<PAGE>
Annual Report
as of March 31, 1999
Evergreen
Balanced Funds
[LOGO OF EVERGREEN FUNDS/SM/ APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
Letter to Shareholders ................................................... 1
Evergreen American Retirement Fund
Fund at a Glance ...................................................... 2
Portfolio Manager Interview ........................................... 3
Evergreen Balanced Fund
Fund at a Glance ...................................................... 7
Portfolio Manager Interview ........................................... 8
Evergreen Foundation Fund
Fund at a Glance ...................................................... 12
Portfolio Manager Interview ........................................... 13
Evergreen Tax Strategic Foundation Fund
Fund at a Glance ...................................................... 18
Portfolio Manager Interview ........................................... 19
Financial Highlights
Evergreen American Retirement Fund..................................... 23
Evergreen Balanced Fund................................................ 25
Evergreen Foundation Fund.............................................. 27
Evergreen Tax Strategic Foundation Fund................................ 29
Schedule of Investments
Evergreen American Retirement Fund..................................... 31
Evergreen Balanced Fund................................................ 34
Evergreen Foundation Fund.............................................. 40
Evergreen Tax Strategic Foundation Fund................................ 46
Statements of Assets and Liabilities...................................... 52
Statements of Operations ................................................. 53
Statements of Changes in Net Assets....................................... 54
Combined Notes to Financial
Statements ............................................................... 57
- --------------------------------------------------------------------------------
Evergreen Funds
- --------------------------------------------------------------------------------
Evergreen Funds is one of the nation's fastest growing investment companies with
approximately $50 billion in assets under management.
With over 70 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy.
Look to the Evergreen Funds to provide a distinctive level of service and
excellence in investment management.
This annual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
-----------------------------------------------------------------
Mutual Funds: ARE NOT FDIC INSURED May lose value . Are not bank guaranteed
-----------------------------------------------------------------
Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
May 1998
---
[PHOTO OF WILLIAM M. ENNIS APPEARS HERE]
William M. Ennis
Managing Director
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Balanced Funds annual report, which
covers the twelve-month period ended March 31, 1999.
Continued Strength in the Domestic Economy
The twelve-month period was a volatile time in the stock market. The first
quarter of the period, which was the second quarter of 1998, saw a rising stock
market and relatively stable interest rates. Stock markets around the world,
including the United States, declined dramatically last summer and into the
early fall. The Federal Reserve's actions to lower interest rates in late 1998
helped restore investor confidence and the U.S. stock market rallied strongly
during the final quarter of 1998 and into the first quarter of 1999.
Throughout the period, the strong performance of large capitalization growth
stocks continued. Investors who focused on this small group of stocks,
particularly technology stocks, fared well. Currently, the stock market is
responding positively to the combination of low inflation, low interest rates
and low unemployment. The economy appears strong and investor confidence seems
high. We remain cautiously optimistic about the stock market.
Shift in the Interest Rate Environment
Healthy economic growth and low inflation kept interest rates low throughout the
first half of the period and pushed bond prices higher. In the latter half of
the period, lingering concerns about inflation affected the fixed-income markets
and produced a shift in the interest-rate environment. Fears about the robust
U.S. economy and high levels of consumer spending drove interest rates steadily
upward during the second half of the period, despite three separate cuts in the
Fed Funds rate by the Federal Reserve in the final months of 1998. As a result,
bond prices fell in response to the rising interest rates. In the near future,
we believe interest rates will remain in their current trading range; the
underlying fundamentals in the fixed income markets support continued low rates
and minimal inflation.
Year 2000 Preparation1
At Evergreen, we continue to prepare ourselves to provide uninterrupted service
and communication with all our shareholders throughout the end of 1999 and right
through the date change into the Year 2000 and beyond. As of the end of April,
when this report was finalized, we have completed 75% of the testing of internal
systems and are rapidly moving through the remaining systems. In March, we
successfully participated in industry-wide testing with the Securities Industry
Association. We are confident our efforts will enable our shareholders to
receive the same Evergreen products and services we deliver today.
As always, we encourage all shareholders to diversify their mutual fund
portfolios and we suggest you consult with your financial advisor for an
allocation strategy that helps you meet your investment goals and objectives.
Evergreen Funds offers a wide range of funds that includes multiple investment
styles to help you find one that is appropriate in your portfolio.
Thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
----------------
William M. Ennis
Managing Director
Evergreen Funds
1 The information above constitutes Year 2000 readiness disclosure.
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
American Retirement Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of March 31, 1999
We continue to believe that value stocks offer excellent price appreciation
potential, although it is taking longer than we expected for that potential to
be realized.
Portfolio
Management
- --------------------------------------------------------------------------------
[PHOTO OF IRENE D. O'NEILL [PHOTO OF NATALIE KUCHARSKI
APPEARS HERE] APPEARS HERE]
Irene D. O'Neill, Natalie Kucharski
CFA Tenure: July 1991
Tenure: March 1988
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[STYLE BOX Morningstar's Style Box is based on a portfolio date as of
APPEARS HERE] 3/31/99.
The Equity Style Box placement is based on a fund's
price-to-earnings and price-to-book ratio relative to the S&P
500, as well as the size of the companies in which it invests,
or median market capitalization.
[STYLE BOX The Fixed-Income Style Box placement is based on a fund's
APPEARS HERE] average effective maturity or duration and the average credit
rating of the bond portfolio.
/1/Source: 1999 Morningstar, Inc.
/2/Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Historical performance shown for Classes A, B and C prior to
their inception is based on the performance of Class Y, the original class
offered. These historical returns for Classes A, B and C have not been adjusted
to reflect the effect of each class' 12b-1 fees. These fees for Classes A, B and
C are .25%, 1.00%, and 1.00%, respectively. Class Y does not pay a 12b-1 fee. If
these fees had been reflected, returns would have been lower.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/2/
- --------------------------------------------------------------------------------
Class A Class B Class C Class Y
Portfolio Inception Date 3/14/88
................................................................................
Class Inception Date 1/3/95 1/3/95 1/3/95 3/14/88
................................................................................
Average Annual Returns*
1 year with sales charge -12.00% -12.72% -9.22% N/A
................................................................................
1 year w/o sales charge -7.63% -8.29% -8.34% -7.38%
................................................................................
3 years 7.06% 7.11% 7.98% 9.05%
................................................................................
5 years 9.74% 9.83% 10.11% 11.00%
................................................................................
10 years 9.72% 9.90% 9.90% 10.35%
................................................................................
Since Portfolio Inception 9.69% 9.86% 9.86% 10.26%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% N/A
Front End CDSC CDSC
................................................................................
30-day SEC yield 2.76% 2.14% 2.14% 3.16%
................................................................................
12-month dividends
per share $0.55 $0.42 $0.42 $0.59
................................................................................
12-month capital gain
distributions per share $0.13 $0.13 $0.13 $0.13
................................................................................
* Adjusted for maximum sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Comparison of a $10,000 investment in Evergreen American Retirement Fund, Class
A shares/2/, versus a similar investment in the Wilshire 5000 Index, the Lehman
Brothers Government/Corporate Bond Index (LBGCBI), and the Consumer Price Index
(CPI).
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 is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in an index.
2
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
American Retirement Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform during the year?
The Evergreen American Retirement Fund's investment strategy fell out of favor
during the 12 months ended March 31, 1999. For the fiscal year, the Fund's Class
A shares had a total return of -7.63%. Class B and C shares had returns of
- -8.29% and -8.34%, respectively, while Class Y shares had a total return of
- -7.38%. These returns are before deduction of any applicable sales charges.
During the same 12-month period, the average balanced fund had a total return of
4.71%, as measured by Lipper Inc., an independent monitor of mutual fund
performance.
Portfolio
Characteristics
---------------
Total Net Assets $204,760,589
................................................................................
Number of Holdings 125
................................................................................
Beta 0.50
................................................................................
P/E Ratio 16.2x
................................................................................
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(based on portfolio assets)
---------------------------
[PIE CHART APPEARS HERE]
Common Stock 49.1%
Government Agency
Notes/Bonds 26.8%
Convertible Preferred
Stock 10.7%
Convertible Debentures 7.0%
Treasury Notes/Bonds 3.9%
Corporate Notes/Bonds 1.5%
Cash and equivalents 1.0%
How did the investment environment affect performance?
The Fund's equity strategy was not rewarded during this period, despite the
strategy's long-term success. The fixed-income strategy, emphasizing government
agency securities, continued to work well and generated a positive return within
the Fund.
In equities, the American Retirement Fund has consistently applied a value
strategy, buying and owning stocks of companies that are believed to be
undervalued, based on their relatively low price/earnings ratios or underlying
asset values, and that provide above-average dividend yields. We have also
focused on mid-sized companies that often are overlooked by Wall Street analysts
despite offering what we believe to be good growth potential. This has worked
well in the long run. In the 12-month period, however, investors favored
large-company growth stocks, with little or no yield, and very high
price/earnings ratios. This was especially true during the final six months when
large, technology and Internet companies were the market leaders as the stock
market staged a strong comeback. The Fund's emphasis on income-producing
equities limited its ability to invest in technology companies unless they had
issued convertible securities. The lack of earnings and cash flow -- not to
mention the absence of dividends -- for the Internet group has kept the Fund
from participating in this speculative sector.
Overall, investors were clearly chasing a very narrow group of aggressive growth
stocks, to the detriment of the value universe. As a result, it was not a year
that rewarded value-driven, yield-oriented strategies.
Top 5 Industries --
Equity
------
(based on net assets)
Banks 7.7%
................................................................................
Retailing & Wholesale 5.6%
................................................................................
Healthcare Products & Services 5.4%
................................................................................
Consumer Products & Services 5.1%
................................................................................
Electrical Equipment & Services 4.5%
................................................................................
3
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
American Retirement Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
What have been your primary investment strategies?
As the year progressed, we increased our allocation to equities as we found what
we believe are attractive values among companies that are restructuring or are
in the midst of earnings turn-arounds that should provide accelerating earnings
growth. To accomplish this, we have re-deployed assets from convertible
securities.
We have kept the Fund's fixed-income allocation at about 30% of net assets, and
we continue to invest primarily in U.S. government agency securities, which tend
to offer a yield advantage over Treasury securities and yet still provide
extremely high credit quality.
In the final six months of the year, we have taken advantage of the increase in
interest rates by lengthening the average maturity of our fixed-income holdings,
both to increase income and to offer the opportunity for future price
appreciation should rates start to decline. The average weighted maturity of the
Fund's fixed-income portfolio increased from 4.6 years to 10.3 years in the
final six months of the year. Average credit quality remained the highest, AAA.
Top 10
Equity Holdings
---------------
(based on net assets)
Houston Industries, Inc. ACES 1.6%
................................................................................
Eagle Hardware & Garden, Inc. 1.6%
................................................................................
Shared Medical Systems Corp. 1.4%
................................................................................
Merrill Lynch & Co., Inc. STRYPES 1.3%
................................................................................
Lancaster Colony Corp. 1.3%
................................................................................
Newell Rubbermaid, Inc. 1.3%
................................................................................
AMP, Inc. 1.2%
................................................................................
Williams Companies, Inc. 1.2%
................................................................................
Baxter International, Inc. 1.1%
................................................................................
Hubbell, Inc. Cl. B 1.1%
................................................................................
What themes have you emphasized in managing the equity portion of the portfolio?
We have emphasized consumer-related industries, healthcare, airlines, and have
added to our technology holdings, especially in the final six months of the
fiscal year.
A healthy domestic economy, with high employment and low inflation, has given
confidence to the American consumer. We have tried to take advantage of this by
investing in consumer-related companies, including manufacturers, service
providers and retailers. We have looked for companies that we believe are
undervalued in relation to the overall market and have the potential to improve
their profitability because of restructuring or turn-around situations.
In the consumer sector, we have invested in several significant opportunities,
including:
. Newell, a consumer products company, whose stock fell out of favor because
of market uneasiness over its acquisition of Rubbermaid. We believe Newell,
which has had a record of consistent earnings growth, has the potential to
effect cost-savings from its acquisition and improve earnings.
. Mattel, the toy manufacturer, saw its stock slump as the influential
retailer Toys `R' Us reduced its inventories. We believe Mattel can bring
its earnings back and take advantage of its pending acquisition of The
Learning Co., a children's software firm.
. Talbot's, a women's clothing retailer, is attracting its core customers
back with better merchandising. We believe this will lead to better revenue
and earnings growth.
4
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
American Retirement Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
In healthcare, we have invested in and increased our holdings in a number of
value opportunities, including: American Home Products, a pharmaceutical
company; Baxter International, a diversified medical products and services
company; and Shared Medical Systems, which provides management information
systems to hospitals and other healthcare providers. We also have purchased
convertible securities in Elan Corporation, a pharmaceutical company, and
CareMatrix, which operates assisted-living centers.
We invested in airlines as the stock prices of this group became depressed
because of fears of an impending recession early in 1999. That recession has not
materialized, however, and airline passenger traffic and ticket prices have
increased, improving the earnings prospects for the industry. Fund holdings
include Delta, United and Continental Airlines convertibles.
We have tended to be under-weighted in technology companies because of high
prices in relation to earnings and unimpressive, if any, dividend yields on
their common stock. We have found some opportunities, however, by investing in
convertible securities of companies such as: Loral Space, a satellite company;
Network Associates, a software firm; and Solectron, which assembles PCs and
other devices for the technology industry.
Top 5 Industries --
Bonds
-----
(based on net assets)
Government Agency Obligations 26.8%
................................................................................
Treasury Obligations 3.8%
................................................................................
Banks 0.5%
................................................................................
Finance & Insurance 0.5%
................................................................................
Telecommunication Services & Equipment 0.5%
................................................................................
What areas have you de-emphasized?
Earlier in the fiscal year, when investors were concerned about the potential of
a domestic economic slowdown, we increased the Fund's emphasis on utility
companies because of their traditional defensive characteristics. Their earnings
have tended to hold up well in times of economic downturns. As it became evident
we were not heading into a recession, the utility holdings were reduced during
the second half of the fiscal year. A changing regulatory environment also had
an adverse affect on utility stock prices, because consolidation has slowed and
investors have become less certain about utility stock values.
We also have reduced our exposures to smaller industrial companies and to food
companies. A slowdown in industrial production has affected the earnings growth
of some industrial companies, while consolidation of supermarket chains has led
to more price competition and less pricing power for the food processors.
In general, we have tried to move away from slow-growing companies into value
stocks with better earnings growth prospects.
What types of investments have supported Fund performance?
Telecommunications, broadcasting and entertainment and building products
companies all have helped the Fund. In addition, consistent with the Fund's
long-term value approach, performance has been aided as industries have
consolidated and Fund holdings have been acquired by larger companies. For
example, among the integrated oil companies, BP Amoco made a takeover offer for
Atlantic Richfield at the end of the period.
The Fund also benefited from several takeovers in the communications sector.
Frontier Corporation, a provider of telephone, wireless and Internet services,
is to be acquired by Global Crossing. In addition,
5
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
American Retirement Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
AirTouch Communications received a buyout offer from UK-based Vodaphone. The
explosive growth in telecommunications traffic and the desire of industry
participants to grow quickly and to capture market share is driving the high
level of acquisition activity. In addition, performance was helped by AT&T's
acquisition of Telecommunications Inc. The Fund had owned Telecommunication's
convertible preferred stock, and performance was lifted both by the appreciation
of this security's price and by the performance of AT&T after the acquisition.
Time-Warner, a diversified company involved in entertainment, publishing and
telecommunications, also was a major contributor to performance. Management's
restructuring efforts to improve the balance sheet and generate earnings from
Time-Warner's rich asset base have boosted the company's cash flow and market
valuation. At the close of the fiscal year, Time-Warner was the Fund's largest
position.
The performance of the building and construction sector was helped by the Fund's
earlier investment in Eagle Hardware. Lowes Companies, a major hardware
retailer, acquired Eagle as part of its strategy to broaden its regional reach
into the West Coast.
Top 5 Bond
Holdings
--------
(based on net assets)
U.S. Treasury Bonds 6.00% 2/15/2026 3.0%
................................................................................
FNMA 6.42% 2/12/2008 2.4%
................................................................................
FNMA 5.65% 2/22/2028 2.2%
................................................................................
FNMA 6.52% 3/5/2008 2.0%
................................................................................
FNMA 6.08% 9/1/2028 1.9%
................................................................................
What is your outlook?
We think the domestic economy will continue to grow, at least for the balance of
1999, and interest rates should be stable. A major factor that will affect the
markets will be whether overseas economies, including Japan and Brazil, start to
rebound in response to declining interest rates. The Japanese and Brazilian
stock markets, which rallied in the first quarter of 1999, could be signaling a
pick-up in global growth later this year.
We continue to believe that value stocks offer excellent price appreciation
potential, although it is taking longer than we expected for that potential to
be realized. Stock market performance during the past year has been driven
principally by a very narrow group of large-company growth stocks, and at some
time we expect performance to broaden to include a much larger group of stocks.
At the start of a new fiscal year, the value sector of the market looks
extremely undervalued and attractive. The start of a global economic recovery
could have a major impact on value stocks in cyclical and industrial businesses.
6
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Balanced Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of March 31, 1999
The Evergreen Balanced Fund had strong, competitive returns during a year of
contrasting crosscurrents and periodic volatility.
Portfolio
Management
- --------------------------------------------------------------------------------
[PHOTO OF CHRIS CONKEY APPEARS HERE] [PHOTO OF JUDITH WARNERS APPEARS HERE]
Chris Conkey Judith Warners
Tenure: August 1998 Tenure: August 1998
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
Morningstar's Style Box is based on a portfolio date as of
[GRAPHIC 3/31/99.
APPEARS HERE]
The Equity Style Box placement is based on a fund's
price-to-earnings and price-to-book ratio relative to the S&P
500, as well as the size of the companies in which it invests,
or median market capitalization.
[GRAPHIC The Fixed-Income Style Box placement is based on a fund's
APPEARS HERE] average effective maturity or duration and the average credit
rating of the bond portfolio.
/1/Source: 1999 Morningstar, Inc.
/2/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Historical performance shown for Classes A, C, and Y prior
to their inception is based on the performance of Class B, the original class
offered. These historical returns for Classes A and Y have been adjusted to
eliminate the effect of the higher 12b-1 fees applicable to Class B. The 12b-1
fees for Classes A, B and C are 0.25%, 1.00%, and 1.00%, respectively. Class Y
does not pay a 12b-1 fee. If these fees had not been eliminated, returns would
have been lower.
- --------------------------------------------------------------------------------
Performance and Returns/2/
- --------------------------------------------------------------------------------
Class A Class B Class C Class Y
Portfolio Inception Date 9/11/35
................................................................................
Class Inception Date 1/20/98 9/11/35 1/22/98 1/26/98
................................................................................
Average Annual Returns*
................................................................................
1 year with sales charge 2.43% 2.32% 5.91% N/A
................................................................................
1 year w/o sales charge 7.52% 6.71% 6.79% 7.79%
................................................................................
3 years 14.03% 14.35% 15.07% 16.18%
................................................................................
5 years 14.51% 14.58% 14.78% 15.91%
................................................................................
10 years 12.07% 11.74% 11.70% 12.89%
................................................................................
Since Portfolio Inception 8.63% 8.53% 8.49% 8.79%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% N/A
Front End CDSC CDSC
................................................................................
30-day SEC yield 2.23% 1.60% 1.60% 2.59%
................................................................................
12-month income dividends
per share $0.41 $0.32 $0.32 $0.44
................................................................................
12-month capital gain distributions
per share $2.03 $2.03 $2.03 $2.03
................................................................................
* Adjusted for maximum sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Comparison of a $10,000 investment in Evergreen Balanced Fund, Class B
shares/2/, versus a similar investment in the S&P 500 Index, the Lehman Brothers
Government/Corporate Bond Index (LBGCBI), and the Consumer Price Index (CPI).
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 is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in an index.
7
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Balanced Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform?
The Evergreen Balanced Fund had strong, competitive returns during a year of
contrasting crosscurrents and periodic volatility. Positive performance in the
final six months overcame the effects of a plunging stock market in the late
summer and early fall of 1998. For the 12-month period ending March 31, 1999,
the Fund's Class A shares had a total return of 7.52%. Class B and Class C
shares had returns of 6.71% and 6.79%, respectively, and Class Y shares had a
total return of 7.79%. These returns are before deduction of any applicable
sales charges. During the same 12-month period, the average balanced fund had a
return of 4.71%, as measured by Lipper Inc., an independent monitor of mutual
fund performance.
Portfolio
Characteristics
---------------
Total Net Assets $1,711,012,868
................................................................................
Number of Holdings 237
................................................................................
Beta 0.55
................................................................................
P/E Ratio 24.1x
................................................................................
What was the investment environment like during the period?
It was a year of change, beginning with a period of calm in the spring of 1998,
characterized by a rising stock market and relatively stable interest rates. At
that time, the primary fear in the markets was that strong economic growth would
stimulate inflation pressures and lead to interest rate increases. This period
of calm came to a dramatic halt in July and August when the Russian government
defaulted on part of its external debt and devalued the ruble.
This climactic event coming in the wake of the Asian financial crisis caught the
financial markets by surprise. In fact, it came when many financial institutions
were highly leveraged, meaning they had been investing with borrowed money. The
near-collapse of one highly leveraged hedge fund, Long-Term Capital Corp., added
to the uncertainty and volatility in the markets. Stock markets around the
world, including in the United States, plunged, as did the markets for bonds
carrying credit risk, including corporate bonds.
During this highly volatile time, investors fled to the highest quality
instruments, especially U.S. Treasury securities. The low point for the domestic
stock market came at about the mid-point of the fiscal year, the beginning of
October 1998. As one might expect, this was also the peak of the rally in U.S.
Treasury securities, as rates dropped and prices rose. The yield on the 10-year
U.S. Treasury hit a low of 4.16% on October 5, 1998, about the same time as the
S&P 500 Index hit its low for the year, on October 8.
A primary factor helping turn the markets around in early October was the U.S.
Federal Reserve. Not only did the Federal Reserve engineer a bailout of
Long-Term Capital, but it started lowering short-term interest rates to restore
confidence to the markets. Rates were lowered three successive times in the fall
of 1998, by a total of 0.75%.
- --------------------------------------------------------------------------------
Portfolio Composition
- --------------------------------------------------------------------------------
(based on portfolio assets)
---------------------------
[PIE CHART APPEARS HERE]
Common Stock 60.6%
Corporate Notes/Bonds 18.6%
Mortgage-Backed
Securities 8.4%
Asset-Backed Securities 4.7%
Foreign Bonds 3.2%
Treasury Notes/Bonds 2.1%
Cash & Equivalents 1.2%
Convertible Preferred
Stock 0.7%
Convertible Debentures 0.5%
8
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Balanced Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
The stock market rallied strongly in the fourth calendar quarter of 1998 and the
first quarter of 1999, led by large-company stocks, especially in technology and
consumer-related industries. The financial service industries, which had been
especially hard hit during the period of global economic uncertainty, also
staged a comeback, although not as strong or as lasting as the rally in
technology stocks.
In the bond market, interest rates on high quality bonds started to rise again,
with the value of U.S. Treasuries slumping. High quality corporate bonds also
fell in value, although not as much as U.S. Treasuries. During the final six
months of the year, the total returns of A-rated, 10-year corporate bonds were
slightly positive, in contrast to the negative returns of 10-year Treasuries.
Top 5 Industries --
Equity
------
(based on net assets)
Healthcare Products & Services 9.3%
................................................................................
Information Services & Technology 6.5%
................................................................................
Finance & Insurance 5.5%
................................................................................
Oil/Energy 4.3%
................................................................................
Retailing & Wholesale 4.3%
................................................................................
What was your overall strategy in blending stocks and bonds during the fiscal
year?
We began the year with 60% of net assets in equities and 40% in bonds. As
concerns grew in the late summer about a global economic slowdown, we shifted
the allocation in favor of high quality bonds. At the mid-point of the year, the
target allocation was 52% stocks and 48% bonds, which was a very defensive
positioning for the Fund. This decision helped protect the Fund during a time of
uncertainty. We took the Federal Reserve Board's decision to lower short-term
interest rates as a positive signal for the stock market, and the outlook
appeared much more favorable for equities than for higher quality bonds. As a
result, during the second half of the year, we shifted the allocation in favor
of stocks, ending the period with a 63% in stocks and 37% in fixed income. This
also worked in favor of the Fund, because we were able to increase our
weightings in the stock market during the strong rally.
What strategies did you use in managing the equity portion of the portfolio?
We had been emphasizing financial services, energy and healthcare during the
first part of the year. As we went into the summer and uncertainty grew about
the possibility of a global economic slowdown, we began reducing our holdings in
finance and energy. We retained the Fund's emphasis on pharmaceuticals where we
saw opportunities for continued earnings growth, and concentrated on the large
pharmaceutical companies such as Pfizer, Warner-Lambert, American Home Products
and Merck & Co.
During the same summer period, we started increasing our holdings in technology,
which had been de-emphasized during the first part of the year. We either
established or added to our positions in market-leading companies such as
Microsoft, Sun Microsystems, Cisco Systems, and Solectron, which assembles
technology products, including PCs, for other companies.
We also added MCI Worldcom, although it is not a pure technology company.
9
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Balanced Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
We also emphasized consumer-oriented stocks to take advantage of the strong
domestic economy and consumer optimism, with positions in companies such as
Wal-Mart and Time Warner.
Our decision to reduce our holdings in finance and energy helped performance
during the worst of the market correction in the fall, although we did not fully
participate in the financial sector's comeback during the fourth calendar
quarter of 1998. Our increased emphasis on technology did help performance,
however, as that sector soared in the fourth quarter of 1998 and the first
quarter of 1999.
Late in the year, we selectively added back to our positions in finance, because
of the improving prospects, and in energy to take advantage of consolidation in
the industry and the apparent bottoming of oil prices. These were two sectors
that we traded in and out of during the full, 12-month period as the investment
environment changed.
Top 10
Equity Holdings
---------------
(based on net assets)
General Electric Co. 2.7%
................................................................................
Microsoft Corp. 2.4%
................................................................................
Wal-Mart Stores, Inc. 1.2%
................................................................................
Merck & Co., Inc. 1.1%
................................................................................
Pharmacia & Upjohn, Inc. 1.0%
................................................................................
Staples, Inc. 1.0%
................................................................................
Intel Corp. 1.0%
................................................................................
American International Group, Inc. 1.0%
................................................................................
Morton International, Inc. 1.0%
................................................................................
Pfizer, Inc. 1.0%
................................................................................
What were some of the individual companies that helped performance?
General Electric, the Fund's largest holding, and EMC, a leader in data storage,
were big contributors. The Fund owned both these companies for the entire
12-month period. Other significant contributors included Microsoft, Sun
Microsystems and MCI Worldcom. The pharmaceutical companies, as a group,
continued to help performance, supported by companies such as Merck, Pfizer and
Bristol-Myers Squibb.
Top 5 Industries --
Bonds
-----
(based on net assets)
Finance & Insurance 6.8%
................................................................................
Asset-Backed Securities 4.7%
................................................................................
Commercialized Mortgage-Backed Securities 3.1%
................................................................................
Mortgage Pass Through Securities 2.9%
................................................................................
Collateralized Mortgage Obligations 2.4%
................................................................................
10
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Balanced Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
What strategies have you used in managing the fixed income portion of the
portfolio?
Aside from lowering the overall bond allocation, we have taken advantage of the
yield spreads -- or yield advantages -- of corporate bonds and mortgage-related
securities over Treasuries. Since the semiannual report of September 30, 1998,
we have lowered the Treasury allocation within the bond portion of the portfolio
from 10% to 7% of fixed income assets, while increasing industrial bonds from
26% to 29%, and banking and finance bonds from 19% to 22%. Mortgage-backed
securities have been increased from 13% to 15% of fixed income assets.
We emphasized the corporate sector because we thought, especially after the
volatility of the summer and early fall, that corporate bonds were very
attractively priced, particularly when compared with Treasuries.
We have maintained an average maturity slightly longer than the average bond
fund. Average weighted maturity on March 31, 1999, stood at 11.2 years, very
close to the 11 years on September 30, 1998. Average credit quality in the fixed
income portion of the portfolio was AA- on March 31, compared to AA, on
September 30, 1998. The fund continues to emphasize very solid credit quality.
Top 5 Bond
Holdings
--------
(based on net assets)
FNMA 5.50% 7/1/2009 0.9%
................................................................................
Realkredit Danmark 5.00%, 10/1/2029 0.8%
................................................................................
Sun Life Canada Capital Trust 8.53% 5/29/2049 0.7%
................................................................................
U.S. Treasury Bonds 7.875% 2/15/2021 0.7%
................................................................................
Nomura Depositor Trust, Ser 1998-STI, CI A1
144A 5.22% 1/15/2003 0.7%
................................................................................
What is your outlook?
The worries about foreign economic problems eating into corporate profits and
crippling the domestic economy have receded. We believe we have seen the passing
of the worst fears.
