ---------- ----------
Net asset value end of year $ 16.14 $ 15.13 $ 12.27
============ ========== ==========
Total return 11.50 % 29.70% ( 1.10%)
Ratios/supplemental data
Ratios to average net assets:
Total expenses 0.99 % 1.07% 1.14%
Total expenses, excluding indirectly paid expenses N/A N/A N/A
Total expenses, excluding fee waivers & expense
reimbursements N/A N/A N/A
Net investment income 3.64 % 3.89% 3.51%
Portfolio turnover rate 10% 28% 33%
Average commission rate paid per share $ 0.0649 N/A N/A
Net assets end of year (millions) $ 809 $ 623 $ 332
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991 1990*
<S> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of year $ 11.98 $ 10.75 $ 8.95 $ 10.00
========= ========= ======== ===========
Income (loss) from investment operations
Net investment income 0.31 0.27 0.33 1.23 (a)
Net realized and unrealized gain (loss) on investments 1.55 1.83 2.77 ( 0.59)
--------- --------- -------- -----------
Total from investment operations 1.86 2.10 3.10 0.64
--------- --------- -------- -----------
Less distributions
From net investment income ( 0.31) ( 0.24) ( 0.33) ( 1.17)
From net realized gain on investments ( 0.41) ( 0.63) ( 0.97) ( 0.52)
---------- ---------- --------- -----------
Total distributions ( 0.72) ( 0.87) ( 1.30) ( 1.69)
---------- ---------- --------- -----------
Net asset value end of year $ 13.12 $ 11.98 $ 10.75 $ 8.95
========== ========== ========= ===========
Total return 15.70% 20.00% 36.40% 6.60%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.20% 1.40% 1.20% 0.00%+
Total expenses, excluding fee waivers & expense
reimbursements N/A 1.43% 2.58% 3.64%+
Net investment income 2.81% 2.93% 2.86% 15.07%(a)+
Portfolio turnover rate 60% 127% 178% 131%
Net assets end of year (millions) $ 240 $ 64 $ 11 $ 2
</TABLE>
+ Annualized.
* For the period from January 2, 1990 (commencement of class operations) to
December 31, 1990.
** The Fund changed its fiscal year end from December 31 to March 31,
effective March 31, 1997.
(a) Includes receipt of a special dividend representing $0.62 per share net
investment income and 7.59% of average net assets.
# 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 year)
<TABLE>
<CAPTION>
Year Ended March 31, Year Ended December 31,
-------------------------------- --------------------------------
1998 1997** 1996 1995*
<S> <C> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of year $ 13.57 $ 13.50 $ 12.20 $ 10.44
============ =========== ============ ==========
Income from investment operations
Net investment income 0.31 0.07 0.27 0.29
Net realized and unrealized gain on investments 2.96 0.06 # 1.59 2.24
------------ ------------- ------------ ----------
Total from investment operations 3.27 0.13 1.86 2.53
------------ ------------- ------------ ----------
Less distributions
From net investment income ( 0.30) ( 0.06) ( 0.28) ( 0.31)
From net realized gain on investments ( 0.18) 0 ( 0.28) ( 0.46)
------------ ------------- ------------ ----------
Total distributions ( 0.48) ( 0.06) ( 0.56) ( 0.77)
------------ ------------- ------------ ----------
Net asset value end of year $ 16.36 $ 13.57 $ 13.50 $ 12.20
============ ============= ============ ==========
Total return + 24.40 % 1.00 % 15.40 % 24.80%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.42 % 1.38 %++ 1.52 % 1.75%++
Total expenses, excluding indirectly paid expenses 1.42 % N/A N/A N/A
Total expenses, excluding fee waivers & expense
reimbursements N/A N/A 1.76 % 5.02%++
Net investment income 2.21 % 2.30 %++ 2.39 % 2.79%++
Portfolio turnover rate 50% 29% 88% 110%
Average commission rate paid per share $ 0.0659 $ 0.0656 $ 0.0648 N/A
Net assets end of year (thousands) $ 69,879 $ 15,039 $ 11,166 $ 2,702
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, Year Ended December 31,
-------------------------------- --------------------------------
1998 1997** 1996 1995*
<S> <C> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of year $ 13.56 $ 13.49 $ 12.19 $ 10.31
============ =========== ============ ==========
Income from investment operations
Net investment income 0.21 0.05 0.19 0.22
Net realized and unrealized gain on investments 2.94 0.06 # 1.59 2.37
------------ ------------- ------------ ----------
Total from investment operations 3.15 0.11 1.78 2.59
------------ ------------- ------------ ----------
Less distributions
From net investment income ( 0.20) ( 0.04) ( 0.20) ( 0.25)
From net realized gain on investments ( 0.18) 0 ( 0.28) ( 0.46)
------------ ------------- ------------ ----------
Total distributions ( 0.38) ( 0.04) ( 0.48) ( 0.71)
------------ ------------- ------------ ----------
Net asset value end of year $ 16.33 $ 13.56 $ 13.49 $ 12.19
============ ============= ============ ==========
Total return + 23.44 % 0.08 % 14.70 % 25.60%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.18 % 2.14 %++ 2.27 % 2.50%++
Total expenses, excluding indirectly paid expenses 2.18 % N/A N/A N/A
Total expenses, excluding fee waivers & expense
reimbursements N/A N/A 2.51 % 3.65%++
Net investment income 1.46 % 1.55 %++ 1.64 % 2.03%++
Portfolio turnover rate 50% 29% 2% 110%
Average commission rate paid per share $ 0.0659 $ 0.0656 $ 0.0648 N/A
Net assets end of year (thousands) $ 185,042 $ 38,838 $ 28,007 $ 6,559
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ 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.
** The Fund changed its fiscal year end from December 31 to March 31,
effective March 31, 1997.
# The net investment income is not in accord with the net realized and
unrealized gain (loss) for the period due to the timing of the sales of Fund
shares and the amount of per share realized and unrealized gains and losses
at such time.
See Combined Notes to Financial Statements.
27
<PAGE>
EVERGREEN
Tax Strategic Foundation Fund
Financial Highlights
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended March 31, Year Ended December 31,
-------------------------------- --------------------------------
1998 1997** 1996 1995*
<S> <C> <C> <C> <C>
CLASS C SHARES
Net asset value beginning of year $ 13.53 $ 13.47 $ 12.19 $ 10.69
============ =========== ============ ==========
Income from investment operations
Net investment income 0.21 0.06 0.18 0.22
Net realized and unrealized gain on investments 2.94 0.05 # 1.58 1.99
------------ ------------- ------------ ----------
Total from investment operations 3.15 0.11 1.76 2.21
------------ ------------- ------------ ----------
Less distributions
From net investment income ( 0.20) ( 0.05) ( 0.20) ( 0.25)
From net realized gain on investments ( 0.18) 0 ( 0.28) ( 0.46)
------------ ------------- ------------ ----------
Total distributions ( 0.38) ( 0.05) ( 0.48) ( 0.71)
------------ ------------- ------------ ----------
Net asset value end of year $ 16.30 $ 13.53 $ 13.47 $ 12.19
============ ============= ============ ==========
Total return + 23.49 % 0.08 % 14.50 % 21.20%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.18 % 2.13 %++ 2.25 % 2.50%++
Total expenses, excluding indirectly paid
expenses 2.18 % N/A N/A N/A
Total expenses, excluding fee waivers &
expense reimbursements N/A N/A 2.48 % 18.91%++
Net investment income 1.46 % 1.55 %++ 1.64 % 2.07%++
Portfolio turnover rate 50% 29% 88% 110%
Average commission rate paid per share $ 0.0659 $ 0.0656 $ 0.0648 N/A
Net assets end of year (thousands) $ 27,699 $ 5,086 $ 4,108 $ 496
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------
1998 1997**
<S> <C> <C>
CLASS Y SHARES
Net asset value beginning of year $ 13.61 $ 13.54
============ ===========
Income from investment operations
Net investment income 0.37 0.09
Net realized and unrealized gain on investments 2.95 0.05 #
------------ -------------
Total from investment operations 3.32 0.14
------------ -------------
Less distributions
From net investment income ( 0.36) ( 0.07)
From net realized gain on investments ( 0.18) 0
------------ -------------
Total distributions ( 0.54) ( 0.07)
------------ -------------
Net asset value end of year $ 16.39 $ 13.61
============ =============
Total return 24.73 % 1.00 %
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.15 % 1.13 %++
Total expenses, excluding indirectly paid
expenses 1.15 % N/A
Total expenses, excluding fee waivers &
expense reimbursements N/A N/A
Net investment income 2.48 % 2.54 %++
Portfolio turnover rate 50% 29%
Average commission rate paid per share $ 0.0659 $ 0.0656
Net assets end of year (thousands) $ 19,881 $ 15,311
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1996 1995 1994 1993*
<S> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of year $ 12.22 $ 10.27 $ 10.31 $ 10.00
============ ========= ========= ===========
Income from investment operations
Net investment income 0.34 0.35 0.27 0.05
Net realized and unrealized gain on investments 1.56 2.39 0.08 0.31
------------ --------- --------- -----------
Total from investment operations 1.90 2.74 0.35 0.36
------------ --------- --------- -----------
Less distributions
From net investment income ( 0.30) ( 0.33) ( 0.27) ( 0.05)
From net realized gain on investments ( 0.28) ( 0.46) ( 0.12) 0
------------ ---------- ---------- -----------
Total distributions ( 0.58) ( 0.79) ( 0.39) ( 0.05)
------------ ---------- ---------- -----------
Net asset value end of year $ 13.54 $ 12.22 $ 10.27 $ 10.31
============ ========== ========== ===========
Total return 15.80 % 27.30% 3.40% 3.50%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.30 % 1.50% 1.49% 0.00%++
Total expenses, excluding indirectly paid
expenses N/A N/A N/A N/A
Total expenses, excluding fee waivers &
expense reimbursements 1.56 % 2.23% 2.41% 3.10%++
Net investment income 2.63 % 3.06% 2.87% 3.65%++
Portfolio turnover rate 88% 110% 245% 60%
Average commission rate paid per share $ 0.0649 N/A N/A N/A
Net assets end of year (thousands) $ 15,002 $ 13,485 $ 10,575 $ 5,424
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ 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.
** The Fund changed its fiscal year end from December 31 to March 31,
effective March 31, 1997.
# The net investment income is not in accord with the net realized and
unrealized gain (loss) for the period due to the timing of the sales of Fund
shares and the amount of per share realized and unrealized gains and losses
at such time.
See Combined Notes to Financial Statements.
28
<PAGE>
EVERGREEN
American Retirement Fund
Schedule of Investments
March 31, 1998
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 44.0%
Automotive Equipment &
Manufacturing - 0.7%
30,000 Dana Corp. ................... $1,745,625
----------
Banks - 5.5%
40,000 Australia & New Zealand Banking
Group Ltd. ................... 1,357,500
32,312 Banc One Corp. ............... 2,043,734
20,000 BancorpSouth, Inc. ........... 878,750
20,000 Bank of New York Co., Inc. ... 1,256,250
16,000 Cape Cod Bank & Trust Co. .... 704,000
13,000 Comerica, Inc. ............... 1,375,562
25,050 Crestar Financial Corp. ...... 1,481,081
8,000 First Union Corp. ** ......... 454,000
15,000 Fleet Financial Group, Inc. .. 1,275,938
53,000 Hibernia Corp. Cl. A ......... 1,089,813
24,000 Susquehanna Bancshares, Inc. . 891,000
----------
12,807,628
----------
Building, Construction &
Furnishings - 0.9%
30,000 Fletcher Challenge Building ADR 596,250
13,584 Medusa Corp. ................. 830,322
10,577 Southdown, Inc. .............. 737,085
----------
2,163,657
----------
Business Equipment &
Services - 1.0%
15,000 Dun & Bradstreet Corp. ....... 512,813
36,000 Pitney Bowes, Inc. ........... 1,806,750
----------
2,319,563
----------
Chemical & Agricultural
Products - 1.4%
8,000 Eastman Chemical Co. ......... 539,500
11,000 Grace (W.R.) & Co. ........... 920,562
17,000 Imperial Chemical Industries
Plc, ADR ..................... 1,221,875
15,600 Stepan Co. ................... 473,850
----------
3,155,787
----------
Consumer Products &
Services - 1.2%
11,000 International Flavors &
Fragrances, Inc. ............. 518,375
30,000 Jostens, Inc. ................ 720,000
110,000 Stride Rite Corp. ............ 1,491,875
----------
2,730,250
----------
Diversified Companies - 1.4%
10,000 Harris Corp. ................. 521,250
19,000 Tenneco, Inc. ................ 811,062
80,000 Tomkins Plc, ADR ............. 1,930,000
----------
3,262,312
----------
Electrical Equipment &
Services - 2.4%
15,000 AMP, Inc. .................... 657,187
12,000 Emerson Electric Co. ......... 782,250
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Electrical Equipment &
Services - continued
36,656 Hubbell, Inc. Cl. B .......... $1,846,546
36,000 Thomas & Betts Corp. ......... 2,304,000
----------
5,589,983
----------
Finance & Insurance - 3.0%
36,363 Equitable Companies, Inc. .... 2,052,237
10,000 Hartford Financial Services
Group, Inc. .................. 1,085,000
20,000 LaSalle Re Holdings Ltd. ..... 838,750
15,000 Ohio Casualty Corp. .......... 720,000
6,000 Transamerica Corp. ........... 699,000
46,184 Trenwick Group, Inc. ......... 1,731,900
----------
7,126,887
----------
Food & Beverage Products - 1.9%
70,900 Flowers Industries, Inc. ..... 1,661,719
18,000 H.J. Heinz Co. ............... 1,050,750
50,000 Lance, Inc. .................. 1,137,500
28,000 Tasty Baking Corp. ........... 623,000
----------
4,472,969
----------
Healthcare Products &
Services - 2.5%
20,000 Baxter International, Inc. ... 1,102,500
14,000 Bristol-Myers Squibb Co. ..... 1,460,375
30,100 Shared Medical System Corp. .. 2,359,087
30,000 West Co., Inc. ............... 903,750
----------
5,825,712
----------
Industrial Specialty Products &
Services - 2.2%
10,000 Bemis Co., Inc. .............. 451,250
45,000 Carpenter Technology Corp. ... 2,430,000
48,776 Flowserve Corp. .............. 1,591,317
42,000 Lindberg Corp. ............... 740,250
----------
5,212,817
----------
Machinery - Diversified - 0.8%
55,100 Hardinge Brothers, Inc. ...... 1,880,288
----------
Oil / Energy - 3.7%
8,000 Amoco Corp. .................. 691,000
8,000 Atlantic Richfield Co. ....... 629,000
60,000 Berry Petroleum Co. Cl. A .... 907,500
15,000 Consolidated Natural Gas Co. . 865,312
15,400 Exxon Corp. .................. 1,041,425
3,000 Kerr-McGee Corp. ............. 208,688
10,000 Mobil Corp. .................. 766,250
17,200 Penn Virginia Corp. .......... 500,950
21,550 * Seitel, Inc. ................. 325,944
12,000 Texaco, Inc. ................. 723,000
60,000 Williams Companies, Inc. ..... 1,920,000
----------
8,579,069
----------
Oil Field Services - 0.6%
40,000 Lufkin Industries, Inc. ...... 1,300,000
----------
</TABLE>
29
<PAGE>
EVERGREEN
American Retirement Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Publishing, Broadcasting &
Entertainment - 2.0%
27,270 CBS Corp. ........................ $ 925,475
31,250 * Chancellor Media Corp. ........... 1,433,594
8,000 McGraw-Hill Companies, Inc. ...... 608,500
50,000 Reader's Digest Association, Inc. 1,365,625
5,800 Time Warner, Inc. ................ 417,600
-----------
4,750,794
-----------
Real Estate - 0.3%
10,000 Post Property, Inc. REIT ......... 399,375
15,000 Prentiss Properties Trust REIT ... 391,875
-----------
791,250
-----------
Retailing & Wholesale - 2.1%
23,000 J. C. Penney Co., Inc. ........... 1,740,812
8,000 Mercantile Stores Co., Inc. ...... 537,500
70,260 * Proffitts, Inc. .................. 2,546,925
-----------
4,825,237
-----------
Textile & Apparel - 0.1%
10,000 Oxford Industries, Inc. .......... 313,750
-----------
Thrift Institutions - 1.8%
45,000 First Palm Beach Bancorp, Inc. ... 1,811,250
18,100 Horizon Financial Corp. .......... 339,375
50,400 Maryland Federal Bancorp, Inc. ... 1,971,900
-----------
4,122,525
-----------
Transportation - 0.6%
27,000 Union Pacific Corp. .............. 1,517,063
-----------
Utilities - Electric - 4.9%
18,200 Commonwealth Energy System ....... 725,725
20,000 Eastern Utilities Associates ..... 545,000
30,000 Enova Corp. ...................... 838,125
80,000 Houston Industries, Inc. ......... 2,300,000
23,000 IES Industries, Inc. ............. 855,313
50,000 Long Island Lighting Co. ......... 1,575,000
37,000 PP&L Resources, Inc. ............. 874,125
22,000 Southern Co. ..................... 609,125
55,000 TNP Enterprises, Inc. ............ 1,818,437
40,000 Wisconsin Energy Corp. ........... 1,227,500
-----------
11,368,350
-----------
Utilities - Gas - 1.7%
40,500 Chesapeake Utilities Corp. ....... 744,188
9,250 Northwest Natural Gas Co. ........ 260,156
22,000 South Jersey Industries, Inc. .... 653,125
40,000 Southwest Gas Corp. .............. 835,000
60,400 Yankee Energy System, Inc. ....... 1,483,575
-----------
3,976,044
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Utilities - Telephone - 1.3%
5,500 * AirTouch Communications, Inc. .... $ 269,156
35,000 Frontier Corp. ................... 1,139,688
30,000 * U.S. West Communications Group, Inc. 1,642,500
-----------
3,051,344
-----------
Total Common Stocks
(cost $67,813,752)................ 102,888,904
-----------
CONVERTIBLE PREFERRED - 16.7%
Banks - 1.5%
50,000 National Australia Bank, Ltd.
7.875%, Series Unit .............. 1,450,000
58,000 WBK Trust
10.0%, STRYPES (exchangeable for
Westpac Banking Corp. Common
Stock) ........................... 1,975,625
-----------
3,425,625
-----------
Business Equipment &
Services - 0.2%
6,000 Microsoft Corp.
$2.196, Series A, PERCS .......... 555,000
-----------
Communication Systems &
Services - 0.5%
30,000 AirTouch Communications, Inc.
6.00%, Series B .................. 1,237,500
-----------
Diversified Companies - 1.6%
26,800 Corning, Inc.
6.00%, MIPS ...................... 1,835,800
80,000 Ingersoll Rand Co.
6.75%, PRIDES .................... 2,015,000
-----------
3,850,800
-----------
Electrical Equipment &
Services - 1.1%
50,000 Pioneer Standard Financial Trust
6.75%, 144A ...................... 2,537,500
-----------
Finance & Insurance - 2.5%
20,000 American General Corp.
$3.00, Series A, MIPS ............ 1,620,000
13,000 American Heritage Life
Investment Corp.
8.50%, PRIDES .................... 796,250
20,000 Frontier Financing Trust
6.25%, TOPRS, 144A ............... 1,312,600
11,000 Frontier Financing Trust
6.25%, TOPRS ..................... 721,930
4,000 Life Re Corp.
6.00% ............................ 288,000
15,000 Merrill Lynch & Co., Inc.
7.25%, STRYPES
(exchangeable for SunAmerica,
Inc. Common Stock) ............... 1,087,500
-----------
5,826,280
-----------
</TABLE>
30
<PAGE>
EVERGREEN
American Retirement Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
CONVERTIBLE PREFERRED - continued
Food & Beverage Products - 1.3%
25,000 Ralston Purina Co.
7.00%, SAILS (exchangeable for
Interstate Bakeries Common Stock) $1,578,125
30,000 Wendys Financing I
5.00%, Series A, TECONS ........ 1,576,875
----------
3,155,000
----------
Metal Products & Services - 1.4%
20,000 Timet Capital Trust I
6.625%, BUCS, 144A ............. 955,000
20,000 Timet Capital Trust I
6.625% ......................... 955,000
80,000 Worthington Industries, Inc.
7.25%, DECS (exchangeable for
Rouge Steel Co. Common Stock) .. 1,290,400
----------
3,200,400
----------
Oil / Energy - 0.4%
20,000 Callon Petroleum Co.
8.50%, Series A ................ 767,500
5,000 Nuevo Energy Co.
5.75%, Series A, TECONS ........ 245,625
----------
1,013,125
----------
Oil Field Services - 1.0%
40,000 EVI, Inc.
5.00%, 144A .................... 1,815,200
10,000 Hvide Capital Trust
6.50%, 144A .................... 472,500
----------
2,287,700
----------
Paper & Packaging - 0.6%
30,000 Crown Cork & Seal Co., Inc.
4.50%, MIPS .................... 1,500,000
----------
Publishing, Broadcasting &
Entertainment - 2.1%
15,000 AMC Entertainment, Inc.
$1.75 .......................... 615,000
10,000 American Radio Systems Corp.
7.00%, 144A .................... 781,300
10,300 Granite Broadcasting Corp.
$1.938 ......................... 585,813
22,000 Houston Industries, Inc.
7.00%, ACES (exchangeable for
Time Warner, Inc. Common Stock) 1,425,875
20,000 Merrill Lynch & Co., Inc.
6.00%, STRYPES due 6/1/99
(exchangeable for Cox
Communications, Inc. Common
Stock) ......................... 705,000
10,000 TCI Communications, Inc.
$2.125, Series A ............... 720,000
----------
4,832,988
----------
Transportation - 1.0%
20,000 CNF Trust I
5.00%, Series A, TECONS ........ 1,160,000
20,000 Union Pacific Capital Trust
6.25%, TIDES, 144A ............. 1,065,000
----------
2,225,000
----------
Utilities - Electric - 0.9%
45,000 BNDES Participacoes SA
DECS ........................... 2,002,500
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
CONVERTIBLE PREFERRED - continued
Utilities - Gas - 0.6%
40,000 MCN Corp.
8.75%, PRIDES .................. $1,305,000
----------
Total Convertible Preferred
(cost $35,096,931).............. 38,954,418
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
CONVERTIBLE DEBENTURES - 10.5%
Banks - 0.5%
$ 800,000 First State Bancorp
7.50%, 4/30/17 ..... 1,222,000
------------
Building, Construction
& Furnishings - 0.7%
1,500,000 Eagle Hardware &
Garden, Inc.
6.25%, 3/15/01 ..... 1,734,375
------------
Business Equipment
& Services - 1.2%
1,000,000 HMT Technology Corp.
5.75%, 1/15/04, 144A . 870,000
250,000 Personnel Group of
America, Inc.
5.75%, 7/1/04, 144A 358,125
250,000 Platinum Technology,
Inc.
6.75%, 11/15/01 .... 506,875
1,000,000 Quantum Corp.
7.00%, 8/1/04 ...... 985,000
------------
2,720,000
------------
Consumer Products &
Services - 0.7%
2,000,000 Action Performance
Companies, Inc.
4.75%, 4/1/05, 144A 1,720,000
------------
Industrial Specialty
Products &
Services - 0.4%
600,000 Robbins & Myers, Inc.
6.50%, 9/1/03 ...... 890,280
------------
Leisure &
Tourism - 1.7%
2,500,000 Family Golf Centers,
Inc.
5.75%, 10/15/04, 144A 3,147,000
1,000,000 Marriot International,
Inc.
Zero Coupon, 3/25/11 . 720,000
------------
3,867,000
------------
Oil Field
Services - 3.6%
1,000,000 Diamond Offshore
Drilling, Inc.
3.75%, 2/15/07 ..... 1,267,500
Key Energy Group, Inc.
1,000,000 5.00%, 9/15/04, 144A 800,000
500,000 7.00%, 7/1/03, 144A . 840,000
2,000,000 Nabors Industries,
Inc.
5.00%, 5/15/06 ..... 2,855,000
Offshore Logistics,
Inc.
1,000,000 6.00%, 12/15/06, 144A 1,102,500
500,000 6.00%, 12/15/03 ... 551,250
1,000,000 Parker Drilling Co.
5.50%, 8/1/04 ...... 1,005,000
------------
8,421,250
------------
Publishing,
Broadcasting &
Entertainment - 0.3%
1,000,000 Jacor Communications,
Inc.
Zero Coupon, 6/12/11 . 800,000
------------
</TABLE>
31
<PAGE>
EVERGREEN
American Retirement Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
CONVERTIBLE DEBENTURES - continued
Retailing & Wholesale - 1.4%
Central Garden & Pet Co.
$ 500,000 6.00%, 11/15/03, 144A .................. $ 757,500
1,600,000 6.00%, 11/15/03 ........................ 2,424,000
------------
3,181,500
------------
Total Convertible Debentures
(cost $21,539,090)....................... 24,556,405
------------
CORPORATE BONDS - 1.7%
Banks - 0.4%
1,000,000 NationsBank Corp.
