<PAGE>
EVERGREEN
BALANCED FUNDS
(four photos: Statue of Liberty, bonds, column, dam)
(Photo of mountain and tree)
1997 ANNUAL REPORT
Evergreen Keystone
(Logo) FUNDS(SM) (Logo)
<PAGE>
EVERGREEN BALANCED FUNDS
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
(Statue of Liberty photo) Economic Overview......................................................... 1
EVERGREEN A Report From Your Portfolio Manager...................................... 3
AMERICAN Results to Date........................................................... 5
</TABLE>
<TABLE>
<C> <S> <C>
RETIREMENT Statement of Investments.................................................. 6
FUND Statement of Assets and Liabilities....................................... 12
Statements of Operations.................................................. 13
Statements of Changes in Net Assets....................................... 14
Financial Highlights...................................................... 15
</TABLE>
<TABLE>
<C> <S> <C>
(Certificates photo) EVERGREEN A Report From Your Portfolio Manager...................................... 17
BALANCED Results to Date........................................................... 19
</TABLE>
<TABLE>
<C> <S> <C>
FUND Statement of Investments.................................................. 20
Statement of Assets and Liabilities....................................... 23
Statements of Operations.................................................. 24
Statements of Changes in Net Assets....................................... 25
Financial Highlights...................................................... 26
</TABLE>
<TABLE>
<C> <S> <C>
(Column photo) EVERGREEN A Report From Your Portfolio Manager...................................... 30
FOUNDATION Results to Date........................................................... 32
</TABLE>
<TABLE>
<C> <S> <C>
FUND Statement of Investments.................................................. 33
Statement of Assets and Liabilities....................................... 39
Statements of Operations.................................................. 40
Statements of Changes in Net Assets....................................... 41
Financial Highlights...................................................... 42
</TABLE>
<TABLE>
<C> <S> <C>
(Dam photo) EVERGREEN TAX A Report From Your Portfolio Managers..................................... 44
STRATEGIC Results to Date........................................................... 46
</TABLE>
<TABLE>
<C> <S> <C>
FOUNDATION Statement of Investments.................................................. 47
FUND Statement of Assets and Liabilities....................................... 52
Statements of Operations.................................................. 53
Statements of Changes in Net Assets....................................... 54
Financial Highlights...................................................... 55
</TABLE>
<TABLE>
<C> <S> <C>
Combined Notes to Financial Statements.................................... 57
Independent Auditors' Report.............................................. 66
Trustees and Officers...................................... Inside Back Cover
Federal Income Tax Status of Distributions................. Inside Back Cover
</TABLE>
<PAGE>
EVERGREEN BALANCED FUNDS
ECONOMIC OVERVIEW
BY EVERGREEN ASSET MANAGEMENT CHAIRMAN
STEPHEN A. LIEBER
The dynamic United States economy during the first
third of 1997 has almost overwhelmed the expectations (Stephen A. Lieber photo)
of the experts. The achievement of a gross domestic
product increase of 5.6% in the first quarter, together with a core
inflation rate of 2.2% and little indicated pressure for wage inflation,
dramatically contrasts with the predictions of economists who anticipated slower
growth and a trend of rising wages as the number of unemployed shrank as a
percentage of the labor force. Even more confounding, is the contrast with
expectations of the business cycle. If the economy were to be following the
pattern evident in most post-war years, it would now be deep in a recession, not
in an impressively sustained expansion. The investor, as well as the economist,
must ask whether this is a significantly different era for the American economy,
suggesting different responses and strategies.
Several major differences from recent experience are evident. Comparatively
stable wage costs are foremost, and are the subject of much debate. Some argue
that U.S. wage costs are held down by international competition, especially as a
result of the rise of the dollar, and the consequent cheapening of imports.
Others hold that the bargaining power of labor has been diminished by the
downsizing of corporations with its emphasis on productivity gains. Another view
is that industry emphasis on cost control and flexibility on relocation has
served to reduce the bargaining power of the work force. Irrespective of which
one of the factors is decisive, the evidence does indicate that wage pressures
have unexpectedly not mirrored the rise in employment. The issue of increased
productivity is also debated as an important factor, but there is very little
agreement on the statistical evidence.
The prospects for increasing productivity are enhanced by sustained capital
spending, up at a rate of 11.9% in the first quarter. Raw materials have also
played a role in reducing cost pressures, especially with the decline in oil and
petroleum products during the first quarter. Seldom have commodity price
pressures been so few during a period of significantly increased demand.
Notwithstanding these favorable trends, the Federal Open Market Committee
chose to make a "pre-emptive" 0.25% increase in the discount rate during March,
with a view toward containing the pressures for too rapid economic growth. In
this environment of favorable trends, it is understandable that consumer
spending has risen to record levels, up 6.4% in the first quarter, that consumer
savings rose to 5.3% in March, and that polls of consumer confidence show a
diminished anticipation of recession.
Investment implications of this economic strength are, as usual, subject to
widespread debate. The most obvious implication is that the strong economy is
producing a broad, sustained growth in corporate profits, which translates into
higher dividends and, to-date, in higher stock prices. It has also brought
higher bond yields and a decline in bond prices as the anticipation of Federal
Reserve growth restraining policies become more widespread. The higher bond
yields, in turn, also tend to put competitive pressures against the higher stock
prices achieved because of rising corporate earnings. The challenge for
investors is, in fact, an unusual one; responding to what many economists and,
perhaps, the Federal Reserve regulators view as a too successful economy. How
does one invest in an economy which appears to be too successful?
The approach to this challenge favored by the Evergreen Keystone Funds is to
concentrate investment on long-term values. Those values include corporations
with strong financial condition, long-term records of outstanding achievement,
effective management which enhances its business franchise with new and improved
products and services, and well-grounded innovators who can create new demand
and, thus, rapidly growing businesses. A cautious and patient approach which
takes into account the volatility of the securities markets generated by this
unexpected strength and "pre-emptive" monetary moves, seems to us the best
long-term approach. Patient accumulation with purchases during periods of market
weakness,
1
<PAGE>
EVERGREEN BALANCED FUNDS
ECONOMIC OVERVIEW -- (CONTINUED)
and judicious sales during those periods so aptly named by Federal Reserve
Chairman, Alan Greenspan, as "irrational exuberance", are the strategies of our
equity management. Important, too, is the use of appropriate balance between
equities and fixed income, with a careful adjustment of the allocation of
assets, including the maturities of obligations in an effort to both minimize
risk and maximize return. International investing presents yet another
opportunity for asset allocation, based on the search for the most comparatively
undervalued and well-grounded long-term growth opportunities.
Recognizing the multiplicity of choices, the complexity of asset allocation,
and the necessity for constant evaluation in order to take advantage of shifting
opportunities, the Evergreen Keystone Funds provide a wide variety of investing
options and an investment management group oriented toward long-term results.
2
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
(Statue of Liberty photo)
A REPORT FROM YOUR
PORTFOLIO MANAGER
IRENE O'NEILL
Evergreen American Retirement Fund's fiscal year-end was
changed from December 31,
to March 31. This report will concentrate on the three-month (Irene O'Neill
period ended March 31, photo)
1997. During the three-month period under review, the broad
equity markets rose
dramatically before turning down sharply in mid-March. Although
prices in fixed income markets rose early in the year, they declined from
mid-February through the end of the quarter. For the three-month period
ended March 31, 1997, the Fund's total return was unchanged (Class Y, no-load
shares: 0%*, Class A shares at net asset value: -0.1%*), which was in line
with the Lipper Balanced Fund Average of the 335 balanced funds tracked by
Lipper Analytical Services during that time**. (Please see page 5 for
additional performance information.)
Within the equity portfolio, the Fund's best performing industries during
the period under review were energy; building, construction and furnishings;
and banks. The energy industry, representing 8.8% of net assets, includes oil
field services companies and oil and gas producers. This sector extended its
strong performance from 1996, providing a 6.4% return for the period.
Although energy prices subsided as the winter weather waned, the trend toward
rising global demand, especially in emerging nations, remains in place. Oil
and gas producers are increasing their production volumes and stepping up
exploration activity to replace reserves and boost production further. The
accelerated pace of exploration has lifted demand for oil field
services, and companies in this market are raising the prices they charge their
customers. This combination is stimulating earnings growth. The building,
construction and furnishings segment, representing 0.8% of net
assets, is composed primarily of cement companies and provided a 6.3% return
during the three-month period. These companies continue to benefit from strong
construction activity which has supported higher selling prices for cement.
Due to the high level of operating leverage in this business, rising prices
are driving strong earnings growth. The banking sector, representing 9.1% of
net assets, provided a return of 3.8% during the period. These stocks rose on
expectations that bank earnings trends will be favorably affected by
share buybacks and productivity gains. Bank stocks are often favored as
defensive investments during volatile periods in the stock market as this
industry trades at a lower valuation than the broad market and is generally
expected to meet earnings estimates,
FIGURES REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS.
* -4.8% WAS THE 3-MONTH TOTAL RETURN ENDED 3/31/97, FOR THE FUND'S CLASS A
SHARES WITH THE MAXIMUM 4.75% FRONT-END SALES CHARGE.
PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDEND AND CAPITAL
GAIN DISTRIBUTIONS, IF ANY. INVESTMENT RETURN, PRINCIPAL VALUE AND
YIELD WILL FLUCTUATE. INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. THE FUND ALSO OFFERS CLASS B
SHARES, WHICH ARE SUBJECT TO A MAXIMUM 5% CONTINGENT DEFERRED SALES CHARGE,
AND CLASS C SHARES WHICH ARE SUBJECT TO A 1% CONTINGENT
DEFERRED SALES CHARGE WITHIN THE FIRST YEAR AFTER THE MONTH OF PURCHASE.
THE FUND'S CLASS Y (NO-LOAD) SHARES ARE AVAILABLE TO CERTAIN
INSTITUTIONAL INVESTORS. PLEASE SEE THE PROSPECTUSES FOR ADDITIONAL
INFORMATION REGARDING THESE CLASSES OF SHARES.
** SOURCE: LANA (LIPPER ANALYTICAL NEW APPLICATIONS) LIPPER ANALYTICAL
SERVICES INC., IS AN INDEPENDENT MUTUAL FUNDS PERFORMANCE MONITOR.
LIPPER AVERAGE DOES NOT INCLUDE SALES CHARGES AND IF INCLUDED, AVERAGE MAY
BE LOWER.
3
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
(Statue of Liberty photo)
A REPORT FROM YOUR
PORTFOLIO MANAGER -- (CONTINUED)
The electric utility and transportation industries, representing 5.4% and
0.5%, respectively, of net assets, were the two weakest sectors during the
quarter. Stocks in the electric utility sector declined 9.1% as a result
of concerns about deregulation and rising interest rates. Uncertainty about the
outcome of deregulation proposals floated by utility regulators in various
states has clouded the outlook for the industry. Additionally,
the prospect of rising interest rates as the Federal Reserve attempts to slow
the economy put pressure on electric utility stock prices. The railroad
stocks, which comprise the Fund's transportation industry, declined
9% during the quarter. Severe winter weather in much of the Western United
States delayed rail shipments and will negatively impact first quarter
earnings for these companies. These stocks were also affected by the
prospect of rising interest rates as the railroad industry is considered
economically sensitive.
New equity purchases for the Fund continued to
emphasize defensive issues, especially convertibles, which
offer yield considerably higher than the market average. Among the issues
purchased were convertibles in Proffitt's, Inc., a regional retailer;
National Australia Bank, the largest bank in Australia; Equitable Company,
a major insurance insurer; and MCN Corp., a gas distributor and exploration and
production company. Consistent with the Fund's focus on equities with above
market yields, common stocks purchased for the Fund included First Palm Beach
Bancorp, Inc., a Florida bank; Long Island Lighting Company, a New York
utility; and Berry Petroleum, a heavy oil producer. With a rising interest rate
environment likely to produce a period of volatility for the equity markets,
the Fund's focus on equities with high dividend yields should offer
downside protection.
After practically pre-announcing its move, the Federal Open Market Committee
raised the Federal Funds rate .25% at its March 25 meeting. From nearly all
economic reports, the U.S. economy appears to be running too hot. Consumer
demand, which accounts for two-thirds of the Gross Domestic Product, is strong
and will probably grow over 5% in the first quarter. Consumer confidence is at
record highs, the unemployment rate is low, and job creation is strong. Tight
job markets appear to be sparking a pickup in wage growth. Wages rose about
2.5% per year from 1992 to 1994 and are increasing at 4% annual rate currently.
One or more tightenings are likely to follow by the end of the third quarter,
which could bring the Federal Funds rate to 6%. The heady growth of the U.S.
economy in the first quarter took long-term U.S. Treasury bond yields from
6.64% on December 31, to 7.08% on March 31.
During the second calendar quarter, economic reports are likely to show
signs of some moderation in growth as the economy ebbs and flows. The real
issue will be whether the Federal Reserve moved pre-emptively enough to
prevent an inflationary up-tick in prices. If it has, economic growth should
coast to a lower level through the remainder of 1997 and into 1998. The Fund's
fixed income portfolio remained defensively positioned during the quarter
because of our concern at the beginning of 1997 that economic growth was
accelerating and might prompt an interest rate hike. Purchases for the fixed
income portfolio consisted of five-year notes issued by the Federal Home Loan
Bank and Federal Home Loan Mortgage Corp. Both of these issues carry call
features, which give them above market yields which, in turn, tend to insulate
the Fund from rising interest rates. At quarter-end the Fund's fixed income
portfolio had a weighted average maturity of 4.7 years and a duration of 3.2
years, nearly unchanged from year-end 1996.
Consistent with its objectives and conservative investment style, Evergreen
American Retirement Fund continues to hold a diversified and balanced
portfolio, emphasizing income-producing securities that are both defensive and
have the potential for capital growth.
4
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
(Statue of Liberty photo)
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 Brothers
Government/Corporate Bond Indexes ("Indexes").
