<PAGE>
EVERGREEN
GROWTH AND INCOME
FUNDS
1995 ANNUAL REPORT
(Photos of a statue, stock certificates, a building, the Statue of
Liberty and a city skyline)
(Photo of a lake surrounded by woods with a mountain in the background)
(Evergreen Tree logo appears here)
<PAGE>
EVERGREEN GROWTH AND INCOME FUNDS
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
(Photo of A Review of the Past Year
statue) and Prospects for the Future.............................................. 1
FOUNDATION A Report From Your Portfolio Manager...................................... 3
FUND Results to Date........................................................... 7
Statement of Investments.................................................. 8
Statement of Assets and Liabilities....................................... 12
Statement of Operations................................................... 13
Statement of Changes in Net Assets........................................ 14
Financial Highlights...................................................... 15
(Photo of BALANCED A Report From Your Portfolio Manager...................................... 16
stock certificates) FUND Results to Date........................................................... 18
Statement of Investments.................................................. 19
Statement of Assets and Liabilities....................................... 22
Statement of Operations................................................... 23
Statement of Changes in Net Assets........................................ 24
Financial Highlights...................................................... 25
(Photo of VALUE A Report From Your Portfolio Manager...................................... 27
a building) FUND Results to Date........................................................... 28
Statement of Investments.................................................. 29
Statement of Assets and Liabilities....................................... 31
Statement of Operations................................................... 32
Statement of Changes in Net Assets........................................ 33
Financial Highlights...................................................... 34
(Photo of AMERICAN RETIREMENT A Report From Your Portfolio Manager...................................... 37
Statue of Liberty) FUND Results to Date........................................................... 39
Statement of Investments.................................................. 40
Statement of Assets and Liabilities....................................... 44
Statement of Operations................................................... 45
Statement of Changes in Net Assets........................................ 46
Financial Highlights...................................................... 47
(Photo of GROWTH & INCOME A Report From Your Portfolio Manager...................................... 48
city skyline) FUND Results to Date........................................................... 51
Statement of Investments.................................................. 52
Statement of Assets and Liabilities....................................... 55
Statement of Operations................................................... 56
Statement of Changes in Net Assets........................................ 57
Financial Highlights...................................................... 58
Combined Notes to Financial Statements.................................... 59
Report of Independent Accountants -- Price Waterhouse LLP................. 69
Report of Ernst & Young LLP -- Independent Auditors....................... 70
Independent Auditors' Report -- KPMG Peat Marwick LLP..................... 71
Trustees and Officers.........................................Inside Back Cover
</TABLE>
<PAGE>
EVERGREEN GROWTH AND INCOME FUNDS
A REVIEW OF THE PAST YEAR
AND PROSPECTS FOR THE FUTURE
BY STEPHEN A. LIEBER, CHAIRMAN
EVERGREEN ASSET MANAGEMENT CORP.
As 1995 ended, there was a general high level of (Photo of
confidence in the national ability to control Stephen A. Lieber)
inflation. In the broadest consensus on economic
matters that we had seen in decades, we found
expectations that the United
States will have no more than a 2.5% rate of inflation through 1996.
Expectations of controlled inflation allowed interest rates to fall, as measured
by the 30-year U. S. Treasury bond, from a peak of almost 8% at the beginning of
1995, to 6% in December. Investors throughout the world normally expect a 3%
real (net after inflation) rate of return, and in some periods of greater
volatility in the inflation rate, up to a 4% real rate of return. Assuming a
2.5% inflation rate, real returns at the end of 1995 calculated to be 3.5%. If
the rate of inflation remains steadily below 2.5%, or even trends downward in
1996, it is reasonable to expect that long-term interest rates will range around
current levels or, move even lower, but with one caveat.
That caveat has to do with the value of the dollar relative to the currencies
of the other major trading nations. Since the beginning of the current major
decline in interest rates in August, the dollar has been gradually stronger
against the German mark and the Japanese yen. This has supported international
confidence in investing in dollar obligations, as has the decline in our
inflation rate. Thus, we must look at 1996 prospects for the dollar as well as
for our inflation rate. The dollar is subject to political risks as well as
economic trends.
The central political issue related to the dollar and, in the longer run, to
inflation prospects has to do with the United States budget deficit,
notwithstanding that its deficit as a percentage of Gross Domestic Product ranks
the U.S. comparative position as one of the lowest among major industrial
nations. If the current negotiations between the legislative and the executive
branches over budget legislation produce a program for deficit control which
will be widely considered likely to succeed, there should be broader foreign
confidence in our currency and less apprehension over the resurgence of
inflation.
The key challenge to the equity markets in this environment of preoccupation
with inflation control and deficit reduction is whether fiscal policy and
corporate strategies will permit sufficient growth to meet investor expectations
of increasing corporate earnings. Corporations are focused on tight cost control
to compete globally. Frequently, corporate productivity gains, particularly for
manufacturing and service industries, are obtained through employment reduction.
This has deflationary consequences that may prove positive to the bond market,
but inherently slows consumer demand and creates a drag effect on production
growth. Our conclusion is that the economic and political conditions likely to
prevail at least at the beginning of 1996, will tend to support expectations of
controlled inflation, but not allow rapid expansion of corporate profits. For
those equity investors who anticipate earnings growth from corporations
positively affected by sustained lower interest rates, the environment should be
offering satisfactory returns. For those who expect sizable growth in cyclical
industries, the likelihood is that such returns will only be obtained by
corporations with classical turnaround situations, restructuring, or the
introduction of new or higher profit-margin products. Outstanding profit gains
are likely to be readily achieved by companies with either innovative products
or services, or participation in exceptionally high-growth markets.
We see 1996 as a year of less widespread gains than those of 1995, as
optimism will likely be tempered by the realization that effective inflation
control and cost reduction by government and industry incurs the risk of slowed
growth. However, the real return-driven demand in a low-inflation environment
should support new opportunities in both bonds and equities.
1
<PAGE>
EVERGREEN GROWTH AND INCOME FUNDS
A REVIEW OF THE PAST YEAR AND
PROSPECTS FOR THE FUTURE -- (CONTINUED)
Investing for both growth and income could well prove particularly rewarding
in 1996 if the securities markets remain highly sensitive to changes in economic
direction. Frequent and sizable volatility is likely as consensus expectations
change regarding the prospects for specific industries and sectors within those
industries. Investment direction will be driven by the vast and continuing flows
of new savings into the equity markets from employee benefit plans, personal
savings, and institutional resources, all impacted by declining bond market
yield alternatives. Attention may well shift rapidly from industry to industry
as expectations change. Those companies with the implicit stability of earnings
trends to have established dividend policies and, even increasing dividend
trends, should have a lower level of downside volatility in weaker markets.
Currently, many companies which are oriented toward returns on equity,
increasingly choose to use excess cash flow to buy back their shares rather than
pay out only higher dividends. This, too, provides a support for equity prices
in volatile, downward phases of market fluctuation. We expect to see a sustained
pattern of corporate buy-backs in 1996. Our overall expectations are for a
continued slower economy in an environment of lower inflation where investors
and investment managers will have to concentrate both their new purchases and
their retention of long-term investments on those companies with superior growth
possibilities notwithstanding a possibly lackluster economy.
2
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
statue)
A REPORT FROM YOUR
PORTFOLIO MANAGER
STEPHEN A. LIEBER
Evergreen Foundation Fund completed its sixth year on (Photo of
December 31, 1995. The Fund's total return (Class Y, no-load Stephen A.
shares) for the twelve months ended December 31, was 29.7%*. Leiber)
Since inception on January 2, 1990, through December 31, 1995,
the Fund's cumulative total return was 158.8%, which is
equivalent to an average annual compound return of 17.2%.
These performance figures compare with 25.2% for the Lipper
Balanced Fund Average** of 220 balanced funds tracked by
Lipper for calendar 1995, and 82.0% (10.5% compounded) for the
average of the 57 balanced funds tracked by Lipper since the
Fund's inception. The Fund's five-year average annual
return through December 31, was 19.4%, as compared with 13.0%
for the Lipper average of 61 balanced funds. Evergreen Foundation Fund's
compound annual returns ranked #1 among those funds tracked by Lipper for both
the five-year period, and the period since its inception through December 31,
1995. The Fund ranked #17 among 220 balanced funds tracked by Lipper for the
twelve months ended December 31. Our goal has been to provide a superior return
and risk profile. The Fund has maintained its Morningstar five-star rating for
every month that Morningstar has been monitoring the Fund***. (For additional
performance information, please see page 7.)
With the strategic focus on maximization of return and minimization of risk,
the Fund required and received an investment strategy for 1995 which was
responsive to changing economic and market trends. The Fund began the year with
a 59.9% allocation of net assets to common stocks, including a small position in
convertible obligations, 28.4% in intermediate and long-term U.S. Government
obligations, and 11.7% in cash equivalent investments. By the end of the year,
these positions had shifted to 42.2% common stocks, 48.2% U.S. Government
obligations, largely long-term, and 9.6% cash equivalent investments.
The common stock position was most markedly reduced after the enormous surge
in presumptive growth stocks during July. We judged that the market had become
overly speculative and fully priced in many areas, particularly as it was
cresting on a wave of enthusiasm, marked by as many as 339 new highs on the New
York Stock Exchange in one day, as compared with 8 new lows. While we certainly
did not think the Fund portfolio was speculatively invested in over-extended
values, we nonetheless recognized that the stock market pricing structure had,
in many sectors, become vulnerable. We concentrated new investments on issues of
a more defensive type, where we believed we were still finding undervalued
growth opportunities.
The major increase in fixed income investments began in August when the
German Bundesbank announced a reduction in interest rates. We had long waited
for such a reduction, because we believed that the
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
*PERFORMANCE FOR THE FUND'S CLASS A, CLASS B, AND CLASS C SHARES IS NOT
AVAILABLE AS THOSE CLASSES WERE NOT IN EXISTENCE FOR THE FULL 12-MONTH PERIOD
ENDED 12/31/95. PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDEND AND
CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
FLUCTUATE. INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.
**LIPPER ANALYTICAL SERVICES, INC., IS AN INDEPENDENT MUTUAL FUNDS PERFORMANCE
MONITOR.
***MORNINGSTAR PROPRIETARY RATINGS REFLECT HISTORICAL RISK-ADJUSTED PERFORMANCE
AS OF 12/31/95, AND ARE SUBJECT TO CHANGE EVERY MONTH. MORNINGSTAR RATINGS ARE
CALCULATED FROM THE FUND'S THREE- AND FIVE-YEAR AVERAGE ANNUAL RETURNS IN EXCESS
OF 90-DAY TREASURY BILL RETURNS WITH APPROPRIATE FEE ADJUSTMENTS, AND A RISK
FACTOR THAT REFLECTS FUND PERFORMANCE BELOW 90-DAY TREASURY BILL RETURNS. TEN
PERCENT OF THE FUNDS IN AN INVESTMENT CATEGORY RECEIVE FIVE STARS, 22.5% RECEIVE
FOUR STARS, 35% RECEIVE 3 STARS, 22.5% RECEIVE 2 STARS, AND TEN PERCENT RECEIVE
ONE STAR. THE FUND WAS RATED WITH 2,466 FUNDS IN THE HYBRID FUNDS CATEGORY.
3
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
a statue)
A REPORT FROM YOUR
PORTFOLIO MANAGER -- (CONTINUED)
United States bond market was providing a real return (interest rate minus
inflation rate) inordinately above historical levels. The German and European
interest rates altered investment alternatives which tended to keep U.S. rates
high. With the German returns going down, we expected a consequent major and
sustained rally in the United States bond market. Our expectation was based not
only on the unusually high real rate of return, but on an evident trend of
declining economic activity and sustained low inflation rates. We made the
largest purchase of the year on indications that German rates were to be
reduced, buying $75 million of U.S. Treasury bonds, 6 1/4% due 2023 at a price
of $90.84. Our expectations proved correct, and these bonds ended the year at
$102.81. Subsequently, we added additional bonds of this maturity, and increased
other holdings from shorter to longer maturities.
The total return from the equity investments of the Fund during the calendar
year was 38.9%, and that from the fixed income investments was 23.3%. We see the
equity and fixed income opportunities as closely inter-linked in the present
environment, with the trend for equity demand likely to continue to be
established by bond market returns. The challenge facing the Fund and all
similar investments in the first part of 1996, we believe, is the prospective
impacts of a slowed economy. Our anticipation is that further cuts in short-term
interest rates can be expected to re-establish a steep yield curve, which, in
turn, may not only enhance opportunity for gains in the short-to-intermediate
sectors of the bond markets, but also in equity markets as fixed income
competition from yields is reduced. The stock market will face the more
difficult challenge of sustained earnings in a slowed economy. The implications
of corporate employment cuts, together with prospective Federal budget cuts and
employment reduction, will leave the economy's growth in question. Where strong
profits growth can be shown by corporations with the evident strength to sustain
that growth, we anticipate good demand for their equities.
The equity structure of the Fund's portfolio has been oriented to this
expected environment. We particularly focused on interest sensitivity,
especially those companies and institutions whose profits are likely to benefit
from lower rates. Thus, during the year, we built our holdings in Federal
National Mortgage Association to become the largest in the Fund, with over 2.4%
of net assets and 5.6% of equity assets at year-end. A number of specialized
participants in the mortgage industry were added to and increased in the
portfolio during the year. These produced sizable returns, led by MGIC
Investment Corp., up 71.2%, and Countrywide Credit Industries, Inc., up 68.0%.
These trends also encouraged us to expand the Fund's investment in banks which
might benefit from the prospective steeper yield curve opportunities, with
particular emphasis on those regional banks which we believe are likely
candidates for merger and acquisition opportunities. The Fund's twenty-four bank
holdings provided an overall (as weighted) return of 50.0% during the year, led
by 85.2% for Baybanks, Inc. Several of the Fund's bank holdings provided gains
well in excess of 50%. These included: Meridian Bancorp, Inc., 78.4%; Bank of
Boston Corp., 78.1%; First Security Corp., 69.3%; and AmSouth Bancorporation,
59.8%. The benefits of the continuing consolidation of the banking industry were
also seen, especially with the acquisition proposal for Meridian Bancorp, Inc.
by CoreStates Financial Corp. After the acquisition was announced, we sold a
portion of our position (purchased March, 1994) for a 46.3% gain to the Fund.
Baybanks, Inc. has received an acquisition bid from Bank of Boston Corp., and
has appreciated 207.0% from the September, 1992, purchase at $32 per share,
through year-end 1995. Victoria Bankshares, Inc. received an acquisition offer
by Norwest Corp., for an appreciation of 51.6% from the Fund's first purchase on
July, 1993, through December 31, 1995+.
+ THE FUND MAY BE NEGATIVELY IMPACTED SHOULD THESE ACQUISITIONS NOT BE
COMPLETED.
4
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
a statue)
A REPORT FROM YOUR
PORTFOLIO MANAGER -- (CONTINUED)
The Fund's positioning in health care companies during their sell-off in 1993
when many feared that their profitability would be impaired, paid off handsomely
in 1995. These included positions in Eli Lilly & Co., 77.9%, Merck & Co., 70.9%,
Pfizer, Inc., 62.8%, and Johnson & Johnson, 56.0%.
Technology stocks in the portfolio, while few in number, provided excellent
gains during the first half of the year, but, even after the decline in the
second half, still sustained overall impressive returns for the full year. The
Fund's largest technology holding, and second largest holding overall, Intel
Corp., appreciated 74.5% during the year. While having a limited number of
commitments in this field, we took advantage of their sharp sell-off toward the
end of the year to modestly increase our holdings in companies where we think
there is a very high probability of sustained, impressive earnings growth in
1996 and beyond, especially those where the growth was cautiously appraised by
the market. The largest new holding in this area during the year, and increased
toward the end of the year, was in the shares of Hewlett-Packard Co. The
outstanding gain among technology companies for the portfolio through the year
was in the shares of Cisco Systems, Inc., which appreciated 112.0%.
Investment in the shares of real estate and home building companies was also
part of our effort to benefit from the opportunities of interest rate
sensitivity. The largest gain in this group came from the shares of Continental
Homes Holding Corp. which appreciated 114.6%. A few declines were also seen,
especially during the period of the tax-loss selling at the year-end, most
notably in the shares of Tucker Properties Corp., an underperforming retail
shopping center company which was in the process of a merger.
Many of the holdings which we had earlier seen with unrecognized growth
opportunities, developed well during the year. Scott Paper Co., for example, not
only completed its own sizable restructuring and overhead reduction program, but
also finally merged into Kimberly-Clark Corp. Thus, the Fund's original holdings
(purchased March, 1991) with an average cost of $19.95 realized a gain of 212.3%
upon completion of the acquisition. We also held Kimberly-Clark Corp. and, that
too, benefited by the possibilities of the combination, rising 62.5% during the
year. Armstrong World Industries Inc.'s corporate downsizing and cost
reduction program led us to purchase the shares in 1994, and in 1995 they rose
62.4%.
While predominantly investing in larger, well-known companies, the Fund also
has a substantial number of holdings among smaller companies which we considered
to be special situation growth opportunities. During the year, several of these
provided exceptional appreciation, led by Nautica Enterprises, Inc., up 116.5%,
Seitel, Inc., 9% convertible bonds due 3/31/02, up 67.6%, Consolidated Products,
Inc., up 66.5%, Shared Medical Systems Corp., up 64.1%, and Praxair, Inc., up
63.8%.
Our selections did not all provide appreciation. Most of the companies where
there was adversity and price declines were among the Fund's smaller holdings.
The weakest of all was a Mexican hotel and construction conglomerate, purchased
earlier in the year after the Mexican currency breakdown, Grupo Sidek, S.A. de
C.V., which declined 78.6% to year-end. Even the relatively high quality,
conservatively positioned Telefonos de Mexico, S.A. de C.V. declined 19.0%. In
the real estate area, the weak holdings were the aforementioned Tucker
Properties Corp., down 31.5%, Glimcher Realty Trust, down 21.0%, and Arbor
Property Trust, down 19.6%. Each of these real estate issues also, however,
provided very large dividend income, somewhat offsetting declines. We look to
underlying values to bring about a recovery and eventual gain. For example,
5
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
a statue)
A REPORT FROM YOUR
PORTFOLIO MANAGER -- (CONTINUED)
Roadway Services, Inc. declined 11.5% during the year, but announced a new
program of corporate restructuring into two units which will effectively take
the loss-making subsidiary out of the consolidated figures and show the
underlying health of the main earning asset.
The Fund was very defensively structured at year-end; positioned to benefit
from anticipated further declines in interest rates, with very limited
vulnerability to cyclical industries, holding predominantly high marketable
companies with well established growth trends, and companies with high
probabilities of business and profits turnaround. With sizable liquidity in cash
equivalents and a number of intermediate term U.S. government bond holdings,
resources are available to buy stocks on either specific issue or general market
weakness. We look forward during the coming months to selectively enlarge the
equity position by seeking to invest in companies which will have outstanding
profits outlook when compared with a generally slowly growing economy. An
intensive securities research and analysis effort is being maintained by our
enlarged research staff. We will maintain a quick responsiveness to changing
conditions, ready not only to shift holdings of equities where appropriate, but
also asset allocation on a continuing basis.
In closing, I express the appreciation of our entire research and portfolio
management group to the large number of new shareholders who have joined us in
the past year, as well as those who have supported the development of this Fund
over the years since its inception. We are dedicated to the goal of providing
the foundation of your investment portfolio and are appreciative of your trust.
6
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
a statue)
RESULTS TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN FOUNDATION FUND
The graphs below compare a $10,000 investment in the Evergreen Foundation
Fund (Class A, Class B, Class C and Class Y Shares) with a similar investment in
the S&P 500 and Lipper Balanced Funds Average Indexes ("Indexes").
(Four line graphs appear here with the following plot points:)
CLASS A
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=23.6%
1/3/95* 3/31/95 6/30/95 9/30/95 12/31/95
EVERGREEN FOUNDATION FUND
LIPPER BALANCED FUNDS AVERAGE
S&P 500
CLASS B
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=23.7%
1/3/95* 3/31/95 6/30/95 9/30/95 12/31/95
EVERGREEN FOUNDATION FUND
LIPPER BALANCED FUNDS AVERAGE
S&P 500
CLASS C
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=27.5%
1/3/95* 3/31/95 6/30/95 9/30/95 12/31/95
EVERGREEN FOUNDATION FUND
LIPPER BALANCED FUNDS AVERAGE
S&P 500
CLASS Y
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=29.7%
FIVE YEAR=19.4%
SINCE INCEPTION=17.2%
1/1/90* 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
EVERGREEN FOUNDATION FUND
LIPPER BALANCED FUNDS AVERAGE
S&P 500
*Commencement of class operations.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE RESULTS. MUTUAL FUNDS
ARE
NOT OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY INSURED.
For the purposes of the graphs and the accompanying tables, it has been
assumed that (a) the maximum sales charge of 4.75% was deducted from the initial
$10,000 investment in Class A Shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the investment in Class B
and Class C Shares, assuming full redemption on December 31, 1995; (c) all
recurring fees (including investment advisory fees net of fee waiver) were
deducted; and (d) all dividends and distributions were reinvested.
The Indexes are unmanaged indexes and include the reinvestment of income,
but do not reflect the payment of transaction costs and advisory fees associated
with an investment in the Fund.
7
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
a statue) STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 41.1%
BANKS -- 6.6%
16,600 AmSouth Bancorporation.............. $ 670,225
40,000 BancFirst Corp...................... 745,000
133,700 Bankers Trust New York
Corp................................ 8,891,050
252,700 Bank of Boston Corp................. 11,687,375
50,000 Barnett Banks, Inc.................. 2,950,000
65,000 Baybanks, Inc....................... 6,386,250
30,500 Cape Cod Bank & Trust Co............ 1,204,750
20,000 CB Bancshares, Inc.................. 580,000
55,000 Central Fidelity Banks, Inc......... 1,760,000
10,000 Citicorp............................ 672,500
48,500 Crestar Financial Corp.............. 2,867,562
52,500 Family Bancorp...................... 938,438
90,138 First Chicago NBD Corp.............. 3,560,451
3,000 First Empire State Corp............. 654,000
181,800 First of America Bank Corp.......... 8,067,375
5,000 First Security Corp................. 192,500
58,500 First Union Corp.**................. 3,254,062
70,801 Hibernia Corp. Cl. A................ 761,111
90,000 Meridian Bancorp, Inc............... 4,185,000
25,000 Mississippi Valley
Bancshares, Inc..................... 646,875
50,000 Morgan (J.P.) & Co., Inc............ 4,012,500
92,000 Seacoast Banking Corporation of
Florida Cl. A....................... 2,001,000
32,500 U.S. Trust Corp..................... 1,616,875
18,000 Victoria Bankshares, Inc............ 621,000
68,925,899
BUSINESS EQUIPMENT & SERVICES -- .2%
26,000 International Business Machines
Corp................................ 2,385,500
CHEMICALS -- 1.0%
40,000 Fuller (H.B.) Co.................... 1,390,000
40,000 Nalco Chemical Co................... 1,205,000
100,000 PPG Industries, Inc................. 4,575,000
20,000 Praxair, Inc........................ 672,500
90,000 Schulman (A.), Inc.................. 2,025,000
15,000 Sigma-Aldrich Corp.................. 742,500
10,610,000
CONSUMER PRODUCTS &
SERVICES -- 3.6%
85,000 American Greetings Corp.