6.50%, 8/15/03 .......................... 1,015,586
------------
Finance & Insurance - 0.9%
1,000,000 American General Finance Corp.
7.125%, 12/1/99 ......................... 1,017,788
1,000,000 Ford Motor Credit Co.
5.625%, 12/15/98 ........................ 998,267
------------
2,016,055
------------
Telecommunication Services
& Equipment - 0.4%
1,000,000 GTE Southwest, Inc., Series A
5.82%, 12/1/99 .......................... 998,240
------------
Total Corporate Bonds
(cost $4,004,940)........................ 4,029,881
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 25.1%
Government Agency Notes &
Bonds - 24.4%
1,000,000 Federal Farm Credit Bank
6.70%, 8/6/04 ........................... 1,004,659
Federal Home Loan Bank
2,000,000 5.65%, 12/29/00 ........................ 1,993,488
1,000,000 6.195%, 2/5/03 ......................... 991,288
2,000,000 6.532%, 12/28/07 ....................... 1,994,663
2,000,000 6.565%, 8/6/02 ......................... 2,011,384
2,000,000 6.585%, 10/15/02 ....................... 2,005,172
2,000,000 6.70%, 4/9/03 .......................... 2,001,916
3,000,000 6.715%, 4/9/03 ......................... 3,003,405
2,000,000 7.00%, 8/13/04 ......................... 2,004,442
2,000,000 7.00%, 7/14/05 ......................... 2,039,438
2,000,000 7.04%, 10/14/05 ........................ 2,002,108
2,000,000 7.26%, 4/3/02 .......................... 2,002,440
Federal Home Loan Mortgage Corp.
2,000,000 6.54%, 12/10/07 ........................ 2,020,458
2,000,000 6.542%, 3/19/01 ........................ 1,996,985
1,000,000 6.91%, 6/20/05 ......................... 1,016,684
2,000,000 7.585%, 9/19/06 ........................ 2,084,004
2,000,000 7.865%, 8/8/11 ......................... 2,111,684
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - continued
Government Agency Notes &
Bonds - continued
Federal National Mortgage
Association
$5,000,000 5.65%, 2/22/28 ......................... $ 4,548,182
2,000,000 6.24%, 1/14/08 ......................... 1,988,064
1,000,000 6.25%, 8/12/03 ......................... 990,746
3,000,000 6.32%, 3/3/08 .......................... 2,987,389
1,000,000 6.41%, 3/8/06 .......................... 1,030,472
1,000,000 6.45%, 1/28/05 ......................... 994,423
2,000,000 6.46%, 1/1/08 .......................... 2,006,648
2,000,000 6.52%, 3/5/08 .......................... 1,989,903
2,000,000 6.54%, 4/1/05 .......................... 1,995,442
2,000,000 6.68%, 12/28/01 ........................ 2,001,068
3,000,000 7.28%, 5/23/07 ......................... 3,113,403
1,000,000 Student Loan Marketing
Association
5.90%, 2/20/01 .......................... 994,282
------------
56,924,240
------------
Treasury Notes & Bonds - 0.7%
1,500,000 U.S. Treasury Bonds
7.125%, 2/15/23 ........................ 1,711,876
------------
Total U.S. Government & Agency
Obligations
(cost $58,127,135)....................... 58,636,116
------------
SHORT-TERM INVESTMENTS - 2.5%
Commercial Paper - 2.2%
385,000 Dominion Semiconductor
5.55%, 4/17/98 .......................... 384,050
530,000 Eiger Capital Corp.
5.53%, 4/6/98 ........................... 529,593
170,000 Gold Crown Managers Acceptance Corp.
5.55%, 4/8/98 ........................... 169,816
815,000 Lucent Technologies, Inc.
5.50%, 4/20/98 .......................... 812,634
250,000 Park Avenue Recreation Corp.
5.57%, 4/27/98 .......................... 248,994
765,000 Three Rivers Funding Corp.
5.57%, 4/24/98 .......................... 762,278
540,000 Tiger Managers Acceptance Corp.
5.58%, 4/21/98 .......................... 538,326
1,630,000 Twin Towers, Inc.
5.56%, 4/27/98 .......................... 1,623,455
------------
5,069,146
------------
Government Agency Notes &
Bonds - 0.3%
700,000 Federal Agricultural Mortgage Corp.
7.03%, 5/26/98 .......................... 701,213
150,000 Federal Home Loan Mortgage Corp.
5.45%, 4/9/98 ........................... 149,818
------------
851,031
------------
Total Short-Term Investments
(cost $5,918,965)........................ 5,920,177
------------
Total Investments -
(cost $192,500,813).......... 100.5% 234,985,901
Other Assets and
Liabilities - net ........... ( 0.5) (1,166,559)
----- ------------
Net Assets .................. 100.0% $233,819,342
===== ============
</TABLE>
32
<PAGE>
EVERGREEN
American Retirement Fund
Schedule of Investments (continued)
March 31, 1998
* Non-income producing securities.
** At March 31, 1998, the Fund owned 8,000 shares of common stock of First
Union Corp. at a cost of $106,108. During the year ended March 31, 1998,
the Fund earned $10,400 in dividend income from this investment. These
shares were purchased by the Fund prior to the acquisition of the
investment advisor and Lieber & Company by First Union.
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 Board of
Trustees.
Summary of Portfolio Abbreviations:
ACES Automatically Convertible Equity Securities.
ADR American Depository Receipts.
BUCS Beneficial Unsecured Convertible Securities.
DECS Dividend Enhanced Convertible Stock.
MIPS Monthly Income Preferred Shares.
PERCS Preferred Equity Redemption Cumulative Stock.
PRIDES Preferred Redeemable Increased Dividend Equity Securities.
REIT Real Estate Investment Trust.
SA Sociedad Anonyme (Spanish Corporation)
SAILS Stock Appreciation Income Linked Securities.
STRYPES Structured Yield Product Exchangeable for Stock.
TECONS Term Convertible Shares.
TIDES Term Income Deferrable Equitable Securities.
TOPRS Trust Origanated Preferred Securities.
See Combined Notes to Financial Statements.
33
<PAGE>
EVERGREEN
Balanced Fund
Schedule of Investments
March 31, 1998
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 56.3%
Advertising & Related
Services - 0.3%
93,600 Gannett Co., Inc. ... $ 6,727,500
-----------
Aerospace &
Defense - 0.4%
50,000 Rockwell International 2,868,750
Corp.
62,200 United Technologies
Corp. ............... 5,741,838
-----------
8,610,588
-----------
Automotive Equipment &
Manufacturing - 1.5%
283,700 Ford Motor Co. ...... 18,387,306
150,000 General Motors Corp. 10,115,625
-----------
28,502,931
-----------
Banks - 4.7%
250,020 BankAmerica Corp. ... 20,657,903
279,700 BankBoston Corp. .... 30,836,925
100,000 Chase Manhattan Corp. . 13,487,500
275,700 Fleet Financial Group,
Inc. ................. 23,451,731
-----------
88,434,059
-----------
Business Equipment &
Services - 0.8%
150,000 Xerox Corp. ......... 15,965,625
-----------
Capital Goods - 0.4%
60,000 Deere & Co. ......... 3,716,250
75,750 Ingersoll Rand Co. .. 3,631,266
-----------
7,347,516
-----------
Chemical & Agricultural
Products - 3.7%
133,200 Dow Chemical Co. .... 12,953,700
250,000 Du Pont (E. I.) De 17,000,000
Nemours & Co.
400,000 Monsanto Co. ........ 20,800,000
300,000 Morton International, 9,843,750
Inc.
136,000 PPG Industries, Inc. 9,239,500
-----------
69,836,950
-----------
Communication Systems &
Services - 0.1%
27,900 * Cisco Systems, Inc. . 1,908,534
-----------
Consumer Products &
Services - 2.9%
200,000 * Cendant Corp. ....... 7,925,000
23,300 Colgate-Palmolive Co. . 2,018,363
150,000 Gillette Co. ........ 17,803,125
220,000 Procter & Gamble Co. 18,562,500
139,000 Whirlpool Corp. ..... 9,530,187
-----------
55,839,175
-----------
Diversified
Companies - 1.1%
213,600 AlliedSignal, Inc. .. 8,971,200
80,000 Minnesota Mining & 7,295,000
Manufacturing Co.
81,400 Tyco International Ltd. 4,446,475
-----------
20,712,675
-----------
Electrical Equipment &
Services - 4.5%
108,000 Emerson Electric Co. 7,040,250
861,800 General Electric Co. 74,276,387
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Electrical Equipment &
Services - continued
49,600 Honeywell, Inc. ..... $ 4,101,300
-----------
85,417,937
-----------
Finance &
Insurance - 4.5%
83,492 Allstate Corp. ...... 7,676,046
60,000 CIGNA Corp. ......... 12,300,000
414,400 Federal Home Loan 19,658,100
Mortgage Corp.
200,000 Federal National 12,650,000
Mortgage Association
15,000 General Reinsurance 3,309,375
Corp.
53,600 PMI Group, Inc. ..... 4,328,200
68,200 SAFECO Corp. ........ 3,727,556
40,000 St. Paul Companies, 3,565,000
Inc.
150,000 Travelers Group, Inc. . 9,000,000
200,000 Travelers Property
Casualty Corp.
Cl. A ............... 8,800,000
-----------
85,014,277
-----------
Food & Beverage Products - 2.6%
46,800 Bestfoods ........... 5,469,750
29,100 Coca Cola Co. ....... 2,253,431
79,200 H.J. Heinz Co. ...... 4,623,300
88,000 Kellogg Co. ......... 3,795,000
569,800 Philip Morris 23,753,538
Companies, Inc.
141,800 Sara Lee Corp. ...... 8,738,425
-----------
48,633,444
-----------
Healthcare Products &
Services - 11.1%
300,000 American Home Products 28,612,500
Corp.
194,900 Bristol-Myers Squibb 20,330,506
Co.
58,200 HBO & Co. ........... 3,512,006
101,200 * HEALTHSOUTH Corp. ... 2,839,925
647,200 Johnson & Johnson ... 47,447,850
56,200 * Lincare Holdings, Inc. 3,958,588
213,000 Merck & Co., Inc. ... 27,343,875
318,300 Pfizer, Inc. ........ 31,730,531
204,800 Schering-Plough Corp. . 16,729,600
181,900 SmithKline Beecham Plc,
ADR ................. 11,380,119
37,200 * Universal Health
Services, Inc.
Cl. B ............... 2,148,300
84,000 Warner-Lambert Co. .. 14,306,250
-----------
210,340,050
-----------
Information Services &
Technology - 1.4%
200,000 * EMC Corp. ........... 7,562,500
100,000 Hewlett-Packard Co. . 6,337,500
100,000 International Business 10,387,500
Machines Corp.
23,200 * Microsoft Corp. ..... 2,075,675
-----------
26,363,175
-----------
Oil / Energy - 6.2%
96,600 Amoco Corp. ......... 8,343,825
289,000 Atlantic Richfield Co. 22,722,625
263,600 Chevron Corp. ....... 21,170,375
127,000 Exxon Corp. ......... 8,588,375
332,900 Mobil Corp. ......... 25,508,462
280,400 Royal Dutch Petroleum 15,930,225
Co.
58,200 Texaco, Inc. ........ 3,506,550
</TABLE>
34
<PAGE>
EVERGREEN
Balanced Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Oil / Energy - continued
294,400 Unocal Corp. ........ $ 11,389,600
-------------
117,160,037
-------------
Oil Field
Services - 0.5%
90,400 Halliburton Co. ..... 4,536,950
62,200 Schlumberger Ltd. ... 4,711,650
-------------
9,248,600
-------------
Paper &
Packaging - 1.5%
30,800 Georgia-Pacific Corp. . 1,994,300
57,000 International Paper Co. 2,668,313
126,600 Kimberly-Clark Corp. 6,345,825
300,000 Weyerhaeuser Co. .... 16,950,000
-------------
27,958,438
-------------
Real Estate - 2.5%
119,500 Arden Realty Group, 3,405,750
Inc. REIT
200,000 Boston Properties, Inc. 7,037,500
REIT
703,150 Equity Office 21,533,969
Properties Trust REIT
70,000 First Industrial Realty 2,520,000
Trust, Inc. REIT
200,003 Patriot American 5,400,081
Hospitality, Inc. REIT
100,000 Spieker Properties, 4,125,000
Inc. REIT
100,000 TriNet Corporate Realty 3,831,250
-------------
Trust, Inc. REIT
47,853,550
-------------
Retailing &
Wholesale - 0.7%
79,100 J. C. Penney Co., Inc. 5,986,881
60,000 May Department Stores 3,810,000
Co.
70,000 Sears, Roebuck & Co. 4,020,625
-------------
13,817,506
-------------
Transportation - 0.4%
120,000 Norfolk Southern Corp. 4,485,000
46,800 Union Pacific Corp. . 2,629,575
-------------
7,114,575
-------------
Utilities - Electric -
1.0%
39,500 American Electric Power 1,984,875
Co., Inc.
87,300 Cinergy Corp. ....... 3,230,100
74,000 Consolidated Edison 3,459,500
Inc.
42,000 Duke Power Co. ...... 2,501,625
71,400 Florida Progress Corp. 2,976,487
86,800 Houston Industries, 2,495,500
Inc.
65,200 PacifiCorp .......... 1,605,550
44,105 Texas Utilities Co. . 1,733,878
-------------
19,987,515
-------------
Utilities - Telephone -
3.5%
248,000 Ameritech Corp. ..... 12,260,500
300,000 AT&T Corp. .......... 19,687,500
157,651 Bell Atlantic Corp. . 16,159,227
23,950 Century Telephone 1,463,944
Enterprises, Inc.
162,000 GTE Corp. ........... 9,699,750
41,800 SBC Communications, 1,823,525
Inc.
75,480 Sprint Corp. ........ 5,109,053
-------------
66,203,499
-------------
Total Common Stocks
(cost $480,276,161).. 1,068,998,156
-------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
CONVERTIBLE PREFERRED - 2.7%
Consumer Products &
Services - 0.7%
100,000 Cendant Corp.
6.86% ............... $ 4,425,000
150,000 Newell Financial Trust I
5.25%, 144A ......... 8,475,000
-------------
12,900,000
-------------
Finance &
Insurance - 1.4%
64,200 Allstate Corp.
6.76%, DECS
(Exchangeable for PMI
Group, Inc. common 4,225,163
stock)
63,500 Conseco, Inc.
7.00%, PRIDES ....... 12,295,187
200,000 SunAmerica, Inc.
$3.188, PERCS ....... 9,687,500
-------------
26,207,850
-------------
Retailing &
Wholesale - 0.6%
200,000 Kmart Financing I
7.75% ............... 12,550,000
-------------
Total Convertible
Preferred
(cost $36,210,992)... 51,657,850
-------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
CONVERTIBLE DEBENTURES - 1.2%
Healthcare Products &
Services - 0.5%
$10,000,000 HEALTHSOUTH Corp.
3.25%, 4/1/03, 144A 9,962,500
---------
Industrial Specialty
Products &
Services - 0.2%
3,000,000 Solectron Corp.
6.00%, 3/1/06 ...... 4,147,500
---------
Retailing &
Wholesale - 0.5%
5,250,000 Staples, Inc.
4.50%, 10/1/00, 144A . 8,413,125
---------
Total Convertible
Debentures
(cost $18,250,000).. 22,523,125
----------
CORPORATE BONDS - 18.2%
Aerospace &
Defense - 0.9%
5,000,000 Boeing Co.
6.625%, 2/15/38, 144A 4,941,900
Northrop Grumman Corp.
5,500,000 7.00%, 3/1/06 ..... 5,645,695
5,000,000 9.375%, 10/15/24 .. 5,913,950
----------
16,501,545
----------
Automotive Equipment &
Manufacturing - 0.4%
7,500,000 Hertz Corp.
7.00%, 5/1/02 ...... 7,634,850
----------
Consumer Products &
Services - 0.1%
1,001,000 Stanley Works
7.375%, 12/15/02 ... 1,047,256
----------
</TABLE>
35
<PAGE>
EVERGREEN
Balanced Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
CORPORATE BONDS - continued
Diversified
Companies - 0.7%
General Electric
Capital Corp.
$1,280,000 8.75%, 3/14/03 .... $ 1,438,170
5,470,000 8.75%, 5/21/07 .... 6,410,840
5,000,000 Grand Metropolitan
Investment Corp.
7.45%, 4/15/35 ..... 5,610,500
-----------
13,459,510
-----------
Finance &
Insurance - 7.3%
8,000,000 ABN Amro Bank NV
Chicago Branch
7.30%, 12/1/26 ..... 7,987,600
8,000,000 AMBAC, Inc.
9.375%, 8/1/11 ..... 9,930,160
3,465,000 Amsouth Bancorp
6.75%, 11/1/25 ..... 3,564,688
6,550,000 Associates Corp. North
America
8.625%, 11/15/04 ... 7,368,422
6,750,000 Bear Stearns Cos. Inc.
6.20%, 3/30/03 ..... 6,710,175
5,800,000 Beneficial Corp.
6.25%, 2/18/13 ..... 5,713,174
698,000 Boatmen's Bancshares,
Inc.
6.75%, 3/15/03 ..... 711,011
4,500,000 CIT Group Holdings,
Inc.
9.25%, 3/15/01 ..... 4,876,470
6,400,000 Commercial Credit
Group, Inc.
10.00%, 5/15/09 .... 8,111,552
1,280,000 Dean Witter, Discover
& Co.
6.75%, 10/15/13 .... 1,284,493
General Motors
Acceptance Corp.
5,500,000 5.875%, 1/22/03 ... 5,435,760
6,600,000 8.50%, 1/1/03 ..... 7,194,198
2,250,000 International Lease
Finance Corp.
5.75%, 1/15/03 ..... 2,204,933
5,500,000 John Hancock Mutual
Life Insurance Co.
7.375%, 2/15/24, 144A 5,674,405
6,500,000 Lehman Brothers
Holdings, Inc.
6.50%, 10/1/02 ..... 6,531,265
7,000,000 Liberty Mutual
Insurance Co.
7.697%, 10/15/97 ... 7,260,190
5,000,000 Mellon Capital II
7.995%, 1/15/27 .... 5,300,700
2,250,000 Merrill Lynch & Co.,
Inc.
6.00%, 2/12/03 ..... 2,233,125
4,000,000 National Westminster
Bancorp
9.375%, 11/15/03 ... 4,563,000
6,000,000 Nationwide CSN Trust
9.875%, 2/15/25, 144A 6,917,880
Paine Webber Group,
Inc.
4,705,000 8.25%, 5/1/02 ..... 5,003,673
5,050,000 9.25%, 12/15/01 ... 5,511,621
6,200,000 Prudential Insurance
Co.
7.125%, 7/1/07 ..... 6,457,424
1,164,000 Salomon, Inc.
5.50%, 1/15/99 ..... 1,159,914
3,750,000 Southtrust Bank
6.565%, 12/15/27 ... 3,810,075
6,700,000 Sun Life Canada
Capital Trust
8.526%, 5/29/49 .... 7,333,820
-----------
138,849,728
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
CORPORATE BONDS - continued
Food & Beverage
Products - 0.4%
$ 989,000 PepsiCo, Inc.
7.625%, 11/1/98 .... $ 998,544
Philip Morris
Companies, Inc.
5,000,000 7.20%, 2/1/07 ..... 5,157,900
1,164,000 8.65%, 5/15/98 .... 1,167,562
-----------
7,324,006
-----------
Healthcare Products &
Services - 0.6%
8,000,000 Medpartners, Inc.
6.875%, 9/1/00 ..... 7,929,440
3,000,000 Merck & Co., Inc.
6.40%, 3/1/28 ...... 2,983,140
-----------
10,912,580
-----------
Industrial Specialty
Products &
Services - 0.6%
1,629,000 Jet Equipment Trust
9.41%, 6/15/10, 144A . 1,952,128
1,100,000 Textron, Inc.
10.01%, 2/1/00 ..... 1,175,614
Waste Management, Inc.
7,000,000 7.65%, 3/15/11 .... 7,207,812
326,000 8.75%, 5/1/18 ..... 360,325
-----------
10,695,879
-----------
Information Services &
Technology - 0.3%
6,500,000 Comdisco Inc.
6.125%, 1/15/03 .... 6,404,905
-----------
Machinery - Diversifie
- 0.1%
2,000,000 Caterpillar, Inc.
9.375%, 7/15/01 .... 2,184,940
-----------
Oil / Energy - 1.2%
5,000,000 Global Marine, Inc.
7.125%, 9/1/07 ..... 5,128,906
4,250,000 Occidental Petroleum
Corp.
9.25%, 8/1/19 ...... 5,170,465
5,000,000 Petroleum Geo Services
6.625%, 3/30/08 .... 4,991,550
7,500,000 Transocean Offshore,
Inc.
8.00%, 4/15/27 ..... 8,516,325
-----------
23,807,246
-----------
Oil Field
Services - 0.5%
Atlantic Richfield Co.
931,000 9.00%, 4/1/21 ..... 1,182,882
3,500,000 9.875%, 3/1/16 .... 4,684,225
4,250,000 Smith International,
Inc.
7.00%, 9/15/07 ..... 4,348,133
-----------
10,215,240
-----------
Paper &
Packaging - 0.4%
8,000,000 James River Corp.
6.75%, 10/1/99 ..... 8,077,600
-----------
Publishing, Broadcasting &
Entertainment - 0.6%
10,450,000 Time Warner Inc.
8.05%, 1/15/16 ..... 11,282,551
-----------
</TABLE>
36
<PAGE>
EVERGREEN
Balanced Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
CORPORATE BONDS - continued
Real Estate - 0.6%
$ 7,000,000 Equity Office Properties Trust
6.375%, 2/15/03 ..................... $ 6,929,860
4,000,000 Glenborough Realty Trust, Inc.
7.625%, 3/15/05, 144A ............... 3,982,500
-------------
10,912,360
-------------
Retailing & Wholesale - 0.7%
8,000,000 Fred Meyer Inc.
7.15%, 3/1/03 ....................... 7,993,280
4,300,000 Sears Roebuck & Co.
10.00%, 2/3/12 ...................... 5,670,969
-------------
13,664,249
-------------
Telecommunication Services &
Equipment - 0.6%
6,750,000 Bellsouth Capital Funding Corp.
7.12%, 7/15/97, Deb. ................ 7,137,787
4,000,000 Frontier Corp.
6.25%, 12/15/99, 144A ............... 4,005,200
-------------
11,142,987
-------------
Transportation - 0.8%
5,884,228 Atlantic Coast Airlines Corp.
7.20%, 1/1/14 ....................... 5,973,374
3,000,000 Golden St. Pete Transportation Corp.
8.04%, 2/1/19 ....................... 3,172,500
6,250,000 Norfolk Southern Corp.
7.05%, 5/1/37 ....................... 6,582,500
-------------
15,728,374
-------------
Utilities - Electric - 0.9%
5,000,000 Central Illinois Public Service Co.
7.61%, 6/1/17 ....................... 5,361,350
5,000,000 Oklahoma Gas & Electric Co.
6.65%, 7/15/27 ...................... 5,185,700
4,000,000 Rural Electric Cooperative
8.67%, 9/15/18 ...................... 4,539,160
284,000 System Energy Resources, Inc.
11.375%, 9/1/16 ..................... 302,514
838,000 Union Electric Co.
8.00%, 12/15/22 ..................... 895,328
-------------
16,284,052
-------------
Utilities - Gas - 0.3%
5,000,000 K N Energy Inc.
6.45%, 3/1/03 ....................... 5,004,000
-------------
Utilities - Telephone - 0.2%
3,500,000 GTE Florida Inc.
6.86%, 2/1/28 ....................... 3,516,520
-------------
Total Corporate Bonds
(cost $339,315,281).................. 344,650,378
-------------
ASSET-BACKED SECURITIES - 5.2%
5,500,000 Americredit Automobile Receivable,
Series 1997-C, Class A3,
6.30%, 7/5/03 ....................... 5,554,395
12,500,000 Carco Auto Loan Master Trust,
Series 1997-1, Class A,
6.69%, 8/15/04 ...................... 12,573,875
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
ASSET-BACKED SECURITIES - continued
$ 2,750,000 Contimortgage Home Equity Loan,
Series 1997-4, Class A7
6.63%, 9/15/16 ...................... $ 2,774,062
4,000,000 Contimortgage Home Equity Loan Trust,
Series 1998-1, Class A6,
6.58%, 12/15/18 ..................... 4,006,250
6,150,000 Corestates Home Equity Loan,
Series 1996-1, Class A4,
7.00%, 6/15/12 ...................... 6,215,344
Green Tree Financial Corp.
6,000,000 Series 1993-4, Class A3,
6.25%, 1/15/19 ...................... 6,011,220
6,000,000 Series 1997-3, Class A5,
7.14%, 7/15/28 ...................... 6,148,080
Merrill Lynch Mortgage Investors, Inc.