Domestically, the economy appears strong. The interest rate reductions of the
Federal Reserve have boosted equity valuations and given the U.S. consumer more
confidence to spend. At the same time, the domestic job market continues to be
very strong, which is another factor helping consumer confidence. The Federal
Reserve continues to be wary that overseas economic problems could worsen;
therefore, we believe it is unlikely to raise short-term interest rates in the
near term, especially with no evidence of increased inflation. Given this
outlook, we anticipate relative stability in interest rates.
In the bond market, this relatively stable interest rate environment should
benefit corporate bonds and mortgage-backed securities, which offer a yield
advantage over Treasuries, and we expect to continue to emphasize these sectors.
In the stock market, we are cautiously optimistic. Corporate earnings continue
to rise, and American industry continues to find ways to consolidate, reduce
costs and increase profits. We probably will continue to see different sectors
take turns in leading performance in the stock market, and we expect to continue
to rotate among the sectors as conditions and opportunities change.
11
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Foundation Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of March 31, 1999
Merger and acquisition offers made for underlying companies of the Fund's
holdings continued to provide a significant benefit to the portfolio,
demonstrating that we had purchased issues which were considered undervalued
opportunities.
Portfolio
Management
--------------
[PHOTO OF STEPHEN A. LIEBER APPEARS HERE]
Stephen A. Lieber
Tenure: January 1990
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[STYLE BOX Morningstar's Style Box is based on a portfolio date as of
APPEARS HERE] 3/31/99.
The Equity Style Box placement is based on a fund's
price-to-earnings and price-to-book ratio relative to the S&P
500, as well as the size of the companies in which it invests,
or median market capitalization.
[STYLE BOX The Fixed-Income Style Box placement is based on a fund's
APPEARS HERE] average effective maturity or duration and the average credit
rating of the bond portfolio.
/1/Source: 1999 Morningstar, Inc.
/2/Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Historical performance shown for Classes A, B and C prior to
their inception is based on the performance of Class Y, the original class
offered. These historical returns for Classes A, B and C have not been adjusted
to reflect the effect of each class' 12b-1 fees. These fees for Classes A, B and
C are .25%, 1.00%, and 1.00%, respectively. Class Y does not pay a 12b-1 fee. If
these fees had been reflected, returns would have been lower.
- --------------------------------------------------------------------------------
Performance and Returns/2/
- --------------------------------------------------------------------------------
Class A Class B Class C Class Y
Portfolio Inception Date 1/2/90
................................................................................
Class Inception Date 1/3/95 1/3/95 1/3/95 1/2/90
................................................................................
Average Annual Returns*
................................................................................
1 year with sales charge 0.56% -0.19% 3.76% N/A
................................................................................
1 year w/o sales charge 5.58% 4.81% 4.76% 5.84%
................................................................................
3 years 14.95% 15.21% 15.94% 17.13%
................................................................................
5 years 14.72% 14.87% 15.05% 16.07%
................................................................................
Since Portfolio Inception 15.75% 15.95% 15.93% 16.49%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% N/A
Front End CDSC CDSC
................................................................................
30-day SEC Yield 1.90% 1.24% 1.25% 2.24%
................................................................................
12-month dividends per share $0.43 $0.27 $0.27 $0.48
................................................................................
12-month capital gain distributions
per share $0.15 $0.15 $0.15 $0.15
................................................................................
*Adjusted for maximum sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Comparison of a $10,000 investment in Evergreen Foundation Fund, Class A
shares/2/, versus a similar investment in the S&P 500 Index and the Consumer
Price Index (CPI).
The S&P 500 Index is an unmanaged index. It does not include transaction costs
associated with buying and selling securities nor any management fees. The
Consumer Price Index is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
12
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform for the year?
The Evergreen Foundation Fund's fiscal year ended March 31, 1999, with a gain of
5.84%, providing a relative performance which is an exception to the Fund's
strong comparative annual returns since its inception. It ranks #1 among all
balanced funds since its inception with a 16.5% annualized return as measured by
Lipper Analytical Services, Inc., an independent monitor of mutual funds. These
returns are for the original Class Y shares, while Class A shares provided
5.58%, and Class B and C shares provided 4.81% and 4.76%, respectively,
unadjusted for any sales charges.
Portfolio
Characteristics
---------------
Total Net Assets $3,117,058,240
................................................................................
Number of Holdings 336
................................................................................
Beta 0.62
................................................................................
P/E Ratio 21.8x
................................................................................
How would you describe the basic investment strategy of the Foundation Fund?
While the equity portion of the Fund's portfolio has historically enjoyed strong
returns, this latest 12-month period was an exception; in contrast with the
48.4% return on equities in the prior fiscal year, the Fund's stock positions
provided only a 6.0% return. This was the first year since the inception of the
Fund in January 1990 that the equity performance of the portfolio did not
surpass the return of the S&P 500. These were unusual and, we believe, temporary
circumstances. The major reason for this underperformance was the severe decline
of financial company shares in the late summer and fall of 1998.
Performance of the fixed income portion of the portfolio also fell behind the
prior year, generating a return of 5.7%, as compared with the 19.9% return for
the twelve months ended March 31, 1998. While we continued, and even increased,
the emphasis on longer maturity U.S. Treasury bonds, the benefits of this
strategy which had been so apparent through the third quarter of the Fund's
fiscal year, were reversed in this latest quarter. Fears of renewed inflation
through sustained economic growth and the risks of high oil prices once again
drove bond prices down, notwithstanding their historically high real rate of
return above the current, still low rate of inflation.
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 among fixed income, equities,
and cash equivalents in varying amounts, intending to provide both opportunities
for gain and risk avoidance. The fixed income portion of the portfolio 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
our analysis of their potential and the general level of the market. With a risk
avoidance focus, the Fund's equity securities are principally held in companies
with larger market capitalizations and high liquidity.
13
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How do you manage the asset allocation between stocks and bonds?
In the effort to achieve maximum opportunity and reduced risk, a principal
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 an effort to have the Fund
benefit from anticipated trends. For example, the cash reserve position, which
had been held as a considerable allocation of resources prior to the stock
market decline last fall, was reduced through consistent buying largely of
common stocks during the sell-off. We met our goal of taking advantage of the
volatility in the market and purchased many issues, which we believed were
severely undervalued.
- --------------------------------------------------------------------------------
Portfolio Composition
- --------------------------------------------------------------------------------
(based on portfolio assets)
[PIE CHART APPEARS HERE]
Common Stock 65.6%
Treasury Notes/Bonds 27.6%
Cash & Equivalents 5.3%
Government Agency/
Notes/Bonds 0.7%
Convertible Preferred 0.6%
Convertible Debentures 0.2%
Corporate Notes/Bonds 0.0%
*less than one tenth of one percent.
What were some of the top-performing investments of the year?
Twenty-two of the Fund's present portfolio holdings provided returns of better
than 50% during the fiscal year. The top performers were Sun Microsystems Inc.,
with a gain of 199.2%; followed by Nielsen Media Research, Inc., with a gain of
153.0%; Cisco Systems, Inc., with a gain of 143.4%; and Tricon Global
Restaurants, Inc., with a gain of 133.2%. In addition to these issues, among the
top ten performers were Microsoft Corp., up 99.5%; AirTouch Communications,
Inc., up 97.5%; Time Warner, Inc., up 91.5%; QUALCOMM Financial Trust 1, 5 3/4%
Convertible Preferred., up 89.9%; Home Depot, Inc., up 85.1%; and Texas
Instruments, Inc., up 83.3%.
14
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
Did corporate consolidations continue to be a theme?
Merger and acquisition offers made for underlying companies of the Fund's
holdings continued to provide a significant benefit to the portfolio,
demonstrating that we had purchased issues which were considered undervalued
opportunities. A record number of 38 of our holdings either received or
completed merger and acquisition transactions during the year, with an average
gain on completed acquisitions of 78.7%. Banks and thrifts continued to be an
important contributor to these gains, led by First of America Bank Corp., with a
217.7% appreciation; Crestar Financial Corp., with a 170.2% appreciation; and
Beneficial Corp., with a 151.1% appreciation. Among those whose merger and
acquisition transactions have not been completed, the outstanding gain is in
AirTouch Communications, Inc., with a 273.4% increase since purchase in August,
1996; followed by BankBoston Corp., with a 196.0% increase since purchase in
September, 1992. The range of transactions, in industry terms, was
extraordinary, including electric utilities (Long Island Lighting Co., Eastern
Utilities Associates, and Orange and Rockland Utilities, Inc.); telephone
utilities (360 (Degrees) Communications Co., AirTouch Communications, Inc., and
Frontier Corp.); insurance companies (American Bankers Insurance Group, Inc. and
Nac Re Corp.); oil companies (Amoco Corp. and Mobil Corp.); real estate
companies (Interstate Hotels Co., Oasis Residential, Inc., and Continental Homes
Holding Corp.); and specialties such as Chrysler Corp., Pioneer Hi-Bred
International, Inc.; and the brokerage firm, Interstate/Johnson Lane, Inc. In
each case, our effort in selecting the investment had been focused on finding a
uniquely valuable business franchise. The acquisition bids or the merger offers
made for these companies confirmed our choice.
Top 5 Industries --
Equity
------
(based on net assets)
Finance & Insurance 11.5%
................................................................................
Information Services & Technology 9.0%
................................................................................
Healthcare Products & Services 7.3%
................................................................................
Banks 6.5%
................................................................................
Utilities-Telephone 3.9%
................................................................................
Top 10
Equity Holdings
---------------
(based on net assets)
Intel Corp. 3.1%
................................................................................
Microsoft Corp. 2.1%
................................................................................
General Electric Co. 2.0%
................................................................................
Federal National Mortgage Association 1.6%
................................................................................
International Business Machines Corp. 1.3%
................................................................................
Merrill Lynch & Co., Inc. 1.1%
................................................................................
American International Group, Inc. 1.1%
................................................................................
Hewlett-Packard Co. 1.1%
................................................................................
Du Pont (E.I.) De Nemours & Co. 1.1%
................................................................................
Sprint Corp. 1.1%
................................................................................
15
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
What significant recent acquisitions has the fund made?
The Fund was an active buyer of equities during the period of stock market
weakness subsequent to the Russian default in August last year. With financial
institutions being especially hard hit, they were given particular weight in our
purchasing decisions, although the range of purchasing of issues was quite wide.
Most notable were the gains on holdings purchased from the beginning of
September to the end of October. These were led by a 107.9% gain in the shares
of Costco Companies Inc.; 101.2% gain in the shares of Lowe's Companies, Inc.;
90.8% gain in the shares of Home Depot, Inc.; 88.2% gain in the shares of
Frontier Corp.; and 70.9% gain in the shares of Southwest Airlines Co. The
largest single equity purchase made during this period was in shares of American
Express Co., which appreciated 48.6% to the end of the fiscal year, and as of
April 14, has over a 70% gain. Other sizable purchases included shares of
Citigroup, Inc., which gained 62.6% by March 31; American International Group,
Inc., up 54.5%; and Household International, Inc., up 60.1%. This was a period
of exceptional activity for the Fund, with 46 equity issues either initiated or
increased during this period; and with many of these stocks being bought on a
scale-down as prices declined sharply. We acted quickly when we saw the market
over-emphasizing the negative and ignoring significant growth potentials. We
were able to exercise our long-term investment strategy of trying to buy the
best long-range growth opportunities on an undervalued basis.
In the fixed income side of the portfolio, we also took advantage of market
uncertainties which emphasized shorter-term negatives rather than fundamentals.
Thus, in June, during a period of Treasury bond market weakness, we purchased
$90 million of 28-year U.S. Treasury bonds on a yield of just under 6%. Again,
in March of 1999, we added significantly to our position in U.S. Treasury bonds,
7 1/4% due 2022, at a yield of almost 6%. In contrast, when we thought interest
rates had fallen below an appropriate level in October, we sold U.S. Treasury,
6% due 2026, on a yield basis of 5.06%, realizing a 17.3% gain from purchase one
year before. These transactions reflect our commitment to a strategy of active
bond management, utilizing exclusively U.S. Government & Agency securities with
the aim of achieving capital appreciation, as well as yield and protection of
principal.
A similar policy of active management has been followed with equities where we
want to take advantage of volatility. Illustratively, the Fund purchased 20,000
shares of Home Depot, Inc. (adding to our position) on October 8, 1998, and a
portion of the total position (including this purchase) was sold January 27,
1999, with a gain of 150.6%. A similar strategy was followed with regard to a
position in Household International, Inc., where a block of shares was sold in
July, with a 161.3% gain to the portfolio, and repurchased more than 30% lower
in October. Merger and acquisition gains also provided a substantial flow of
cash to permit new purchases, with the largest being from the cash acquisition
of Mercantile Stores Co., Inc. by Dillard's, Inc., which had provided a 74.4%
gain over an almost four-year holding period. Similarly, shares of Wachovia
Corp. were sold, with a 156.1% gain, as a result of that bank's purchase of our
holding, Central Fidelity Banks, Inc.
Top 4 Industries --
Bonds
-----
(based on net assets)
U.S. Treasury Obligations 27.6%
................................................................................
Government Agency Obligations 0.7%
................................................................................
Finance & Insurance 0.0%*
................................................................................
Chemical & Agricultural Products 0.0%*
................................................................................
*less than one tenth of one percent.
16
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
Top 5 Bond
Holdings
--------
(based on net assets)
U.S. Treasury Bonds 6.00% 2/15/2026 6.8%
................................................................................
U.S. Treasury Bonds 6.25% 8/15/2023 6.4%
................................................................................
U.S. Treasury Bonds 7.125% 2/15/2023 4.6%
................................................................................
U.S. Treasury Bonds 8.125% 8/15/2019 2.0%
................................................................................
U.S. Treasury Bonds 7.25% 5/15/2016 1.8%
................................................................................
What is your outlook?
As observed in last year's annual report, we stated: "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." This remains the case. This is
an extraordinary period in American economic history, where sizable growth is
being achieved with minimal inflation. Three major factors seem to be at work:
the evidence of a sustained rise in productivity in major sectors of our
economy; the declines in economic activity and slowing trends in other major
trading countries, leading to continual price pressure for commodities and
broadly available manufactured goods; and a growing availability of financial
liquidity as the United States expands, Europe improves the flow of funds with
the new Eurocurrency, and Asia slowly begins its recovery. We expect a
continuing environment supporting a strong bond market, particularly as the real
interest rate remains at historically high levels, and the perception remains
that the U.S. Federal Reserve will be watchful over the need to act in a
restricted fashion if the economy accelerates too rapidly, or prices suggest new
inflation. Once again, we anticipate that equity markets will find support from
increased savings. The goal of our investment management will again be to
concentrate on the search for investments in corporations with exceptional
profits growth, purchased with reasonable valuation. Bond selections will focus
on prudent positioning in U.S. Government securities, based on constantly
revalued economic expectations.
17
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of March 31, 1999
The stock portfolio's performance was not strong enough to sustain the Fund's
historical returns, largely because its sizable interest-sensitive components
were severely depressed during the fall and did not fully recover by fiscal
year-end.
Portfolio
Management
[PHOTO OF STEPHEN A. LIEBER [PHOTO OF JAMES T. COLBY, III
APPEARS HERE] APPEARS HERE]
Stephen A. Lieber James T. Colby III
Tenure: November 1993 Tenure: November 1993
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[STYLE BOX Morningstar's Style Box is based on a portfolio date as of
APPEARS HERE] 3/31/99.
The Equity Style Box placement is based on a fund's
price-to-earnings and price-to-book ratio relative to the S&P
500, as well as the size of the companies in which it invests,
or median market capitalization.
[STYLE BOX The Fixed-Income Style Box placement is based on a fund's
APPEARS HERE] average effective maturity or duration and the average credit
rating of the bond portfolio.
/1/Source: 1999 Morningstar, Inc.
/2/Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loans and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Historical performance shown for Classes A, B and C prior to
their inception is based on the performance of Class Y, the original class
offered. These historical returns for Classes A, B and C have not been adjusted
to reflect the effect of each class' 12b-1 fees. These fees for Classes A, B and
C are .25%, 1.00%, and 1.00%, respectively. Class Y does not pay a 12b-1 fee. If
these fees had been reflected, returns would have been lower.
- --------------------------------------------------------------------------------
Performance and Returns/2/
- --------------------------------------------------------------------------------
Class A Class B Class C Class Y
Portfolio Inception Date 11/2/93
................................................................................
Class Inception Date 1/17/95 1/6/95 3/3/95 11/2/93
................................................................................
Average Annual Returns*
................................................................................
1 year with sales charge -3.70% -4.53% -0.58% N/A
................................................................................
1 year w/o sales charge 1.12% 0.41% 0.41% 1.38%
................................................................................
3 years 11.52% 11.75% 12.50% 13.67%
................................................................................
5 years 13.44% 13.67% 13.89% 14.85%
................................................................................
Since Portfolio Inception 12.57% 12.88% 12.97% 13.85%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% N/A
Front End CDSC CDSC
................................................................................
30-day SEC Yield 1.89% 1.23% 1.23% 2.23%
................................................................................
12-month dividends
per share $0.34 $0.23 $0.23 $0.38
................................................................................
12-month capital gain distributions
per share $0.03 $0.03 $0.03 $0.03
................................................................................
*Adjusted for maximum sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Comparison of a $10,000 investment in Evergreen Tax Strategic Foundation Fund,
Class A shares,/2/ versus a similar investment in the S&P 500 Index, the Lehman
Brothers Municipal Bond Index (LBMBI), and the Consumer Price Index (CPI).
The S&P 500 Index 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 is a
commonly used measure of inflation and does not represent an investment return.
It is not possible to invest directly in an index.
18
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform during the fiscal year?
The Fund's performance, while positive -- up 1.38% during the fiscal year --
marked its first adverse year since inception and compares to a return of 24.7%
for the prior fiscal year, and a compound annualized return of 13.9% since
inception on November 2, 1993. For the first time since 1994, the Fund's equity
portfolio had a negative return, which was offset by a positive return on the
fixed income portfolio. These returns are for the original Class Y shares, while
Class A shares provided 1.12%, and Class B and C shares both provided 0.41%,
unadjusted for any sales charges.
Portfolio
Characteristics
---------------
Total Net Assets $394,983,297
................................................................................
Number of Holdings 250
................................................................................
Beta 0.45
................................................................................
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 meet the needs of these investors by developing a Fund that would seek to
produce the combination of defensive and growth characteristics of the Evergreen
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.
In the Fund's fixed income portion, we emphasize the highest quality bonds,
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 portion of the portfolio is of the highest
grade, either insured or AAA rated. During the fiscal year, the Fund's fixed
income portion had a return of 6.3%.
We also manage the Fund with a strategy aimed at minimizing 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.
19
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
- --------------------------------------------------------------------------------
Portfolio Composition
- --------------------------------------------------------------------------------
(based on portfolio assets)
---------------------------
[PIE CHART APPEARS HERE]
Municipal Bonds 53.6%
Common Stock 45.9%
Cash & Equivalents 0.5%
What contributed to the less than typical performance during the past fiscal
year?
The stock portfolio's performance was not strong enough to sustain the Fund's
historical returns, largely because its sizable interest-sensitive components
were severely depressed during the fall and did not fully recover by fiscal
year-end. With over 20% of the portfolio in interest-sensitive sectors, this
negative impact was not overcome, particularly as long-term bond rates rose to
almost 6% at the end of the quarter. The tax-exempt bond portfolio, in contrast,
outperformed the Lipper Insured Municipal Bond Index by nearly 100 basis points.
Notwithstanding the negative pressures on the sizable portion of the portfolio,
the Fund had many examples of excellent investment results offsetting the
negatives and, in our opinion, setting the stage for further gains. In contrast
with the previous year where eight of the top fifteen performers were involved
in financial services, only one of this year's top performers was in that
industry. The top fifteen had gains of 34% or more: led by Sun Microsystems,
Inc., whose shares rose 199.2%; International Business Machines Corp., up 75.7%;
Sonic Automotive, Inc., up 73.3%; Lowe's Companies, Inc., up 72.4%; BP Amoco
P.L.C., up 72.3%; Gucci Group N.V., up 69.6%; Frontier Corp., up 68.2%; Intel
Corp., up 50.8%; Sprint Corp. (PCS Group), up 47.4%; American International
Group, Inc., up 44.9%; Medtronic, Inc., up 44.4%; General Electric Co., up
41.5%; AMP, Inc., up 36.7%; American Home Products Corp., up 36.6%; and
Perkin-Elmer Corp., up 34.1%. These gains demonstrated the diversity of the
portfolio, its focus on growth opportunities, and the development of special
situations.
Top 5 Industries --
Equity
------
(based on net assets)
Finance & Insurance 10.7%
................................................................................
Banks 7.8%
................................................................................
Healthcare Products & Services 4.3%
................................................................................
Information Services & Technology 3.4%
................................................................................
Retailing & Wholesale 2.6%
................................................................................
20
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
Did mergers and acquisitions again contribute to the Fund's strong performance?
The Fund benefited from 17 merger and acquisition transactions involving
portfolio securities. The average return to date on the 17 transactions
completed and pending was 73.2%. The largest single percentage increase was in
the Fund's holding of BankBoston Corp., which had been bought in November, 1993,
at $13.68 per share, and which has received an acquisition bid from Fleet
Financial Group, Inc. The gain on this holding through March 31, 1999 is 216.8%.
The second largest gain was from the completion of the transaction of First of
America Bank Corp., with its merger into National City Corp., yielding a 224.9%
gain since purchase in July, 1995. The financials in the group of companies
acquired included: Beverly Bancorporation, Inc., Crestar Financial Corp.,
Interstate/Johnson Lane, Inc., Nac Re Corp., and American Bankers Insurance
Group, Inc. Only one merger and acquisition transaction will have a negative
result for the Fund, with a projected loss of 19.1% for St. John Knits, Inc.,
which has had a buyout offer from its management. The mergers and acquisitions
with the largest financial impact for the Fund are AMP, Inc. by Tyco
International Ltd., and Frontier Corp. proposed by Global Crossing Ltd. We
purchased both of these holdings as strong undervalued business franchises, and
each was subsequently sought after by higher-growth-rate, acquisition-oriented
companies.
Top 10
Equity Holdings
---------------
(based on net assets)
Merrill Lynch & Co., Inc. 1.5%
................................................................................
Perkin Elmer Corp. 1.3%
................................................................................
Citigroup, Inc. 1.1%
................................................................................
International Business Machines Corp. 1.1%
................................................................................
Frontier Corp. 1.1%
................................................................................
Paine Webber Group, Inc. 1.1%
................................................................................
Lehman Brothers Holding, Inc. 1.0%
................................................................................
Intel Corp. 1.0%
................................................................................
Suntrust Banks, Inc. 0.9%
................................................................................
Legg Mason, Inc. 0.9%
................................................................................
What significant recent purchases has the Fund made?
Throughout the fiscal year, the focus of the Fund in its equity purchases has
been the search for undervalued growth opportunities, with minimal or no taxable
income. The outstanding purchases during the period were those which provided
increases of 50% or more during the fiscal year. They were: AFLAC, Inc., up
103.0%; Park Electrochemical Corp., up 94.1%; Frontier Corp., up 102.1%; Chase
Manhattan Corp., up 70.1%; Merrill Lynch & Co., Inc., up 71.4%; and BankAmerica
Corp., up 56.4%. While several of these holdings were purchased earlier in the
fiscal year, most of the major gains from new purchases were among issues bought
during the stock market weakness in the fall. We viewed the decline, which was
led by apprehensions over the health of financial institutions, as an important
opportunity to buy outstanding issues in this field notwithstanding our overall
sizable positions. Thus, new positions were accumulated in shares of major
financial institutions, which have already enjoyed sizable increases from their
highly depressed fall levels, led by Chase Manhattan Corp., which rose 70.1%
through March 31, 1999, and had doubled from the late
21
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Tax Strategic Foundation Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
September purchases through April 14, 1999. Issues purchased during the fall
sell-off which have already received merger and acquisition offers are Atlantic
Richfield Co. and American Bankers Insurance Group, Inc. Additional purchases
during the year were in the shares of MGIC Investment Corp., Newell Rubbermaid
Inc., and International Business Machines Corp.
Top 5 Industries --
Bonds
-----
(based on net assets)
Housing 8.4%
................................................................................
Water & Sewer 7.0%
................................................................................
General Obligations-Local Government 5.6%
................................................................................
Higher Education 5.2%
................................................................................
Hospital 5.1%
................................................................................
Top 5 Bond
Holdings
--------
(based on net assets)
District of Columbia Arpt. Auth. RB 5.50%
10/1/2002 1.4%
................................................................................
Chicago, IL Skyway Toll Bridge 5.50%
1/1/2023 1.4%
................................................................................
Clark Cnty., NV 6.00% 7/1/2022 1.4%
................................................................................
New York St. Urban Dev. Corp. 5.50%
7/1/2016 1.3%
................................................................................
Jefferson Cnty., AL Swr. RB 5.38% 2/1/2036 1.3%
................................................................................
What is your outlook?
As observed in last year's annual report, we stated: "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." This remains the case in 1999.
This is an extraordinary period in American economic history, where sizable
growth is being achieved with minimal inflation. Three major factors seem to be
at work: the evidence of a sustained rise in productivity in major sectors of
our economy; the declines in economic activity and slowing trends in other major
trading countries, leading to continual price pressure for commodities and
broadly available manufactured goods; and a growing availability of financial
liquidity as the United States expands, Europe improves the flow of funds with
the new Eurocurrency, and Asia slowly begins its recovery. We expect a
continuing environment supporting a strong bond market, particularly as the real
interest rate remains at historically high levels, and the perception remains
that the U.S. Federal Reserve will be watchful over the need to act in a
restricted fashion if the economy accelerates too rapidly, or prices suggest new
inflation. Once again, we anticipate that equity markets will find support from
increased savings. The goal of our investment management will again be to
concentrate on the search for investments in corporations with exceptional
profits growth, purchased with reasonable valuation. Bond selections will focus
on prudent positioning in highest quality tax-exempt bonds, based on constantly
revalued economic expectations.
22
<PAGE>
[LOGO OF EVERGREEN AMERICAN RETIREMENT FUND APPEARS HERE]
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Year Ended March 31, December 31,
--------------------------- -----------------
1999 1998 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of
period $ 16.70 $ 13.74 $ 13.86 $ 12.82 $10.65
------- ------- ------- ------- ------
.........................................................................
Income from investment
operations
.........................................................................
Net investment income 0.53 0.49 0.11 0.45 0.41
.........................................................................
Net realized and unrealized
gains or losses on
securities and foreign
currency related
transactions (1.79) 3.29 (0.12) 1.12 2.22
------- ------- ------- ------- ------
Total from investment
operations (1.26) 3.78 (0.01) 1.57 2.63
------- ------- ------- ------- ------
.........................................................................
.........................................................................
Less distributions to
shareholders from
Net realized gains (0.13) (0.34) 0 (0.11) 0
------- ------- ------- ------- ------
.........................................................................
Net investment income (0.55) (0.48) (0.11) (0.42) (0.46)
.........................................................................
Total distributions to
shareholders (0.68) (0.82) (0.11) (0.53) (0.46)
------- ------- ------- ------- ------
.........................................................................
Net asset value, end of
period $ 14.76 $ 16.70 $ 13.74 $ 13.86 $12.82
------- ------- ------- ------- ------
.........................................................................
.........................................................................
Total return* (7.63%) 28.02% (0.10%) 12.50% 24.90%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period
(thousands) $25,451 $29,005 $14,590 $11,116 $1,335
.........................................................................
Ratios to average net assets
Expenses 1.31% 1.40% 1.37%+ 1.30% 1.37%+
.........................................................................
Net investment income 3.37% 3.21% 3.43%+ 3.53% 3.73%+
.........................................................................
Portfolio turnover rate 56% 34% 9% 16% 49%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended
Year Ended March 31, December 31,
----------------------------- -----------------
1999 1998 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value, beginning
of period $ 16.61 $ 13.67 $ 13.80 $ 12.80 $10.65
-------- -------- ------- ------- ------
.........................................................................
Income from investment
operations
.........................................................................
Net investment income 0.41 0.38 0.09 0.36 0.35
.........................................................................
Net realized and unrealized
gains or losses on
securities and foreign
currency related
transactions (1.78) 3.26 (0.13) 1.09 2.20
-------- -------- ------- ------- ------
Total from investment
operations (1.37) 3.64 (0.04) 1.45 2.55
-------- -------- ------- ------- ------
.........................................................................
.........................................................................
Less distributions to
shareholders from
Net realized gains (0.13) (0.34) 0 (0.11) 0
-------- -------- ------- ------- ------
.........................................................................
Net investment income (0.42) (0.36) (0.09) (0.34) (0.40)
.........................................................................
Total distributions to
shareholders (0.55) (0.70) (0.09) (0.45) (0.40)
-------- -------- ------- ------- ------
.........................................................................
Net asset value, end of
period $ 14.69 $ 16.61 $ 13.67 $ 13.80 $12.80
-------- -------- ------- ------- ------
.........................................................................
.........................................................................
Total return* (8.29%) 27.06% (0.30%) 11.50% 24.10%
.........................................................................
Ratios and supplemental
data
.........................................................................
Net assets, end of period
(thousands) $146,946 $158,252 $76,791 $57,622 $4,839
.........................................................................