Cl. A............................... 2,348,125
61,600 Armstrong World Industries Inc...... 3,819,200
<CAPTION>
SHARES VALUE
<C> <S> <C>
CONSUMER PRODUCTS & SERVICES --
(CONTINUED)
80,000 Block, (H & R) Inc.................. $ 3,240,000
23,311 Consolidated Products, Inc.......... 343,840
40,000 CPC International Inc............... 2,745,000
22,500 Kellwood Co......................... 458,437
118,800 Kimberly-Clark Corp................. 9,830,700
30,000* Marisa Christina, Inc............... 510,000
15,000 Minnesota Mining & Manufacturing
Co.................................. 993,750
34,050* Nautica Enterprises, Inc............ 1,489,688
94,500 Procter & Gamble Co................. 7,843,500
7,200* Schweitzer-Mauduit
International, Inc.................. 166,500
60,700 Whirlpool Corp...................... 3,232,275
37,021,015
DIVERSIFIED INDUSTRIAL
COMPANIES -- .1%
20,000 Grace (W.R.) & Co................... 1,182,500
ELECTRICAL EQUIPMENT &
ELECTRONICS -- 4.3%
50,000 AMP Inc............................. 1,918,750
40,000* Applied Materials, Inc.............. 1,575,000
161,511 Avnet, Inc.......................... 7,227,617
25,000* Cisco Systems, Inc.................. 1,865,625
51,000 Hewlett-Packard Co.................. 4,271,250
337,200 Intel Corp.......................... 19,136,100
3,000* Lam Research Corp................... 137,250
49,000 Micron Technology, Inc.............. 1,941,625
20,000 Motorola, Inc....................... 1,140,000
94,000 Texas Instruments, Inc.............. 4,864,500
44,077,717
ENERGY -- .2%
30,000 Exxon Corp.......................... 2,403,750
FINANCE & INSURANCE -- 5.6%
57,300 AMBAC, Inc.......................... 2,685,937
50,000 American International Group, Inc... 4,625,000
148,350 Countrywide Credit Industries,
Inc................................. 3,226,613
20,000 Donaldson, Lufkin & Jenrette, Inc... 625,000
10,000 Federal Home Loan Mortgage Corp..... 835,000
197,000 Federal National Mortgage
Association......................... 24,452,625
65,000 Hartford Steam Boiler Inspection &
Insurance Co........................ 3,250,000
80,000 John Alden Financial Corp........... 1,670,000
</TABLE>
8
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
a statue) STATEMENT OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
FINANCE & INSURANCE -- (CONTINUED)
119,000 John Nuveen Co. (The) Cl. A......... $ 2,945,250
40,000 MBIA, Inc........................... 3,000,000
60,000 Merrill Lynch & Co., Inc............ 3,060,000
120,600 MGIC Investment Corp................ 6,542,550
30,300 Raymond James Financial, Inc........ 640,088
57,558,063
HEALTH CARE PRODUCTS &
SERVICES -- 5.0%
107,500* Alza Corp........................... 2,660,625
50,000 Bristol Myers Squibb Co............. 4,293,750
175,000 Caremark International, Inc......... 3,171,875
40,000 Columbia/HCA Healthcare
Corp................................ 2,030,000
10,000* Elan Corp. Plc. ADR................. 486,250
49,275 Guidant Corp........................ 2,081,869
51,000 Johnson & Johnson................... 4,366,875
65,762 Lilly (Eli) & Co.................... 3,699,112
65,000* Lincare Holdings, Inc............... 1,625,000
50,000* Living Centers of America, Inc...... 1,750,000
69,600 McKesson Corp....................... 3,523,500
109,758 Merck & Co., Inc.................... 7,216,588
50,000 Pfizer, Inc......................... 3,150,000
86,000 Schering-Plough Corp................ 4,708,500
9,200 Shared Medical Systems Corp......... 500,250
1,750* Therapeutic Discovery Corp.
Units+.............................. 12,688
87,500 U.S. Healthcare, Inc................ 4,068,750
20,000 Warner Lambert Co................... 1,942,500
51,288,132
INDUSTRIAL, COMMERCIAL GOODS &
SERVICES -- 3.3%
190,000 Chrysler Corp....................... 10,521,250
210,000 General Electric Co................. 15,120,000
53,000 PHH Corp............................ 2,477,750
34,000 Roadway Services, Inc............... 1,661,750
34,500 Snap-On, Inc........................ 1,561,125
6,000* Strattec Security Corp.............. 108,000
44,900 Superior Surgical Manufacturing Co.,
Inc................................. 426,550
40,000 Trinity Industries, Inc............. 1,260,000
21,000..... Willamette Industries, Inc.......... 1,181,250
34,317,675
<CAPTION>
SHARES VALUE
<C> <S> <C>
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- .4%
10,000 Capital Cities/ABC, Inc............. $ 1,233,750
30,000 Disney (Walt) Co. (The)............. 1,770,000
2,500* Lin Television Corp................. 74,375
25,000 Time Warner, Inc.................... 946,875
2,000 Washington Post Co.................. 564,000
4,589,000
REAL ESTATE -- 6.5%
30,000* Alexander's, Inc.................... 2,085,000
53,400 Arbor Property Trust................ 327,075
14,000 Associated Estates Realty Corp...... 301,000
93,500 Bay Apartment Communities, Inc...... 2,267,375
35,000 Cali Realty Corp.................... 765,625
124,500 Capstead Mortgage Corp.............. 2,847,937
36,500 Carr Realty Corp.................... 889,688
40,000 Chelsea GCA Realty, Inc............. 1,200,000
100,000 Columbus Realty Trust............... 1,937,500
139,300 Continental Homes Holding Corp...... 3,430,262
280,300 Crown American Realty Trust......... 2,207,363
65,000 CWM Mortgage Holdings, Inc.......... 1,105,000
120,000 DeBartolo Realty Corp............... 1,560,000
105,200 Essex Property Trust, Inc........... 2,025,100
114,300 Factory Stores of America, Inc...... 1,500,187
110,000 FelCor Suite Hotels, Inc............ 3,052,500
100,200 Gables Residential Trust............ 2,292,075
100,000 Glimcher Realty Trust............... 1,725,000
147,000* Grupo Sidek, S.A. de C.V. Sponsored
ADR................................. 330,750
281,216 HGI Realty Inc...................... 6,432,816
50,000 Highwoods Properties, Inc........... 1,412,500
5,000 Irvine Apartment
Communities, Inc.................... 96,250
30,000 JP Realty, Inc...................... 656,250
140,000 Kranzco Realty Trust................ 2,065,000
15,000 Liberty Property Trust.............. 311,250
35,000 Macerich Co. (The).................. 700,000
20,000* M/I Schottenstein Homes, Inc........ 235,000
95,000* Miles Homes, Inc.................... 142,500
65,000 Mills Corp.......................... 1,105,000
126,200 North American Mortgage Co.......... 2,681,750
10,000 Oasis Residential, Inc.............. 227,500
40,000 Patriot American
Hospitality, Inc.................... 1,030,000
100,000 Post Properties, Inc................ 3,187,500
90,000 Public Storage, Inc................. 1,710,000
</TABLE>
9
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
a statue) STATEMENT OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
REAL ESTATE -- (CONTINUED)
65,000 Security Capital Industrial
Trust............................... $ 1,137,500
111,992 Security Capital Pacific
Trust............................... 2,211,842
100,000 Sovran Self Storage, Inc............ 2,637,500
50,000 Spieker Properties, Inc............. 1,256,250
52,500 Starwood Lodging Trust++............ 1,561,875
32,900 Storage USA, Inc.................... 1,073,363
57,900 Tanger Factory Outlet Centers,
Inc................................. 1,447,500
50,000 Taubman Centers, Inc................ 500,000
72,900 Tucker Properties Corp.............. 637,875
25,000 Urban Shopping Centers, Inc......... 534,375
66,840,833
RETAILING & DISTRIBUTION -- 1.3%
50,000* Borders Group, Inc.................. 925,000
73,900 Fingerhut Companies., Inc........... 1,025,363
110,000 Lowe's Companies, Inc............... 3,685,000
155,400 Mercantile Stores Co., Inc.......... 7,187,250
12,822,613
THRIFT INSTITUTIONS -- .4%
93,375 BSB Bancorp, Inc.................... 2,311,031
46,100 Standard Federal Bancorporation..... 1,815,187
4,126,218
TRANSPORTATION -- .6%
30,000 Burlington Northern Santa Fe........ 2,340,000
20,000 Conrail Inc......................... 1,400,000
40,000 Union Pacific Corp.................. 2,640,000
6,380,000
UTILITIES -- ELECTRIC -- .4%
125,000 Allegheny Power System, Inc......... 3,578,125
32,000 TNP Enterprises, Inc................ 600,000
4,178,125
UTILITIES -- TELEPHONE -- 1.6%
280,000 GTE Corp............................ 12,320,000
50,000 Southern New England Tele-
communications, Corp................ 1,987,500
80,000 Telefonos de Mexico, S.A. de C.V.
Sponsored ADR....................... 2,550,000
16,857,500
OTHER SECURITIES -- .0%(A).......... 304,375
TOTAL COMMON STOCKS
(COST $351,896,475)............ 425,868,915
<CAPTION>
SHARES VALUE
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS -- .2%
ELECTRICAL EQUIPMENT &
ELECTRONICS -- .2%
100,000 Westinghouse Electric Corp.
$1.30 Cumulative Series C........... $ 1,619,000
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $1,568,800).............. 1,619,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CONVERTIBLE DEBENTURES -- 1.0%
AUTOMOTIVE EQUIPMENT &
MANUFACTURING -- .1%
$ 1,000,000 Exide Corp.
2.90%, 12/15/05................. 722,500
BUILDING & CONSTRUCTION -- .1%
500,000 Engle Homes, Inc.
7.00%, 3/1/03................... 435,000
CONSUMER PRODUCTS &
SERVICES -- .5%
1,770,000 Bell Sports Corp.
4.25%, 11/15/00................. 1,236,788
4,386,500 Time Warner, Inc.
8.75%, 1/10/15.................. 4,545,511
5,782,299
ENERGY -- .1%
400,000 Seitel, Inc.
9.00%, 3/31/02.................. 1,518,520
ENVIRONMENTAL SERVICES -- .0%
(A)
300,000 Weston (Roy F.) Inc.
7.00%, 4/15/02.................. 261,000
HEALTH CARE PRODUCTS &
SERVICES -- .1%
750,000 Maxxim Medical, Inc.
6.75%, 3/1/03................... 772,500
200,000 Regency Health Services, Inc.
6.50%, 7/15/03.................. 198,000
970,500
RETAILING & WHOLESALE -- .1%
800,000 Big B, Inc.
6.50%, 3/15/03.................. 798,000
TOTAL CONVERTIBLE DEBENTURES
(COST $10,131,472)......... 10,487,819
</TABLE>
10
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
a statue) STATEMENT OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 48.1%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- .1%
$ 1,000,000 8.10%, 8/12/19.................. $1,210,948
TENNESSEE VALLEY
AUTHORITY -- 1.8%
8,000,000 7.25%, 7/15/43.................. 8,296,800
10,000,000 7.85%, 6/15/44.................. 10,680,000
18,976,800
U.S TREASURY BONDS -- 42.4%
100,000,000 6.25%, 8/15/23.................. 102,812,500
100,000,000 7.125%, 2/15/23................. 114,250,000
49,000,000 7.25%, 5/15/16.................. 55,967,114
7,000,000 7.625%, 11/15/22................ 8,456,875
4,000,000 8.00%, 11/15/21................. 5,007,500
50,000,000 8.125%, 8/15/19................. 62,890,600
25,000,000 8.125%, 5/15/21................. 31,648,400
30,000,000 8.375%, 8/15/08................. 35,090,580
10,000,000 8.50%, 2/15/20.................. 13,075,000
7,000,000 10.00%, 5/15/10................. 9,139,375
1,000,000 10.625%, 8/15/15................ 1,532,500
439,870,444
U.S. TREASURY NOTES -- 3.8%
15,000,000 6.50%, 8/15/05.................. 15,984,375
13,000,000 7.25%, 5/15/04.................. 14,466,543
8,000,000 7.25%, 8/15/04.................. 8,900,000
39,350,918
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(COST $465,461,944)........ 499,409,110
SHORT-TERM INVESTMENTS -- 8.5%
COMMERCIAL PAPER -- 4.0%
2,900,000 BMW U.S. Capital Corp. 5.71%,
1/12/96......................... 2,894,940
2,000,000 Columbia University
5.80%, 1/12/96.................. 1,996,455
1,300,000 DuPont (E.I.) De Nemours
5.71%, 1/3/96................... 1,299,588
5,800,000 Gannett Co., Inc.
5.80%, 1/17/96.................. 5,785,049
7,000,000 Liberty Mutual Capital Corp.
5.65%, 2/1/96................... 6,965,943
2,500,000 Mid-South Capital Corp.
5.82%, 1/8/96................... 2,497,171
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM INVESTMENTS -- CONTINUED
COMMERCIAL PAPER -- (CONTINUED)
$ 3,300,000 Newell Co.
5.72%, 2/2/96................... $ 3,283,221
12,700,000 Sherwood Medical Co.
5.70%, 1/31/96.................. 12,639,675
3,900,000 Toronto Dominion Holdings
5.56%, 1/22/96.................. 3,887,351
41,249,393
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 4.5%
8,000,000 Federal Farm Credit Bank 5.65%,
1/16/96......................... 7,981,167
Federal Home Loan Mortgage
Association
23,800,000 5.41%, 2/13/96.................. 23,646,206
4,500,000 5.46%, 1/22/96.................. 4,485,667
2,400,000 5.48%, 1/31/96.................. 2,389,040
8,700,000 Federal National Mortgage
Association
5.64%, 1/9/96................... 8,689,096
47,191,176
TOTAL SHORT-TERM INVESTMENTS
(COST $88,440,569)......... 88,440,569
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
(COST
$917,499,260)....... 98.9% 1,025,825,413
OTHER ASSETS AND
LIABILITIES -- NET... 1.1 11,863,443
NET ASSETS............. 100.0% $1,037,688,856
</TABLE>
* Non-income producing securities.
** At December 31, 1995 the Fund owned 58,500 shares of common stock of First
Union at a cost of $2,358,441. During the year ended December 31, 1995, the
Fund earned $114,660 in dividend income from this investment. These were
purchased by the Fund prior to the acquisition of the investment adviser and
Lieber & Company by First Union.
+ Consists of one share Therapeutic Discovery Corp. common and one Alza Corp.
warrant exercisable for the purchase of 1/8 share Alza Corp. common at $65
per full share from 6/11/96 through 12/31/99.
++ Consists of one share Starwood Lodging Trust and one share Starwood Lodging
Corp. common stock.
(a) Less than one tenth of a percent.
ADR -- American Depositary Receipts
See accompanying notes to financial statements.
11
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
a statue) STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $917,499,260)......................................................... $1,025,825,413
Receivable for securities sold.............................................................................. 37,354,667
Dividends and interest receivable........................................................................... 11,865,163
Receivable for Fund shares sold............................................................................. 6,739,767
Prepaid expenses............................................................................................ 42,309
Total assets.......................................................................................... 1,081,827,319
LIABILITIES:
Due to custodian bank....................................................................................... 228,699
Payable for securities purchased............................................................................ 41,767,439
Accrued Advisory fee........................................................................................ 717,479
Accrued expenses............................................................................................ 665,310
Payable for Fund shares repurchased......................................................................... 561,419
Distribution fee payable.................................................................................... 198,117
Total liabilities..................................................................................... 44,138,463
NET ASSETS..................................................................................................... $1,037,688,856
NET ASSETS CONSIST OF:
Paid-in capital............................................................................................. $ 927,083,910
Undistributed net investment income......................................................................... 271,849
Accumulated net realized gain on investments................................................................ 2,006,944
Net unrealized appreciation of investments.................................................................. 108,326,153
Net assets............................................................................................ $1,037,688,856
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($107,112,642/7,085,085 shares of beneficial interest outstanding)........................... $ 15.12
Sales charge -- 4.75% of offering price..................................................................... .75
Maximum offering price................................................................................ $ 15.87
Class B Shares ($296,354,743/19,661,616 shares of beneficial interest outstanding).......................... $ 15.07
Class C Shares ($11,359,633/753,726 shares of beneficial interest outstanding).............................. $ 15.07
Class Y Shares ($622,861,838/41,157,032 shares of beneficial interest outstanding).......................... $ 15.13
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
a statue) STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends.................................................................................... $ 9,786,123
Interest..................................................................................... 21,250,511
Total investment income................................................................ 31,036,634
EXPENSES:
Advisory fee................................................................................. $5,387,186
Distribution fee -- Class A Shares........................................................... 116,677
Distribution fee -- Class B Shares........................................................... 972,541
Shareholder services fee -- Class B Shares................................................... 324,180
Distribution fee -- Class C Shares........................................................... 37,823
Shareholder services fee -- Class C Shares................................................... 12,608
Transfer agent fee........................................................................... 599,501
Registration and filing fees................................................................. 304,929
Custodian fee................................................................................ 167,163
Reports and notices to shareholders.......................................................... 91,048
Professional fees............................................................................ 86,428
Trustees' fees and expenses.................................................................. 13,247
Insurance.................................................................................... 6,037
Miscellaneous................................................................................ 30,523
8,149,891
Less: Expense reimbursement.................................................................. (11,064)
Net expenses........................................................................... 8,138,827
Net investment income........................................................................... 22,897,807
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments............................................................. 9,385,074
Net change in unrealized appreciation of investments......................................... 121,111,375
Net gain on investments......................................................................... 130,496,449
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................ $153,394,256
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
a statue) STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................................. $ 22,897,807 $ 10,250,344
Net realized gain on investments.................................................. 9,385,074 9,121,276
Net change in unrealized appreciation (depreciation) of investments............... 121,111,375 (22,489,557)
Net increase (decrease) in net assets resulting from operations................ 153,394,256 (3,117,937)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME:
Class A Shares.................................................................... (1,908,188) --
Class B Shares.................................................................... (4,488,521) --
Class C Shares.................................................................... (170,820) --
Class Y Shares.................................................................... (16,164,235) (10,200,009)
Total distributions to shareholders from net investment income................. (22,731,764) (10,200,009)
NET REALIZED GAIN ON INVESTMENTS:
Class A Shares.................................................................... (993,303) --
Class B Shares.................................................................... (2,824,116) --
Class C Shares.................................................................... (113,415) --
Class Y Shares.................................................................... (7,827,124) (6,648,790)
Total distributions to shareholders from net realized gain on investments...... (11,757,958) (6,648,790)
Total distributions to shareholders............................................ (34,489,722) (16,848,799)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold......................................................... 652,779,207 176,755,199
Proceeds from reinvestment of distributions....................................... 32,843,419 15,798,795
Payment for shares redeemed....................................................... (98,358,101) (81,458,191)
Net increase from Fund share transactions...................................... 587,264,525 111,095,803
Net increase in net assets..................................................... 706,169,059 91,129,067
NET ASSETS:
Beginning of year................................................................. 331,519,797 240,390,730
End of year (including undistributed net investment income of $271,849 and
$105,806, respectively)......................................................... $ 1,037,688,856 $ 331,519,797
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
(Photo of EVERGREEN FOUNDATION FUND
a statue) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JANUARY 3, 1995* THROUGH CLASS Y SHARES
DECEMBER 31, 1995
CLASS A CLASS B CLASS C YEAR ENDED DECEMBER 31,
SHARES SHARES SHARES 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......................... $12.24 $12.24 $12.24 $12.27 $13.12 $11.98
Income (loss) from investment operations:
Net investment income....................................... .44 .36 .34 .51 .42 .31
Net realized and unrealized gain (loss) on investments...... 3.14 3.09 3.09 3.07 (.57) 1.55
Total from investment operations.......................... 3.58 3.45 3.43 3.58 (.15) 1.86
Less distributions to shareholders from:
Net investment income....................................... (.47) (.39) (.37) (.49) (.42) (.31)
Net realized gain on investments............................ (.23) (.23) (.23) (.23) (.28) (.41)
Total distributions....................................... (.70) (.62) (.60) (.72) (.70) (.72)
Net asset value, end of period............................... $15.12 $15.07 $15.07 $15.13 $12.27 $13.12
TOTAL RETURN+................................................ 29.7% 28.7% 28.5% 29.7% (1.1%) 15.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)..................... $107 $296 $11 $623 $332 $240
Ratios to average net assets:
Expenses.................................................... 1.33%++# 2.07%++ 2.23%++# 1.07% 1.14% 1.20%
Net investment income....................................... 3.73%++# 2.99%++ 2.83%++# 3.89% 3.51% 2.81%
Portfolio turnover rate...................................... 28% 28% 28% 28% 33% 60%
<CAPTION>
1992 1991
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......................... $10.75 $8.95
Income (loss) from investment operations:
Net investment income....................................... .27 .33
Net realized and unrealized gain (loss) on investments...... 1.83 2.77
Total from investment operations.......................... 2.10 3.10
Less distributions to shareholders from:
Net investment income....................................... (.24) (.33)
Net realized gain on investments............................ (.63) (.97)
Total distributions....................................... (.87) (1.30)
Net asset value, end of period............................... $11.98 $10.75
TOTAL RETURN+................................................ 20.0% 36.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)..................... $64 $11
Ratios to average net assets:
Expenses.................................................... 1.40% 1.20%
Net investment income....................................... 2.93% 2.86%
Portfolio turnover rate...................................... 127% 178%
</TABLE>
* Commencement of class operations.