1,655,602 Series 1992-B, Class B,
8.50%, 4/15/12 ...................... 1,653,532
3,597,136 Series 1992-D, Class B,
8.50%, 6/15/17 ...................... 3,809,439
5,000,000 Series 1991-D, Class B,
9.85%, 7/15/11 ...................... 5,112,500
8,000,000 Olympic Automobile Receivables Trust,
Series 1997-A, Class A5
6.80%, 2/15/05 ...................... 8,139,040
10,000,000 Premier Auto Trust, Series 1997-2,
Class B,
6.53%, 12/6/03 ...................... 10,087,500
7,500,000 Southern Pacific Secured Assets Corp.,
Series 1996-3, Class A4
7.60%, 10/25/27 ..................... 7,661,719
930,000 University Support Services, Inc.,
Series 1992-D,
8.98%, 11/1/07 ...................... 927,094
10,900,000 WFS Financial Owner Trust, Series
1997-C, Class CTFS
6.30%, 3/20/05 ...................... 10,842,094
6,650,000 World Omni Automobile Lease, Series
1997-A, Class A4,
6.90%, 6/25/03 ...................... 6,762,185
-------------
Total Asset-Backed Securities
(cost $96,861,861)................... 98,278,329
-------------
FOREIGN BONDS (U.S. DOLLARS) - 1.3%
5,000,000 Bayer Corp.
7.125%, 10/1/15, 144A ............... 5,225,200
4,000,000 IBJ Preferred Capital Co. LLC
8.79%, 12/29/49, 144A ............... 3,870,000
640,000 International Bank For Reconstruction &
Development Co.
7.95%, 5/15/16 ...................... 755,283
7,000,000 Republic of Columbia
8.625%, 4/1/08 ...................... 7,032,130
8,000,000 YPF Sociedad Anonima
7.25%, 3/15/03 ...................... 7,969,680
-------------
Total Foreign Bonds (U.S. Dollars)
(cost $24,946,002)................... 24,852,293
-------------
FOREIGN BONDS (NON-U.S. DOLLARS) - 3.8%
Nykredit
DKK
280,000 7.00%, 10/1/29 ..................... 40,108
DKK
194,622,000 6.00%, 10/1/26 ..................... 27,312,221
DKK Realkredit Danmark
206,500,000 6.00%, 10/1/26 ...................... 28,979,115
</TABLE>
37
<PAGE>
EVERGREEN
Balanced Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
FOREIGN BONDS (NON-U.S. DOLLARS) - continued
Republic of Greece
GRD
7,200,000 6.75%, 11/13/06 ..................... $ 4,231,516
GRD
2,150,000,000 8.60%, 3/26/08 ...................... 6,999,609
SEK Skandinaviska Enskilda
60,000,000 0.00%, 5/26/33 ..................... 5,226,000
------------
Total Foreign Bonds (Non-U.S. Dollars)
(cost $72,865,840).................... 72,788,569
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 2.0%
Treasury Notes & Bonds - 0.9%
U.S. Treasury Bonds
$ 2,750,000 6.375%, 8/15/27 ..................... 2,904,688
9,935,000 7.875%, 2/15/21 ..................... 12,193,623
1,450,000 U.S. Treasury Notes
5.50%, 2/28/03 ....................... 1,441,387
------------
16,539,698
------------
U.S. Government Agency
Obligations - 1.1%
11,000,000 Federal Home Loan Bank
5.625%, 3/19/01 ...................... 10,953,580
10,000,000 Federal National Mortgage Association
5.25%, 1/15/03 ....................... 9,768,700
------------
..................................... 20,722,280
------------
Total U.S. Government & Agency
Obligations
(cost $37,335,232).................... 37,261,978
------------
MORTGAGE-BACKED SECURITIES - 7.8%
Mortgage Pass-Through
Certificates - 2.7%
Federal Home Loan Mortgage Corp.
1,547,373 7.08%, 6/1/16 ....................... 1,585,574
1,846,801 7.56%, 3/1/22 ....................... 1,896,433
5,432,301 7.86%, 4/1/22 ....................... 5,723,418
Federal National Mortgage Association
18,134,863 5.50%, 7/1/09 ....................... 17,684,211
5,193,664 7.00%, 5/1/24 ....................... 5,248,821
3,639,786 7.45%, 2/1/27 ....................... 3,716,549
2,284,692 7.57%, 12/1/23 ...................... 2,354,604
1,014,694 7.59%, 5/1/22 ....................... 1,062,263
3,396,186 7.63%, 9/1/21 ....................... 3,555,909
5,116,224 7.74%, 1/1/31 ....................... 5,348,858
Government National Mortgage
Association
565,397 8.50%, 5/15/21 ...................... 600,027
345,631 8.50%, 7/15/21 ...................... 367,772
712,402 8.50%, 6/15/22 ...................... 754,028
371,573 9.00%, 9/15/21 ...................... 401,759
593,937 9.00%, 10/15/21 ..................... 642,189
329,669 9.50%, 2/15/21 ...................... 357,582
------------
51,299,997
------------
Collateralized Mortgage
Obligations - 5.1%
3,300,000 Asset Securitization Corp.,
Series 1996-D3, Class A3
7.14%, 10/13/26 ...................... 3,510,891
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MORTGAGE-BACKED SECURITIES - continued
Collateralized Mortgage
Obligations - continued
$ 2,000,000 Chase Commercial Mortgage Securities
Corp., Series 1997-2, Class B,
6.60%, 11/19/07 ...................... $ 1,963,750
2,200,000 Chase Commercial Mortgage Securities
Corp., Series 1997-1, Class B,
7.37%, 4/19/07 ....................... 2,235,337
4,763,274 Chase Mortgage Finance Corp.,
Series 1994-D, Class M,
6.75%, 2/25/25 ....................... 4,648,956
2,400,000 Commercial Mortgage Acceptance
Corp., Series 1997-ML1, Class B,
6.42%, 12/15/07 ...................... 2,412,000
7,694,341 Criimi Mae Financial Corp.
Series 1, Class A,
7.00%, 1/1/33 ........................ 7,667,892
1,250,000 FFCA Secured Lending Corp.,
Series 1997-1, Class B1,
7.74%, 6/18/13 ....................... 1,322,852
5,507,639 Financial Asset Securitization,
Series 1997-NAM 1, Class FXA2,
7.75%, 5/25/27 ....................... 5,627,258
Federal National Mortgage Association
1,250,000 Remic Trust 1993-248, Class SA,
4.19%, 8/25/23 ....................... 1,049,787
5,000,000 Series 1997-M6, Class C,
6.85%, 5/17/20 ....................... 5,221,094
7,898,205 Independent National Mortgage Corp.,
144A, Series 1997-A, Class A,
7.84%, 12/26/26 ...................... 7,954,440
1,080,985 KS Mortgage Capital, L. P., 144A,
Series 1995-1, Class A1,
7.14%, 4/20/02 ....................... 1,084,025
Merrill Lynch Mortgage Investors, Inc.
2,299,000 Series 1996-C2, Class B,
6.96%, 11/21/28 ...................... 2,357,193
5,000,000 Series 1997-C1, Class A3,
7.12%, 6/18/29 ....................... 5,221,875
5,870,000 Merrill Lynch Trust, Series 35, Class G,
8.45%, 11/1/18 ....................... 6,222,200
1,891,030 Mid State Trust, Series 6, Class A3,
7.45%, 11/1/35 ....................... 1,909,827
6,000,000 Morgan Stanley Capital I Inc.,
Commercial Mortgage Certificate
1998 Wf1 Class C
6.77%, 1/15/08 ....................... 6,063,750
4,000,000 Nomura Asset Securities Corp.,
Commercial Mortgage Certificate
Series 1998 D6, Class A 3
6.98%, 3/17/28 ....................... 4,061,400
12,508,375 Nomura Depositor Trust Str I,
Commercial Mortgage Certificate
Series 1998-ST1A, Class A1, 144A
5.91%, 2/15/24 ....................... 12,508,570
306,517 Paine Webber Mortgage Acceptance
Corp. IV, Series 1993-5, Class A3,
6.875%, 6/25/08 ...................... 305,818
PNC Mortgage Securities Corp.
2,485,717 Series 1997-4, Class 2PP3,
7.25%, 7/25/27 ....................... 2,472,542
6,840,505 Series 1997-4, Class 2PP1,
7.50%, 7/25/27 ....................... 6,823,668
</TABLE>
38
<PAGE>
EVERGREEN
Balanced Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MORTGAGE-BACKED SECURITIES - continued
Collateralized Mortgage
Obligations - continued
$ 4,817,956 Shearson Lehman CMO Inc.,
Series V, Class 5
7.50%%, 5/1/19 ...................... $ 4,977,285
--------------
97,622,410
--------------
Total Mortgage-Backed Securities
(cost $146,908,231).................. 148,922,407
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
REPURCHASE AGREEMENT - 1.5%
$ 27,655,000 Keystone Joint Repurchase Agreement,
investments in repurchase
agreements, in a joint trading
account, purchased 3/31/98,
5.67%, maturing 4/1/98, maturity
value $27,659,356,
(cost $27,655,000) (a) .............. $ 27,655,000
--------------
Total Investments -
(cost $1,280,624,600)..... 100.0% 1,897,588,085
Other Assets and
Liabilities - net ........ 0.0 (434,344)
------ --------------
Net Assets ................ 100.0% $1,897,153,741
====== ==============
</TABLE>
* Non-income producing securities.
(a) The repurchase agreements are fully collateralized by U.S. Government
and/or agency obligations based on market prices at March 31, 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 Board of
Trustees.
Summary of Portfolio Abbreviations:
ADR American Depository Receipt
DECS Dividend Enhanced Convertible Stock
PERCS Preferred Equity Redemption Cumulative Stock
PRIDES Preferred Redeemable Income Debt Exchangeable for Stock
REIT Real Estate Investment Trust
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward foreign currency exchange contracts to sell:
<TABLE>
<S> <C> <C> <C> <C> <C>
Exchange U.S. $ Value at In Exchange Net Unrealized
Date Contracts to Deliver March 31, 1998 for U.S. $ Appreciation
- ------- -------------------------------------- ----------------- ------------- --------
6/26/98 8,115,000 German Deutsche Marks $4,409,236 $4,460,580 $ 51,344
4/16/98 198,540,000 Danish Kroner 28,181,905 28,781,421 599,516
6/12/98 199,000,000 Danish Kroner 28,324,458 28,645,458 321,000
--------
Unrealized appreciation on forward foreign currency
exchange contracts $971,860
========
</TABLE>
See Combined Notes to Financial Statements.
39
<PAGE>
EVERGREEN
Foundation Fund
Schedule of Investments
March 31, 1998
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 60.8%
Aerospace &
Defense - 0.8%
392,600 Boeing Co. .......... $20,464,275
5,420 Raytheon Co. Cl. A .. 308,263
11,000 United Technologies
Corp. ............... 1,015,437
-----------
21,787,975
-----------
Automotive Equipment &
Manufacturing - 1.6%
438,400 Chrysler Corp. ...... 18,221,000
85,000 General Motors Corp. 5,732,187
30,000 Genuine Parts Co. ... 1,143,750
208,800 Goodyear Tire & Rubber
Co................... 15,816,600
-----------
40,913,537
-----------
Banks - 7.7%
55,400 AmSouth Bancorp ..... 3,272,062
50,000 Bancfirst Corp. ..... 1,987,500
391,800 BankBoston Corp. .... 43,195,950
5,000 Bankers Trust Corp. . 601,563
140,062 BSB Bancorp, Inc. ... 4,341,922
82,000 Cape Cod Bank & Trust
Co. ................. 3,608,000
27,000 CB Bancshares, Inc. . 982,125
92,700 CitiCorp ............ 13,163,400
106,000 Crestar Financial Corp. 6,267,250
321,950 Dime Bancorp, Inc. .. 9,678,622
85,138 First Chicago NBD Corp. 7,502,786
3,800 First Empire State
Corp. ................ 1,899,525
290,900 First of America Bank
Corp. ................ 25,162,850
16,875 First Security Corp. 401,836
117,000 First Union Corp. ** 6,639,750
45,000 Fleet Financial Group,
Inc. ................. 3,827,812
43,400 Hancock Holding Co. . 2,669,100
70,801 Hibernia Corp. Cl. A 1,455,846
278,400 KeyCorp ............. 10,527,000
50,000 Mississippi Valley
Bancshares, Inc. .... 2,087,500
131,825 NationsBank Corp. ... 9,614,986
66,150 Peoples Heritage
Financial Group ..... 3,191,738
102,000 Seacoast Banking Corp.
of Florida Cl. A ..... 3,774,000
88,200 SunTrust Banks, Inc. 6,648,075
65,000 U.S. Trust Corp. .... 4,273,750
58,275 Wachovia Corp. ...... 4,942,448
80,000 Webster Financial Corp. 5,560,000
238,300 Wilmington Trust Corp. 15,817,162
-----------
203,094,558
-----------
Building, Construction
& Furnishings - 1.7%
211,400 Armstrong World
Industries, Inc. .... 18,299,312
17,857 Engle Homes, Inc. ... 299,105
82,500 Home Depot, Inc. .... 5,563,594
356,122 Lennar Corp. ........ 12,263,951
103,000 Lowe's Companies, Inc. 7,229,312
15,100 M/I Schottenstein
Homes, Inc. .......... 330,313
-----------
43,985,587
-----------
Business Equipment &
Services - 0.3%
35,500 * Crescent Operating,
Inc. ................. 758,813
50,000 Lucent Technologies,
Inc. ................. 6,393,750
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Business Equipment &
Services - continued
10,000 * Policy Management
Systems Corp. ....... $ 803,125
10,000 Xerox Corp. ......... 1,064,375
-----------
9,020,063
-----------
Capital Goods - 1.0%
115,000 Caterpillar, Inc. ... 6,332,187
301,700 Deere & Co. ......... 18,686,544
-----------
25,018,731
-----------
Chemical & Agricultural
Products - 3.5%
40,000 Air Products & 3,315,000
Chemicals, Inc.
571,200 Du Pont (E. I.) De
Nemours & Co. ....... 38,841,600
70,000 Grace (W.R.) & Co. .. 5,858,125
60,000 H.B. Fuller Co. ..... 3,592,500
217,800 Monsanto Co. ........ 11,325,600
170,000 Morton International,
Inc. ................ 5,578,125
75,000 Nalco Chemical Co. .. 3,042,187
58,000 Pioneer Hi-Bred
International, Inc. . 5,658,625
110,800 PPG Industries, Inc. 7,527,475
45,000 Praxair, Inc. ....... 2,314,688
115,000 Schulman (A.), Inc. . 2,903,750
100,560 Solutia, Inc. ....... 2,991,660
-----------
92,949,335
-----------
Communication Systems &
Services - 0.3%
105,000 * Cisco Systems, Inc. . 7,179,375
-----------
Consumer Products &
Services - 1.7%
35,000 Avon Products, Inc. . 2,730,000
95,000 Black & Decker Corp. 5,040,937
233,150 * Cendant Corp. ....... 9,238,569
32,052 * Consolidated Products,
Inc. ................ 617,001
50,000 H & R Block, Inc. ... 2,378,125
146,300 International Flavors &
Fragrances, Inc. .... 6,894,387
105,100 * Nautica Enterprises,
Inc. ................ 3,231,825
40,000 Nike, Inc. Cl. B .... 1,770,000
20,000 Premark International,
Inc. ................ 662,500
94,200 Procter & Gamble Co. 7,948,125
118,500 Tupperware Corp. .... 3,155,063
-----------
43,666,532
-----------
Diversified
Companies - 0.0% (a)
8,000 Cooper Industries, Inc. 475,500
2,800 Tyco International Ltd. 152,950
-----------
628,450
-----------
Electrical Equipment &
Services - 2.8%
163,400 AMP, Inc. ........... 7,158,963
130,000 Applied Power, Inc.
Cl. A ............... 5,005,000
512,200 General Electric Co. 44,145,237
107,000 Honeywell, Inc. ..... 8,847,562
</TABLE>
40
<PAGE>
EVERGREEN
Foundation Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Electrical Equipment &
Services - continued
1,500 Motorola, Inc. ..... $ 90,938
117,000 Perkin Elmer Corp. . 8,460,562
-----------
73,708,262
-----------
Finance &
Insurance - 9.1%
10,668 Aetna, Inc. ........ 890,111
60,000 AFLAC, Inc. ........ 3,795,000
120,000 Allstate Corp. ..... 11,032,500
110,600 Ambac Financial Group,
Inc. ............... 6,463,187
169,475 American International
Group, Inc. ........ 21,343,258
173,500 Beneficial Corp. ... 21,568,219
51,800 Chubb Corp. ........ 4,059,825
148,350 Countrywide Credit
Industries, Inc. ... 7,890,366
95,000 * Degeorge Financial
Corp. .............. 130,625
20,000 FBL Financial Group,
Inc.
Cl. A .............. 1,012,500
40,000 Federal Home Loan
Mortgage Corp. ..... 1,897,500
699,000 Federal National
Mortgage Association.. 44,211,750
115,000 Frontier Insurance
Group, Inc. ......... 3,176,875
24,000 Interstate/Johnson
Lane, Inc. .......... 732,000
70,000 John Alden Financial
Corp. ............... 1,509,375
142,200 John Nuveen Co., Cl. A 5,208,075
118,600 Lehman Brothers
Holdings, Inc. ...... 8,880,175
279,400 Marsh & McLennan Co.,
Inc. ................ 24,395,112
327,400 Merrill Lynch & Co.,
Inc. ................ 27,174,200
345,200 MGIC Investment Corp. 22,675,325
40,000 Mid Ocean Ltd. ..... 3,100,000
155,000 NAC RE Corp. ....... 8,127,812
110,000 Nationwide Financial
Services, Inc.
Cl. A .............. 4,771,250
15,000 Ohio Casualty Corp. 720,000
142,250 Raymond James
Financial, Inc. .... 6,196,766
9,470 * Security Capital
Group, Inc. Cl. B
Warrants $28.00
Expiring 9/18/98 ... 31,369
3,500 SLM Holding Corp. .. 152,688
-----------
241,145,863
-----------
Food & Beverage
Products - 0.6%
120,000 Bestfoods .......... 14,025,000
30,000 * Corn Products
International, Inc.. 1,076,250
3,000 Tricon Global
Restaurants, Inc. ... 90,188
-----------
15,191,438
-----------
Forest Products - 0.3%
88,000 Union Camp Corp. ... 5,258,000
90,000 Willamette Industries,
Inc. ............... 3,380,625
-----------
8,638,625
-----------
Healthcare Products &
Services - 6.0%
205,700 Abbott Laboratories 15,491,781
1,750 * Alza Corp. Warrants
$65.00 Expiring
12/31/99 ........... 1,695
202,900 American Home Products
Corp. .............. 19,351,587
65,000 Baxter International,
Inc. ............... 3,583,125
101,200 Bristol-Myers Squibb
Co. ................ 10,556,425
180,900 Columbia / HCA
Healthcare Corp. ... 5,834,025
23,000 * Covance, Inc. ...... 564,938
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Healthcare Products &
Services - continued
76,000 * First Health Group
Corp. .............. $ 4,123,000
68,550 Guidant Corp. ...... 5,029,856
114,500 Johnson & Johnson .. 8,394,281
312,524 Lilly (Eli) & Co. .. 18,634,244
65,000 * Lincare Holdings, Inc. 4,590,625
41,666 * Maxxim Medical, Inc. . 1,195,293
160,000 McKesson Corp. ..... 9,240,000
151,750 * MedPartners, Inc. .. 1,555,438
146,600 Medtronic, Inc. .... 7,604,875
167,758 Merck & Co., Inc. .. 21,535,933
96,000 Pfizer, Inc. ....... 9,570,000
11,500 * Quest Diagnostics,
Inc. ............... 193,344
132,000 Schering-Plough Corp. 10,782,750
9,200 Shared Medical System
Corp. ............... 721,050
1,800 Warner-Lambert Co. . 306,563
-----------
158,860,828
-----------
Industrial Specialty
Products &
Services - 1.7%
155,970 Autoliv, Inc. ...... 4,844,818
40,000 Bemis Co., Inc. .... 1,805,000
147,000 Corning, Inc. ...... 6,504,750
64,600 * Halter Marine Group,
Inc. ............... 1,025,525
30,000 Parker Hannifin Corp. 1,537,500
30,000 Pittston Brink's Group 1,143,750
190,000 Snap-on, Inc. ...... 8,668,750
6,000 * Strattec Security
Corp. .............. 163,969
35,000 Sundstrand Corp. ... 2,117,500
378,000 Timken Co. ......... 12,781,125
50,000 Trinity Industries,
Inc. ............... 2,743,750
55,000 * UCAR International,
Inc. ............... 1,725,625
38,000 * Unova, Inc. ........ 760,000
-----------
45,822,062
-----------
Information Services &
Technology - 6.3%
137,566 * Analog Devices, Inc. . 4,574,069
110,000 Compaq Computer Corp. 2,846,250
37,500 Computer Associates
International, Inc. .. 2,165,625
10,000 Computer Sciences
Corp. ................ 550,000
531,800 Hewlett-Packard Co. .. 33,702,825
821,600 Intel Corp. ........ 64,136,150
164,000 International Business 17,035,500
Machines Corp.
346,000 * Microsoft Corp. .... 30,967,000
224,000 * Sun Microsystems, Inc. . 9,345,000
2,000 Texas Instruments, Inc. . 108,250
-----------
165,430,669
-----------
Leisure &
Tourism - 0.1%
30,993 Disney Walt Co. .... 3,308,503
-----------
Oil / Energy - 1.4%
60,000 Amoco Corp. ........ 5,182,500
1,200 Atlantic Richfield Co. 94,350
113,500 Consolidated Natural
Gas Co. ............ 6,547,531
289,000 Equitable Resources,
Inc. ............... 9,609,250
102,400 Exxon Corp. ........ 6,924,800
</TABLE>
41
<PAGE>
EVERGREEN
Foundation Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Oil / Energy - continued
900 Kerr-McGee Corp. ...................... $ 62,606
91,800 Mobil Corp. ........................... 7,034,175
900 Pennzoil Co. .......................... 58,163
86,206 * Seitel, Inc. .......................... 1,303,866
1,200 Sonat, Inc. ........................... 52,200
33,877 Union Pacific Resource Group, Inc. .... 808,813
-----------
37,678,254
-----------
Oil Field Services - 0.5%
1,600 Halliburton Co. ....................... 80,300
47,200 * R & B Falcon Corp. .................... 1,398,300
121,400 Schlumberger Ltd. ..................... 9,196,050
30,900 * Western Atlas, Inc. ................... 2,390,888
-----------
13,065,538
-----------
Paper & Packaging - 0.2%
85,000 Kimberly-Clark Corp. .................. 4,260,625
-----------
Publishing, Broadcasting &
Entertainment - 0.4%
30,000 Belo (A.H.) Corp.
Ser. A ................................ 1,650,000
81,620 CBS Corp. ............................. 2,769,979
20,000 * Cox Communications, Inc.
Cl. A ................................. 840,000
6,666 Gaylord Entertainment Co. ............. 238,310
65,000 Time Warner, Inc. ..................... 4,680,000
3,000 Washington Post Co., Cl. B ............ 1,595,437
-----------
11,773,726
-----------
Real Estate - 6.1%
38,000 * Alexander's, Inc. REIT ................ 3,560,125
24,100 Arden Realty Group, Inc. REIT ......... 686,850
50,000 Bay Apartment Communities, Inc. REIT 1,856,250
58,100 Berkshire Realty Co., Inc. REIT ....... 697,200
100,000 Boston Properties, Inc. REIT .......... 3,518,750
50,009 Bradley Real Estate, Inc. REIT ........ 1,043,938
140,000 Brandywine Realty Trust REIT .......... 3,333,750
280,400 Capstead Mortgage Corp. REIT .......... 5,537,900
171,900 CarrAmerica Realty Corp. REIT ......... 5,157,000
100,000 Chelsea GCA Realty, Inc. REIT ......... 3,700,000
159,300 Continental Homes Holding Corp. ....... 7,407,450
355,000 Crescent Real Estate Equities, Inc. REIT 12,780,000
305,300 Crown American Realty Trust REIT ...... 2,862,187
200,000 * Entertainment Properties Trust REIT ... 3,925,000
42,500 Equity Residential Properties Trust REIT 2,135,625
105,200 Essex Property Trust, Inc. REIT ....... 3,609,675
199,700 * FAC Realty, Inc. REIT ................. 1,959,556
90,000 FelCor Suite Hotels, Inc. REIT ........ 3,335,625
100,200 Gables Residential Trust REIT ......... 2,724,188
174,000 Glimcher Realty Trust REIT ............ 3,806,250
28,000 Highwoods Properties, Inc. REIT ....... 988,750
67,419 * Homestead Village Properties, Inc. .... 1,019,712
384,316 Horizon Group, Inc. REIT .............. 4,731,891
50,300 INMC Mortgage Holdings, Inc.