(Four chart graphics appear here, values are as follows:)
Class A
1-Year Total Return=3.75%
Average Annual Compound
Return Since Inception=13.89%
(Customer to fill in plot points on 4 graphs below)
Evergreen American Retirement Fund
Wilshire 5000 Index
Lehman Brothers Government/
Corporate Bond Index
1/3/95* 3/95 3/96 9/96 3/97
Class B
1-Year Total Return=3.02%
Average Annual Compound
Return Since Inception=14.37%
Evergreen American Retirement Fund
Wilshire 5000 Index
Lehman Brothers Government/
Corporate Bond Index
1/13/95* 3/95 9/95 3/96 9/96 3/97
Class C
1-Year Total Return=7.07%
Average Annual Compound
Return Since Inception=15.52%
Evergreen American Retirement Fund
Wilshire 5000 Index
Lehman Brothers Government/
Corporate Bond Index
1/3/95* 3/95 9/95 3/96 9/96 3/97
Class Y
1-Year Total
Return=9.09%
Average Annual
Compound Return:
5-Year=11.29%
Since Inception
=10.53%
3/14/88* 12/88 12/89 12/90 12/91 12/92 12/94 12/94 12/96 3/97
*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 March 31, 1997;
(c) all recurring fees (including investment advisory fees) were deducted; and
(d) all dividends and distributions were reinvested.
The Indexes are unmanaged 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.
5
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
(Statue of Liberty Photo)
STATEMENT OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 45.1%
AEROSPACE & DEFENSE -- 0.0% (A)
2,800 Newport News Shipbuilding, Inc. $ 40,600
AUTOMOTIVE EQUIPMENT &
MANUFACTURING -- 0.3%
14,700 Federal-Mogul Corp................. 361,988
BANKS -- 7.4%
40,000 Australia & New Zealand Banking.... 1,240,000
20,000 BancorpSouth, Inc.................. 547,500
20,000 Bank of New York Co., Inc. (The)... 735,000
16,000 Cape Cod Bank & Trust Co........... 432,000
13,000 Comerica, Inc...................... 732,875
25,050 Crestar Financial Corp............. 867,356
45,000 First Palm Beach Bancorp, Inc...... 1,248,750
4,000 First Union Corp. **............... 324,500
5,000 Fleet Financial Group, Inc......... 286,250
53,000 Hibernia Corp. Cl. A............... 695,625
25,000 Liberty Bancorp, Inc............... 1,162,500
25,200 Maryland Federal Bancorp, Inc...... 888,300
16,000 Susquehanna Bancshares, Inc........ 526,000
9,686,656
BUILDING, CONSTRUCTION &
FURNISHINGS -- 0.5%
7,937 Hanson Plc......................... 180,567
13,584 Medusa Corp........................ 509,400
689,967
BUSINESS EQUIPMENT &
SERVICES -- 1.8%
5,000* AC Nielson Corp.................... 75,000
15,000 Cognizant Corp..................... 436,875
15,000 Dun & Bradstreet Corp. (The)....... 380,625
817 Lucent Technologies, Inc........... 43,097
157* NCR Corp........................... 5,534
18,000 Pitney Bowes, Inc.................. 1,057,500
16,000 Reynolds & Reynolds Co. (The), Cl.
A.................................. 382,000
2,380,631
CHEMICAL & AGRICULTURAL
PRODUCTS -- 1.9%
2,000 Dow Chemical Co. (The)............. 160,000
8,000 Eastman Chemical Co................ 430,000
11,000 Grace (W.R.) & Co.................. 521,125
17,000 Imperial Chemical Industrial
Plc, ADR........................... 773,500
4,535 Millennium Chemicals Inc........... 85,031
5,000 Praxair, Inc....................... 224,375
<CAPTION>
SHARES VALUE
</TABLE>
CHEMICAL & AGRICULTURAL
PRODUCTS -- CONTINUED
<TABLE>
<C> <S> <C>
15,600 Stepan Chemical Co................. $ 288,600
2,482,631
COMMUNICATION SYSTEMS &
SERVICES -- 0.1%
5,500* AirTouch Communications, Inc....... 126,500
CONSUMER PRODUCTS &
SERVICES -- 1.6%
3,000 Colgate-Palmolive Co............... 298,875
15,875* Imperial Tobacco Group Plc ADR..... 212,328
11,000 International Flavors &
Fragrances, Inc.................... 481,250
30,000 Jostens, Inc....................... 678,750
11,000 Tambrands, Inc..................... 471,625
2,142,828
DIVERSIFIED COMPANIES -- 1.7%
5,000 Harris Corp........................ 384,375
2,000 Minnesota Mining & Manufacturing
Co................................. 169,000
19,000* Tenneco, Inc....................... 741,000
50,000 Tomkins Plc, ADR................... 925,000
2,219,375
ELECTRICAL EQUIPMENT &
SERVICES -- 1.4%
15,000 AMP, Inc........................... 515,625
2,000 Emerson Electric Co................ 90,000
11,656 Hubbell, Inc. Cl.B................. 492,466
16,000 Thomas & Betts Corp................ 684,000
1,782,091
ENERGY -- 5.7%
8,000 Amoco Corp......................... 693,000
4,000 Atlantic Richfield Co.............. 540,000
60,000 Berry Petroleum Co. Cl. A.......... 855,000
1,302 El Paso Natural Gas Co............. 73,726
7,937* Energy Group Plc ADR............... 254,976
7,700 Exxon Corp......................... 829,675
3,000 Kerr-McGee Corp.................... 185,625
5,000 Mobil Corp......................... 653,125
19,250 Northwest Natural Gas Co........... 471,625
4,000 PanEnergy Corp..................... 172,500
10,775 Seitel, Inc........................ 381,165
6,000 Texaco, Inc........................ 657,000
52,928 Union Pacific Resource Group,
Inc................................ 158,574
30,000 Williams Companies., Inc. (The).... 1,335,000
</TABLE>
6
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
(Statue of Liberty Photo)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS -- CONTINUED
ENERGY -- CONTINUED
<C> <S> <C>
5,000 YPF Sociedad Anonima, Cl.D ADR..... $ 132,500
7,393,491
FINANCE & INSURANCE -- 3.3%
35,000 GCR Holdings, Ltd.................. 800,625
8,000 Hartford Steam Boiler Inspection &
Insurance Co. (The)................ 358,000
10,000 ITT Hartford Group, Inc............ 721,250
20,000 LaSalle Re Holdings, Ltd........... 575,000
30,000 Ohio Casualty Corp................. 1,233,750
1,500 Provident Cos., Inc................ 82,125
3,000 Transamerica Corp.................. 268,500
4,123 Trenwick Group, Inc................ 204,088
4,243,338
FOOD & BEVERAGE PRODUCTS -- 1.2%
18,000 H.J. Heinz Co...................... 711,000
50,000 Lance, Inc......................... 900,000
1,611,000
HEALTHCARE PRODUCTS &
SERVICES -- 2.4%
14,000 Bristol-Myers Squibb Co............ 826,000
14,000 Shared Medical System Corp......... 651,000
5,000 Warner-Lambert Co.................. 432,500
30,000 West Co., Inc. (The)............... 813,750
5,333 Zeneca Group Plc, ADR.............. 454,638
3,177,888
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES -- 1.6%
60,000 BW/IP Holding, Inc. Cl.A........... 907,500
30,000 Goulds Pumps, Inc.................. 701,250
15,000 Graco, Inc......................... 431,250
2,040,000
METAL PRODUCTS & SERVICES -- 0.8%
42,000 Lindberg Corp...................... 378,000
5,000 Phelps Dodge Corp.................. 365,625
10,000 Quanex Corp........................ 251,250
994,875
LEISURE & TOURISM -- 0.7%
45,000 Gaylord Entertainment Co. Cl. A.... 967,500
PAPER & PACKAGING -- 0.2%
12,000 Westvaco Corp...................... 301,500
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- 1.7%
2,460* Cox Communications, Inc. Cl.A...... 50,737
<CAPTION>
SHARES VALUE
</TABLE>
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- CONTINUED
<TABLE>
<C> <S> <C>
15,625* Evergreen Media Corp. Cl. A........ $ 456,055
8,000 McGraw-Hill Cos., Inc.............. 409,000
30,000 Reader's Digest Assn., Inc. (The)
Cl.A............................... 862,500
5,800 Time Warner, Inc................... 250,850
2,803 Times Mirror Co. Series A.......... 153,114
2,182,256
REAL ESTATE -- 0.6%
10,000 Post Property, Inc................. 381,250
15,000 Prentiss Properties Trust.......... 380,625
761,875
RETAILING & WHOLESALE -- 0.6%
8,000 J. C. Penney Co., Inc.............. 381,000
8,000 Mercantile Stores Co., Inc......... 371,000
752,000
TEXTILE & APPAREL -- 0.6%
3,800 Garan, Inc......................... 68,400
10,000 Oxford Industry, Inc............... 266,250
6,600 V. F. Corp......................... 441,375
776,025
TRANSPORTATION -- 0.5%
3,191 Burlington Northern Santa Fe....... 236,134
7,000 Union Pacific Corp................. 397,250
633,384
UTILITIES -- ELECTRIC -- 5.4%
18,200 Commonwealth Energy System......... 379,925
20,000 Eastern Utilities Assn............. 360,000
30,000 Enova Corp......................... 660,000
30,000 Houston Industries, Inc............ 626,250
10,000 Illinova Corp...................... 228,750
50,000 Long Island Lighting Co............ 1,200,000
37,000 PP&L Resources, Inc................ 749,250
20,000 Public Service Enterprise Group,
Inc................................ 525,000
22,000 Southern Co........................ 464,750
4,000 Southwestern Public Svc. Co........ 143,500
10,000 Texas Utilities Co................. 342,500
55,000 TNP Enterprises, Inc............... 1,175,625
8,000 Unicom Corp........................ 156,000
7,011,550
UTILITIES -- GAS -- 2.3%
15,000 AGL Resource, Inc.................. 275,625
40,500 Chesapeake Utilities Corp.......... 703,688
</TABLE>
7
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
(Statue of Liberty Photo)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS -- CONTINUED
UTILITIES -- GAS -- CONTINUED
<C> <S> <C>
25,000 CMS Energy Corp. Cl. G............. $ 465,625
22,000 South Jersey Industry, Inc......... 470,250
40,000 Southwest Gas Corp................. 695,000
20,400 Yankee Energy System, Inc.......... 448,800
3,058,988
UTILITIES -- TELEPHONE -- 0.8%
2,521 AT & T Corp........................ 87,605
35,000 Frontier Corp...................... 625,625
10,000 U.S. West, Inc..................... 340,000
1,053,230
TOTAL COMMON STOCKS
(COST $48,623,071)............... 58,872,167
CONVERTIBLE PREFERRED STOCKS -- 11.3%
BANKS -- 1.0%
50,000* National Australia Bank Limited
7.875%, UNIT....................... 1,250,000
BUILDING, CONSTRUCTION &
FURNISHINGS -- 0.3%
7,000 Southdown, Inc.
$2.875, Series D................... 395,500
BUSINESS EQUIPMENT &
SERVICES -- 0.4%
6,000 Microsoft Corp.
$2.196, Series A PERCS............. 486,750
COMMUNICATION SYSTEMS &
SERVICES -- 0.7%
30,000 AirTouch Communications Cl.B
6.00%, 8/16/99..................... 768,750
5,000 Sprint Corp.
8.25%, DECS
(exchangeable for Southern New
England Telecommunications,
Corp. Common Stock)................ 171,875
940,625
CONSUMER PRODUCTS &
SERVICES -- 0.4%
5,000 SCI Finance LLC
$3.125, Series A................... 516,250
ENERGY -- 0.4%
5,000 Nuevo Energy Co.
5.75%, Series A, TECONS............ 240,625
5,000 Valero Energy Corp.
$3.125............................. 336,875
577,500
<CAPTION>
SHARES VALUE
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS -- CONTINUED
FINANCE & INSURANCE -- 1.5%
20,000 American General Corp.
$3.00, Series A, MIPS.............. $ 1,125,000
15,000 Merrill Lynch & Co., Inc.
7.25%, STRYPES due 6/15/99
(exchangeable for SunAmerica,
Inc. Common Stock)................. 885,000
2,010,000
FOOD & BEVERAGE PRODUCTS -- 0.8%
20,000 Wendy's Financing I
5.00%, Series A, TECONS............ 1,012,500
HEALTHCARE PRODUCTS & SERVICES -- 0.2%
5,000 Pacificare Health Systems
Delaware, $1.00, Series A.......... 166,875
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES -- 1.0%
80,000 Worthington Industries, Inc.
7.25%, DECS
(exchangeable for Rouge Steel, Co.
Common Stock)...................... 1,280,000
METAL PRODUCTS & SERVICES -- 0.7%
20,000* Timet Capital Trust I 144A
6.625%, BUCS....................... 937,600
PAPER & PACKAGING -- 1.0%
20,000 Crown Cork & Seal Co., Inc.
4.5%, MIPS......................... 985,000
10,000 James River Corp. Virginia
9.00%, Series P, DECS.............. 270,000
1,255,000
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- 1.8%
15,000 AMC Entertainment, Inc.
$1.75.............................. 510,000
10,000* American Radio Systems Corp.
7%, 144A........................... 470,000
10,300 Granite Broadcasting Corp.
$1.938............................. 504,700
20,000 Merrill Lynch & Co., Inc.
6.00%, STRYPES due 6/1/99
(exchangeable for Cox
Communications, Inc)............... 410,000
10,000 TCI Communications, Inc.
$2.125, Series A................... 387,500
1,197 Times Mirror Co.
$1.374, Series B................... 39,800
2,322,000
</TABLE>
8
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
(Statue of Liberty Photo)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
CONVERTIBLE PREFERRED STOCKS -- CONTINUED
<C> <S> <C>
TEXTILE & APPAREL -- 0.1%
5,000 Designer Financial Trust
6.00%, 12/30/16 TOPRS.............. $ 163,125
UTILITIES -- 1.0%
40,000 MCN Corp.