+ Total return is calculated for the periods indicated and is not annualized.
Initial sales charge or contingent deferred sales charges are not reflected.
++ Annualized. Due to the recent commencement of their offering, the ratios for
Class A, Class B and Class C shares are not necessarily comparable to that of
Class Y shares and are not necessarily indicative of future ratios.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of operating expenses and net investment income to average net assets would
have been the following:
<TABLE>
<CAPTION>
JANUARY 3, 1995*
THROUGH
DECEMBER 31, 1995
CLASS A CLASS C
SHARES SHARES
<S> <C> <C>
Expenses................................................................... 1.34% 2.37%
Net investment income...................................................... 3.72% 2.69%
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
(Photo of EVERGREEN BALANCED FUND
stock certificates)
A REPORT FROM YOUR
PORTFOLIO MANAGER
DEAN HAWES
Evergreen Balanced Fund enjoyed an excellent year in 1995, (Photo of
both on an absolute basis and relative basis. The Fund's Dean Hawes)
12-month total returns through December 31, 1995, for all
classes of shares exceeded that of the Lipper Balanced Funds
Average of the 220 balanced funds tracked by Lipper Analytical
Services during that time*. Fueled by declining interest rates
and continued strong corporate earnings growth, the stock
market posted returns not seen in 20 years and the bond market
posted returns not seen in 10 years**. The Fund was positioned
to capitalize on the financial markets' strong returns as it
carried relatively little cash equivalent investments during
the year.
Fifty-five to sixty percent of the Fund's net assets remained
in equities for most of 1995, with the balance predominately in bonds. The Fund
focused on financial stocks that could benefit from the decline in interest
rates, and de-emphasized consumer cyclical stocks that would struggle with
industry over-capacity and a debt-laden consumer. Both strategies added value.
Finance was the Fund's best performing sector, while consumer cyclicals were the
worst during 1995. The Fund's overall fixed income strategy was to maintain an
average maturity somewhat longer than our benchmark index, the Lehman
Government/Corporate Bond Index. Our belief that interest rates would decline
proved correct, but we did not expect yields on U.S. Treasury bonds to fall
almost 25% in just 12 months. Stock selection within the Fund proved favorable
as did our maturity structure which was somewhat longer than our benchmark
index.
Looking ahead, we believe that the economic slowdown that began in 1995
should continue well into 1996. With the exception of technology, most sectors
of the U.S. economy are now experiencing very little growth. Industrial activity
has weakened, inventory levels are high, and many consumers will likely remain
subdued as they cope with relatively high levels of debt and slow income growth.
Inflation, at 2.74% for 1995**, seems unlikely to gain much momentum in this
environment. We believe the current period of economic sluggishness should
persist for a few quarters, but risk of recession is low. By late spring, the
drag from the inventory correction should have run its course. Further declines
in short-term interest rates and a second half of 1996 economic recovery of our
trading partners (Europe, Japan and Mexico) should have our economy on solid
footing by late 1996.
The fixed income portion of the Fund during the first half of 1995 was
positioned to mirror the duration and maturity of the Lehman
Government/Corporate Bond Index. For 1995 as a whole, the Fund's duration was
5.8 years and its average maturity was 9.9 years. During August and October, the
average maturity of the Fund's bond portfolio was lengthened. Our view was that
the economic activity was decelerating and that interest rates would decline
further. The duration of the bond portfolio at year-end was 5.8 years and the
average maturity was 10.8 years. As we enter 1996, the bond portfolio continues
to be positioned to benefit from stable to declining interest rates. During
1995, we increased the percentage of U.S. Treasury and Government issues from
45% to 63% of bonds. Due to concerns associated with a weakening economy, yield
spreads between Treasury and corporate issues narrowed to levels that biased us
toward Treasuries.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
*LIPPER ANALYTICAL SERVICES, INC., IS AN INDEPENDENT MUTUAL FUNDS PERFORMANCE
MONITOR.
**SOURCE: IBBOTSON AND ASSOCIATES
16
<PAGE>
(Photo of EVERGREEN BALANCED FUND
stock certificates)
A REPORT FROM YOUR
PORTFOLIO MANAGER -- (CONTINUED)
Fiscal policy -- especially when the budget accord is passed -- is
restrictive, and monetary policy remains neutral at best. We expect further
interest rates cut in 1996. During the past 40 years, the Fed Funds rate has
averaged 1.75% above the inflation rate, which was 2.74% for 1995. While we are
not forecasting a 4.49% (2.74% plus 1.75%) Fed Funds rate, there obviously is
ample room for the Fed to lower rates from the current 5.25% rate. Weakening
corporate and consumer loan demand also imply lower interest rates. Financial
institutions should become larger buyers of bonds. This increasing demand should
help keep yields biased to the downside. Driven by continued earnings gains and
a precipitous drop in interest rates, major market indices surged to new highs
during 1995. As the year concluded, the S&P 500 Reinvested Index+ and the Dow
Jones Industrial Average+ were each up over 36%. Earnings gains in 1996 will
moderate and likely be up no more than one-half as much as in 1995. However, the
market can still climb higher if inflation remains benign, which is our belief.
Strategically, the Fund is emphasizing capital goods companies that derive a
significant portion of their sales from abroad. Textron, General Electric and
Emerson Electric are three high quality and well managed companies that
exemplify this theme. Secondly, the corporate restructuring themes should
continue to prevail in 1996. In this area, we remain partial to banks and
insurance companies, along with railroads and aerospace corporations. We believe
these industries will continue to aggressively pursue lowering their cost of
doing business during 1996. Boeing and Travelers are two companies currently
held whose returns for 1995 far exceeded that of the S&P 500 and had positive
impacts on the Fund's performance. The financial sector was the Fund's most
heavily weighted sector through all of 1995 and also the sector most responsible
for boosting the Fund's aggregate performance. Going forward, we are cognizant
that the current bull cycle is mature. We have thus, modestly increased the
weightings in energy and utility stocks to near a market weighting. Their high
dividend yields should help provide somewhat of a cushion should the general
market experience a setback during the spring months.
Current asset allocation as a percent of net assets is 60% stocks and 38%
bonds. The 5% previously held in cash has been moved to bonds due to our view
that money market rates will continue to decline.
We welcome our new shareholders and would like to thank our existing
shareholders for their continued support.
+UNMANAGED INDEXES OF SELECTED SECURITIES. INVESTMENTS CAN NOT BE MADE IN AN
INDEX.
17
<PAGE>
(Photo of EVERGREEN BALANCED FUND
stock certificates)
RESULTS TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN BALANCED FUND
The graphs below compare a $10,000 investment in the Evergreen Balanced
Fund (Class A, Class B, Class C and Class Y Shares) with a similar investment in
the S&P 500 and Lehman Brothers Government/Corporate Bond Indexes ("Indexes").
(Four line graphs appear here with the following plot points:)
CLASS A
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=20.5%
SINCE INCEPTION=10.2%
6/6/91* 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
EVERGREEN BALANCED FUND
LEHMAN BROS. GOVT/CORP. INDEX
S&P 500
CLASS B
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=20.6%
SINCE INCEPTION=9.2%
1/25/93* 12/31/93 12/31/94 12/31/95
EVERGREEN BALANCED FUND
LEHMAN BROS. GOVT/CORP. INDEX
S&P 500
CLASS C
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=24.5%
SINCE INCEPTION=15.4%
9/2/94* 12/31/94 6/30/95 12/31/95
EVERGREEN BALANCED FUND
LEHMAN BROS. GOVT/CORP. INDEX
S&P 500
CLASS Y
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=26.8%
SINCE INCEPTION=11.9%
4/1/91* 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
EVERGREEN BALANCED FUND
LEHMAN BROS. GOVT/CORP. INDEX
S&P 500
*Commencement of class operations.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE RESULTS. MUTUAL FUNDS
ARE
NOT OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY INSURED.
For the purposes of the graphs and the accompanying tables, it has been
assumed that (a) the maximum sales charge of 4.75% was deducted from the initial
$10,000 investment in Class A Shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the investment in Class B
and Class C Shares, assuming full redemption on December 31, 1995; (c) all
recurring fees (including investment advisory fees) were deducted; and (d) all
dividends and distributions were reinvested.
The Indexes are unmanaged indexes and include the reinvestment of income,
but do not reflect the payment of transaction costs and advisory fees associated
with an investment in the Fund.
18
<PAGE>
(Photo of EVERGREEN BALANCED FUND
stock certificates) STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS -- 59.7%
AEROSPACE & DEFENSE -- 2.3%
128,000 Boeing Co......................... $ 10,032,000
250,000 Raytheon Co....................... 11,812,500
21,844,500
BANKING -- 5.1%
120,000 BankAmerica Corp.................. 7,770,000
140,000 Boatmen's Bancshares, Inc......... 5,722,500
190,000 Corestates Financial Corp......... 7,196,250
200,000 First Chicago NBD Corp............ 7,900,000
97,400 First Virginia Banks, Inc......... 4,066,450
200,000 National City Corp................ 6,625,000
150,000 NationsBank Corp.................. 10,443,750
49,723,950
BASIC INDUSTRY -- 2.3%
350,000 Hanson Plc, ADR................... 5,337,500
230,000 International Paper Co............ 8,711,250
130,000 Phelps Dodge Corp................. 8,092,500
22,141,250
CHEMICALS -- 2.4%
130,000 Dow Chemical Co................... 9,148,750
140,000 Du Pont (E.I.) de Nemours......... 9,782,500
100,000 Imperial Chemical Industries Plc,
ADR............................... 4,675,000
23,606,250
CONSUMER DURABLES -- 2.1%
125,000 General Motors Corp............... 6,609,375
150,000 Goodyear Tire and Rubber Co....... 6,806,250
449,950 Sunbeam Corp...................... 6,861,737
20,277,362
DATA PROCESSING -- .6%
110,000* COMPAQ Computer Corp.............. 5,280,000
DRUGS -- 1.1%
200,000 Schering-Plough Corp.............. 10,950,000
ELECTRONICS -- 3.2%
260,000 GTE Corp.......................... 11,440,000
125,000 Hewlett-Packard Co................ 10,468,750
160,000 SBC Communications, Inc........... 9,200,000
31,108,750
ENERGY -- 4.8%
182,000 Chevron Corp...................... 9,555,000
145,000 Exxon Corp........................ 11,618,125
<CAPTION>
SHARES VALUE
<C> <S> <C>
ENERGY -- (CONTINUED)
125,000 Mobil Corp........................ $ 14,000,000
140,000 Texaco, Inc....................... 10,990,000
46,163,125
FINANCE AND INSURANCE -- 5.2%
180,800* Allmerica Financial Corp.......... 4,881,600
92,703 Allstate Corp..................... 3,812,411
225,000 American General Corp............. 7,846,875
220,000 Beneficial Corp................... 10,257,500
55,000* ITT Hartford Group, Inc........... 2,660,625
220,000 Providian Corp.................... 8,965,000
180,000 Travelers Group, Inc.............. 11,317,500
49,741,511
FINANCIAL SERVICES -- .6%
50,000 Federal National Mortgage
Association....................... 6,206,250
FOOD & BEVERAGE -- 3.0%
114,350 American Stores Co................ 3,058,863
122,500 CPC International, Inc............ 8,406,562
150,400 McCormick & Co., Inc.............. 3,628,400
200,000 McDonald's Corp................... 9,025,000
500,000* Shoney's, Inc..................... 5,125,000
29,243,825
FOREST PRODUCTS -- 1.1%
250,000 Weyerhaeuser Co................... 10,812,500
HEALTHCARE & COSMETICS -- 1.8%
130,000 Bristol Myers Squibb Co........... 11,163,750
313,900* Tenet Healthcare Corp............. 6,513,425
17,677,175
MACHINERY -- DIVERSIFIED -- .5%
150,000 Ingersoll Rand Co................. 5,268,750
MANUFACTURING/DISTRIBUTING -- 1.1%
220,000 Avnet, Inc........................ 9,845,000
17,500* U.S. Industries, Inc.............. 321,563
10,166,563
MEDICAL -- .7%
600,000* Beverly Enterprises............... 6,375,000
MULTI-INDUSTRY -- 6.0%
150,000 Emerson Electric Co............... 12,262,500
180,000 General Electric Co............... 12,960,000
55,000 ITT Industries Corp............... 1,320,000
</TABLE>
19
<PAGE>
(Photo of EVERGREEN BALANCED FUND
stock certificates) STATEMENT OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS -- CONTINUED
MULTI-INDUSTRY -- (CONTINUED)
55,000* ITT Corp.......................... $ 2,915,000
115,000 Temple Inland, Inc................ 5,074,375
150,000 Textron, Inc...................... 10,125,000
145,000 United Technologies Corp.......... 13,756,875
58,413,750
OFFICE EQUIPMENT & SUPPLIES -- .9%
180,000 Pitney Bowes, Inc................. 8,460,000
OIL & GAS -- 2.4%
75,000 Atlantic Richfield Co............. 8,306,250
150,000 Kerr-McGee Corp................... 9,525,000
200,000 Unocal Corp....................... 5,825,000
23,656,250
REAL ESTATE -- 1.2%
396,800 HealthCare Realty Trust, Inc...... 9,126,400
100,500 Highwood Properties, Inc.......... 2,839,125
11,965,525
RETAIL & APPAREL -- 2.5%
200,000 Dillard Department Stores, Inc.... 5,700,000
352,800* Fruit Of The Loom, Inc............ 8,599,500
125,000 May Department Stores Co.......... 5,281,250
100,000 Sears, Roebuck & Co............... 3,900,000
23,480,750
TELEPHONE -- 1.9%
130,000 AT&T Corp......................... 8,417,500
148,000 Bell Atlantic Corp................ 9,897,500
18,315,000
TOBACCO -- 2.4%
225,000 American Brands, Inc.............. 10,040,625
150,000 Philip Morris Cos., Inc........... 13,575,000
23,615,625
TRANSPORTATION -- 1.9%
150,000 Conrail, Inc...................... 10,500,000
100,000 Norfolk Southern Corp............. 7,937,500
18,437,500
UTILITIES -- 2.6%
268,200 Carolina Power & Light Co......... 9,252,900
150,000 General Public Utilities Corp..... 5,100,000
450,000 Southern Co....................... 11,081,250
25,434,150
TOTAL COMMON STOCKS
(COST $430,455,232).......... 578,365,311
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS -- 14.3%
ASSET-BACKED SECURITIES -- 1.2%
$ 1,308,414 Fleet Financial Home Equity Trust,
6.70%, 1/16/06.................... $ 1,319,933
10,000,018 Resolution Trust Corp.,
7.50%, 9/25/22.................... 10,232,078
11,552,011
BANKING -- 2.0%
3,000,000 Boatmen's Bancshares, Inc., 6.75%,
3/15/03........................... 3,105,921
5,000,000 First Chicago Corp.,
9.875%, 8/15/00................... 5,793,475
10,000,000 NationsBank Corp.
7.625%, 4/15/05................... 10,966,230
19,865,626
CAPITAL EQUIPMENT -- .6%
5,500,000 General Electric Capital Corp.,
8.75%, 3/14/03.................... 6,351,614
CHEMICALS -- .6%
5,000,000 Dow Chemical Co.,
8.625%, 4/1/06.................... 5,786,340
CONSUMER PRODUCTS -- .6%
5,000,000 General Mills, Inc.,
9.00%, 12/20/02................... 5,825,890
ENERGY -- 1.2%
4,000,000 Atlantic Richfield Co.,
9.00%, 4/1/21..................... 5,105,764
2,000,000 BP North America, Inc.,
9.875%, 3/15/04................... 2,504,804
4,400,000 Texaco Capital Corp.,
7.90%, 2/13/97.................... 4,515,738
12,126,306
FINANCE AND INSURANCE -- 3.7%
12,550,000 Chrysler Financial Corp.,
10.34%, 5/15/08................... 12,750,762
277,286 CIT Group Securitization Corp.,
4.70%, 6/15/18.................... 275,201
5,500,000 Dean Witter, Discover & Co.,
6.75%, 10/15/13................... 5,501,490
2,750,000 International Bank for
Reconstruction &
Development Co.,
7.95%, 5/15/16.................... 3,248,421
5,000,000 Merrill Lynch, Pierce, Fenner &
Smith, Inc.,
7.00%, 4/27/08.................... 5,230,900
4,250,000 Norwest Financial, Inc.,
7.10%, 11/15/96................... 4,308,093
5,000,000 Smith Barney Holdings, Inc.,
5.50%, 1/15/99.................... 4,967,065
36,281,932
</TABLE>
20
<PAGE>
(Photo of EVERGREEN BALANCED FUND
stock certificates) STATEMENT OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS -- CONTINUED
FOOD AND BEVERAGE -- .5%
$ 4,250,000 PepsiCo, Inc.,
7.625%, 11/1/98................... $ 4,489,870
HARDWARE & TOOLS -- .5%
4,300,000 Stanley Works,
7.375%, 12/15/02.................. 4,622,281
MEDICAL -- .6%
5,000,000 Baxter International, Inc.,
7.25%, 2/15/08.................... 5,373,805
MULTI-INDUSTRY -- .9%
7,000,000 Jet Equipment Trust,
9.41%, 6/15/10.................... 8,385,965
POLLUTION CONTROL -- .2%
1,400,000 Waste Management,
8.75%, 5/1/18..................... 1,651,495
SOVEREIGN GOVERNMENT -- .6%
5,000,000 Ontario Province Canada,
7.75%, 6/4/02..................... 5,486,595
TOBACCO -- .7%
Philip Morris Cos., Inc.,
5,000,000 8.65%, 5/15/98.................... 5,309,840
1,405,000 8.75%, 12/1/96.................... 1,443,585
6,753,425
UTILITIES -- .4%
3,600,000 Union Electric Co.,
8.00%, 12/15/22................... 4,027,230
TOTAL CORPORATE BONDS
(COST $129,434,784).......... 138,580,385
U.S. GOVERNMENT &
AGENCY OBLIGATIONS -- 23.2%
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 2.2%
3,477,325 8.50%, 5/15/21.................... 3,653,364
2,507,221 8.50%, 7/15/21.................... 2,634,150
4,558,947 8.50%, 6/15/22.................... 4,789,744
2,727,860 9.00%, 9/15/21.................... 2,892,382
4,386,083 9.00%, 10/15/21................... 4,650,616
2,652,032 9.50%, 2/15/21.................... 2,848,447
21,468,703
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
UNITED STATES TREASURY
BONDS -- 13.2%
$20,000,000 7.625%, 2/15/07................... $ 22,012,500
20,000,000 8.750%, 5/15/17................... 26,462,500
32,400,000 8.875%, 8/15/17................... 43,416,000
10,000,000 9.125%, 5/15/09................... 12,250,000
17,500,000 9.125%, 5/15/18................... 24,051,563
128,192,563
UNITED STATES TREASURY
NOTES -- 7.8%
8,000,000 6.375%, 7/15/99................... 8,270,000
10,000,000 6.50%, 4/30/99.................... 10,368,750
10,000,000 7.25%, 8/31/96.................... 10,128,110
10,000,000 7.50%, 2/15/05.................... 11,353,110
10,000,000 7.75%, 11/30/99................... 10,837,500
10,000,000 8.125%, 2/15/98................... 10,575,000
3,500,000 8.875%, 11/15/98.................. 3,832,500
10,000,000 9.25%, 1/15/96.................... 10,028,110
75,393,080
TOTAL U.S. GOVERNMENT
& AGENCY OBLIGATIONS
(COST $209,868,434).......... 225,054,346
REPURCHASE AGREEMENT -- 1.9%
18,462,000 Donaldson, Lufkin & Jenrette
Securities Corp., 5.75%, dated
12/29/95, due 1/2/96 --
collateralized by $18,374,000 U.S.
Treasury Notes, 5.625%, 8/31/97;
value including accrued
interest -- $19,181,932
(cost $18,462,000)................ 18,462,000
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS
(COST $788,220,450)... 99.1% 960,462,042
OTHER ASSETS AND
LIABILITIES -- NET.... .9 8,808,208
NET ASSETS............... 100.0% $969,270,250
</TABLE>
* Non-income producing securities.
ADR -- American Depositary Receipts
See accompanying notes to financial statements.