REIT .................................. 1,257,500
120,000 Innkeepers USA Trust REIT ............. 1,965,000
30,000 * Interstate Hotels Co. ................. 1,076,250
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Real Estate - continued
101,500 Kilroy Realty Corp. REIT .............. $ 2,899,094
132,000 Kranzco Realty Trust REIT ............. 2,376,000
45,000 Liberty Property Trust REIT ........... 1,209,375
165,000 Mack-Cali Realty Corp. REIT ........... 6,445,312
125,000 Marriott International, Inc. .......... 4,648,437
125,000 Marriott International, Inc.
Cl. A ................................. 4,476,563
25,000 Meditrust Co. REIT .................... 771,875
38,100 Oasis Residential, Inc. REIT .......... 845,344
94,997 Patriot American Hospitality, Inc. REIT . 2,564,919
268,713 Post Property, Inc. REIT .............. 10,731,725
166,500 Prentiss Properties Trust REIT ........ 4,349,812
90,000 Public Storage, Inc. REIT ............. 2,778,750
76,817 Security Capital Industrial Trust REIT . 1,968,436
111,992 Security Capital Pacific Trust REIT ... 2,694,808
31,250 Sodexho Marriott Services, Inc. ....... 830,078
100,000 Sovran Self Storage, Inc. REIT ........ 2,968,750
70,000 Spieker Properties, Inc. REIT ......... 2,887,500
262,750 Starwood Hotels & Resorts Trust REIT .. 14,040,703
14,000 Storage USA, Inc. REIT ................ 537,250
140,000 Sunstone Hotel Investors, Inc. REIT ... 2,240,000
43,500 Tanger Factory Outlet Centers, Inc.
REIT .................................. 1,266,938
2,200 TriNet Corporate Realty Trust, Inc. REIT 84,288
135,000 Trizec Hahn Corp. ...................... 3,180,937
5,705 Vornado Realty Trust REIT ............. 248,524
30,000 Western Investment Real Estate Trust
REIT .................................. 448,125
-----------
162,169,965
-----------
Retailing & Wholesale - 1.1%
70,000 * Autozone, Inc. ........................ 2,371,250
236,511 Avnet, Inc. ........................... 13,614,164
199,000 Mercantile Stores Co., Inc. ........... 13,370,313
-----------
29,355,727
-----------
Telecommunication Services &
Equipment - 0.1%
45,500 Compania de Telecom de Chile
SA, ADR ............................... 1,254,094
-----------
Textile & Apparel - 0.0% (a)
34,900 Superior Surgical Manufacturing Co.,
Inc. .................................. 610,750
-----------
Thrift Institutions - 0.5%
131,300 Golden West Financial Corp. ........... 12,580,181
-----------
Transportation - 1.1%
25,000 Burlington Northern Santa Fe .......... 2,600,000
27,200 * FDX Corp. ............................. 1,934,600
76,800 GATX Corp. ............................ 5,990,400
20,000 KLM Royal Dutch Air Lines ............. 812,500
17,000 Roadway Express, Inc. ................. 417,563
300,000 Union Pacific Corp. ................... 16,856,250
-----------
28,611,313
-----------
Utilities-Electric - 0.7%
36,200 Central Hudson Gas & Electric Corp. ... 1,579,225
149,700 Long Island Lighting Co. .............. 4,715,550
</TABLE>
42
<PAGE>
EVERGREEN
Foundation Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Utilities-Electric - continued
138,400 New York State Electric & Gas Corp. $ 5,518,700
33,300 Orange & Rockland Utilities, Inc. .. 1,494,338
40,000 PP&L Resources, Inc. ............... 945,000
100,000 Public Service Enterprise Group, Inc. 3,787,500
32,000 TNP Enterprises, Inc. .............. 1,058,000
-------------
19,098,313
-------------
Utilities-Telephone - 3.2%
98,333 * 360 Communications Co. ............. 3,072,906
30,000 * AirTouch Communications, Inc. ...... 1,468,125
2,000 Ameritech Corp. .................... 98,875
10,000 AT&T Corp. ......................... 656,250
174,040 Bell Atlantic Corp. ................ 17,839,100
1,600 BellSouth Corp. .................... 108,100
494,000 Frontier Corp. ..................... 16,085,875
376,400 GTE Corp. .......................... 22,536,950
2,400 SBC Communications, Inc. ........... 104,700
351,000 Sprint Corp. ....................... 23,758,313
-------------
85,729,194
-------------
Total Common Stocks
(cost $959,724,030)................. 1,606,538,073
-------------
CONVERTIBLE PREFERRED - 0.6%
Finance & Insurance - 0.0% (a)
3,557 Aetna, Inc.
6.25%, Series C .................... 284,782
1,000 Conseco, Inc.
7.00%, PRIDES ...................... 193,625
2,500 SunAmerica, Inc.
$3.188, PERCS ...................... 121,094
-------------
599,501
-------------
Industrial Specialty Products &
Services - 0.1%
50,000 Qualcomm Financial Trust I
5.75%, 144A ........................ 2,365,500
-------------
Metal Products & Services - 0.3%
100,000 Timet Capital Trust I
6.625%, BUCS, 144A ................. 4,775,000
115,000 Worthington Industries, Inc.
7.25%, DECS (exchangeable for
Rouge Steel Co. Common Stock) ...... 1,854,950
-------------
6,629,950
-------------
Oil Field Services - 0.1%
70,000 EVI, Inc.
5.00%, 144A ........................ 3,176,600
-------------
Real Estate - 0.1%
95,000 First Union Real Estate Equity
8.40%, Series A .................... 3,705,000
-------------
Retailing & Wholesale - 0.0% (a)
1,300 Kmart Financing I
7.75% .............................. 81,575
-------------
Total Convertible Preferred
(cost $15,457,797).................. 16,558,126
-------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
CONVERTIBLE DEBENTURES - 0.2%
Building, Construction &
Furnishings - 0.0% (a)
$ 500,000 Home Depot, Inc.
3.25%, 10/1/01 ...... $ 755,000
-----------
Business Equipment &
Services - 0.0% (a)
800,000 Personnel Group of
America, Inc.
5.75%, 7/1/04, 144A . 1,146,000
-----------
Environmental
Services - 0.0% (a)
100,000 USA Waste Services,
Inc.
4.00%, 2/1/02 ....... 117,500
-----------
Industrial Specialty
Products &
Services - 0.2%
2,100,000 Robbins & Myers, Inc.
6.50%, 9/1/03 ....... 3,115,980
750,000 Simula, Inc.
8.00%, 5/1/04 ....... 828,750
-----------
3,944,730
-----------
Total Convertible
Debentures
(cost $4,280,000).... 5,963,230
-----------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 26.5%
Government Agency Notes
& Bonds - 0.8%
1,000,000 Federal National
Mortgage Association
8.10%, 8/12/19 ...... 1,221,819
Tennessee Valley
Authority
8,000,000 7.25%, 7/15/43 ..... 8,391,560
10,000,000 7.85%, 6/15/44, Series
A ................... 10,852,540
-----------
20,465,919
-----------
Treasury Notes &
Bonds - 25.7%
U.S. Treasury Bonds
60,000,000 6.00%, 2/15/26 ..... 59,906,280
170,000,000 6.25%, 8/15/23 ..... 175,206,420
36,340,000 6.75%, 8/15/26 ..... 39,974,037
125,000,000 7.125%, 2/15/23 .... 142,656,375
49,000,000 7.25%, 5/15/16 ..... 55,768,174
7,000,000 7.625%, 11/15/22 ... 8,426,257
10,000,000 8.00%, 11/15/21 .... 12,465,630
50,000,000 8.125%, 8/15/19 .... 62,531,300
25,000,000 8.125%, 5/15/21 .... 31,492,200
30,000,000 8.375%, 8/15/08 .... 33,684,390
10,000,000 8.50%, 2/15/20 ..... 12,987,510
7,000,000 10.00%, 5/15/10 .... 8,682,191
1,000,000 10.625%, 8/15/15 ... 1,499,063
U.S. Treasury Notes
30,000,000 5.75%, 8/15/03 ..... 30,103,140
350,000 5.875%, 2/15/00 .... 351,750
455,000 6.125%, 8/31/98 .... 456,280
400,000 6.25%, 3/31/99 ..... 402,751
900,000 6.50%, 5/31/01 ..... 921,657
630,000 6.50%, 8/15/05 ..... 658,350
-----------
678,173,755
-----------
Total U.S. Government &
Agency
Obligations
(cost $657,254,023).. 698,639,674
-----------
</TABLE>
43
<PAGE>
EVERGREEN
Foundation Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 11.3%
Commercial Paper - 11.3%
$ 3,090,000 Alfa Corp.
5.52%, 5/4/98 ................... $ 3,074,365
945,000 American Home Products, Inc.
5.50%, 4/28/98 .................. 941,102
6,800,000 Amoco Managers
5.57%, 4/21/98 .................. 6,778,958
3,120,000 Aristar, Inc.
5.53%, 4/14/98 .................. 3,113,769
17,400,000 Asset Portfolio Funding
5.50%, 4/7/98 ................... 17,384,050
8,160,000 Bemis Co., Inc.
5.51%, 4/24/98 .................. 8,131,274
3,215,000 BMW U.S. Capital Corp.
5.51%, 5/13/98 .................. 3,194,333
3,700,000 Daimler-Benz North America Corp.
5.50%, 5/4/98 ................... 3,681,346
640,000 Delaware Funding Corp.
5.53%, 5/20/98 .................. 635,183
Duke Capital Corp.
5,765,000 5.51%, 4/20/98 ................. 5,748,235
3,250,000 5.52%, 4/13/98 ................. 3,244,020
1,750,000 5.55%, 4/29/98 ................. 1,742,446
Eiger Capital Corp.
8,150,000 5.52%, 4/27/98 ................. 8,117,508
8,760,000 5.52%, 5/22/98 ................. 8,691,497
2,830,000 Fina Oil & Chemical Co.
5.54%, 5/12/98 .................. 2,812,144
Finova Capital Corp.
29,330,000 5.49%, 4/9/98 .................. 29,294,218
1,600,000 5.55%, 4/20/98 ................. 1,595,313
6,300,000 Great Lakes Chemical Corp.
5.52%, 4/15/98 ................. 6,286,476
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - continued
Commercial Paper - continued
GTE Corp.
$25,000,000 5.57%, 4/3/98 .................. $ 24,992,264
11,600,000 5.67%, 5/7/98 .................. 11,534,228
28,750,000 Market Street Funding Corp.
5.55%, 5/13/98 .................. 28,563,844
15,330,000 Massachusetts College of Pharmacy &
Allied Health Services
5.50%, 4/2/98 ................... 15,327,658
Montana Blanc Capital Corp.
6,225,000 5.53%, 5/28/98 ................. 6,170,495
20,000,000 5.55%, 5/22/98 ................. 19,842,750
16,000,000 Park Avenue Recreation Corp.
5.55%, 5/22/98 .................. 15,874,200
25,000,000 Republic Industries Funding Corp.
5.52%, 4/24/98 .................. 24,911,833
Spec Purpose Accts Recreation Co.
16,350,000 5.51%, 4/20/98 ................. 16,302,453
1,675,000 5.55%, 5/6/98 .................. 1,665,962
9,780,000 Swiss Re Financial Products Corp.
5.50%, 4/27/98 .................. 9,741,152
Trident Capital Finance, Inc.
8,680,000 5.50%, 4/7/98 .................. 8,672,043
320,000 5.55%, 5/19/98 ................. 317,632
------------
298,382,751
------------
Total Short-Term Investments
(cost $298,382,751).............. 298,382,751
------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Total Investments -
(cost $1,935,098,601)..... 99.4% 2,626,081,854
Other Assets and
Liabilities - net ......... 0.6 15,145,758
----- -------------
Net Assets ................ 100.0% $2,641,227,612
===== ==============
</TABLE>
* Non-income producing securities.
** At March 31, 1998 the Fund owned 117,000 shares of common stock of First
Union Corp. at a cost of $2,358,411. During the period ended March 31, 1998
the Fund earned $152,000 in dividend income from this investment. These
shares were purchased by the Fund prior to the acquisition of the
investment adviser and Lieber & Company by First Union.
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 Board of
Trustees.
(a) Less than one-tenth of a percent.
ADR American Depository Receipts
BUCS Beneficial Unsecured Convertible Securities
DECS Dividend Enhanced Convertible Stock
PERCS Preferred Equity Redemption Cumulative Stock
PRIDES Preferred Redeemable Increased Dividend Equity Securities
REIT Real Estate Investment Trust
SA Sociedad Anonyme (Spanish Corporation)
See Combined Notes to Financial Statements.
44
<PAGE>
EVERGREEN
Tax Strategic Foundation Fund
Schedule of Investments
March 31, 1998
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCK - 39.8%
Aerospace &
Defense - 0.8%
45,000 Boeing Co. ........... $2,345,625
----------
Automotive Equipment &
Manufacturing - 0.1%
10,000 Sonic Automotive, Inc.
Banks - 6.9% ........ 172,500
----------
19,600 BancorpSouth, Inc. ... 861,175
19,500 BankBoston Corp. ..... 2,149,875
27,563 Beverly Bancorporation,
Inc. ................. 737,297
25,000 Cape Cod Bank & Trust
Co. .................. 1,100,000
15,000 CitiCorp ............. 2,130,000
5,000 Comerica, Inc. ....... 529,062
14,000 Crestar Financial Corp. 827,750
24,660 Dime Bancorp, Inc. ... 741,341
4,000 First Empire State Corp. 1,999,500
16,500 First of America Bank
Corp. ................ 1,427,250
3,000 First Union Corp. ** . 170,250
5,000 Fleet Financial Group,
Inc. ................. 425,312
11,550 Interchange Financial
Services Corp. ....... 355,163
8,000 KeyCorp .............. 302,500
11,875 NationsBank Corp. .... 866,133
15,750 One Valley Bancorp of
West Virginia, Inc. .. 595,547
10,000 Republic New York Corp. 1,333,750
15,000 Seacoast Banking Corp.
of Florida Cl. A ..... 555,000
37,255 SouthTrust Corp. ..... 1,560,053
10,000 Suntrust Banks, Inc. . 753,750
20,000 Wilmington Trust Corp. . 1,327,500
----------
20,748,208
----------
Building, Construction &
Furnishings - 1.3%
25,000 Clayton Homes, Inc. .. 506,250
10,700 La-Z-Boy Chair Co. ... 534,331
16,000 Lowe's Companies, Inc. . 1,123,000
10,000 Royal Group Technologies
Ltd. .................. 327,500
39,100 Shelby Williams
Industries, Inc. ...... 584,056
33,300 * Toll Brothers, Inc. .. 936,563
----------
4,011,700
----------
Business Equipment &
Services - 0.4%
17,500 * Crescent Operating, Inc. 374,063
10,000 First Data Corp. ..... 325,000
5,000 Lucent Technologies,
Inc. ................. 639,375
----------
1,338,438
----------
Capital Goods - 1.0%
20,600 Caterpillar, Inc. .... 1,134,288
30,000 Deere & Co. .......... 1,858,125
----------
2,992,413
----------
Chemicals & Agricultural
Products - 2.0%
20,000 Du Pont (E. I.) De
Nemours & Co. ........ 1,360,000
10,000 H.B. Fuller Co. ...... 598,750
19,000 MacDermid, Inc. ...... 546,250
35,000 Monsanto Co. ......... 1,820,000
11,000 Morton International,
Inc. ................. 360,937
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCK - continued
Chemicals & Agricultural
Products - continued
20,000 Schulman (A.), Inc. .. $ 505,000
20,000 Sigma-Aldrich Corp. .. 745,000
----------
5,935,937
----------
Communication Systems &
Services - 0.1%
4,500 * Cisco Systems, Inc. .. 307,688
----------
Consumer Products &
Services - 1.4%
10,000 Adidas AG ADS, 144A .. 887,500
37,788 * Cendant Corp. ........ 1,497,350
12,000 Gucci Group .......... 570,000
32,100 Russ Berrie & Co., Inc. 973,031
10,500 Toro Co. ............. 402,281
----------
4,330,162
----------
Electrical Equipment &
Services - 2.3%
24,900 AMP, Inc. ............ 1,090,931
6,600 Applied Power, Inc., Cl.
A ..................... 254,100
10,000 General Electric Co. . 861,875
40,000 Harman International
Industries, Inc. ..... 1,760,000
17,000 Honeywell, Inc. ...... 1,405,688
19,700 Perkin Elmer Corp. ... 1,424,556
----------
6,797,150
----------
Finance &
Insurance - 5.2%
18,000 American International
Group, Inc. .......... 2,266,875
12,000 Chubb Corp. .......... 940,500
20,000 Countrywide Credit
Industries, Inc. ...... 1,063,750
3,000 Enhance Financial
Services Group, Inc. .. 208,312
10,000 FBL Financial Group,
Inc., Cl. A ........... 506,250
12,000 Federal National
Mortgage Association .. 759,000
20,000 * FPIC Insurance Group,
Inc. ................... 645,000
30,000 Frontier Insurance
Group, Inc. ............ 828,750
47,100 Interstate/Johnson Lane,
Inc. ................... 1,436,550
13,333 Legg Mason, Inc. ..... 790,814
20,000 Lehman Brothers
Holdings, Inc. ......... 1,497,500
20,000 Mercury General Corp. 1,251,250
28,000 Merrill Lynch & Co.,
Inc. ................... 2,324,000
28,000 Nationwide Financial
Services, Inc.
Cl. A .................. 1,214,500
183 * Security Capital Group,
Inc. Cl. B,
Warrants $28.00 Expiring
9/18/98 ................. 606
----------
15,733,657
----------
Food & Beverage
Products - 0.2%
15,000 International Home Foods,
Inc. .................. 498,750
----------
Healthcare Products &
Services - 2.6%
7,000 Abbott Laboratories .. 527,188
20,000 American Home Products
Corp................... 1,907,500
23,800 Beckman Instruments, Inc. 1,364,037
19,000 * First Health Group Corp. . 1,030,750
5,000 * Lincare Holdings, Inc. . 353,125
12,000 Medtronic, Inc. ...... 622,500
5,000 Merck & Co., Inc. .... 641,875
10,000 Pfizer, Inc. ......... 996,875
</TABLE>
45
<PAGE>
EVERGREEN
Tax Strategic Foundation Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCK - continued
Healthcare Products &
Services - continued
5,000 Shared Medical System Corp. .......... $ 391,875
-----------
7,835,725
-----------
Industrial Specialty Products &
Services - 1.3%
29,151 Autoliv, Inc. ........................ 905,503
7,500 * Chemfab Corp. ........................ 183,750
24,000 Furon Co. ............................ 565,500
25,000 * Meade Instruments Corp. .............. 242,187
7,800 Park Electrochemical Corp. ........... 201,338
13,900 Snap-on, Inc. ........................ 634,187
20,000 Timken Co. ........................... 676,250
20,000 * UCAR International, Inc. ............. 627,500
-----------
4,036,215
-----------
Information Services &
Technology - 1.7%
8,000 * Etec Systems, Inc. ................... 472,000
10,000 * Gateway 2000, Inc. ................... 469,375
24,000 Hewlett-Packard Co. .................. 1,521,000
24,000 Intel Corp. .......................... 1,873,500
4,000 International Business Machines Corp. 415,500
10,000 * Sun Microsystems, Inc. ............... 417,187
-----------
5,168,562
-----------
Oil/Energy - 0.7%
10,000 Amoco Corp. .......................... 863,750
10,000 Equitable Resources, Inc. ............ 332,500
30,000 Williams Companies, Inc. ............. 960,000
-----------
2,156,250
-----------
Oil Field Services - 0.1%
5,000 Schlumberger Ltd. .................... 378,750
-----------
Publishing, Broadcasting &
Entertainment - 0.2%
10,000 Belo (A.H.) Corp., Ser. A ............ 550,000
-----------
Real Estate - 5.8%
10,300 * Alexander's, Inc. REIT ............... 964,981
60,000 AMB Property Corp. REIT .............. 1,447,500
50,000 Boston Properties, Inc. REIT ......... 1,759,375
20,000 Brandywine Realty Trust REIT ......... 476,250
25,000 Capital Trust, Cl. A ................. 243,750
12,000 Capstead Mortgage Corp. REIT ......... 237,000
31,400 Continental Homes Holding Corp. ...... 1,460,100
70,000 Del Webb Corp. ....................... 2,135,000
25,000 Equity Office Properties Trust REIT .. 765,625
13,500 Gables Residential Trust REIT ........ 367,031
45,831 * Homestead Village Properties, Inc. ... 693,194
35,400 Horizon Group, Inc. REIT ............. 435,862
40,000 INMC Mortgage Holdings, Inc. ......... 1,000,000
15,000 * Interstate Hotels Co. ................ 538,125
40,000 * John Q. Hammons Hotels, Inc., Cl. A .. 315,000
30,000 Kilroy Realty Corp. REIT ............. 856,875
29,000 Patriot American Hospitality, Inc. REIT 783,000
20,000 Prentiss Properties Trust REIT ....... 522,500
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCK - continued
Real Estate - continued
3,485 Security Capital Pacific Trust REIT .. $ 83,858
10,000 SL Green Realty Corp. REIT ........... 255,625
20,000 Starwood Hotels & Resorts
Trust REIT ........................... 1,068,750
55,000 Sunstone Hotel Investors, Inc. REIT .. 880,000
15,000 Trizec Hahn Corp. .................... 353,438
-----------
17,642,839
-----------
Retailing & Wholesale - 1.9%
18,000 Avnet, Inc. .......................... 1,036,125
22,200 Mercantile Stores Co., Inc. .......... 1,491,562
10,000 * Payless Shoesource, Inc. ............. 752,500
80,000 SED International Holdings, Inc. ..... 910,000
35,100 St. John Knits, Inc. ................. 1,658,475
-----------
5,848,662
-----------
Thrift Institutions - 1.0%
18,000 Bank United Corp. .................... 900,000
15,000 BankUnited Financial Corp. ........... 210,000
10,000 Golden West Financial Corp. .......... 958,125
30,000 Mech Financial, Inc. ................. 915,000
-----------
2,983,125
-----------
Transportation - 1.7%
47,000 * Airnet Systems, Inc. ................. 1,363,000
10,000 GATX Corp. ........................... 780,000
20,700 Midwest Express Holdings, Inc. ....... 1,014,300
35,000 Union Pacific Corp. .................. 1,966,563
-----------
5,123,863
-----------
Utilities - Electric - 0.1%
9,900 TNP Enterprises, Inc. ................ 327,319
-----------
Utilities - Telephone - 1.0%
25,000 Frontier Corp. ....................... 814,063
18,000 GTE Corp. ............................ 1,077,750
18,000 Sprint Corp. ......................... 1,218,375
-----------
3,110,188
-----------
Total Common Stock
(cost $89,101,662).................... 120,373,726
-----------
CONVERTIBLE PREFERRED STOCKS - 1.1%
Banks - 0.7%
63,000 WBK Trust, 10.00%, STRYPES
(exchangeable for Westpac
Banking Corp. Common Stock) .......... 2,145,937
-----------
Transportation - 0.4%
20,000 CNF Trust I TECONS (exchangeable for
CNF Transportation, Inc.
common stock), 5.00%, Ser. A ......... 1,160,000
-----------
Total Convertible Preferred Stocks
(cost $2,975,050)..................... 3,305,937
-----------
</TABLE>
46
<PAGE>
EVERGREEN
Tax Strategic Foundation Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
CONVERTIBLE DEBENTURES - 0.2%
Business Equipment &
Services - 0.1%
$ 150,000 Personnel Group of America, Inc.,
5.75%, 7/1/04, 144A ................. $ 214,875
----------
Oil Field Services - 0.1%
250,000 Parker Drilling Co.,
5.50%, 8/1/04 ....................... 251,250
----------
Total Convertible Debentures
(cost $400,000)...................... 466,125
----------
MUNICIPAL OBLIGATIONS - 59.2%
Long Term - 52.2%
Alaska - 0.7%
1,000,000 Alaska Hsg. Fin. Corp. Mtge.
RB, 1996 Ser. A
6.05%, 12/1/17 (MBIA) ............... 1,055,860
1,000,000 Alaska Hsg. Fin. Corp. RB
Mtge. Ser. A-1
5.30%, 12/1/12 (MBIA) ............... 1,019,110
----------
2,074,970
----------
Arizona - 0.2%
500,000 City of Tucson GO RB,
Ser. 1995
5.70%, 7/1/08 (FGIC) ................ 540,030
----------
California - 4.2%
500,000 California Edl. Facs. Auth.
RB (Carnegie Institution of
Washington), Ser. A
5.60%, 10/1/23 ...................... 516,365
700,000 California Hsg. Fin. Agcy. RB
Ser. I
5.75%, 2/1/29 (MBIA) ................ 722,904
500,000 California Hsg. Fin. Agcy. RB
Home Mtge. Ser. L
5.35%, 8/1/17 ....................... 508,300
1,500,000 California St. Ser. BG
5.05%, 12/1/11 ...................... 1,509,105
1,000,000 Los Angeles Cnty. Metro.