Ratios to average net
assets
Expenses 2.06% 2.15% 2.11%+ 2.06% 2.12%+
.........................................................................
Net investment income 2.63% 2.46% 2.68%+ 2.79% 2.97%+
.........................................................................
Portfolio turnover rate 56% 34% 9% 16% 49%
.........................................................................
</TABLE>
(a) For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
(b) For the three-month period ended March 31, 1997. The Fund changed its fis-
cal year end from December 31 to March 31, effective March 31, 1997.
* Excluding sales charges.
+ Annualized.
See Combined Notes to Financial Statements.
23
<PAGE>
[LOGO OF EVERGREEN AMERICAN RETIREMENT FUND APPEARS HERE]
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Year Ended March 31, December 31,
------------------------- ----------------
1999 1998 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value, beginning of
period $16.65 $13.70 $13.83 $12.81 $10.65
------ ------ ------ ------ ------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.43 0.38 0.09 0.36 0.36
.........................................................................
Net realized and unrealized gains
or losses on securities and
foreign currency related
transactions (1.81) 3.27 (0.13) 1.11 2.19
------ ------ ------ ------ ------
.........................................................................
Total from investment operations (1.38) 3.65 (0.04) 1.47 2.55
------ ------ ------ ------ ------
.........................................................................
Less distributions to
shareholders from
.........................................................................
Net investment income (0.42) (0.36) (0.09) (0.34) (0.39)
Net realized gains (0.13) (0.34) 0 (0.11) 0
------ ------ ------ ------ ------
.........................................................................
Total distributions to
shareholders (0.55) (0.70) (0.09) (0.45) (0.39)
------ ------ ------ ------ ------
.........................................................................
Net asset value, end of period $14.72 $16.65 $13.70 $13.83 $12.81
------ ------ ------ ------ ------
.........................................................................
.........................................................................
Total return* (8.34%) 27.08% (0.30%) 11.60% 24.00%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period
(thousands) $1,860 $2,777 $1,769 $1,487 $ 110
.........................................................................
Ratios to average net assets
Expenses 2.06% 2.15% 2.12%+ 2.05% 2.10%+
.........................................................................
Net investment income 2.59% 2.46% 2.65%+ 2.80% 2.96%+
.........................................................................
Portfolio turnover rate 56% 34% 9% 16% 49%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, Year Ended December 31,
--------------------------- -------------------------
1999 1998 1997 (b) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 16.70 $ 13.74 $ 13.86 $ 12.83 $ 10.67 $ 11.60
------- ------- ------- ------- ------- -------
.........................................................................
Income from investment
operations
.........................................................................
Net investment income 0.61 0.55 0.14 0.48 0.47 0.60
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (1.83) 3.27 (0.14) 1.10 2.16 (0.93)
------- ------- ------- ------- ------- -------
Total from investment
operations (1.22) 3.82 0.00 1.58 2.63 (0.33)
------- ------- ------- ------- ------- -------
.........................................................................
.........................................................................
Less distributions to
shareholders from
Net realized gains (0.13) (0.34) 0 (0.11) 0 0
------- ------- ------- ------- ------- -------
.........................................................................
Net investment income (0.59) (0.52) (0.12) (0.44) (0.47) (0.60)
.........................................................................
Total distributions to
shareholders (0.72) (0.86) (0.12) (0.55) (0.47) (0.60)
------- ------- ------- ------- ------- -------
.........................................................................
Net asset value, end of
period $ 14.76 $ 16.70 $ 13.74 $ 13.86 $ 12.83 $ 10.67
------- ------- ------- ------- ------- -------
.........................................................................
.........................................................................
Total return (7.38%) 28.34% 0.00% 12.60% 25.10% (2.90%)
.........................................................................
Ratios and supplemental
data
.........................................................................
Net assets, end of
period (thousands) $30,503 $43,786 $37,237 $41,243 $39,327 $37,176
.........................................................................
Ratios to average net
assets
Expenses 1.06% 1.14% 1.11%+ 1.05% 1.26% 1.28%
.........................................................................
Net investment income 3.59% 3.45% 3.56%+ 3.65% 3.96% 5.40%
.........................................................................
Portfolio turnover rate 56% 34% 9% 16% 49% 136%
.........................................................................
</TABLE>
(a) For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
(b) For the three-month period ended March 31, 1997. The Fund changed its fis-
cal year end from December 31 to March 31, effective March 31, 1997.
* Excluding sales charges.
+ Annualized.
See Combined Notes to Financial Statements.
24
<PAGE>
[LOGO OF EVERGREEN BALANCED FUND APPEARS HERE]
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
March 31,
-----------------
1999 1998 #(a)
<S> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $12.87 $12.36
------ ------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.37 0.08
.........................................................................
Net realized and unrealized gains or losses on securities,
futures contracts and foreign currency related transactions 0.48 0.81
------ ------
.........................................................................
Total from investment operations 0.85 0.89
------ ------
.........................................................................
Less distributions to shareholders from
.........................................................................
Net investment income (0.41) (0.12)
.........................................................................
Net realized gains (2.03) (0.26)
------ ------
.........................................................................
Total distributions to shareholders (2.44) (0.38)
------ ------
.........................................................................
Net asset value, end of period $11.28 $12.87
------ ------
.........................................................................
Total return* 7.52% 7.38%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period (millions) $1,241 $1,277
.........................................................................
Ratios to average net assets
Expenses 0.96% 0.99%+
.........................................................................
Net investment income 2.97% 3.25%+
.........................................................................
Portfolio turnover rate 102% 76%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, Year Ended June 30,
------------------------ ------------------------------
1999 1998 #(b) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value
beginning of period $ 12.88 $ 12.95 $11.33 $10.09 $ 9.26 $10.10
---------- ---------- ------ ------ ------ ------
.........................................................................
Income from investment
operations
.........................................................................
Net investment income 0.28 0.26 0.30 0.29 0.31 0.28
.........................................................................
Net realized and
unrealized gains or
losses on securities,
futures contracts and
foreign currency
related transactions 0.48 1.53 2.07 1.42 0.96 (0.37)
---------- ---------- ------ ------ ------ ------
Total from investment
operations 0.76 1.79 2.37 1.71 1.27 (0.09)
---------- ---------- ------ ------ ------ ------
.........................................................................
.........................................................................
Less distributions to
shareholders from
Tax basis return of
capital 0 0 0 0 0 (0.02)
---------- ---------- ------ ------ ------ ------
.........................................................................
Net investment income (0.32) (0.27) (0.30) (0.27) (0.33) (0.35)
.........................................................................
Net realized gains (2.03) (1.59) (0.45) (0.20) (0.11) (0.38)
Total distributions to
shareholders (2.35) (1.86) (0.75) (0.47) (0.44) (0.75)
---------- ---------- ------ ------ ------ ------
.........................................................................
Net asset value, end of
period $ 11.29 $ 12.88 $12.95 $11.33 $10.09 $ 9.26
---------- ---------- ------ ------ ------ ------
.........................................................................
.........................................................................
.........................................................................
Total return* 6.71% 14.89% 21.95% 17.35% 14.20% (1.16%)
.........................................................................
Ratios and supplemental
data
.........................................................................
Net assets, end of
period (millions) $ 434 $ 580 $1,625 $1,481 $1,345 $1,390
.........................................................................
Ratios to average net
assets:
Expenses 1.71% 1.35%+ 1.70% 1.72% 1.77% 1.71%
.........................................................................
Net investment income 2.23% 2.66%+ 2.50% 2.71% 3.33% 2.81%
.........................................................................
Portfolio turnover rate 102% 76% 89% 96% 88% 88%
.........................................................................
</TABLE>
(a) For the period from January 20, 1998 (commencement of class operations) to
March 31, 1998.
(b) For the nine-month period ended March 31, 1998. The Fund changed its fiscal
year end from June 30 to March 31, effective March 31, 1998.
* Excluding sales charges.
+ Annualized.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
25
<PAGE>
[LOGO OF EVERGREEN BALANCED FUND APPEARS HERE]
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------------
1999 1998 #(a)
<S> <C> <C>
CLASS C SHARES
Net asset value, beginning of period $12.88 $12.43
------ ------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.26 0.05
.........................................................................
Net realized and unrealized gains or losses
on securities, futures contracts and
foreign currency related transactions 0.51 0.75
------ ------
.........................................................................
Total from investment operations 0.77 0.80
------ ------
.........................................................................
Less distributions to shareholders from
.........................................................................
Net investment income (0.32) (0.09)
.........................................................................
Net realized gains (2.03) (0.26)
------ ------
.........................................................................
Total distributions to shareholders (2.35) (0.35)
------ ------
.........................................................................
Net asset value, end of period $11.30 $12.88
------ ------
.........................................................................
Total return* 6.79% 6.58%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period (millions) $ 2 $ 1
.........................................................................
Ratios to average net assets:
Expenses 1.71% 1.76%+
.........................................................................
Net investment income 2.21% 2.41%+
.........................................................................
Portfolio turnover rate 102% 76%
.........................................................................
<CAPTION>
Year Ended Period Ended
March 31, 1999 March 31, 1998 #(b)
<S> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $12.86 $12.01
------ ------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.39 0.08
.........................................................................
Net realized and unrealized gains or losses
on securities, futures contracts and
foreign currency related transactions 0.49 0.86
------ ------
.........................................................................
Total from investment operations 0.88 0.94
------ ------
.........................................................................
Less distributions to shareholders from
.........................................................................
Net investment income (0.44) (0.09)
.........................................................................
Net realized gains (2.03) 0
------ ------
.........................................................................
Total distributions to shareholders (2.47) (0.09)
------ ------
.........................................................................
Net asset value, end of period $11.27 $12.86
------ ------
.........................................................................
Total return 7.79% 7.79%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period (millions) $ 34 $ 39
.........................................................................
Ratios to average net assets
Expenses 0.71% 0.75%+
.........................................................................
Net investment income 3.22% 3.47%+
.........................................................................
Portfolio turnover rate 102% 76%
.........................................................................
</TABLE>
(a) For the period from January 22, 1998 (commencement of class operations) to
March 31, 1998.
(b) For the period from January 26, 1998 (commencement of class operations) to
March 31, 1998.
+ Excluding sales charges.
* Annualized.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
26
<PAGE>
[LOGO OF EVERGREEN FOUNDATION FUND APPEARS HERE]
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Year Ended March 31, December 31,
------------------------ ----------------
1999 1998 # 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of
period $20.44 $16.00 $16.13 $15.12 $12.24
------ ------ ------ ------ ------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.44 0.44 0.12 0.50 0.44
.........................................................................
Net realized and unrealized gains
or losses on securities and
foreign currency related
transactions 0.68 4.87 (0.13) 1.16 3.14
------ ------ ------ ------ ------
.........................................................................
Total from investment operations 1.12 5.31 (0.01) 1.66 3.58
------ ------ ------ ------ ------
.........................................................................
Less distributions to shareholders
from
.........................................................................
Net investment income (0.43) (0.44) (0.12) (0.50) (0.47)
Net realized gains (0.15) (0.43) 0 (0.15) (0.23)
------ ------ ------ ------ ------
.........................................................................
Total distributions to
shareholders (0.58) (0.87) (0.12) (0.65) (0.70)
------ ------ ------ ------ ------
.........................................................................
Net asset value, end of period $20.98 $20.44 $16.00 $16.13 $15.12
------ ------ ------ ------ ------
.........................................................................
.........................................................................
Total return* 5.58% 33.88% (0.20%) 11.30% 29.70%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period
(millions) $ 380 $ 350 $ 220 $ 206 $ 107
.........................................................................
Ratios to average net assets
Expenses 1.26% 1.28% 1.25%+ 1.24% 1.33%+
.........................................................................
Net investment income 2.18% 2.39% 2.83%+ 3.39% 3.73%+
.........................................................................
Portfolio turnover rate 10% 9% 2% 10% 28%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended
Year Ended March 31, December 31,
------------------------ ----------------
1999 1998 # 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value, beginning of
period $20.34 $15.94 $16.07 $15.07 $12.24
------ ------ ------ ------ ------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.29 0.30 0.09 0.40 0.36
.........................................................................
Net realized and unrealized gains
or losses on securities and
foreign currency related
transactions 0.67 4.84 (0.13) 1.15 3.09
------ ------ ------ ------ ------
.........................................................................
Total from investment operations 0.96 5.14 (0.04) 1.55 3.45
------ ------ ------ ------ ------
.........................................................................
Less distributions to shareholders
from
.........................................................................
Net investment income (0.27) (0.31) (0.09) (0.40) (0.39)
Net realized gains (0.15) (0.43) 0 (0.15) (0.23)
------ ------ ------ ------ ------
.........................................................................
Total distributions to
shareholders (0.42) (0.74) (0.09) (0.55) (0.62)
------ ------ ------ ------ ------
.........................................................................
Net asset value, end of period $20.88 $20.34 $15.94 $16.07 $15.07
------ ------ ------ ------ ------
.........................................................................
.........................................................................
Total return* 4.81% 32.81% (0.30%) 10.50% 28.70%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period
(millions) $1,432 $1,124 $ 606 $ 570 $ 296
.........................................................................
Ratios to average net assets
Expenses 2.01% 2.04% 2.00%+ 1.99% 2.07%+
.........................................................................
Net investment income 1.43% 1.63% 2.07%+ 2.64% 2.99%+
.........................................................................
Portfolio turnover rate 10% 9% 2% 10% 28%
.........................................................................
</TABLE>
(a) For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
(b) For the three-month period ended March 31, 1997. The Fund changed its fis-
cal year end from December 31 to March 31, effective March 31, 1997.
* Excluding sales charges.
+ Annualized.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
27
<PAGE>
[LOGO OF EVERGREEN FOUNDATION FUND APPEARS HERE]
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Year Ended March 31, December 31,
------------------------ ----------------
1999 1998 # 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value, beginning of
period $20.34 $15.94 $16.06 $15.07 $12.24
------ ------ ------ ------ ------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.29 0.30 0.09 0.40 0.34
.........................................................................
Net realized and unrealized gains
or losses on securities and
foreign currency related
transactions 0.66 4.84 (0.13) 1.14 3.09
------ ------ ------ ------ ------
.........................................................................
Total from investment operations 0.95 5.14 (0.04) 1.54 3.43
------ ------ ------ ------ ------
.........................................................................
Less distributions to shareholders
from
.........................................................................
Net investment income (0.27) (0.31) (0.08) (0.40) (0.37)
Net realized gains (0.15) (0.43) 0 (0.15) (0.23)
------ ------ ------ ------ ------
.........................................................................
Total distributions to
shareholders (0.42) (0.74) (0.08) (0.55) (0.60)
------ ------ ------ ------ ------
.........................................................................
Net asset value, end of period $20.87 $20.34 $15.94 $16.06 $15.07
------ ------ ------ ------ ------
.........................................................................
.........................................................................
Total return* 4.76% 32.81% (0.30%) 10.40% 28.50%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period
(millions) $ 68 $ 50 $ 28 $ 27 $ 11
.........................................................................
Ratios to average net assets
Expenses 2.01% 2.04% 2.00%+ 1.99% 2.23%+
.........................................................................
Net investment income 1.43% 1.63% 2.07%+ 2.64% 2.83%+
.........................................................................
Portfolio turnover rate 10% 9% 2% 10% 28%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended December
Year Ended March 31, 31,
------------------------ ----------------------
1999 1998 # 1997 (b) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning
of period $20.45 $16.02 $16.14 $15.13 $12.27 $13.12
------ ------ ------ ------ ------ ------
.........................................................................
Income from investment
operations
.........................................................................
Net investment income 0.49 0.49 0.13 0.54 0.51 0.42
.........................................................................
Net realized and unrealized
gains or losses on
securities and foreign
currency related
transactions 0.68 4.86 (0.13) 1.16 3.07 (0.57)
------ ------ ------ ------ ------ ------
Total from investment
operations 1.17 5.35 0.00 1.70 3.58 (0.15)
------ ------ ------ ------ ------ ------
.........................................................................
.........................................................................
Less distributions to
shareholders from
Net realized gains (0.15) (0.43) 0 (0.15) (0.23) (0.28)
------ ------ ------ ------ ------ ------
.........................................................................
Net investment income (0.48) (0.49) (0.12) (0.54) (0.49) (0.42)
.........................................................................
Total distributions (0.63) (0.92) (0.12) (0.69) (0.72) (0.70)
------ ------ ------ ------ ------ ------
.........................................................................
Net asset value, end of
period $20.99 $20.45 $16.02 $16.14 $15.13 $12.27
------ ------ ------ ------ ------ ------
.........................................................................
.........................................................................
Total return 5.84% 34.12% 0.00% 11.50% 29.70% (1.10%)
.........................................................................
Ratios and supplemental
data
.........................................................................
Net assets, end of period
(millions) $1,238 $1,117 $ 802 $ 809 $ 623 $ 332
.........................................................................
Ratios to average net
assets
Expenses 1.01% 1.03% 1.00%+ 0.99% 1.07% 1.14%
.........................................................................
Net investment income 2.43% 2.65% 3.07%+ 3.64% 3.89% 3.51%
.........................................................................
Portfolio turnover rate 10% 9% 2% 10% 28% 33%
.........................................................................
</TABLE>
(a) For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
(b) For the three-month period ended March 31, 1997. The Fund changed its fis-
cal year end from December 31 to March 31, effective March 31, 1997.
* Excluding sales charges.
+ Annualized.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
28
<PAGE>
[LOGO OF EVERGREEN TAX STRATEGIC FOUNDATION FUND APPEARS HERE]
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Year Ended March 31, December 31,
-------------------------- -----------------
1999 1998 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of
period $ 16.36 $ 13.57 $ 13.50 $ 12.20 $10.44
------- ------- ------- ------- ------
.........................................................................
Income from investment
operations
.........................................................................
Net investment income 0.34 0.31 0.07 0.27 0.29
.........................................................................
Net realized and unrealized
gains or losses on securities (0.16) 2.96 0.06# 1.59 2.24
------- ------- ------- ------- ------
.........................................................................
Total from investment
operations 0.18 3.27 0.13 1.86 2.53
------- ------- ------- ------- ------
.........................................................................
Less distributions to
shareholders from
.........................................................................
Net realized gains (0.03) (0.18) 0 (0.28) (0.46)
------- ------- ------- ------- ------
Net investment income (0.34) (0.30) (0.06) (0.28) (0.31)
.........................................................................
Total distributions to
shareholders (0.37) (0.48) (0.06) (0.56) (0.77)
------- ------- ------- ------- ------
.........................................................................
Net asset value, end of period $ 16.17 $ 16.36 $ 13.57 $ 13.50 $12.20
------- ------- ------- ------- ------
.........................................................................
.........................................................................
Total return* 1.12% 24.40% 1.00% 15.40% 24.80%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period
(thousands) $81,566 $69,879 $15,039 $11,166 $2,702
.........................................................................
Ratios to average net assets:
Expenses 1.33% 1.42% 1.38%+ 1.52% 1.75%+
.........................................................................
Net investment income 2.18% 2.21% 2.30%+ 2.39% 2.79%+
.........................................................................
Portfolio turnover rate 64% 50% 29% 88% 110%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended
Year Ended March 31, December 31,
---------------------------- -----------------
1999 1998 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value, beginning
of period $ 16.33 $ 13.56 $ 13.49 $ 12.19 $10.31
-------- -------- ------- ------- ------
.........................................................................
Income from investment
operations
.........................................................................
Net investment income 0.22 0.21 0.05 0.19 0.22
.........................................................................
Net realized and unrealized
gains or losses on
securities (0.15) 2.94 0.06# 1.59 2.37
-------- -------- ------- ------- ------
Total from investment
operations 0.07 3.15 0.11 1.78 2.59
-------- -------- ------- ------- ------
.........................................................................
.........................................................................
Less distributions to
shareholders from
Net realized gains (0.03) (0.18) 0 (0.28) (0.46)
-------- -------- ------- ------- ------
.........................................................................
Net investment income (0.23) (0.20) (0.04) (0.20) (0.25)
.........................................................................
Total distributions to
shareholders (0.26) (0.38) (0.04) (0.48) (0.71)
-------- -------- ------- ------- ------
.........................................................................
Net asset value, end of
period $ 16.14 $ 16.33 $ 13.56 $ 13.49 $12.19
-------- -------- ------- ------- ------
.........................................................................
.........................................................................
Total return* 0.41% 23.44% 0.08% 14.70% 25.60%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period
(thousands) $244,486 $185,042 $38,838 $28,007 $6,559
.........................................................................
Ratios to average net
assets:
Expenses 2.08% 2.18% 2.14%+ 2.27% 2.50%+
.........................................................................
Net investment income 1.42% 1.46% 1.55%+ 1.64% 2.03%+
.........................................................................
Portfolio turnover rate 64% 50% 29% 2% 110%
.........................................................................
</TABLE>
(a) For the period from January 17, 1995 and January 6, 1995 (commencement of
class A and class B operations, respectively) to December 31, 1995.
(b) For the three-month period ended March 31, 1997. The Fund changed its fis-
cal year end from December 31 to March 31, effective March 31, 1997.
* Excluding sales charges.
+ Annualized.
# The per share amount is not in accord with the net realized and unrealized
gains or losses for the period due to the timing of the sales of Fund shares
and the amount of per share realized and unrealized gains or losses at such
time.
See Combined Notes to Financial Statements.
29
<PAGE>
[LOGO OF EVERGREEN TAX STRATEGIC FOUNDATION FUND APPEARS HERE]
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Year Ended March 31, December 31,
-------------------------- ----------------
1999 1998 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset, value beginning of
period $ 16.30 $ 13.53 $13.47 $12.19 $10.69
------- ------- ------ ------ ------
.........................................................................
Income from investment
operations
.........................................................................
Net investment income 0.22 0.21 0.06 0.18 0.22
.........................................................................
Net realized and unrealized
gains or losses on securities (0.15) 2.94 0.05# 1.58 1.99
------- ------- ------ ------ ------
.........................................................................
Total from investment operations 0.07 3.15 0.11 1.76 2.21
------- ------- ------ ------ ------
.........................................................................
Less distributions to
shareholders from
.........................................................................
Net investment income (0.23) (0.20) (0.05) (0.20) (0.25)
Net realized gains (0.03) (0.18) 0 (0.28) (0.46)
------- ------- ------ ------ ------
.........................................................................
Total distributions to
shareholders (0.26) (0.38) (0.05) (0.48) (0.71)
------- ------- ------ ------ ------
.........................................................................
Net asset value, end of period $ 16.11 $ 16.30 $13.53 $13.47 $12.19
------- ------- ------ ------ ------
.........................................................................
.........................................................................
Total return* 0.41% 23.49% 0.08% 14.50% 21.20%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period
(thousands) $45,035 $27,699 $5,086 $4,108 $ 496
.........................................................................
Ratios to average net assets
Expenses 2.08% 2.18% 2.13%+ 2.25% 2.50%+
.........................................................................
Net investment income 1.42% 1.46% 1.55%+ 1.64% 2.07%+
.........................................................................
Portfolio turnover rate 64% 50% 29% 88% 110%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, Year Ended December 31,
-------------------------- -------------------------
1999 1998 1997 (b) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 16.39 $ 13.61 $ 13.54 $ 12.22 $ 10.27 $ 10.31
------- ------- ------- ------- ------- -------
.........................................................................
Income from investment
operations
.........................................................................
Net investment income 0.37 0.37 0.09 0.34 0.35 0.27
.........................................................................
Net realized and
unrealized gains or
losses on securities (0.15) 2.95 0.05# 1.56 2.39 0.08
------- ------- ------- ------- ------- -------
Total from investment
operations 0.22 3.32 0.14 1.90 2.74 0.35
------- ------- ------- ------- ------- -------
.........................................................................
.........................................................................
Less distributions to
shareholders from
Net realized gains (0.03) (0.18) 0 (0.28) (0.46) (0.12)
------- ------- ------- ------- ------- -------
.........................................................................
Net investment income (0.38) (0.36) (0.07) (0.30) (0.33) (0.27)
.........................................................................
Total distributions to
shareholders (0.41) (0.54) (0.07) (0.58) (0.79) (0.39)
------- ------- ------- ------- ------- -------
.........................................................................
Net asset value, end of
period $ 16.20 $ 16.39 $ 13.61 $ 13.54 $ 12.22 $ 10.27
------- ------- ------- ------- ------- -------
.........................................................................
.........................................................................
Total return 1.38% 24.73% 1.00% 15.80% 27.30% 3.40%
.........................................................................
Ratios and supplemental
data
.........................................................................
Net assets, end of
period (thousands) $23,895 $19,881 $15,311 $15,002 $13,485 $10,575
.........................................................................
Ratios to average net
assets
Expenses 1.08% 1.15% 1.13%+ 1.30% 1.50% 1.49%
.........................................................................
Net investment income 2.42% 2.48% 2.54%+ 2.63% 3.06% 2.87%
.........................................................................
Portfolio turnover rate 64% 50% 29% 88% 110% 245%
.........................................................................
</TABLE>
(a) For the period from March 3, 1995 (commencement of class C operations) to
December 31, 1995.
(b) For the three-month period ended March 31, 1997. The Fund changed its fis-
cal year end from December 31 to March 31, effective March 31, 1997.
* Excluding sales charges.
+ Annualized.
# The per share amount is not in accord with the net realized and unrealized
gains or losses for the period due to the timing of the sales of Fund shares
and the amount of per share realized and unrealized gains or losses at such
time.
See Combined Notes to Financial Statements.
30
<PAGE>
[LOGO OF EVERGREEN AMERICAN RETIREMENT FUND APPEARS HERE]
Schedule of Investments
March 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 49.1%
Automotive Equipment & Manufacturing - 2.9%
29,000 Arvin Industries, Inc................................. $ 976,938
24,940 Daimler Chrysler AG................................... 2,140,164
30,000 Dana Corp. ........................................... 1,140,000
170,100 Simpson Industries, Inc. ............................. 1,637,212
------------
5,894,314
------------
Banks - 6.9%
40,000 BancorpSouth, Inc. ................................... 640,000
40,000 Bank of New York Co., Inc. ........................... 1,437,500
32,312 Bank One Corp......................................... 1,779,179
60,873 BB & T Corp. ......................................... 2,202,842
19,500 Comerica, Inc. ....................................... 1,217,531
47,761 First State Bancorp................................... 913,429
8,000 First Union Corp. **.................................. 427,500
53,000 Hibernia Corp. Cl. A.................................. 695,625
30,000 Huntington Bancshares, Inc............................ 928,125
188,730 Republic Security Financial Corp...................... 1,745,753
24,048 Suntrust Banks, Inc. ................................. 1,496,988
36,000 Susquehanna Bancshares, Inc........................... 661,500
------------
14,145,972
------------
Building, Construction &
Furnishings - 2.4%
10,000 Armstrong World Industries, Inc....................... 451,875
83,333 Eagle Hardware & Garden, Inc. ........................ 3,182,279
22,530 Southdown, Inc. ...................................... 1,209,579
------------
4,843,733
------------
Business Equipment &
Services - 0.4%
25,000 Dun & Bradstreet Corp................................. 890,625
------------
Consumer Products & Services - 4.3%
48,300 CPI Corp.............................................. 1,080,713
100,000 Lancaster Colony Corp. ............................... 2,662,500
20,000 Liz Claiborne, Inc. .................................. 652,500
40,000 Mattel, Inc. ......................................... 995,000
54,415 Newell Rubbermaid, Inc. .............................. 2,584,712
60,000 Service Corp. International........................... 855,000
------------
8,830,425
------------
Diversified Companies - 1.5%
10,000 Harris Corp........................................... 286,250
80,000 Ruddick Corp.......................................... 1,560,000
80,000 Tomkins Plc, ADR...................................... 1,190,000
------------
3,036,250
------------
Electrical Equipment &
Services - 2.6%
22,000 Emerson Electric Co. ................................. 1,164,625
56,656 Hubbell, Inc. Cl. B................................... 2,266,240
53,000 Thomas & Betts Corp. ................................. 1,990,813
------------
5,421,678
------------
Electronic Equipment &
Services - 1.2%
45,529 AMP, Inc. ............................................ 2,444,338
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Finance & Insurance - 2.2%
30,000 Dain Rauscher Corp.................................... $ 1,020,000
20,000 Hartford Financial Services Group, Inc................ 1,136,250
15,000 Lincoln National Corp................................. 1,483,125
20,000 Paine Webber Group, Inc............................... 797,500
------------
4,436,875
------------
Food & Beverage Products - 1.3%
70,900 Flowers Industries, Inc. ............................. 1,745,913
18,000 H.J. Heinz Co. ....................................... 852,750
------------
2,598,663
------------
Healthcare Products & Services - 4.0%
20,000 American Home Products Corp........................... 1,305,000
35,000 Baxter International, Inc............................. 2,310,000
28,000 Bristol-Myers Squibb Co............................... 1,800,750
50,100 Shared Medical System Corp. .......................... 2,789,944
------------
8,205,694
------------
Industrial Specialty Products & Services - 1.7%
80,000 Federal Signal Corp. ................................. 1,670,000
10,000 Honeywell, Inc. ...................................... 758,125
30,000 Leggett & Platt, Inc. ................................ 600,000
42,000 Lindberg Corp......................................... 370,125
------------
3,398,250
------------
Machinery - Diversified - 0.6%
82,650 Hardinge, Inc......................................... 1,167,431
------------
Metal Products & Services - 0.1%
50,000 Titanium Metals Corp. ................................ 287,500
------------
Oil/Energy - 2.6%
23,000 Atlantic Richfield Co................................. 1,679,000
10,586 BP Amoco Plc.......................................... 1,068,524
15,400 Exxon Corp. .......................................... 1,086,663
10,000 Mobil Corp............................................ 880,000
12,000 Texaco, Inc. ......................................... 681,000
------------
5,395,187
------------
Printing, Publishing, Broadcasting &
Entertainment - 1.3%
51,900 Bowne & Co., Inc. .................................... 606,581
40,000 New York Times Co. ................................... 1,140,000
11,600 Time Warner, Inc. .................................... 824,325
------------
2,570,906
------------
Retailing & Wholesale - 3.0%
43,000 J. C. Penney Co., Inc................................. 1,741,500
30,000 Longs Drug Stores Corp................................ 913,125
70,260 * Saks, Inc. ......................................... 1,826,760
70,600 Talbots Inc........................................... 1,720,875
------------
6,202,260
------------
Transportation - 2.1%
20,000 Delta Air Lines, Inc.................................. 1,390,000
20,000 * UAL Corp. .......................................... 1,555,000
27,000 Union Pacific Corp. .................................. 1,442,813
------------
4,387,813
------------
</TABLE>
31
<PAGE>
[LOGO OF EVERGREEN AMERICAN RETIREMENT FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Electric - 2.7%
40,000 Public Service Co. of New Mexico..................... $ 680,000
80,000 Reliant Energy, Inc.................................. 2,085,000
93,000 Sempra Energy........................................ 1,784,437
35,000 TNP Enterprises, Inc. ............................... 1,006,250
------------
5,555,687
------------
Utilities - Gas - 2.7%
54,000 Keyspan Energy....................................... 1,356,750
55,000 Peoples Energy Corp.................................. 1,777,187
60,000 Williams Companies, Inc.............................. 2,370,000
------------
5,503,937
------------
Utilities - Telephone - 2.6%
16,437 AT&T Corp............................................ 1,311,878
35,000 Frontier Corp........................................ 1,815,625
40,000 U.S. West, Inc....................................... 2,202,500
------------
5,330,003
------------
Total Common Stocks (cost $81,440,553)............... 100,547,541
------------
CONVERTIBLE PREFERRED - 10.7%
Aerospace & Defense - 0.8%
36,000 Loral Space & Communications
6.00%............................................... 1,602,000
------------
Banks - 0.7%
50,000 National Australia Bank, Ltd.