21
<PAGE>
(Photo of EVERGREEN BALANCED FUND
stock certificates) STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $788,220,450)........................................................... $960,462,042
Dividends and interest receivable............................................................................. 7,271,953
Receivable for Fund shares sold............................................................................... 3,174,523
Prepaid expenses.............................................................................................. 23,854
Total assets............................................................................................ 970,932,372
LIABILITIES:
Due to custodian bank......................................................................................... 19,023
Payable for Fund shares repurchased........................................................................... 1,038,915
Accrued Advisory fee.......................................................................................... 326,078
Accrued expenses.............................................................................................. 262,956
Withholding tax liability..................................................................................... 15,150
Total liabilities....................................................................................... 1,662,122
NET ASSETS....................................................................................................... $969,270,250
NET ASSETS CONSIST OF:
Paid-in capital............................................................................................... $796,415,802
Undistributed net investment income........................................................................... 612,856
Net unrealized appreciation of investments.................................................................... 172,241,592
Net assets.............................................................................................. $969,270,250
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($41,849,376/3,190,791 shares of beneficial interest outstanding)................................. $13.12
Sales charge -- 4.75% of offering price.......................................................................... .65
Maximum offering price........................................................................................ $13.77
Class B Shares ($108,983,015/8,300,963 shares of beneficial interest outstanding)................................ $13.13
Class C Shares ($300,450/22,910 shares of beneficial interest outstanding)....................................... $13.11
Class Y Shares ($818,137,409/62,371,646 shares of beneficial interest outstanding)............................... $13.12
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
(Photo of EVERGREEN BALANCED FUND
stock certificates) STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding taxes of $238,059)............................................ $ 17,065,656
Interest.................................................................................... 30,890,083
Total investment income............................................................... 47,955,739
EXPENSES:
Advisory fee................................................................................ $ 4,870,748
Administrative personnel and service fees................................................... 676,130
Distribution fee -- Class A Shares.......................................................... 102,400
Distribution fee -- Class B Shares.......................................................... 784,084
Shareholder services fee -- Class B Shares.................................................. 261,361
Distribution fee -- Class C Shares.......................................................... 1,811
Shareholder services fee -- Class C Shares.................................................. 604
Custodian fee............................................................................... 224,756
Transfer agent fee.......................................................................... 163,805
Registration and filing fees................................................................ 56,861
Professional fees........................................................................... 27,112
Reports and notices to shareholders......................................................... 20,870
Insurance................................................................................... 20,103
Trustees' fees and expenses................................................................. 19,842
Miscellaneous............................................................................... 7,895
Total expenses........................................................................ 7,238,382
Net investment income.......................................................................... 40,717,357
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments............................................................ 33,813,027
Net change in unrealized appreciation of investments........................................ 154,935,970
Net gain on investments........................................................................ 188,748,997
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................................... $229,466,354
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
(Photo of EVERGREEN BALANCED FUND
stock certificates) STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................................. $ 40,717,357 $ 35,492,616
Net realized gain on investments.................................................. 33,813,027 15,321,171
Net change in unrealized appreciation (depreciation) of investments............... 154,935,970 (72,298,630)
Net increase (decrease) in net assets resulting from operations................... 229,466,354 (21,484,843)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME:
Class A Shares.................................................................... (1,620,476) (1,519,114)
Class B Shares.................................................................... (3,381,480) (2,795,862)
Class C Shares.................................................................... (8,000) (1,794)
Class Y Shares.................................................................... (35,087,211) (31,021,065)
Total distributions to shareholders from net investment income.............. (40,097,167) (35,337,835)
NET REALIZED GAIN ON INVESTMENTS:
Class A Shares.................................................................... (1,423,252) (699,327)
Class B Shares.................................................................... (3,696,589) (1,691,363)
Class C Shares.................................................................... (10,158) (3,132)
Class Y Shares.................................................................... (28,740,172) (13,311,813)
Total distributions to shareholders from net realized gain on investments... (33,870,171) (15,705,635)
Total distributions to shareholders......................................... (73,967,338) (51,043,470)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold......................................................... 170,978,316 306,060,376
Proceeds from reinvestment of distributions....................................... 66,166,480 49,902,518
Payment for shares redeemed....................................................... (343,286,923) (224,174,850)
Net increase (decrease) from Fund share transactions........................ (106,142,127) 131,788,044
Net increase in net assets.................................................. 49,356,889 59,259,731
NET ASSETS:
Beginning of year................................................................. 919,913,361 860,653,630
End of year (including undistributed net investment income of $612,856 and
$495,614, respectively)......................................................... $ 969,270,250 $ 919,913,361
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
(Photo of EVERGREEN BALANCED FUND -- CLASS A AND B SHARES
stock certificates) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JUNE 10,
1991*
YEAR ENDED THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992 1991 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period.............................. $11.17 $12.07 $11.41 $11.02 $10.00 $11.18 $12.08
Income (loss) from investment
operations:
Net investment income................ .51 .43 .42 .42 .30 .42 .36
Net realized and unrealized gain
(loss) on investments............... 2.40 (.71) .75 .43 1.08 2.40 (.71)
Total from investment operations... 2.91 (.28) 1.17 .85 1.38 2.82 (.35)
Less distributions to shareholders
from:
Net investment income................ (.50) (.43) (.42) (.42) (.35) (.41) (.36)
Net realized gain on investments..... (.46) (.19) (.09) (.04) (.01) (.46) (.19)
In excess of net investment income... -- -- -- -- -- -- --
Total distributions................. (.96) (.62) (.51) (.46) (.36) (.87) (.55)
Net asset value, end of period........ $13.12 $11.17 $12.07 $11.41 $11.02 $13.13 $11.18
TOTAL RETURN+......................... 26.5% (2.4%) 10.4% 7.9% 11.8% 25.6% (3.0%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)..................... $41,849 $41,010 $35,032 $17,408 $334 $108,983 $100,052
Ratios to average net assets:
Expenses............................. .88% .89% .91% .91% .92%++ 1.62% 1.48%
Net investment income................ 4.05% 3.69% 3.61% 3.93% 4.38%++ 3.30% 3.12%
Portfolio turnover rate............... 37% 35% 19% 12% 19% 37% 35%
<CAPTION>
JANUARY 26,
1993*
THROUGH
DECEMBER 31,
1993
<S> <C>
PER SHARE DATA:
Net asset value, beginning of
period.............................. $11.54
Income (loss) from investment
operations:
Net investment income................ .34
Net realized and unrealized gain
(loss) on investments............... .65
Total from investment operations... .99
Less distributions to shareholders
from:
Net investment income................ (.34)
Net realized gain on investments..... (.09)
In excess of net investment income... (.02)
Total distributions................. (.45)
Net asset value, end of period........ $12.08
TOTAL RETURN+......................... 8.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)..................... $65,475
Ratios to average net assets:
Expenses............................. 1.41%++
Net investment income................ 3.09%++
Portfolio turnover rate............... 19%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
25
<PAGE>
(photo of EVERGREEN BALANCED FUND -- CLASS C AND Y SHARES
stock certificates) FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS Y SHARES
CLASS C SHARES
SEPTEMBER 2,
1994*
YEAR THROUGH YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31,
1995 1994 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............ $11.17 $12.00 $11.17 $12.07 $11.41 $11.02
Income (loss) from investment operations:
Net investment income.......................... .41 .18 .54 .46 .45 .46
Net realized and unrealized gain (loss) on
investments................................... 2.40 (.61) 2.40 (.71) .75 .42
Total from investment operations............. 2.81 (.43) 2.94 (.25) 1.20 .88
Less distributions to shareholders from:
Net investment income.......................... (.41) (.21) (.53) (.46) (.45) (.45)
Net realized gain on investments............... (.46) (.19) (.46) (.19) (.09) (.04)
Total distributions........................... (.87) (.40) (.99) (.65) (.54) (.49)
Net asset value, end of period.................. $13.11 $11.17 $13.12 $11.17 $12.07 $11.41
TOTAL RETURN+................................... 25.5% (3.6%) 26.8% (2.2%) 10.7% 8.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)....... $300 $195 $818,137 $778,657 $760,147 $520,232
Ratios to average net assets:
Expenses....................................... 1.62% 1.64%++ .62% .64% .66% .66%
Net investment income.......................... 3.31% 3.23%++ 4.30% 3.93% 3.86% 4.20%
Portfolio turnover rate......................... 37% 35% 37% 35% 19% 12%
<CAPTION>
APRIL 1,
1991*
THROUGH
DECEMBER 31,
1991
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period............ $10.00
Income (loss) from investment operations:
Net investment income.......................... .36
Net realized and unrealized gain (loss) on
investments................................... 1.03
Total from investment operations............. 1.39
Less distributions to shareholders from:
Net investment income.......................... (.36)
Net realized gain on investments............... (.01)
Total distributions........................... (.37)
Net asset value, end of period.................. $11.02
TOTAL RETURN+................................... 15.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)....... $247,472
Ratios to average net assets:
Expenses....................................... .68%++
Net investment income.......................... 4.86%++
Portfolio turnover rate......................... 19%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
26
<PAGE>
(photo of EVERGREEN VALUE FUND
a building)
A REPORT FROM YOUR
PORTFOLIO MANAGER
J. DONALD RAINES
We believe the Gross Domestic Product (GDP) slowdown that (Photo of
began in 1995 should continue into 1996. Most sectors of the J. Donald
economy are experiencing reduced levels of demand. Industrial Raines)
activity has weakened, reflecting inventory levels that are
high relative to demand trends. Consumers will likely remain
subdued as they cope with high levels of debt and slow income
growth. We believe that the current environment of economic
sluggishness should persist for the next few quarters, but
that the risk of a recession is low. By late spring, the drag
from the inventory correction should have run its course.
Further declines in short-term interest rates and stimulative
policies currently being pursued by our trading partners should lead to
a pick-up in activity in the second half of the year. Inflation remains subdued
for the near-term.
Interest rate declines of almost two percentage points and unexpectedly
robust corporate profits combined in 1995 to produce the best stock market
performance in two decades. The twelve-month total return for the Dow Jones
Industrial Average* was in excess of 36%. Our sense is that this combination of
variables is unlikely to be repeated in 1996. The slowdown in the economy is
already largely reflected in the current interest rate structure, and corporate
profit comparisons will be more difficult. Our belief is that a cautious
approach is appropriate given the high expectations currently priced into the
stock market. Financial stocks provided the highest returns in 1995. This sector
was well represented in the portfolio throughout 1995, with our holdings
concentrated in the banking and insurance industries. Performance in this sector
was enhanced by the unexpected magnitude of the interest rate declines and the
pick-up in takeover activity that occurred in the second half of the year which
caused many banking stocks to move to premium valuations.
Our exposure to the technology sector was limited last year. Our belief was
that long-term valuations were distorted by the unusually high levels of
profitability being experienced by the manufacturers of commodity-type products.
The latter half of the year saw meaningful corrections in this sector as demand
slowed for computer-related products. We are using weakness in the technology
sector to selectively add positions such as shares of IBM Corp., as we believe
that the long-term fundamentals of high value-added producers are relatively
attractive and current prices are much more reasonable. Retailers also represent
good value but one must be particularly selective in this area, as consumer
demand trends are still weak and the industry is suffering from excess capacity.
We have focused on companies with strong marketing positions and diverse
distribution channels, as we feel they are long-term winners. The Fund also
maintained its exposure to the conglomerate group as we feel that the diversity
of their operations would serve them well in a slowing economic environment. ITT
Corp. represented an attractive opportunity in this area, as its operations were
restructured to maximize shareholder value and provide distinct business
franchises.
Long-term demand trends in the energy sector are turning positive and we feel
energy producers and processors represent good investment opportunities. Union
Pacific Resources was added to the portfolio and provided a vehicle to benefit
from increased natural gas pricing late in 1995. The stock market is vulnerable
to disappointments as current price levels reflect high levels of expectations
on the part of investors. Disappointments in earnings are dealt with harshly, as
was seen in latter half of 1995 in the technology-related industries. The Fund
is positioned in a moderately defensive structure as we feel that opportunities
will arise in 1996 to re-deploy assets at more reasonable levels of valuations.
The portfolios price-to-earnings ratio is approximately 13 times 1995 earnings,
a 10% discount to the S&P 500 Reinvested Index, and the yield on our portfolio
securities is at a 30% premium to that of the S&P 500, a position that reflects
our concerns and should provide ample support in a period of weakness. Growth
expectations for the securities we own are in line with the overall market and
should allow our portfolio to fully participate in further market advances.
* UNMANAGED REINVESTED INDEX. INVESTMENTS CAN NOT BE MADE IN AN INDEX.
27
<PAGE>
(Photo of EVERGREEN VALUE FUND
a building)
RESULTS TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN VALUE FUND
The graphs below compare a $10,000 investment in the Evergreen Value Fund
(Class A, Class B, Class C and Class Y Shares) with a similar investment in the
S&P 500 Index ("Index").
(Four line graphs appear here with the following plot points:)
CLASS A
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=25.6%
FIVE YEAR=13.6%
SINCE INCEPTION=12.7%
<TABLE>
<CAPTION>
12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EVERGREEN VALUE FUND
S&P 500
</TABLE>
CLASS B
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=25.9%
SINCE INCEPTION=12.6%
1/25/93* 12/31/93 12/31/94 12/31/95
EVERGREEN VALUE FUND
S&P 500
CLASS C
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=29.9%
SINCE INCEPTION=19.3%
1/25/93* 12/31/93 12/31/94 12/31/95
EVERGREEN VALUE FUND
S&P 500
CLASS Y
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=32.2%
FIVE YEAR=15.0%
SINCE INCEPTION=15.0%
12/31/90* 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
EVERGREEN VALUE FUND
S&P 500
*Commencement of class operations.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE RESULTS. MUTUAL FUNDS
ARE
NOT OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY INSURED.
For the purposes of the graphs and the accompanying tables, it has been
assumed that (a) the maximum sales charge of 4.75% was deducted from the initial
$10,000 investment in Class A Shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the investment in Class B
and Class C Shares, assuming full redemption on December 31, 1995; (c) all
recurring fees (including investment advisory fees) were deducted; and (d) all
dividends and distributions were reinvested.
The Index is an unmanaged index and includes the reinvestment of income,
but does not reflect the payment of transaction costs and advisory fees
associated with an investment in the Fund.
28
<PAGE>
(Photo of EVERGREEN VALUE FUND
a building) STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 100.3%
BANKING & FINANCE -- 8.1%
380,000 Bankers Trust New York Corp.... $ 25,270,000
410,000 Boatmen's Bancshares, Inc...... 16,758,750
541,200 Central Fidelity Banks, Inc.... 17,318,400
10,000 Comerica, Inc.................. 401,250
337,700 First Tennessee National
Corp........................... 20,430,850
510,000 National City Corp............. 16,893,750
97,073,000
CAPITAL GOODS -- 5.6%
336,800 Boeing Co...................... 26,396,700
862,400 Raytheon Co.................... 40,748,400
67,145,100
CHEMICALS/PLASTICS -- 7.9%
260,000 Air Products &
Chemicals, Inc................. 13,715,000
300,000 Dow Chemical Co................ 21,112,500
230,000* FMC Corp....................... 15,553,750
255,000 Rohm & Haas Co................. 16,415,625
560,000 Tenneco Inc.................... 27,790,000
94,586,875
COMMUNICATION -- .2%
120,000 Equifax, Inc................... 2,565,000
CONSUMER DURABLES -- 1.1%
260,700 Stanley Works.................. 13,426,050
CONSUMER PRODUCTS -- 4.3%
1,000,000* Fruit of The Loom, Inc. Cl.A... 24,375,000
300,000 Philip Morris Cos., Inc........ 27,150,000
51,525,000
DATA PROCESSING -- 2.2%
15,000* COMPAQ Computer Corp........... 720,000
275,000 International Business Machines
Corp........................... 25,231,250
25,951,250
ENERGY -- 7.1%
640,000 Chevron Corp................... 33,600,000
200,000 Exxon Corp..................... 16,025,000
455,000 Texaco, Inc.................... 35,717,500
85,342,500
FOOD & BEVERAGE -- 5.5%
1,143,000 American Stores Co............. 30,575,250
637,500 McCormick & Co., Inc........... 15,379,688
1,866,100* Shoney's Inc................... 19,127,525
65,082,463
<CAPTION>
SHARES VALUE
<C> <S> <C>
FOREST PRODUCTS -- 1.1%
315,000 Weyerhaeuser Co................ $ 13,623,750
HEALTHCARE & COSMETICS -- 5.1%
25,000 Avon Products, Inc............. 1,884,375
243,200 Bristol Myers Squibb Co........ 20,884,800
350,000 Schering-Plough Corp........... 19,162,500
30,000 U.S. Healthcare, Inc........... 1,395,000
180,000 Warner Lambert Co.............. 17,482,500
60,809,175
INSURANCE -- 9.0%
608,175 Allstate Corp.................. 25,011,196
1,050,000 American General Corp.......... 36,618,750
30,000 American International Group,
Inc............................ 2,775,000
139,800* ITT Hartford Group Corp........ 6,762,825
878,400 Providian Corp................. 35,794,800
106,962,571
MULTI-INDUSTRY -- 4.5%
20,000 Dun & Bradstreet Corp.......... 1,295,000
38,000 Emerson Electric Co............ 3,106,500
528,000 General Electric Co............ 38,016,000
139,800* ITT Corp....................... 7,409,400
139,800 ITT Industries, Inc............ 3,355,200
53,182,100
OIL & GAS -- 8.7%
270,000 Atlantic Richfield Co.......... 29,902,500
67,000 Kerr-McGee Corp................ 4,298,950
641,300 Sonat, Inc..................... 22,846,313
633,000 Tosco Corp..................... 24,133,125
500,000 Union Pacific Resources Group,
Inc............................ 12,687,500
360,000 Unocal Corp.................... 10,485,000
104,353,388
PROCESS INDUSTRIES -- .1%
13,000 Automatic Data
Processing, Inc................ 965,250
PRODUCER MANUFACTURING -- 3.5%
188,175 ADT Ltd........................ 2,822,625
20,000 AMP Inc........................ 767,500
455,000 Briggs & Stratton Corp......... 19,735,625
35,000 Eastman Kodak Co............... 2,345,000
235,000 Textron, Inc................... 15,862,500
41,533,250
</TABLE>
29
<PAGE>
(Photo of EVERGREEN VALUE FUND
a building) STATEMENT OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
RETAIL & APPAREL -- 5.2%
187,500 Dayton Hudson Corp............. $ 14,062,500
565,000 Dillard Department
Stores, Inc.................... 16,102,500
34,000 Penney (J.C.) Co., Inc......... 1,619,250
680,000 May Department Stores Co....... 28,730,000
25,000 Sears, Roebuck & Co............ 975,000
61,489,250
TOBACCO -- 3.0%
804,400 American Brands, Inc........... 35,896,350
TRANSPORTATION -- 5.9%
299,900 Burlington Northern
Santa Fe Inc................... 23,392,200
470,000 Norfolk Southern Corp.......... 37,306,250
150,000 Union Pacific Corp............. 9,900,000
70,598,450
UTILITIES -- 12.2%
489,900 Carolina Power & Light Co...... 16,901,550
15,000 Florida Progress Corp.......... 530,625
1,088,400 General Public Utility Corp.... 37,005,600
865,000 GTE Corp....................... 38,060,000
50,000 Houston Industries, Inc........ 1,212,500
1,215,700 NICOR, Inc..................... 33,431,750
50,000 PECO Energy Co................. 1,506,250
710,000 Southern Co.................... 17,483,750
146,132,025
TOTAL COMMON STOCKS
(COST $986,302,788)....... 1,198,242,797
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
<C> <S> <C>
U.S. TREASURY SECURITIES -- .8%
$ 10,000,000 U.S. Treasury Notes,
6.50%, 11/30/96
(COST $9,885,156).............. $ 10,118,750
**REPURCHASE AGREEMENT -- 11.0%
131,095,000 Donaldson, Lufkin & Jenrette
Securities Corp., 5.75%,
dated 12/29/95, due 1/2/96
(COST $131,095,000)............ 131,095,000
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
(COST
$1,127,282,944)... 112.1% 1,339,456,547
OTHER ASSETS AND
LIABILITIES -- NET.. (12.1) (144,406,273)
NET ASSETS........... 100.0% $1,195,050,274
</TABLE>
* Non-income producing securities.
** Collateralized by:
$30,065,000 U.S. Treasury Notes, 5.375%, 5/31/98; value including accrued
interest -- $30,415,881
$21,597,000 U.S. Treasury Notes, 6.875%, 8/31/99; value including accrued
interest -- $23,684,409
$27,350,000 U.S. Treasury Bonds, 12.00%, 8/15/13; value including accrued
interest -- $44,587,581
$26,750,000 U.S. Treasury Bonds, 8.875%, 2/15/19; value including accrued
interest -- $37,805,426
See accompanying notes to financial statements.
30
<PAGE>
(Photo of EVERGREEN VALUE FUND
a building) STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities at value.......................................................................... $1,208,361,547
Investments in repurchase agreement at value................................................................ 131,095,000
Investments at value (identified cost $1,127,282,944).................................................... 1,339,456,547
Cash........................................................................................................ 289
Dividends and interest receivable........................................................................... 3,393,956
Receivable for Fund shares sold............................................................................. 1,852,483
Prepaid expenses............................................................................................ 22,865
Total assets.......................................................................................... 1,344,726,140
LIABILITIES:
Payable for securities purchased............................................................................ 147,806,094
Payable for Fund shares repurchased......................................................................... 922,845
Accrued Advisory fee........................................................................................ 505,161
Accrued expenses............................................................................................ 260,705
Distribution fee payable.................................................................................... 181,061
Total liabilities..................................................................................... 149,675,866
NET ASSETS..................................................................................................... $1,195,050,274
NET ASSETS CONSIST OF:
Paid-in capital............................................................................................. $ 981,657,808
Undistributed net investment income......................................................................... 1,943,860
Accumulated net realized losses on investments.............................................................. (724,997)
Net unrealized appreciation of investments.................................................................. 212,173,603
Net assets............................................................................................... $1,195,050,274
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($292,434,370/14,298,496 shares of beneficial interest outstanding).......................... $ 20.45
Sales charge -- 4.75% of offering price..................................................................... 1.02
Maximum offering price................................................................................ $ 21.47
Class B Shares ($141,072,407/6,896,720 shares of beneficial interest outstanding)........................... $ 20.45
Class C Shares ($810,742/39,670 shares of beneficial interest outstanding).................................. $ 20.44
Class Y Shares ($760,732,755/37,202,080 shares of beneficial interest outstanding).......................... $ 20.45
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
(Photo of EVERGREEN VALUE FUND
a building) STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $7,120)....................................... $ 32,766,843
Interest..................................................................................... 4,886,044
Total investment income................................................................ 37,652,887
EXPENSES:
Advisory fee................................................................................. $5,120,579
Administrative personnel and services fee.................................................... 697,266
Distribution fee -- Class A Shares........................................................... 603,896
Distribution fees -- Class B Shares.......................................................... 916,221
Shareholder services fee -- Class B Shares................................................... 305,407
Distribution fees -- Class C Shares.......................................................... 4,798
Shareholder services fee -- Class C Shares................................................... 1,599
Transfer agent fee........................................................................... 462,534
Custodian fee................................................................................ 239,241
Registration and filing fees................................................................. 36,347
Professional fees............................................................................ 22,375
Reports and notices to shareholders.......................................................... 22,340
Insurance.................................................................................... 17,548
Trustees' fees and expenses.................................................................. 17,230
Miscellaneous................................................................................ 7,961
Total expenses......................................................................... 8,475,342
Net investment income........................................................................... 29,177,545
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments............................................................. 50,649,714
Net change in unrealized appreciation (depreciation) of investments.......................... 196,633,111
Net gain on investments......................................................................... 247,282,825
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................ $276,460,370
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
(Photo of EVERGREEN VALUE FUND
a building) STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR YEAR
ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................................. $ 29,177,545 $ 23,555,892
Net realized gain on investments.................................................. 50,649,714 37,989,054
Net change in unrealized appreciation (depreciation) of
investments.................................................................... 196,633,111 (46,787,958)
Net increase in net assets resulting from operations........................... 276,460,370 14,756,988
DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME:
Class A Shares.................................................................... (6,221,428) (5,495,722)
Class B Shares.................................................................... (2,281,745) (1,952,154)
Class C Shares.................................................................... (12,030) (2,060)
Class Y Shares.................................................................... (19,218,021) (15,879,870)
Total distributions to shareholders from net investment income................. (27,733,224) (23,329,806)
IN EXCESS OF NET INVESTMENT INCOME:
Class B Shares.................................................................... -- (24,340)
Class C Shares.................................................................... -- (951)
Total distributions to shareholders in excess
of net investment income.................................................... -- (25,291)
NET REALIZED GAIN ON INVESTMENTS:
Class A Shares.................................................................... (12,319,599) (8,939,524)
Class B Shares.................................................................... (5,935,694) (4,906,369)
Class C Shares.................................................................... (33,758) (22,671)
Class Y Shares.................................................................... (32,229,160) (24,431,670)
Total distributions to shareholders from net realized gain on investments...... (50,518,211) (38,300,234)
Total distributions to shareholders......................................... (78,251,435) (61,655,331)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold......................................................... 309,533,208 270,641,999
Proceeds from acquisition of ABT Growth and Income Trust.......................... 63,356,435 --
Proceeds from reinvestment of distributions....................................... 66,652,380 57,894,547
Payments for shares redeemed...................................................... (243,317,457) (194,045,034)
Net increase resulting from Fund share transactions............................ 196,224,566 134,491,512
Net increase in net assets..................................................... 394,433,501 87,593,169
NET ASSETS:
Beginning of year................................................................. 800,616,773 713,023,604
End of year (including undistributed net investment income (loss) of $1,943,860
and ($434,532), respectively)................................................... $ 1,195,050,274 $ 800,616,773
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
(Photo of EVERGREEN VALUE FUND -- CLASS A SHARES
a building) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991
PER SHARE DATA:
Net asset value, beginning of year............................... $16.62 $17.63 $17.11 $17.08 $14.61
Income from investment operations:
Net investment income.......................................... .55 .52 .47 .44 .46
Net realized and unrealized gain (loss) on investments......... 4.69 (.20) 1.10 .89 3.17
Total from investment operations............................. 5.24 .32 1.57 1.33 3.63
Less distributions to shareholders from:
Net investment income.......................................... (.51) (.51) (.47) (.43) (.43)
Net realized gain on investments............................... (.90) (.82) (.58) (.87) (.73)
Total distributions.......................................... (1.41) (1.33) (1.05) (1.30) (1.16)
Net asset value, end of year..................................... $20.45 $16.62 $17.63 $17.11 $17.08
TOTAL RETURN+.................................................... 31.8% 1.9% 9.3% 8.0% 25.1%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of year (in millions)............................ $292 $189 $190 $169 $136
Ratios to average net assets:
Expenses....................................................... .90% .93% .99% 1.01%* .96%*
Net investment income.......................................... 2.78% 2.96% 2.63% 2.37%* 2.78%*
Portfolio turnover rate.......................................... 53% 70% 46% 56% 69%
<CAPTION>
PER SHARE DATA:
Net asset value, beginning of year...............................