Trans. Auth. Sales Tax RB
Ser. A
5.13%, 7/1/10 (MBIA) ................ 1,037,480
1,200,000 Los Angeles Cnty. Pub. Works
Fin. Auth. RB Regional Park &
Open Space Dist. A
5.00%, 10/1/16 ...................... 1,176,588
500,000 Modesto Irrigation Dist.
Fing. Auth. RB Refunding
(Domestic Wtr. Proj.) Ser. D
5.00%, 9/1/12 (AMBAC) ............... 505,055
1,200,000 Northern CA Transmission RB
Ser. A
5.30%, 5/1/10 (MBIA) ................ 1,276,008
1,000,000 Oakland GO Ser. C, Measure K
5.90%, 12/15/22 (MBIA) .............. 1,072,110
700,000 Palm Desert Fing. Auth. Tax
Alloc. RB (Housing Set Aside)
5.00%, 10/1/13 (MBIA) ............... 703,885
1,000,000 San Francisco Bay Area Rapid
Transport Dist. Sales Tax RB
5.25%, 7/1/18 ....................... 1,008,920
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS - continued
California - continued
$1,000,000 San Francisco City & Cnty.
Int'l Aprt. RB Ser. Issue
10-A, (AMT)
5.70%, 5/1/26 (MBIA) ................ $1,042,790
500,000 Simi Valley Unified Sch.
Dist. Refunding Capital
Improvement Proj. Cert. Part.
5.25%, 8/1/22 ....................... 514,590
1,000,000 Southern CA Pub. Pwr. Auth.
RB (Mead Adelanto Proj.)
Ser. A
5.00%, 7/1/17 (AMBAC) ............... 981,740
----------
12,575,840
----------
500,000 Arapahoe Cnty. Pub. Hwy.
Auth. Capital Imp. Trust Fund
Hwy. RB (E-470 Proj.)
6.15%, 8/31/26 (MBIA) ............... 551,670
3,000,000 Arapahoe Cnty. Senior E-470
Pub. Auth. Capital Imp. Trust
Fund Hwy. Prerefunded RB
7.00%, 8/31/26 ...................... 3,566,760
1,000,000 Denver City & Cnty. Arpt. RB
Ser. D
5.50%, 11/15/25 (MBIA) .............. 1,027,470
500,000 Denver City & Cnty. Sch.
Dist. # 1 GO RB, Ser. 1994A
6.50%, 6/1/10 (MBIA) ................ 583,650
1,070,000 Douglas Cnty. Sch. Dist. # 1
Imp. Prerefunded RB Ser. A
6.50%, 12/15/16 ..................... 1,217,179
1,500,000 E-470 Pub. Hwy. Auth. RB
Ser. A
5.00%, 9/1/26 (MBIA) ................ 1,444,890
3,060,000 Univ. Hosp. Auth. RB Ser. A
6.40%, 11/15/22 (AMBAC) ............. 3,395,957
500,000 Univ. Hosp. Auth. RB Ser. A
5.25%, 11/15/22 (AMBAC) ............. 499,285
----------
12,286,861
----------
Delaware - 0.4%
1,000,000 Delaware Econ. Dev. Auth. RB
(The Osteopathic Hosp. Assoc.
of Delaware/Riverside
Hosp.), Ser. A
6.50%, 1/1/08 ....................... 1,121,430
----------
District Of Columbia - 0.5%
1,500,000 Metro Wash DC Airport Authority
RB Ser. B
5.50%, 10/1/23 (AMT) ................ 1,530,765
----------
Florida - 1.2%
300,000 Dade Cnty. Aviation RRB,
Ser. 1995A
6.10%, 10/1/11 (AMBAC) .............. 329,805
2,000,000 Florida Muni. Pwr. Agcy. RB
Prerefunded (Stanton II Proj.)
6.50%, 10/1/20 (AMBAC) .............. 2,227,000
1,000,000 Sarasota Cnty. Pub. Hosp.
Board RB (Sarasota Mem. Hosp.
Proj.) Ser. B
5.38%, 10/1/20 ...................... 1,011,550
----------
3,568,355
----------
</TABLE>
47
<PAGE>
EVERGREEN
Tax Strategic Foundation Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Georgia - 2.9%
$ 1,000,000 Atlanta Wtr. & Swr. RB
5.25%, 1/1/27 (FGIC) ......................... $ 999,910
1,000,000 Cherokee Cnty. Wtr. & Swr.
Auth. RB
5.20%, 8/1/25 (MBIA) ......................... 1,021,730
2,000,000 Cobb-Marietta Colliseum &
Exhibit Hall Auth. RB
6.75%, 10/1/26 (MBIA) ........................ 2,206,580
1,000,000 Dalton Util. RRB
6.00%, 1/1/08 (MBIA) ......................... 1,115,580
2,000,000 De Kalb Cnty. Prerefunded GO
6.65%, 1/1/20 ................................ 2,206,860
1,000,000 Georgia Muni. Elec. Auth.
Pwr. Rev. Spec. Oblig. Bonds
Ser. Y
6.50%, 1/1/17 (MBIA) ......................... 1,176,330
----------
8,726,990
----------
Hawaii - 0.4%
1,000,000 Hawaii St. GO Ser. CN
6.00%, 3/1/09 (FGIC) ......................... 1,114,500
----------
Illinois - 1.8%
1,000,000 Chicago Board of Ed. GO
(School Reform Proj.)
6.75%, 12/1/09 (AMBAC) ....................... 1,181,420
2,500,000 Chicago Skyway Toll Bridge
Prerefunded RB
6.75%, 1/1/14 ................................ 2,852,150
1,000,000 Chicago Wastewater
Transmission RB
5.00%, 1/1/15 (FGIC) ......................... 988,750
450,000 Illinois Sales Tax RB Ser. V
6.38%, 6/15/17 ............................... 500,557
----------
5,522,877
----------
Indiana - 0.7%
2,000,000 Indiana Hsg. Fin. Single
Family Mtge. RB Ser. A-2
5.15%, 7/1/17 (FNMA/GNMA) .................... 1,997,420
----------
Maine - 0.5%
1,000,000 Maine Hlth. & High Edl. Facs.
Auth. RB Ser. B
5.75%, 7/1/26 (AMBAC) ........................ 1,052,930
500,000 Maine Hsg. Auth. Mtge.
Purchase RB Ser. F-1
5.50%, 11/15/29 .............................. 504,670
----------
1,557,600
----------
Maryland - 0.3%
1,000,000 Prince Georges Cnty. GO
(Cons. Pub. Imps.)
5.50%, 3/15/16 ............................... 1,040,400
----------
Massachusetts - 3.0%
250,000 Massachusetts Hsg. Fin. Agcy.
Hsg. Proj. RRB, 1993 Ser. A
5.95%, 10/1/08 (AMBAC) ....................... 265,550
250,000 Massachusetts Bay Trans.
Auth. General Trans. Sys.
Bonds, Ser. 1994A
7.00%, 3/1/08 ................................ 298,658
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Massachusetts - continued
$ 1,000,000 Massachusetts Bay Trans.
Auth. RB (Refunding Gen.
Trans. Sys. A)
7.00%, 3/1/14 ................................ $1,230,180
1,000,000 Massachusetts Hsg. Fin. Agcy.
RB (AMT) Single Family Ser. 59
5.40%, 6/1/20 (MBIA) ......................... 999,920
2,500,000 Massachusetts Port. Auth. RB
Ser. A
5.00%, 7/1/27 ................................ 2,403,275
820,000 Massachusetts Port. Auth. RB
Refunding Ser. A
5.50%, 7/1/13 ................................ 860,811
1,000,000 Massachusetts Tpke. Auth. RB
Senior Ser. A
5.13%, 1/1/23 (MBIA) ......................... 981,350
1,000,000 Massachusetts Tpke. Auth. RB
(Western Tpke.) Ser. A
5.55%, 1/1/17 (MBIA) ......................... 1,011,320
1,000,000 Massachusetts Wtr. Resources
Auth. RB (Houston Inds. Inc.
Proj. A)
4.75%, 8/1/37 ................................ 917,100
----------
8,968,164
----------
Michigan - 1.9%
1,000,000 Detroit Prerefunded GO Ser. A
6.80%, 4/1/15 ................................ 1,154,280
1,030,000 Detroit Wtr. Supply Sys. RB
Sr. Lien Ser. A
5.75%, 7/1/11 (MBIA) ......................... 1,130,343
300,000 Michigan Muni. Bond Auth. RB
(Local Govt. Loan Proj.),
Ser 1994G
6.55%, 11/1/08 (AMBAC) ....................... 340,827
1,000,000 Michigan Bldg. Auth. RB Fac.
Proj. Ser. II
5.05%, 10/15/14 .............................. 992,010
2,000,000 Monroe Cnty. Econ. Dev. Corp.
Ltd. Prerefunded RB (Comm.
Hlth. Serv. Proj.)
7.00%, 9/1/21 (MBIA) ......................... 2,215,180
----------
5,832,640
----------
Minnesota - 0.7%
2,000,000 Minnesota St. Prerefunded GO
6.63%, 8/1/08 ................................ 2,157,000
----------
Missouri - 3.3%
480,000 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) ....................... 500,424
930,000 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) ........................... 981,680
1,000,000 Missouri Hsg. Dev. Commission
Mtge.
5.55%, 3/1/29 ................................ 1,022,980
</TABLE>
48
<PAGE>
EVERGREEN
Tax Strategic Foundation Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Missouri - continued
$ 2,000,000 Sikeston Elec. Prerefunded RB
6.25%, 6/1/22 (MBIA) .......................... $2,194,380
2,250,000 Sikeston Elec. RB
6.25%, 6/1/12 (MBIA) .......................... 2,468,677
775,000 Sikeston Elec. RB
6.00%, 6/1/13 (MBIA) .......................... 871,643
500,000 St. Louis Board of Ed. GO
Refunding Ser. A
5.50%, 4/1/10 ................................. 537,795
500,000 St. Louis Muni. Fin. Corp.
Leasehold Rev. Imp. Bonds
(City Justice Ctr.),
Ser. 1996A
5.95%, 2/15/16 (AMBAC) ........................ 539,370
1,000,000 St. Louis Regl. Convention &
Sports Complex Auth. RB Facs. C
5.30%, 8/15/17 (AMBAC) ........................ 1,010,530
----------
10,127,479
----------
Nevada - 0.7%
1,000,000 Clark Cnty., Las Vegas
McCarran Int'l Arpt.
Passanger Facs. RB Ser. A,
1992 Series A
6.00%, 7/1/22 (AMBAC) ......................... 1,071,500
1,000,000 Washoe Cnty. GO
5.00%, 6/1/17 (MBIA) .......................... 978,220
----------
2,049,720
----------
New Jersey - 0.5%
1,400,000 New Jersey Tpke. Auth. RB
Ser. C
6.50%, 1/1/16 (MBIA) .......................... 1,647,786
----------
New York - 6.6%
2,500,000 Metro Trans. Auth. NY
Commuter Facs. RB Ser. C-2
5.38%, 7/1/27 (FGIC) .......................... 2,540,950
1,000,000 Metro Trans. Auth. NY
Commuter Facs. RB Ser. D
5.13%, 7/1/22 (MBIA) .......................... 982,880
375,000 New York City GO Ser. L
5.38%, 8/1/11 (MBIA) .......................... 389,662
2,485,000 New York City Prerefunded GO
Ser. A
8.00%, 8/15/21 ................................ 2,822,190
2,000,000 New York City Transitional
Fin. Auth. RB Future Tax
Secured Ser. A
5.00%, 8/15/15 ................................ 1,963,460
250,000 New York St. Mtge. Agcy.
Homeowner Mtge. RB, Ser. 44
(AMT)
6.60%, 4/1/03 ................................. 264,090
990,000 New York St. Mtge. Agcy.
Homeowner Mtge. RB, Ser. 56
(AMT)
5.88%, 10/1/19 ................................ 1,025,363
245,000 New York St. Med. Care Facs.
Fin. Agcy. RB (Mental Hlth.
Svcs. Facs.), 1992 Ser. B
6.25%, 8/15/10 (AMBAC) ........................ 264,281
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS - continued
New York - continued
$ 2,000,000 New York St. Med. Care Facs.
Fin. Agcy. RB Refunding Hosp.
Insured Mtge. A
5.38%, 2/15/25 (MBIA) ......................... $2,017,100
500,000 New York St. Med. Care Facs.
Fin. Agcy. RB (Mental Hlth.
Svcs. Facs.), 1995 Ser. A
6.00%, 2/15/25 (MBIA) ......................... 532,125
500,000 New York St. Mtge. Agcy. RB
(Homeowner Mtge.) Ser. 63,
(AMT)
5.60%, 4/1/10 ................................. 518,970
1,000,000 New York St. Thruway Auth.
Ser. C
6.00%, 1/1/25 (FGIC) .......................... 1,070,810
1,000,000 New York St. Thruway Auth. RB
Ser. B
5.00%, 1/1/20 (MBIA) .......................... 971,510
250,000 Port Auth. of New York & New
Jersey Consolidated Bonds,
97th Ser. 2nd Installment
(AMT)
7.00%, 7/15/05 (FGIC) ......................... 288,993
2,000,000 Port Auth. of New York & New
Jersey Special Obligation RB
(JFK Intl. Aprt. Terminal 6
Proj.)
6.25%, 12/1/10 ((MBIA) (AMT)) ................. 2,270,660
2,000,000 United Nations Dev. Corp.
Prerefunded RB Ser. A
6.00%, 7/1/26 ................................. 2,203,040
----------
20,126,084
----------
North Carolina - 0.2%
500,000 North Carolina Hsg. Fin.
Agcy. Single Family Ser. 00,
(Orig. Avg. Life Est.)
5.80%, 9/1/12 (FHA) ............................ 526,430
----------
North Dakota - 0.3%
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) ......................... 1,079,750
----------
Ohio - 1.9%
500,000 Akron Econ. Dev. RB
6.00%, 12/1/12 (MBIA) ......................... 562,055
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) ......................... 838,236
1,000,000 Cleveland Arpt. Sys. RB Ser. A
5.13%, 1/1/17 (FSA AMT) ....................... 978,120
2,000,000 Cleveland Prerefunded GO
Ser. B
6.75%, 10/1/08 (AMBAC) ........................ 2,206,580
1,000,000 Jefferson Cnty. GO Refunding
Improvement
5.70%, 12/1/13 ................................ 1,097,550
----------
5,682,541
----------
</TABLE>
49
<PAGE>
EVERGREEN
Tax Strategic Foundation Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Oregon - 0.3%
$ 1,025,000 Eugene Cnty. Elec. Util. RB
4.75%, 8/1/12 ..................................... $1,003,034
----------
Pennsylvania - 5.2%
2,500,000 North Penn Wtr. Auth. RB
6.88%, 11/1/19 (FGIC) ............................. 2,887,575
2,000,000 North Wales Wtr. Auth. RB
7.00%, 11/1/20 (FGIC) ............................. 2,307,900
500,000 Pennsylvania Convention Ctr.
Auth. RB Ser. A, 1989 Ser. A
6.70%, 9/1/16 (FGIC) .............................. 592,890
500,000 Pennsylvania Higher Ed. Facs.
Auth. RB Drexel Univ.
4.80%, 5/1/28 (MBIA) .............................. 466,135
500,000 Pennsylvania Hsg. Fin. Agcy.
Single Family Mtge. Ser. 61B RB
5.20%, 10/1/14 .................................... 502,150
1,965,000 Pennsylvania
Intergovernmental Coop. Auth.
Spec. Tax Rev. Phil. Funding
Prog., Prerefunded
6.80%, 6/15/12 .................................... 2,164,369
1,450,000 Pennsylvania
Intergovernmental Coop. Auth.
Spec. Tax Rev. Phil. Funding
Prog., Prerefunded
7.00%, 6/15/14 .................................... 1,684,407
3,000,000 Philadelphia Hosp. & Higher
Ed. Facs. Auth. Prerefunded
RB Childrens Hosp. Proj. Ser. A
6.50%, 2/15/21 .................................... 3,297,390
750,000 Philadelphia Wtr. & Wastewater RB
6.25%, 8/1/11 (MBIA) .............................. 858,525
1,000,000 York Cnty. Solid Waste &
Refuse Auth. Solid Waste Sys. RB
5.50%, 12/1/11 (FGIC) ............................. 1,075,740
----------
15,837,081
----------
South Dakota - 0.4%
1,235,000 South Dakota Hsg. Dev. Auth.
RB Homeownership B
5.25%, 5/1/17 ..................................... 1,238,236
----------
Tennessee - 0.1%
300,000 Bristol Hlth. & Edl. Facs.
Board RRB (Bristol Mem.
Hosp.), Ser. 1993
6.75%, 9/1/07 (FGIC) .............................. 350,079
----------
Texas - 4.7%
1,000,000 Cypress Fair Independent Sch. Dist.
5.13%, 2/15/12 .................................... 1,012,780
1,000,000 Harris Cnty. Hlth. Facs.
Hosp. RB (Memorial Hermann
Hosp. Sys. Proj.)
5.50%, 6/1/10 ..................................... 1,062,920
1,000,000 Houston Wtr. Conveyance Sys.
Contract COP, Ser. 1993J
6.13%, 12/15/09 (AMBAC) ........................... 1,133,850
500,000 Houston Wtr. Conveyance Sys.
Contract COP, Ser. 1993H
7.50%, 12/15/10 (AMBAC) ........................... 632,745
1,500,000 Irving Independent Sch. Dist. GO
5.13%, 2/15/18 .................................... 1,488,090
460,000 Lubbock Elec. Light & Pwr. Sys. RB
4.25%, 4/15/16 (AMBAC) ............................ 412,229
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Texas - continued
$ 460,000 Lubbock Elec. Light & Pwr. Sys. RB
4.25%, 4/15/17 (AMBAC) ............................ $ 409,110
1,000,000 San Antonio Elec. & Gas RB
5.25%, 2/1/10 ..................................... 1,039,320
2,000,000 San Antonio Prerefunded GO
6.75%, 8/1/08 ..................................... 2,164,060
1,500,000 Tarrant Cnty. Hlth. Facs.
Dev. Corp. Hlth. Res. Sys. Ser. A
5.25%, 2/15/17 (MBIA) ............................. 1,499,910
1,000,000 Texas Muni. Pwr. Agcy. RB
5.25%, 9/1/09 (MBIA) .............................. 1,054,460
2,000,000 Univ. of Texas Permanent
Univ. Fund RB Prerefunded
6.50%, 7/1/11 ..................................... 2,180,200
----------
14,089,674
----------
Utah - 0.4%
500,000 Salt Lake City Hosp. RB (IHC
Hosp., Inc.)
6.30%, 2/15/15 .................................... 576,570
500,000 Utah Hsg. Fin. Agcy. RB
(Single Family Mtge.) Ser. B
6.00%, 7/1/16 (FHA) ............................... 528,775
----------
1,105,345
----------
Vermont - 0.5%
1,315,000 Burlington Elec. RB Ser. A
6.25%, 7/1/12 (MBIA) ............................. 1,511,514
----------
Virginia - 0.7%
1,000,000 Virginia Hsg. Dev. Auth.
Commonwealth Mtg. RB Ser. H,
Sub-Ser. H-1-RMK
5.00%, 7/1/14 ..................................... 998,820
1,000,000 Virginia Pub. Bldg. Auth.
Facs. RB Ser. A
5.38%, 8/1/10 ..................................... 1,052,290
----------
2,051,110
----------
Washington - 0.3%
500,000 Snohomish Cnty. Sch. Dist. GO
5.70%, 12/1/15 (FGIC) ............................. 529,680
500,000 Vancouver Wtr. & Swr. RB
5.25%, 6/1/17 (MBIA) .............................. 502,130
----------
1,031,810
----------
West Virginia - 0.7%
1,000,000 West Virginia St. Ser. A
5.75%, 11/1/21 (FGIC) ............................. 1,055,120
1,000,000 West Virginia St. Hsg. Dev.
Fund RB Ser. A
6.05%, 5/1/27 ..................................... 1,057,610
----------
2,112,730
----------
Wisconsin - 0.6%
1,000,000 Wisconsin Clean Wtr. RB Ser. 1
6.88%, 6/1/11 ..................................... 1,206,710
500,000 Wisconsin Hsg. & Econ. Dev.
Auth. Home Ownership RB
Ser. E (AMT)
6.00%, 9/1/28 ..................................... 520,290
----------
1,727,000
----------
</TABLE>
50
<PAGE>
EVERGREEN
Tax Strategic Foundation Fund
Schedule of Investments (continued)
March 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Puerto Rico - 1.3%
$ 1,000,000 Puerto Rico Commonwealth GO
6.50%, 7/1/10 (MBIA) ........................... $ 1,173,250
225,000 Puerto Rico Commonwealth
Infrastructure Fin. Auth. RB Ser. A
5.00%, 7/1/28 (AMBAC) .......................... 218,160
1,000,000 Puerto Rico Elec. Pwr. Auth. RB
Ser. DD
5.00%, 7/1/28 .................................. 953,500
500,000 Puerto Rico Elec. Pwr. Auth. RB Ser. BB
6.25%, 7/1/10 (MBIA) ........................... 575,040
500,000 Puerto Rico Hsg. Bank & Fin.
Agcy. RB (Single Family
Affordable Hsg. Mtge. Subsidy
Prog.) Portfolio I (AMT)
5.85%, 4/1/09 .................................. 524,590
500,000 Puerto Rico Pub. Bldgs. Auth.
RB Govt. Fac. Ser. B
5.10%, 7/1/10 (MBIA) ........................... 518,170
------------
3,962,710
------------
Total Long Term
(cost $155,015,764) ............................ 157,875,955
------------
Short Term - 7.0%
Indiana - 0.3%
1,000,000 Purdue Univ. RB Ser. H
3.60% - VRDN ................................... 1,000,000
------------
Iowa - 2.2%
6,700,000 Iowa Finance Auth. RB
3.75% - VRDN ................................... 6,700,000
------------
Massachusetts - 1.7%
5,000,000 Massachusetts St. Hlth. &
Edl. Facs., Capital Assets
Program, Series D
3.80% - VRDN ................................... 5,000,000
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS - continued
New York - 1.6%
$ 3,800,000 New York City Muni. Wtr. Fin.
Auth.; Wtr. and Swr. Sys. RB,
1993 Ser. C
3.85% - VRDN (FGIC) ............................ $ 3,800,000
1,000,000 New York City Muni. Wtr. Fin.
Auth. Wtr. & Swr. Ser. C
Mandatory Tendr Upon Exp/Term
Of Liquidity
3.85% - VRDN (FGIC) ............................ 1,000,000
------------
4,800,000
------------
Texas - 0.3%
1,000,000 Coastal Bend Hlth. Facs. Dev.
3.70% - VRDN ................................... 1,000,000
------------
Wisconsin - 0.4%
1,110,000 Louisiana Crosse Indl. Dev. RB
3.85% - VRDN ...................................................
1,110,000
------------
Wyoming - 0.5%
1,600,000 Lincoln Cnty. Poll. Ctrl. RRB
3.85% - VRDN ................................... 1,600,000
------------
Total Short Term
(cost $21,210,000) ............................. 21,210,000
------------
Total Municipal Obligations
(cost $176,225,764) ............................ 179,085,955
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Amount
<S> <C> <C> <C>
MUTUAL FUND SHARES - 0.0% (a)
152,000 Federated Tax Free
Obligations Fund (at net asset value)
(cost $152,000) ................... 152,000
-------
Total Investments -
(cost $268,854,476) ..... 100.3% 303,383,743
Other Assets and
Liabilities - net ....... ( 0.3%) (882,503)
----- -----------
Net Assets .............. 100.0% $302,501,240
===== ============
</TABLE>
* Non income producing securities.
** At March 31, 1998 the Fund owned 3,000 shares of common stock of First
Union Corp. at a cost of $57,890. During the period ended March 31, 1998
the Fund earned $3,900 in dividend income from this investment. These
shares were purchased by the Fund prior to the acquisition of the
investment adviser and Lieber & Company by First Union.
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 Board of
Trustees.
(a) Less than one-tenth of a percent.
Summary of abbreviations:
ADS American Depository Shares
AMT Subject to Alternative Minimum Tax
FHA Federal Housing Authority
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Corp.
GO General Obligations
GNMA Government National Mortgage Corp.
RB Revenue Bonds
REIT Real Estate Investment Trust
RRB Refunding Revenue Bonds
STRYPES Structured Yield Product Exchangeable for Stock
TECONS Term Convertible Shares
VRDN Variable Rate Demand Notes are payable on demand at par on no more than
seven calendar days' notice given by the Fund to the issuer or other
parties not affiliated with the issuer. These notes normally incorporate
an irrevocable letter of credit or line of credit from a major bank.
Interest rates presented for these securities are those in effect as of
March 31, 1998.
Municipal bond insurance companies:
AMBAC American Municipal Bond Assurance Corp.
FGIC Financial Guarantee Insurance Corp.
MBIA Municipal Bond Insurance Association
See Combined Notes to Financial Statements.