8.75%, PRIDES...................... 1,070,000
5,000 Philippine Long Distance
Telephone Co., GDS
7.00%, Series III.................. 275,000
1,345,000
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $13,929,232)............... 14,658,725
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
CONVERTIBLE DEBENTURES -- 7.9%
BUSINESS EQUIPMENT &
SERVICES -- 1.6%
$1,000,000 Adaptec, Inc. 144A
4.75%, 2/1/04...................... 981,300
1,000,000 HMT Technology Corp. 144A
5.75%, 1/15/04..................... 850,000
250,000 Platinum Technology, Inc.
6.75%, 11/15/01.................... 280,000
2,111,300
ENERGY -- 0.4%
500,000 Swift Energy Co.
6.25%, 11/15/06.................... 492,500
FINANCE & INSURANCE -- 0.8%
900,000 Equitable Cos., Inc. (The)
6.125%, 12/15/24................... 1,064,250
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES -- 0.5%
600,000 Robbins & Myers, Inc.
6.50%, 9/1/03...................... 697,500
OIL FIELD SERVICES -- 2.3%
500,000 Key Energy Group, Inc. 144A
7.50%, 7/1/03...................... 740,000
1,000,000 Nabors Industries, Inc.
5.00%, 5/15/06..................... 1,265,000
1,000,000 Offshore Logistics, Inc. 144A
6.00%, 12/15/06.................... 965,000
2,970,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CONVERTIBLE DEBENTURES -- CONTINUED
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- 0.4%
$1,000,000 Jacor Communications, Inc.
Zero coupon, 6/12/11............... $ 457,500
RETAILING & WHOLESALE -- 1.5%
500,000 Central Garden & Pet Co. 144A
6.00%, 11/15/03.................... 476,250
1,500,000 Proffitt's Inc.
4.75%, 11/1/03..................... 1,507,500
1,983,750
REAL ESTATE -- 0.4%
1,000,000 Marriot International, Inc.
Zero Coupon, 3/25/11............... 552,500
TOTAL CONVERTIBLE DEBENTURES
(COST $9,816,701)................ 10,329,300
CORPORATE BONDS -- 3.4%
BANKS -- 0.7%
1,000,000 NationsBank Corp.
6.50%, 8/15/03..................... 959,739
CONSUMER PRODUCTS &
SERVICES -- 0.4%
500,000 Pepsico, Inc.
6.875%, 5/15/97.................... 500,682
FINANCE & INSURANCE -- 1.5%
1,000,000 American General Finance Corp.
7.125%, 12/1/99.................... 1,006,602
1,000,000 Ford Motor Credit Co.
5.625%, 12/15/98................... 984,182
1,990,784
TELECOMMUNICATION SERVICES &
EQUIPMENT -- 0.8%
1,000,000 GTE Southwest, Inc. Series A
5.82%, 12/1/99..................... 976,158
TOTAL CORPORATE BONDS
(COST $4,501,740)................ 4,427,363
</TABLE>
9
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
(Statue of Liberty Photo)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 22.0%
<C> <S> <C>
GOVERNMENT AGENCY NOTES &
BONDS -- 20.9%
Federal Agricultural Mortgage
Corp. Medium-Term Note
$ 700,000 7.03%, 5/26/98..................... $ 705,221
Federal Home Loan Bank
2,000,000 5.65%, 12/29/00.................... 1,925,398
2,000,000 6.13%, 12/14/98.................... 1,989,448
1,000,000 6.195%, 2/5/03..................... 958,808
2,000,000 6.455%, 7/8/98..................... 2,002,418
2,000,000 7.26%, 4/3/02...................... 2,000,000
1,000,000 7.29%, 10/18/01.................... 998,323
3,000,000 7.67%, 1/25/07..................... 2,944,962
3,000,000 8.00%, 1/10/12..................... 2,938,479
Federal Home Loan
Mortgage Corp.
1,000,000 6.773%, 1/7/02..................... 986,227
1,000,000 6.91%, 6/20/05..................... 974,361
2,000,000 7.00%, 3/12/02..................... 1,979,808
2,000,000 7.585%, 9/19/06.................... 1,989,144
Federal National Mortgage Assn.
1,000,000 6.25%, 8/12/03..................... 956,791
1,000,000 6.41%, 3/8/06...................... 956,227
2,000,000 6.68%, 12/28/01.................... 1,965,526
Student Loan Marketing Assn.
1,000,000 5.90%, 2/20/01..................... 967,165
27,238,306
TREASURY NOTES & BONDS -- 1.1%
U.S. Treasury Bonds
1,500,000 7.125%, 2/15/23.................... 1,480,781
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(COST $29,184,844)............... 28,719,087
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM INVESTMENTS -- 8.9%
COMMERCIAL PAPER -- 8.9%
Bell Atlantic Financial
Services, Inc.
$ 900,000 5.30%, 4/16/97..................... $ 898,012
300,000 5.52%, 4/30/97..................... 298,666
550,000 Columbia/HCA Healthcare Corp.
5.52%, 5/9/97...................... 546,795
1,900,000 Federal National Mortgage
Assn. Discount Notes
5.22%, 4/24/97..................... 1,893,663
950,000 Finova Capital Corp.
5.32%, 4/10/97..................... 948,737
450,000 General Electric Capital Corp.
Discount Notes
5.52%, 5/12/97..................... 447,171
600,000 Great Lakes Chemical Corp.
5.32%, 4/25/97..................... 597,872
2,100,000 Holy Cross Health System Corp.
5.35%, 4/16/97..................... 2,095,319
850,000 Norfolk Southern Corp.
5.27%, 4/24/97..................... 847,138
300,000 Pearson, Inc.
5.31%, 4/10/97..................... 299,602
500,000 PHH Corp.
5.32%, 4/7/97...................... 499,557
1,000,000 Riverwoods Funding Corp.
5.60%, 5/5/97...................... 994,711
1,000,000 Tennessee Valley Authority
Discount Notes
5.29%, 4/29/97..................... 995,886
200,000 Transamerica Corp.
5.32%, 4/30/97..................... 199,143
11,562,272
TOTAL SHORT-TERM INVESTMENTS
(COST $11,562,272)............... 11,562,272
TOTAL INVESTMENTS --
(COST $117,617,860)...... 98.6 % 128,568,914
OTHER ASSETS AND
LIABILITIES -- NET....... 1.4 % 1,817,475
NET ASSETS................. 100.0 % $130,386,389
</TABLE>
10
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
(Statue of Liberty Photo)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
* Non-income producing securities.
** At March 31, 1997 and December 31, 1996 the Fund
owned 4,000 shares of common stock of First Union Corp.
at a cost of $106,108. During the three months ended
March 31, 1997 and year ended December 31, 1996 the
fund earned $2,320 and $8,800, respectively, in dividend
income from this investment. These were purchased by the
Fund prior to the acquisition of the investment advisor and
Lieber & Company by First Union.
(a) Less than one tenth of one percent.
The following abbreviations are used in this portfolio:
ADR -- American Depositary Receipts
BUCS -- Beneficial Unsecured Convertible Securities
DECS -- Dividend Enhanced Convertible Stock
GDS -- Global Depositary Shares
MIPS -- Monthly Income Preferred Shares
PERCS -- Preferred Equity Redemption Cumulative
Stock
PRIDES -- Provisionally Redeemable Income Debt
Exchangeable for Stock
STRYPES -- Structured Yield Product Exchangeable for
Stock
TECONS -- Term Convertible Shares
TOPRS -- Trust Originated Preferred Shares
144A -- Rule 144A securities are restricted as to resale to
qualified institutional investors
See accompanying notes to financial statements.
11
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
(Statue of Liberty Photo)
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $117,617,860)........................................................... $128,568,914
Cash.......................................................................................................... 71,136
Receivable for investment securities sold..................................................................... 1,529,094
Receivable for Fund shares sold............................................................................... 1,718,468
Dividends and interest receivable............................................................................. 799,467
Receivable from investment advisor............................................................................ 90,000
Prepaid expenses.............................................................................................. 68,132
Total assets............................................................................................ 132,845,211
LIABILITIES:
Payable for investment securities purchased................................................................... 2,000,900
Payable for Fund shares repurchased........................................................................... 186,529
Distribution fee payable...................................................................................... 94,346
Advisory fee payable.......................................................................................... 81,969
Accrued expenses and other liabilities........................................................................ 95,078
Total liabilities....................................................................................... 2,458,822
NET ASSETS....................................................................................................... $130,386,389
NET ASSETS CONSISTS OF:
Paid-in capital............................................................................................... $119,185,572
Undistributed net investment income........................................................................... 11,347
Undistributed net realized gain on investment transactions.................................................... 238,416
Net unrealized appreciation of investments.................................................................... 10,951,054
Net assets.............................................................................................. $130,386,389
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A shares ($14,590,144 (divided by) 1,062,020 shares of beneficial interest outstanding)................ $13.74
Sales charge -- 4.75% of offering price....................................................................... .69
Maximum offering price.................................................................................. $14.43
Class B shares ($76,790,544 (divided by) 5,617,901 shares of beneficial interest outstanding)................. $13.67
Class C shares ($1,768,772 (divided by) 129,121 shares of beneficial interest outstanding).................... $13.70
Class Y shares ($37,236,929 (divided by) 2,710,150 shares of beneficial interest outstanding)................. $13.74
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
(Statue of Liberty Photo)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1997 1996
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $7,812 and $17,809)............................ $ 683,306 $1,791,668
Interest...................................................................................... 746,948 1,705,527
Total investment income................................................................. 1,430,254 3,497,195
EXPENSES:
Advisory fee.................................................................................. 225,438 549,949
Distribution fee -- Class A Shares............................................................ 7,950 14,426
Distribution fee -- Class B Shares............................................................ 124,370 199,829
Shareholder services fee -- Class B Shares.................................................... 41,457 66,610
Distribution fee -- Class C Shares............................................................ 2,995 5,713
Shareholder services fee -- Class C Shares.................................................... 998 1,904
Registration and filing fees.................................................................. 54,250 50,750
Custodian fee................................................................................. 35,808 71,900
Transfer agent fee............................................................................ 57,111 73,721
Professional fees............................................................................. 17,602 18,371
Reports and notices to shareholders........................................................... 24,005 16,745
Insurance..................................................................................... 2,747 1,850
Trustees' fees and expenses................................................................... 3,175 5,335
Miscellaneous................................................................................. 5,784 12,965
Total expenses.......................................................................... 603,690 1,090,068
Less: Fee waivers and expense reimbursements.................................................. (90,000) (28,241)
Net expenses............................................................................... 513,690 1,061,827
Net investment income............................................................................ 916,564 2,435,368
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions.................................................. 274,144 537,906
Net change in unrealized appreciation (depreciation) of investments........................... (1,782,365) 6,223,491
Net realized and unrealized gain (loss) on investments........................................... (1,508,221) 6,761,397
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................. ($ 591,657) $9,196,765
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
(Statue of Liberty Photo)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31
1997 1996 1995
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................................... $ 916,564 $ 2,435,368 $ 1,556,941
Net realized gain on investment transactions............................ 274,144 537,906 460,019
Net change in unrealized appreciation (depreciation) of investments..... (1,782,365) 6,223,491 6,860,189
Net increase (decrease) in net assets resulting from operations...... (591,657) 9,196,765 8,877,149
DISTRIBUTIONS TO SHAREHOLDERS:
FROM NET INVESTMENT INCOME:
Class A Shares.......................................................... (114,069) (214,502) (15,368)
Class B Shares.......................................................... (485,797) (839,295) (56,118)
Class C Shares.......................................................... (11,029) (22,543) (987)
Class Y Shares.......................................................... (323,235) (1,330,115) (1,498,372)
Total distributions from net investment income....................... (934,130) (2,406,455) (1,570,845)
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)
FROM NET REALIZED GAINS ON INVESTMENTS:
Class A Shares.......................................................... -- (61,826) --
Class B Shares.......................................................... -- (302,689) --
Class C Shares.......................................................... -- (7,483) --
Class Y Shares.......................................................... -- (321,583) --
Total distributions from net realized gains on investments........... -- (693,581) --
IN EXCESS OF NET REALIZED GAINS ON INVESTMENTS:
Class A Shares.......................................................... -- (3,185) --
Class B Shares.......................................................... -- (15,592) --
Class C Shares.......................................................... -- (385) --
Class Y Shares.......................................................... -- (16,566) --
Total distributions in excess of net realized gains on investments... -- (35,728) --
Total distributions to shareholders............................... (934,130) (3,135,764) (1,572,068)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold............................................... 27,711,777 66,932,304 9,254,552
Proceeds from reinvestment of distributions............................. 847,895 2,790,578 1,339,655
Payment for shares redeemed............................................. (8,115,115) (9,928,020) (9,463,471)
Net increase resulting from Fund share transactions.................. 20,444,557 59,794,862 1,130,736
Net increase in net assets........................................ 18,918,770 65,855,863 8,435,817
NET ASSETS:
Beginning of period..................................................... 111,467,619 45,611,756 37,175,939
End of period (including undistributed net investment income of $11,347,
$28,913 and $0, respectively)........................................ $130,386,389 $111,467,619 $45,611,756
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND --
CLASS A AND B SHARES
(Statue of Liberty photo)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B
THREE THREE YEAR
MONTHS MONTHS ENDED
ENDED YEAR ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31 MARCH 31, 31
1997** 1996 1995* 1997** 1996
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................ $13.86 $12.82 $10.65 $13.80 $12.80
Income (loss) from investment operations:
Net investment income.............................................. .11 .45 .41 .09 .36
Net realized and unrealized gain (loss) on investments............. (.12) 1.12 2.22 (.13) 1.09
Total from investment operations.................................. (.01) 1.57 2.63 (.04) 1.45
Less distributions to shareholders from:
Net investment income.............................................. (.11) (.42) (.46) (.09) (.34)
Net realized gain on investments................................... -- (.11) -- -- (.11)
Total distributions.............................................. (.11) (.53) (.46) (.09) (.45)
Net asset value, end of period...................................... $13.74 $13.86 $12.82 $13.67 $13.80
TOTAL RETURN+....................................................... (.1%) 12.5% 24.9% (.3%) 11.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).......................... $14,590 $11,116 $1,335 $76,791 $57,622
Ratios to average net assets:
Expenses #......................................................... 1.37%++ 1.30% 1.37%++ 2.11%++ 2.06%
Net investment income #............................................ 3.43%++ 3.53% 3.73%++ 2.68%++ 2.79%
Portfolio turnover rate............................................. 9% 16% 49% 9% 16%
Average commission rate paid per share.............................. $.0606 $.0619 N/A $.0606 $.0619
<CAPTION>
1995*
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period................................ $10.65
Income (loss) from investment operations:
Net investment income.............................................. .35
Net realized and unrealized gain (loss) on investments............. 2.20
Total from investment operations.................................. 2.55
Less distributions to shareholders from:
Net investment income.............................................. (.40)
Net realized gain on investments................................... --
Total distributions.............................................. (.40)
Net asset value, end of period...................................... $12.80
TOTAL RETURN+....................................................... 24.1%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).......................... $4,839
Ratios to average net assets:
Expenses #......................................................... 2.12%++
Net investment income #............................................ 2.97%++
Portfolio turnover rate............................................. 49%
Average commission rate paid per share.............................. N/A
</TABLE>
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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 charges are not reflected.