7.875%, Series Unit................................. 1,565,625
------------
Communication Systems &
Services - 0.6%
15,000 AirTouch Communications, Inc.
6.00%, Series B..................................... 1,181,250
------------
Electrical Equipment &
Services - 0.9%
50,000 Pioneer Standard Financial Trust 6.75%............... 1,775,000
------------
Finance & Insurance - 1.3%
20,000 American General Corp.
$3.00, Series A, MIPS............................... 1,790,000
13,000 American Heritage Life Investment Corp. 8.50%,
PRIDES.............................................. 825,500
------------
2,615,500
------------
Metal Products & Services - 0.2%
20,000 Timet Capital Trust I
6.625%.............................................. 387,500
------------
Printing, Publishing, Broadcasting &
Entertainment - 2.2%
27,000 Houston Industries, Inc.
7.00%, ACES (exchangeable for Time Warner, Inc.
common stock)....................................... 3,253,500
20,000 Merrill Lynch & Co., Inc.
6.00%, STRYPES (exchangeable for Cox Communications,
Inc. common stock).................................. 1,232,500
------------
4,486,000
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - continued
Retailing & Wholesale - 1.6%
7,500 CVS
6.00%, TRACES...................................... $ 641,250
65,000 Merrill Lynch & Co., Inc.
(exchangeable for Dollar
General Corp. common stock)
8.50%, STRYPES..................................... 2,742,188
------------
3,383,438
------------
Transportation - 1.0%
20,000 CNF Trust I
5.00%, Ser. A, TECONS (exchangeable for CNF
Transportation, Inc. common stock)................. 1,110,000
20,000 Union Pacific Capital Trust
6.25%, TIDES, 144A................................. 1,002,500
------------
2,112,500
------------
Utilities - Electric - 1.4%
45,000 Bndes Participacoes S.A............................. 742,500
40,000 Texas Utilities Co.
9.25%, PRIDES...................................... 2,132,500
------------
2,875,000
------------
Total Convertible Preferred (cost $19,930,152)...... 21,983,813
------------
<CAPTION>
Principal
Amount
<C> <S> <C>
CONVERTIBLE DEBENTURES - 7.0%
Business Equipment &
Services - 0.1%
$ 250,000 Interim Services, Inc.
4.50%, 6/1/05...................................... 191,875
------------
Consumer Products & Services - 0.8%
2,000,000 Action Performance Companies, Inc. 4.75%, 4/1/05,
144A............................................... 1,745,000
------------
Electrical Equipment &
Services - 1.0%
4,000,000 Solectron Corp.
0.00%, 1/27/19, 144A............................... 1,980,000
------------
Healthcare Products & Services - 1.4%
2,000,000 Carematrix
6.25%, 8/15/04..................................... 1,720,000
2,000,000 Elan Finance Corporation Limited 0.00%, 12/14/18.... 1,150,000
------------
2,870,000
------------
Information Services &
Technology - 1.1%
6,000,000 Network Assocs. Inc.
0.00%, 2/13/18..................................... 2,190,000
------------
Oil Field Services - 1.1%
2,000,000 Nabors Industries, Inc.
5.00%, 5/15/06..................................... 2,257,500
------------
Retailing & Wholesale - 0.9%
Central Garden & Pet Co.
500,000 6.00%, 11/15/03, 144A............................... 451,250
1,600,000 6.00%, 11/15/03..................................... 1,444,000
------------
1,895,250
------------
</TABLE>
32
<PAGE>
[LOGO OF EVERGREEN AMERICAN RETIREMENT FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - continued
Transportation - 0.6%
$1,000,000 Continental Airlines Inc. 6.75%, 4/15/06............. $ 1,295,000
------------
Total Convertible Debentures (cost $15,377,420)...... 14,424,625
------------
CORPORATE BONDS - 1.5%
Banks - 0.5%
1,000,000 NationsBank Corp.
6.50%, 8/15/03...................................... 1,024,682
------------
Finance & Insurance - 0.5%
1,000,000 American General Finance Corp. 7.125%, 12/1/99....... 1,011,153
------------
Telecommunication Services &
Equipment - 0.5%
1,000,000 GTE Southwest, Inc. 5.82%, 12/1/99, Ser. A........... 1,003,455
------------
Total Corporate Bonds (cost $3,011,568).............. 3,039,290
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 30.7%
Government Agency Notes &
Bonds - 26.8%
2,000,000 Federal Farm Credit Bank Consolidated MTN
5.75%, 12/7/28...................................... 1,842,680
Federal Home Loan Bank
2,000,000 5.375%, 10/6/03...................................... 1,969,346
3,000,000 5.50%, 12/11/13...................................... 2,873,466
2,000,000 6.532%, 12/28/07..................................... 2,000,992
Federal Home Loan Mortgage Corp.
2,000,000 6.54%, 12/10/07...................................... 2,023,770
2,000,000 6.542%, 3/19/08...................................... 2,001,102
2,000,000 7.585%, 9/19/06...................................... 2,088,544
2,000,000 7.865%, 8/8/11....................................... 2,085,456
Federal National Mortgage Association
5,000,000 5.65%, 2/22/28....................................... 4,548,465
1,850,000 6.00%, 1/14/05....................................... 1,846,786
2,215,000 6.10%, 1/26/05....................................... 2,208,116
3,000,000 6.16%, 1/23/08....................................... 2,985,066
2,000,000 6.24%, 1/14/08....................................... 1,994,368
3,000,000 6.32%, 3/3/08........................................ 3,005,790
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - continued
Government Agency Notes &
Bonds - continued
Federal National Mortgage
Association - continued
$1,000,000 6.41%, 3/8/06........................................ $ 1,034,284
5,000,000 6.42%, 2/12/08....................................... 4,980,775
2,000,000 6.46%, 1/1/08........................................ 2,013,880
4,000,000 6.52%, 3/5/08........................................ 3,992,740
3,000,000 7.28%, 5/23/07....................................... 3,106,023
Federal National Mortgage
Association MTN
4,000,000 6.08%, 9/1/28........................................ 3,865,348
2,355,000 6.875%, 9/24/12...................................... 2,451,725
------------
54,918,722
------------
U.S. Treasury Notes & Bonds - 3.9%
U.S. Treasury Bonds
6,000,000 6.00%, 2/15/26....................................... 6,106,877
1,500,000 7.125%, 2/15/23...................................... 1,732,500
------------
7,839,377
------------
Total U.S. Government & Agency
Obligations (cost $63,341,840)...................... 62,758,099
------------
SHORT-TERM INVESTMENTS - 0.5%
U.S. Government Agency
Obligations - 0.5%
420,000 Federal Home Loan Bank
Discount Notes
4.76%, 4/23/99...................................... 418,778
305,000 Federal Home Loan Mortgage
Discount Notes
4.75%, 4/8/99....................................... 304,718
250,000 Federal National Mortgage
Association Discount Notes
4.76%, 4/6/99....................................... 249,835
------------
Total Short-Term Investments
(cost $973,331)..................................... 973,331
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $184,074,864).......................... 99.5% 203,726,699
Other Assets and
Liabilities - net............................ 0.5 1,033,890
----- ------------
Net Assets.................................... 100.0% $204,760,589
===== ============
</TABLE>
* Non-income producing securities.
** At March 31, 1999, 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, 1999, the Fund earned $13,440 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 the guidelines established by the
Board of Trustees.
Summary of Abbreviations:
ACES Automatically Convertible Equity Securities
ADR American Depository Receipts
MIPS Monthly Income Preferred Shares
MTN Medium Term Note
PRIDES Preferred Redeemable Increased Dividend Equity Security
STRYPES Structured Yield Product Exchangeable for Stock
TECONS Term Convertible Securities
TIDES Term Income Deferrable Equitable Securities
TRACES Trust Automatic Common Exchangeable Securities
See Combined Notes to Financial Statements.
33
<PAGE>
[LOGO OF EVERGREEN BALANCED FUND APPEARS HERE]
Schedule of Investments
March 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 60.6%
Aerospace & Defense - 0.6%
80,000 United Technologies Corp........................ $ 10,835,000
--------------
Automotive Equipment &
Manufacturing - 1.9%
84,850 Daimler Chrysler AG............................. 7,281,191
400,000 *Delphi Automotive Systems Corp................. 7,100,000
138,200 Ford Motor Co................................... 7,842,850
118,000 General Motors Corp............................. 10,251,250
--------------
32,475,291
--------------
Banks - 2.9%
131,300 Bank One Corp................................... 7,229,706
150,000 BankAmerica Corp................................ 10,593,750
150,000 Dime Bancorp, Inc............................... 3,478,125
200,000 Fleet Financial Group, Inc...................... 7,525,000
135,000 Mellon Bank Corp................................ 9,500,625
300,000 Wells Fargo Co.................................. 10,518,750
--------------
48,845,956
--------------
Business Equipment & Services - 1.2%
240,000 Automatic Data Processing, Inc.................. 9,930,000
190,000 Xerox Corp...................................... 10,141,250
--------------
20,071,250
--------------
Capital Goods - 0.7%
325,000 Deere & Co...................................... 12,553,125
--------------
Chemical & Agricultural
Products - 2.3%
210,000 Du Pont (E. I.) De Nemours & Co................. 12,193,125
200,000 Monsanto Co..................................... 9,187,500
470,000 Morton International, Inc....................... 17,272,500
--------------
38,653,125
--------------
Communication Systems &
Services - 2.7%
155,000 *Cisco Systems, Inc............................. 16,987,031
185,000 *MCI WorldCom, Inc.............................. 16,378,281
135,000 *Tellabs, Inc................................... 13,196,250
--------------
46,561,562
--------------
Consumer Products & Services - 1.4%
80,000 Gillette Co..................................... 4,755,000
115,000 Newell Rubbermaid, Inc.+........................ 5,462,500
140,000 Procter & Gamble Co............................. 13,711,250
--------------
23,928,750
--------------
Diversified Companies - 1.9%
226,600 AlliedSignal, Inc............................... 11,145,888
400,000 Raychem Corp.................................... 9,025,000
173,900 Tyco International Ltd.......................... 12,477,325
--------------
32,648,213
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Electrical Equipment & Services - 3.4%
410,000 General Electric Co............................. $ 45,356,250
125,000 Motorola, Inc................................... 9,156,250
64,600 *Solectron Corp.+............................... 3,137,137
--------------
57,649,637
--------------
Environmental Services - 0.4%
150,000 Waste Management, Inc........................... 6,656,250
--------------
Finance & Insurance - 5.5%
145,000 American International Group, Inc............... 17,490,625
198,706 Associates First Capital Corp. Cl. A............ 8,941,770
230,000 Citigroup, Inc.................................. 14,691,250
217,170 Conseco, Inc.................................... 6,705,124
100,000 Federal Home Loan Mortgage Corp................. 5,712,500
120,000 Federal National Mortgage Assoc................. 8,310,000
90,000 Hartford Financial Services Group, Inc.......... 5,113,125
150,000 Lehman Brothers Holdings, Inc................... 8,962,500
135,000 Merrill Lynch & Co., Inc........................ 11,939,063
140,000 Nationwide Financial Services, Inc. Cl. A....... 5,880,000
--------------
93,745,957
--------------
Food & Beverage Products - 3.0%
93,600 Bestfoods....................................... 4,399,200
29,100 Coca Cola Co.................................... 1,786,013
212,400 Flowers Industries, Inc......................... 5,230,350
79,200 H.J. Heinz Co................................... 3,752,100
260,000 McDonald's Corp................................. 11,781,250
105,000 Pepsi Bottling Group, Inc....................... 2,277,187
200,000 Pepsico, Inc.................................... 7,837,500
200,900 *Safeway, Inc................................... 10,308,681
172,000 Sara Lee Corp................................... 4,257,000
--------------
51,629,281
--------------
Healthcare Products & Services - 8.8%
245,000 American Home Products Corp..................... 15,986,250
185,800 Bristol-Myers Squibb Co......................... 11,949,262
95,000 Cardinal Health, Inc............................ 6,270,000
180,000 Johnson & Johnson............................... 16,863,750
140,000 Lilly (Eli) & Co................................ 11,882,500
179,100 Medtronic, Inc.................................. 12,850,425
240,000 Merck & Co., Inc................................ 19,245,000
123,000 Pfizer, Inc..................................... 17,066,250
285,000 Pharmacia & Upjohn, Inc......................... 17,776,875
209,600 Schering-Plough Corp............................ 11,593,500
142,000 Warner-Lambert Co............................... 9,398,625
--------------
150,882,437
--------------
</TABLE>
34
<PAGE>
[LOGO OF EVERGREEN BALANCED FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Industrial Specialty Products &
Services - 1.1%
225,000 Ecolab, Inc..................................... $ 7,987,500
150,000 Honeywell, Inc.................................. 11,371,875
--------------
19,359,375
--------------
Information Services &
Technology - 6.5%
108,800 *EMC Corp....................................... 13,899,200
190,000 Hewlett-Packard Co.............................. 12,884,375
148,000 Intel Corp...................................... 17,593,500
93,700 International Business Machines Corp............ 16,608,325
464,400 *Microsoft Corp................................. 41,607,337
63,800 *Sun Microsystems, Inc.......................... 7,976,994
--------------
110,569,731
--------------
Oil/Energy - 4.3%
70,600 Chevron Corp.................................... 6,243,687
142,900 Exxon Corp...................................... 10,083,381
108,900 Mobil Corp...................................... 9,583,200
200,000 Reliant Energy, Inc............................. 5,212,500
230,400 Royal Dutch Petroleum Co........................ 11,980,800
300,000 Texaco, Inc..................................... 17,025,000
387,500 Unocal Corp..................................... 14,264,844
--------------
74,393,412
--------------
Oil Field Services - 0.3%
48,434 BP Amoco Plc.................................... 4,888,807
--------------
Printing, Publishing, Broadcasting & Entertainment - 2.3%
370,000 CBS Corp.+...................................... 15,146,875
250,000 Disney (Walt) Co................................ 7,781,250
99,400 Gannett Co., Inc................................ 6,262,200
140,000 Time Warner, Inc................................ 9,948,750
--------------
39,139,075
--------------
Real Estate - 1.0%
175,000 Boston Properties, Inc. REIT+................... 5,534,375
475,000 Equity Office Properties Trust REIT............. 12,082,813
--------------
17,617,188
--------------
Retailing & Wholesale - 3.6%
232,500 CVS Corp........................................ 11,043,750
150,000 *Federated Department Stores, Inc............... 6,018,750
536,809 *Staples, Inc................................... 17,647,596
90,000 Tandy Corp...................................... 5,743,125
230,000 Wal-Mart Stores, Inc............................ 21,203,125
--------------
61,656,346
--------------
Transportation - 0.3%
125,000 CNF Transportation, Inc......................... 4,726,563
--------------
Utilities - Electric - 1.3%
195,000 Dominion Resources, Inc......................... 7,202,813
150,000 Duke Power Co................................... 8,193,750
165,000 Florida Progress Corp........................... 6,228,750
--------------
21,625,313
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Telephone - 3.2%
192,800 Ameritech Corp................................. $ 11,158,300
181,000 AT&T Corp...................................... 14,446,062
206,202 Bell Atlantic Corp............................. 10,658,066
112,000 GTE Corp....................................... 6,776,000
75,480 Sprint Corp.................................... 7,406,475
93,900 U.S. West, Inc................................. 5,170,369
--------------
55,615,272
--------------
Total Common Stocks
(cost $703,061,486)........................... 1,036,726,916
--------------
CONVERTIBLE PREFERRED - 0.7%
Retailing & Wholesale - 0.7%
200,000 Kmart Financing I 7.75% (cost $10,894,754)..... 12,100,000
--------------
<CAPTION>
Principal
Amount
<C> <S> <C>
CONVERTIBLE DEBENTURES - 0.5%
Healthcare Products & Services - 0.5%
$ 10,000,000 HEALTHSOUTH Corp.
3.25%, 4/1/03, 144A
(cost $10,000,000)............................ 8,150,000
--------------
ASSET-BACKED SECURITIES - 4.7%
958,590 Americredit Automobile Recreation Trust, Series
1997-B Class A 2
6.36%, 9/12/00................................ 961,183
3,500,000 Carco Auto Loan Master Trust, Series 1997-1,
Class A,
6.689%, 8/15/04............................... 3,528,280
2,750,000 Contimortgage Home Equity Loan, Series 1997-4,
Class A7 6.63%, 9/15/16....................... 2,726,790
4,000,000 Contimortgage Home Equity Loan Trust, Series
1998-1, Class A6,
6.58%, 12/15/18............................... 4,008,760
6,150,000 Corestates Home Equity Loan Trust, Series 1996-
1, Class A4,
7.00%, 6/15/12................................ 6,325,490
Green Tree Financial Corp.
3,126,369 Series 1993-4, Class A3, 6.25%,1/15/19......... 3,135,154
6,000,000 Series 1997-3, Class A5, 7.14%,7/15/28......... 6,181,860
Merrill Lynch Mortgage
Investors, Inc.
3,073,621 Series 1992-D, Class B,
8.50%, 6/15/17................................ 3,281,213
4,986,676 Series 1991-D, Class B,
9.85%, 7/15/11................................ 5,019,389
399,734 Money Store Auto Trust, Series 1997-2 Class A1
6.17%, 3/20/01**.............................. 401,313
8,000,000 Olympic Automobile Receivables Trust, Series
1997-A,
Class A5
6.80%, 2/15/05................................ 8,202,840
</TABLE>
See Combined Notes to Financial Statements.
35
<PAGE>
[LOGO OF EVERGREEN BALANCED FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - continued
$ 10,000,000 Premier Auto Trust, Series 1997 2, Class B,
6.53%, 12/6/03................................ $ 10,118,700
2,500,000 Railcar Leasing LLC, Class A 2 7.125%, 1/15/13,
144A.......................................... 2,642,175
7,500,000 Southern Pacific Secured Assets Corp., Series
1996-3, Class A4
7.60%, 10/25/27............................... 7,797,532
388,223 Union Acceptance Corp., Series 1995-C, Class A,
6.40%, 10/10/02............................... 387,978
545,000 University Support Services, Inc.,
Series 1992-CD, Class D 9.00%, 11/1/07........ 543,297
6,900,000 WFS Financial Owner Trust, Series 1997-C, Class
CTFS 6.30%, 3/20/05........................... 6,856,875
8,591,010 World Omni Automobile Lease,
Series 1997-A, Class A4,
6.90%, 6/25/03................................ 8,711,799
--------------
Total Asset-Backed Securities
(cost $79,412,066)............................ 80,830,628
--------------
CORPORATE BONDS - 18.6%
Aerospace & Defense - 1.3%
5,000,000 Boeing Co.
6.625%, 2/15/38+.............................. 4,762,500
8,300,000 Lockheed Martin Corp.
7.45%, 6/15/04................................ 8,781,815
5,500,000 Northrop Grumman Corp.
7.00%, 3/1/06................................. 5,603,840
Raytheon Co.
2,000,000 6.40%, 12/15/18................................ 1,912,800
2,000,000 6.75%, 8/15/07................................. 2,050,460
--------------
23,111,415
--------------
Banks - 0.6%
3,465,000 Amsouth Bancorp
6.75%, 11/1/25................................ 3,533,884
5,000,000 Barnett Capital I
8.06%, 12/1/26................................ 5,260,850
698,000 Boatmen's Bancshares, Inc.
6.75%, 3/15/03................................ 721,481
--------------
9,516,215
--------------
Cable/Other Video Distribution - 0.6%
5,000,000 CSC Holdings Inc.
7.625%, 7/15/18............................... 5,037,500
4,000,000 TCI Communications Inc.
8.00%, 8/1/05................................. 4,420,000
--------------
9,457,500
--------------
Consumer Products & Services - 0.2%
3,000,000 American Greetings Corp.
6.10%, 8/1/28................................. 2,948,700
1,001,000 Stanley Works
7.375%, 12/15/02.............................. 1,032,572
--------------
3,981,272
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Diversified Companies - 0.3%
$ 5,000,000 Grand Metropolitan Investment Corp.
7.45%, 4/15/35................................ $ 5,490,550
--------------
Environmental Services - 0.2%
3,000,000 Allied Waste North America,Inc.
7.375%, 1/1/04................................ 2,932,500
--------------
Finance & Insurance - 6.8%
8,000,000 AMBAC, Inc.
9.375%, 8/1/11................................ 9,893,680
6,550,000 Associates Corp. North America
8.625%, 11/15/04.............................. 7,349,231
3,000,000 Bear Stearns Cos., Inc.
6.875%, 10/1/05............................... 3,062,040
5,800,000 Beneficial Corp.
6.25%, 2/18/13................................ 5,840,948
4,500,000 CIT Group Holdings, Inc.
9.25%, 3/15/01................................ 4,789,215
6,400,000 Commercial Credit Group, Inc.
10.00%, 5/15/09............................... 8,126,144
1,280,000 Dean Witter, Discover & Co.
6.75%, 10/15/13............................... 1,310,707
4,900,000 Ford Motor Credit Company
5.80%, 1/12/09................................ 4,707,038
General Electric Capital Corp.
1,300,000 8.75%, 3/14/03................................. 1,441,817
2,470,000 8.75%, 5/21/07................................. 2,902,991
5,600,000 General Motors Acceptance Corp.
8.50%, 1/1/03................................. 6,085,464
7,500,000 GS Escrow Corp.
6.75%, 8/1/01................................. 7,524,315
1,750,000 International Lease Finance Corp.
5.75%, 1/15/03................................ 1,741,127
4,975,000 John Hancock Mutual Life Insurance Co.
7.375%, 2/15/24, 144A......................... 5,192,955
5,000,000 Lehman Brothers Holdings Incorporated
6.625%, 4/1/04................................ 4,989,250
5,725,000 Massachusetts Mutual Life Insurance Co.,
7.625%, 11/15/23, 144A........................ 6,226,968
6,000,000 Nationwide CSN Trust,
9.875%, 2/15/25, 144A ........................ 6,836,040
Paine Webber Group, Inc.
5,460,000 6.45%, 12/1/03................................. 5,457,871
4,705,000 8.25%, 5/1/02.................................. 4,948,154
6,200,000 Prudential Insurance Co.
7.125%, 7/1/07................................ 6,444,652
11,700,000 Sun Life Canada Capital Trust
8.526%, 5/29/49............................... 11,975,886
--------------
116,846,493
--------------
Food & Beverage Products - 0.2%
4,000,000 Pepsi Bottling Group, Inc.
7.00%, 3/1/29................................. 4,014,068
--------------
</TABLE>
36
<PAGE>
[LOGO OF EVERGREEN BALANCED FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Healthcare Products & Services - 0.5%
$ 5,000,000 Johnson & Johnson
8.72%, 11/1/24........................... $ 5,815,300
3,000,000 Merck & Co., Inc.
6.40%, 3/1/28............................ 2,960,850
--------------
8,776,150
--------------
Industrial Specialty Products &
Services - 0.1%
1,126,000 Waste Management, Inc.
8.75%, 5/1/18............................ 1,210,900
--------------
Information Services & Technology - 0.4%
6,500,000 Comdisco Inc.
6.125%, 1/15/03.......................... 6,483,100
--------------
Machinery - Diversified - 0.1%
2,000,000 Caterpillar, Inc.
9.375%, 7/15/01+......................... 2,155,300
--------------
Oil/Energy - 0.9%
931,000 Atlantic Richfield Co.
9.00%, 4/1/21............................ 1,167,409
4,000,000 CMS Panhandle Holding Co.
6.50%, 7/15/09........................... 3,998,696
5,000,000 K N Energy Inc.
7.35%, 8/1/26............................ 5,304,500
5,000,000 Petroleum Geo-Services
7.50%, 3/31/07........................... 5,157,650
--------------
15,628,255
--------------
Paper & Packaging - 0.3%
5,000,000 James River Corp.
6.75%, 10/1/99........................... 5,025,600
--------------
Real Estate - 0.6%
EOP Operating, Ltd.
3,050,000 6.375%, 2/15/03........................... 3,027,857
3,950,000 6.625%, 2/15/05........................... 3,900,467
4,000,000 Glenborough Pptys LP
7.625%, 3/15/05.......................... 3,875,920
--------------
10,804,244
--------------
Retailing & Wholesale - 1.0%
3,000,000 CVS Corp.
5.50%, 2/15/04........................... 2,958,279
8,000,000 Fred Meyer Inc.
7.15%, 3/1/03............................ 8,225,840
4,300,000 Sears Roebuck & Co.
10.00%, 2/3/12........................... 5,607,458
--------------
16,791,577
--------------
Telecommunication Services & Equipment -
0.4%
6,750,000 Bellsouth Capital Funding Corp.
7.12%, 7/15/97........................... 6,927,593
--------------
Transportation - 1.8%
5,000,000 American Airline
8.39%, 1/2/17............................ 5,073,000
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Transportation - continued
$ 5,000,000 Continental Airlines Inc.
6.795%, 2/2/20................... $ 4,975,625
5,881,288 FDX Corp.
6.845%, 1/15/19.................. 5,984,828
7,600,000 Golden St. Pete Trans Corp.
8.04%, 2/1/19.................... 7,448,000
6,250,000 Norfolk Southern Corp.
7.05%, 5/1/37.................... 6,481,250
--------------
29,962,703
--------------
Utilities - Electric - 0.7%
6,500,000 National Rural Utilities
Cooperative Finance
5.00%, 10/1/02................... 6,351,215
4,000,000 Soyland Power Cooperative Inc.
8.67%, 9/15/18................... 4,526,080
838,000 Union Electric Co.
8.00%, 12/15/22.................. 902,618
--------------
11,779,913
--------------
Utilities - Telephone - 1.6%
5,000,000 AT&T Corp.
6.50%, 3/15/29................... 4,887,800
2,000,000 MCI Communications Corp. 6.125%,
4/15/02.......................... 2,018,240
5,640,000 MCI Worldcom Inc. 7.75%, 4/1/07... 6,179,015
Sprint Capital Corp.
3,500,000 6.125%, 11/15/08.................. 3,440,745
10,260,000 6.875%, 11/15/28.................. 10,130,724
--------------
26,656,524
--------------
Total Corporate Bonds
(cost $319,871,543).............. 317,551,872
--------------
FOREIGN BONDS (U.S. DOLLARS) - 1.2%
640,000 International Bank For
Reconstruction & Development Co.