51
<PAGE>
EVERGREEN
Balanced Funds
Statements of Assets and Liabilities
March 31, 1998
<TABLE>
<CAPTION>
American
Retirement
Fund
-----------------
<S> <C>
Assets
Investments at value (identified cost - $192,500,813, $1,280,624,600,
$1,935,098,601 and $268,854,476, respectively).......................... $ 234,985,901
Cash .................................................................... 194,322
Receivable for investments sold ......................................... 62,143
Receivable for Fund shares sold ......................................... 1,353,344
Dividends and interest receivable ....................................... 1,458,986
Unamortized organization expenses ....................................... 0
Unrealized appreciation on forward foreign
currency exchange contracts ............................................ 0
Prepaid expenses and other assets ....................................... 76,514
- -------------------------------------------------------------------------- -------------
Total assets ........................................................... 238,131,210
- -------------------------------------------------------------------------- -------------
Liabilities
Payable for investments purchased ....................................... 3,550,955
Payable for Fund shares repurchased ..................................... 400,533
Advisory fee payable .................................................... 144,415
Distribution Plan expenses payable ...................................... 121,943
Due to related parties .................................................. 0
Accrued expenses and other liabilities .................................. 94,022
- -------------------------------------------------------------------------- -------------
Total liabilities ...................................................... 4,311,868
- -------------------------------------------------------------------------- -------------
Net assets ............................................................... $ 233,819,342
========================================================================== =============
Net assets represented by
Paid-in capital ......................................................... $ 189,282,268
Undistributed (distributions in excess of) net investment income ........ 235,752
Accumulated net realized gain on investments,
futures contracts and foreign currency related transactions ............ 1,816,234
Net unrealized appreciation on investments and
foreign currency related transactions .................................. 42,485,088
- -------------------------------------------------------------------------- -------------
Total net assets ....................................................... $ 233,819,342
========================================================================== =============
Net assets consists of
Class A ................................................................. $ 29,004,525
Class B ................................................................. 158,251,514
Class C ................................................................. 2,777,392
Class Y ................................................................. 43,785,911
- -------------------------------------------------------------------------- -------------
$ 233,819,342
=============
Shares outstanding
Class A ................................................................. 1,736,778
Class B ................................................................. 9,526,808
Class C ................................................................. 166,810
Class Y ................................................................. 2,621,505
- -------------------------------------------------------------------------- -------------
Net asset value per share
Class A ................................................................. $ 16.70
========================================================================== =============
Class A - Offering price (based on sales charge of 4.75%) ............... $ 17.53
========================================================================== =============
Class B ................................................................. $ 16.61
========================================================================== =============
Class C ................................................................. $ 16.65
========================================================================== =============
Class Y ................................................................. $ 16.70
========================================================================== =============
<CAPTION>
Tax-Strategic
Balanced Foundation Foundation
Fund Fund Fund
------------------- ----------------- -----------------
<S> <C> <C> <C>
Assets
Investments at value (identified cost - $192,500,813, $1,280,624,600,
$1,935,098,601 and $268,854,476, respectively).......................... $ 1,897,588,085 $2,626,081,854 $ 303,383,743
Cash .................................................................... 984 755,162 731
Receivable for investments sold ......................................... 15,147,304 0 0
Receivable for Fund shares sold ......................................... 1,152,930 12,537,545 4,234,931
Dividends and interest receivable ....................................... 11,257,799 9,893,420 2,463,873
Unamortized organization expenses ....................................... 0 0 4,862
Unrealized appreciation on forward foreign
currency exchange contracts ............................................ 971,860 0 0
Prepaid expenses and other assets ....................................... 391,480 204,409 47,793
- --------------------------------------------------------------------------- --------------- -------------- -------------
Total assets ........................................................... 1,926,510,442 2,649,472,390 310,135,933
- --------------------------------------------------------------------------- --------------- -------------- -------------
Liabilities
Payable for investments purchased ....................................... 24,812,113 3,028,219 6,862,231
Payable for Fund shares repurchased ..................................... 3,159,453 2,491,690 280,329
Advisory fee payable .................................................... 688,926 1,648,099 227,316
Distribution Plan expenses payable ...................................... 555,541 879,282 181,285
Due to related parties .................................................. 27,600 0 0
Accrued expenses and other liabilities .................................. 113,068 197,488 83,532
- --------------------------------------------------------------------------- --------------- -------------- -------------
Total liabilities ...................................................... 29,356,701 8,244,778 7,634,693
- --------------------------------------------------------------------------- --------------- -------------- -------------
Net assets ............................................................... $ 1,897,153,741 $2,641,227,612 $ 302,501,240
=========================================================================== =============== ============== =============
Net assets represented by
Paid-in capital ......................................................... $ 1,232,456,544 $1,944,730,227 $ 267,647,747
Undistributed (distributions in excess of) net investment income ........ 2,779,889 (35,481) 17,451
Accumulated net realized gain on investments,
futures contracts and foreign currency related transactions ............ 43,981,058 5,549,613 306,775
Net unrealized appreciation on investments and
foreign currency related transactions .................................. 617,936,250 690,983,253 34,529,267
- --------------------------------------------------------------------------- --------------- -------------- -------------
Total net assets ....................................................... $ 1,897,153,741 $2,641,227,612 $ 302,501,240
=========================================================================== =============== ============== =============
Net assets consists of
Class A ................................................................. $ 1,277,419,448 $ 350,078,735 $ 69,878,735
Class B ................................................................. 579,673,910 1,123,867,181 185,042,260
Class C ................................................................. 829,197 50,216,288 27,699,006
Class Y ................................................................. 39,231,186 1,117,065,408 19,881,239
- --------------------------------------------------------------------------- --------------- -------------- -------------
$ 1,897,153,741 $2,641,227,612 $ 302,501,240
=============== ============== =============
Shares outstanding
Class A ................................................................. 99,290,770 17,129,241 4,272,621
Class B ................................................................. 45,003,516 55,243,018 11,331,967
Class C ................................................................. 64,372 2,468,520 1,699,021
Class Y ................................................................. 3,050,729 54,619,171 1,213,326
- --------------------------------------------------------------------------- --------------- -------------- -------------
Net asset value per share
Class A ................................................................. $ 12.87 $ 20.44 $ 16.36
=========================================================================== =============== ============== =============
Class A - Offering price (based on sales charge of 4.75%) ............... $ 13.51 $ 21.46 $ 17.18
=========================================================================== =============== ============== =============
Class B ................................................................. $ 12.88 $ 20.34 $ 16.33
=========================================================================== =============== ============== =============
Class C ................................................................. $ 12.88 $ 20.34 $ 16.30
=========================================================================== =============== ============== =============
Class Y ................................................................. $ 12.86 $ 20.45 $ 16.39
=========================================================================== =============== ============== =============
</TABLE>
See Combined Notes to Financial Statements.
52
<PAGE>
EVERGREEN
Balanced Funds
Statements of Operations
Year Ended March 31, 1998
<TABLE>
<CAPTION>
American
Retirement Balanced
Fund Fund*
-------------- ---------------
<S> <C> <C>
Investment income
Dividends (net of foreign withholding taxes of $14,071, $33,136, $9,289, and
$924, respectively).............................................................. $ 3,825,947 $ 16,541,641
Interest ......................................................................... 4,464,283 35,108,602
- ----------------------------------------------------------------------------------- ----------- ------------
Total income ...................................................................... 8,290,230 51,650,243
Expenses
Advisory fee ..................................................................... 1,350,506 5,534,574
Distribution Plan expenses ....................................................... 1,236,802 7,232,979
Transfer agent fees .............................................................. 385,565 2,214,659
Trustees fees .................................................................... 9,529 117,124
Administrative services fees ..................................................... 0 294,242
Other ............................................................................ 327,060 913,574
- ----------------------------------------------------------------------------------- ----------- ------------
Total expenses .................................................................. 3,309,462 16,307,152
Less: Indirectly paid expenses ................................................... (5,046) (2,660)
- ----------------------------------------------------------------------------------- ----------- ------------
Net expenses .................................................................... 3,304,416 16,304,492
- ----------------------------------------------------------------------------------- ----------- ------------
Net investment income ............................................................ 4,985,814 35,345,751
- ----------------------------------------------------------------------------------- ----------- ------------
Net realized and unrealized gain (loss) on investments, futures contracts
and foreign currency related transactions
Net realized gain (loss) on:
Investments ..................................................................... 5,840,219 128,518,720
Futures contracts ............................................................... 0 (266,127)
Foreign currency related transactions ........................................... 0 (1,250,925)
- ----------------------------------------------------------------------------------- ----------- ------------
Net realized gain on investments, futures contracts and foreign currency
related transactions ............................................................ 5,840,219 127,001,668
- ----------------------------------------------------------------------------------- ----------- ------------
Net change in unrealized appreciation of investments and foreign currency
related transactions ............................................................ 31,534,034 84,015,495
- ----------------------------------------------------------------------------------- ----------- ------------
Net realized and unrealized gain on investments, futures contracts and foreign
currency related transactions ................................................... 37,374,253 211,017,163
- ----------------------------------------------------------------------------------- ----------- ------------
Net increase in net assets resulting from operations ............................. $42,360,067 $246,362,914
=================================================================================== =========== ============
<CAPTION>
Tax-Strategic
Foundation Foundation
Fund Fund
--------------- ---------------
<S> <C> <C>
Investment income
Dividends (net of foreign withholding taxes of $14,071, $33,136, $9,289, and
$924, respectively).............................................................. $ 24,841,677 $ 1,251,681
Interest ......................................................................... 52,356,287 4,781,233
- ------------------------------------------------------------------------------------ ------------ -----------
Total income ...................................................................... 77,197,964 6,032,914
Expenses
Advisory fee ..................................................................... 16,156,433 1,451,786
Distribution Plan expenses ....................................................... 9,377,671 1,200,054
Transfer agent fees .............................................................. 3,887,808 204,142
Trustees fees .................................................................... 59,346 6,683
Administrative services fees ..................................................... 0 0
Other ............................................................................ 1,617,873 285,694
- ------------------------------------------------------------------------------------ ------------ -----------
Total expenses .................................................................. 31,099,131 3,148,359
Less: Indirectly paid expenses ................................................... (7,771) (3,963)
- ------------------------------------------------------------------------------------ ------------ -----------
Net expenses .................................................................... 31,091,360 3,144,396
- ------------------------------------------------------------------------------------ ------------ -----------
Net investment income ............................................................ 46,106,604 2,888,518
- ------------------------------------------------------------------------------------ ------------ -----------
Net realized and unrealized gain (loss) on investments, futures contracts
and foreign currency related transactions
Net realized gain (loss) on:
Investments ..................................................................... 37,733,396 1,331,487
Futures contracts ............................................................... 0 0
Foreign currency related transactions ........................................... 0 0
- ------------------------------------------------------------------------------------ ------------ -----------
Net realized gain on investments, futures contracts and foreign currency
related transactions ............................................................ 37,733,396 1,331,487
- ------------------------------------------------------------------------------------ ------------ -----------
Net change in unrealized appreciation of investments and foreign currency
related transactions ............................................................ 507,820,113 28,378,750
- ------------------------------------------------------------------------------------ ------------ -----------
Net realized and unrealized gain on investments, futures contracts and foreign
currency related transactions ................................................... 545,553,509 29,710,237
- ------------------------------------------------------------------------------------ ------------ -----------
Net increase in net assets resulting from operations ............................. $591,660,113 $32,598,755
==================================================================================== ============ ===========
</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.
Year Ended June 30, 1997
<TABLE>
<CAPTION>
Balanced
Fund
----------------
<S> <C>
Investment income
Interest ................................................................................ $ 40,204,287
Dividends (net of foreign withholding taxes of $91,085).................................. 24,547,062
- ------------------------------------------------------------------------------------------ ------------
Total income ............................................................................. 64,751,349
Expenses
Advisory fee ............................................................................ 6,854,615
Distribution Plan expenses .............................................................. 15,437,631
Transfer agent fees ..................................................................... 2,979,483
Administative service fees .............................................................. 101,818
Custodian fees .......................................................................... 596,802
Trustees fees ........................................................................... 55,886
Other ................................................................................... 193,248
- ------------------------------------------------------------------------------------------ ------------
Total expenses ......................................................................... 26,219,483
Less: Indirectly paid expenses .......................................................... (146,111)
- ------------------------------------------------------------------------------------------ ------------
Net expenses ........................................................................... 26,073,372
- ------------------------------------------------------------------------------------------ ------------
Net investment income ................................................................... 38,677,977
- ------------------------------------------------------------------------------------------ ------------
Net realized and unrealized gain on investments and foreign currency related transactions
Net realized gain on:
Investments ............................................................................ 116,423,636
Foreign currency related transactions .................................................. 4,563,646
- ------------------------------------------------------------------------------------------ ------------
Net realized gain on investments and foreign currency related transactions .............. 120,987,282
- ------------------------------------------------------------------------------------------ ------------
Net change in unrealized appreciation of investments and foreign currency related 146,568,036
- ------------------------------------------------------------------------------------------ ------------
transactions
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency related 267,555,318
- ------------------------------------------------------------------------------------------ ------------
transactions
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations .................................... $306,233,295
========================================================================================== ============
</TABLE>
See Combined Notes to Financial Statements.
53
<PAGE>
EVERGREEN
Balanced Funds
Statements of Changes in Net Assets
Year Ended March 31, 1998
<TABLE>
<CAPTION>
American
Retirement
Fund
----------------
<S> <C>
Operations
Net investment income ...................................................... $ 4,985,814
Net realized gain on investments, futures contracts and foreign currency
related transactions ...................................................... 5,840,219
Net change in unrealized appreciation of investments and foreign
currency related transactions ............................................. 31,534,034
- ----------------------------------------------------------------------------- -------------
Net increase in net assets resulting from operations ....................... 42,360,067
- ----------------------------------------------------------------------------- -------------
Distributions to shareholders
From net investment income
Class A ................................................................... (695,207)
Class B ................................................................... (2,792,552)
Class C ................................................................... (49,486)
Class Y ................................................................... (1,312,760)
In excess of net investment income
Class A ................................................................... 0
Class B ................................................................... 0
Class C ................................................................... 0
From net realized gain on investments, futures contracts and foreign
currency related transactions
Class A ................................................................... (514,560)
Class B ................................................................... (2,734,907)
Class C ................................................................... (50,154)
Class Y ................................................................... (874,184)
- ----------------------------------------------------------------------------- -------------
Total distributions to shareholders ....................................... (9,023,810)
- ----------------------------------------------------------------------------- -------------
Capital share transactions
Proceeds from shares sold .................................................. 86,591,263
Payment for shares redeemed ................................................ (24,953,880)
Net asset value of shares issued in reinvestment of distributions .......... 8,459,313
Shares issued in acquisition of Evergreen Balanced Fund II ................. 0
Shares issued in acquisition of Keystone Balanced Fund II .................. 0
- ----------------------------------------------------------------------------- -------------
Net increase in net assets resulting from capital share transactions ...... 70,096,696
- ----------------------------------------------------------------------------- -------------
Total increase in net assets ............................................. 103,432,953
Net assets
Beginning of year .......................................................... 130,386,389
- ----------------------------------------------------------------------------- -------------
End of year ................................................................ $ 233,819,342
============================================================================= =============
Undistributed (distributions in excess of) net investment income ............ $ 235,752
============================================================================= =============
<CAPTION>
Balanced Foundation
Fund* Fund
------------------ ------------------
<S> <C> <C>
Operations
Net investment income ...................................................... $ 35,345,751 $ 46,106,604
Net realized gain on investments, futures contracts and foreign currency
related transactions ...................................................... 127,001,668 37,733,396
Net change in unrealized appreciation of investments and foreign
currency related transactions ............................................. 84,015,495 507,820,113
- ------------------------------------------------------------------------------ -------------- --------------
Net increase in net assets resulting from operations ....................... 246,362,914 591,660,113
- ------------------------------------------------------------------------------ -------------- --------------
Distributions to shareholders
From net investment income
Class A ................................................................... (12,029,418) (6,648,634)
Class B ................................................................... (25,630,818) (13,556,896)
Class C ................................................................... (2,502) (596,052)
Class Y ................................................................... (263,102) (25,594,285)
In excess of net investment income
Class A ................................................................... 0 (129,791)
Class B ................................................................... 0 (748,102)
Class C ................................................................... 0 (36,273)
From net realized gain on investments, futures contracts and foreign
currency related transactions
Class A ................................................................... (25,111,250) (6,367,014)
Class B ................................................................... (168,719,950) (19,081,303)
Class C ................................................................... (135) (836,192)
Class Y ................................................................... 0 (22,106,374)
- ------------------------------------------------------------------------------ -------------- --------------
Total distributions to shareholders ....................................... (231,757,175) (95,700,916)
- ------------------------------------------------------------------------------ -------------- --------------
Capital share transactions
Proceeds from shares sold .................................................. 121,903,416 691,840,878
Payment for shares redeemed ................................................ (278,715,460) (299,555,598)
Net asset value of shares issued in reinvestment of distributions .......... 199,041,548 89,801,360
Shares issued in acquisition of Evergreen Balanced Fund II ................. 214,923,155 0
Shares issued in acquisition of Keystone Balanced Fund II .................. 0 8,490,928
- ------------------------------------------------------------------------------ -------------- --------------
Net increase in net assets resulting from capital share transactions ...... 257,152,659 490,577,568
- ------------------------------------------------------------------------------ -------------- --------------
Total increase in net assets ............................................. 271,758,398 986,536,765
Net assets
Beginning of year .......................................................... 1,625,395,343 1,654,690,847
- ------------------------------------------------------------------------------ -------------- --------------
End of year ................................................................ $1,897,153,741 $2,641,227,612
============================================================================== ============== ==============
Undistributed (distributions in excess of) net investment income ............ $ 2,779,889 $ (35,481)
============================================================================== ============== ==============
<CAPTION>
Tax-Strategic
Foundation
Fund
---------------
<S> <C>
Operations
Net investment income ...................................................... $ 2,888,518
Net realized gain on investments, futures contracts and foreign currency
related transactions ...................................................... 1,331,487
Net change in unrealized appreciation of investments and foreign
currency related transactions ............................................. 28,378,750
- ------------------------------------------------------------------------------ -------------
Net increase in net assets resulting from operations ....................... 32,598,755
- ------------------------------------------------------------------------------ -------------
Distributions to shareholders
From net investment income
Class A ................................................................... (845,312)
Class B ................................................................... (1,429,127)
Class C ................................................................... (189,734)
Class Y ................................................................... (422,361)
In excess of net investment income
Class A ................................................................... 0
Class B ................................................................... 0
Class C ................................................................... 0
From net realized gain on investments, futures contracts and foreign
currency related transactions
Class A ................................................................... (424,397)
Class B ................................................................... (1,129,269)
Class C ................................................................... (141,334)
Class Y ................................................................... (207,645)
- ------------------------------------------------------------------------------ -------------
Total distributions to shareholders ....................................... (4,789,179)
- ------------------------------------------------------------------------------ -------------
Capital share transactions
Proceeds from shares sold .................................................. 212,133,212
Payment for shares redeemed ................................................ (15,800,328)
Net asset value of shares issued in reinvestment of distributions .......... 4,084,131
Shares issued in acquisition of Evergreen Balanced Fund II .................
Shares issued in acquisition of Keystone Balanced Fund II .................. 0
- ------------------------------------------------------------------------------ -------------
Net increase in net assets resulting from capital share transactions ...... 200,417,015
- ------------------------------------------------------------------------------ -------------
Total increase in net assets ............................................. 228,226,591
Net assets
Beginning of year .......................................................... 74,274,649
- ------------------------------------------------------------------------------ -------------
End of year ................................................................ $ 302,501,240
============================================================================== =============
Undistributed (distributions in excess of) net investment income ............ $ 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.
54
<PAGE>
EVERGREEN
Balanced Funds
Statements of Changes in Net Assets
Prior Periods - 1997
<TABLE>
<CAPTION>
American
Retirement
Fund*
---------------
<S> <C>
Operations
Net investment income ...................................................... $ 916,564
Net realized gain on investments, futures contracts and foreign currency
related transactions ...................................................... 274,144
Net change in unrealized appreciation (depreciation) on investments and
foreign currency related transactions ..................................... (1,782,365)
- ----------------------------------------------------------------------------- ------------
Net increase (decrease) in net assets resulting from operations ........... (591,657)
- ----------------------------------------------------------------------------- ------------
Distributions to shareholders
From net investment income
Class A ................................................................... (114,069)
Class B ................................................................... (485,797)
Class C ................................................................... (11,029)
Class Y ................................................................... (323,235)
From net realized gain on investments, futures contracts and foreign
currency related transactions
Class B ................................................................... 0
- ----------------------------------------------------------------------------- ------------
Total distributions to shareholders ....................................... (934,130)
- ----------------------------------------------------------------------------- ------------
Capital share transactions
Proceeds from shares sold .................................................. 27,711,777
Payments for shares redeemed ............................................... (8,115,115)
Net asset value of shares issued in reinvestment of distributions .......... 847,895
- ----------------------------------------------------------------------------- ------------
Net increase (decrease) in net assets resulting from capital share
transactions ............................................................. 20,444,557
- ----------------------------------------------------------------------------- ------------
Total increase in net assets ............................................. 18,918,770
Net assets
Beginning of year .......................................................... 111,467,619
- ----------------------------------------------------------------------------- ------------
End of year ................................................................ $130,386,389
============================================================================= ============
Undistributed net investment income ......................................... $ 11,347
============================================================================= ============
<CAPTION>
Balanced Foundation
Fund** Fund*
------------------ ------------------
<S> <C> <C>
Operations
Net investment income ...................................................... $ 38,677,977 $ 10,995,411
Net realized gain on investments, futures contracts and foreign currency
related transactions ...................................................... 120,987,282 7,808,618
Net change in unrealized appreciation (depreciation) on investments and
foreign currency related transactions ..................................... 146,568,036 (22,555,700)
- ------------------------------------------------------------------------------ -------------- --------------
Net increase (decrease) in net assets resulting from operations ........... 306,233,295 (3,751,671)
- ------------------------------------------------------------------------------ -------------- --------------
Distributions to shareholders
From net investment income
Class A ................................................................... 0 (1,460,563)
Class B ................................................................... (38,660,044) (3,012,553)
Class C ................................................................... 0 (138,668)
Class Y ................................................................... 0 (5,968,305)
From net realized gain on investments, futures contracts and foreign
currency related transactions
Class B ................................................................... (57,571,132) 0
- ------------------------------------------------------------------------------ -------------- --------------
Total distributions to shareholders ....................................... (96,231,176) (10,580,089)
- ------------------------------------------------------------------------------ -------------- --------------
Capital share transactions
Proceeds from shares sold .................................................. 200,987,044 124,109,877
Payments for shares redeemed ............................................... (351,020,484) (76,822,274)
Net asset value of shares issued in reinvestment of distributions .......... 84,249,628 9,578,914
- ------------------------------------------------------------------------------ -------------- --------------
Net increase (decrease) in net assets resulting from capital share
transactions ............................................................. (65,783,812) 56,866,517
- ------------------------------------------------------------------------------ -------------- --------------
Total increase in net assets ............................................. 144,218,307 42,534,757
Net assets
Beginning of year .......................................................... 1,481,177,036 1,612,156,090
- ------------------------------------------------------------------------------ -------------- --------------
End of year ................................................................ $1,625,395,343 $1,654,690,847
============================================================================== ============== ==============
Undistributed net investment income ......................................... $ 3,239,562 $ 441,087
============================================================================== ============== ==============
<CAPTION>
Tax-Strategic
Foundation
Fund*
---------------
<S> <C>
Operations
Net investment income ...................................................... $ 316,568
Net realized gain on investments, futures contracts and foreign currency
related transactions ...................................................... 865,777
Net change in unrealized appreciation (depreciation) on investments and
foreign currency related transactions ..................................... (916,721)
- ------------------------------------------------------------------------------ ------------
Net increase (decrease) in net assets resulting from operations ........... 265,624
- ------------------------------------------------------------------------------ ------------
Distributions to shareholders
From net investment income
Class A ................................................................... (69,706)
Class B ................................................................... (123,210)
Class C ................................................................... (16,785)
Class Y ................................................................... (78,613)
From net realized gain on investments, futures contracts and foreign
currency related transactions
Class B ................................................................... 0
- ------------------------------------------------------------------------------ ------------
Total distributions to shareholders ....................................... (288,314)
- ------------------------------------------------------------------------------ ------------
Capital share transactions
Proceeds from shares sold .................................................. 17,462,938
Payments for shares redeemed ............................................... (1,659,842)
Net asset value of shares issued in reinvestment of distributions .......... 211,565
- ------------------------------------------------------------------------------ ------------
Net increase (decrease) in net assets resulting from capital share
transactions ............................................................. 16,014,661
- ------------------------------------------------------------------------------ ------------
Total increase in net assets ............................................. 15,991,971
Net assets
Beginning of year .......................................................... 58,282,678
- ------------------------------------------------------------------------------ ------------
End of year ................................................................ $ 74,274,649
============================================================================== ============
Undistributed net investment income ......................................... $ 30,456
============================================================================== ============
</TABLE>
* For the period ended March 31, 1997. The Fund changed its fiscal year end
from December 31 to March 31, effective March 31, 1997.