++ 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 operating expenses and net investment income (loss) to average net assets
would have been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B
THREE THREE YEAR
MONTHS MONTHS ENDED
ENDED YEAR ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31, MARCH 31, 31,
1997** 1996 1995* 1997** 1996
<S> <C> <C> <C> <C> <C>
Expenses............................................................ 1.68% 1.33% 10.96% 2.43% 2.09%
Net investment income (loss)........................................ 3.12% 3.50% (5.86% ) 2.36% 2.76%
<CAPTION>
1995*
<S> <C>
Expenses............................................................ 4.20%
Net investment income (loss)........................................ .89%
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND --
CLASS C AND Y SHARES
(Statue of Liberty photo)
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS C CLASS Y
THREE MONTHS THREE MONTHS
ENDED YEAR ENDED ENDED
MARCH 31, DECEMBER 31, MARCH 31, YEAR ENDED DECEMBER 31,
1997** 1996 1995* 1997** 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......... $13.83 $12.81 $10.65 $13.86 $12.83 $10.67 $11.60 $10.95
Income (loss) from investment operations:
Net investment income........................ .09 .36 .36 .14 .48 .47 .60 .56
Net realized and unrealized gain (loss) on
investments................................ (.13) 1.11 2.19 (.14) 1.10 2.16 (.93) .96
Total from investment operations.......... (.04) 1.47 2.55 -- 1.58 2.63 (.33) 1.52
Less distributions to shareholders from:
Net investment income....................... (.09) (.34) (.39) (.12) (.44) (.47) (.60) (.60)
Net realized gain on investments............ -- (.11) -- -- (.11) -- -- (.24)
In excess of net realized gain on
investments................................ -- -- -- -- -- -- -- (.03)
Total distributions....................... (.09) (.45) (.39) (.12) (.55) (.47) (.60) (.87)
Net asset value, end of period............... $13.70 $13.83 $12.81 $13.74 $13.86 $12.83 $10.67 $11.60
TOTAL RETURN+................................ (.3%) 11.6% 24.0% .0% 12.6% 25.1% (2.9%) 14.1%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).... $1,769 $1,487 $110 $37,237 $41,243 $39,327 $37,176 $37,336
Ratios to average net assets:
Expenses.................................... 2.12%#++ 2.05%# 2.10%#++ 1.11%#++ 1.05%# 1.26% 1.28% 1.36%
Net investment income....................... 2.65%#++ 2.80%# 2.96%#++ 3.56%#++ 3.65%# 3.96% 5.40% 5.13%
Portfolio turnover rate...................... 9% 16% 49% 9% 16% 49% 136% 92%
Average commission rate paid per share....... $.0606 $.0619 N/A $.0606 $.0619 N/A N/A N/A
<CAPTION>
1992
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period......... $10.52
Income (loss) from investment operations:
Net investment income........................ .66
Net realized and unrealized gain (loss) on
investments................................ .55
Total from investment operations.......... 1.21
Less distributions to shareholders from:
Net investment income....................... (.61)
Net realized gain on investments............ (.17)
In excess of net realized gain on
investments................................ --
Total distributions....................... (.78)
Net asset value, end of period............... $10.95
TOTAL RETURN+................................ 11.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).... $23,781
Ratios to average net assets:
Expenses.................................... 1.51%#
Net investment income....................... 6.23%#
Portfolio turnover rate...................... 151%
Average commission rate paid per share....... N/A
</TABLE>
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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 charges are not reflected.
++ 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 operating expenses and net investment income (loss) to average net assets
would have been the following:
<TABLE>
<CAPTION>
CLASS Y
CLASS C YEAR
THREE MONTHS THREE MONTHS ENDED
ENDED YEAR ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31, MARCH 31, 31,
1997** 1996 1995* 1997** 1996
<S> <C> <C> <C> <C> <C>
Expenses........................................................ 2.43% 2.08% 103.52% 1.38% 1.09%
Net investment income (loss).................................... 2.34% 2.77% (98.46%) 3.29% 3.61%
<CAPTION>
1992
<S> <C>
Expenses........................................................ 1.59%
Net investment income (loss).................................... 6.15%
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
EVERGREEN BALANCED FUND
(photo of certificates)
A REPORT FROM YOUR
PORTFOLIO MANAGER
DEAN HAWES
Evergreen Balanced Fund's fiscal year-end was changed from
December 31, to March 31. For the twelve-month period ended
March 31, 1997, Evergreen Balanced Fund's total return (Class Y, (Dean Hawes
no-load shares) was 9.9%*. This return was achieved in an photo appears
environment in which bonds, as a result of the rise in interest here)
rates, provided only modest returns. Fortunately, the stock
market continued its rise and rewarded investors with above
average gains. During this twelve-month period, fixed income
exposure remained essentially unchanged while equity exposure
was reduced modestly to 51% from 54%. Despite assuming a more
conservative posture, the relative outperformance in the final
two quarters of the fiscal year allowed Evergreen Balanced Fund,
for the twelve-month period, to exceed the average return of the Lipper Balanced
Fund universe of the 294 balanced funds tracked by Lipper Analytical Services,
Inc., during that time**. The twelve-month total return ended March 31, for the
Fund's Class A shares at net asset value was 9.6%. (Please see page 19 for
additional performance information.)
Within the equity portion of the portfolio, a relative overweighting in the
financial sector, versus that in the S&P 500 Index***, throughout the year
enhanced returns. The outlook in this industry appears strong as consolidation
within the industry continues and banks have begun to focus on increasing
fee-based business. We anticipate remaining overweighted. Conversely, we
remained underweighted in utilities, although we did realign the group by adding
CINergy Corp. and increasing our position of CMS Energy Corp. We began the year
slightly underweighted in information technology, but modestly increased our
position as the year progressed with names such as Microsoft Corp. and Atmel
Corp. Despite a bumpy ride for technology stocks in early 1997, industry
fundamentals remain positive as global competition and the quest for
productivity gains provide a favorable backdrop. Stock selection will be
paramount, but we do look to be at least market weighted. A tactical shift was
made in the energy and oil sectors as we reduced exposure to companies most
directly impacted by fluctuating crude oil prices, and added companies which
emphasize drilling, exploration, and refining and marketing interests.
Accordingly, Exxon Corp. and Atlantic Richfield Co. were sold while we acquired
Reading and Bates, Diamond Offshore Drilling and Ultramar Diamond Shamrock.
Within the consumer non-durable sector we remain modestly underweighted as
healthcare remains our area of preference. Long-term demographic trends are
favorable and short-term earnings visibility is good. Within the healthcare
sector, we added Johnson & Johnson and Pfizer, Inc. These two proven companies
have excellent earnings prospects and we anticipate them to outperform the
overall market averages.
FIGURES REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS.
* 4.4% WAS THE 12-MONTH TOTAL RETURN FOR THE FUND'S CLASS A SHARES WITH THE
MAXIMUM 4.75% FRONT END SALES CHARGE. THE FUND ALSO OFFERS CLASS B SHARES
WHICH ARE SUBJECT TO A MAXIMUM 5% CONTINGENT DEFERRED SALES CHARGE, AND
CLASS C SHARES WHICH ARE SUBJECT TO A 1% CONTINGENT DEFERRED SALES CHARGE
WITHIN THE FIRST YEAR AFTER THE MONTH OF PURCHASE. PERFORMANCE FOR THESE
CLASSES OF SHARES MAY BE DIFFERENT.
PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDEND AND CAPITAL GAIN
DISTRIBUTIONS, IF ANY. INVESTMENT RETURN, PRINCIPAL VALUE AND YIELD WILL
FLUCTUATE. INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.
** SOURCE: LANA (LIPPER ANALYTICAL NEW APPLICATIONS) LIPPER ANALYTICAL SERVICES
INC., IS AN INDEPENDENT MUTUAL FUNDS PERFORMANCE MONITOR. LIPPER AVERAGE
DOES NOT INCLUDE SALES CHARGES AND IF INCLUDED, AVERAGE MAY BE LOWER.
*** THE S&P 500 IS AN UNMANAGED INDEX OF COMMON STOCKS IN INDUSTRY,
TRANSPORTATION, FINANCE, AND PUBLIC UTILITIES, DENOTING GENERAL MARKET
PERFORMANCE AS MONITORED BY STANDARD & POOR'S CORP. AN INVESTMENT CAN NOT BE
MADE IN AN INDEX.
17
<PAGE>
EVERGREEN BALANCED FUND
(photo of certificates)
A REPORT FROM YOUR
PORTFOLIO MANAGER -- (CONTINUED)
Within the fixed income portion, the portfolio closed the fiscal year at
93.8% of its neutral duration. As of March 31, portfolio duration was 4.65
years. As the year came to an end, we became concerned with the interest rate
outlook and shortened the portfolio duration using Treasuries. This portfolio
adjustment sets the stage for duration extensions should interest rates increase
throughout the remainder of 1997.
We will approach the coming quarters with a degree of caution, noting
increased market volatility and the potential for further interest rate
increases by the Federal Reserve. Stock selection will be critical as the market
punishes those companies which fail to meet earnings expectations. Our current
asset allocation of 51% stocks, 46% bonds and 3% cash should position the Fund
well for the remainder of 1997. Although we remain somewhat cautious, market
corrections will be viewed as an opportunity to utilize our cash reserves to
increase equity exposure. Our focus will remain on attractively priced stocks of
established companies with solid earnings prospects. We anticipate the bond
market to continue its second-half recovery and provide modest returns. The
current portfolio allocation should allow the Fund to take advantage of any
upswing in the financial markets while helping to reduce risk should the markets
retreat.
Thank you for your investment in the Evergreen Balanced Fund.
18
<PAGE>
EVERGREEN BALANCED FUND
(photo of 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 charts appear here, plot points are as follows:)
(customer to fill in plot points below)
Class A
1-Year Total Return=4.41%
Average Annual Compound
Return Since Inception=10.91%
Evergreen Balanced Fund
S&P 500 Index
Lehman Brothers
Government/
Corporate Bond Index
6/10/91* 3/92 3/93 3/94 3/95 3/96 3/97
Class B
1-Year Total Return=3.97%
Average Annual Compound
Return Since Inception=9.22%
Evergreen Balanced Fund
S&P 500 Index
Lehman Brothers
Government/
Corporate Bond Index
6/10/91* 3/93 3/94 3/95 3/96 3/97
Class C
1-Year Total Return=7.44%
Average Annual Compound
Return Since Inception=11.83%
Evergreen Balanced Fund
S&P 500 Index
Lehman Brothers
Government/
Corporate Bond Index
9/2/94* 3/95 3/96 3/97
Class Y
1-Year Total Return=9.91%
Average Annual Compound
Return Since Inception=11.30%
Evergreen Balanced Fund
S&P 500 Index
Lehman Brothers
Government/
Corporate Bond Index
4/1/91* 3/92 3/93 3/94 3/95 3/96 3/97
*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 March 31, 1997; (c) all
recurring fees (including investment advisory fees) were deducted; and (d) all
dividends and distributions were reinvested.
The Indexes are unmanaged 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.