COLTS 7.95%, 5/15/16............. 763,424
4,000,000 National Westminster Bancorp
9.375%, 11/15/03................. 4,543,320
30,000,000 Skandinaviska Enskilda
0.00%, 5/26/33................... 2,553,000
4,500,000 Sumitomo Bank Corp.
9.40%, 12/29/49, 144A............ 4,418,010
8,000,000 YPF Sociedad Anonima
7.25%, 3/15/03................... 7,839,360
--------------
Total Foreign Bonds (U.S. Dollars)
(cost $20,314,026)............... 20,117,114
--------------
FOREIGN BONDS (NON U.S. DOLLARS) - 2.0%
GRD
1,750,000,000 Greece Rep Of
8.60%, 3/26/08................... 6,790,369
</TABLE>
37
<PAGE>
[LOGO OF EVERGREEN BALANCED FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
FOREIGN BONDS (NON U.S. DOLLARS) - continued
DKK Nykredit
2,226,000 6.00%, 10/1/26................................ $ 324,316
DKK
53,000,000 6.00%, 10/1/29................................ 7,540,713
DKK Realkredit Danmark
101,410,000 5.00%, 10/1/29................................ 13,666,035
DKK
151,000 6.00%, 10/1/26................................ 21,945
DKK
44,250,000 6.00%, 10/1/29................................ 6,260,396
--------------
Total Foreign Bonds (Non U.S. Dollars) (cost
$36,088,807)................................. 34,603,774
--------------
MORTGAGE-BACKED SECURITIES - 8.4%
Mortgage Pass-Through Certificates - 2.9%
Federal Home Loan Mortgage Corp.
$ 8,600,000 5.00%, 1/15/04................................ 8,395,750
2,449,137 7.32%, 4/1/22................................. 2,520,701
Federal National Mortgage Association
15,334,857 5.50%, 7/1/09................................. 15,036,441
5,400,000 6.50%, 10/1/28................................ 5,374,674
669,470 6.80%, 5/1/22................................. 687,466
1,301,429 6.97%, 2/1/27................................. 1,326,442
2,997,435 7.00%, 5/1/24................................. 3,038,649
1,864,088 7.07%, 1/1/31................................. 1,919,433
9,187,027 7.08%, 9/1/21................................. 9,462,638
Government National Mortgage Association
348,176 8.50%, 5/15/21................................ 370,480
175,933 8.50%, 7/15/21................................ 186,213
439,586 8.50%, 6/15/22................................ 464,999
243,472 9.00%, 9/15/21................................ 261,350
300,598 9.00%, 10/15/21............................... 322,671
207,892 9.50%, 2/15/21................................ 223,353
--------------
49,591,260
--------------
Collateralized Mortgage Obligations - 5.5%
10,000,000 Bear Stearns Commercial Mortgage Securities
Inc., Series 1998-C1, Class C
6.75%, 6/16/30............................... 9,954,687
2,000,000 Chase Commercial Mortgage Securities Corp.
Series 1997-2, Class B, 6.60%,11/19/07........ 2,020,130
2,200,000 Chase Commercial Mortgage Securities Corp.
Series 1997-1, Class B,
7.37%, 4/19/07................................ 2,322,287
2,500,000 CNL Funding, Series 98-1, LP, Class B-1
6.60%, 4/18/11............................... 2,302,734
2,400,000 Commercial Mortgage Acceptance Corp.,
Series 1997-ML1, Class B, 6.65%, 12/15/07.... 2,410,404
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MORTGAGE-BACKED SECURITIES - continued
Collateralized Mortgage Obligations -
continued
$ 6,114,301 Criimi Mae Financial Corp., Series 1, Class A,
7.00%, 1/1/33................................ $ 6,156,337
4,000,000 Crimi Mae Commercial Mortgage Trust, Series
1998 C1,
Class A, 7.00%, 3/2/11 144A.................. 3,650,000
1,250,000 Federal National Mortgage Association
Series 1993-248, Class SA, 4.61%, 8/25/23..... 1,126,413
5,000,000 Federal National Mortgage Association
Series 1997-M6, Class C, 6.85%, 5/17/20....... 5,162,425
1,250,000 FFCA Secured Lending Corp., Series 1997-1,
Class B1, 7.74%, 6/18/13..................... 1,187,695
5,460,063 Financial Asset Securitization, Series 1997-
NAM 1, Class FXA2, 7.75%, 4/25/27............ 5,624,939
3,745,000 G E Capital Mortgage Services Inc., Series
1994-27, Class A6, 6.50%, 7/25/24............ 3,567,113
7,740,555 Independent National Mortgage Corp., Series
1997-A, Class A,
7.82%, 12/26/26 144A......................... 7,387,392
265,445 KS Mortgage Capital, L. P. Series 1995-1,
Class A1, 7.25%, 4/20/02 144A,............... 265,432
6,452,828 Mellon Residential Funding Corporation, Series
1999-TBC1, Class A3
6.11%, 1/25/29............................... 6,462,911
1,683,319 Mid State Trust, Series 6, Class A3,
7.54%, 7/1/35................................ 1,682,259
2,550,000 Morgan Stanley Capital I Inc., Series 1998-
HF2, Class B 6.30%, 11/15/30................. 2,613,839
3,825,000 Nationslink Funding Corp., Series 1998-2,
Class B
6.65%, 7/20/08............................... 3,900,902
11,419,239 Nomura Depositor Trust, Series 1998-ST1,
Class A1, 5.22%, 2/15/34 144A................ 11,172,983
2,460,111 PNC Mortgage Securities Corp.
Series 1997-4, Class 2PP3, 7.25%, 7/25/27..... 2,502,133
4,672,922 PNC Mortgage Securities Corp.
Series 1997-4, Class 2PP1, 7.50%, 7/25/27..... 4,739,365
85,021 Prudential Home Mortgage Securities Co.,
Series 1990-12, Class A1
7.88%, 10/1/20............................... 84,752
4,131,817 Residential Funding Mortgage Securities I
Inc.,
Series 1999-S2 Class M1
6.50%, 1/25/29............................... 3,986,398
</TABLE>
38
<PAGE>
[LOGO OF EVERGREEN BALANCED FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MORTGAGE-BACKED SECURITIES - continued
Collateralized Mortgage Obligations -
continued
$ 3,407,028 Shearson Lehman CMO Inc., Series V, Class 5
7.50%, 5/1/19................................ $ 3,456,907
--------------
93,740,437
--------------
Total Mortgage-Backed Securities (cost
$143,350,205)................................ 143,331,697
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 2.1%
U.S. Treasury Notes & Bonds - 2.1%
U.S. Treasury Bonds
10,750,000 5.25%, 11/15/28............................... 10,026,095
8,220,000 5.50%, 8/15/28................................ 7,866,787
9,200,000 7.875%, 2/15/21............................... 11,389,324
6,905,000 U.S. Treasury Notes 6.125%, 8/15/07........... 7,228,636
--------------
Total U.S. Government & Agency Obligations
(cost $36,861,900)........................... 36,510,842
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 0.9%
Money Market Shares - 0.5%
$ 9,459,928 Navigator Prime Portfolio(b).................. $ 9,459,928
--------------
Repurchase Agreement - 0.4%
7,144,000 Evergreen Joint Repurchase Agreement.
Investments in repurchase agreements, in a
joint trading account, purchased 3/31/99,
5.00% maturing 4/1/99, maturity value
$7,144,992 (cost $7,144,000)(a).............. 7,144,000
--------------
Total Short Term Investments
(cost $16,603,928)........................... 16,603,928
--------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $1,376,458,715).................. 99.7% 1,706,526,771
Other Assets and
Liabilities - net...................... 0.3 4,486,097
----- --------------
Net Assets.............................. 100.0% $1,711,012,868
===== ==============
</TABLE>
* Non-income producing securities
** At March 31, 1999, the Fund owned a principal amount of $399,734 of Money
Store Auto Trust at a cost of $400,657. During the year ended March 31,
1999, the Fund earned $20,026 in interest income from this investment. This
security was purchased by the Fund prior to the acquisition of The Money
Store by First Union.
+ A portion of these securities are on loan (see Note 8).
(a) The repurchase agreements are fully collateralized by U.S. Government
and/or agency obligations based on market prices plus accrued interest at
March 31, 1999.
(b) Represents investment of cash collateral received for securities on loan.
144A Securities that may be resold to "qualified institutional buyers" under
rule 144A of the Securities Act of 1933. These securities have been deter-
mined to be liquid under the guidelines established by the Board of Trust-
ees.
Summary of Abbreviations:
CMO Collateralized Mortgage Obligations
COLTS Continously Offered Longer Term Securities
REIT Real Estate Investment Trust
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
Unrealized
Exchange U.S. Value at In Exchange Appreciation
Date Contracts to Receive March 31, 1999 for U.S. $ (Depreciation)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4/19/99 81,577,000 Danish Krone $11,871,554 $12,836,462 $964,908
6/15/99 105,017,000 Danish Krone 15,323,511 15,607,092 283,581
6/30/99 6,400,000 Euro 6,955,516 6,920,960 (34,556)
</TABLE>
See Combined Notes to Financial Statements.
39
<PAGE>
[LOGO OF EVERGREEN FOUNDATION FUND APPEARS HERE]
Schedule of Investments
March 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 65.6%
Aerospace & Defense - 0.4%
287,600 Boeing Co. ........................................ $ 9,814,350
35,000 Sundstrand Corp. .................................. 2,432,500
1,000 United Technologies Corp. ......................... 135,438
--------------
12,382,288
--------------
Automotive Equipment & Manufacturing - 1.9%
155,970 Autoliv, Inc. ..................................... 5,858,623
354,066 Daimler Chrysler AG................................ 30,383,289
150,000 General Motors Corp. .............................. 13,031,250
30,000 Genuine Parts Co. ................................. 864,375
208,800 Goodyear Tire & Rubber Co. ........................ 10,400,850
4,000 *Strattec Security Corp. .......................... 112,500
--------------
60,650,887
--------------
Banks - 6.5%
50,000 Bancfirst Corp. ................................... 1,743,750
127,923 Bank One Corp. .................................... 7,043,760
183,539 BankAmerica Corp. ................................. 12,962,442
788,600 BankBoston Corp. .................................. 34,156,237
83,000 Bankers Trust Corp. ............................... 7,324,750
140,062 BSB Bancorp, Inc. ................................. 3,411,823
27,000 CB Bancshares, Inc. ............................... 718,875
164,000 CCBT Bancorp, Inc. ................................ 2,644,500
301,950 Dime Bancorp, Inc. ................................ 7,001,466
16,875 First Security Corp. .............................. 325,898
117,000 First Union Corp.**................................ 6,252,187
91,200 Firstar Corp. ..................................... 8,162,400
126,000 Fleet Financial Group, Inc. ....................... 4,740,750
43,400 Hancock Holding Co. ............................... 1,996,400
70,801 Hibernia Corp. Cl. A............................... 929,263
281,400 KeyCorp ........................................... 8,529,937
3,800 M&T Bank Corp. .................................... 1,820,200
95,000 Mellon Bank Corp. ................................. 6,685,625
40,000 Mercantile Bancorp, Inc. .......................... 1,900,000
50,000 Mississippi Valley Bancshares, Inc. ............... 1,606,250
349,080 National City Corp. ............................... 23,170,185
280,500 Pacific Century Financial Corp. ................... 5,855,438
132,300 Peoples Heritage Financial Group .................. 2,381,400
102,000 Seacoast Banking Corp. of Florida
Cl. A ............................................ 2,728,500
90,000 SouthTrust Corp. .................................. 3,358,125
260,280 SunTrust Banks, Inc. .............................. 16,202,430
65,000 U.S. Trust Corp. .................................. 4,822,188
160,000 Webster Financial Corp. ........................... 4,620,000
175,000 Wells Fargo Co. ................................... 6,135,938
238,300 Wilmington Trust Corp. ............................ 13,612,887
--------------
202,843,604
--------------
Building, Construction &
Furnishings - 1.2%
397,100 Armstrong World Industries, Inc. .................. 17,943,956
80,800 Centex Corp. ...................................... 2,696,700
414,225 D.R. Horton, Inc. ................................. 6,938,269
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Building, Construction &
Furnishings - continued
17,857 Engle Homes, Inc. .................................. $ 187,498
366,122 Lennar Corp. ....................................... 8,191,980
-------------
35,958,403
-------------
Business Equipment &
Services - 0.4%
28,000 Automatic Data Processing, Inc. .................... 1,158,500
82,000 *Computer Sciences Corp. ........................... 4,525,375
120,000 *Convergys Corp. ................................... 2,055,000
45,500 *Crescent Operating, Inc. .......................... 164,938
603 Momentum Business Applications...................... 5,389
40,636 Paychex, Inc. ...................................... 1,927,670
30,000 Pittston Brink's Group.............................. 705,000
20,000 *Policy Management Systems Corp. ................... 612,500
20,000 Xerox Corp. ........................................ 1,067,500
-------------
12,221,872
-------------
Capital Goods - 0.7%
185,000 Caterpillar, Inc. .................................. 8,498,438
321,700 Deere & Co. ........................................ 12,425,662
-------------
20,924,100
-------------
Chemical & Agricultural
Products - 2.4%
80,000 Air Products & Chemicals, Inc. ..................... 2,740,000
595,400 Du Pont (E. I.) De Nemours & Co. ................... 34,570,412
42,000 H.B. Fuller Co. .................................... 2,475,375
260,800 Monsanto Co. ....................................... 11,980,500
120,000 Morton International, Inc. ......................... 4,410,000
55,000 Nalco Chemical Co. ................................. 1,460,938
174,000 Pioneer Hi-Bred International, Inc. ................ 6,546,750
120,800 PPG Industries, Inc. ............................... 6,191,000
40,000 Praxair, Inc. ...................................... 1,442,500
115,000 Schulman (A.), Inc. ................................ 1,566,875
100,560 Solutia, Inc. ...................................... 1,747,230
-------------
75,131,580
-------------
Communication Systems & Services - 1.2%
30,000 *AirTouch Communications, Inc. ..................... 2,898,750
49,800 *Ascend Communications, Inc. ....................... 4,167,637
179,100 *Cisco Systems, Inc. ............................... 19,622,644
70,000 Lucent Technologies, Inc. .......................... 7,542,500
39,900 *MCI WorldCom, Inc. ................................ 3,533,644
6,666 Nielsen Media Research, Inc. ....................... 164,567
-------------
37,929,742
-------------
Consumer Products &
Services - 1.3%
35,000 Black & Decker Corp. ............................... 1,940,313
208,150 Cendant Corp. ...................................... 3,278,362
40,065 *Consolidated Products, Inc. ....................... 703,642
10,000 Harman International Industries, Inc. .............. 367,500
69,300 International Flavors & Fragrances, Inc. ........... 2,603,081
</TABLE>
40
<PAGE>
[LOGO OF EVERGREEN FOUNDATION FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Consumer Products &
Services - continued
130,100 *Nautica Enterprises, Inc. ........................ $ 1,471,756
224,600 Newell Rubbermaid, Inc. ........................... 10,668,500
20,000 Premark International, Inc. ....................... 658,750
100,451 Procter & Gamble Co. .............................. 9,837,920
221,100 Stanley Works...................................... 5,665,687
108,500 Tupperware Corp. .................................. 1,953,000
--------------
39,148,511
--------------
Diversified Companies - 0.2%
167,100 GATX Corp. ........................................ 5,503,856
2,800 Tyco International Ltd. ........................... 200,900
--------------
5,704,756
--------------
Electrical Equipment &
Services - 2.5%
130,000 Applied Power, Inc. Cl. A.......................... 3,542,500
254,300 Emerson Electric Co. .............................. 13,462,006
562,400 General Electric Co. .............................. 62,215,500
--------------
79,220,006
--------------
Electronic Equipment &
Services - 0.6%
226,667 AMP, Inc. ......................................... 12,169,185
162,566 *Analog Devices, Inc. ............................. 4,836,338
2,000 Texas Instruments, Inc. ........................... 198,500
--------------
17,204,023
--------------
Finance & Insurance - 11.5%
100,000 AFLAC, Inc. ....................................... 5,443,750
294,000 Allstate Corp. .................................... 10,896,375
110,600 AMBAC Financial Group, Inc. ....................... 5,972,400
15,000 American Bankers Insurance Group, Inc. ............ 780,000
263,000 American Express Co. .............................. 30,902,500
294,090 American International Group, Inc. ................ 35,474,606
61,800 Chubb Corp. ....................................... 3,619,163
301,750 Citigroup, Inc. ................................... 19,274,281
158,350 Countrywide Credit Industries, Inc. ............... 5,938,125
40,000 FBL Financial Group, Inc. Cl. A.................... 710,000
84,000 Federal Home Loan Mortgage Corp. .................. 4,798,500
718,000 Federal National Mortgage Assoc. .................. 49,721,500
126,500 Frontier Insurance Group, Inc. .................... 1,502,188
497,055 Household International, Inc. ..................... 22,678,134
32,700 Interstate/Johnson Lane, Inc. ..................... 1,023,919
50,900 J.P. Morgan & Co., Inc. ........................... 6,279,788
155,200 John Nuveen Co. Cl. A.............................. 6,499,000
177,600 Lehman Brothers Holdings, Inc. .................... 10,611,600
93,000 Lincoln National Corp. ............................ 9,195,375
419,100 Marsh & McLennan Co., Inc. ........................ 31,091,981
85,000 MBIA, Inc. ........................................ 4,930,000
402,400 Merrill Lynch & Co., Inc. ......................... 35,587,250
343,800 MGIC Investment Corp. ............................. 12,054,487
155,000 NAC RE Corp. ...................................... 8,321,562
110,000 Nationwide Financial Services, Inc. Cl. A.......... 4,620,000
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Finance & Insurance - continued
15,000 Ohio Casualty Corp. ................................ $ 585,000
201,100 Paine Webber Group, Inc. ........................... 8,018,862
39,200 Progressive Corp. Ohio.............................. 5,625,200
312,975 Raymond James Financial, Inc. ...................... 6,181,256
20,250 Reinsurance Group Of America........................ 685,969
3,500 SLM Holding Corp. .................................. 146,125
20,000 Torchmark Corp. .................................... 632,500
147,000 UNUM Corp. ......................................... 6,991,688
40,860 Xl Capital Ltd. .................................... 2,482,245
-------------
359,275,329
-------------
Food & Beverage Products - 0.5%
100,000 American Stores Co. ................................ 3,300,000
240,000 Bestfoods........................................... 11,280,000
30,000 *Corn Products International, Inc. ................. 718,125
23,027 Hershey Foods Corp. ................................ 1,289,512
3,000 *Tricon Global Restaurants, Inc. ................... 210,750
-------------
16,798,387
-------------
Forest Products - 0.1%
800 Union Camp Corp. ................................... 53,700
90,000 Willamette Industries, Inc. ........................ 3,397,500
-------------
3,451,200
-------------
Healthcare Products &
Services - 7.3%
431,400 Abbott Laboratories................................. 20,194,912
427,600 American Home Products Corp. ....................... 27,900,900
70,000 Baxter International, Inc. ......................... 4,620,000
87,600 Beckman Coulter, Inc. .............................. 3,854,400
202,400 Bristol-Myers Squibb Co. ........................... 13,016,850
100,000 Columbia/HCA Healthcare Corp. ...................... 1,893,750
23,000 *Covance, Inc. ..................................... 576,438
152,000 *First Health Group Corp. .......................... 2,441,500
29,400 Glaxo Wellcome Plc, ADR............................. 1,967,963
137,100 Guidant Corp. ...................................... 8,294,550
88,500 *Health Management Associates, Inc. Cl. A........... 1,078,594
40,000 IMS Health, Inc. ................................... 1,325,000
111,500 Johnson & Johnson................................... 10,446,156
312,524 Lilly (Eli) & Co. .................................. 26,525,474
130,000 *Lincare Holdings, Inc. ............................ 3,656,250
81,666 *Maxxim Medical, Inc. .............................. 1,541,446
183,680 McKesson HBOC, Inc. ................................ 12,122,880
96,600 Medtronic, Inc. .................................... 6,931,050
335,516 Merck & Co., Inc. .................................. 26,904,189
162,000 Perkin Elmer Corp. ................................. 15,724,125
89,500 Pfizer, Inc. ....................................... 12,418,125
314,000 Schering-Plough Corp. .............................. 17,368,125
9,200 Shared Medical System Corp. ........................ 512,325
34,900 Superior Uniform Group, Inc. ....................... 436,250
81,400 Warner-Lambert Co. ................................. 5,387,662
-------------
227,138,914
-------------
</TABLE>
41
<PAGE>
[LOGO OF EVERGREEN FOUNDATION FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Industrial Specialty Products & Services - 1.0%
100,000 Corning, Inc. ..................................... $ 6,000,000
58,800 *Halter Marine Group, Inc. ........................ 341,775
127,000 Honeywell, Inc. ................................... 9,628,188
190,000 Snap-on, Inc. ..................................... 5,510,000
378,000 Timken Co. ........................................ 6,142,500
50,000 Trinity Industries, Inc. .......................... 1,468,750
38,000 *Unova, Inc. ...................................... 501,125
--------------
29,592,338
--------------
Information Services & Technology - 9.0%
38,000 *BMC Software, Inc. ............................... 1,408,375
154,133 Compaq Computer Corp. ............................. 4,884,089
37,500 Computer Associates International, Inc. ........... 1,333,594
60,000 *Dell Computer Corp. .............................. 2,452,500
40,000 *EMC Corp. ........................................ 5,110,000
514,800 Hewlett-Packard Co. ............................... 34,909,875
809,600 Intel Corp. ....................................... 96,241,200
230,000 International Business Machines Corp. ............. 40,767,500
740,000 *Microsoft Corp. .................................. 66,322,500
224,000 *Sun Microsystems, Inc. ........................... 28,014,000
--------------
281,443,633
--------------
Leisure & Tourism - 0.3%
292,750 Starwood Hotels & Resorts.......................... 8,361,672
--------------
Oil/Energy - 2.0%
100,000 Atlantic Richfield Co. ............................ 7,300,000
105,054 BP Amoco Plc....................................... 10,603,888
153,000 Chevron Corp. ..................................... 13,530,938
66,000 Consolidated Natural Gas Co. ...................... 3,213,375
289,000 Equitable Resources, Inc. ......................... 7,532,063
86,400 Exxon Corp. ....................................... 6,096,600
71,800 Mobil Corp. ....................................... 6,318,400
86,206 *Seitel, Inc. ..................................... 1,201,496
1,200 Sonat, Inc. ....................................... 36,000
120,000 Texaco, Inc. ...................................... 6,810,000
33,877 Union Pacific Resource Group, Inc. ................ 402,289
--------------
63,045,049
--------------
Oil Field Services - 0.5%
83,430 Baker Hughes, Inc. ................................ 2,028,392
23,600 Halliburton Co. ................................... 908,600
187,800 Schlumberger Ltd. ................................. 11,303,212
--------------
14,240,204
--------------
Paper & Packaging - 0.2%
60,000 Kimberly-Clark Corp. .............................. 2,876,250
37,520 *Sealed Air Corp. ................................. 1,845,515
--------------
4,721,765
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Printing, Publishing, Broadcasting &
Entertainment - 1.0%
80,000 Belo (A.H.) Corp. Ser. A.......................... $ 1,460,000
128,620 *CBS Corp. ....................................... 5,265,381
20,000 *Cox Communications, Inc. Cl. A................... 1,512,500
107,479 Disney (Walt) Co. ................................ 3,345,284
40,000 New York Times Co. ............................... 1,140,000
243,800 Time Warner, Inc. ................................ 17,325,038
3,000 Washington Post Co., Cl. B........................ 1,564,500
--------------
31,612,703
--------------
Real Estate - 3.7%
38,000 *Alexander's, Inc. REIT........................... 2,574,500
111,992 Archstone Communities Trust....................... 2,253,839
24,100 Arden Realty Group, Inc. REIT..................... 536,225
50,000 Avalonbay Communities, Inc. REIT.................. 1,581,250
73,100 Berkshire Realty Co., Inc. REIT................... 817,806
150,000 Boston Properties, Inc. REIT...................... 4,743,750
50,009 Bradley Real Estate, Inc. REIT.................... 906,413
140,000 Brandywine Realty Trust REIT...................... 2,275,000
28,917 Camden Property Trust REIT........................ 715,696
800,000 Canadian Hotel Properties REIT.................... 4,239,815
260,400 Capstead Mortgage Corp. REIT...................... 1,399,650
171,900 CarrAmerica Realty Corp. REIT..................... 3,792,544
130,000 Chelsea GCA Realty, Inc. REIT..................... 3,623,750
376,700 Crescent Real Estate Equities, Inc. REIT.......... 8,099,050
305,300 Crown American Realty Trust REIT.................. 1,984,450
200,000 Entertainment Properties Trust REIT............... 3,450,000
42,500 Equity Residential Properties Trust REIT.......... 1,753,125
105,200 Essex Property Trust, Inc. REIT................... 2,748,350
115,000 FelCor Lodging Trust Inc. REIT.................... 2,666,562
10,700 Gables Residential Trust REIT..................... 236,069
174,000 Glimcher Realty Trust REIT........................ 2,501,250
28,000 Highwoods Properties, Inc. REIT................... 659,750
72,419 *Homestead Village Properties, Inc................ 176,521
16,068 *Horizon Group Properties, Inc. REIT.............. 70,298
50,300 Indymac Mortgage Holdings, Inc. REIT.............. 547,013
140,000 Innkeepers USA Trust REIT......................... 1,303,750
111,500 Kilroy Realty Corp. REIT.......................... 2,285,750
132,000 Kranzco Realty Trust REIT......................... 1,559,250
45,000 Liberty Property Trust REIT....................... 933,750
175,000 Mack-Cali Realty Corp. REIT....................... 5,140,625
235,000 Marriott International, Inc. Cl. A................ 7,901,875
370,000 Meditrust Co. REIT................................ 4,601,875
180,086 Patriot American Hospitality, Inc. REIT........... 922,941
200,000 Philips International Realty Corp. REIT........... 2,837,500
278,713 Post Property, Inc. REIT.......................... 10,033,668
</TABLE>
42
<PAGE>
[LOGO OF EVERGREEN FOUNDATION FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Real Estate - continued
166,500 Prentiss Properties Trust REIT..................... $ 3,101,062
220,686 Prime Retail, Inc. REIT............................ 1,931,002
76,817 Prologis Trust REIT................................ 1,574,748
90,000 Public Storage, Inc. .............................. 2,250,000
31,250 *Sodexho Marriott Services, Inc. .................. 689,453
100,000 Sovran Self Storage, Inc. REIT..................... 2,331,250
70,000 Spieker Properties, Inc. REIT...................... 2,467,500
14,000 Storage USA, Inc. REIT............................. 397,250
223,200 Sunstone Hotel Investors, Inc. REIT................ 1,604,250
32,300 Tanger Factory Outlet Centers, Inc. REIT........... 617,738
135,000 Trizec Hahn Corp. ................................. 2,480,625
3,785 *Vornado Operating Co. ............................ 22,710
75,705 Vornado Realty Trust REIT.......................... 2,611,822
30,000 Western Investment Real Estate Trust REIT.......... 311,250
--------------
114,264,320
--------------
Retailing & Wholesale - 1.8%
130,000 *Autozone, Inc. ................................... 3,948,750
256,511 Avnet, Inc. ....................................... 9,394,715
45,000 *Costco Companies, Inc. ........................... 4,120,312
46,400 Dayton Hudson Corp. ............................... 3,091,400
54,833 Dollar General Corp. .............................. 1,864,322
77,186 Family Dollar Stores, Inc. ........................ 1,775,278
31,500 Gap, Inc. ......................................... 2,120,344
140,000 Home Depot, Inc. .................................. 8,715,000
139,700 J. C. Penney Co., Inc. ............................ 5,657,850
216,000 Lowe's Companies, Inc.............................. 13,068,000
89,900 W.W. Grainger, Inc. ............................... 3,871,319
--------------
57,627,290
--------------
Telecommunication Services & Equipment - 0.3%
55,000 *ICG Communications, Inc. ......................... 1,100,000
36,000 *Intermedia Communications, Inc. .................. 958,500
60,000 *Qwest Communications International, Inc. ......... 4,325,625
106,000 *Telephone Save Holdings, Inc. .................... 1,106,375
33,165 *Univision Communications, Inc. Cl. A.............. 1,658,250
--------------
9,148,750
--------------
Thrift Institutions - 0.5%
165,800 Golden West Financial Corp. ....................... 15,833,900
--------------
Transportation - 1.4%
92,200 AMR Corp. ......................................... 5,399,462
75,000 Burlington Northern Santa Fe Corp. ................ 2,465,625
113,410 Southwest Airlines Co. ............................ 3,430,653
52,000 *UAL Corp. ........................................ 4,043,000
524,000 Union Pacific Corp. ............................... 28,001,250
35,000 *US Airways Group, Inc. ........................... 1,708,438
--------------
45,048,428
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Electric - 1.1%
439,500 Central Hudson Gas & Electric Corp. .............. $ 15,739,594
104,300 Eastern Utilities Associates...................... 2,952,994
138,400 Energy East Corp. ................................ 7,274,650
33,300 Orange & Rockland Utilities, Inc. ................ 1,912,669
200,000 PacifiCorp ....................................... 3,450,000
40,000 PP&L Resources, Inc. ............................. 990,000
49,500 Public Service Enterprise Group, Inc. ............ 1,890,281
26,800 TNP Enterprises, Inc. ............................ 770,500
--------------
34,980,688
--------------
Utilities - Gas - 0.2%
276,636 Keyspan Energy.................................... 6,950,480
--------------
Utilities - Telephone - 3.9%
72,766 ALLTEL Corp. ..................................... 4,538,779
20,000 AT&T Corp. ....................................... 1,596,250
348,080 Bell Atlantic Corp. .............................. 17,991,385
135,000 Cincinnati Bell, Inc. ............................ 3,029,063
65,500 Compania de Telecom de Chile SA, ADR.............. 1,543,344
612,300 Frontier Corp. ................................... 31,763,062
311,400 GTE Corp. ........................................ 18,839,700
34,000 *McLeod USA, Inc., Cl. A.......................... 1,428,000
351,000 Sprint Corp. ..................................... 34,441,875
175,500 *Sprint Corp. (PCS Group)......................... 7,776,844
--------------
122,948,302
--------------
Total Common Stocks (cost $1,295,899,169)......... 2,045,803,124
--------------
CONVERTIBLE PREFERRED - 0.6%
Consumer Products &
Services - 0.1%
70,000 Cendant Corp.