** For the year ended June 30, 1997.
See Combined Notes to Financial Statements.
55
<PAGE>
EVERGREEN
Balanced Funds
Statements of Changes in Net Assets
Prior Periods - 1996
<TABLE>
<CAPTION>
American
Retirement
Fund*
----------------
<S> <C>
Operations
Net investment income ...................................................... $ 2,435,368
Net realized gain on investments, futures contracts and foreign currency
related transactions ...................................................... 537,906
Net change in unrealized appreciation on investments and foreign
currency related transactions ............................................. 6,223,491
- ----------------------------------------------------------------------------- ------------
Net increase in net assets resulting from operations ...................... 9,196,765
- ----------------------------------------------------------------------------- ------------
Distributions to shareholders
From net investment income
Class A ................................................................... (214,502)
Class B ................................................................... (839,295)
Class C ................................................................... (22,543)
Class Y ................................................................... (1,330,115)
In excess of net investment income
Class A ................................................................... 0
Class B ................................................................... 0
Class C ................................................................... 0
Class Y ................................................................... 0
From net realized gain on investments, futures contracts and foreign
currency related transactions
Class A ................................................................... (61,826)
Class B ................................................................... (302,689)
Class C ................................................................... (7,483)
Class Y ................................................................... (321,583)
In excess of net realized gain on investments, futures contracts and
foreign currency related transactions
Class A ................................................................... (3,185)
Class B ................................................................... (15,592)
Class C ................................................................... (385)
Class Y ................................................................... (16,566)
- ----------------------------------------------------------------------------- ------------
Total distributions to shareholders ....................................... (3,135,764)
- ----------------------------------------------------------------------------- ------------
Capital share transactions
Proceeds from shares sold .................................................. 66,932,304
Payment for shares redeemed ................................................ (9,928,020)
Net asset value of shares issued in reinvestment of distributions .......... 2,790,578
- ----------------------------------------------------------------------------- ------------
Net increase (decrease) in net assets resulting from capital share
transactions ............................................................. 59,794,862
- ----------------------------------------------------------------------------- ------------
Total increase in net assets ............................................. 65,855,863
Net assets
Beginning of year .......................................................... 45,611,756
- ----------------------------------------------------------------------------- ------------
End of year ................................................................ $111,467,619
============================================================================= ============
Undistributed accumulated (distributions in excess of) net investment
income ..................................................................... $ 28,913
============================================================================= ============
<CAPTION>
Tax-Strategic
Balanced Foundation Foundation
Fund** Fund* Fund*
------------------ ----------------- ---------------
<S> <C> <C> <C>
Operations
Net investment income ...................................................... $ 38,649,314 $ 45,192,977 $ 858,454
Net realized gain on investments, futures contracts and foreign currency
related transactions ...................................................... 54,917,152 21,629,530 1,133,442
Net change in unrealized appreciation on investments and foreign
currency related transactions ............................................. 132,899,484 96,176,448 4,531,613
- ------------------------------------------------------------------------------ -------------- -------------- ------------
Net increase in net assets resulting from operations ...................... 226,465,950 162,998,955 6,523,509
- ------------------------------------------------------------------------------ -------------- -------------- ------------
Distributions to shareholders
From net investment income
Class A ................................................................... 0 (5,718,718) (163,381)
Class B ................................................................... (38,649,314) (12,786,120) (306,929)
Class C ................................................................... 0 (568,120) (42,461)
Class Y ................................................................... 0 (26,366,104) (342,618)
In excess of net investment income
Class A ................................................................... 0 0 (121)
Class B ................................................................... (4,413,251) 0 (226)
Class C ................................................................... 0 0 (31)
Class Y ................................................................... 0 0 (253)
From net realized gain on investments, futures contracts and foreign
currency related transactions
Class A ................................................................... 0 (1,819,496) (209,265)
Class B ................................................................... (18,717,526) (5,077,907) (555,359)
Class C ................................................................... 0 (231,947) (82,045)
Class Y ................................................................... 0 (7,335,097) (303,414)
In excess of net realized gain on investments, futures contracts and
foreign currency related transactions
Class A ................................................................... 0 0 0
Class B ................................................................... 0 0 0
Class C ................................................................... 0 0 0
Class Y ................................................................... 0 0 0
- ------------------------------------------------------------------------------ -------------- -------------- ------------
Total distributions to shareholders ....................................... (61,780,091) (59,903,509) (2,006,103)
- ------------------------------------------------------------------------------ -------------- -------------- ------------
Capital share transactions
Proceeds from shares sold .................................................. 227,626,268 717,070,601 32,091,878
Payment for shares redeemed ................................................ (308,498,436) (301,222,020) (3,143,238)
Net asset value of shares issued in reinvestment of distributions .......... 52,483,524 55,523,207 1,574,099
- ------------------------------------------------------------------------------ -------------- -------------- ------------
Net increase (decrease) in net assets resulting from capital share
transactions ............................................................. (28,388,644) 471,371,788 30,522,739
- ------------------------------------------------------------------------------ -------------- -------------- ------------
Total increase in net assets ............................................. 136,297,215 574,467,234 35,040,145
Net assets
Beginning of year .......................................................... 1,344,879,821 1,037,688,856 23,242,533
- ------------------------------------------------------------------------------ -------------- -------------- ------------
End of year ................................................................ $1,481,177,036 $1,612,156,090 $ 58,282,678
============================================================================== ============== ============== ============
Undistributed accumulated (distributions in excess of) net investment
income ..................................................................... $ 115,118 $ 138,085 $ (631)
============================================================================== ============== ============== ============
</TABLE>
* For the year ended December 31, 1996.
** For the year ended June 30, 1996.
See Combined Notes to Financial Statements.
56
<PAGE>
Combined Notes to Financial Statements
1. ORGANIZATION
The Evergreen Balanced Funds consist of Evergreen American Retirement Fund
("American Retirement"), Evergreen Balanced Fund ("Balanced"), Evergreen
Foundation Fund ("Foundation"), and Evergreen Tax Strategic Foundation Fund
("Tax Strategic"), each of which is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as diversified, open-end management
investment companies. Each Fund is a series of the Evergreen Equity Trust, a
Delaware business Trust organized on September 18, 1997. Formerly, each Fund
was organized as either a Massachusetts business Trust or a series of a
Massachusetts business trust. American Retirement, Balanced, Foundation, Tax
Strategic, are collectively referred to herein as the "Funds".
The Funds offer Class A, Class B, Class C and Class Y shares. Class A shares
are sold with a maximum front-end sales charge of 4.75%. Class B and Class C
shares are sold without a front-end sales charge, but pay a higher ongoing
distribution fee than Class A. Class B shares are sold subject to a contingent
deferred sales charge that is payable upon redemption and decreases depending
on how long the shares have been held. Class C shares are sold subject to a
contingent deferred sales charge payable on shares redeemed within one year
after the month of purchase. Class B shares purchased after January 1, 1997
will automatically convert to Class A shares after seven years. Class B shares
purchased prior to January 1, 1997 retain their existing conversion rights.
Class Y shares are sold at net asset value and are not subject to contingent
deferred sales charges or distribution fees. Class Y shares are sold only to
investment advisory clients of First Union and its affiliates, certain
institutional investors or Class Y shareholders of record of certain other
funds managed by First Union and its affiliates.
2. REORGANIZATION OF EVERGREEN BALANCED FUND
The Fund was formed for the purpose of combining the net assets of the
Evergreen Balanced Fund II (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 Evergreen Select Balanced Fund, an
institutional balanced fund, through a redemption-in-kind in the amount of
approximately $729 million.
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 identified 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 ......... $ 214,923,155 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
$1,831,271,692.
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.
3. ACQUISITION OF KEYSTONE BALANCED FUND II
Effective at the close of business on July 17, 1997, Foundation acquired the
net assets of Keystone Balanced Fund II, an open-end management investment
company registered under the 1940 Act in an exchange of shares. The net assets
were exchanged through a non-taxable exchange for 111,203, 316,984, and 36,146
Class A, Class B and Class C shares, respectively, of Foundation. The acquired
57
<PAGE>
Combined Notes to Financial Statements (continued)
net assets consisted primarily of portfolio securities with unrealized
appreciation of $1,216,239. The aggregate net assets of Foundation 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 advisor to be creditworthy pursuant to guidelines established by the
Board of Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, Balanced, along with certain other funds managed by Keystone
Investment Management Company ("Keystone"), may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are fully collateralized by U.S. Treasury
and/or federal agency obligations.
C. Reverse Repurchase Agreements
To obtain short-term financing, the 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 (loss) resulting from changes in foreign
currency exchange rates is a component of net unrealized appreciation
(depreciation) on investments and foreign currency related transactions. Net
realized foreign currency gains and losses resulting from changes in exchange
rates include: foreign currency gains and losses between trade date and
settlement date on investment securities transactions, foreign currency related
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Fund and the amount actually received. Such gains
and losses are included in realized gain (loss) on foreign currency related
transactions. The portion of foreign currency gains and losses related to
fluctuations in exchange rates between the initial purchase trade date and
subsequent sale trade date is included in realized gain (loss) on foreign
currency related transactions.
E. 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
58
<PAGE>
Combined Notes to Financial Statements (continued)
gain (loss) on foreign currency related transactions. The Fund bears the risk
of an unfavorable change in the foreign currency exchange rate underlying the
forward contract and is subject to the credit risk that the other party will
not fulfill their obligations under the contract. Forward contracts involve
elements of market risk in excess of the amount reflected in the statement of
assets and liabilities.
F. 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. 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.
G. 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
transaction 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.
H. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated
investment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable
income and net capital gains, if any, to their shareholders. The Funds also
intend to avoid any excise tax liability by making the required distributions
under the Code. Accordingly, no provision for federal 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. The significant differences between financial
statement amounts available for distributions and distributions made in
accordance with income tax regulations are primarily due to differing
treatments for realized gains from foreign currency related transactions and
certain distributions received from real estate investment trusts.
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.
5. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with no par
value authorized. Shares of beneficial interest of the Funds are currently
divided into Class A, Class B, Class C and Class Y. Transactions in shares of
the Funds were as follows:
59
<PAGE>
Combined Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
AMERICAN RETIREMENT
<TABLE>
<CAPTION>
Year Ended
March 31, 1998
------------------------------
Shares Amount
------------- ----------------
<S> <C> <C>
Class A
Shares sold ...................................... 776,394 $ 11,977,023
Shares redeemed .................................. (175,621) (2,728,081)
Shares issued in reinvestment of distributions.... 73,985 1,168,200
- -------------------------------------------------- ----------- ---------------
Net increase ..................................... 674,758 10,417,142
- -------------------------------------------------- ----------- ---------------
Class B
Shares sold ...................................... 4,220,724 64,924,905
Shares redeemed .................................. (651,898) (10,105,217)
Shares issued in reinvestment of distributions.... 340,081 5,338,212
- -------------------------------------------------- ----------- ---------------
Net increase ..................................... 3,908,907 60,157,900
- -------------------------------------------------- ----------- ---------------
Class C
Shares sold ...................................... 80,905 1,241,277
Shares redeemed .................................. (49,433) (711,589)
Shares issued in reinvestment of distributions.... 6,217 97,713
- -------------------------------------------------- ----------- ---------------
Net increase ..................................... 37,689 627,401
- -------------------------------------------------- ----------- ---------------
Class Y
Shares sold ...................................... 542,883 8,448,058
Shares redeemed .................................. (749,260) (11,408,993)
Shares issued in reinvestment of distributions.... 117,732 1,855,188
- -------------------------------------------------- ----------- ---------------
Net decrease ..................................... (88,645) (1,105,747)
================================================== =========== ===============
Net increase ..................................... 4,532,709 $ 70,096,696
================================================== =========== ===============
<CAPTION>
Three Months Ended Year Ended
March 31, 1997* December 31, 1996
----------------------------- ----------------------------
Shares Amount Shares Amount
------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Class A
Shares sold ...................................... 326,820 $ 4,608,875 762,980 $ 10,140,786
Shares redeemed .................................. (74,356) (1,044,019) (84,770) (1,127,903)
Shares issued in reinvestment of distributions.... 7,652 106,973 19,559 264,707
- -------------------------------------------------------------- ------------- ----------- -------------
Net increase ..................................... 260,116 3,671,829 697,769 9,277,590
- -------------------------------------------------------------- ------------- ----------- -------------
Class B
Shares sold ...................................... 1,531,877 21,511,234 3,892,133 51,648,645
Shares redeemed .................................. (124,007) (1,740,809) (175,385) (2,331,018)
Shares issued in reinvestment of distributions.... 33,372 464,195 81,733 1,103,810
- -------------------------------------------------------------- ------------- ----------- -------------
Net increase ..................................... 1,441,242 20,234,620 3,798,481 50,421,437
- -------------------------------------------------------------- ------------- ----------- -------------
Class C
Shares sold ...................................... 25,543 360,283 100,739 1,334,965
Shares redeemed .................................. (4,726) (66,693) (3,928) (53,590)
Shares issued in reinvestment of distributions.... 755 10,535 2,161 29,233
- -------------------------------------------------------------- ------------- ----------- -------------
Net increase ..................................... 21,572 304,125 98,972 1,310,608
- -------------------------------------------------------------- ------------- ----------- -------------
Class Y
Shares sold ...................................... 87,120 1,231,385 287,843 3,807,908
Shares redeemed .................................. (370,659) (5,263,594) (481,537) (6,415,509)
Shares issued in reinvestment of distributions.... 19,041 266,192 103,943 1,392,828
- -------------------------------------------------------------- ------------- ----------- -------------
Net decrease ..................................... (264,498) (3,766,017) (89,751) (1,214,773)
============================================================== ============= =========== =============
Net increase ..................................... 1,458,432 $ 20,444,557 4,505,471 $ 59,794,862
============================================================== ============= =========== =============
</TABLE>
* The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
- --------------------------------------------------------------------------------
BALANCED
<TABLE>
<CAPTION>
Year Ended
March 31, 1998*
-----------------------------------
Shares Amount
--------------- -------------------
<S> <C> <C>
Class A
Shares sold ....................................... 860,543 $ 9,401,463
Shares redeemed ................................... (4,919,924) (61,467,813)
Shares issued in reinvestment of distributions..... 2,175,164 26,275,982
Automatic conversion of Class B shares to
Class A shares ................................... 97,487,277 1,205,409,703
Shares issued in acquisition of Evergreen
Balance Fund II .................................. 3,687,710 45,716,406
- --------------------------------------------------- ------------- ------------------
Net increase ...................................... 99,290,770 1,225,335,741
- --------------------------------------------------- ------------- ------------------
Class B
Shares sold ....................................... 9,070,640 111,415,080
Shares redeemed ................................... (15,656,468) (202,986,801)
Shares issued in reinvestment of distributions..... 13,954,804 172,765,442
Automatic conversion of Class B shares to
Class A shares ................................... (97,487,277) (1,205,409,703)
Shares issued in acquisition of Evergreen
Balance Fund II .................................. 9,587,697 118,815,736
- --------------------------------------------------- ------------- ------------------
Net decrease ...................................... (80,530,604) (1,005,400,246)
- --------------------------------------------------- ------------- ------------------
Class C
Shares sold ....................................... 22,780 270,797
Shares redeemed ................................... (1,672) (21,003)
Shares issued in reinvestment of distributions..... 10 124
Shares issued in acquisition of Evergreen
Balance Fund II .................................. 43,254 532,825
- --------------------------------------------------- ------------- ------------------
Net increase ...................................... 64,372 782,743
- --------------------------------------------------- ------------- ------------------
Class Y
Shares sold ....................................... 196,984 816,075
Shares redeemed ................................... (1,167,179) (14,239,843)
Shares issued in reinvestment of distributions..... 0 0
Shares issued in acquisition of Evergreen
Balance Fund II .................................. 4,020,924 49,858,189
- --------------------------------------------------- ------------- ------------------
Net increase ...................................... 3,050,729 36,434,421
=================================================== ============= ==================
Net increase (decrease) ........................... 21,875,267 $ 257,152,659
=================================================== ============= ==================
<CAPTION>
Year Ended Year Ended
June 30, 1997 June 30, 1996
---------------------------------- ----------------------------------
Shares Amount Shares Amount
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Class A
Shares sold ....................................... 0 0 0 0
Shares redeemed ................................... 0 0 0 0
Shares issued in reinvestment of distributions..... 0 0 0 0
Automatic conversion of Class B shares to
Class A shares ................................... 0 0 0 0
Shares issued in acquisition of Evergreen
Balance Fund II .................................. 0 0 0 0
- ------------------------------------------------------------------ --------------- -------------- ---------------
Net increase ...................................... 0 0 0 0
- ------------------------------------------------------------------ --------------- -------------- ---------------
Class B
Shares sold ....................................... 16,959,452 $ 200,987,044 20,948,679 $ 227,626,268
Shares redeemed ................................... (29,517,723) (351,020,484) (28,542,355) (308,498,436)
Shares issued in reinvestment of distributions..... 7,405,182 84,249,628 4,948,269 52,483,524
Automatic conversion of Class B shares to
Class A shares ................................... 0 0 0 0
Shares issued in acquisition of Evergreen
Balance Fund II .................................. 0 0 0 0
- ------------------------------------------------------------------ --------------- -------------- ---------------
Net decrease ...................................... (5,153,089) (65,783,812) (2,645,407) (28,388,644)
- ------------------------------------------------------------------ --------------- -------------- ---------------
Class C
Shares sold ....................................... 0 0 0 0
Shares redeemed ................................... 0 0 0 0
Shares issued in reinvestment of distributions..... 0 0 0 0
Shares issued in acquisition of Evergreen
Balance Fund II .................................. 0 0 0 0
- ------------------------------------------------------------------ --------------- -------------- ---------------
Net increase ...................................... 0 0 0 0
- ------------------------------------------------------------------ --------------- -------------- ---------------
Class Y
Shares sold ....................................... 0 0 0 0
Shares redeemed ................................... 0 0 0 0
Shares issued in reinvestment of distributions..... 0 0 0 0
Shares issued in acquisition of Evergreen
Balance Fund II .................................. 0 0 0 0
- ------------------------------------------------------------------ --------------- -------------- ---------------
Net increase ...................................... 0 0 0 0
================================================================== =============== ============== ===============
Net increase (decrease) ........................... (5,153,089) $ (65,783,812) (2,645,407) $ (28,388,644)
================================================================== =============== ============== ===============
</TABLE>
* The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 1998.
60
<PAGE>
Combined Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
FOUNDATION
<TABLE>
<CAPTION>
Year Ended Three Months Ended
March 31, 1998 March 31, 1997*
--------------------------------- --------------------------------
Shares Amount Shares Amount
--------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
Class A
Shares sold ...................................... 5,521,670 $ 103,759,687 1,573,527 $ 26,044,624
Shares redeemed .................................. (2,914,232) (53,799,294) (734,487) (12,146,536)
Shares issued in reinvestment of distributions ... 689,871 12,869,510 85,926 1,413,485
Shares issued in acquisition of Keystone
Balance Fund II ................................. 111,203 2,040,162 0 0
- -------------------------------------------------- ------------- ---------------- ------------- ---------------
Net increase ..................................... 3,408,512 64,870,065 924,966 15,311,573
- -------------------------------------------------- ------------- ---------------- ------------- ---------------
Class B
Shares sold ...................................... 19,625,977 367,905,222 3,519,353 58,129,934
Shares redeemed .................................. (4,438,949) (81,802,033) (1,205,547) (19,871,723)
Shares issued in reinvestment of distributions ... 1,744,118 32,347,483 175,001 2,868,253
Shares issued in acquisition of Keystone
Balance Fund II ................................. 316,984 5,790,704 0 0
- -------------------------------------------------- ------------- ---------------- ------------- ---------------
Net increase ..................................... 17,248,130 324,241,376 2,488,807 41,126,464
- -------------------------------------------------- ------------- ---------------- ------------- ---------------
Class C
Shares sold ...................................... 1,016,989 19,227,162 176,251 2,897,772
Shares redeemed .................................. (405,258) (7,403,302) (91,055) (1,506,028)
Shares issued in reinvestment of distributions ... 74,186 1,375,625 6,429 105,303
Shares issued in acquisition of Keystone
Balance Fund II ................................. 36,146 660,062 0 0
- -------------------------------------------------- ------------- ---------------- ------------- ---------------
Net increase ..................................... 722,063 13,859,547 91,625 1,497,047
- -------------------------------------------------- ------------- ---------------- ------------- ---------------
Class Y
Shares sold ...................................... 10,695,459 200,948,807 2,229,198 37,037,547
Shares redeemed .................................. (8,434,531) (156,550,969) (2,606,400) (43,297,987)
Shares issued in reinvestment of distributions ... 2,313,662 43,208,742 315,233 5,191,873
- -------------------------------------------------- ------------- ---------------- ------------- ---------------
Net increase (decrease) .......................... 4,574,590 87,606,580 (61,969) (1,068,567)
================================================== ============= ================ ============= ===============
Net increase ..................................... 25,953,295 $ 490,577,568 3,443,429 $ 56,866,517
================================================== ============= ================ ============= ===============
<CAPTION>
Year Ended
December 31, 1996
---------------------------------
Shares Amount
--------------- -----------------
<S> <C> <C>
Class A
Shares sold ...................................... 8,413,021 $ 126,479,881
Shares redeemed .................................. (3,177,106) (47,846,922)
Shares issued in reinvestment of distributions ... 474,763 7,335,750
Shares issued in acquisition of Keystone
Balance Fund II ................................. 0 0
- ---------------------------------------------------------------- ----------------
Net increase ..................................... 5,710,678 85,968,709
- ---------------------------------------------------------------- ----------------
Class B
Shares sold ...................................... 18,909,215 282,822,448
Shares redeemed .................................. (4,174,149) (62,881,641)
Shares issued in reinvestment of distributions ... 1,109,399 17,095,215
Shares issued in acquisition of Keystone
Balance Fund II ................................. 0 0
- ---------------------------------------------------------------- ----------------
Net increase ..................................... 15,844,465 237,036,022
- ---------------------------------------------------------------- ----------------
Class C
Shares sold ...................................... 1,165,822 17,413,787
Shares redeemed .................................. (308,109) (4,629,756)
Shares issued in reinvestment of distributions ... 43,393 668,629
Shares issued in acquisition of Keystone
Balance Fund II ................................. 0 0
- ---------------------------------------------------------------- ----------------
Net increase ..................................... 901,106 13,452,660
- ---------------------------------------------------------------- ----------------
Class Y
Shares sold ...................................... 19,300,331 290,354,485
Shares redeemed .................................. (12,328,011) (185,863,701)
Shares issued in reinvestment of distributions ... 1,977,198 30,423,613
- ---------------------------------------------------------------- ----------------
Net increase (decrease) .......................... 8,949,518 134,914,397
================================================================ ================
Net increase ..................................... 31,405,767 $ 471,371,788
================================================================ ================
</TABLE>
* The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
- --------------------------------------------------------------------------------
TAX STRATEGIC
<TABLE>
<CAPTION>
Year Ended Three Months Ended
March 31, 1998 March 31, 1997*
----------------------------- ---------------------------
Shares Amount Shares Amount
------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Class A
Shares sold ..................................... 3,458,299 $ 53,040,118 315,408 $ 4,371,432
Shares redeemed ................................. (371,701) (5,726,480) (38,895) (539,727)
Shares issued in reinvestment of distributions .. 77,658 1,200,787 4,842 66,689
- ------------------------------------------------- ----------- ------------- ---------- ------------
Net increase .................................... 3,164,256 48,514,425 281,355 3,898,394
- ------------------------------------------------- ----------- ------------- ---------- ------------
Class B
Shares sold ..................................... 8,736,220 134,105,426 816,857 11,299,403
Shares redeemed ................................. (423,863) (6,502,615) (36,136) (499,992)
Shares issued in reinvestment of distributions .. 154,897 2,385,102 8,114 111,726
- ------------------------------------------------- ----------- ------------- ---------- ------------
Net increase .................................... 8,467,254 129,987,913 788,835 10,911,137
- ------------------------------------------------- ----------- ------------- ---------- ------------
Class C
Shares sold ..................................... 1,515,720 23,364,146 102,016 1,405,348
Shares redeemed ................................. (212,250) (3,128,629) (31,923) (445,521)
Shares issued in reinvestment of distributions .. 19,807 305,243 745 10,250
- ------------------------------------------------- ----------- ------------- ---------- ------------
Net increase .................................... 1,323,277 20,540,760 70,838 970,077
- ------------------------------------------------- ----------- ------------- ---------- ------------
Class Y
Shares sold ..................................... 105,640 1,623,522 27,768 386,755
Shares redeemed ................................. (29,733) (442,604) (12,744) (174,602)
Shares issued in reinvestment of distributions .. 12,558 192,999 1,657 22,900
- ------------------------------------------------- ----------- ------------- ---------- ------------
Net increase .................................... 88,465 1,373,917 16,681 235,053
================================================= =========== ============= ========== ============
Net increase .................................... 13,043,252 $200,417,015 1,157,709 $16,014,661
================================================= =========== ============= ========== ============
<CAPTION>
Year Ended
December 31, 1996
-----------------------------
Shares Amount
------------- ---------------
<S> <C> <C>
Class A
Shares sold ..................................... 652,149 $ 8,273,511
Shares redeemed ................................. (73,546) (929,252)
Shares issued in reinvestment of distributions .. 26,949 357,306
- ------------------------------------------------------------- -------------
Net increase .................................... 605,552 7,701,565
- ------------------------------------------------------------- -------------
Class B
Shares sold ..................................... 1,563,566 19,725,070
Shares redeemed ................................. (85,378) (1,087,302)
Shares issued in reinvestment of distributions .. 59,693 793,572
- ------------------------------------------------------------- -------------
Net increase .................................... 1,537,881 19,431,340
- ------------------------------------------------------------- -------------
Class C
Shares sold ..................................... 263,684 3,324,801
Shares redeemed ................................. (5,604) (70,810)
Shares issued in reinvestment of distributions .. 6,172 81,908
- ------------------------------------------------------------- -------------
Net increase .................................... 264,252 3,335,899
- ------------------------------------------------------------- -------------
Class Y
Shares sold ..................................... 63,086 768,496
Shares redeemed ................................. (84,857) (1,055,874)
Shares issued in reinvestment of distributions .. 26,475 341,313
- ------------------------------------------------------------- -------------
Net increase .................................... 4,704 53,935
============================================================= =============
Net increase .................................... 2,412,389 $ 30,522,739
============================================================= =============
</TABLE>
* The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
61
<PAGE>
Combined Notes to Financial Statements (continued)
6. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities, excluding
short-term securities, were as follows for the year ended March 31, 1998:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
---------------- ----------------
<S> <C> <C>
American Retirement ......... $ 133,086,704 $ 57,622,719
Balanced .................... 1,272,598,779 1,299,416,840
Foundation .................. 469,563,034 178,592,797
Tax Strategic ............... 264,371,465 80,994,736
</TABLE>
On March 31, 1998, the composition of unrealized appreciation and depreciation
of investment securities based on the aggregate cost of investments for federal
income tax purposes was as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Net Unrealized
Tax Cost Appreciation Depreciation Appreciation
---------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
American Retirement ......... $ 192,562,140 $ 44,842,928 $ (2,419,167) $ 42,423,761
Balanced .................... 1,280,698,926 619,482,205 (2,593,046) 616,889,159
Foundation .................. 1,934,879,330 701,584,810 (10,382,286) 691,202,524
Tax Strategic ............... 268,883,076 35,400,698 (900,031) 34,500,667
</TABLE>
7. DISTRIBUTION PLANS
Evergreen Distributor, Inc. (formerly, Evergreen Keystone Distributor, Inc.)