Income from investment operations:
Net investment income..........................................
Net realized and unrealized gain (loss) on investments.........
Total from investment operations.............................
Less distributions to shareholders from:
Net investment income..........................................
Net realized gain on investments...............................
Total distributions..........................................
Net asset value, end of year.....................................
TOTAL RETURN+....................................................
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of year (in millions)............................
Ratios to average net assets:
Expenses.......................................................
Net investment income..........................................
Portfolio turnover rate..........................................
<CAPTION>
</TABLE>
+ Initial sales charge is not reflected.
* Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992 1991
<S> <C> <C>
Expenses................................................................................ 1.02% 1.05%
Net investment income................................................................... 2.36% 2.69%
</TABLE>
See accompanying notes to financial statements.
34
<PAGE>
(Photo of EVERGREEN VALUE FUND -- CLASS B AND C SHARES
a building) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS B SHARES CLASS C SHARES
FEBRUARY 2, SEPTEMBER 2,
1993* 1994*
YEAR ENDED THROUGH YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1995 1994
PER SHARE DATA:
Net asset value, beginning of period................... $16.62 $17.63 $17.24 $16.61 $18.28
Income (loss) from investment operations:
Net investment income................................ .39 .42 .35 .39 .19
Net realized and unrealized gain (loss) on
investments........................................ 4.70 (.20) 1.01 4.70 (.81 )
Total from investment operations................... 5.09 .22 1.36 5.09 (.62 )
Less distributions to shareholders from:
Net investment income................................ (.36) (.41) (.35 ) (.36) (.19 )
Net realized gain on investments..................... (.90) (.82) (.58 ) (.90) (.82 )
Distributions in excess of net investment income..... -- -- (.04 ) -- (.04 )
Total distributions................................ (1.26) (1.23) (.97 ) (1.26) (1.05 )
Net asset value, end of period....................... $20.45 $16.62 $17.63 $20.44 $16.61
TOTAL RETURN+.......................................... 30.9% 1.3% 8.0% 30.9% (3.41% )
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).............. $141,072 $104,297 $59,953 $811 $485
Ratios to average net assets:
Expenses............................................. 1.65% 1.53% 1.48% ++ 1.65% 1.68% ++
Net investment income................................ 2.04% 2.36% 2.09% ++ 2.03% 2.16% ++
Portfolio turnover rate................................ 53% 70% 46% 53% 70%
<CAPTION>
PER SHARE DATA:
Net asset value, beginning of period...................
Income (loss) from investment operations:
Net investment income................................
Net realized and unrealized gain (loss) on
investments........................................
Total from investment operations...................
Less distributions to shareholders from:
Net investment income................................
Net realized gain on investments.....................
Distributions in excess of net investment income.....
Total distributions................................
Net asset value, end of period.......................
TOTAL RETURN+..........................................
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)..............
Ratios to average net assets:
Expenses.............................................
Net investment income................................
Portfolio turnover rate................................
<CAPTION>
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charges are not
reflected.
++ Annualized.
See accompanying notes to financial statements.
35
<PAGE>
(Photo of EVERGREEN VALUE FUND -- CLASS Y SHARES
a building) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
JANUARY 3,
1991*
THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992 1991
PER SHARE DATA:
Net asset value, beginning of period..................... $16.61 $17.63 $17.11 $17.08 $14.28
Income from investment operations:
Net investment income.................................. .57 .56 .52 .49 .47
Net realized and unrealized gain (loss)
on investments....................................... 4.72 (.20) 1.12 .90 3.53
Total from investment operations..................... 5.29 .36 1.64 1.39 4.00
Less distributions to shareholders from:
Net investment income.................................. (.55) (.56) (.52) (.49) (.47 )
Net realized gains..................................... (.90) (.82) (.58) (.87) (.73 )
Distributions in excess of net investment income....... -- -- (.02) -- --
Total distributions.................................. (1.45) (1.38) (1.12) (1.36) (1.20 )
Net asset value, end of period......................... $20.45 $16.61 $17.63 $17.11 $17.08
TOTAL RETURN+............................................ 32.2% 2.1% 9.7% 8.3% 25.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................ $760,733 $507,028 $463,087 $326,154 $ 271,391
Ratios to average net assets:
Expenses............................................... .65% .68% .65% .68%** .69% ++**
Net investment income.................................. 3.02% 3.21% 2.98% 2.90%** 3.04% ++**
Portfolio turnover rate.................................. 53% 70% 46% 56% 69%
</TABLE>
* Commencement of class operations.
+ Total return is calculated for the periods indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
<TABLE>
<CAPTION>
JANUARY 3, 1991
YEAR ENDED THROUGH
DECEMBER 31, 1992 DECEMBER 31, 1991
<S> <C> <C>
Expenses............................................................. .69% .77%
Net investment income................................................ 2.89% 2.96%
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
(Photo of EVERGREEN AMERICAN RETIREMENT FUND
Statue of Liberty)
A REPORT FROM YOUR
PORTFOLIO MANAGER
IRENE D. O'NEILL
Evergreen American Retirement Fund completed its seventh (Photo of
fiscal year on December 31, 1995. The past year was one of Irene D.
generally strong performance for both the stock and fixed O'Neill)
income markets. For the twelve months ended December 31, 1995,
the Fund's total return (Class Y, no-load shares) was 25.1%*.
The Fund's average annual compound returns for the five-year
period and the period since the Fund's inception on March 14,
1988, through December 31, 1995, were 13.0% and 10.6%,
respectively. (For additional performance information, please
see page 39.) Most of the Fund's industry groups contributed
to the performance of the equity portfolio. Healthcare
products and services, representing 6.0% of the Fund's net assets at
year-end, was the strongest, providing a 57.2% return for the fiscal year.
Companies within the sector benefited from two trends: the drive to reduce
medical costs by the government and industry, and a shift to defensive issues
such as drug stocks, in response to slower economic growth. Finance and
insurance, which accounted for 7.0% of net assets, was the second best
performing group, providing a return of 48.9% for the fiscal year. Of particular
note, were investments in three catastrophic reinsurers, whose specialty is
insuring against events such as hurricanes. These companies were brought public
in the second half of 1995 at low valuations of earnings, but with very
attractive dividend yields. At 10.0% of the Fund's net assets, energy remains
the single largest industry holding, and generated a return of 32.9% for the
fiscal year. Performance of the energy stocks was strong in the fourth quarter
when unusually cold weather helped to lift energy demand and prices. In
addition, the cost savings that have resulted from several years of
restructuring are being used to boost exploration spending. This action is
expected to help expand oil and gas reserves through the decade. Banks, which
represent 5.5% of the Fund's net assets, benefited from the decline in interest
rates through much of 1995, and the ongoing consolidation in the banking
industry. This sector provided a return of 43.6% to the Fund during the fiscal
year. Considering how cautious consumers were throughout 1995, it is not
surprising that the Fund's weakest performing groups were those directly related
to consumer spending. Retailers provided a return of -3.0%, while the consumer
products and services sector generated a return of 1.6%. The metal products and
services sector, which provided a return of 2.8% during the year, was negatively
impacted as a result of concern that weaker economic growth would cause prices
of metals, such as copper, to decline.
The Fund's emphasis on undervaluation in security selection was rewarded this
year with four mergers or acquisitions of portfolio holdings, the largest number
in any year since inception. Paco Pharmaceutical Services, which was a
beneficiary of outsourcing by the drug companies was acquired by West Co. in
April 1995. Consistent with our ongoing theme of banking consolidation, Michigan
National Corp. was acquired by National Australia Bank. In addition, Summit
Bancorporation will be acquired by UJB Financial during the first quarter of
1996. We sold our shares of this company, and realized a gain, in the fourth
quarter. The
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
*PERFORMANCE FOR THE FUND'S CLASS A, CLASS B, AND CLASS C SHARES IS NOT
AVAILABLE AS THOSE CLASSES WERE NOT IN EXISTENCE FOR THE FULL 12-MONTH PERIOD
ENDED 12/31/95. PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDEND AND
CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
FLUCTUATE. INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.
37
<PAGE>
(Photo of EVERGREEN AMERICAN RETIREMENT FUND
Statue of Liberty)
A REPORT FROM YOUR
PORTFOLIO MANAGER -- (CONTINUED)
remaining two acquisitions were of two industrial products companies, Joslyn
Corp. and Elco Industries, which were acquired by Danaher Corp. and Textron
Inc., respectively. The average return to the Fund on the four acquisitions was
70.2% and ranged from 19.2% on Paco Pharmaceutical, held for eighteen months, to
129.9% for Elco Industries, which was held for six months.
At the outset of 1996, Evergreen American Retirement Fund is pursuing several
investment themes. Energy remains the Fund's largest commitment. This industry's
strong cash flow and high dividend yields should help make it a defensive
holding in a potentially difficult market. Deregulation remains a major
portfolio theme and applies to several industry groups, including banking,
telecommunications, and electric utilities. Interstate banking should continue
to propel consolidation of banks and expected passage of the telecommunications
bill should be positive for media companies. Deregulation of electric utilities
is also likely to result in mergers and acquisitions, as companies seek ways to
reduce costs. Our expectation of a low interest rate environment should
favorably affect the banking, electric utility, and insurance industries. In
addition, many insurance companies are restructuring operations and making more
effective use of capital. These actions should help produce higher earnings and
returns on equity.
One theme that is a consistent thread in many of the Fund's investments is
special situations. These are typically companies that are undergoing
restructuring or earnings turnaround, whose potential value has not yet been
recognized by the market.
FIXED INCOME
The U.S. economy weakened and interest rates declined through most of 1995 as
the rate hikes engineered by the Federal Reserve Board in 1994 and early 1995
finally took hold. A brief detour occurred during the summer when rates moved up
after the Fed reduced the Federal Funds rate by .25%, raising concern that
growth would reaccelerate. As there were few signs of a resurgence in either
growth or inflation during the autumn, this fear proved unfounded and interest
rates resumed their decline. Movement toward a seven-year target for a balanced
budget by the President and Congress also helped to drive the rally in fixed
income markets through year-end. Passage of a balanced budget is expected to
reduce the growth rate of government spending and requisite borrowing below what
was previously projected. With the Treasury needing to borrow less to finance
government spending, interest rates should remain low. In addition, consumer
spending shows few signs of picking up and inflation remains subdued. These
factors are likely to hold down interest rates despite volatility early in 1996
due to the impasse in budget talks. In keeping with the Fund's very conservative
investment approach and our expectation of lower interest rates, a Federal Home
Loan bank note with a five-year maturity was added to the portfolio in the
fourth quarter.
The major risk to the equity market in 1996 appears to be slower than
anticipated economic growth and with it the potential for disappointing
corporate earnings. Barring an unfavorable resolution to federal budget
negotiations, interest rates should remain subdued and could likely provide
support for stocks. Evergreen American Retirement Fund will continue to hold a
diversified and balanced portfolio, emphasizing income producing securities
which are both defensive and have the potential for capital growth.
We welcome our new shareholders and would like to thank our existing
shareholders for their continued support.
38
<PAGE>
(Photo of EVERGREEN AMERICAN RETIREMENT FUND
Statue of Liberty)
RESULTS TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN AMERICAN RETIREMENT FUND
The graphs below compare a $10,000 investment in the Evergreen American
Retirement Fund (Class A, Class B, Class C and Class Y Shares) with a similar
investment in the Wilshire 5000 and Lehman General Bond Indexes ("Indexes").
(Four line graphs appear here with the following plot points:)
CLASS A
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=19.2%
1/3/95* 3/31/95 6/30/95 9/30/95 12/31/95
EVERGREEN AMERICAN RETIREMENT FUND
LEHMAN GENERAL BOND INDEX
WILSHIRE 5000 INDEX
CLASS B
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=19.3%
1/3/95* 3/31/95 6/30/95 9/30/95 12/31/95
EVERGREEN AMERICAN RETIREMENT FUND
LEHMAN GENERAL BOND INDEX
WILSHIRE 5000 INDEX
CLASS C
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=23.2%
1/3/95* 3/31/95 6/30/95 9/30/95 12/31/95
EVERGREEN AMERICAN RETIREMENT FUND
LEHMAN GENERAL BOND INDEX
WILSHIRE 5000 INDEX
CLASS Y
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=25.1%
FIVE YEAR=13.0%
SINCE INCEPTION=10.6%
<TABLE>
<CAPTION>
3/14/88 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EVERGREEN AMERICAN RETIREMENT FUND
LEHMAN GENERAL BOND INDEX
WILSHIRE 5000 INDEX
</TABLE>
*Commencement of class operations.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE RESULTS. MUTUAL FUNDS
ARE
NOT OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY INSURED.
For the purposes of the graphs and the accompanying tables, it has been
assumed that (a) the maximum sales charge of 4.75% was deducted from the initial
$10,000 investment in Class A Shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the investment in Class B
and Class C Shares, assuming full redemption on December 31, 1995; (c) all
recurring fees (including investment advisory fees) were deducted; and (d) all
dividends and distributions were reinvested.
The Indexes are unmanaged indexes and include the reinvestment of income,
but do not reflect the payment of transaction costs and advisory fees associated
with an investment in the Fund.
39
<PAGE>
(Photo of EVERGREEN AMERICAN RETIREMENT FUND
Statue of Liberty) STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 57.3%
AUTOMOTIVE EQUIPMENT &
MANUFACTURING -- .6%
14,700 Federal-Mogul Corp.................. $ 288,488
BANKS -- 5.1%
20,000 BancorpSouth, Inc................... 405,000
10,000 Bank of New York Co., Inc........... 487,500
8,000 Cape Cod Bank & Trust Co............ 316,000
15,000 Citizens Bancorp.................... 483,750
4,000 First Union Corp.**................. 222,500
16,000 Susquehanna Bancshares, Inc......... 424,000
2,338,750
BUSINESS EQUIPMENT &
SERVICES -- 2.8%
15,000 Dun & Bradstreet Corp............... 971,250
8,000 Reynolds & Reynolds Co. Cl. A....... 311,000
1,282,250
CHEMICALS -- 3.7%
2,000 Dow Chemical Co..................... 140,750
8,000 Eastman Chemical Co................. 501,000
9,000 Grace (W.R.) & Co................... 532,125
2,000 Imperial Chemical Industries Plc,
ADR................................. 93,500
5,000 Praxair, Inc........................ 168,125
15,600 Stepan Co........................... 259,350
1,694,850
COMMUNICATIONS SYSTEMS &
SERVICES -- .7%
5,500* Airtouch Communications, Inc........ 155,375
2,521 AT&T Corp........................... 163,235
318,610
CONSUMER PRODUCTS &
SERVICES -- 5.4%
2,130* ADT, Inc............................ 31,950
12,000 Armor All Products Corp............. 217,500
3,000 Colgate-Palmolive Co................ 210,750
20,000 Dean Foods Co....................... 550,000
18,000 Heinz (H.J.) Co..................... 596,250
15,000 Jostens, Inc........................ 363,750
2,000 Minnesota Mining & Manufacturing
Co.................................. 132,500
30,000 Russ Berrie & Co., Inc.............. 378,750
2,481,450
<CAPTION>
SHARES VALUE
<C> <S> <C>
ELECTRICAL EQUIPMENT &
ELECTRONICS -- 1.5%
1,000 Emerson Electric Co................. $ 81,750
5,828 Hubbell, Inc. Cl. B................. 383,191
3,000 Thomas & Betts Corp................. 221,250
686,191
ENERGY -- 8.7%
8,000 Amoco Corp.......................... 575,000
4,000 Atlantic Richfield Co............... 443,000
7,700 Exxon Corp.......................... 616,962
3,000 Kerr-McGee Corp..................... 190,500
5,000 Mobil Corp.......................... 560,000
4,000 Panhandle Eastern Corp.............. 111,500
6,000 Texaco, Inc......................... 471,000
20,000 Williams Companies, Inc............. 877,500
5,000 YPF Sociedad Anonima ADR............ 108,125
3,953,587
FINANCE & INSURANCE -- 5.1%
20,000* GCR Holdings, Ltd................... 450,000
8,000 Hartford Steam Boiler Inspection &
Insurance Co........................ 400,000
10,000* ITT Hartford Group, Inc............. 483,750
20,000* LaSalle Re Holdings Ltd............. 457,500
1,500* Provident Companies, Inc. W/I....... 50,812
8,000 Renaissance Re Holdings Ltd......... 243,000
3,000 Transamerica Corp................... 218,625
2,303,687
HEALTH CARE PRODUCTS &
SERVICES -- 5.4%
20,000 ADAC Laboratories................... 242,500
7,000 Bristol Myers Squibb Co............. 601,125
14,000 Shared Medical Systems Corp......... 761,250
6,000 U.S. Healthcare, Inc................ 279,000
2,500 Warner Lambert Co................... 242,812
5,333 Zeneca Group Plc, ADR............... 311,313
2,438,000
INDUSTRIAL, COMMERCIAL GOODS &
SERVICES -- 1.7%
10,000 Graco, Inc.......................... 305,000
13,500 Hanson Plc, ADR..................... 205,875
5,000 Harris Corp......................... 273,125
784,000
</TABLE>
40
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
STATEMENT OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
METAL PRODUCTS & SERVICES -- 1.3%
42,000 Lindberg Corp....................... $ 283,500
5,000 Phelps Dodge Corp................... 311,250
594,750
PAPER & PACKAGING -- .7%
12,000 Westvaco Corp....................... 333,000
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- 1.1%
2,460* Cox Communications, Inc............. 47,970
4,000 McGraw-Hill, Inc.................... 348,500
2,803 Times-Mirror Co. Cl. A.............. 94,952
491,422
REAL ESTATE -- .7%
10,000 Post Properties, Inc................ 318,750
RETAILING & DISTRIBUTION -- 1.8%
5,000 Marsh Supermarkets, Inc. Class A.... 66,250
8,000 Mercantile Stores Co., Inc.......... 370,000
8,000 Penney (J.C.) Co., Inc.............. 381,000
817,250
TEXTILE & APPAREL -- 2.2%
23,000 Kellwood Co......................... 468,625
10,000 Oxford Industries, Inc.............. 167,500
6,600 VF Corp............................. 348,150
984,275
TRANSPORTATION -- 1.6%
3,191 Burlington Northern, Inc............ 248,898
7,000 Union Pacific Corp.................. 462,000
710,898
UTILITIES -- ELECTRIC -- 6.2%
9,100 Commonwealth Energy System.......... 407,225
20,000 Eastern Utilities Association....... 472,500
14,000 Houston Industries, Inc............. 339,500
10,000 Illinova Corp....................... 300,000
10,000 Texas Utilities Co.................. 411,250
35,000 TNP Enterprises, Inc................ 656,250
8,000 Unicom Corp......................... 262,000
2,848,725
<CAPTION>
SHARES VALUE
<C> <S> <C>
UTILITIES -- GAS -- 1.0%
25,000 CMS Energy Corp. Class G............ $ 471,875
TOTAL COMMON STOCKS
(COST $20,704,242)............. 26,140,808
CONVERTIBLE PREFERRED STOCKS -- 8.2%
BANKS -- .4%
7,000 ONBANCorp, Inc.
6.75%, Series B..................... 196,000
BUILDING, CONSTRUCTION &
FURNISHINGS -- .7%
7,000 Southdown, Inc.,
$2.875, Series D.................... 309,750
CONSUMER PRODUCTS & SERVICES -- .8%
5,000 SCI Finance LLC
$3.125, Series A.................... 370,000
ENERGY -- .5%
5,000 Valero Energy Corp.
$3.125.............................. 257,500
FINANCE & INSURANCE -- 1.1%
8,000 Integon Corp.,
$3.875.............................. 480,000
HEALTH CARE PRODUCTS &
SERVICES -- .6%
10,000 FHP International Corp.,
5.00%, Series A..................... 266,250
PAPER & PACKAGING -- .5%
10,000 James River Corp. of Virginia 9.00%,
Series P............................ 233,750
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- 2.6%
15,000 AMC Entertainment, Inc.