7.50%............................................ 2,016,875
--------------
Metal Products & Services - 0.1%
100,000 Timet Capital Trust I 6.625%, BUCS, 144A.......... 1,937,500
--------------
Paper & Packaging - 0.0%
33,250 *Sealed Air Corp.
$2.00, Ser A..................................... 1,645,875
--------------
Real Estate - 0.1%
95,000 First Union Real Estate Equity 8.40%, Ser. A...... 1,983,125
76,863 Prime Retail, Inc., Series B
8.50%............................................ 1,229,808
--------------
3,212,933
--------------
Retailing & Wholesale - 0.2%
160,000 Merrill Lynch & Co., Inc. (exchangeable for Dollar
General Corp. common stock) 8.50% ............... 6,750,000
--------------
</TABLE>
43
<PAGE>
[LOGO OF EVERGREEN FOUNDATION FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - continued
Telecommunication Services & Equipment - 0.1%
40,000 Qualcomm Financial Trust I
5.75%............................................ $ 3,611,200
--------------
Total Convertible Preferred (cost $22,244,306).... 19,174,383
--------------
<CAPTION>
Principal
Amount
<C> <S> <C>
CONVERTIBLE DEBENTURES - 0.2%
Business Equipment &
Services - 0.0%
$ 800,000 Personnel Group Of America, Inc. 5.75%, 7/1/04.... 595,000
--------------
Environmental Services - 0.0%
100,000 Waste Management, Inc. 4.00%, 2/1/02.............. 117,875
--------------
Industrial Specialty Products & Services - 0.1%
2,100,000 Robbins & Myers, Inc. 6.50%, 9/1/03............... 1,890,000
750,000 Simula, Inc.
8.00%, 5/1/04.................................... 770,625
--------------
2,660,625
--------------
Retailing & Wholesale - 0.1%
500,000 Home Depot, Inc.
3.25%, 10/1/01................................... 1,388,750
--------------
Total Convertible Debentures (cost $4,280,000).... 4,762,250
--------------
CORPORATE BONDS - 0.0%
Chemical & Agricultural
Products - 0.0%
210,000 Arco Chemical Co.
10.25%, 11/1/10.................................. 224,947
--------------
Finance & Insurance - 0.0%
500,000 Chrysler Financial Corp.
6.95%, 3/25/02................................... 517,040
--------------
Total Corporate Bonds
(cost $765,299).................................. 741,987
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 28.3%
U.S. Treasury Notes & Bonds - 27.6%
U.S. Treasury Bonds
208,000,000 6.00%, 2/15/26.................................... 211,705,104
190,000,000 6.25%, 8/15/23.................................... 198,965,720
36,340,000 6.75%, 8/15/26.................................... 40,575,899
125,000,000 7.125%, 2/15/23................................... 144,375,000
49,500,000 7.25%, 5/15/16.................................... 56,816,744
23,000,000 7.25%, 8/15/22.................................... 26,852,500
7,000,000 7.625%, 11/15/22.................................. 8,518,125
10,000,000 8.00%, 11/15/21................................... 12,578,130
50,000,000 8.125%, 8/15/19................................... 62,968,750
25,000,000 8.125%, 5/15/21................................... 31,765,625
30,000,000 8.375%, 8/15/08................................... 33,431,250
10,000,000 8.50%, 2/15/20.................................... 13,084,380
665,000 8.75%, 5/15/17.................................... 875,514
1,000,000 10.625%, 8/15/15.................................. 1,500,625
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - continued
U.S. Treasury Notes & Bonds - continued
U.S. Treasury Notes
$ 2,000,000 5.875%, 11/15/99................................ $ 2,013,126
350,000 5.875%, 2/15/00................................. 352,953
2,000,000 6.00%, 6/30/99.................................. 2,006,250
1,500,000 6.00%, 8/15/99.................................. 1,507,500
500,000 6.00%, 10/15/99................................. 503,437
1,000,000 6.125%, 9/30/00................................. 1,015,938
500,000 6.375%, 1/15/00................................. 505,782
900,000 6.50%, 5/31/01.................................. 926,437
1,130,000 6.50%, 8/15/05.................................. 1,199,919
1,000,000 6.625%, 3/31/02................................. 1,040,625
500,000 6.875%, 5/15/06................................. 542,813
3,235,000 7.50%, 11/15/01................................. 3,422,025
600,000 7.50%, 2/15/05.................................. 665,438
700,000 7.75%, 11/30/99................................. 713,562
--------------
860,429,171
--------------
U.S. Government Agency Obligations - 0.7%
500,000 Federal Home Loan Mortgage Corp.
6.44%, 1/28/00................................. 505,273
Federal National Mortgage Association
500,000 5.94%, 12/12/05................................. 503,749
1,250,000 6.21%, 8/6/38................................... 1,227,549
Tennessee Valley Authority
8,000,000 7.25%, 7/15/43.................................. 8,212,928
10,000,000 7.85%, 6/15/44, Ser. A.......................... 10,409,520
--------------
20,859,019
--------------
Total U.S. Government & Agency Obligations
(cost $842,635,275)............................ 881,288,190
--------------
SHORT-TERM INVESTMENTS - 5.0%
Commercial Paper - 3.4%
6,750,000 Bank Austria Inc.
4.82%, 4/29/99................................. 6,724,695
34,250,000 Four Winds Funding Corp.
4.86%, 4/28/99................................. 34,125,159
8,000,000 Goldman Sachs Group
4.86%, 4/5/99.................................. 7,995,680
19,000,000 Procter & Gamble Co.
4.81%, 4/1/99.................................. 19,000,000
Sigma Finance Inc.
4,400,000 4.86%, 4/22/99.................................. 4,387,526
18,500,000 4.86%, 4/30/99.................................. 18,427,572
15,200,000 4.87%, 4/30/99.................................. 15,140,370
--------------
105,801,002
--------------
U.S. Government Agency Obligations - 1.6%
Federal Home Loan Bank Discount Notes
1,600,000 4.72%, 4/16/99.................................. 1,596,853
17,360,000 4.73%, 4/21/99.................................. 17,314,382
900,000 4.74%, 4/9/99................................... 899,051
2,500,000 4.74%, 4/14/99.................................. 2,495,721
</TABLE>
44
<PAGE>
[LOGO OF EVERGREEN FOUNDATION FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - continued
U.S. Government Agency Obligations - continued
$24,900,000 Federal Home Loan Mortgage Discount Notes
4.75%, 4/14/99.................................. $ 24,857,290
2,300,000 Federal National Mortgage Association Discount
Notes 4.76%, 4/6/99............................. 2,298,479
--------------
49,461,776
--------------
Total Short-Term Investments
(cost $155,262,778)............................. 155,262,778
--------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $2,321,086,827)..................... 99.7% 3,107,032,712
Other Assets and
Liabilities - net......................... 0.3 10,025,528
----- --------------
Net Assets................................. 100.0% $3,117,058,240
===== ==============
</TABLE>
* Non-income producing securities
** At March 31, 1999, the Fund owned 117,000 shares of common stock of
First Union Corp. at a cost of $2,358,440. During the year ended March
31, 1999, the Fund earned $196,560 in dividend income from this in-
vestment. These shares were purchased by the Fund prior to the acqui-
sition 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 the guidelines established by the
Board of Trustees.
Summary of Abbreviations:
ADR American Depository Receipts
BUCS Beneficial Unsecured Convertible Securities
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
45
<PAGE>
[LOGO OF EVERGREEN TAX STRATEGIC FOUNDATION FUND APPEARS HERE]
Schedule of Investments
March 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 45.9%
Automotive Equipment & Manufacturing - 0.8%
39,151 Autoliv, Inc......................................... $ 1,470,609
18,705 Daimler Chrysler AG.................................. 1,605,123
------------
3,075,732
------------
Banks - 7.8%
39,200 BancorpSouth, Inc. .................................. 627,200
26,875 BankAmerica Corp. ................................... 1,898,047
39,000 BankBoston Corp. .................................... 1,689,187
50,000 CCBT Bancorp, Inc. .................................. 806,250
35,000 Chase Manhattan Corp. ............................... 2,845,937
30,000 *Civic Bancorp....................................... 375,000
7,500 Comerica, Inc. ...................................... 468,281
3,000 First Union Corp. **................................. 160,313
11,500 Fleet Financial Group, Inc. ......................... 432,688
62,000 Huntington Bancshares, Inc. ......................... 1,918,125
17,325 Interchange Financial Services Corp. ................ 268,538
41,000 KeyCorp.............................................. 1,242,813
4,000 M&T Bank Corp. ...................................... 1,916,000
19,800 National City Corp. ................................. 1,314,225
10,000 Northern Trust Corp. ................................ 888,125
15,750 One Valley Bancorp of West Virginia, Inc. ........... 549,281
45,000 Republic New York Corp. ............................. 2,075,625
15,000 Seacoast Banking Corp. of Florida Cl. A.............. 401,250
77,255 SouthTrust Corp. .................................... 2,882,577
58,880 Suntrust Banks, Inc. ................................ 3,665,280
65,000 Westamerica Bancorp.................................. 2,055,625
40,000 Wilmington Trust Corp. .............................. 2,285,000
------------
30,765,367
------------
Building, Construction & Furnishings - 2.6%
46,000 Carlisle Companies, Inc.............................. 2,150,500
68,750 Clayton Homes, Inc................................... 760,547
75,650 D.R. Horton, Inc. ................................... 1,267,138
47,100 La-Z-Boy Chair Co. .................................. 894,900
65,900 *Royal Group Technologies Ltd. ...................... 1,626,906
50,000 Ryland Group, Inc. .................................. 1,265,625
39,100 Shelby Williams Industries, Inc. .................... 373,894
40,000 Standard Pacific Corp. .............................. 515,000
83,500 *Toll Brothers, Inc. ................................ 1,513,437
------------
10,367,947
------------
Business Equipment &
Services - 0.7%
40,000 *Computer Sciences Corp. ............................ 2,207,500
15,000 *Convergys Corp. .................................... 256,875
17,500 *Crescent Operating, Inc. ........................... 63,437
------------
2,527,812
------------
Capital Goods - 0.5%
44,600 Caterpillar, Inc..................................... 2,048,812
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Chemicals & Agricultural Products - 1.2%
20,000 Du Pont (E. I.) De Nemours & Co...................... $ 1,161,250
35,000 Monsanto Co. ........................................ 1,607,812
20,000 Schulman (A.), Inc. ................................. 272,500
56,100 Sigma-Aldrich Corp. ................................. 1,640,925
------------
4,682,487
------------
Communication Systems & Services - 0.3%
38,000 *Orbital Sciences Corp. ............................. 1,075,875
------------
Consumer Products & Services - 1.3%
10,000 Adidas AG ADS, 144A.................................. 446,139
12,000 Gucci Group.......................................... 966,000
60,340 Newell Rubbermaid, Inc............................... 2,866,150
34,500 St. John Knits, Inc. ................................ 909,937
------------
5,188,226
------------
Electrical Equipment & Services - 0.5%
6,600 Applied Power, Inc., Cl. A........................... 179,850
15,000 Emerson Electric Co. ................................ 794,063
4,000 General Electric Co. ................................ 442,500
18,500 Thomas & Betts Corp. ................................ 694,906
------------
2,111,319
------------
Electronic Equipment & Services - 0.8%
57,566 AMP, Inc. ........................................... 3,090,575
------------
Finance & Insurance - 10.7%
4,400 AFLAC, Inc. ......................................... 239,525
45,700 American Bankers Insurance Group, Inc. .............. 2,376,400
17,000 American International Group, Inc. .................. 2,050,625
15,000 *Capital Trust Maryland.............................. 73,125
70,250 Citigroup, Inc....................................... 4,487,219
20,000 Countrywide Credit Industries, Inc................... 750,000
6,000 Enhance Financial Services Group, Inc................ 136,500
20,000 FBL Financial Group, Inc., Cl. A..................... 355,000
21,000 Federal National Mortgage Assoc. .................... 1,454,250
20,000 *FPIC Insurance Group, Inc. ......................... 830,000
52,000 Horace Mann Educators Corp. ......................... 1,205,750
105,866 Legg Mason, Inc. .................................... 3,566,361
68,000 Lehman Brothers Holdings, Inc. ...................... 4,063,000
13,500 Lincoln National Corp. .............................. 1,334,812
68,500 Merrill Lynch & Co., Inc. ........................... 6,057,968
72,700 MGIC Investment Corp. ............................... 2,549,044
35,000 Mony Group, Inc. .................................... 870,625
118,700 Morgan Keegan, Inc. ................................. 1,965,969
30,500 NAC RE Corp. ........................................ 1,637,469
28,000 Nationwide Financial Services, Inc. Cl. A............ 1,176,000
103,800 Paine Webber Group, Inc.............................. 4,139,025
6,500 Progressive Corp. Ohio............................... 932,750
------------
42,251,417
------------
</TABLE>
46
<PAGE>
[LOGO OF EVERGREEN TAX STRATEGIC FOUNDATION FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Food & Beverage
Products - 0.2%
40,000 Coca-Cola Co. Femsa SA, ADR........................ $ 652,500
-------------
Healthcare Products & Services - 4.3%
39,000 Abbott Laboratories................................ 1,825,687
39,000 *Alza Corp. ....................................... 1,491,750
40,000 American Home Products Corp........................ 2,610,000
70,700 Beckman Coulter, Inc............................... 3,110,800
18,000 Medtronic, Inc. ................................... 1,291,500
10,000 Merck & Co., Inc. ................................. 801,875
54,700 Perkin Elmer Corp.................................. 5,309,319
10,000 Warner-Lambert Co. ................................ 661,875
-------------
17,102,806
-------------
Industrial Specialty Products & Services - 0.3%
24,000 Furon Co. ......................................... 303,000
25,000 *Meade Instruments Corp. .......................... 265,625
17,700 Park Electrochemical Corp. ........................ 415,950
-------------
984,575
-------------
Information Services & Technology - 3.4%
14,000 Hewlett-Packard Co. ............................... 949,375
34,000 Intel Corp. ....................................... 4,041,750
25,000 International Business Machines Corp. ............. 4,431,250
4,000 *Network Associates, Inc. ......................... 122,750
89,000 *SCI Systems, Inc.................................. 2,636,625
10,000 *Sun Microsystems, Inc............................. 1,250,625
-------------
13,432,375
-------------
Leisure & Travel - 0.3%
45,000 Starwood Hotels & Resorts.......................... 1,285,313
-------------
Oil/Energy - 0.5%
15,000 Atlantic Richfield Co.............................. 1,095,000
6,616 BP Amoco Plc....................................... 667,803
-------------
1,762,803
-------------
Oil Field Services - 0.6%
43,000 Diamond Offshore Drilling, Inc..................... 1,359,875
15,000 Schlumberger Ltd................................... 902,812
-------------
2,262,687
-------------
Printing, Publishing, Broadcasting &
Entertainment - 0.1%
46,900 Bowne & Co., Inc................................... 548,144
-------------
Real Estate - 2.2%
19,300 *Alexander's, Inc. REIT............................ 1,307,575
3,485 Archstone Communities Trust........................ 70,136
39,000 Boston Properties, Inc. REIT....................... 1,233,375
20,000 Brandywine Realty Trust REIT....................... 325,000
60,000 Del Webb Corp...................................... 1,301,250
45,831 *Homestead Village Properties, Inc................. 111,713
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Real Estate - continued
1,480 Horizon Group Properties, Inc. REIT................. $ 6,475
80,000 Indymac Mortgage Holdings, Inc. REIT................ 870,000
66,500 Kilroy Realty Corp. REIT............................ 1,363,250
30,000 Newhall Land & Farming Co........................... 716,250
75,554 Patriot American Hospitality, Inc. REIT............. 387,214
9,900 Prentiss Properties Trust REIT...................... 184,388
33 Prime Retail, Inc................................... 289
115,000 Sunstone Hotel Investors, Inc. REIT................. 826,562
-------------
8,703,477
-------------
Retailing & Wholesale - 2.6%
8,000 Avnet, Inc. ........................................ 293,000
10,000 *Barnes & Noble, Inc. .............................. 321,250
74,700 Ethan Allen Interiors, Inc. ........................ 3,104,719
32,000 Lowe's Companies, Inc. ............................. 1,936,000
83,000 *Saks, Inc. ........................................ 2,158,000
130,000 *Sonic Automotive, Inc. ............................ 2,015,000
20,000 *Williams Sonoma, Inc. ............................. 565,000
-------------
10,392,969
-------------
Thrift Institutions - 0.6%
18,000 Bank United Corp. .................................. 735,750
15,000 BankUnited Financial Corp. ......................... 106,875
30,000 Mech Financial, Inc. ............................... 948,750
29,298 St. Paul Bancorp, Inc. ............................. 634,485
-------------
2,425,860
-------------
Transportation - 1.2%
13,000 *Airnet Systems, Inc. .............................. 91,000
42,850 *Midwest Express Holdings, Inc. .................... 1,258,719
65,000 Union Pacific Corp. ................................ 3,473,437
-------------
4,823,156
-------------
Utilities - Gas - 0.7%
70,000 Williams Companies, Inc............................. 2,765,000
-------------
Utilities - Telephone - 1.7%
15,000 Cincinnati Bell, Inc................................ 336,563
81,000 Frontier Corp. ..................................... 4,201,875
18,000 Sprint Corp. ....................................... 1,766,250
9,000 *Sprint Corp. (PCS Group)........................... 398,812
-------------
6,703,500
-------------
Total Common Stocks
(cost $152,049,647)................................ 181,030,734
-------------
CONVERTIBLE PREFERRED STOCKS - 0.0%
Real Estate - 0.0%
7,080 Prime Retail, Inc. Series B
8.50%
(cost $181,427).................................... 113,280
-------------
</TABLE>
47
<PAGE>
[LOGO OF EVERGREEN TAX STRATEGIC FOUNDATION FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - 0.0%
Business Equipment &
Services - 0.0%
$ 150,000 Personnel Group Of America, Inc. 5.75%, 7/1/04 144A
(cost $150,000)................................... $ 111,563
-------------
LONG TERM MUNICIPAL OBLIGATIONS - 53.6%
Alabama - 3.8%
3,000,000 Alabama Wtr. Poll. Ctrl. Auth.
5.50%, 8/15/16.................................... 3,117,600
4,000,000 Jefferson Cnty. Swr. Rev. Wts
Series D
5.75%, 2/1/22 (FGIC).............................. 4,270,800
5,000,000 Jefferson Cnty. Swr. Rev.
5.38%, 2/1/36..................................... 5,088,000
2,500,000 Montgomery Special Care Facilities 5.00%,
11/15/29.......................................... 2,401,475
-------------
14,877,875
-------------
Alaska - 0.7%
800,000 Alaska Hsg. Fin. Corp. Mtge. RB,
1996 Ser. A
6.05%, 12/1/17 (MBIA)............................. 850,216
2,000,000 Alaska Hsg. Fin. Corp. RB
Mtge. Ser. A-1
5.30%, 12/1/12 (MBIA)............................. 2,057,320
-------------
2,907,536
-------------
Arizona - 0.1%
500,000 City of Tucson GO RB, Ser. 1995 5.70%, 7/1/08
(FGIC)............................................ 541,520
-------------
California - 3.2%
2,500,000 California Hlth. Facs. Fin.
5.13%, 8/15/22.................................... 2,508,825
1,000,000 California Hsg. Fin. Agcy. RB
5.30%, 8/1/28..................................... 1,008,410
700,000 California Hsg. Fin. Agcy. RB Ser. I 5.75%, 2/1/29
(MBIA)............................................ 729,855
500,000 California Hsg. Fin. Agcy. RB Home Mtge. Ser. L
5.35%, 8/1/17..................................... 514,045
1,000,000 California St. Pub. Wks. Bd.
5.25%, 12/1/13.................................... 1,051,040
1,000,000 San Francisco Bay Trans. Tax
5.25%, 7/1/18..................................... 1,029,040
2,000,000 San Francisco City & Cnty. Int'l. Aprt. RB Ser.
Issue 10-A,
5.70%, 5/1/26 (AMT) (MBIA)........................ 2,123,600
3,150,000 San Francisco Int'l. Arpt. RB 5.25%, 5/1/13........ 3,278,867
500,000 Simi Valley Unified Sch. Dist. Refunding Capital
Improvement Proj. COP
5.25%, 8/1/22..................................... 519,175
-------------
12,762,857
-------------
Colorado - 0.6%
1,000,000 Denver City & Cnty. Arpt. RB Ser. D 5.50%, 11/15/25
(MBIA)............................................ 1,036,210
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
LONG TERM MUNICIPAL OBLIGATIONS - continued
Colorado - continued
$1,500,000 Jefferson Cnty. Sch. Dst.
R001 (FGIC)
5.00%, 12/15/17.................................... $ 1,498,080
------------
2,534,290
------------
Delaware - 0.3%
1,000,000 Delaware Econ. Dev. Auth. RB (The Osteopathic Hosp.
Assoc. of Delaware/Riverside Hosp.), Ser. A 6.50%,
1/1/08............................................. 1,120,210
------------
District Of Columbia - 1.9%
1,900,000 District Columbia Rev. Carnegie Endowment
5.75%, 11/15/26.................................... 1,974,176
5,500,000 District of Columbia Arpt. Auth. RB
Ser. B
5.50%, 10/1/23 (AMT)............................... 5,601,035
------------
7,575,211
------------
Florida - 2.8%
1,250,000 Florida Hsg. Fin. Corp. RB.
5.35%, 1/1/21...................................... 1,261,613
2,000,000 Florida St. Brd. of Ed. Cap. Outlay 5.50%, 6/1/15... 2,091,300
2,500,000 Gainesville Util. Sys. Rev.
5.50%, 10/1/13..................................... 2,655,450
2,500,000 Sunrise Florida Util. Sys. RB
5.00%, 10/1/28..................................... 2,484,725
2,500,000 Volusia Cnty. Sales Tax
5.00%, 10/1/16..................................... 2,518,300
------------
11,011,388
------------
Illinois - 4.1%
5,315,000 Chicago Skyway Toll Bridge
5.50%, 1/1/23...................................... 5,501,078
2,965,000 Chicago Board of Education Chicago School Reform
Series A
5.25%, 12/1/18 (AMBAC)............................. 3,008,348
1,000,000 Chicago Board of Ed. GO (School Reform Proj.)
6.75%, 12/1/09 (AMBAC)............................. 1,188,870
1,600,000 Cook Cnty., GO
5.63%, 11/15/22.................................... 1,675,120
2,300,000 Illinois Dev. Fin. Auth.
5.00%, 1/1/17...................................... 2,305,198
3,855,000 Illinois Dev. Fin. Auth. Rev.
0.00%, 12/1/13..................................... 1,865,666
450,000 Illinois Sales Tax RB Ser. V
6.38%, 6/15/17..................................... 507,524
------------
16,051,804
------------
Indiana - 1.3%
2,000,000 Indiana Hsg. Fin. Single Family Mtge. RB Ser. A-2
5.15%, 7/1/17 (FNMA/GNMA).......................... 2,022,900
3,000,000 Marion Cnty. Cnvtn. & Rect'l.
5.00%, 6/1/27...................................... 2,894,400
------------
4,917,300
------------
</TABLE>
48
<PAGE>
[LOGO OF EVERGREEN TAX STRATEGIC FOUNDATION FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
LONG TERM MUNICIPAL OBLIGATIONS - continued
Maine - 0.4%
$1,000,000 Maine Hlth. & High Edl. Facs. Auth RB Ser. B
5.75%, 7/1/26 (AMBAC)............................. $ 1,056,430
500,000 Maine Hsg. Auth. Mtge. Purchase RB Ser. F-1
5.50%, 11/15/29................................... 508,415
-------------
1,564,845
-------------
Massachusetts - 3.4%
250,000 Mass. Bay Trans. Auth. General Trans. Sys. Bonds,
Ser. 1994A
7.00%, 3/1/08..................................... 297,300
1,000,000 Mass. Bay Trans. Auth. (Refunding Gen. Trans. Sys.
A)
7.00%, 3/1/14..................................... 1,237,240
1,000,000 Mass. Hsg. Fin. Auth. RB (AMT) Single Family Ser.
59
5.40%, 6/1/20 (MBIA).............................. 1,024,370
4,750,000 Mass. St. Indstl. Fin. Agcy.
5.25%, 7/1/27..................................... 4,805,955
2,500,000 Mass. St. Indstl. Fin. Agcy.
5.00%, 9/1/23..................................... 2,444,725
250,000 Mass. Hsg. Fin. Agcy. Hsg. Proj. RRB, 1993 Ser. A
5.95%, 10/1/08 (AMBAC)............................ 266,468
1,195,000 Mass. Tpke. Auth. RB (Western Tpke.) Ser. A
5.55%, 1/1/17 (MBIA).............................. 1,209,937
2,000,000 Mass. Tpke. Auth. RB Senior Ser. A
5.13%, 1/1/23 (MBIA).............................. 1,990,320
-------------
13,276,315
-------------
Michigan - 1.6%
1,030,000 Detroit Wtr. Supply Sys. RB Sr. Lien Ser. A
5.75%, 7/1/11 (MBIA).............................. 1,138,881
2,500,000 Detroit Wtr. Supply Sys. Rev.
5.75%, 7/1/12..................................... 2,769,550
300,000 Michigan Muni. Bond Auth. RB (Local Govt. Loan
Proj.), Ser 1994G
6.55%, 11/1/08 (AMBAC)............................ 340,473
2,000,000 Michigan St. Hosp. Fin. Auth. RB (FGIC)
5.63%, 11/1/18.................................... 2,076,100
-------------
6,325,004
-------------
Minnesota - 0.5%
2,000,000 Southern Minnesota Muni. Pwr. Agcy. (MBIA)
5.75%, 1/1/18..................................... 2,116,380
-------------
Missouri - 2.2%
410,000 Missouri Hsg. Dev. Commission Single Family Mtge.
RB (Homeownership Loan Proj.), 1996 Ser. D
6.00%, 9/1/17 (Collateralized by GNMA or FNMA
Certificates AMT)................................. 431,275
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
LONG TERM MUNICIPAL OBLIGATIONS - continued
Missouri - continued
$ 855,000 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)...................................... $ 908,044
955,000 Missouri St. Hsg. Dev. Comm. Mtge. 5.55%, 3/1/29.... 986,056
490,000 Missouri St. Hsg. Dev. Comm. Mtge. 5.50%, 3/1/25.... 494,822
500,000 St. Louis Muni. Fin. Corp. Leasehold Rev. Imp. Bonds
(City Justice Ctr.), Ser. 1996A
5.95%, 2/15/16 (AMBAC)............................. 542,780
1,000,000 St. Louis Regl. Convention & Sports Complex Auth. RB
Facs. C
5.30%, 8/15/17 (AMBAC)............................. 1,023,140
4,000,000 University Missouri Univ. Rev.
5.50%, 11/1/21..................................... 4,153,720
------------
8,539,837
------------
Nebraska - 0.2%
785,000 Nebraska Inv. Fin. Auth. SFHRB
5.60%, 9/1/20...................................... 792,693
------------
Nevada - 2.7%
5,000,000 Clark County GO 5.00%, 11/1/14...................... 5,065,450
5,000,000 Clark County, GO 1992 Series A
6.00%, 7/1/22 (AMBAC).............................. 5,434,350
------------
10,499,800
------------
New Jersey - 1.1%
2,500,000 New Jersey Econ. Dev. Pollution (MBIA)
6.40%, 5/1/32...................................... 2,770,325
1,400,000 New Jersey Tpke. Auth. RB Ser. C 6.50%, 1/1/16
(MBIA)............................................. 1,659,322
------------
4,429,647
------------
New York - 6.9%
2,250,000 Long Island Pwr. Auth., Series A 5.50%, 12/1/29..... 2,311,695
2,000,000 Long Island Pwr. Auth.