("EDI"), a wholly-owned subsidiary of The BISYS Group Inc. ("BISYS") serves as
principal underwriter to the Funds.
Each Fund has adopted Distribution Plans for each class of shares 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 Fund is permitted to
pay. The Fund may compensate the principal underwriter for such excess amounts
in later years with annual interest at the prime rate plus 1.00%.
During the year ended March 31, 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:
<TABLE>
<CAPTION>
Class A Class B Class C
---------- ------------- ----------
<S> <C> <C> <C>
American Retirement ......... $ 54,682 $1,161,176 $ 20,944
Balanced .................... 611,968 7,041,305 1,210
Foundation .................. 695,844 8,316,140 365,687
Tax Strategic ............... 94,260 978,824 126,970
</TABLE>
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.
62
<PAGE>
Combined Notes to Financial Statements (continued)
8. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED
TRANSACTIONS
Pursuant to an agreement with American Retirement's, Foundation's and Tax
Strategic's investment advisor, Evergreen Asset Management Corp. ("Evergreen
Asset"), a wholly owned subsidiary of First Union, Evergreen Asset is entitled
to an annual fee based on each of American Retirement's, Foundation's and Tax
Strategic's average daily net assets, respectively, in accordance with the
following schedules:
<TABLE>
<CAPTION>
Foundation and American
Tax Strategic Retirement
- ---------------------------------- ----------------------------
<S> <C>
First $750 million 0.875% First $750 million 0.75%
Next $250 million 0.750% Over $250 million 0.70%
Over $1 billion 0.700%
</TABLE>
Keystone, a subsidiary of First Union, is the investment advisor for Balanced.
In return for providing investment management and administrative services to
Balanced, the Fund pays Keystone a management fee that is calculated daily and
paid monthly. The management fee is computed at an annual rate of 1.50% of
Balanced'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")(formerly Evergreen Keystone Investment
Services, Inc.), a subsidiary of First Union, is the administrator and BISYS
Fund Services is sub-administrator to the Funds. As administrator, EIS provides
the Funds with facilities, equipment and personnel. As sub-administrator to the
Funds, BISYS Fund Services provides the officers of the Funds. The
administrator and sub-administrator for each Fund are entitled to an annual fee
based on the average daily net assets of the funds administered by EIS for
which First Union or its investment advisory subsidiaries are also the
investment advisors. The administration fee is calculated by applying
percentage rates, which start at 0.05% and decline to 0.01% per annum as net
assets increase, to the average daily net asset value of the Fund. The
sub-administration fee is calculated by applying percentage rates, which start
at 0.01% and decline to .004% per annum as net assets increase, to the average
daily net asset value of the Fund. For American Retirement, Foundation, and Tax
Strategic the administration and sub-administration fee is paid by their
respective investment advisor and is not a Fund expense. For the year ended
March 31, 1998, Balanced paid $294,242 to EIS for providing administrative
services.
Evergreen Service Company ("ESC") (formerly, Evergreen Keystone Service
Company, Inc.), a wholly-owned subsidiary of Keystone, serves as the transfer
and dividend disbursing agent for the Funds.
Effective May 5, 1997, Evergreen Service Company ("ESC"), a wholly-owned
subsidiary of Keystone, began providing transfer and dividend disbursing agent
services for American Retirement, Foundation and Tax Strategic that were
formerly provided by State Street Bank & Trust Company ("State Street"). For
the year ended March 31, 1998, ESC received $376,878, $3,652,742 and $204,142
in transfer agent fees from American Retirement, Foundation and Tax Strategic,
respectively. For certain accounts in American Retirement and Foundation, First
Union had been sub-contracted by ESC and previously State Street to maintain
shareholder sub-account records, take fund purchase and redemption orders and
answer inquiries. For each account, First Union earned a fee which totaled
$8,687 and $235,066 for American Retirement and Foundation, respectively for
the year ended March 31, 1998.
Lieber & Company, an affiliate of First Union, is the investment sub-advisor to
American Retirement, Foundation, and Tax Strategic and also provides brokerage
services with respect to substantially all security transactions of these Funds
effected on the New York or American Stock Exchanges. For the year ended March
31, 1998 American Retirement, Foundation and Tax Strategic incurred the
following brokerage commissions with Lieber & Company:
<TABLE>
<S> <C>
American Retirement ......... $ 80,739
Foundation .................. 483,014
Tax Strategic ............... 113,411
</TABLE>
Lieber & Company is reimbursed by Evergreen Asset, at no additional expense to
the Funds, for its cost of providing investment advisory services.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
63
<PAGE>
Combined Notes to Financial Statements (continued)
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, Balanced, Foundation, and Tax
Strategic may defer any or all compensation related to performance of duties as
a Trustee. Each Trustee's deferred balances are allocated to deferral accounts
which are included in the accrued expenses for the Funds. The investment
performance of the deferral accounts are based on the investment performance of
certain Evergreen Funds. Any gains earned or losses incurred in the deferral
accounts are reported in the Fund's Trustee's fees and expenses. Trustees will
be paid either in one lump sum or in quarterly installments for up to ten years
at their election, not earlier than either the year in which the Trustee ceases
to be a member of the Board of Trustees or January 1, 2000. As of March 31,
1998, the value of the Trustees' deferral account for American Retirement,
Balanced, Foundation, and Tax Strategic was $17,428, $83,697, $35,481, and
$7,764.
11. FINANCING AGREEMENT
On October 31, 1996, a financing agreement among certain of the Evergreen
Funds, State Street Bank & Trust ("State Street") and a group of Banks (the
"Banks") became effective. Under this agreement, the Banks provided an
unsecured credit facility in the aggregate amount of $225 million ($112.5
million committed and $112.5 million uncommitted) allocated evenly among the
Banks. Borrowings under this facility bore interest at 0.75% per annum above
the Federal Funds rate. A commitment fee of 0.10% per annum was incurred on the
unused portion of the committed facility, which was allocated to all
participating Funds. State Street served as agent for the Banks, and as agent
was entitled to a fee of $15,000 which was allocated to all of the
participating Funds. This agreement was terminated on October 31, 1997.
On October 31, 1997, a temporary financing agreement between the participating
Funds and First Union became effective. Under this agreement, First Union
provided a fully committed unsecured credit facility in the aggregate amount of
$300 million. Borrowings under this facility bore interest at 1.00% per annum
above the Federal Funds rate. State Street served as administrative agent under
this agreement, but received no compensation for its services. This agreement
was terminated on December 22, 1997.
On December 22, 1997, a financing agreement among all of the Evergreen Funds,
State Street and a group of Banks became effective. Under this agreement, the
Banks provide an unsecured credit facility in the aggregate amount of $400
million ($275 million committed and $125 million uncommitted). The credit
facility is allocated, 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 committed facility, which will be allocated to all
Funds. For its assistance in arranging this financing agreement, the Capital
Market Group of First Union was paid a one time arrangement fee of $27,500.
State Street serves as administrative agent for the Banks, and as
administrative agent is entitled to a fee of $20,000 per annum which is
allocated to all of the Funds.
During the year ended March 31, 1998, the Funds had no significant borrowings
under these agreements.
64
<PAGE>
Independent Auditors' Report
Trustees and Shareholders
Evergreen Equity Trust
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments of Evergreen American Retirement Fund,
Evergreen Balanced Fund, Evergreen Foundation Fund and Evergreen Tax Strategic
Foundation Fund of Evergreen Equity Trust listed below as of March 31, 1998,
and the related statements of operations, statements of changes in net assets,
and financial highlights for each of the years or periods presented below:
Evergreen American Retirement Fund - statement of operations for the year
ended March 31, 1998, statements of changes in net assets for the year
ended March 31, 1998, the three months ended March 31, 1997 and the year
ended December 31, 1996 and financial highlights for the years or periods
presented on pages 18 through 20, except for the periods prior to December
31, 1996. The financial highlights for the periods prior to December 31,
1996 were audited by other auditors whose report dated February 15, 1996
expressed an unqualified opinion thereon.
Evergreen Balanced Fund - statement of operations for the nine months ended
March 31, 1998 and the year ended June 30, 1997, statements of changes in
net assets for the nine months ended March 31, 1998 and each of the years
in the two year period ended June 30, 1997, and financial highlights for
the years or periods presented on pages 21 through 23.
Evergreen Foundation Fund - statement of operations for the year ended
March 31, 1998, statements of changes in net assets for the year ended
March 31, 1998, the three months ended March 31, 1997 and the year ended
December 31, 1996 and financial highlights for the years or periods
presented on pages 24 through 26, except for the periods prior to December
31, 1996. The financial highlights for the periods prior to December 31,
1996 were audited by other auditors whose report dated February 15, 1996
expressed an unqualified opinion thereon.
Evergreen Tax Strategic Foundation Fund - statement of operations for the
year ended March 31, 1998, statements of changes in net assets for the year
ended March 31, 1998, the three months ended March 31, 1997 and the year
ended December 31, 1996 and financial highlights for the periods presented
on pages 27 and 28, expect for the periods prior to December 31, 1996. The
financial highlights for the periods prior to December 31, 1996 were
audited by other auditors whose report dated February 15, 1996 expressed an
unqualified opinion thereon.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures include confirmation of
securities owned as of March 31, 1998 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Evergreen American Retirement Fund, Evergreen Balanced Fund, Evergreen
Foundation Fund, and Evergreen Tax Strategic Foundation Fund, funds of
Evergreen Equity Trust, as of March 31, 1998, the results of their operations,
changes in their net assets and financial highlights for each of the years or
periods specified in the first paragraph above in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
May 1, 1998
65
<PAGE>
ADDITIONAL INFORMATION (Unaudited)
Special Meeting of Shareholders
On December 15, 1997, a special meeting of shareholders for American
Retirement, Foundation, and Tax Strategic was held
to consider a number of proposals and had the following shares represented at
the meeting. On October 16, 1997, the record date for the meeting the Funds had
the following shares outstanding:
<TABLE>
<CAPTION>
American
Retirement
--------------
<S> <C>
Record date shares outstanding ......................................................... 11,676,896
Shares represented at meeting .......................................................... 7,118,479
Percentage of record date shares represented at meeting ................................ 61.0%
The votes recorded at the meeting, by proposal, were as follows:
Proposal 1 - The proposed reorganization of each Fund as a series of the
Evergreen Equity Trust, a Delaware business trust:
Shares voted "For" ............................................................... 6,315,328
Shares voted "Against" ........................................................... 115,548
Shares voted "Abstain" ........................................................... 687,603
Proposal 2 - Reclassification as non-fundamental of the investment objective
currently classified as fundamental:
Shares voted "For" ............................................................... 6,232,727
Shares voted "Against" ........................................................... 153,490
Shares voted "Abstain" ........................................................... 732,262
Proposal 3 - Changes to Fundamental investment restrictions:
Proposal 3A - To amend the Fundamental restriction concerning diversification of
investments:
Shares voted "For" ............................................................... 6,269,671
Shares voted "Against" ........................................................... 127,189
Shares voted "Abstain" ........................................................... 721,619
Proposal 3B - To amend the Fundamental restriction concerning concentration of a
Fund's assets in a particular industry:
Shares voted "For" ............................................................... 6,269,671
Shares voted "Against" ........................................................... 127,189
Shares voted "Abstain" ........................................................... 721,619
Proposal 3C - To amend the Fundamental restriction concerning the issuance of
senior securities:
Shares voted "For" ............................................................... 6,269,671
Shares voted "Against" ........................................................... 127,189
Shares voted "Abstain" ........................................................... 721,619
Proposal 3D - To amend the Fundamental restriction concerning borrowing:
Shares voted "For" ............................................................... 6,269,671
Shares voted "Against" ........................................................... 127,189
Shares voted "Abstain" ........................................................... 721,619
Proposal 3E - To amend the Fundamental restriction concerning underwriting:
Shares voted "For" ............................................................... 6,269,671
Shares voted "Against" ........................................................... 127,189
Shares voted "Abstain" ........................................................... 721,619
Proposal 3F - To amend the Fundamental restriction concerning investments in Real
Estate:
Shares voted "For" ............................................................... 6,269,671
Shares voted "Against" ........................................................... 127,189
Shares voted "Abstain" ........................................................... 721,619
Proposal 3G - To amend the Fundamental restriction concerning commodities:
Shares voted "For" ............................................................... 6,269,671
Shares voted "Against" ........................................................... 127,189
Shares voted "Abstain" ........................................................... 721,619
Proposal 3H - To amend the Fundamental restriction concerning lending:
Shares voted "For" ............................................................... 6,269,671
Shares voted "Against" ........................................................... 127,189
Shares voted "Abstain" ........................................................... 721,619
<CAPTION>
Tax
Foundation Strategic
--------------- --------------
<S> <C> <C>
Record date shares outstanding ......................................................... 113,591,523 11,267,455
Shares represented at meeting .......................................................... 66,320,831 6,593,651
Percentage of record date shares represented at meeting ................................ 58.4% 58.5%
The votes recorded at the meeting, by proposal, were as follows:
Proposal 1 - The proposed reorganization of each Fund as a series of the
Evergreen Equity Trust, a Delaware business trust:
Shares voted "For" ............................................................... 57,692,561 6,030,170
Shares voted "Against" ........................................................... 829,118 73,295
Shares voted "Abstain" ........................................................... 7,799,152 490,186
Proposal 2 - Reclassification as non-fundamental of the investment objective
currently classified as fundamental:
Shares voted "For" ............................................................... 56,953,514 5,921,252
Shares voted "Against" ........................................................... 1,385,813 131,540
Shares voted "Abstain" ........................................................... 7,981,504 540,859
Proposal 3 - Changes to Fundamental investment restrictions:
Proposal 3A - To amend the Fundamental restriction concerning diversification of
investments:
Shares voted "For" ............................................................... 56,950,679 5,951,636
Shares voted "Against" ........................................................... 1,225,590 107,527
Shares voted "Abstain" ........................................................... 8,144,562 534,488
Proposal 3B - To amend the Fundamental restriction concerning concentration of a
Fund's assets in a particular industry:
Shares voted "For" ............................................................... 56,946,730 5,951,636
Shares voted "Against" ........................................................... 1,229,539 107,527
Shares voted "Abstain" ........................................................... 8,144,562 534,488
Proposal 3C - To amend the Fundamental restriction concerning the issuance of
senior securities:
Shares voted "For" ............................................................... 56,951,752 5,951,636
Shares voted "Against" ........................................................... 1,224,213 107,527
Shares voted "Abstain" ........................................................... 8,144,866 534,488
Proposal 3D - To amend the Fundamental restriction concerning borrowing:
Shares voted "For" ............................................................... 56,941,950 5,951,636
Shares voted "Against" ........................................................... 1,234,015 107,527
Shares voted "Abstain" ........................................................... 8,144,866 534,488
Proposal 3E - To amend the Fundamental restriction concerning underwriting:
Shares voted "For" ............................................................... 56,948,380 5,951,636
Shares voted "Against" ........................................................... 1,227,889 107,527
Shares voted "Abstain" ........................................................... 8,144,562 534,488
Proposal 3F - To amend the Fundamental restriction concerning investments in Real
Estate:
Shares voted "For" ............................................................... 56,951,247 5,951,636
Shares voted "Against" ........................................................... 1,225,022 107,527
Shares voted "Abstain" ........................................................... 8,144,562 534,488
Proposal 3G - To amend the Fundamental restriction concerning commodities:
Shares voted "For" ............................................................... 56,937,046 5,951,636
Shares voted "Against" ........................................................... 1,239,223 107,527
Shares voted "Abstain" ........................................................... 8,144,562 534,488
Proposal 3H - To amend the Fundamental restriction concerning lending:
Shares voted "For" ............................................................... 56,937,578 5,951,636
Shares voted "Against" ........................................................... 1,238,387 107,527
Shares voted "Abstain" ........................................................... 8,144,866 534,488
</TABLE>
66
<PAGE>
ADDITIONAL INFORMATION (Unaudited) (continued)
<TABLE>
<CAPTION>
American Tax
Retirement Foundation Strategic
------------ ------------ ------------
<S> <C> <C> <C>
Proposal 3I - To amend the Fundamental restriction concerning the investment in
Federally Tax Exempt Securities:
Shares voted "For" ............................................................... - - 5,951,636
Shares voted "Against" ........................................................... - - 107,527
Shares voted "Abstain" ........................................................... - - 534,488
Proposal 3J9 - Reclassification as nonfundamental of current fundamental
restriction:
Unseasoned Issuers
Shares voted "For" ............................................................... 6,269,649 56,945,613 -
Shares voted "Against" ........................................................... 127,310 1,232,240 -
Shares voted "Abstain" ........................................................... 721,520 8,142,978 -
Proposal 3J10 - Reclassification as nonfundamental of current fundamental
restriction:
Control or Management
Shares voted "For" ............................................................... 6,269,649 56,937,753 5,951,636
Shares voted "Against" ........................................................... 127,310 1,240,100 107,527
Shares voted "Abstain" ........................................................... 721,520 8,142,978 534,488
Proposal 3J11 - Reclassification as nonfundamental of current fundamental
restriction:
Short Sales
Shares voted "For" ............................................................... 6,269,649 56,942,642 5,951,636
Shares voted "Against" ........................................................... 127,310 1,235,211 107,527
Shares voted "Abstain" ........................................................... 721,520 8,142,978 534,488
Proposal 3J12 - Reclassification as nonfundamental of current fundamental
restriction:
Margin Purchases
Shares voted "For" ............................................................... 6,269,649 56,939,968 -
Shares voted "Against" ........................................................... 127,310 1,237,885 -
Shares voted "Abstain" ........................................................... 721,520 8,142,978 -
Proposal 3J13 - Reclassification as nonfundamental of current fundamental
restriction:
Other Investment Companies
Shares voted "For" ............................................................... 6,269,649 56,946,734 -
Shares voted "Against" ........................................................... 127,310 1,234,367 -
Shares voted "Abstain" ........................................................... 721,520 8,139,730 -
Proposal 3J14 - Reclassification as nonfundamental of current fundamental
restriction:
Officers' and Director's Ownership of Shares
Shares voted "For" ............................................................... 6,269,649 56,943,489 -
Shares voted "Against" ........................................................... 127,310 1,237,612 -
Shares voted "Abstain" ........................................................... 721,520 8,139,730 -
Proposal 3J15 - Reclassification as nonfundamental of current fundamental
restriction:
Warrants
Shares voted "For" ............................................................... 6,269,649 56,946,734 -
Shares voted "Against" ........................................................... 127,310 1,234,367 -
Shares voted "Abstain" ........................................................... 721,520 8,139,730 -
Proposal 3J16 - Reclassification as nonfundamental of current fundamental
restriction:
Interests in Oil, Gas, or Other Mineral Explorations or Development Programs
Shares voted "For" ............................................................... 6,269,649 56,945,688 -
Shares voted "Against" ........................................................... 127,310 1,234,091 -
Shares voted "Abstain" ........................................................... 721,520 8,141,052 -
Proposal 3J17 - Reclassification as nonfundamental of current fundamental
restriction:
Joint Trading
Shares voted "For" ............................................................... 6,269,649 56,948,457 -
Shares voted "Against" ........................................................... 127,310 1,231,529 -
Shares voted "Abstain" ........................................................... 721,520 8,140,845 -
Proposal 3J18 - Reclassification as nonfundamental of current fundamental
restriction:
Options
Shares voted "For" ............................................................... 6,269,649 56,946,423 -
Shares voted "Against" ........................................................... 127,310 1,233,563 -
Shares voted "Abstain" ........................................................... 721,520 8,140,845 -
Proposal 3J19 - Reclassification as nonfundamental of current fundamental
restriction:
Investment in Equity Securities
Shares voted "For" ............................................................... 6,269,649 - -
Shares voted "Against" ........................................................... 127,310 - -
Shares voted "Abstain" ........................................................... 721,520 - -
</TABLE>
67
<PAGE>
ADDITIONAL INFORMATION (Unaudited) (continued)
On January 6, 1998, a special meeting of shareholders for Evergreen Balanced
Fund and Keystone Balanced Fund (K-1) was held to consider a proposal for
reorganization of the Funds and had the following shares represented at the
meeting. On November 10, 1997, the record date for the meeting, the Funds had
the following shares outstanding:
<TABLE>
<S> <C> <C>
Evergreen Keystone
Balanced Balanced (K-1)
--------- ------------------
Record date shares outstanding ......................................................... 70,550,743 120,903,563
Shares represented at meeting .......................................................... 62,701,031 67,051,635
Percentage of record date shares represented at meeting ................................ 88.9% 55.5%
Proposal - The proposed reorganization of each Fund as a series of the Evergreen
Equity Trust, a Delaware business trust:
Shares voted "For" ............................................................... 46,920,528 61,550,057
Shares voted "Against" ........................................................... 178,867 1,584,174
Shares voted "Abstain" ........................................................... 15,601,636 3,917,404
</TABLE>
FEDERAL TAX STATUS OF DISTRIBUTIONS (Unaudited)
Pursuant to section 852 of the Internal Revenue Code, the Funds have designated
the following amounts as long-term 28% capital gain distributions and long-term
20% capital gain distributions for the fiscal year ended March 31, 1998:
<TABLE>
<S> <C> <C> <C> <C>
Aggregate Per Share
------------------------ ------------------------
28% 20% 28% 20%
---------- ---------- --------- --------
American Retirement ......... $ 929,318 $ 2,838,500 $ 0.074 $ 0.236
Balanced .................... 66,297,210 93,567,090 0.981 1.328
Foundation .................. 16,351,073 19,569,413 0.148 0.169
Tax Strategic ............... 35,225 260,310 0.004 0.021
</TABLE>
77.40% of the dividends distributed by Tax Strategic for the fiscal year ended
March 31, 1998 are exempt from federal income tax, other than
alternative minimum tax.
For corporate shareholders, the following percentages of ordinary income
dividends paid during the fiscal year ended March 31, 1998 qualified for the
dividends received deduction:
<TABLE>
<S> <C>
American Retirement ......... 62.320%
Balanced .................... 23.720%
Foundation .................. 30.130%
Tax Strategic ............... 63.407%
</TABLE>
68
<PAGE>
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