$1.75............................... 611,250
10,300 Granite Broadcasting Corp.
$1.938.............................. 556,200
1,197 Times Mirror Co.
$1.374, Series B.................... 30,898
1,198,348
UTILITIES -- TELEPHONE -- 1.0%
5,000 Philippine Long Distance Telephone
Co. GDS
7.00%, Series III................... 260,313
5,000 Sprint Corp.
8.25%............................... 190,000
450,313
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $3,129,521).............. 3,761,911
</TABLE>
41
<PAGE>
(Photo of EVERGREEN AMERICAN RETIREMENT FUND
Statue of Liberty) STATEMENT OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CONVERTIBLE DEBENTURES -- 6.9%
AUTOMOTIVE EQUIPMENT &
MANUFACTURING -- .8%
$ 500,000 Exide Corp.
2.90%, 12/15/05..................... $ 361,250
BUILDING, CONSTRUCTION &
FURNISHINGS -- 1.0%
450,000 Medusa Corp.
6.00%, 11/5/03...................... 436,500
CONSUMER PRODUCTS & SERVICES -- .7%
320,000 Max & Erma's Restaurants, Inc.
8.00%, 9/1/04....................... 312,800
ELECTRICAL EQUIPMENT &
ELECTRONICS -- 1.2%
400,000 Conner Peripherals, Inc.
6.50%, 3/1/02....................... 406,000
150,000 Integrated Device Technology, Inc
5.50%, 6/1/02....................... 123,750
529,750
ENERGY -- .8%
100,000 Seitel, Inc.
9.00%, 3/31/02...................... 379,630
FINANCE & INSURANCE -- .8%
100,000 Equitable Co., Inc.
6.125%, 12/15/24.................... 113,000
200,000 Trenwick Group, Inc.
6.00%, 12/15/99..................... 236,000
349,000
METAL PRODUCTS & SERVICES -- .3%
150,000 Quanex Corp.
6.88%, 6/30/07...................... 144,750
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- .7%
329,000 Time Warner, Inc.
8.75%, 1/10/15...................... 340,926
RETAILING & DISTRIBUTION -- .4%
200,000 Big B, Inc.
6.50%, 3/15/03...................... 199,500
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
UTILITIES -- GAS -- .2%
$ 100,000 Ensearch Corp.
6.375%, 4/1/02...................... $ 99,500
TOTAL CONVERTIBLE DEBENTURES
(COST $2,914,768).............. 3,153,606
CORPORATE OBLIGATIONS -- 10.0%
FINANCE & INSURANCE -- 4.5%
1,000,000 American General Finance Corp.
Senior Notes
7.125%, 12/1/99..................... 1,045,777
1,000,000 Ford Motor Credit Co.
5.625%, 12/15/98.................... 999,173
2,044,950
UTILITIES -- TELEPHONE -- 2.2%
1,000,000 GTE Southwest, Inc.
5.82%, 12/1/99...................... 999,845
BANKS -- 2.2%
1,000,000 NationsBank Corp.
6.50%, 8/15/03...................... 1,022,731
CONSUMER PRODUCTS &
SERVICES -- 1.1%
500,000 PepsiCo, Inc.
6.875%, 5/15/97..................... 508,650
TOTAL CORPORATE OBLIGATIONS
(COST $4,501,740).............. 4,576,176
U.S. GOVERNMENT &
AGENCY OBLIGATIONS -- 16.5%
700,000 Federal Agricultural Mortgage Corp.
7.03%, 5/26/98...................... 726,359
2,000,000 Federal Home Loan Bank Notes 5.65%,
12/29/00............................ 2,007,188
1,500,000 U.S. Treasury Bond
7.125%, 2/15/23..................... 1,713,750
3,000,000 U.S. Treasury Note
7.50%, 12/31/96..................... 3,067,500
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(COST $7,387,099).............. 7,514,797
</TABLE>
42
<PAGE>
(Photo of EVERGREEN AMERICAN RETIREMENT FUND
Statue of Liberty) STATEMENT OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM INVESTMENTS -- 5.4%
COMMERCIAL PAPER -- 1.4%
$ 650,000 BellSouth Telecommunications, Inc.
5.77%, 1/24/96...................... $ 647,604
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 4.0%
600,000 Federal Home Loan Bank
5.50%, 1/31/96...................... 597,250
Federal Home Loan Mortgage Corp.
250,000 5.46%, 1/16/96...................... 249,431
400,000 5.50%, 1/25/96...................... 398,534
550,000 Federal National Mortgage
Association
5.46%, 1/22/96...................... 548,248
1,793,463
TOTAL SHORT-TERM INVESTMENTS
(COST $2,441,067).............. 2,441,067
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
(COST $41,078,437)..... 104.3% 47,588,365
OTHER ASSETS AND
LIABILITIES -- NET..... (4.3) (1,976,609)
NET ASSETS................ 100.0% $45,611,756
</TABLE>
* Non-income producing securities.
** At December 31, 1995 the Fund owned 4,000 shares of common stock of First
Union at a cost of $106,108. During the year ended December 31, 1995, the
Fund earned $7,840 in dividend income from this investment. These were
purchased by the Fund prior to the acquisition of the investment adviser and
Lieber & Company by First Union.
The following abbreviations are used in this portfolio:
ADR -- American Depositary Receipts
GDS -- Global Depositary Shares
W/I -- When Issued
See accompanying notes to financial statements.
43
<PAGE>
(Photo of EVERGREEN AMERICAN RETIREMENT FUND
Statue of Liberty) STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $41,078,437)............................................................. $47,588,365
Dividends and interest receivable.............................................................................. 330,215
Receivable for Fund shares sold................................................................................ 271,927
Receivable for securities sold................................................................................. 166,650
Prepaid expenses............................................................................................... 49,836
Total assets............................................................................................. 48,406,993
LIABILITIES:
Due to custodian bank.......................................................................................... 23,159
Payable for securities purchased............................................................................... 2,611,882
Accrued expenses............................................................................................... 79,844
Payable for Fund shares repurchased............................................................................ 48,659
Accrued Advisory fee........................................................................................... 28,396
Distribution fee payable....................................................................................... 3,297
Total liabilities........................................................................................ 2,795,237
NET ASSETS........................................................................................................ $45,611,756
NET ASSETS CONSIST OF:
Paid-in capital................................................................................................ $38,946,153
Accumulated net realized gain on investments................................................................... 155,675
Net unrealized appreciation of investments..................................................................... 6,509,928
Net assets............................................................................................... $45,611,756
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($1,335,481/104,135 shares of benefical interest outstanding)................................... $ 12.82
Sales charge -- 4.75% of offering price........................................................................ .64
Maximum offering price................................................................................... $ 13.46
Class B Shares ($4,839,103/378,178 shares of beneficial interest outstanding).................................. $ 12.80
Class C Shares ($109,911/8,577 shares of beneficial interest outstanding)...................................... $ 12.81
Class Y Shares ($39,327,261/3,064,399 shares of beneficial interest outstanding)............................... $ 12.83
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
(Photo of EVERGREEN AMERICAN RETIREMENT FUND
Statue of Liberty) STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $6,076)............................................. $1,073,750
Interest........................................................................................... 994,467
Total investment income...................................................................... 2,068,217
EXPENSES:
Advisory fee....................................................................................... $297,242
Distribution fee-Class A Shares.................................................................... 659
Distribution fee-Class B Shares.................................................................... 9,137
Shareholder services fee-Class B Shares............................................................ 3,045
Distribution fee-Class C Shares.................................................................... 187
Shareholder services fee-Class C Shares............................................................ 62
Registration and filing fees....................................................................... 77,216
Custodian fee...................................................................................... 57,306
Transfer agent fee................................................................................. 54,402
Professional fees.................................................................................. 40,958
Trustees' fees and expenses........................................................................ 15,121
Reports and notices to shareholders................................................................ 16,699
Insurance.......................................................................................... 1,475
Miscellaneous...................................................................................... 14,231
587,740
Less: Expense reimbursement........................................................................ (76,464)
Net expenses................................................................................. 511,276
Net investment income................................................................................. 1,556,941
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment transactions....................................................... 460,019
Net change in unrealized appreciation (depreciation) of investments................................ 6,860,189
Net gain on investments............................................................................... 7,320,208
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $8,877,149
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
(Photo of EVERGREEN AMERICAN RETIREMENT FUND
Statue of Liberty) STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................................. $ 1,556,941 $ 2,106,165
Net realized gain (loss) on investments........................................... 460,019 (224,124)
Net change in unrealized appreciation (depreciation)
of investments................................................................. 6,860,189 (3,049,986)
Net increase (decrease) in net assets resulting from operations................ 8,877,149 (1,167,945)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME:
Class A Shares.................................................................... (15,368) --
Class B Shares.................................................................... (56,118) --
Class C Shares.................................................................... (987) --
Class Y Shares.................................................................... (1,498,372) (2,092,261)
Total distributions from net investment income................................. (1,570,845) (2,092,261)
IN EXCESS OF NET INVESTMENT INCOME:
Class A Shares.................................................................... (12) --
Class B Shares.................................................................... (44) --
Class C Shares.................................................................... (1) --
Class Y Shares.................................................................... (1,166) --
Total distributions in excess of net investment income......................... (1,223) --
Total distributions to shareholders......................................... (1,572,068) (2,092,261)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold......................................................... 9,254,552 11,089,665
Proceeds from reinvestment of distributions....................................... 1,339,655 1,774,030
Payment for shares redeemed....................................................... (9,463,471) (9,763,060)
Net increase resulting from Fund share transactions............................ 1,130,736 3,100,635
Net increase (decrease) in net assets.......................................... 8,435,817 (159,571)
NET ASSETS:
Beginning of year................................................................. 37,175,939 37,335,510
End of year (including undistributed net investment income of $0 and $13,904,
respectively)................................................................... $45,611,756 $37,175,939
</TABLE>
46
<PAGE>
(Photo of EVERGREEN AMERICAN RETIREMENT FUND
Statue of Liberty) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JANUARY 3, 1995* THROUGH CLASS Y SHARES
DECEMBER 31, 1995
CLASS A CLASS B CLASS C YEAR ENDED DECEMBER 31,
SHARES SHARES SHARES 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period............................ $10.65 $10.65 $10.65 $10.67 $11.60 $10.95 $10.52
Income (loss) from investment
operations:
Net investment income.............. .41 .35 .36 .47 .60 .56 .66
Net realized and unrealized gain
(loss) on investments............. 2.22 2.20 2.19 2.16 (.93) .96 .55
Total from investment
operations...................... 2.63 2.55 2.55 2.63 (.33) 1.52 1.21
Less distributions to shareholders
from:
Net investment income.............. (.46) (.40) (.39) (.47) (.60) (.60) (.61)
Net realized gains on
investments....................... -- -- -- -- -- (.24) (.17)
In excess of net realized gains on
investments....................... -- -- -- -- -- (.03) --
Total distributions.............. (.46) (.40) (.39) (.47) (.60) (.87) (.78)
Net asset value, end of period...... $12.82 $12.80 $12.81 $12.83 $10.67 $11.60 $10.95
TOTAL RETURN**...................... 24.9% 24.1% 24.0% 25.1% (2.9%) 14.1% 11.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)................... $1,335 $4,839 $110 $39,327 $37,176 $37,336 $23,781
Ratios to average net assets:
Expenses........................... 1.37%+# 2.12%+# 2.10%+# 1.26% 1.28% 1.36% 1.51%
Net investment income.............. 3.73%+# 2.97%+# 2.96%+# 3.96% 5.40% 5.13% 6.23%
Portfolio turnover rate............. 49% 49% 49% 49% 136% 92% 151%
<CAPTION>
1991
<S> <C>
PER SHARE DATA:
Net asset value, beginning of
period............................ $9.59
Income (loss) from investment
operations:
Net investment income.............. .60
Net realized and unrealized gain
(loss) on investments............. 1.15
Total from investment
operations...................... 1.75
Less distributions to shareholders
from:
Net investment income.............. (.60)
Net realized gains on
investments....................... (.22)
In excess of net realized gains on
investments....................... --
Total distributions.............. (.82)
Net asset value, end of period...... $10.52
TOTAL RETURN**...................... 18.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)................... $15,632
Ratios to average net assets:
Expenses........................... 1.50%
Net investment income.............. 5.91%
Portfolio turnover rate............. 97%
</TABLE>
* Commencement of class operations.
** Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
+ Annualized. Due to the recent commencement of their offering, the ratios for
Class A, Class B and Class C shares are not necessarily comparable to that
of the Class Y shares, and are not necessarily indicative of future ratios.
# Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of operating expenses and net investment income (loss) to
average net assets, exclusive of any applicable state expense limitations,
would have been the following:
<TABLE>
<CAPTION>
JANUARY 3, 1995* THROUGH
DECEMBER 31, 1995
CLASS A CLASS B
SHARES SHARES
<S> <C> <C>
Expenses..................................................................... 10.96% 4.20%
Net investment income (loss)................................................. (5.86%) .89%
<CAPTION>
CLASS C
SHARES
<S> <C>
Expenses..................................................................... 103.52%
Net investment income (loss)................................................. (98.46%)
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
(Photo of EVERGREEN GROWTH & INCOME FUND
city skyline)
A REPORT FROM YOUR
PORTFOLIO MANAGER
EDMUND H. NICKLIN
Evergreen Growth and Income Fund completed its ninth year (Photo of
of operations on December 31, 1995. Implementation of the Edmund H.
Fund's strategy of investing in a portfolio of securities we Nicklin)
deem to be undervalued, purchased on a "value timing" basis
provided favorable results. As the Fund's long-standing
shareholders are aware, security selection on a value timing
basis is a research-driven process based upon the
identification of a catalyst for change in addition to
quantification of undervaluation.
Fund performance in 1995 directly benefited from the trend
of American industry to exploit economies of scale. The high
cost of developing new products, the savings on
distribution to a more dense customer base and the need to
leverage productivity-enhancing technological advancements all require much
larger business entities. During 1995, nine companies in the Fund's portfolio
were acquired or received acquisition offers. These acquisitions and offers,
plus the positive performance of most sectors of the portfolio, led to a total
return of 32.9% for the Fund (Class Y, no-load shares) for the twelve months
ended December 31, 1995*. While the Fund's 1995 total return did not exceed that
of the S&P 500 Reinvested Index**, it did exceed the return of the Lipper Growth
and Income Funds Index of 30 growth and income funds***. The Fund's average
annual compound returns (Class Y, no-load shares) for the five-year period and
the period since its inception on October 15, 1986, through December 31, 1995,
were 17.3% and 13.4%, respectively, which exceeded the respective returns of the
Lipper Growth and Income Funds Index. (For additional performance information,
please see page 51.)
Many companies manifest sub-par financial performance at the time of their
addition to the Fund's portfolio. However, a financial or operational problem is
often necessary to depress the market price, so that the security satisfies the
undervaluation criterion of the value timing strategy. Mid-cap companies are
often attractive value timing candidates because they can provide an effective
trade-off between the financial strength necessary for management to work
through the period of problem identification and resolution, and the level of
Wall Street research coverage (less coverage correlates to greater appreciation
potential). Small troubled companies often lack enough of the former and large
closely followed companies often have an excess of the latter. The median market
capitalization of the Fund's portfolio was $1.7 billion at year-end 1995,
consistent with a mid-cap classification.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
*PERFORMANCE FOR THE FUND'S CLASS A, CLASS B, AND CLASS C SHARES IS NOT
AVAILABLE AS THOSE CLASSES WERE NOT IN EXISTENCE FOR THE FULL 12-MONTH PERIOD
ENDED 12/31/95. PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDEND AND
CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
FLUCTUATE. INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.
**AN UNMANAGED INDEX OF SELECTED SECURITIES. AN INVESTMENT CAN NOT BE MADE IN AN
INDEX.
***LIPPER ANALYTICAL SERVICES, INC., IS AN INDEPENDENT MUTUAL FUNDS PERFORMANCE
MONITOR.
EFFECTIVE 1/19/96, FFB LEXICON CAPITAL APPRECIATION EQUITY FUND WAS MERGED INTO
EVERGREEN GROWTH & INCOME FUND. AS A RESULT, THE COMBINED ASSETS UPON COMPLETION
OF THE MERGER WERE $376 MILLION.
48
<PAGE>
(Photo of EVERGREEN GROWTH & INCOME FUND
city skyline)
A REPORT FROM YOUR
PORTFOLIO MANAGER -- (CONTINUED)
PORTFOLIO HIGHLIGHTS
The Fund's investment strategy and focus on undervaluation requires that
significant diversity be incorporated into the portfolio, not only among
individual securities, but industries as well. Of the fifteen industry groupings
in the Fund's portfolio at year-end, each produced a positive return in 1995
with the exception of retailing and electronic sectors. Best results for the
year were recorded by railroads (+78%), finance and insurance (+74%), and banks
and thrifts (+56%). Performance in the rail group was driven by acquisitions,
with the Fund holding both the acquirees and the acquirors. Chicago &
Northwestern Holdings Corp. provided a gain of 72% during 1995 from its
acquisition by Union Pacific, which itself appreciated 46% on the strength of
this acquisition, its proposed acquisition of Southern Pacific Rail Corp. and
its forthcoming spin-off of Union Pacific Resources Group Inc. Results for the
finance and insurance group were driven by the Fund's two largest holdings:
Federal Home Loan Mortgage Corporation and Federal National Mortgage
Association, each appreciating approximately 65% in 1995. The excellent
performance of the bank and thrift group was driven by acquisitions reflecting
the strategy of regional banks to leverage their enhanced distribution network.
The largest disappointment in 1995 was the retail group, whose negative return
in 1995 was driven by a nationwide excess of stores. Caldor, the largest
individual disappointment declared bankruptcy as a result of its inability to
secure financing from either vendors or lending institutions for its Christmas
merchandise.
Continued consolidation in the radio industry, combined with increased demand
for advertising spots, indicated undervaluation for a number of radio
broadcasters. Four were added to the portfolio during 1995. The value of
television stations also increased reflecting scarcity value with the emergence
of two new broadcast networks. Three television broadcasters were added, and one
long-standing holding, Outlet Communications, was purchased by NBC in February,
1996. This acquisition provided substantial appreciation to the Fund, even
through fiscal year-end. These additions raised the portfolio commitment to
publishing, broadcasting and entertainment to over 15% of net assets at year-end
1995. Electric utilities saw their shares decline early in 1995 in response to
the opening of power generation to competition. Previously expended capital
costs for generation capacity could be a risk in a competitive environment.
Expecting state regulators to allow capital cost recovery, five electric
utilities were judged to offer attractive returns with acceptable risk and were
added to the portfolio.
The value timing strategy is not expected to provide a near-term reward for
every investment. Indeed, one lab testing company, two electronic component
companies, one software company and an electronic surveillance firm are
currently available in the marketplace at prices less than the Fund's cost. A
reexamination of each of these positions suggests that the original estimate of
undervaluation was correct, but that the improvement of financial performance by
management is a greater job and will take longer than originally anticipated.
In 1996, the Fund will continue to focus on identifying undervaluation and a
catalyst necessary to secure the value discrepancy - second generation value
investing. The overly optimistic expectations for technology companies in the
summer of 1995 has given way to a more sober assessment of these companies'
opportunities and their valuation in the equity market.
49
<PAGE>
(Photo of EVERGREEN GROWTH & INCOME FUND
city skyline)
A REPORT FROM YOUR
PORTFOLIO MANAGER -- (CONTINUED)
As the economy enters its sixth year of recovery, we believe earnings
momentum will decrease markedly due to the age of the current expansion and a
reduction in the benefit from corporate restructuring, a significant component
of earnings improvement in previous years. With substantially less earnings
momentum in 1996, the outlook for the broader market is more dependent upon the
actions of the Federal Reserve Board. With evident economic slowing in fourth
quarter 1995, additional decreases in the Fed Funds rate beyond the .25% in
December 1995 are likely. This loosening of monetary policy may well be
supportive of higher equity prices in 1996, but the real opportunity will be in
the identification of individual companies that can produce better earnings in a
less hospitable economic environment. An objective of the value timing strategy
is to identify companies that can provide that added performance.
I would like to take this opportunity to welcome the many new shareholders of
the Evergreen Growth & Income Fund and thank them for the confidence they have
displayed in joining the Fund's long-standing shareholders. Also, I would like
to welcome shareholders of FFB Lexicon Capital Appreciation Fund which merged
into Evergreen Growth & Income Fund on January 19, 1996.
50
<PAGE>
(Photo of EVERGREEN GROWTH & INCOME FUND
city skyline)
RESULTS TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN GROWTH & INCOME FUND
The graphs below compare a $10,000 investment in the Evergreen Growth and
Income Fund (Class A, Class B, Class C and Class Y Shares) with a similar
investment in the S&P 500 and Lipper Growth and Income Funds Average Indexes
("Indexes").
(Four line graphs appear here with the following plot points:)
CLASS A
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=26.7%
<TABLE>
<CAPTION>
1/3/95* 3/31/95 6/30/95 9/30/95 12/31/95
<S> <C> <C> <C> <C> <C>
EVERGREEN GROWTH & INCOME FUND
LIPPER GROWTH & INCOME FUNDS AVERAGE
S&P 500
</TABLE>
CLASS B
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=27.2%
<TABLE>
<CAPTION>
1/3/95* 3/31/95 6/30/95 9/30/95 12/31/95
<S> <C> <C> <C> <C> <C>
EVERGREEN GROWTH & INCOME FUND
LIPPER GROWTH & INCOME FUNDS AVERAGE
S&P 500
</TABLE>
CLASS C
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=31.2%
<TABLE>
<CAPTION>
1/3/95* 3/31/95 6/30/95 9/30/95 12/31/95
<S> <C> <C> <C> <C> <C>
EVERGREEN GROWTH & INCOME FUND
LIPPER GROWTH & INCOME FUNDS AVERAGE
S&P 500
</TABLE>
CLASS Y
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=32.9%
FIVE YEAR=17.3%
SINCE INCEPTION=13.4%
<TABLE>
<CAPTION>
10/15/86* 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EVERGREEN GROWTH &
INCOME FUND
LIPPER GROWTH & INCOME
FUNDS AVERAGE
S&P 500
</TABLE>
*Commencement of class operations.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE RESULTS. MUTUAL FUNDS
ARE
NOT OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY INSURED.