19
<PAGE>
EVERGREEN BALANCED FUND
(photo of certificates)
STATEMENT OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 50.8%
BANKS -- 6.0%
140,000 Banc One Corp..................... $ 5,565,000
66,800 Bank of Boston Corp............... 4,475,600
100,000 BankAmerica Corp.................. 10,075,000
110,000 Chase Manhattan Corp.............. 10,298,750
190,000 CoreStates Financial Corp......... 9,025,000
125,000 First Chicago NBD Corp............ 6,765,625
180,000 National City Corp................ 8,392,500
54,597,475
BUILDING, CONSTRUCTION &
FURNISHINGS -- 0.9%
100,000 *American Standard Cos., Inc...... 4,500,000
100,000 Masco Corp........................ 3,575,000
8,075,000
BUSINESS EQUIPMENT &
SERVICES -- 0.6%
135,000 *Quantum Corp..................... 5,214,375
CHEMICAL & AGRICULTURAL
PRODUCTS -- 0.6%
50,000 Du Pont (E. I.) De Nemours
& Co.............................. 5,300,000
COMMUNICATION SYSTEMS &
SERVICES -- 0.5%
100,000 *Cisco Systems, Inc............... 4,812,500
CONSUMER PRODUCTS &
SERVICES -- 3.4%
210,000 American Brands, Inc.............. 10,631,250
115,000 General Motors Corp............... 6,368,125
40,000 Gillette Co. (The)................ 2,905,000
100,000 Philip Morris Cos., Inc........... 11,412,500
31,316,875
DIVERSIFIED COMPANIES -- 4.1%
60,000 AlliedSignal Inc.................. 4,275,000
75,000 Fluor Corp........................ 3,937,500
150,000 General Electric Co............... 14,887,500
140,000 Textron Inc....................... 14,700,000
37,800,000
ELECTRICAL EQUIPMENT &
SERVICES -- 0.4%
75,000 Emerson Electric Co............... 3,375,000
ENERGY -- 5.3%
150,000 Chevron Corp...................... 10,443,750
55,000 Mobil Corp........................ 7,184,375
150,000 Sonat, Inc........................ 8,175,000
<CAPTION>
SHARES VALUE
</TABLE>
ENERGY -- CONTINUED
<TABLE>
<C> <S> <C>
140,000 Texaco, Inc....................... $ 15,330,000
200,000 Unocal Corp....................... 7,625,000
48,758,125
FINANCE & INSURANCE -- 1.1%
110,000 Allstate Corp. (The).............. 6,531,250
50,900 UNUM Corp......................... 3,715,700
10,246,950
FOOD & BEVERAGE PRODUCTS -- 2.0%
110,350 American Stores Co................ 4,910,575
235,000 McCormick & Co., Inc.............. 5,757,500
200,000 Sara Lee Corp..................... 8,100,000
18,768,075
HEALTHCARE PRODUCTS &
SERVICES -- 5.4%
220,000 Bristol-Myers Squibb Co........... 12,980,000
125,000 HBO & Co.......................... 5,937,500
200,000 *HEALTHSOUTH Corp................. 3,825,000
125,000 Johnson & Johnson................. 6,609,375
227,000 *Lincare Holdings, Inc............ 9,363,750
130,000 Pfizer, Inc....................... 10,936,250
49,651,875
INDUSTRIAL SPECIALTY PRODUCTS
& SERVICES -- 1.6%
45,000 Aluminum Co. of America........... 3,060,000
250,000 Weyerhaeuser Co................... 11,156,250
14,216,250
INFORMATION SERVICES &
TECHNOLOGY -- 3.1%
150,000 *Atmel Corp....................... 3,590,625
80,000 *Compaq Computer Corp............. 6,130,000
77,000 Intel Corp........................ 10,712,625
90,000 *Microsoft Corp................... 8,251,875
28,685,125
MANUFACTURING -- DISTRIBUTING
-- 0.8%
150,000 Case Corp......................... 7,612,500
METAL PRODUCTS & SERVICES -- 0.4%
75,000 Crown Cork & Seal Inc............. 3,871,875
OFFICE EQUIPMENT &
SUPPLIES -- 0.8%
130,000 Pitney Bowes, Inc................. 7,637,500
</TABLE>
20
<PAGE>
EVERGREEN BALANCED FUND
(photo of certificates)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS -- CONTINUED
<C> <S> <C>
OIL -- 2.2%
150,000 Ashland Inc....................... $ 6,037,500
50,000 *Diamond Offshore Drilling Inc.... 3,425,000
175,000 *Reading & Bates Corp............. 3,959,375
150,000 Ultramar Diamond Shamrock Corp.... 4,762,500
50,000 Williams Companies., Inc. (The)... 2,225,000
20,409,375
PAPER & PACKAGING -- 1.0%
230,000 International Paper Co............ 8,941,250
REAL ESTATE -- 1.2%
280,000 Healthcare Realty Trust, Inc...... 7,665,000
100,500 Highwoods Properties, Inc......... 3,366,750
11,031,750
RETAILING & WHOLESALE -- 1.3%
100,000 Dayton Hudson Corp................ 4,175,000
150,000 Sears, Roebuck & Co............... 7,537,500
11,712,500
TRANSPORTATION -- 2.2%
100,342 Conrail, Inc...................... 11,313,561
100,000 Norfolk Southern Corp............. 8,525,000
19,838,561
UTILITIES -- TELEPHONE -- 1.0%
148,000 Bell Atlantic Corp................ 9,009,500
UTILITIES -- 4.9%
200,000 Carolina Power & Light Co......... 7,250,000
150,000 CINergy Corp...................... 5,118,750
75,000 CMS Energy Corp................... 2,465,625
260,000 GTE Corp.......................... 12,122,500
160,000 SBC Communications, Inc........... 8,420,000
450,000 Southern Co....................... 9,506,250
44,883,125
TOTAL COMMON STOCKS
(COST $361,353,728).......... 465,765,561
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
CORPORATE BONDS -- 11.3%
BANKS -- 2.0%
$ 3,000,000 Boatmen's Bancshares, Inc.
6.75%, 3/15/03.................... 2,925,579
5,000,000 First Chicago Corp.,
9.875%, 8/15/00................... 5,419,630
<CAPTION>
PRINCIPAL
AMOUNT VALUE
</TABLE>
CORPORATE BONDS -- CONTINUED
BANKS -- CONTINUED
<TABLE>
<C> <S> <C>
$10,000,000 NationsBank Corp.
7.625%, 4/15/05................... $ 10,109,680
18,454,889
CHEMICAL & AGRICULTURAL
PRODUCTS -- 0.6%
5,000,000 Dow Chemical Co.
8.625%, 4/1/06.................... 5,406,290
CONSUMER PRODUCTS &
SERVICES -- 0.5%
5,000,000 Philip Morris Cos., Inc.
8.65%, 5/15/98.................... 5,105,780
ENERGY -- 0.5%
4,000,000 Atlantic Richfield Co.,
9.00%, 4/1/21..................... 4,538,644
FINANCE & INSURANCE -- 2.6%
5,500,000 Dean Witter, Discover & Co.
6.75%, 10/15/13................... 4,957,414
5,500,000 General Electric Capital Corp.,
8.75%, 3/14/03.................... 5,917,164
2,750,000 International Bank For
Reconstruction &
Development,
7.95%, 5/15/16.................... 2,883,287
5,000,000 Merrill Lynch, Pierce,
Fenner & Smith Inc.,
7.00%, 4/27/08.................... 4,822,755
5,000,000 Smith Barney Holdings, Inc.,
5.50%, 1/15/99.................... 4,897,885
23,478,505
FOOD & BEVERAGE PRODUCTS -- 1.1%
5,000,000 General Mills, Inc.,
9.00%, 12/20/02................... 5,412,310
4,250,000 PepsiCo, Inc.,
7.625%, 11/1/98................... 4,317,860
9,730,170
HEALTHCARE PRODUCTS &
SERVICES -- 0.5%
5,000,000 Baxter International
7.25%, 2/15/08.................... 4,936,775
INDUSTRIAL SPECIALTY PRODUCTS
& SERVICES -- 2.0%
7,000,000 Jet Equiptment Trust, 144A
9.41%, 6/15/10.................... 7,832,720
10,000,000 Loews Corp.
6.75%, 12/15/06................... 9,422,470
</TABLE>
21
<PAGE>
EVERGREEN BALANCED FUND
(photo of certificates)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
INDUSTRIAL SPECIALTY PRODUCTS
-- CONTINUED
<C> <S> <C>
$ 1,400,000 Waste Management Inc.
8.75%, 5/1/18..................... $ 1,511,229
18,766,419
MANUFACTURING --
DISTRIBUTING -- 0.5%
4,300,000 Stanley Works,
7.375%, 12/15/02.................. 4,348,052
MORTGAGE BACKED SECURITIES --
0.0%(B)
322,947 Fleet Financial Home
Equity Trust Class A,
Series 1990
6.70%, 1/16/06.................... 323,571
SOVEREIGN GOVERNMENT -- 0.6%
5,000,000 Ontario Province Canada,
7.75%, 6/4/02..................... 5,153,900
UTILITIES -- 0.4%
3,600,000 Union Electric Co.,
8.00%, 12/15/22................... 3,555,871
TOTAL CORPORATE BONDS
(COST $102,043,342).......... 103,798,866
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 34.2%
GOVERNMENT AGENCY NOTES &
BONDS -- 1.8%
Government National
Mortgage Assn.
3,021,454 8.50%, 5/15/21.................... 3,102,656
1,975,747 8.50%, 7/15/21.................... 2,028,845
1,981,940 9.00%, 9/15/21.................... 2,077,321
3,434,969 9.00%, 10/15/21................... 3,600,276
1,768,337 9.50%, 2/15/21.................... 1,902,068
3,697,121 8.50%, 6/15/22.................... 3,796,481
16,507,647
TREASURY NOTES & BONDS -- 32.4%
U.S. Treasury Bonds
20,000,000 7.625%, 2/15/07................... 20,525,000
24,100,000 8.75%, 11/15/08................... 26,269,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
</TABLE>
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- CONTINUED
TREASURY NOTES & BONDS -- CONTINUED
<TABLE>
<C> <S> <C>
$20,000,000 8.75%, 5/15/17.................... $ 23,193,740
15,000,000 8.75%, 5/15/20.................... 17,517,180
17,000,000 8.875%, 8/15/17................... 19,948,429
17,500,000 9.125%, 5/15/18................... 21,054,688
U.S. Treasury Notes
10,000,000 5.50%, 11/15/98................... 9,868,750
20,990,000 5.875%, 2/28/99................... 20,793,219
65,000,000 6.375%, 6/30/97................... 65,142,220
8,000,000 6.375%, 7/15/99................... 7,985,000
10,000,000 6.50%, 4/30/99.................... 10,012,500
10,000,000 7.125%, 2/29/00................... 10,134,370
10,000,000 7.75%, 11/30/99................... 10,284,370
10,000,000 7.75%, 2/15/01.................... 10,353,120
10,000,000 8.00%, 8/15/99.................... 10,321,870
10,000,000 8.125%, 2/15/98................... 10,168,750
3,500,000 8.875%, 11/15/98.................. 3,633,437
297,205,643
TOTAL U.S. GOVERNMENT
& AGENCY OBLIGATIONS
(COST $318,053,006).......... 313,713,290
</TABLE>
<TABLE>
<C> <S> <C>
REPURCHASE AGREEMENT -- 2.5%
22,381,460 Donaldson, Lufkin & Jenrette
Securities Corp., (cost,
$22,381,460) (a).................. 22,381,460
TOTAL INVESTMENTS --
(COST $803,831,536).... 98.8% 905,659,177
OTHER ASSETS AND
LIABILITIES -- NET..... 1.2 11,217,026
NET ASSETS............... 100.0% $916,876,203
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. Government
obligations based on market prices at March 31, 1997.
(b) Less than one tenth of one percent.
* Non-income producing securities.
144A -- Rule 144A securities are restricted as to resale to qualified
institutional investors.
See accompanying notes to financial statements.