5.00%, 4/1/13...................................... 2,033,880
2,500,000 Metro Trans. Auth. Commuter
Facs. RB Ser. C-2
5.38%, 7/1/27 (FGIC)............................... 2,578,325
250,000 New York St. Mtge. Agcy. Homeowner Mtge. RB,
Ser. 44 (AMT)
6.60%, 4/1/03...................................... 263,213
920,000 New York St. Mtge. Agcy. Homeowner
Mtge. RB,
Ser. 56 (AMT)
5.88%, 10/1/19..................................... 957,858
2,500,000 New York St. Dorm. Auth. RB (AMBAC)
5.20%, 2/15/14..................................... 2,566,300
1,700,000 New York St. Local Govt. Assist. 5.38%, 4/1/14...... 1,756,525
3,000,000 New York St. Local Govt. Assist. 5.00%, 4/1/16...... 3,007,560
210,000 New York St. Med. Care Facs. Fin. 6.25%, 8/15/10.... 228,144
</TABLE>
49
<PAGE>
[LOGO OF EVERGREEN TAX STRATEGIC FOUNDATION FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
LONG TERM MUNICIPAL OBLIGATIONS - continued
New York - continued
$ 35,000 New York St. Med. Care Facs. Fin. 6.25%, 8/15/10.... $ 37,660
2,000,000 New York St. Med. Care Facs. Fin. Refunding Hosp.
Insured Mtge. A 5.38%, 2/15/25 (MBIA).............. 2,039,540
500,000 New York St. Mtge. Agcy. RB (Homeowner Mtge.) Ser.
63, 5.60%, 4/1/10 (AMT)............................ 523,225
1,000,000 New York St. Thruway Auth. RB Ser. B 5.00%, 1/1/20
(MBIA)............................................. 984,690
2,500,000 New York St. Thruway Auth. Svc. Contract
5.00%, 4/1/18...................................... 2,484,850
5,000,000 New York St. Urban Dev. Corp.
5.50%, 7/1/16...................................... 5,243,350
250,000 Port Auth. of NY & NJ Consolidated Bonds, 97th Ser.
2nd Installment 7.00%, 7/15/05 (AMT) (FGIC)........ 287,585
------------
27,304,400
------------
North Carolina - 0.1%
500,000 North Carolina Hsg. Fin. Agcy. Single Family Ser.
00,
5.80%, 9/1/12 (FHA)................................ 530,150
------------
North Dakota - 0.5%
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).............................. 1,078,870
1,000,000 North Dakota St. Hsg. Fin. Agcy. 5.55%, 7/1/29...... 1,011,590
------------
2,090,460
------------
Ohio - 0.4%
500,000 Akron Econ. Dev. RB 6.00%, 12/1/12 (MBIA)........... 568,220
1,000,000 Jefferson Cnty. GO Refunding Improvement (FSA)
5.70%, 12/1/13..................................... 1,117,240
------------
1,685,460
------------
Pennsylvania - 1.7%
500,000 Pennsylvania Convention Ctr. Auth. RB Ser. A, 1989
Ser. A
6.70%, 9/1/16 (FGIC)............................... 600,675
2,000,000 Pennsylvania St. Higher Edl. Facs. (MBIA)
5.75%, 5/1/22...................................... 2,134,220
3,000,000 Trinity Area Sch. Dist. Pennsylvania 5.00%,
11/1/13............................................ 3,020,310
1,000,000 York Cnty. Solid Waste & Refuse Auth. Solid Waste
Sys. RB
5.50%, 12/1/11 (FGIC).............................. 1,083,600
------------
6,838,805
------------
South Carolina - 0.7%
2,540,000 Charleston Cnty. RB
5.13%, 8/15/14..................................... 2,594,762
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
LONG TERM MUNICIPAL OBLIGATIONS - continued
South Dakota - 0.9%
$1,455,000 Brookings COP
5.10%, 12/1/18..................................... $ 1,445,965
1,000,000 South Dakota Conserv. Dist. (AMBAC) 5.00%, 8/1/19... 983,640
1,235,000 South Dakota Hsg. Dev. Auth. Homeownership B
5.25%, 5/1/17...................................... 1,253,611
------------
3,683,216
------------
Tennessee - 0.1%
300,000 Bristol Hlth. & Edl. Facs. Board RRB (Bristol Mem.
Hosp.), Ser. 1993 6.75%, 9/1/07 (FGIC)............. 349,359
------------
Texas - 2.9%
2,500,000 Colorado River Texas Municipal Water District
5.13%, 1/1/16...................................... 2,527,850
2,625,000 Dallas GO
5.25%, 8/15/16..................................... 2,699,602
1,000,000 Harris Cnty. Hlth. Facs. Hosp. RB (Memorial Hermann
Hosp. Sys. Proj.) (FSA)
5.50%, 6/1/10...................................... 1,069,720
500,000 Houston Wtr. Conveyance Sys. Contract COP, Ser.
1993H 7.50%, 12/15/10 (AMBAC)...................... 627,990
1,500,000 Irving Independent Sch. Dist. GO 5.13%, 2/15/18..... 1,509,180
460,000 Lubbock Elec. Light & Pwr. Sys. RB 4.25%, 4/15/17
(AMBAC)............................................ 418,793
950,000 San Antonio Elec. & Gas RB 5.25%, 2/1/10............ 1,001,956
50,000 San Antonio Elec. & Gas Prerefunded RB
5.25%, 2/1/10...................................... 53,693
1,500,000 Texas St. Dept. Hsg. & Comm. Affairs Series A
5.25%, 7/1/18 (AMT)................................ 1,501,170
------------
11,409,954
------------
Utah - 3.9%
5,000,000 Intermountain Pwr. Agcy. Utah Rev. 5.00%, 7/1/20.... 4,878,150
500,000 Salt Lake City Hosp. RB (IHC Hosp., Inc.)
6.30%, 2/15/15..................................... 577,170
470,000 Utah Hsg. Fin. Agcy. RB (Single Family Mtge.) Ser. B
6.00%, 7/1/16 (FHA)................................ 500,648
5,000,000 Utah St. Brd. Regents RB 5.00%, 4/1/20.............. 4,879,350
2,825,000 Utah St. Hsg. Fin. Agcy.
5.35%, 7/1/18...................................... 2,845,425
1,500,000 Utah St. Hsg. Fin. Agcy.
5.38%, 7/1/18...................................... 1,511,205
------------
15,191,948
------------
Virginia - 0.7%
2,805,000 Medical College VA Hosp. Auth. 5.13%, 7/1/18........ 2,796,276
------------
</TABLE>
50
<PAGE>
[LOGO OF EVERGREEN TAX STRATEGIC FOUNDATION FUND APPEARS HERE]
Schedule of Investments (continued)
March 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
LONG TERM MUNICIPAL OBLIGATIONS - continued
Washington - 1.8%
$3,000,000 Port Seattle Passenger Facs. 5.00%, 12/1/23......... $ 2,925,060
3,500,000 Seattle Wtr. Sys. RB
5.50%, 6/1/18...................................... 3,587,885
500,000 Snohomish Cnty. Sch. Dist. GO 5.70%, 12/1/15
(FGIC)............................................. 533,755
------------
7,046,700
------------
West Virginia - 0.5%
1,000,000 West Virginia St. Ser. A
5.75%, 11/1/21 (FGIC).............................. 1,068,440
1,000,000 West Virginia St. Hsg. Dev. Fund RB Ser. A
6.05%, 5/1/27...................................... 1,065,020
------------
2,133,460
------------
Wisconsin - 1.0%
1,000,000 Wisconsin Clean Wtr. RB Ser. 1 6.88%, 6/1/11........ 1,211,130
500,000 Wisconsin Hsg. & Econ. Dev. Auth. Home Ownership RB
Ser. E 6.00%, 9/1/28 (AMT)......................... 524,535
2,000,000 Wisconsin Hsg. Econ. Dev. Auth. 5.60%, 3/1/28....... 2,037,080
------------
3,772,745
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
LONG TERM MUNICIPAL OBLIGATIONS - continued
Wyoming - 0.5%
$2,000,000 Wyoming Cmnty. Dev. Auth. 5.45%, 12/1/29............ $ 2,018,160
------------
Puerto Rico - 0.1%
385,000 Puerto Rico Hsg. Bank & Fin. Agcy. RB (Single Family
Affordable Hsg. Mtge. Subsidy Prog.) Portfolio I
5.85%, 4/1/09 (AMT)................................ 406,152
------------
Total Municipal Obligations (cost $208,928,650)..... 211,696,519
------------
SHORT-TERM INVESTMENTS - 0.1%
Mutual Fund Shares - 0.1%
382,567 Federated Tax Free Obligations Fund (at net asset
value) (cost $382,567)............................. 382,567
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $361,692,291).......................... 99.6% 393,334,663
Other Assets and
Liabilities - net............................ 0.4 1,648,634
----- ------------
Net Assets.................................... 100.0% $394,983,297
===== ============
</TABLE>
* Non-income producing securities
** At March 31, 1999, the Fund owned 3,000 shares of common stock of First
Union Corp. at a cost of $57,890. During the year ended March 31, 1999, the
Fund earned $5,040 in dividend income from this investment. These shares
were purchased by the Fund prior to the acquisition of the investment advi-
sor and Lieber & Company by First Union.
(a) Less than one-tenth of one percent.
144A Securities that may be resold to "qualified institutional buyers" under
rule 144A of the Securities Act of 1933. These securities have been deter-
mined to be liquid under the guidelines established by the Board of Trust-
ees.
Summary of Abbreviations:
ADR American Depository Receipts
ADS American Depository Shares
AMT Subject to the Alternative Minimum Tax
COP Certificates of Participation
FHA Federal Housing Authority
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Assocociation
GNMA Government National Mortgage Association
GO General Obligations
RB Revenue Bonds
REIT Real Estate Investment Trust
RRB Refunding Revenue Bonds
SA Sociedad Anonyme (Spanish Corporation)
SFHRB Single Family Housing Revenue Bonds
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, 1999.
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>
[LOGO OF EVERGREEN BALANCED FUNDS APPEARS HERE]
Statements of Assets and Liabilities
March 31, 1999
<TABLE>
<CAPTION>
American Tax Strategic
Retirement Balanced Foundation Foundation
Fund Fund Fund Fund
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Identified cost of
securities............. $184,074,864 $1,376,458,715 $2,321,086,827 $361,692,291
Net unrealized gains on
securities............. 19,651,835 330,068,056 785,945,885 31,642,372
- -------------------------------------------------------------------------------------
Market value of
securities............. 203,726,699 1,706,526,771 3,107,032,712 393,334,663
Cash.................... 174,159 266,702 354,062 0
Receivable for
securities sold........ 2,892,335 13,212,747 6,123,728 3,888,175
Receivable for Fund
shares sold............ 145,307 831,288 8,095,704 1,046,864
Dividends and interest
receivable............. 1,052,144 9,398,452 11,983,534 3,599,710
Unrealized gains on
forward foreign
currency exchange
contracts.............. 0 1,248,489 0 0
Prepaid expenses and
other assets........... 20,673 181,606 70,380 29,669
- -------------------------------------------------------------------------------------
Total assets.......... 208,011,317 1,731,666,055 3,133,660,120 401,899,081
- -------------------------------------------------------------------------------------
Liabilities
Payable for securities
purchased.............. 2,196,871 7,447,139 4,699,104 5,507,700
Payable for Fund shares
redeemed............... 790,315 2,472,228 9,091,315 883,525
Payable for securities
on loan................ 0 9,459,928 0 0
Unrealized losses on
forward foreign
currency exchange
contracts.............. 0 34,556 0 0
Advisory fee payable.... 134,066 631,337 1,968,976 295,781
Distribution Plan
expenses payable....... 41,945 252,070 471,741 113,826
Accrued expenses and
other liabilities...... 87,531 355,929 370,744 114,952
- -------------------------------------------------------------------------------------
Total liabilities..... 3,250,728 20,653,187 16,601,880 6,915,784
- -------------------------------------------------------------------------------------
Net assets.............. $204,760,589 $1,711,012,868 $3,117,058,240 $394,983,297
- -------------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital......... $189,056,455 $1,281,084,990 $2,311,236,804 $363,744,940
Undistributed
(overdistributed) net
investment income...... (18,461) 410,783 (67,644) (11,170)
Accumulated net
realized gains or
losses on securities,
futures contracts, and
foreign currency
related transactions... (3,929,240) 98,245,545 19,942,810 (392,845)
Net unrealized gains or
losses on securities
and foreign currency
related transactions... 19,651,835 331,271,550 785,946,270 31,642,372
- -------------------------------------------------------------------------------------
Total net assets...... $204,760,589 $1,711,012,868 $3,117,058,240 $394,983,297
- -------------------------------------------------------------------------------------
Net assets consists of
Class A................. $ 25,451,460 $1,240,844,016 $ 380,003,120 $ 81,566,499
Class B................. 146,945,834 433,898,024 1,431,732,453 244,486,245
Class C................. 1,860,042 2,400,277 67,642,126 45,035,406
Class Y................. 30,503,253 33,870,551 1,237,680,541 23,895,147
- -------------------------------------------------------------------------------------
Total net assets........ $204,760,589 $1,711,012,868 $3,117,058,240 $394,983,297
- -------------------------------------------------------------------------------------
Shares outstanding
Class A................. 1,724,033 110,041,473 18,110,070 5,044,566
Class B................. 10,003,131 38,429,428 68,578,217 15,149,753
Class C................. 126,324 212,499 3,240,528 2,795,177
Class Y................. 2,066,314 3,005,438 58,968,095 1,474,733
- -------------------------------------------------------------------------------------
Net asset value per
share
Class A................. $ 14.76 $ 11.28 $ 20.98 $ 16.17
- -------------------------------------------------------------------------------------
Class A--Offering price
(based on sales charge
of 4.75%).............. $ 15.50 $ 11.84 $ 22.03 $ 16.98
- -------------------------------------------------------------------------------------
Class B................. $ 14.69 $ 11.29 $ 20.88 $ 16.14
- -------------------------------------------------------------------------------------
Class C................. $ 14.72 $ 11.30 $ 20.87 $ 16.11
- -------------------------------------------------------------------------------------
Class Y................. $ 14.76 $ 11.27 $ 20.99 $ 16.20
- -------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
52
<PAGE>
[LOGO OF EVERGREEN BALANCED FUNDS APPEARS HERE]
Statements of Operations
Year Ended March 31, 1999
<TABLE>
<CAPTION>
American Tax Strategic
Retirement Balanced Foundation Foundation
Fund Fund Fund Fund
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income
Dividends (net of
foreign withholding
taxes of $3,336,
$52,629, $56,105, and
$2,328,
respectively).......... $ 5,352,041 $ 18,745,415 $ 35,862,193 $ 2,967,348
Interest................ 5,300,851 50,856,296 63,053,333 10,124,790
- -----------------------------------------------------------------------------------
Total investment
income............... 10,652,892 69,601,711 98,915,526 13,092,138
Expenses
Advisory fee............ 1,707,228 7,603,851 21,613,189 3,269,877
Distribution Plan
expenses............... 1,684,418 8,315,322 14,210,851 2,894,934
Transfer agent fee...... 496,868 3,294,647 5,763,098 425,857
Administrative services
fees................... 0 264,350 0 0
Trustees' fees and
expenses............... 4,980 26,974 53,099 7,026
Organization expenses... 0 0 0 4,862
Other................... 211,747 1,450,487 1,571,179 338,399
- -----------------------------------------------------------------------------------
Total expenses......... 4,105,241 20,955,631 43,211,416 6,940,955
Less: Fee credits....... (7,514) (60,734) (90,680) (16,192)
- -----------------------------------------------------------------------------------
Net expenses........... 4,097,727 20,894,897 43,120,736 6,924,763
- -----------------------------------------------------------------------------------
Net investment income... 6,555,165 48,706,814 55,794,790 6,167,375
- -----------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities,
futures contracts and
foreign currency
related transactions
Net realized gains or
losses on:
Securities............. (3,871,180) 350,239,600 34,893,505 (145,766)
Futures contracts...... 0 8,277,408 0 0
Foreign currency
related
transactions.......... 0 193,880 (4,613) 0
- -----------------------------------------------------------------------------------
Net realized gains or
losses on securities,
futures contracts and
foreign currency
related transactions... (3,871,180) 358,710,888 34,888,892 (145,766)
- -----------------------------------------------------------------------------------
Net change in
unrealized gains or
losses on securities,
futures contracts and
foreign currency
related transactions... (22,833,253) (286,664,700) 65,223,251 (2,886,895)
- -----------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities,
futures contracts and
foreign currency
related transactions... (26,704,433) 72,046,188 100,112,143 (3,032,661)
- -----------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............. $(20,149,268) $ 120,753,002 $155,906,933 $ 3,134,714
- -----------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
53
<PAGE>
[LOGO OF EVERGREEN BALANCED FUNDS APPEARS HERE]
Statements of Changes in Net Assets
Year Ended March 31, 1999
<TABLE>
<CAPTION>
American Tax Strategic
Retirement Balanced Foundation Foundation
Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income... $ 6,555,165 $ 48,706,814 $ 55,794,790 $ 6,167,375
Net realized gains or
losses on securities,
futures contracts and
foreign currency
related transactions... (3,871,180) 358,710,888 34,888,892 (145,766)
Net change in unrealized
gains or losses on
securities and foreign
currency related
transactions........... (22,833,253) (286,664,700) 65,223,251 (2,886,895)
- ---------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ (20,149,268) 120,753,002 155,906,933 3,134,714
- ---------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class A................ (1,002,690) (40,794,518) (7,549,144) (1,787,162)
Class B................ (4,353,747) (14,038,816) (17,590,016) (3,343,831)
Class C................ (64,114) (42,716) (829,474) (594,293)
Class Y................ (1,371,469) (1,284,883) (28,290,021) (541,359)
Net realized gains
Class A................ (236,492) (184,104,811) (2,672,130) (131,728)
Class B................ (1,333,852) (86,113,414) (9,707,057) (378,359)
Class C................ (19,045) (276,654) (461,341) (68,239)
Class Y................ (302,263) (5,578,251) (9,222,962) (36,526)
- ---------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (8,683,672) (332,234,063) (76,322,145) (6,881,497)
- ---------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 43,457,864 223,177,562 728,373,282 166,239,896
Payment for shares
redeemed............... (51,886,973) (493,032,834) (542,736,621) (76,065,961)
Net asset value of
shares issued in
reinvestment of
distributions.......... 8,203,296 295,195,460 70,776,628 6,054,905
Net asset value of
shares issued in
acquisition of
CoreFund, Inc. Balanced
Fund................... 0 0 139,832,551 0
- ---------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... (225,813) 25,340,188 396,245,840 96,228,840
- ---------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... (29,058,753) (186,140,873) 475,830,628 92,482,057
Net assets
Beginning of period..... 233,819,342 1,897,153,741 2,641,227,612 302,501,240
- ---------------------------------------------------------------------------------------
End of period........... $204,760,589 $1,711,012,868 $3,117,058,240 $394,983,297
- ---------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income...... $ (18,461) $ 410,783 $ (67,644) $ (11,170)
- ---------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
54
<PAGE>
[LOGO OF EVERGREEN BALANCED FUNDS APPEARS HERE]
Statements of Changes in Net Assets
Year Ended March 31, 1998
<TABLE>
<CAPTION>
American Tax Strategic
Retirement Balanced Foundation Foundation
Fund Fund (a) Fund Fund
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income... $ 4,985,814 $ 35,345,751 $ 46,106,604 $ 2,888,518
Net realized gains on
securities and foreign
currency related
transactions........... 5,840,219 127,001,668 37,733,396 1,331,487
Net change in
unrealized gains on
securities and foreign
currency related
transactions........... 31,534,034 84,015,495 507,820,113 28,378,750
- --------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............ 42,360,067 246,362,914 591,660,113 32,598,755
- --------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class A................ (695,207) (12,029,418) (6,778,425) (845,312)
Class B................ (2,792,552) (25,630,818) (14,304,998) (1,429,127)
Class C................ (49,486) (2,502) (632,325) (189,734)
Class Y................ (1,312,760) (263,102) (25,594,285) (422,361)
Net realized gains
Class A................ (514,560) (25,111,250) (6,367,014) (424,397)
Class B................ (2,734,907) (168,719,950) (19,081,303) (1,129,269)
Class C................ (50,154) (135) (836,192) (141,334)
Class Y................ (874,184) 0 (22,106,374) (207,645)
- --------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (9,023,810) (231,757,175) (95,700,916) (4,789,179)
- --------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 86,591,263 121,903,416 691,840,878 212,133,212
Payment for shares
redeemed............... (24,953,880) (278,715,460) (299,555,598) (15,800,328)
Net asset value of
shares issued in
reinvestment of
distributions.......... 8,459,313 199,041,548 89,801,360 4,084,131
Net asset value of
shares issued in
acquisition of:
Evergreen Balanced
II.................... 0 214,923,155 0 0
Keystone Balanced II... 0 0 8,490,928 0
- --------------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions.......... 70,096,696 257,152,659 490,577,568 200,417,015
- --------------------------------------------------------------------------------------
Total increase in net
assets............... 103,432,953 271,758,398 986,536,765 228,226,591
Net assets
Beginning of period..... 130,386,389 1,625,395,343 1,654,690,847 74,274,649
- --------------------------------------------------------------------------------------
End of period........... $233,819,342 $1,897,153,741 $2,641,227,612 $302,501,240
- --------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income...... $ 235,752 $ 2,779,889 $ (35,481) $ 17,451
- --------------------------------------------------------------------------------------
</TABLE>
(a) For the nine months 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.
55
<PAGE>
[LOGO OF EVERGREEN BALANCED FUNDS APPEARS HERE]
Statement of Changes in Net Assets
Year Ended June 30, 1997
<TABLE>
<CAPTION>
Balanced
Fund
- --------------------------------------------------------------------------------
<S> <C>
Operations
Net investment income......................................... $ 38,677,977
Net realized gains on securities and foreign currency related
transactions................................................. 120,987,282
Net change in unrealized gains on securities and foreign
currency related transactions................................ 146,568,036
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations......... 306,233,295
- --------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class B...................................................... (38,660,044)
Net realized gains
Class B...................................................... (57,571,132)
- --------------------------------------------------------------------------------
Total distributions to shareholders.......................... (96,231,176)
- --------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold..................................... 200,987,044
Payment for shares redeemed................................... (351,020,484)
Net asset value of shares issued in reinvestment of
distributions................................................ 84,249,628
- --------------------------------------------------------------------------------
Net decrease in net assets resulting from capital share
transactions................................................ (65,783,812)
- --------------------------------------------------------------------------------
Total increase in net assets................................ 144,218,307
Net assets
Beginning of period........................................... 1,481,177,036
- --------------------------------------------------------------------------------
End of period................................................. $1,625,395,343
- --------------------------------------------------------------------------------
Undistributed net investment income........................... $ 3,239,562
- --------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
56
<PAGE>
[EVERGREEN LOGO APPEARS HERE]
Combined Notes to Financial Statements
1. ORGANIZATION
The Evergreen Balanced Funds consist of Evergreen American Retirement Fund
("American Retirement Fund"), Evergreen Balanced Fund ("Balanced Fund"), Ever-
green Foundation Fund ("Foundation Fund"), and Evergreen Tax Strategic Founda-
tion Fund ("Tax Strategic Fund"), (collectively, the "Funds"). Each Fund is a
diversified series of Evergreen Equity Trust (the "Trust"), a Delaware business
trust organized on September 18, 1997. The Trust is an open-end management in-
vestment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act").
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 dis-
tribution fee than Class A. Class B shares are sold subject to a contingent de-
ferred sales charge that is payable upon redemption and decreases depending on
how long the shares have been held. Class B shares purchased after January 1,
1997 will automatically convert to Class A shares after seven years. Class B
shares purchased prior to January 1, 1997 retain their existing conversion
rights. Class C shares are sold subject to a contingent deferred sales charge
payable on shares redeemed within one year after the month of purchase. Class Y
shares are sold only to investment advisory clients of First Union Corporation
("First Union") and its affiliates, certain institutional investors or Class Y
shareholders of record of certain other funds managed by First Union and its
affiliates as of December 30, 1994.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
Securities traded on a national securities exchange or included on the NASDAQ
National Market System ("NMS") and other securities traded in the over-the-
counter market are valued at the last reported sales price on the exchange
where primarily traded. Securities traded on an exchange or NMS for which there
has been no sale and other securities traded in the over-the-counter market are
valued at the mean between the last reported bid and asked price.
Corporate bonds, Municipal bonds, U.S. government obligations, mortgage and
other asset-backed securities and other fixed-income securities are valued at
prices provided by an independent pricing service. In determining a price for
normal institutional-size transactions, the pricing service uses methods based
on market transactions for comparable securities and analysis of various rela-
tionships between similar securities which are generally recognized by institu-
tional traders. Securities for which valuations are not available from an inde-
pendent pricing service may be valued by brokers which use prices provided by
market makers or estimates of market value obtained from yield data relating to
investments or securities with similar characteristics.
An independent pricing service values each Fund's municipal bonds at fair value
using a variety of factors which may include yield, liquidity, interest rate
risk, credit quality, coupon, maturity and type of issue. Securities for which
valuations are not available from an independent pricing service may be valued
by brokers which use prices provided by market makers or estimates of market
value obtained from yield data relating to investments or securities with simi-
lar characteristics.
Securities for which valuations are not available from an independent pricing
service (including restricted securities) are valued at fair value as deter-
mined in good faith according to procedures established by the Board of Trust-
ees.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
57
<PAGE>
[EVERGREEN LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. Each Fund monitors the adequacy of the collateral daily and
will require the seller to provide additional collateral in the event the mar-
ket value of the securities pledged falls below the carrying value of the re-
purchase agreement, including accrued interest. Each Fund will only enter into
repurchase agreements with banks and other financial institutions, which are
deemed by the investment advisor to be creditworthy pursuant to guidelines es-
tablished by the Board of Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange Commis-
sion, Balanced Fund, along with certain other funds managed by Evergreen In-
vestment Management Company ("EIMC"), a subsidiary of First Union, may transfer
uninvested cash balances into a joint trading account. These balances are in-
vested in one or more repurchase agreements that are fully collateralized by
U.S. Treasury and/or federal agency obligations.
C. Foreign Currency
The books and records of the Funds are maintained in United States (U.S.) dol-
lars. Foreign currency amounts are translated into U.S. dollars as follows:
market value of investments, other assets and liabilities at the daily rate of
exchange; purchases and sales of investments and income and expenses at the
rate of exchange prevailing on the respective dates of such transactions. Net
unrealized foreign exchange gain (loss) resulting from changes in foreign cur-
rency exchange rates is a component of net unrealized gains or losses on secu-
rities and foreign currency related transactions. Net realized gain or loss on
foreign currency related transactions includes foreign currency gains and
losses between trade date and settlement date on investment securities transac-
tions, gains and losses on foreign currency related transactions and the dif-
ference between the amounts of interest and dividends recorded on the books of
the Fund and the amount actually received. The portion of foreign currency
gains or losses related to fluctuations in exchange rates between the initial
purchase trade date and subsequent sale trade date of investments denominated
in foreign currencies is included in realized gain or loss on securities.
D. Futures Contracts
In order to gain exposure to or protect against changes in security values, the
Funds may buy and sell futures contracts.
The initial margin deposited with a broker when entering into a futures trans-
action is subsequently adjusted by daily payments or receipts ("variation mar-
gin") 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 il-
liquid 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.
E. Forward Foreign Currency Exchange Contracts
The Funds may enter into forward foreign currency exchange contracts ("forward
contracts") to settle portfolio purchases and sales of securities denominated
in a foreign currency and to hedge certain foreign currency assets or liabili-
ties. Forward contracts are recorded at the forward rate and marked-to-market
daily. Realized gains and losses arising from such transactions are included in
net realized gain or loss on foreign currency related transactions. The Fund
bears the risk of an unfavorable change in the foreign currency exchange rate
underlying the forward contract and is subject to the credit risk that the
other party will not fulfill their obligations under the contract. Forward con-
tracts involve elements of market risk in excess of the amount reflected in the
statement of assets and liabilities.
58
<PAGE>
[EVERGREEN LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
F. When-issued and Delayed Delivery Transactions
The Funds record when-issued or delayed delivery transactions on the trade date
and will segregate with the custodian qualifying assets having a value suffi-
cient to make payment for the securities purchased. Securities purchased on a
when-issued or delayed delivery basis are marked-to-market daily and the Fund
begins earning interest on the settlement date. Losses may arise due to changes
in the market value of the underlying securities or if the counterparty does
not perform under the contract.
G. Securities Lending
In order to generate income and to offset expenses, the Funds may lend portfo-
lio securities to brokers, dealers and other financial organizations. The
Funds' investment adviser will monitor the creditworthiness of such borrowers.