For the purposes of the graphs and the accompanying tables, it has been
assumed that (a) the maximum sales charge of 4.75% was deducted from the initial
$10,000 investment in Class A Shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the investment in Class B
and Class C Shares, assuming full redemption on December 31, 1995; (c) all
recurring fees (including investment advisory fees) were deducted; and (d) all
dividends and distributions were reinvested.
The Indexes are unmanaged indexes and include the reinvestment of income,
but do not reflect the payment of transaction costs and advisory fees associated
with an investment in the Fund.
51
<PAGE>
(Photo of EVERGREEN GROWTH & INCOME FUND
city skyline) STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 93.6%
BANKS & THRIFTS -- 10.2%
35,000 Bank of New York Co., Inc............. $ 1,706,250
36,950 BSB Bancorp, Inc...................... 914,513
67,500 Central Fidelity Banks, Inc........... 2,160,000
22,500 Cullen/Frost Bankers, Inc............. 1,125,000
70,000 First Security Corp................... 2,695,000
145,000 Hibernia Corp. Cl. A.................. 1,558,750
20,000 Liberty Bancorp, Inc.................. 745,000
20,000 ONBANCorp, Inc........................ 667,500
40,000 State Street Boston Corp.............. 1,800,000
50,000 Summit Bancorporation................. 1,575,000
45,000 Susquehanna Bancshares, Inc........... 1,192,500
120,000 Washington Mutual Savings Bank........ 3,465,000
55,000 Webster Financial Corp................ 1,622,500
21,227,013
BUSINESS EQUIPMENT &
SERVICES -- 9.0%
105,000* Airtouch Communications, Inc.......... 2,966,250
11,950* Associated Group, Inc. Cl. A.......... 225,556
11,950* Associated Group, Inc. Cl. B.......... 227,050
62,500* Compuware Corp........................ 1,156,250
7,200* Cray Research, Inc.................... 178,200
130,000 Harper Group, Inc..................... 2,307,500
45,100* Landmark Graphics Corp................ 1,048,575
10,000* MSC Industrial Direct Co., Inc........ 275,000
100,000 Pittston Services Group............... 3,137,500
68,500* Platinum Technology, Inc.............. 1,258,688
30,000* Policy Management Systems Corp........ 1,428,750
116,000 Reynolds & Reynolds Co. Cl. A......... 4,509,500
18,718,819
CHEMICALS & AGRICULTURAL
PRODUCTS -- 3.6%
22,500 Air Products & Chemicals, Inc......... 1,186,875
47,300 Fuller (H.B.) Co...................... 1,643,675
7,800 Great Lakes Chemical Corp............. 561,600
120,000 Praxair, Inc.......................... 4,035,000
7,427,150
CONSUMER PRODUCTS &
SERVICES -- 2.0%
40,000 CPC International Inc................. 2,745,000
55,000 Dean Foods Co......................... 1,512,500
4,257,500
DIVERSIFIED COMPANIES -- 4.8%
60,000 Grace (W.R.) & Co..................... 3,547,500
<CAPTION>
SHARES VALUE
<C> <S> <C>
DIVERSIFIED COMPANIES -- (CONTINUED)
35,000* ITT Corp.............................. $ 1,855,000
95,000 ITT Industries, Inc................... 2,280,000
65,000 Morton International, Inc............. 2,331,875
10,014,375
ELECTRICAL EQUIPMENT &
ELECTRONICS -- 2.6%
15,000 AVX Corp.............................. 397,500
31,718 First Data Corp....................... 2,121,141
125,000 Sensormatic Electronics Corp.......... 2,171,875
21,000* Vishay Intertechnology, Inc........... 661,500
5,352,016
ENERGY -- 4.6%
25,000 Anadarko Petroleum Corp............... 1,353,125
45,000 Coastal Corp.......................... 1,676,250
10,000* Forcenergy Gas Exploration, Inc....... 110,000
25,000 Kerr-McGee Corp....................... 1,587,500
115,000 Oryx Energy Co........................ 1,538,125
54,000 Southwestern Energy Co................ 688,500
50,000 Williams Companies, Inc............... 2,193,750
20,000 YPF Sociedad Anonima-ADR.............. 432,500
9,579,750
FINANCE & INSURANCE -- 9.6%
80,000 Federal Home Loan Mortgage Corp....... 6,680,000
50,000 Federal National Mortgage
Association........................... 6,206,250
10,000 Guaranty National Corp................ 153,750
7,000 Hartford Steam Boiler Inspection &
Insurance Co.......................... 350,000
80,000* ITT Hartford Group Corp............... 3,870,000
100,000* LaSalle Re Holdings Ltd............... 2,287,500
10,000 National RE Corp...................... 380,000
19,927,500
HEALTH CARE PRODUCTS &
SERVICES -- 12.0%
35,000 Caremark International, Inc........... 634,375
32,500* Elan Corporation, Plc, ADR............ 1,580,313
30,000* Health Systems International, Inc..... 963,750
12,000 Johnson & Johnson..................... 1,027,500
130,000* Laboratory Corporation of America
Holdings.............................. 1,218,750
100,000* Lincare Holdings, Inc................. 2,500,000
30,000* Living Centers of America, Inc........ 1,050,000
25,000 Mallinckrodt Group, Inc............... 909,375
30,000 Manor Care, Inc....................... 1,050,000
19,500 McKesson Corp......................... 987,187
</TABLE>
52
<PAGE>
(Photo of EVERGREEN GROWTH & INCOME FUND
city skyline) STATEMENT OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
HEALTH CARE PRODUCTS &
SERVICES -- (CONTINUED)
56,000 Schering-Plough Corp.................. $ 3,066,000
12,500 Shared Medical Systems Corp........... 679,687
25,000* Spacelabs Medical, Inc................ 718,750
120,000* Tenet Healthcare Corp................. 2,490,000
11,000 Warner-Lambert Co..................... 1,068,375
60,000* Wellpoint Health Networks, Inc........ 1,927,500
130,000 West Co., Inc......................... 3,055,000
24,926,562
INDUSTRIAL PRODUCTS -- 5.5%
7,500 Eaton Corp............................ 402,187
60,200 J & L Specialty Steel Inc............. 1,128,750
100,000 Lone Star Industries, Inc............. 2,500,000
32,500 Medusa Corp........................... 861,250
55,000 Santa Fe Pacific Gold Corp............ 666,875
87,700* Strattec Security Corp................ 1,578,600
15,000 Sundstrand Corp....................... 1,055,625
15,000 Tecumseh Products Co. Cl. A........... 776,250
25,000 Vulcan Materials Co................... 1,440,625
22,500 York International Corp............... 1,057,500
11,467,662
PAPER -- 1.0%
75,000 Westvaco Corp......................... 2,081,250
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- 15.6%
175,000 Citicasters, Inc...................... 4,134,375
170,000* EZ Communications, Inc. Cl. A......... 3,060,000
50,000 Gaylord Entertainment Co.
Cl. A................................. 1,387,500
112,500* Jacor Communications, Inc............. 1,968,750
100,000* Katz Media Group, Inc................. 1,762,500
20,000 Knight-Ridder, Inc.................... 1,250,000
70,000* Lin Television Corp................... 2,082,500
7,500 McGraw-Hill Companies, Inc............ 653,437
21,000 New York Times Co. Cl. A.............. 622,125
30,500* Outlet Communications, Inc............ 1,441,125
58,000 Scripps (E.W) Co. Cl. A............... 2,283,750
110,000 TCA Cable TV, Inc..................... 3,038,750
70,000 Time Warner, Inc...................... 2,651,250
15,000* U S WEST Media Group.................. 285,000
<CAPTION>
SHARES VALUE
<C> <S> <C>
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- (CONTINUED)
24,000* Viacom, Inc. Cl. A.................... $ 1,101,000
2,800 Washington Post Co.................... 789,600
141,000* Young Broadcasting, Inc. Cl. A........ 3,983,250
32,494,912
RETAILING -- 1.2%
30,000* Caldor Corp........................... 97,500
22,500* Carson Pirie Scott & Co............... 447,187
30,000 Kellwood Co........................... 611,250
12,500 Mercantile Stores Co., Inc............ 578,125
20,000 Sears, Roebuck & Co................... 780,000
2,514,062
TRANSPORTATION -- 4.2%
30,857 Burlington Northern, Inc.............. 2,406,846
57,000 Kansas City Southern Industries,
Inc................................... 2,607,750
55,000 Union Pacific Corp.................... 3,630,000
8,644,596
UTILITIES -- 7.7%
15,000 AT&T Corp............................. 971,250
65,000 Century Telephone Enterprises, Inc.... 2,063,750
32,000 Commonwealth Energy System............ 1,432,000
5,000 Eastern Utilities Associates.......... 118,125
70,000 Houston Industries, Inc............... 1,697,500
50,000 Illinova Corp......................... 1,500,000
17,208 SBC Communications, Inc............... 989,460
40,000 Texas Utilities Co.................... 1,645,000
161,000 TNP Enterprises, Inc.................. 3,018,750
45,000 Unicom Corp........................... 1,473,750
30,000* WorldCom, Inc......................... 1,057,500
15,967,085
TOTAL COMMON STOCKS
(COST $151,547,991).............. 194,600,252
PREFERRED STOCKS -- .1%
ENERGY -- .1%
2,846 Columbia Gas Systems, Inc.
5.22%................................. 69,727
1,743 Columbia Gas Systems, Inc.
7.89% -- DECS......................... 70,801
TOTAL PREFERRED STOCKS
(COST $140,480).................. 140,528
</TABLE>
53
<PAGE>
(Photo of EVERGREEN GROWTH & INCOME FUND
city skyline) STATEMENT OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CONVERTIBLE DEBENTURES -- .1%
ELECTRICAL EQUIPMENT &
ELECTRONICS -- .1%
$ 100,000 Conner Peripherals, Inc.
6.50%, 3/01/02
TOTAL CONVERTIBLE DEBENTURES
(COST $96,500)..................... $ 101,500
CORPORATE OBLIGATIONS -- .8%
ENERGY -- .3%
Columbia Gas Systems, Inc.
106,000 6.39%, 11/28/00.................... 107,781
101,000 6.61%, 11/28/02.................... 103,323
101,000 6.80%, 11/28/05.................... 103,808
101,000 7.05%, 11/28/07.................... 104,030
101,000 7.32%, 11/28/10.................... 103,485
101,000 7.42%, 11/28/15.................... 102,566
101,000 7.62%, 11/28/25.................... 103,586
728,579
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- .5%
Time Warner, Inc.
6.835%, 8/15/00.................... 207,195
206,000
123,000 7.975%, 8/15/04.................... 130,552
247,000 8.11%, 8/15/06..................... 264,241
247,000 8.18%, 8/15/07..................... 265,055
92,000 Viacom, Inc., Sub. Deb.,
8.00%, 7/7/06...................... 94,760
961,803
TOTAL CORPORATE OBLIGATIONS
(COST $1,595,465)............. 1,690,382
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM INVESTMENTS -- 5.0%
COMMERCIAL PAPER -- 2.8%
$2,100,000 Gannett Co.
5.60%, 1/26/96..................... $ 2,091,833
500,000 Liberty Mutual Capital Corp.
5.65%, 2/1/96...................... 497,567
1,300,000 MidSouth Capital Corp.
5.82%, 1/8/96...................... 1,298,529
1,000,000 Sandoz Corp.
5.77%, 1/26/96..................... 995,993
1,000,000 Virginia Electric & Power Co.
5.60%, 1/29/96..................... 995,645
5,879,567
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 2.2%
1,000,000 Federal Home Loan Mortgage Corp.
5.50%, 1/25/96..................... 996,333
900,000 Federal National Mortgage
Association
2,700,000 5.46%, 1/22/96..................... 2,691,401
5.41%, 2/13/96..................... 894,184
4,581,918
TOTAL SHORT-TERM INVESTMENTS
(COST $10,461,485)............ 10,461,485
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
(COST $163,841,921).... 99.6% 206,994,147
OTHER ASSETS AND
LIABILITIES -- NET..... .4 866,326
NET ASSETS................ 100.0% $207,860,473
</TABLE>
* Non-income producing securities.
ADR -- American Depositary Receipts
DECS -- Dividend Enhanced Convertible Stock
See accompanying notes to financial statements.
54
<PAGE>
(Photo of EVERGREEN GROWTH & INCOME FUND
city skyline) STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $163,841,921)........................................................... $206,994,147
Receivable for securities sold................................................................................ 1,298,296
Receivable for Fund shares sold............................................................................... 1,115,164
Dividends and interest receivable............................................................................. 288,301
Prepaid expenses.............................................................................................. 64,270
Total assets............................................................................................ 209,760,178
LIABILITIES:
Due to custodian bank......................................................................................... 715,288
Payable for securities purchased.............................................................................. 622,917
Payable for Fund shares repurchased........................................................................... 197,093
Accrued Advisory fee.......................................................................................... 164,229
Accrued expenses.............................................................................................. 168,787
Distribution fee payable...................................................................................... 31,391
Total liabilities....................................................................................... 1,899,705
NET ASSETS....................................................................................................... $207,860,473
NET ASSETS CONSIST OF:
Paid-in capital............................................................................................... $164,706,825
Accumulated net realized gain on investments.................................................................. 1,422
Net unrealized appreciation of investments.................................................................... 43,152,226
Net assets.............................................................................................. $207,860,473
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($19,001,443/1,019,929 shares of beneficial interest outstanding).............................. $ 18.63
Sales charge - 4.75% of offering price........................................................................ .93
Maximum offering price.................................................................................. $ 19.56
Class B Shares ($46,212,087/2,486,311 shares of beneficial interest outstanding).............................. $ 18.59
Class C Shares ($1,923,627/103,506 shares of beneficial interest outstanding)................................. $ 18.58
Class Y Shares ($140,723,316/7,548,114 shares of beneficial interest outstanding)............................. $ 18.64
</TABLE>
See accompanying notes to financial statements.
55
<PAGE>
(Photo of EVERGREEN GROWTH & INCOME FUND
city skyline) STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends...................................................................................... $ 1,974,761
Interest....................................................................................... 1,254,366
Total investment income.................................................................. 3,229,127
EXPENSES:
Advisory fee................................................................................... $1,332,685
Distribution fee - Class A Shares.............................................................. 22,055
Distribution fee - Class B Shares.............................................................. 159,114
Shareholder services fee - Class B Shares...................................................... 53,139
Distribution fee - Class C Shares.............................................................. 6,902
Shareholder services fee - Class C Shares...................................................... 2,301
Transfer agent fee............................................................................. 116,905
Registration and filing fees................................................................... 102,729
Custodian fee.................................................................................. 76,536
Professional fees.............................................................................. 44,935
Reports and notices to shareholders............................................................ 29,244
Trustees' fees and expenses.................................................................... 10,645
Insurance...................................................................................... 2,021
Miscellaneous.................................................................................. 16,213
1,975,424
Less: Expense reimbursement.................................................................... (38,106)
Net expenses............................................................................. 1,937,318
Net investment income............................................................................. 1,291,809
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments............................................................... 5,206,584
Net change in unrealized appreciation of investments........................................... 28,342,991
Net gain on investments........................................................................... 33,549,575
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............................................. $34,841,384
</TABLE>
See accompanying notes to financial statements.
56
<PAGE>
(Photo of EVERGREEN GROWTH & INCOME FUND
city skyline) STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................................. $ 1,291,809 $ 655,759
Net realized gain on investments.................................................. 5,206,584 4,749,072
Net change in unrealized appreciation (depreciation) of investments............... 28,342,991 (4,490,466)
Net increase in net assets resulting from operations.............................. 34,841,384 914,365
DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME:
Class A Shares.................................................................... (93,250) --
Class B Shares.................................................................... (104,385) --
Class C Shares.................................................................... (5,584) --
Class Y Shares.................................................................... (1,088,590) (655,759)
Total distributions to shareholders from
net investment income.................................................... (1,291,809) (655,759)
IN EXCESS OF NET INVESTMENT INCOME:
Class A Shares.................................................................... (518) --
Class B Shares.................................................................... (580) --
Class C Shares.................................................................... (31) --
Class Y Shares.................................................................... (6,050) --
Total distributions to shareholders in excess of
net investment income.................................................... (7,179) --
NET REALIZED GAIN ON INVESTMENTS:
Class A Shares.................................................................... (468,664) --
Class B Shares.................................................................... (1,156,785) --
Class C Shares.................................................................... (48,338) --
Class Y Shares.................................................................... (3,524,196) (4,749,072)
Total distributions to shareholders from net realized gain on investments... (5,197,983) (4,749,072)
Total distributions to shareholders......................................... (6,496,971) (5,404,831)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold......................................................... 131,253,002 42,704,686
Proceeds from reinvestment of distributions....................................... 5,712,264 4,904,262
Payment for shares redeemed....................................................... (30,906,224) (46,723,537)
Net increase from Fund share transactions................................... 106,059,042 885,411
Net increase (decrease) in net assets....................................... 134,403,455 (3,605,055)
NET ASSETS:
Beginning of year................................................................. 73,457,018 77,062,073
End of year....................................................................... $ 207,860,473 $ 73,457,018
</TABLE>
See accompanying notes to financial statements.
57
<PAGE>
(Photo of EVERGREEN GROWTH & INCOME FUND
city skyline) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JANUARY 3, 1995* THROUGH CLASS Y SHARES
DECEMBER 31, 1995
CLASS A CLASS B CLASS C YEAR ENDED DECEMBER 31,
SHARES SHARES SHARES 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................ $14.48 $14.48 $14.48 $14.52 $15.41 $14.18 $12.99
Income from investment operations:
Net investment income.............................. .13 .05 .06 .18 .14 .14 .15
Net realized and unrealized gain on investments.... 4.64 4.61 4.60 4.59 .12 1.91 1.65
Total from investment operations................. 4.77 4.66 4.66 4.77 .26 2.05 1.80
Less distributions to shareholders from:
Net investment income.............................. (.14 ) (.07 ) (.08) (.17) (.14) (.14) (.15)
Net realized gain on investments................... (.48 ) (.48 ) (.48) (.48) (1.01) (.68) (.46)
Total distributions............................... (.62 ) (.55 ) (.56) (.65) (1.15) (.82) (.61)
Net asset value, end of period...................... $18.63 $18.59 $18.58 $18.64 $14.52 $15.41 $14.18
TOTAL RETURN+....................................... 33.0% 32.2% 32.2% 32.9% 1.7% 14.4% 13.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)............ $19 $46 $2 $141 $73 $77 $64
Ratios to average net assets:
Expenses........................................... 1.55% ++# 2.24% ++# 2.15%++# 1.27% 1.33% 1.26% 1.33%
Net investment income.............................. .99% ++# .30% ++# .35%++# 1.11% .96% .99% 1.18%
Portfolio turnover rate............................. 17% 17% 17% 17% 29% 28% 30%
<CAPTION>
1991
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period................ $10.72
Income from investment operations:
Net investment income.............................. .19
Net realized and unrealized gain on investments.... 2.58
Total from investment operations................. 2.77
Less distributions to shareholders from:
Net investment income.............................. (.19)
Net realized gain on investments................... (.31)
Total distributions............................... (.50)
Net asset value, end of period...................... $12.99
TOTAL RETURN+....................................... 25.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)............ $48
Ratios to average net assets:
Expenses........................................... 1.41%
Net investment income.............................. 1.55%
Portfolio turnover rate............................. 23%
</TABLE>
* Commencement of class operations.
+ Total return is calculated for the periods indicated and is not annualized.
Initial sales charge or contingent deferred sales charges are not reflected.
++ Annualized. Due to the recent commencement of their offering, the ratios for
Class A, Class B and Class C shares are not necessarily comparable to that of
Class Y shares and are not necessarily indicative of future ratios.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of operating expenses and net investment income (loss) to average net assets,
exclusive of any applicable state expense limitations, would have been the
following:
<TABLE>
<CAPTION>
JANUARY 3, 1995* THROUGH
DECEMBER 31, 1995
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
<S> <C> <C> <C>
Expenses..................................................................... 1.64% 2.26% 4.94%
Net investment income (loss)................................................. .90% .28% (2.44%)
</TABLE>
See accompanying notes to financial statements.
58
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND NATURE OF OPERATIONS
The Evergreen Growth and Income Funds (the "Funds") are separate open-end
management investment companies registered under the Investment Company Act of
1940, as amended (the "Act"). The Evergreen Growth and Income Funds included
herein consist of Evergreen Foundation Fund ("Foundation"), Evergreen Growth &
Income Fund ("Growth & Income"), Evergreen Value Fund ("Value"), Evergreen
American Retirement Fund ("ART") and Evergreen Balanced Fund ("Balanced") known
collectively as the Funds.
Effective July 7, 1995, Value and Balanced changed their names from First
Union Value Portfolio and First Union Balanced Portfolio, respectively.
Foundation's investment objectives, in order of priority, are reasonable
income, conservation of capital and capital appreciation. Growth & Income's
investment objective is to achieve a return composed of capital appreciation and
current income by investing in the securities of companies which are undervalued
in the marketplace. The investment objective of Value is long-term capital
appreciation with current income as a secondary objective. ART's investment
objectives, in order of priority, are conservation of capital, reasonable income
and capital growth. Balanced's investment objective is to achieve long-term
total return through capital appreciation, dividends and interest income.
NOTE 2 -- ACQUISITION INFORMATION
On June 30, 1995, Value acquired substantially all of the net assets of ABT
Growth and Income Trust ("ABT"), an open-end investment company registered under
the Act through the issuance of 3,289,535 of its Class A shares in exchange for
ABT's net assets valued at $63,356,435. The aggregate net assets of Value after
the acquisition were $935,777,632. The acquired assets in this non-taxable
exchange consisted primarily of portfolio securities with unrealized
appreciation of $10,278,721.
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. These policies are
in conformity with generally accepted accounting principles.
SECURITY VALUATIONS -- Investments in securities traded on a national
securities exchange or included on the NASDAQ National Market System ("NMS") are
valued at the last reported sales price. Securities traded on an exchange or NMS
for which there has been no sale and securities traded in the over-the-counter
market are valued at the mean between the last reported bid and asked price.
Unlisted securities for which market quotations are not readily available are
valued at a price quoted by one or more brokers. Debt securities (other than
short term obligations) are valued on the basis of valuations provided by a
pricing service. Securities for which market quotations are not readily
available are valued at their respective fair value as determined in good faith
by the Trustees. Short-term investments are valued at amortized cost, which
approximates market value.