22
<PAGE>
EVERGREEN BALANCED FUND
(photo of certificates)
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $803,831,536)........................................................... $905,659,177
Receivable for investment securities sold..................................................................... 3,926,869
Receivable for Fund shares sold............................................................................... 3,556,865
Dividends and interest receivable............................................................................. 8,872,702
Prepaid expenses.............................................................................................. 47,547
Total assets............................................................................................ 922,063,160
LIABILITIES:
Payable for investment securities purchased................................................................... 2,659,900
Payable for Fund shares repurchased........................................................................... 1,852,984
Advisory fee payable.......................................................................................... 403,540
Distribution fee payable...................................................................................... 21,979
Accrued expenses.............................................................................................. 248,554
Total liabilities....................................................................................... 5,186,957
NET ASSETS....................................................................................................... $916,876,203
NET ASSETS CONSISTS OF:
Paid-in capital............................................................................................... $757,904,605
Undistributed net investment income........................................................................... 246,535
Undistributed net realized gain on investment transactions.................................................... 56,897,422
Net unrealized appreciation of investments.................................................................... 101,827,641
Net assets.............................................................................................. $916,876,203
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A shares ($41,429,056 (divided by) 3,218,879 shares of beneficial interest outstanding).................... $ 12.87
Sales charge -- 4.75% of offering price.......................................................................... .64
Maximum offering price........................................................................................ $ 13.51
Class B shares ($107,347,482 (divided by) 8,334,838 shares of beneficial interest outstanding)................... $ 12.88
Class C shares ($353,161 (divided by) 27,591 shares of beneficial interest outstanding).......................... $ 12.80
Class Y shares ($767,746,504 (divided by) 59,654,900 shares of beneficial interest outstanding).................. $ 12.87
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
EVERGREEN BALANCED FUND
(photo of certificates)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1997 1996
<S> <C> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding tax of $0 and $45,707)........................ $ 3,035,556 $ 14,642,260
Interest............................................................................ 7,615,522 31,431,682
Total investment income....................................................... 10,651,078 46,073,942
EXPENSES:
Advisory fee........................................................................ $ 1,170,691 $ 4,765,912
Administrative personnel and service fees........................................... 91,488 459,486
Distribution fee -- Class A Shares.................................................. 26,750 107,023
Distribution fee -- Class B Shares.................................................. 205,485 810,803
Shareholder services fee -- Class B Shares.......................................... 68,495 270,267
Distribution fee -- Class C Shares.................................................. 710 1,883
Shareholder services fee -- Class C Shares.......................................... 237 628
Transfer agent fee.................................................................. 126,528 324,216
Custodian fee....................................................................... 73,451 229,946
Reports and notices to shareholders................................................. 46,954 128,217
Registration and filing fees........................................................ 41,318 114,972
Professional fees................................................................... 21,993 39,953
Insurance........................................................................... 9,754 10,253
Trustees' fees and expenses......................................................... 9,664 25,829
Miscellaneous....................................................................... 6,456 15,779
Total expenses................................................................ 1,899,974 7,305,167
Net investment income.................................................................. 8,751,104 38,768,775
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions........................................ 56,839,210 74,563,015
Net change in unrealized appreciation (depreciation) of investments................. (62,291,441) (8,122,510)
Net realized and unrealized gain (loss) on investments................................. (5,452,231) 66,440,505
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... $ 3,298,873 $105,209,280
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
EVERGREEN BALANCED FUND
(photo of certificates)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1997 1996 1995
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.......................................... $ 8,751,104 $ 38,768,775 $ 40,717,357
Net realized gain on investment transactions................... 56,839,210 74,563,015 33,813,027
Net change in unrealized appreciation (depreciation) of
investments................................................. (62,291,441) (8,122,510) 154,935,970
Net increase in net assets resulting from operations..... 3,298,873 105,209,280 229,466,354
DISTRIBUTIONS TO SHAREHOLDERS:
FROM NET INVESTMENT INCOME:
Class A Shares................................................. (369,566) (1,699,709) (1,620,476)
Class B Shares................................................. (786,903) (3,505,791) (3,381,480)
Class C Shares................................................. (2,467) (9,398) (8,000)
Class Y Shares................................................. (7,410,252) (33,878,986) (35,087,211)
Total distributions from net investment
income................................................... (8,569,188) (39,093,884) (40,097,167)
FROM NET REALIZED GAINS ON INVESTMENTS:
Class A Shares................................................. -- (3,402,462) (1,423,252)
Class B Shares................................................. -- (8,639,808) (3,696,589)
Class C Shares................................................. -- (28,096) (10,158)
Class Y Shares................................................. -- (62,657,565) (28,740,172)
Total distributions from net realized gains on
investments.............................................. -- (74,727,931) (33,870,171)
Total distributions to shareholders...................... (8,569,188) (113,821,815) (73,967,338)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold...................................... 52,946,906 234,680,222 170,978,316
Proceeds from reinvestment of distributions.................... 4,394,304 64,783,444 66,166,480
Payment for shares redeemed.................................... (66,950,959) (328,365,114) (343,286,923)
Net decrease resulting from Fund share transactions......... (9,609,749) (28,901,448) (106,142,127)
Net increase (decrease) in net assets.................... (14,880,064) (37,513,983) 49,356,889
NET ASSETS:
Beginning of period............................................ 931,756,267 969,270,250 919,913,361
End of period (including undistributed net investment income of
$246,535, $115,118 and $612,856, respectively.)............. $916,876,203 $ 931,756,267 $ 969,270,250
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
EVERGREEN BALANCED FUND -- CLASS A SHARES
(photo of certificates)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
1997** 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.................................. $12.95 $13.12 $11.17 $12.07 $11.41
Income (loss) from investment operations:
Net investment income............................................... .12 .54 .51 .43 .42
Net realized and unrealized gain (loss) on investments.............. (.08) .94 2.40 (.71) .75
Total from investment operations................................ .04 1.48 2.91 (.28) 1.17
Less distributions to shareholders from:
Net investment income............................................... (.12) (.54) (.50) (.43) (.42)
Net realized gain on investments.................................... -- (1.11) (.46) (.19) (.09)
Total distributions (.12) (1.65) (.96) (.62) (.51)
Net asset value, end of period $12.87 $12.95 $13.12 $11.17 $12.07
TOTAL RETURN+......................................................... .3% 11.4% 26.5% (2.4%) 10.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................. $41,429 $43,169 $41,849 $41,010 $35,032
Ratios to average net assets:
Expenses............................................................ .93%++ 0.89% 0.88% .89% 0.91%
Net investment income............................................... 3.62%++ 3.95% 4.05% 3.69% 3.61%
Portfolio turnover rate............................................... 28% 34% 37% 35% 19%
Average commission rate paid per share................................ $.0595 $.0593 N/A N/A N/A
<CAPTION>
1992
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period.................................. $11.02
Income (loss) from investment operations:
Net investment income............................................... .42
Net realized and unrealized gain (loss) on investments.............. .43
Total from investment operations................................ .85
Less distributions to shareholders from:
Net investment income............................................... (.42)
Net realized gain on investments.................................... (.04)
Total distributions (.46)
Net asset value, end of period $11.41
TOTAL RETURN+......................................................... 7.9%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................. $17,408
Ratios to average net assets:
Expenses............................................................ 0.91%
Net investment income............................................... 3.93%
Portfolio turnover rate............................................... 12%
Average commission rate paid per share................................ N/A
</TABLE>
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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 charges are not reflected.
++ Annualized.
See accompanying notes to financial statements.
26
<PAGE>
EVERGREEN BALANCED FUND -- CLASS B SHARES
(photo of certificates)
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
1997** 1996 1995 1994
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............................................ $12.96 $13.13 $11.18 $12.08
Income (loss) from investment operations:
Net investment income......................................................... .10 .43 .42 .36
Net realized and unrealized gain (loss) on investments........................ (.08) .95 2.40 (.71)
Total from investment operations.......................................... .02 1.38 2.82 (.35)
Less distributions to shareholders from:
Net investment income......................................................... (.10) (.44) (.41) (.36)
Net realized gain on investments.............................................. -- (1.11) (.46) (.19)
In excess of net investment income............................................ -- -- -- --
Total distributions....................................................... (.10) (1.55) (.87) (.55)
Net asset value, end of period................................................ $12.88 $12.96 $13.13 $11.18
TOTAL RETURN+................................................................... .1% 10.6% 25.6% (3.0%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)....................................... $107,347 $109,591 $108,983 $100,052
Ratios to average net assets:
Expenses...................................................................... 1.68%++ 1.64% 1.62% 1.48%
Net investment income......................................................... 2.87%++ 3.19% 3.30% 3.12%
Portfolio turnover rate......................................................... 28% 34% 37% 35%
Average commission rate paid per share.......................................... $ .0595 $ .0593 N/A N/A
<CAPTION>
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%
Average commission rate paid per share.......................................... N/A
</TABLE>
* For the period from January 26, 1993 (commencement of class operations) to
December 31, 1993.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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 charges are not reflected.
++ Annualized.
See accompanying notes to financial statements.
27
<PAGE>
EVERGREEN BALANCED FUND -- CLASS C SHARES
(photo of certificates)
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1997** 1996 1995
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period...................................................... $12.88 $13.11 $11.17
Income (loss) from investment operations:
Net investment income................................................................... .10 .40 .41
Net realized and unrealized gain (loss) on investments.................................. (.09) .93 2.40
Total from investment operations.................................................... .01 1.33 2.81
Less distributions to shareholders from:
Net investment income................................................................... (.09) (.45) (.41)
Net realized gain on investments........................................................ -- (1.11) (.46)
Total distributions................................................................. (.09) (1.56) (.87)
Net asset value, end of period............................................................ $12.80 $12.88 $13.11
TOTAL RETURN+............................................................................. .1% 10.2% 25.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................................................. $353 $355 $300
Ratios to average net assets:
Expenses................................................................................ 1.68%++ 1.65% 1.62%
Net investment income................................................................... 2.92%++ 3.19% 3.31%
Portfolio turnover rate................................................................... 28% 34% 37%
Average commission rate paid per share.................................................... $.0595 $.0593 N/A
<CAPTION>
1994*
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period...................................................... $12.00
Income (loss) from investment operations:
Net investment income................................................................... .18
Net realized and unrealized gain (loss) on investments.................................. (.61)
Total from investment operations.................................................... (.43)
Less distributions to shareholders from:
Net investment income................................................................... (.21)
Net realized gain on investments........................................................ (.19)
Total distributions................................................................. (.40)
Net asset value, end of period............................................................ $11.17
TOTAL RETURN+............................................................................. (3.6%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................................................. $195
Ratios to average net assets:
Expenses................................................................................ 1.64%++
Net investment income................................................................... 3.23%++
Portfolio turnover rate................................................................... 35%
Average commission rate paid per share.................................................... N/A
</TABLE>
* For the period from September 2, 1994 (commencement of class operations) to
December 31, 1994.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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 charges are not reflected.
++ Annualized.
See accompanying notes to financial statements.
28
<PAGE>
EVERGREEN BALANCED FUND -- CLASS Y SHARES
(photo of certificates)
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
1997** 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................. $12.95 $13.12 $11.17 $12.07 $11.41
Income (loss) from investment operations:
Net investment income.............................................. .13 .57 .54 .46 .45
Net realized and unrealized gain (loss) on investments............. (.08) .95 2.40 (.71) .75
Total from investment operations .05....... 1.52 2.94 (.25) 1.20
Less distributions to shareholders from:
Net investment income.............................................. (.13) (.58) (.53) (.46) (.45)
Net realized gain on investments................................... -- (1.11) (.46) (.19) (.09)
Total distributions............................................ (.13) (1.69) (.99) (.65) (.54)
Net asset value, end of period....................................... $12.87 $12.95 $13.12 $11.17 $12.07
TOTAL RETURN+........................................................ .3% 11.7% 26.8% (2.2)% 10.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................ $767,747 $778,641 $818,137 $778,657 $760,147
Ratios to average net assets:
Expenses........................................................... .68%++ .64% .62% .64% .66%
Net investment income.............................................. 3.87%++ 4.19% 4.30% 3.93% 3.86%
Portfolio turnover rate.............................................. 28% 34% 37% 35% 19%
Average commission rate paid per share............................... $.0595 $.0593 N/A N/A N/A
<CAPTION>
1992
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period................................. $11.02
Income (loss) from investment operations:
Net investment income.............................................. .46
Net realized and unrealized gain (loss) on investments............. .42
Total from investment operations 0.88
Less distributions to shareholders from:
Net investment income.............................................. (.45)
Net realized gain on investments................................... (.04)
Total distributions............................................ (.49)
Net asset value, end of period....................................... $11.41
TOTAL RETURN+........................................................ 8.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................ $520,232
Ratios to average net assets:
Expenses........................................................... .66%
Net investment income.............................................. 4.20%
Portfolio turnover rate.............................................. 12%
Average commission rate paid per share............................... N/A
</TABLE>
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
See accompanying notes to financial statements.
29
<PAGE>
EVERGREEN FOUNDATION FUND
(photo of column)
A REPORT FROM YOUR
PORTFOLIO MANAGER
STEPHEN A. LIEBER
Evergreen Foundation Fund's fiscal year-end was changed from
December 31, to March 31. In the quarter ended March 31, 1997, (photo of Stephen
Evergreen Foundation Fund (Class Y, no-load shares) provided a A. Lieber)
negative return of 0.02%*. The Fund (Class Y shares) has
provided a 15.7% average annual total return for the period
since its inception on January 2, 1990, through March 31, 1997.
The asset allocation shifted during this time to 57.1% in
equities, 33.1% in long-term bonds, and 9.2% in short-term cash
equivalents, from 56.2% in equities, 35.3% in long-term bonds,
and 8.5% in short-term cash equivalents at December 31, 1996.
The total returns for the Fund's Class A shares
for the three-month and twelve-month periods ended March 31,
were -4.9% and 7.5%, respectively. The average annual total return for the
Fund's Class A shares for the period since their inception on January 3, 1995,
thorough March 31, 1997, was 15.2%. (Please see page 32 for additional
performance information.)
This period started strongly, with the Fund's net asset value rising 5.8%
through the middle of February. But, the growth sectors of the market
experienced a reversal at the end of February and through March, while the bond
market suffered a moderate reversal as interest rates again began to rise. Thus,
by the end of March, the equity portfolio had provided a return of 2.1%, while
the Fund's fixed income portfolio, comprised mostly of long-term U.S. Treasury
bonds, had a net decline of 3.1% The bond decline and the stock reversal was
somewhat cushioned by a continuing short-term cash equivalent position.
Notwithstanding the overall volatility of the market, and the particularly
negative performance of interest-sensitive equities toward the end, the Fund had
a number of companies which provided exceptional increases in value.
The top ten equity performers during the quarter were Caliber System, Inc.,
+37.4%; Living Centers of America, Inc., +28.9%; Cape Cod Bank & Trust Co.,
+19.8%; CB Bancshares, Inc., +19.2%; Warner-Lambert Co., +18.8%; Timken Co.,
+17.0%; Ohio Casualty Corp., +15.6%; Barnett Banks, Inc., +15.4%; Fingerhut
Companies, Inc., +14.4%; and Conrail, Inc., +14.4%. Our strongest holdings, once
again, reflected a variety of industries and different kinds of investment
opportunities. Some were distinguished by market recognition of the potentials
for new products, as in Warner-Lambert Co., others by business recovery after an
interruption of historical growth trends, as in Caliber System, Inc., and
Fingerhut Companies, Inc., and others as beneficiaries of mergers and
acquisitions, as in the case of Conrail, Inc.
FIGURES REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS.
* PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDEND AND CAPITAL GAIN
DISTRIBUTIONS, IF ANY. INVESTMENT RETURN, PRINCIPAL VALUE AND YIELD WILL
FLUCTUATE. INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.
THE FUND ALSO OFFERS CLASS B SHARES WHICH ARE SUBJECT TO A MAXIMUM 5%
CONTINGENT DEFERRED SALES CHARGE AND CLASS C SHARES WHICH ARE SUBJECT TO A 1%
CONTINGENT DEFERRED SALES CHARGE WITHIN THE FIRST YEAR AFTER THE MONTH OF
PURCHASE. PERFORMANCE FOR THESE CLASSES OF SHARES MAY BE DIFFERENT.
30
<PAGE>
EVERGREEN FOUNDATION FUND
(photo of column)
A REPORT FROM YOUR
PORTFOLIO MANAGER -- (CONTINUED)
During the quarter, major new commitments utilizing cash-equivalent positions
were entered into during periods of general market weakness, or when specific
issues were judged to be out of line with their growth potential. The largest
commitments were additions to positions already held in E.I. Du Pont de Nemours
& Co., Inc., Marsh & McLennan Companies, Inc., and Timken Co. Each of these was
seen as representing significant undervaluation of growth potential. E.I. Du
Pont de Nemours & Co., Inc., is viewed as a company in the process of corporate
restructuring to place emphasis on its major growth sectors, Marsh & McLennan
Companies, Inc. as a participant in the major growth opportunity of the mutual
fund business which had, to some extent, been obscured by a mature, major
insurance agency business, and Timken Co. as a financially undervalued specialty
steel company showing growth far above its traditional roller bearing business.
Purchases were also made of mid-sized companies with high quality business
franchises and innovative policies which we regarded as being undervalued by the
markets.