Loans of securities may not exceed 33 1/3% of a Fund's total assets and will be
collateralized by cash, letters of credit or U.S. Government securities that
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities, including accrued interest. The Fund
monitors the adequacy of the collateral daily and will require the borrower to
provide additional collateral in the event the value of the collateral falls
below 100% of the market value of the securities on loan. While such securities
are on loan, the borrower will pay a Fund any income accruing thereon, and the
Fund may invest any cash collateral received in portfolio securities, thereby
increasing its return. A Fund will have the right to call any such loan and ob-
tain the securities loaned at any time on five days' notice. Any gain or loss
in the market price of the loaned securities, which occurs during the term of
the loan, would affect a Fund and its investors. A Fund may pay fees in connec-
tion with such loans.
H. 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 there-
after when the Fund is made aware of the dividend. Foreign income may be sub-
ject to foreign withholding taxes, which are accrued as applicable. Capital
gains realized on some foreign securities are subject to foreign taxes, which
are accrued as applicable.
I. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated invest-
ment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable in-
come, net tax-exempt income and net capital gains, if any, to their sharehold-
ers. The Funds also intend to avoid any excise tax liability by making the re-
quired distributions under the Code. Accordingly, no provision for federal
taxes is required. To the extent that realized capital gains can be offset by
capital loss carryforwards, it is each Fund's policy not to distribute such
gains.
J. 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 accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles. The significant differences between financial statement
amounts available for distributions and distributions made in accordance with
income tax regulations are primarily due to differing treatment for certain
distributions received from investments in real estate investment trusts, gains
and losses from foreign currency related transactions and for the Balanced
Fund, distributions made in connection with shareholder redemptions.
Certain distributions paid during previous years have been reclassified to con-
form to current year presentation.
59
<PAGE>
[EVERGREEN LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
K. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. Currently, class specific expenses are limited
to expenses incurred under the Distribution Plans for each class.
L. Organization Expenses
Organization expenses for Tax Strategic Fund are amortized to operations over a
five-year period on a straight-line basis. In the event any of the initial
shares of the Fund are redeemed by any holder during the five-year amortization
period, redemption proceeds will be reduced by any unamortized organization ex-
penses 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 redemp-
tion.
3. REORGANIZATION OF EVERGREEN BALANCED FUND
On January 23, 1998, the Balanced Fund was formed for the purpose of combining
the net assets of the Evergreen Balanced Fund II (the "Evergreen Fund"), and
the net assets of the Keystone Balanced Fund (the "Keystone Fund").
On January 21, 1998, prior to the Balanced Fund's acquisition of the Evergreen
Fund's net assets, the Evergreen Fund transferred substantially all of its net
assets related to its Class Y shares to an Evergreen Select Balanced Fund, an
institutional balanced fund, through a redemption-in-kind in the amount of ap-
proximately $737 million.
The Fund acquired all of the remaining assets and identified liabilities of the
Evergreen Fund in exchange for Class A, Class B, Class C and Class Y shares of
the Fund. Also, the Balanced Fund acquired all of the assets and certain lia-
bilities 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 ex-
changes of the respective shares of the Funds. The value of net assets ac-
quired, number of shares issued and unrealized appreciation acquired were as
follows:
<TABLE>
<CAPTION>
Value of Net Number of
Assets Shares Unrealized
Acquired Fund Acquired 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 was
$1,831,271,692.
Prior to the acquisition, the Keystone Fund added three classes of shares des-
ignated as Class A, Class C and Class Y 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 hav-
ing an aggregate value equal to that of the shareholder's Class B shares prior
to the conversion.
At the conclusion of the Balanced Fund's acquisition of the net assets of the
Evergreen Fund and Keystone Fund, the surviving records of the Fund for ac-
counting and performance purposes is the Keystone Fund and for taxation pur-
poses is the Evergreen Fund.
4. ACQUISITIONS
Effective at the close of business on July 24, 1998, Foundation Fund acquired
the net assets of CoreFunds, Inc. Balanced Fund, an open-end management invest-
ment company registered under the 1940 Act in an exchange of shares. The net
assets were exchanged through a non-taxable exchange for 321,554 Class A,
49,982 Class B and 6,470,202 Class Y shares, of Foundation Fund. The acquired
net assets consisted primarily of portfolio securities with unrealized appreci-
ation of $29,739,766. The net assets of Foundation Fund and CoreFunds Inc. Bal-
anced Fund prior to the acquisition were $2,784,240,332 and $139,832,551, re-
spectively. The aggregate net assets of Foundation Fund immediately after the
acquisition were $2,924,072,883.
Effective at the close of business on July 17, 1997, Foundation Fund acquired
the net assets of Keystone Balanced Fund II, an open-end management investment
company registered under the 1940 Act in an exchange of shares. The net assets
were exchanged through a non-taxable exchange for 111,203 Class A,
60
<PAGE>
[EVERGREEN LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
316,984 Class B and 36,146 Class C shares, of Foundation Fund. The acquired net
assets consisted primarily of portfolio securities with unrealized appreciation
of $1,216,239. The aggregate net assets of Foundation Fund immediately after
the acquisition were $1,993,257,978.
5. INVESTMENT ADVISORY AGREEMENTS AND OTHER AFFILIATED TRANSACTIONS
Evergreen Asset Management Corp. ("EAMC"), a wholly-owned subsidiary of First
Union, serves as the investment advisor to the American Retirement Fund, Foun-
dation Fund, and Tax Strategic Fund and is paid an advisory fee that is com-
puted daily and paid monthly based on each Fund's average daily net assets, in
accordance with the following schedules:
<TABLE>
<CAPTION>
Foundation Fund and American
Tax Strategic Fund Retirement Fund
--------------------------------------------------------------------
<S> <C> <C> <C>
First $750 million............. 0.875% First $750 million...... 0.75%
Next $250 million.............. 0.750% Over $750 million....... 0.70%
Over $1 billion................ 0.700%
</TABLE>
Lieber & Company, an affiliate of First Union, is the investment sub-advisor to
American Retirement Fund, Foundation Fund, and Tax Strategic Fund and also pro-
vides brokerage services with respect to substantially all security transac-
tions of the Funds effected on the New York or American Stock Exchanges. For
the year ended March 31, 1999, American Retirement Fund, Foundation Fund, and
Tax Strategic Fund incurred brokerage commissions of $182,233, $719,827 and
$300,137 with Lieber & Company. Lieber & Company is reimbursed by EAMC for pro-
viding investment sub-advisory services at no additional expense to the Funds.
EIMC is the investment advisor for Balanced Fund. In return for providing in-
vestment advisory and administrative services the Balanced Fund pays EIMC an
advisory fee that is calculated daily and paid monthly. The advisory fee is
computed at an annual rate of 1.50% of Balanced Fund's gross investment income
plus an amount determined by applying percentage rates starting at 0.60% and
declining to 0.30% per annum, as net assets increase, to the daily net assets
of the Balanced Fund.
Evergreen Investment Services ("EIS"), an indirectly wholly-owned subsidiary of
First Union, serves as the administrator and The BISYS Group, Inc. ("BISYS")
serves as the sub-administrator to the Funds. As administrator, EIS provides
the Funds with facilities, equipment and personnel. As sub-administrator to the
Funds, BISYS provides the officers of the Funds. Officers of the Funds and af-
filiated Trustees receive no compensation directly from the Funds.
The administrator and sub-administrator for the Funds are entitled to an annual
fee based on the average daily net assets of the Funds administered by EIS for
which First Union or its investment advisory subsidiaries are also the invest-
ment advisors. The administration fee is calculated by applying percentage
rates, which start at 0.05% and decline to 0.01% per annum as net assets in-
crease, to the average daily net assets of the Fund. The sub-administration fee
is calculated by applying percentage rates, which start at 0.01% and decline to
0.004% per annum as net assets increase, to the average daily net asset value
of the Fund. For American Retirement Fund, Foundation Fund, and Tax Strategic
Fund the administration and sub-administration fee is paid by their investment
advisor and is not a fund expense.
For the year ended March 31, 1999, Balanced Fund reimbursed EIMC $264,350 for
providing certain administrative and accounting services.
Evergreen Service Company ("ESC"), an indirectly, wholly owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the
Funds.
61
<PAGE>
[EVERGREEN LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
6. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of BISYS, serves
as principal underwriter to the Funds.
Each Fund has adopted Distribution Plans, as allowed by Rule 12b-1 of the 1940
Act, for each class of shares, except Class Y. Distribution plans permit a Fund
to compensate its principal underwriter for costs related to selling shares of
the Fund and for various other services. These costs, which consist primarily
of commissions and service fees to broker-dealers who sell shares of the Fund,
are paid by the Fund through "Distribution Plan expenses". Each class, except
Class Y, currently pays a service fee equal to 0.25% of the average daily net
asset of the class. Class B and Class C also pay distribution fees equal to
0.75% of the average daily net assets of the class. Distribution Plan expenses
are calculated daily and paid at least quarterly.
During the year ended December 31, 1998, amounts paid or accrued to EDI pursu-
ant 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 Fund....... $ 71,913 $ 1,587,473 $ 25,032
Balanced Fund.................. 3,008,956 5,291,662 14,704
Foundation Fund................ 892,137 12,722,587 596,127
Tax Strategic Fund............. 206,189 2,290,324 398,421
</TABLE>
With respect to Class B, and Class C shares, the principal underwriter may pay
distribution fees greater than the allowable annual amounts each Fund is per-
mitted to pay under the Distribution Plans.
Each of the Distribution Plans may be terminated at any time by vote of the In-
dependent Trustees or by vote of a majority of the outstanding voting shares of
the respective class.
7. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class A, Class B, Class C and Class Y. Transactions in shares of
the Funds were as follows:
American Retirement Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1999 March 31, 1998
------------------------ -----------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold................. 408,785 $ 6,573,365 776,394 $ 11,977,023
Shares redeemed............. (499,948) (7,611,947) (175,621) (2,728,081)
Shares issued in
reinvestment of
distributions.............. 78,418 1,194,727 73,985 1,168,200
- -------------------------------------------------------------------------------
Net increase (decrease)..... (12,745) 156,145 674,758 10,417,142
- -------------------------------------------------------------------------------
Class B
Shares sold................. 2,093,094 33,230,901 4,220,724 64,924,905
Shares redeemed............. (1,977,267) (30,034,353) (651,898) (10,105,217)
Shares issued in
reinvestment of
distributions.............. 360,496 5,461,155 340,081 5,338,212
- -------------------------------------------------------------------------------
Net increase................ 476,323 8,657,703 3,908,907 60,157,900
- -------------------------------------------------------------------------------
Class C
Shares sold................. 62,778 1,016,060 80,905 1,241,277
Shares redeemed............. (108,490) (1,678,195) (49,433) (711,589)
Shares issued in
reinvestment of
distributions.............. 5,226 79,493 6,217 97,713
- -------------------------------------------------------------------------------
Net increase (decrease)..... (40,486) (582,642) 37,689 627,401
- -------------------------------------------------------------------------------
Class Y
Shares sold................. 167,223 2,637,538 542,883 8,448,058
Shares redeemed............. (818,632) (12,562,478) (749,260) (11,408,993)
Shares issued in
reinvestment of
distributions.............. 96,218 1,467,921 117,732 1,855,188
- -------------------------------------------------------------------------------
Net decrease................ (551,191) (8,457,019) (88,645) (1,105,747)
- -------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
capital share
transactions............... $ (225,813) $ 70,096,696
</TABLE>
- --------------------------------------------------------------------------------
62
<PAGE>
[EVERGREEN LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
Balanced Fund
<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended
March 31, 1999 March 31, 1998 (a) June 30, 1997
-------------------------- --------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A
Shares sold............. 12,998,481 $ 147,893,792 740,667 $ 9,401,463 0 $ 0
Shares redeemed......... (20,007,662) (241,408,480) (4,919,924) (61,467,813) 0 0
Shares issued in
reinvestment of
distributions.......... 17,759,884 197,162,184 2,175,164 26,275,982 0 0
Automatic conversion of
Class B shares to Class
A shares............... 0 0 97,487,277 1,205,409,703 0 0
Shares issued in
acquisition of
Evergreen Balanced Fund
II..................... 0 0 3,807,586 45,716,406 0 0
- --------------------------------------------------------------------------------------------------------------
Net increase............ 10,750,703 103,647,496 99,290,770 1,225,335,741 0 0
- --------------------------------------------------------------------------------------------------------------
Class B
Shares sold............. 5,776,852 70,031,992 8,761,830 111,415,080 16,959,452 200,987,044
Shares redeemed......... (20,690,767) (241,461,335) (15,656,468) (202,986,801) (29,517,723) (351,020,484)
Shares issued in
reinvestment of
distributions.......... 8,339,827 92,447,046 13,954,804 172,765,442 7,405,182 84,249,628
Automatic conversion of
Class B shares to Class
A shares............... 0 0 (97,487,277) (1,205,409,703) 0 0
Shares issued in
acquisition of
Evergreen Balanced Fund
II..................... 0 0 9,896,507 118,815,736 0 0
- --------------------------------------------------------------------------------------------------------------
Net decrease............ (6,574,088) (78,982,297) (80,530,604) (1,005,400,246) (5,153,089) (65,783,812)
- --------------------------------------------------------------------------------------------------------------
Class C
Shares sold............. 169,732 2,053,953 21,656 270,797 0 0
Shares redeemed......... (49,785) (594,203) (1,672) (21,003) 0 0
Shares issued in
reinvestment of
distributions.......... 28,180 311,824 10 124 0 0
Shares issued in
acquisition of
Evergreen Balanced Fund
II..................... 0 0 44,378 532,825 0 0
- --------------------------------------------------------------------------------------------------------------
Net increase............ 148,127 1,771,574 64,372 782,743 0 0
- --------------------------------------------------------------------------------------------------------------
Class Y
Shares sold............. 261,048 3,197,825 65,370 816,075 0 0
Shares redeemed......... (784,486) (9,568,816) (1,167,179) (14,239,843) 0 0
Shares issued in
reinvestment of
distributions.......... 478,147 5,274,406 0 0 0 0
Shares issued in
acquisition of
Evergreen Balanced Fund
II..................... 0 0 4,152,538 49,858,189 0 0
- --------------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (45,291) (1,096,585) 3,050,729 36,434,421 0 0
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from capital share
transactions........... $ 25,340,188 $ 257,152,659 $ (65,783,812)
</TABLE>
- --------------------------------------------------------------------------------
(a) For the nine months ended March 31, 1998. The Fund changed its fiscal year
end from June 30 to March 31, effective March 31, 1998.
63
<PAGE>
[EVERGREEN LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
Foundation Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1999 March 31, 1998
-------------------------- -------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 5,707,085 $ 116,332,291 5,521,670 $ 103,759,687
Shares redeemed......... (5,528,399) (112,531,601) (2,914,232) (53,799,294)
Shares issued in
reinvestment of
distributions.......... 480,589 9,839,057 689,871 12,869,510
Shares issued in
acquisition of
CoreFunds, Inc.
Balanced Fund.......... 321,554 6,566,886 0 0
Shares issued in
acquisition of Keystone
Balanced Fund II....... 0 0 111,203 2,040,162
- --------------------------------------------------------------------------------
Net increase............ 980,829 20,206,633 3,408,512 64,870,065
- --------------------------------------------------------------------------------
Class B
Shares sold............. 20,450,695 415,256,001 19,625,977 367,905,222
Shares redeemed......... (8,458,046) (170,363,447) (4,438,949) (81,802,033)
Shares issued in
reinvestment of
distributions.......... 1,292,568 26,379,301 1,744,118 32,347,483
Shares issued in
acquisition of
CoreFunds, Inc.
Balanced Fund.......... 49,982 1,015,265 0 0
Shares issued in
acquisition of Keystone
Balanced Fund II....... 0 0 316,984 5,790,704
- --------------------------------------------------------------------------------
Net increase............ 13,335,199 272,287,120 17,248,130 324,241,376
- --------------------------------------------------------------------------------
Class C
Shares sold............. 1,358,670 27,583,261 1,016,989 19,227,162
Shares redeemed......... (646,190) (13,071,227) (405,258) (7,403,302)
Shares issued in
reinvestment of
distributions.......... 59,528 1,214,951 74,186 1,375,625
Shares issued in
acquisition of Keystone
Balanced Fund II....... 0 0 36,146 660,062
- --------------------------------------------------------------------------------
Net increase............ 772,008 15,726,985 722,063 13,859,547
- --------------------------------------------------------------------------------
Class Y
Shares sold............. 8,320,162 169,201,729 10,695,459 200,948,807
Shares redeemed......... (12,069,787) (246,770,346) (8,434,531) (156,550,969)
Shares issued in
reinvestment of
distributions.......... 1,628,347 33,343,319 2,313,662 43,208,742
Shares issued in
acquisition of
CoreFunds, Inc.
Balanced Fund.......... 6,470,202 132,250,400 0 0
- --------------------------------------------------------------------------------
Net increase............ 4,348,924 88,025,102 4,574,590 87,606,580
- --------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions........... $ 396,245,840 $ 490,577,568
</TABLE>
- --------------------------------------------------------------------------------
Tax Strategic Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1999 March 31, 1998
------------------------ -----------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold................ 2,373,800 $ 38,260,527 3,458,299 $ 53,040,118
Shares redeemed............ (1,712,788) (27,167,670) (371,701) (5,726,480)
Shares issued in
reinvestment of
distributions............. 110,933 1,765,631 77,658 1,200,787
- ------------------------------------------------------------------------------
Net increase............... 771,945 12,858,488 3,164,256 48,514,425
- ------------------------------------------------------------------------------
Class B
Shares sold................ 5,907,847 94,740,617 8,736,220 134,105,426
Shares redeemed............ (2,307,135) (36,564,880) (423,863) (6,502,615)
Shares issued in
reinvestment of
distributions............. 217,074 3,451,970 154,897 2,385,102
- ------------------------------------------------------------------------------
Net increase............... 3,817,786 61,627,707 8,467,254 129,987,913
- ------------------------------------------------------------------------------
Class C
Shares sold................ 1,684,267 26,890,534 1,515,720 23,364,146
Shares redeemed............ (625,888) (9,938,022) (212,250) (3,128,629)
Shares issued in
reinvestment of
distributions............. 37,777 599,814 19,807 305,243
- ------------------------------------------------------------------------------
Net increase............... 1,096,156 17,552,326 1,323,277 20,540,760
- ------------------------------------------------------------------------------
Class Y
Shares sold................ 395,815 6,348,218 105,640 1,623,522
Shares redeemed............ (149,296) (2,395,389) (29,733) (442,604)
Shares issued in
reinvestment of
distributions............. 14,888 237,490 12,558 192,999
- ------------------------------------------------------------------------------
Net increase............... 261,407 4,190,319 88,465 1,373,917
- ------------------------------------------------------------------------------
Net increase in net assets
resulting from capital
share transactions........ $ 96,228,840 $200,417,015
</TABLE>
- --------------------------------------------------------------------------------
64
<PAGE>
[EVERGREEN LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
8. 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, 1999:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
---------------------------------------------------
U.S. Non-U.S. U.S. Non-U.S.
Government Government Government Government
---------------------------------------------------
<S> <C> <C> <C> <C>
American
Retirement
Fund.......... $ 37,032,389 $ 32,768,436 $ 87,494,393 $ 92,171,898
Balanced Fund.. 321,112,321 1,447,836,648 219,667,233 1,771,974,147
Foundation
Fund.......... 268,425,494 492,658,362 0 267,146,924
Tax Strategic
Fund.......... 0 351,226,897 0 237,022,731
</TABLE>
The Balanced Fund loaned securities during the year ended March 31, 1999 to
certain brokers who paid the Fund a negotiated lenders' fee. These fees are in-
cluded in interest income. At March 31, 1999, the value of securities on loan
and the value of collateral amounted to $9,186,293 and $9,459,928, respective-
ly. During the year ended March 31, 1999, Balanced Fund earned $66,125 in in-
come from securities lending.
On March 31, 1999, the composition of unrealized appreciation and depreciation
on securities based on the aggregate cost of securities for federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Tax Unrealized Unrealized Appreciation
Cost Appreciation Depreciation (Depreciation)
----------------------------------------------------
<S> <C> <C> <C> <C>
American
Retirement
Fund.......... $ 184,137,658 $ 29,613,003 $10,023,962 $ 19,589,041
Balanced Fund.. 1,378,817,665 346,464,046 18,754,940 327,709,106
Foundation
Fund.......... 2,318,644,782 876,911,976 88,524,046 788,387,930
Tax Strategic
Fund.......... 361,764,774 41,958,753 10,388,864 31,569,889
</TABLE>
As of March 31, 1999, the American Retirement Fund had capital loss carryovers
for federal income tax purposes of $13,000 expiring 2007.
In addition to capital loss carryovers, capital and currency losses incurred
after October 31 within a Fund's fiscal year-end are deemed to arise on the
first business day of the Fund's following fiscal year. For the fiscal year
ended March 31, 1999, American Retirement Fund and Tax Strategic Fund have in-
curred and elected to defer $3,853,673 and $320,362 of capital loss, respec-
tively, Foundation Fund has incurred and elected to defer $3,471 of currency
loss.
9. EXPENSE OFFSET ARRANGEMENTS
The Funds have entered into expense offset arrangements with ESC and their cus-
todian whereby credits realized as a result of uninvested cash balances were
used to reduce a portion of each Fund's related expenses. The assets deposited
with ESC and the custodian under these expense offset arrangements could have
been invested in income-producing assets. The amount of fee credits received by
each Fund and the impact on each Fund's expense ratio represented as a percent-
age of its average net assets were as follows:
<TABLE>
<CAPTION>
Total
Fee Credits % of Average
Received Net Assets
--------------------------
<S> <C> <C>
American Retirement Fund............... $ 7,514 0.00%
Balanced Fund.......................... 60,734 0.00%
Foundation Fund........................ 90,680 0.00%
Tax Strategic Fund..................... 16,192 0.00%
</TABLE>
65
<PAGE>
[EVERGREEN LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
10. DEFERRED TRUSTEES' FEES
Each Independent Trustee of each Fund may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Fund's Trustees' fees and
expenses. Trustees will be paid either in one lump sum or in quarterly install-
ments for up to ten years at their election, not earlier than either the year
in which the Trustee ceases to be a member of the Board of Trustees or January
1, 2000.
11. FINANCING AGREEMENTS
Certain Evergreen Funds and State Street Bank and Trust Company ("State
Street") and a group of banks (collectively, the "Banks") entered into a fi-
nancing agreement dated December 22, 1997, as amended on November 20, 1998. Un-
der this agreement, the Banks provided an unsecured credit facility in the ag-
gregate amount of $400 million ($275 million committed and $125 million uncom-
mitted). The credit facility was allocated, under the terms of the financing
agreement, among the Banks. The credit facility was accessed by the Funds for
temporary or emergency purposes only and was subject to each Fund's borrowing
restrictions. Borrowings under this facility bear interest at 0.50% per annum
above the Federal Funds rate. A commitment fee of 0.065% per annum will be in-
curred on the unused portion of the committed facility, which was allocated to
all funds. For its assistance in arranging this financing agreement, the Capi-
tal 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 administra-
tive agent is entitled to a fee of $20,000 per annum which is allocated to all
of the Evergreen Funds.
This agreement was amended and renewed on December 22, 1998. The amended fi-
nancing agreement became effective on December 22, 1998 among all of the Ever-
green Funds, State Street and The Bank of New York ("BONY"). Under this agree-
ment, State Street and BONY provide an additional unsecured credit facility in
the aggregate amount of $150 million ($125 million committed and $25 million
uncommitted). The remaining terms and conditions of the agreement are unaffect-
ed.
The Funds did not borrow under these agreements during the year ended March 31,
1999.
12. SUBSEQUENT EVENTS
On May 13, 1999, American Retirement Fund filed an Agreement and Plan of Reor-
ganization with the Securities and Exchange Commission which provides for the
acquisition of all the assets of the Fund and the assumption of identified lia-
bilities by Evergreen Income and Growth Fund, a series of the Evergreen Equity
Trust. A special meeting of shareholders to vote on the above proposal is
scheduled for July 23, 1999. Materials for this meeting will be mailed, to
shareholders of record on May 5, 1999, on or about June 2, 1999.
66
<PAGE>
[EVERGREEN LOGO APPEARS HERE]
Independent Auditors' Report
The Board of Trustees and Shareholders
Evergreen Equity Trust
We have audited the accompanying statements of assets and liabilities, includ-
ing the schedules of investments of the Evergreen American Retirement Fund, Ev-
ergreen Balanced Fund, Evergreen Foundation Fund and Evergreen Tax Strategic
Foundation Fund, portfolios of Evergreen Equity Trust, as of March 31, 1999,
and the related statements of operations for the year then ended, statements of
changes in net assets for each of the years or periods in the two year period
then ended and for the year ended June 30, 1997 for the Evergreen Balanced Fund
and financial highlights for each of the years or periods as indicated on pages
23 to 30. These financial statements and financial highlights are the responsi-
bility of the Funds' 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 stan-
dards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1999 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 pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ever-
green American Retirement Fund, Evergreen Balanced Fund, Evergreen Foundation
Fund and Evergreen Tax Strategic Foundation Fund as of March 31, 1999, the re-
sults of their operations, changes in their net assets and financial highlights
for each of the years or periods described above in conformity with generally
accepted accounting principles.
KPMG LLP
Boston, Massachusetts
April 30, 1999
67
<PAGE>
[EVERGREEN LOGO APPEARS HERE]
Additional Information (Unaudited)
FEDERAL TAX STATUS OF DIVIDENDS (Unaudited)
Pursuant to section 852 of the Internal Revenue Code, the Funds have designated
the following amounts as long-term 20% capital gains for the fiscal year ended
March 31, 1999:
<TABLE>
<CAPTION>
Aggregate Per Share
----------- ---------
<S> <C> <C>
American Retirement Fund.................. 1,873,983 0.135
Balanced Fund............................. 274,987,297 2.026
Foundation Fund........................... 20,471,594 0.140
Tax Strategic Fund........................ 445,856 0.018
</TABLE>
For corporate shareholders, the following percentages of ordinary income divi-
dends paid during the fiscal year ended March 31, 1999 qualified for the divi-
dends received deduction:
<TABLE>
<S> <C>
American Retirement Fund................................. 78.14%
Balanced Fund............................................ 28.94%
Foundation Fund.......................................... 42.86%
Tax Strategic Fund....................................... 100.00%
</TABLE>
For the fiscal year ended March 31, 1999, the percentage representing the por-
tion of dividends exempt from federal income tax, other than alternative mini-
mum tax for Tax Strategic Fund is 75.39%.
YEAR 2000 (Unaudited)
Like other investment companies, the Funds could be adversely affected if the
computer systems used by the Funds' investment advisors and the Funds' other
service providers are not able to perform their intended functions effectively
after 1999 because of the inability of computer software to distinguish the
year 2000 from the year 1900. The Funds' investment advisors are taking steps
to address this potential year 2000 problem with respect to the computer sys-
tems that they use and to obtain satisfactory assurances that comparable steps
are being taken by the Funds' other major service providers. At this time, how-
ever, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Funds from this problem.
68
<PAGE>
Evergreen Funds
Money Market
Treasury Money Market Fund
Money Market Fund
Municipal Money Market Fund
Florida Municipal Money Market Fund
New Jersey Municipal Money Market Fund
Pennsylvania Municipal Money Market Fund
Tax Advantaged
Short Intermediate Municipal Fund
High Grade Municipal Bond Fund
Municipal Bond Fund
California Municipal Bond Fund
Connecticut Municipal Bond Fund
Florida Municipal Bond Fund
Florida High Income Municipal Bond Fund
Georgia Municipal Bond Fund
Maryland Municipal Bond Fund
Massachusetts Municipal Bond Fund
Missouri Municipal Bond Fund
New Jersey Municipal Bond Fund
New York Municipal Bond Fund
North Carolina Municipal Bond Fund
Pennsylvania Municipal Bond Fund
South Carolina Municipal Bond Fund
Virginia Municipal Bond Fund
Income
Capital Preservation and Income Fund
Short Intermediate Bond Fund
Intermediate Term Government Securities Fund
Intermediate Term Bond Fund
U.S. Government Fund
Diversified Bond Fund
Strategic Income Fund
High Yield Bond Fund
Balanced
American Retirement Fund
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund
Growth & Income
Utility Fund
Income and Growth Fund
Equity Income Fund
Value Fund
Blue Chip Fund
Growth and Income Fund
Small Cap Value Fund
Domestic Growth
Tax Strategic Equity Fund
Strategic Growth Fund
Stock Selector Fund
Evergreen Fund
Masters Fund
Omega Fund
Small Company Growth Fund
Aggressive Growth Fund
Micro Cap Fund
Global International
Global Leaders Fund
International Growth Fund
Global Opportunities Fund
Precious Metals Fund
Emerging Markets Growth Fund
Latin America Fund
Express Line
800.346.3858
Investor Services
800.343.2898
www.evergreen-funds.com
67432 543690 05/99
[LOGO OF EVERGREEN BULK RATE
FUNDS/SM/ APPEARS HERE] U.S. POSTAGE
PAID
200 Berkeley Street PERMIT NO. 19
Boston, MA 02116 HUDSON, MA