SECURITY TRANSACTIONS -- Security transactions are accounted for on the
date purchased or sold. Net realized gains or losses are determined on the
identified cost basis.
INVESTMENT INCOME AND EXPENSES -- Dividend income is recorded on the
ex-dividend date. Interest income and expenses are accrued daily.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the Federal Reserve Bank and are designated as being held
on each Fund's behalf by its custodian under a book-entry system. Each Fund
monitors the adequacy of the collateral on a daily basis, and can require the
seller to provide additional collateral in the event the market value of the
securities pledged falls below the carrying value of the repurchase agreement,
including accrued interest. Each Fund will only enter into repurchase agreements
with banks and other financial institutions which are deemed by the investment
adviser to be creditworthy pursuant to guidelines established by the Trustees.
59
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES -- continued
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are distributed quarterly for each of the Funds. Distributions from net realized
capital gains on investments, if any, will be distributed at least annually.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from amounts available under generally accepted
accounting principles. To the extent these differences are permanent in nature,
such amounts are reclassified within the components of net assets.
As of December 31, 1995, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED GAIN
INCOME ON INVESTMENTS
<S> <C> <C>
Growth & Income $ 7,179 $ (7,179)
Value 934,071 (413,490)
ART 1,223 (1,225)
Balanced (502,948) 442,064
</TABLE>
INCOME TAXES -- It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable net income and net realized capital
gains to its shareholders. Accordingly, no provisions for Federal income or
excise taxes are necessary. 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.
ALLOCATION OF EXPENSES -- Expenses specifically identifiable to a class of
shares are charged to that class. Expenses common to a Trust as a whole are
allocated to the funds in that Trust. Investment income, net of expenses (other
than class specific expenses) and realized and unrealized gains and losses are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
USE OF ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
NOTE 4 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AGREEMENTS -- First Union National Bank of North
Carolina ("First Union") is entitled to an annual fee of .50 of 1% of Value's
and Balanced's average daily net assets pursuant to each Fund's investment
advisory agreement.
Pursuant to an agreement with Foundation's, Growth & Income's and ART's
investment adviser, Evergreen Asset Management Corp. ("Evergreen Asset"), a
wholly owned subsidiary of First Union, Evergreen Asset is entitled to an annual
fee based on each of Foundation's, Growth & Income's and ART's average daily net
assets, respectively, in accordance with the following schedules:
<TABLE>
<CAPTION>
FOUNDATION AND GROWTH & INCOME ART
<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>
For the year ended December 31, 1995, Evergreen Asset voluntarily
reimbursed certain class specific expenses amounting to $11,064, $38,106 and
$76,464 for Foundation, Growth & Income and ART, respectively. Evergreen Asset
can modify or terminate these voluntary waivers at any time.
60
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES -- continued
Lieber & Company, an affiliate of First Union, is the investment
sub-adviser to Foundation, Growth & Income and ART and also provides brokerage
services with respect to substantially all security transactions of these Funds
effected on the New York or American Stock Exchanges. For transactions executed
during the year ended December 31, 1995, Foundation, Growth & Income and ART
incurred brokerage commissions of $380,226, $160,659 and $53,276 with Lieber &
Company. Lieber & Company is reimbursed by Evergreen Asset, at no additional
expense to the Funds, for its cost of providing investment advisory services.
ADMINISTRATION AGREEMENT -- Evergreen Asset furnishes Foundation, Growth &
Income and ART with administrative services as part of their advisory agreements
and accordingly, these Funds do not pay a separate administration fee. Furman
Selz, Incorporated ("Furman Selz") is each of the Fund's sub-administrator. As
sub-administrator, Furman Selz provides the officers of the Funds. For
Foundation, Growth & Income and ART, Furman Selz' fee is paid by Evergreen Asset
and is not a fund expense.
Through July 7, 1995, Federated Investor Services ("FAS") provided Value
and Balanced with certain administrative personnel and services. Effective July
7, 1995, Evergreen Asset became Value's and Balanced's administrator and Furman
Selz became their sub-administrator. Evergreen Asset's and Furman Selz' fee for
Value and Balanced is based on the average daily net assets of all of the funds
administered by Evergreen Asset for which either First Union or Evergreen Asset
is also the investment adviser. This fee is calculated at the following annual
rates:
<TABLE>
<CAPTION>
ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<C> <S>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% in excess of $30 billion
<CAPTION>
SUB-ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<C> <S>
0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% in excess of $25 billion
</TABLE>
At December 31, 1995, assets for which Evergreen Asset was the
administrator for which either Evergreen Asset or First Union was investment
adviser totalled approximately $10.4 billion.
PLANS OF DISTRIBUTION -- The Funds' have adopted for their Class A Shares,
Class B Shares, and Class C Shares, Distribution Plans (the "Plans") pursuant to
Rule 12b-1 under the Act (see note 5). Under the terms of the Plans, the Funds
may incur distribution-related and shareholder servicing expenses which may not
exceed an annual fee of .75 of 1% for Class A and an annual fee of 1% for Class
B and Class C Shares. For each of the Funds, the payments for Class A were
voluntarily limited to .25 of 1% of average daily net assets. Rule 12b-1 fees
are accrued daily and paid monthly.
In connection with their Plans, Foundation, Growth & Income and ART have
entered into distribution agreements with Evergreen Funds Distributor, Inc.
("EFD"), a subsidiary of Furman Selz, whereby Foundation, Growth & Income and
ART will compensate EFD for its services at a rate which may not exceed an
annual fee of .25 of 1% of Class A Shares average daily net assets and an annual
fee of 1% of Class B and Class C Share's average daily net assets. A portion of
the payments for Class B and C Shares, up to .25 of 1% may constitute a
shareholder services fee. EFD has entered into a Shareholder Services Agreement
with First Union Brokerage ("FUBS"), an affiliate of First Union, whereby they
will compensate FUBS for
61
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES -- continued
certain services provided to shareholders and /or maintenance of shareholder
accounts relating to each of the Funds' Class B and Class C Shares.
In connection with their Plans, through July 7, 1995, Value and Balanced
had entered into a distribution agreement with Federated Securities Corp.
("FSC") whereby Value and Balanced compensated FSC for its services at a rate
which did not exceed an annual fee of .25 of 1% of Class A average daily net
assets and an annual fee of .75 of 1% of Class B and Class C average daily net
assets. Effective July 7, 1995, Value and Balanced entered into a distribution
agreement with EFD whereby Value and Balanced will compensate EFD for its
services at a rate which may not exceed an annual fee of .25 of 1% of Class A
average daily net assets and an annual fee of .75 of 1% of Class B and Class C
average daily net assets for certain services provided to Class B and C
shareholders.
Value and Balanced have entered into a Shareholder Services Agreement with
FUBS whereby they will compensate up to an annual fee of .25 of 1% of Class B
and C average net assets for certain services provided to shareholders.
SALES CHARGES -- EFD has advised the Funds that it has retained the
following amounts from front-end sales charges resulting from sales of Class A
Shares during the year ended December 31, 1995:
<TABLE>
<CAPTION>
FRONT-END
SALES
CHARGES
<S> <C>
Foundation $178,885
Growth & Income 37,300
Value 6,615
ART 7,397
Balanced 1,731
</TABLE>
NOTE 5 -- SHARES OF BENEFICIAL INTEREST
Foundation, Growth & Income and ART have an unlimited number of $0.0001 par
value shares of beneficial interest authorized. Value and Balanced have an
unlimited number of no par shares authorized. The shares are divided into
classes which are designated Class Y, Class A, Class B, and Class C shares.
Class A shares are sold with a front-end sales charge of up to 4.75%. Class B
shares are sold with a contingent deferred sales charge which declines from 5%
to zero depending on the period of time the shares are held. Class B shares will
automatically convert to Class A shares seven years after purchase. Class C
shares are sold with a contingent deferred sales charge of 1% during the first
year. Class Y shares are sold without a sales charge and are available only to
investment advisory clients of First Union and its affiliates, certain
institutional investors or Class Y shareholders of record of certain other funds
managed by First Union and its affiliates as of December 30, 1994. The classes
have identical voting, dividend, liquidation and other rights, except that Class
A, Class B and Class C shares bear distribution expenses (see Note 4) and have
exclusive voting rights with respect to their distribution plans.
62
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED* YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
FOUNDATION SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold................................................. 7,433,192 $103,904,500 -- --
Shares issued on reinvestment of distributions.............. 194,159 2,828,216 -- --
Shares redeemed............................................. (542,266) (7,709,611) -- --
Net increase................................................ 7,085,085 99,023,105 -- --
CLASS B
Shares sold................................................. 19,717,460 275,013,438 -- --
Shares issued on reinvestment of distributions.............. 487,710 7,076,078 -- --
Shares redeemed............................................. (543,554) (7,846,692) -- --
Net increase................................................ 19,661,616 274,242,824 -- --
CLASS C
Shares sold................................................. 761,087 10,573,728 -- --
Shares issued on reinvestment of distributions.............. 19,172 277,286 -- --
Shares redeemed............................................. (26,533) (379,480) -- --
Net increase................................................ 753,726 10,471,534 -- --
CLASS Y
Shares sold................................................. 18,505,940 263,287,541 13,838,993 $176,755,199
Shares issued on reinvestment of distributions.............. 1,558,776 22,661,839 1,277,157 15,798,795
Shares redeemed............................................. (5,965,644) (82,422,318) (6,406,804) (81,458,191)
Net increase................................................ 14,099,072 203,527,062 8,709,346 111,095,803
Total net increase resulting from Fund share transactions... 41,599,499 $587,264,525 8,709,346 $111,095,803
</TABLE>
* The Fund share activity for Class A, Class B and Class C shares reflect the
period from January 3, 1995 (commencement of class operations) through
December 31, 1995.
63
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
YEAR ENDED* YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
GROWTH & INCOME SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold.................................................... 1,049,648 $ 17,981,665 -- --
Shares issued on reinvestment of distributions................. 29,563 545,083 -- --
Shares redeemed................................................ (59,282) (1,048,468) -- --
Net increase................................................... 1,019,929 17,478,280 -- --
CLASS B
Shares sold.................................................... 2,516,682 43,094,733 -- --
Shares issued on reinvestment of distributions................. 66,937 1,234,636 -- --
Shares redeemed................................................ (97,308) (1,763,506) -- --
Net increase................................................... 2,486,311 42,565,863 -- --
CLASS C
Shares sold.................................................... 106,185 1,808,328 -- --
Shares issued on reinvestment of distributions................. 2,716 50,033 -- --
Shares redeemed................................................ (5,395) (96,507) -- --
Net increase................................................... 103,506 1,761,854 -- --
CLASS Y
Shares sold.................................................... 3,937,086 68,368,276 2,750,023 $ 42,704,686
Shares issued on reinvestment of distributions................. 211,697 3,882,512 339,866 4,904,262
Shares redeemed................................................ (1,658,100) (27,997,743) (3,032,322) (46,723,537)
Net increase................................................... 2,490,683 44,253,045 57,567 885,411
Total net increase resulting from Fund share transactions...... 6,100,429 $106,059,042 57,567 $ 885,411
</TABLE>
* The Fund share activity for Class A, Class B and Class C shares reflect the
period from January 3, 1995 (commencement of class operations) through
December 31, 1995.
64
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED*
DECEMBER 31, 1995 DECEMBER 31, 1994
VALUE SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold................................................... 628,945 $ 12,018,651 1,358,029 $ 23,876,719
Shares issued in acquisition of ABT Growth and Income Trust... 3,289,535 63,356,435 -- --
Shares issued on reinvestment of distributions................ 883,572 17,771,730 839,511 14,241,623
Shares redeemed............................................... (1,863,758) (35,747,673) (1,612,008) (28,379,135)
Net increase.................................................. 2,938,294 57,399,143 585,532 9,739,207
CLASS B
Shares sold................................................... 951,887 18,428,845 3,054,952 53,734,405
Shares issued on reinvestment of distributions................ 394,396 7,933,916 393,979 6,650,920
Shares redeemed............................................... (723,565) (13,658,563) (575,508) (10,093,747)
Net increase.................................................. 622,718 12,704,198 2,873,423 50,291,578
CLASS C
Shares sold................................................... 15,721 307,770 27,701 488,315
Shares issued on reinvestment of distributions................ 2,274 45,762 1,540 25,674
Shares redeemed............................................... (7,532) (149,074) (34) (589)
Net increase.................................................. 10,463 204,458 29,207 513,400
CLASS Y
Shares sold................................................... 14,762,272 278,777,942 10,949,430 192,542,560
Shares issued on reinvestment of distributions................ 2,044,972 40,900,972 2,177,091 36,976,330
Shares redeemed............................................... (10,121,343) (193,762,147) (8,880,310) (155,571,563)
Net increase.................................................. 6,685,901 125,916,767 4,246,211 73,947,327
Total net increase resulting from Fund share transactions..... 10,257,376 $ 196,224,566 7,734,373 $ 134,491,512
</TABLE>
* For Class C shares, the Fund share activity is for the period September 2,
1994 (commencement of class operations) through December 31, 1994.
65
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
YEAR ENDED* YEAR ENDED
ART DECEMBER 31, 1995 DECEMBER 31, 1994
CLASS A SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold............................................................. 103,126 $ 1,278,749 -- --
Shares issued on reinvestment of distributions.......................... 1,195 14,909 -- --
Shares redeemed......................................................... (186) (2,372) -- --
Net increase............................................................ 104,135 1,291,286 -- --
CLASS B
Shares sold............................................................. 380,412 4,651,965 -- --
Shares issued on reinvestment of distributions.......................... 4,314 53,311 -- --
Shares redeemed......................................................... (6,548) (80,579) -- --
Net increase............................................................ 378,178 4,624,697 -- --
CLASS C
Shares sold............................................................. 8,507 104,262 -- --
Shares issued on reinvestment of distributions.......................... 70 878 -- --
Shares redeemed......................................................... -- -- -- --
Net increase............................................................ 8,577 105,140 -- --
CLASS Y
Shares sold............................................................. 280,323 3,219,576 974,228 $11,089,665
Shares issued on reinvestment of distributions.......................... 106,983 1,270,557 162,452 1,774,030
Shares redeemed......................................................... (808,529) (9,380,520) (869,600) (9,763,060)
Net increase............................................................ (421,223) (4,890,387) 267,080 3,100,635
Total net increase resulting from Fund share transactions............... 69,667 $ 1,130,736 267,080 $ 3,100,635
</TABLE>
* The Fund share activity for Class A, Class B and Class C shares reflects the
period from January 3, 1995 (commencement of class operations) through
December 31, 1995.
66
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED*
BALANCED DECEMBER 31, 1995 DECEMBER 31, 1994
CLASS A SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold.................................................... 174,514 $ 2,180,996 1,428,629 $ 17,003,092
Shares issued on reinvestment of distributions................. 228,390 2,924,585 186,207 2,147,984
Shares redeemed................................................ (883,230) (10,834,925) (845,164) (9,900,621)
Net increase (decrease)........................................ (480,326) (5,729,344) 769,672 9,250,455
CLASS B
Shares sold.................................................... 331,882 4,113,278 4,255,156 50,429,083
Shares issued on reinvestment of distributions................. 528,256 6,788,533 374,859 4,311,708
Shares redeemed................................................ (1,507,091) (18,590,977) (1,102,578) (12,868,198)
Net increase (decrease)........................................ (646,953) (7,689,166) 3,527,437 41,872,593
CLASS C
Shares sold.................................................... 6,207 78,623 17,041 196,697
Shares issued on reinvestment of distributions................. 1,346 17,328 438 4,924
Shares redeemed................................................ (2,122) (27,063) -- --
Net increase................................................... 5,431 68,888 17,479 201,621
CLASS Y
Shares sold.................................................... 13,282,634 164,605,419 20,165,185 238,431,504
Shares issued on reinvestment of distributions................. 4,419,582 56,436,034 3,761,875 43,437,902
Shares redeemed................................................ (25,032,555) (313,833,958) (17,187,695) (201,406,031)
Net increase (decrease)........................................ (7,330,339) (92,792,505) 6,739,365 80,463,375
Total net increase (decrease) resulting from Fund share
transactions................................................. (8,452,187) ($106,142,127) 11,053,953 $ 131,788,044
</TABLE>
* For Class C shares, the Fund share activity is for the period September 2,
1994 (commencement of class operations) through December 31, 1994.
NOTE 6 -- INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of investments, excluding
short-term securities for the year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Foundation.......................... $660,068,984 $155,930,127
Growth & Income..................... 113,200,224 21,051,391
Value............................... 671,771,260 508,048,174
ART................................. 19,970,985 18,872,037
Balanced............................ 344,046,539 443,336,660
</TABLE>
67
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 6 -- INVESTMENT TRANSACTIONS -- continued
On December 31, 1995, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost of investments
for federal tax purposes was as follows:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION NET TAX COST
<S> <C> <C> <C> <C>
Foundation............ $119,091,584 10,848,950 $108,242,634 $ 917,582,779
Growth & Income....... 46,323,129 3,181,028 43,142,101 163,852,046
Value................. 215,904,297 4,615,958 211,288,339 1,128,168,208
ART................... 6,766,422 319,289 6,447,133 41,141,232
Balanced.............. 177,747,964 5,506,372 172,241,592 788,220,450
</TABLE>
NOTE 7 -- FINANCING AGREEMENT
Foundation has a financing agreement with its custodian, State Street Bank
and Trust Company (the "Bank"), which provides the Fund with a line of credit,
in the aggregate amount of the lesser of $15,000,000 or 5% of the value of the
Fund's net assets, to be accessed for temporary or emergency purposes.
Borrowings under the line of credit bear interest at 1% above the Bank's cost of
funds as set periodically by the Bank and are secured by securities pledged by
the Fund. During the year ended December 31, 1995, the Fund had no borrowings
under the line of credit.
NOTE 8 -- SUBSEQUENT EVENTS
Effective January 1, 1996, First Fidelity Bancorpation ("First Fidelity")
merged with First Union. Effective on the close of business on January 19, 1996,
Growth & Income acquired substantially all of the net assets of FFB Lexicon
Capital Appreciation Fund, an open-end investment company registered under the
Act. The net assets, valued at $12.75 per share were exchanged through a
non-taxable exchange for 8,631,861 shares of Growth & Income. The aggregate net
assets of Growth & Income after the acquisition were $375,936,243.
Also effective on the close of business on January 19, 1996, Value acquired
substantially all of the net assets of FFB Lexicon Select Value Fund ("Select
Value") and FFB Equity Fund ("FFB Equity"), open-end investment companies
registered under the Act. The net assets of Select Value and FFB Equity, valued
at $13.26 and $13.37 per share, respectively, were exchanged through a
non-taxable exchange for 4,720,676 and 692,924 shares of Value, respectively.
The aggregate net assets of Value after the acquisitions were $1,310,481,335.
68
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND SHAREHOLDERS OF
EVERGREEN FOUNDATION FUND
In our opinion, the accompanying Statement of Assets and Liabilities,
including the Statement of Investments, and the related Statements of Operations
and of Changes in Net Assets and the Financial Highlights present fairly, in all
material respects, the financial position of Evergreen Foundation Fund (the
"Fund"), one of the Evergreen Foundation Trust Portfolios, at December 31, 1995,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
custodian and brokers provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 15, 1996
69
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
THE TRUSTEES AND SHAREHOLDERS OF
EVERGREEN GROWTH & INCOME FUND
EVERGREEN AMERICAN RETIREMENT FUND
We have audited the accompanying statements of assets and liabilities,
including the respective statements of investments, of each of Evergreen Growth
& Income Fund and Evergreen American Retirement Fund (one of the portfolios
constituting Evergreen American Retirement Trust), as of December 31, 1995, and
the respective related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the years presented therein.
These financial statements are the responsibility of each Fund's management. Our
responsibility is to express opinions on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the separate financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned by each Fund as of December 31, 1995, by correspondence with the
custodians and brokers. An audit also includes assessing the overall accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinions.
In our opinion, each of the respective financial statements and financial
highlights referred to above present fairly, in all material respects, the
financial position of Evergreen Growth & Income Fund and Evergreen American
Retirement Fund portfolio of Evergreen American Retirement Trust at December 31,
1995 and the results of their respective operations for the year then ended, the
changes in their respective net assets for each of the two years in the period
then ended, and their respective financial highlights for each of the indicated
periods, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 15, 1996
70
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE TRUSTEES AND SHAREHOLDERS OF
EVERGREEN VALUE FUND
EVERGREEN BALANCED FUND
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, for the Evergreen Growth and Income
Funds listed below, as of December 31, 1995 and the related statements of
operations, the changes in net assets, and the financial highlights for each of
the periods listed below:
Evergreen Value Fund (formerly First Union Value
Portfolio) -- statement of operations for the year ended December 31, 1995,
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in the
five-year period then ended.
Evergreen Balanced Fund (formerly First Union Balanced
Portfolio) -- statement of operations for the year ended December 31, 1995,
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in the
four-year period then ended and for the period from June 10, 1991
(commencement of operations) through December 31, 1991.
The financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the overall accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Evergreen Value Fund and Evergreen Balanced Fund as of December 31, 1995, and
the results of their operations, the changes in their net assets and financial
highlights for each of the periods listed above, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
February 16, 1996
71
<PAGE>
TRUSTEES AND OFFICERS
TRUSTEES:
Laurence B. Ashkin*
Foster Bam*
James S. Howell, Chairman
Robert J. Jeffries*
Gerald M. McDonnell
Thomas L. McVerry
William W. Pettit
Russell A. Salton, III M.D.
Michael S. Scofield
OFFICERS:
John J. Pileggi
President and Treasurer
Joan V. Fiore
Secretary
Sheryl Hirschfeld
Assistant Secretary
Donald E. Brostrom
Assistant Treasurer
Stephen W. St. Clair
Assistant Treasurer
* Trustees for Foundation, Growth & Income
and ART only.
FEDERAL INCOME TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
During the fiscal year ended December 31, 1995 Foundation, Growth & Income,
Value and Balanced paid $6,466,302, $4,132,728, $32,916,721 and $30,347,357
respectively, of net long term capital gain distributions.
For corporate taxpayers 35.17%, 82.57%, 69.98%, 52.12% and 35.81% of the
ordinary income distributions paid during the fiscal year ended December 31,
1995 by Foundation, Growth and Income, Value, ART and Balanced respectively,
qualified for corporate dividends received deduction.
<PAGE>
NOT
FDIC May lose value
INSURED No bank guarantee
Evergreen Funds Distributor, Inc.
537860 2/96