Sales were made predominantly when issues in the portfolio were regarded as
having attained full pricing in the present environment. Many of these were
reductions of positions rather than total liquidations, including MGIC
Investment Corp., with a 260% gain in four and one-half years, Pfizer, Inc.,
with a 218% gain in three and one-half years, First Chicago NBD Corp., with a
137% gain in two years and one-quarter, Barnett Banks, Inc., with a 125% gain in
under four years, Warner-Lambert Co., with a 100% gain in one and one-half
years, and Procter & Gamble Co., with a 92% gain in two years. The equity
strategy was to buy issues we considered undervalued, and to sell those which we
considered fully valued.
The fixed income sector of the Fund was not added to during the quarter.
Increases were made in the short-term cash equivalent holdings.
Recent market volatility illustrates an increasingly selective trend in the
markets, with a recognition that many issues had become fully valued, some
overvalued, while others are ignored. The intensity of our search for
undervalued growth opportunities should continue to produce significant gains
notwithstanding a volatile and often uncertain market. The power of valuable
corporate franchises, strong financials, vigorous research and marketing
programs, and, above all, able managements, is evident in a great many companies
which we regularly analyze and visit. We expect this research intensive effort
to be rewarding in the months ahead with further likelihood of gains from
re-valued growth trends, mergers and acquisitions, and profits generated through
innovative leadership. We have carefully maintained sizable cash reserves to be
able to buy shares on weakness, and have done so during each period of stock
market uncertainty. The Fund's fixed income position continues to be
concentrated in U.S. Government or Agency obligations which, we believe, will
benefit when the present period of anxiety over inflation potentials is past.
The real returns of long-term Treasury bonds above the inflation rate are at
historical levels, currently approximately 5%. We anticipate that when the
Federal Reserve has made amply evident its program to slow the growth of the
economy in order to reduce the risk of inflation, that inflation premium will
decline and the Fund's primarily long-term bond position will rise in value. Our
goal is capital growth with a minimization of risk, and we will continue to
shape the Evergreen Foundation Fund's strategy to these purposes. We thank our
many existing shareholders and welcome the many new shareholders who have joined
us in this year.
31
<PAGE>
EVERGREEN FOUNDATION FUND
(photo of column)
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 Index and Lipper Balanced Funds Average.
(four graphs appear below, plot points are as follows:)
(customer to fill in plot points)
Class A
1-Year Total Return=7.47%
Average Annual Compound
Return Since Inception=15.16%
Evergreen Foundation Fund
S&P 500 Index
Lipper Balanced Funds Average
1/3/95* 3/95 9/95 3/96 9/96 3/97
Class B
1-Year Total Return=7.02%
Average Annual Compound
Return Since Inception=15.69%
Evergreen Foundation Fund
S&P 500 Index
Lipper Balanced Funds Average
1/3/95* 3/95 9/95 3/96 9/96 3/97
Class C
1-Year Total Return=11.03%
Average Annual Compound
Return Since Inception=16.73%
Evergreen Foundation Fund
S&P 500 Index
Lipper Balanced Funds Average
1/3/95* 3/95 9/95 3/96 9/96 3/97
Class Y
1-Year total Return=13.18%
Average Annual Compound Return:
5-Year=13.58%
Since Inception=15.74%
Evergreen Foundation Fund
S&P 500 Index
Lipper Balanced Funds Average
1/2/90* 3/90 3/91 3/92 3/93 3/94 3/95 3/96 3/97
*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 March 31, 1997; (c) all
recurring fees (including investment advisory fees net of fee waiver) were
deducted; and (d) all dividends and distributions were reinvested.
The S&P 500 Index is unmanaged 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.
32
<PAGE>
EVERGREEN FOUNDATION FUND
(photo of column)
STATEMENT OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 56.1%
AEROSPACE & DEFENSE -- 0.4%
63,000 Boeing Co....................... $ 6,213,375
AUTOMOTIVE EQUIPMENT &
MANUFACTURING -- 1.0%
561,500 Chrysler Corp................... 16,845,000
BANKS -- 5.0%
16,600 AmSouth Bancorp................. 800,950
50,000 Bancfirst Corp.................. 1,462,500
390,700 Bank of Boston Corp............. 26,176,900
110,000 Barnett Banks, Inc.............. 5,115,000
93,375 BSB Bancorp, Inc................ 2,836,266
62,000 Cape Cod Bank & Trust Co........ 1,674,000
27,000 CB Bancshares, Inc.............. 958,500
92,500 Central Fidelity Banks, Inc..... 2,566,875
97,000 Crestar Financial Corp.......... 3,358,625
80,138 First Chicago NBD Corp.......... 4,337,469
3,600 First Empire State Corp......... 1,152,000
196,800 First of America Bank Corp...... 11,758,800
7,500 First Security Corp............. 240,938
58,500 First Union Corp. **............ 4,745,812
70,801 Hibernia Corp. Cl. A............ 929,263
25,000 Mississippi Valley Bancshares,
Inc............................. 1,062,500
66,150 Peoples Heritage Financial
Group........................... 2,034,112
102,000 Seacoast Banking Corp.
of Florida Cl. A................ 2,881,500
114,100 Standard Federal
Bancorporation.................. 6,617,800
65,000 U.S. Trust Corp................. 2,730,000
83,439,810
BANKS & THRIFTS -- 0.2%
80,000 Webster Financial Corp.......... 2,810,000
BUILDING, CONSTRUCTION &
FURNISHINGS -- 0.8%
122,800 Armstrong World Industries,
Inc............................. 7,951,300
149,300 Continental Homes Holding
Corp............................ 2,482,113
20,000* M/I Schottenstein Homes, Inc.... 205,000
264,000* Pacific Greystone Corp.......... 3,300,000
13,938,413
BUSINESS EQUIPMENT & SERVICES --
0.9%
82,000 International Business Machines
Corp............................ 11,264,750
50,000 Lucent Technologies, Inc........ 2,637,500
<CAPTION>
SHARES VALUE
<C> <S> <C>
</TABLE>
BUSINESS EQUIPMENT & SERVICES -- CONTINUED
<TABLE>
<C> <S> <C>
10,000* Policy Management Systems
Corp............................ $ 436,250
25,200 Wackenhut Corp. (The)
Series B........................ 359,100
14,697,600
CHEMICAL & AGRICULTURAL
PRODUCTS -- 3.7%
90,000 A. Schulman, Inc................ 1,710,000
30,000 Air Products & Chemicals, Inc... 2,036,250
283,000 Du Pont (E. I.) De Nemours...... 29,998,000
70,000 Grace (W.R.) & Co............... 3,316,250
40,000 H.B. Fuller Co.................. 1,950,000
201,500 Monsanto Co..................... 7,707,375
170,000 Morton International............ 7,182,500
75,000 Nalco Chemical Co............... 2,803,125
58,000 Pioneer Hi-Bred International,
Inc............................. 3,646,750
20,000 Praxair, Inc.................... 897,500
61,247,750
COMMUNICATION SYSTEMS &
SERVICES -- 0.2%
70,000* Cisco Systems, Inc.............. 3,368,750
CONSUMER PRODUCTS & SERVICES --
3.4%
40,000 American Greetings Corp.
Cl. A........................... 1,277,500
95,000 Black & Decker Corp............. 3,051,875
20,000* Broderbund Software, Inc........ 437,500
25,642* Consolidated Products, Inc...... 400,656
120,000 CPC International, Inc.......... 9,840,000
75,000 General Motors Corp............. 4,153,125
148,800 Goodyear Tire & Rubber Co.
(The)........................... 7,774,800
95,000 H. & R. Block, Inc.............. 2,790,625
178,800 International Flavors &
Fragrances, Inc................. 7,822,500
50,000 Kimberly-Clark Corp............. 4,968,750
50,100* Nautica Enterprises, Inc........ 1,258,763
85,400 Procter & Gamble Co. (The)...... 9,821,000
78,500 Tupperware Corp................. 2,629,750
56,226,844
DIVERSIFIED COMPANIES -- 1.8%
8,000 Cooper Industries, Inc.......... 347,000
222,400 General Electric Co............. 22,073,200
</TABLE>
33
<PAGE>
EVERGREEN FOUNDATION FUND
(photo of column)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS -- CONTINUED
DIVERSIFIED COMPANIES -- CONTINUED
<C> <S> <C>
120,800 PPG Industries, Inc............. $ 6,523,200
30,000 Western Atlas Incorporated...... 1,818,750
30,762,150
ELECTRICAL EQUIPMENT &
SERVICES -- 0.4%
173,400 AMP, Inc........................ 5,960,625
10,000* KLA Instruments Corp............ 365,000
6,325,625
ENERGY -- 1.6%
35,000 Amoco Corp...................... 3,031,875
22,000 Consolidated Natural Gas Co..... 1,108,250
282,400 Equitable Resources, Inc........ 8,648,500
50,500 Exxon Corp...................... 5,441,375
45,300 Mobil Corp...................... 5,917,312
43,103 Seitel, Inc..................... 1,524,769
33,877 Union Pacific Resource Group,
Inc............................. 906,210
26,578,291
FINANCE & INSURANCE -- 8.6%
10,668 Aetna, Inc...................... 916,115
120,000 Allstate Corp. (The)............ 7,125,000
55,300 AMBAC, Inc...................... 3,566,850
93,450 American International Group,
Inc............................. 10,968,694
169,000 Beneficial Corp................. 10,921,625
148,350 Countrywide Credit Industries,
Inc............................. 3,671,662
95,000* Degeorge Financial Corp......... 123,203
20,000 FBL Financial Group, Inc........ 520,000
40,000 Federal Home Loan Mortgage
Corp............................ 1,090,000
788,000 Federal National Mortgage
Association..................... 28,466,500
38,600 Hartford Steam Boiler Inspection
& Insurance Co. (The)........... 1,727,350
70,000 John Alden Financial Corp....... 1,172,500
130,000 John Nuveen Co. (The), Cl. A.... 3,851,250
195,700 Marsh & McLennan Co., Inc....... 22,163,025
100,700 Merrill Lynch & Co., Inc........ 8,647,612
165,100 MGIC Investment Corp............ 11,680,825
155,000 NAC RE Corp..................... 5,521,875
100,000* Nationwide Financial Services
Incorporated.................... 2,575,000
235,000 North American Mortgage Co...... 4,788,125
35,000 Ohio Casualty Corp.............. 1,439,375
80,300 Raymond James Financial, Inc.... 2,539,488
<CAPTION>
SHARES VALUE
<C> <S> <C>
</TABLE>
FINANCE & INSURANCE -- CONTINUED
<TABLE>
<C> <S> <C>
203,300 Wilmington Trust Corp........... $ 8,640,250
142,116,324
FOOD & BEVERAGE PRODUCTS -- 0.1%
30,000 Pepsico, Inc.................... 978,750
FOREST PRODUCTS -- 0.4%
88,000 Union Camp Corp................. 4,147,000
50,000 Willamette Industries, Inc...... 3,125,000
7,272,000
HEALTHCARE PRODUCTS &
SERVICES -- 6.2%
185,700 Abbott Laboratories............. 10,422,412
54,000 Alza Corp....................... 1,485,000
1,750* Alza Corp. Warrants $65.00
Expiring 12/31/1999............. 273
140,000 American Home Products Corp..... 8,400,000
100,000 Bristol-Myers Squibb Co......... 5,900,000
180,900 Columbia / HCA Healthcare
Corp............................ 6,082,763
23,000* Covance, Inc.................... 370,875
34,275 Guidant Corp.................... 2,107,913
102,800 Johnson & Johnson............... 5,435,550
221,262 Lilly (Eli) & Co................ 18,198,799
65,000* Lincare Holdings, Inc........... 2,681,250
100,000* Living Centers of America,
Inc............................. 3,450,000
80,000 McKesson Corp................... 5,120,000
151,750* MedPartners, Inc................ 3,224,688
60,800 Medtronic, Inc.................. 3,784,800
167,758 Merck & Co., Inc................ 14,133,611
47,000 Pfizer, Inc..................... 3,953,875
11,500* Quest Diagnostics, Inc.......... 171,063
66,000 Schering-Plough Corp............ 4,801,500
9,200 Shared Medical System Corp...... 427,800
44,900 Superior Surgical Manufacturing
Co., Inc........................ 583,700
1,750* Therapeutic Discovery Corp...... 19,250
15,000 Warner-Lambert Co............... 1,297,500
102,052,622
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES -- 2.6%
65,000 Applied Power, Inc.............. 2,730,000
10,000 Bemis, Inc...................... 400,000
107,000 Corning, Inc.................... 4,748,125
200,000 Deere & Co...................... 8,700,000
</TABLE>
34
<PAGE>
EVERGREEN FOUNDATION FUND
(photo of column)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS -- CONTINUED
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES -- CONTINUED
<C> <S> <C>
20,000 Genuine Parts Company........... $ 932,500
20,000 Parker Hannifair Corp........... 855,000
110,700 PHH Corp........................ 5,106,037
172,000 Snap-on, Inc.................... 6,665,000
6,000* Strattec Security Corp.......... 105,000
183,900 Timken Co. (The)................ 9,838,650
50,000 Trinity Industries, Inc......... 1,518,750
30,000* UCAR International, Inc......... 1,188,750
42,787,812
INFORMATION SERVICES &
TECHNOLOGY -- 6.2%
25,000 Computer Associates
International, Inc.............. 971,875
450,800 Hewlett-Packard Co.............. 24,005,100
340,800 Intel Corp...................... 47,413,800
70,000* Intel Corp. warrants
$41.75-expiring 3/14/98......... 6,938,750
183,800* Microsoft Corp.................. 16,852,162
224,000* Sun Microsystems, Inc........... 6,468,000
102,649,687
OTHER -- 0.0% (A)
10,000 Premark International, Inc...... 198,750
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- 0.6%
30,000 Belo (A.H.) Corp., Series A..... 1,110,000
20,000* Cox Communications, Inc., Class
A............................... 412,500
50,993 Disney Walt Co. (The)........... 3,722,489
20,000 Gaylord Entertainment Co.
Cl.A............................ 430,000
2,500* Lin Television Corp............. 90,625
65,000 Time Warner, Inc................ 2,811,250
3,000 Washington Post Co. (The)....... 1,032,000
9,608,864
REAL ESTATE -- 5.6%
30,000* Alexander's, Inc................ 2,077,500
23,400 Arbor Property Trust REIT....... 160,875
50,000 Bay Apartment Communities, Inc.
REIT............................ 1,793,750
50,009 Bradley Real Estate, Inc. REIT.. 956,422
125,000 Cali Realty Corp. REIT.......... 4,000,000
270,400* Capstead Mortgage Corp. REIT.... 5,509,400
111,900 CarrAmerica Realty Corp. REIT... 3,440,925
40,000 Chelsea GCA Realty, Inc. REIT... 1,435,000
<CAPTION>
SHARES VALUE
<C> <S> <C>
</TABLE>
REAL ESTATE -- CONTINUED
<TABLE>
<C> <S> <C>
184,900 Columbus Realty Trust REIT...... $ 3,721,112
280,000 Crescent Real Estate Equities,
Inc. REIT....................... 7,490,000
305,300 Crown American Realty Trust
REIT............................ 2,366,075
50,300 CWM Mortgage Holdings, Inc...... 974,563
105,200 Essex Property Trust, Inc.
REIT............................ 3,142,850
83,000 Evans Withycombe Residential,
Inc. REIT....................... 1,711,875
165,000 FAC Realty, Inc................. 948,750
90,000 FelCor Suite Hotels, Inc. REIT.. 3,307,500
100,200 Gables Residential Trust REIT... 2,555,100
174,000 Glimcher Realty Trust REIT...... 3,327,750
28,000 Highwoods Properties, Inc.
REIT............................ 938,000
14,076* Homestead Village Properties,
Inc............................. 237,532
9,443* Homestead Village Properties,
Inc. Warrants $10.00
Expiring 10/29/97............... 68,462
363,216 Horizon Group, Inc. REIT........ 4,676,406
142,000 Kranzco Realty Trust REIT....... 2,254,250
15,000 Liberty Property Trust REIT..... 367,500
72,000 Marriott International, Inc..... 3,582,000
38,100 Oasis Residential, Inc. REIT.... 857,250
40,000 Patriot American Hospitality,
Inc. REIT....................... 970,000
130,000 Post Property, Inc. REIT........ 4,956,250
100,000 Prentiss Properties Trust REIT.. 2,537,500
90,000 Public Storage, Inc. REIT....... 2,610,000
70,416 Security Capital Industrial
Trust REIT...................... 1,469,934
111,992 Security Capital Pacific Trust
REIT............................ 2,729,805
100,000 Sovran Self Storage, Inc........ 3,075,000
70,000 Spieker Properties, Inc. REIT... 2,730,000
147,750 Starwood Lodging Trust REIT..... 5,762,250
22,700 Storage USA, Inc. REIT.......... 837,063
45,000 Sunstone Hotel Investors, Inc.
REIT............................ 590,625
57,900 Tanger Factory Outlet Centers,
Inc. REIT....................... 1,519,875
25,000 Urban Shopping Centers, Inc.
REIT............................ 750,000
92,439,149
</TABLE>
35
<PAGE>
EVERGREEN FOUNDATION FUND
(photo of column)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS -- CONTINUED
<C> <S> <C>
RETAILING & WHOLESALE -- 2.0%
216,511 Avnet, Inc...................... $ 12,205,808
30,000 Fingerhut Companies, Inc........ 420,000
50,000 Home Depot, Inc. (The).......... 2,675,000
25,000 J. C. Penney Co., Inc........... 1,190,625
133,000 Lowe's Companies., Inc.......... 4,970,875
195,600 Mercantile Stores Co., Inc...... 9,070,950
70,000 Wyle Electronics................ 2,353,750
32,887,008
TEXTILE & APPAREL -- 0.1%
20,000 V. F. Corp...................... 1,337,500
TRANSPORTATION -- 1.0%
35,000 Burlington Northern Santa Fe.... 2,590,000
34,000 Caliber System, Inc............. 901,000
61,172 Conrail, Inc.................... 6,897,143
20,000 KLM Royal Dutch Air Lines....... 572,500
30,000 Pittston Brink's Group.......... 757,500
17,000 Roadway Express, Inc............ 329,375
80,000 Union Pacific Corp.............. 4,540,000
16,587,518
UTILITIES -- ELECTRIC -- 0.4%
20,000 Central Hudson Gas & Electric
Corp............................ 657,500
100,000 Long Island Lighting Co......... 2,400,000
40,000 PP&L Resources, Inc............. 810,000
100,000 Public Service Enterprise Group,
Inc............................. 2,625,000
32,000 TNP Enterprises, Inc............ 684,000
7,176,500
UTILITIES -- TELEPHONE -- 2.9%
98,333* 360 Communications Co........... 1,696,244
30,000* AirTouch Communications......... 690,000
10,000 AT&T Corp....................... 347,500
150,000 Bell Atlantic Corp.............. 9,131,250
323,800 Frontier Corp................... 5,787,925
325,000 GTE Corp........................ 15,153,125
30,000 NYNEX Corp...................... 1,368,750
301,000 Sprint Corp..................... 13,695,500
47,870,294
TOTAL COMMON STOCKS
(COST $711,979,391)........ 928,416,386
<CAPTION>
SHARES VALUE
<C> <S> <C>
PREFERRED STOCKS -- 0.3%
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES -- 0.3%
50,000 Qualcomm Financial Trust I,
144A............................ $ 2,487,500
115,000* Worthington Industries, Inc..... 1,840,000
4,327,500
TOTAL PREFERRED STOCKS
(COST $4,282,500).......... 4,327,500
CONVERTIBLE PREFERRED STOCKS -- 0.7%
ELECTRICAL EQUIPMENT &
SERVICES -- 0.1%
100,000 Westinghouse Electric Corp.,
144A, $1.30, Series C, PEPS..... 1,638,000
FINANCE & INSURANCE -- 0.0% (A)
3,557 Aetna, Inc.
6.25%, Class A.................. 292,563
METAL PRODUCTS & SERVICES --
0.3%
100,000 Timet Capital Trust I, 144A
6.625%, BUCS.................... 4,688,000
REAL ESTATE -- 0.3%
115,000 First Union Real Estate Equity &
Mortgage Investments
Series A........................ 5,117,500
TOTAL CONVERTIBLE PREFERRED
STOCKS
(COST $9,480,605).......... 11,736,063
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
CONVERTIBLE DEBENTURES -- 0.3%
BUILDING, CONSTRUCTION &
FURNISHINGS -- 0.1%
$ 500,000 Engle Homes, Inc.
7.00%, 3/1/03................... 457,500
500,000 Home Depot, Inc. (The)
3.25%, 10/1/01.................. 500,000
957,500
HEALTHCARE PRODUCTS & SERVICES--
0.0% (A)
750,000 Maxxim Medical, Inc.
6.75%, 3/1/03................... 757,500
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES -- 0.1%
2,000,000 Robbins & Myers, Inc.
6.50%, 9/1/03................... 2,325,000
</TABLE>
36
<PAGE>
EVERGREEN FOUNDATION FUND
(photo of column)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
CONVERTIBLE DEBENTURES -- CONTINUED
<C> <S> <C>
NATURAL GAS -- 0.1%
$ 1,328,000 Consolidated Natural Gas Co.
7.25%, 12/15/15................. $ 1,371,160
TOTAL CONVERTIBLE DEBENTURES
(COST $5,284,665).......... 5,411,160
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 32.8%
GOVERNMENT AGENCY NOTES &
BONDS -- 1.1%
1,000,000 Federal National Mortgage Assn.
8.10%, 8/12/19.................. 1,067,378
Tennessee Valley Authority
8,000,000 7.25%, 7/15/43.................. 7,502,520
10,000,000 7.85%, 6/15/44, Series A........ 9,829,650
18,399,548
TREASURY BONDS & NOTES -- 31.7%
U.S. Treasury Bonds
30,000,000 8.375%, 8/15/08................. 32,259,360
7,000,000 10.00%, 5/15/10................. 8,262,184
1,000,000 10.625%, 8/15/15................ 1,346,562
49,000,000 7.25%, 5/15/16.................. 49,183,750
50,000,000 8.125%, 8/15/19................. 54,843,750
10,000,000 8.50%, 2/15/20.................. 11,390,620
25,000,000 8.125%, 5/15/21................. 27,484,375
10,000,000 8.00%, 11/15/21................. 10,859,370
7,000,000 7.625%, 11/15/22................ 7,312,809
125,000,000 7.125%, 2/15/23................. 123,398,375
150,000,000 6.25%, 8/15/23.................. 132,843,750
U.S. Treasury Notes
30,000,000 5.75%, 8/15/03.................. 28,312,500
13,000,000 7.25%, 5/15/04.................. 13,260,000
8,000,000 7.25%, 8/15/04.................. 8,157,496
15,000,000 6.50%, 8/15/05.................. 14,582,805
523,497,706
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(COST $578,814,301)............. 541,897,254
SHORT-TERM INVESTMENTS -- 9.2%
COMMERCIAL PAPER -- 9.2%
250,000 American Home Products, Inc.
5.27%, 4/4/97................... 249,890
2,000,000 B.I. Funding, Inc.
5.28%, 4/16/97.................. 1,995,600
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
</TABLE>
COMMERCIAL PAPER -- CONTINUED
<TABLE>
<C> <S> <C>
Bell Atlantic Financial
Services, Inc.
$ 3,200,000 5.30%, 4/16/97.................. $ 3,192,933
1,900,000 5.52%, 4/30/97.................. 1,891,552
5,000,000 Columbia/HCA
Healthcare Corp.
5.52%, 5/9/97................... 4,970,867
5,200,000 Corporate Asset Funding
5.26%, 4/2/97................... 5,199,240
21,700,000 Federal Home Loan Bank
Consolidated Discount Note
5.48%, 5/7/97................... 21,581,084
20,800,000 Federal National Mortgage
Association
5.20%, 4/10/97.................. 20,772,960
5,400,000 Finova Capital Corp.
5.32%, 4/10/97.................. 5,392,818
7,000,000 Frigate Funding Corporation
5.29%, 4/15/97.................. 6,985,599
3,100,000 Great Lakes Chemical Corp.
5.32%, 4/25/97.................. 3,089,005
10,000,000 Guardian Industries Corp.
5.38%, 5/15/97.................. 9,934,244
1,000,000 Hercules, Inc.
5.39%, 4/11/97.................. 998,503
10,800,000 International Lease
Finance Corp.
5.26%, 4/8/97................... 10,788,954
National Rural Utilities
Cooperative Finance Corp.
1,900,000 5.33%, 4/22/97.................. 1,894,093
20,000,000 5.51%, 5/16/97.................. 19,862,250
3,350,000 Norfolk Southern Corp.
5.27%, 4/24/97.................. 3,338,721
350,000 PHH Corp.
5.32%, 4/7/97................... 349,690
1,200,000 Transamerica Corp.
5.32%, 4/30/97.................. 1,194,857
16,250,000 Transamerica Finance Corporation
Discount Notes
5.40%, 5/8/97................... 16,159,813
9,150,000 Virginia Electric & Power Co.
5.36%, 5/7/97................... 9,100,956
3,750,000 Xerox Credit Corp.
5.30%, 4/21/97.................. 3,738,958
152,682,587
</TABLE>
37
<PAGE>
EVERGREEN FOUNDATION FUND
(photo of column)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
VALUE
SHORT-TERM INVESTMENTS -- CONTINUED
<C> <S> <C>
TOTAL SHORT-TERM INVESTMENTS
(COST $152,682,587)........ $ 152,682,587
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS --
(COST
$1,462,524,049)........ 99.4% 1,644,470,950
OTHER ASSETS AND
LIABILITIES -- NET..... 0.6 10,219,897
NET ASSETS............. 100.0% $1,654,690,847
</TABLE>
(a) Less than one tenth of one percent.
* Non-income producing securities.
** At March 31, 1997 and December 31, 1996 the Fund owned 58,500 shares of
common stock of First Union Corp. at a cost of $2,358,441. During the period
ended March 31, 1997 and year ended December 31, 1996 the Fund earned $33,930
and $128,700, respectively, in dividend income from this investment. These
shares were acquired by the Fund prior to the acquisition of the investment
adviser and Lieber & Company by First Union.
BUCS -- Beneficial Unsecured Convertible Securities
REIT -- Real Estate Investment Trust
PEPS -- Participating Equity Preferred Shares
144A -- Rule 144A Securities are restricted as to resale to qualified
institutional investors
See accompanying notes to financial statements.
38
<PAGE>
EVERGREEN FOUNDATION FUND
(photo of column)
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $1,462,524,049)....................................................... $1,644,470,950
Cash........................................................................................................ 258,004
Receivable for investment securities sold................................................................... 1,489,561
Receivable for Fund shares sold............................................................................. 5,879,723
Dividends and interest receivable........................................................................... 9,125,885
Prepaid expenses............................................................................................ 73,163
Total assets............................................................................................. 1,661,297,286
LIABILITIES:
Payable for investment securities purchased................................................................. 1,795,121
Payable for Fund shares repurchased......................................................................... 2,099,542
Advisory fee payable........................................................................................ 1,131,671
Distribution fee payable.................................................................................... 889,118
Accrued expenses............................................................................................ 690,987
Total liabilities........................................................................................ 6,606,439
NET ASSETS..................................................................................................... $1,654,690,847
NET ASSETS CONSISTS OF:
Paid-in capital............................................................................................. $1,455,322,214
Undistributed net investment income......................................................................... 441,087
Accumulated net realized gain on investment transactions.................................................... 16,980,645
Net unrealized appreciation of investments.................................................................. 181,946,901
Net assets............................................................................................... $1,654,690,847
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A shares ($219,562,289 (divided by) 13,720,729 shares of beneficial interest outstanding)............. $ 16.00
Sales charge -- 4.75% of offering price..................................................................... .80
Maximum offering price................................................................................... $ 16.80
Class B shares ($605,654,063 (divided by) 37,994,888 shares of beneficial interest outstanding)............. $ 15.94
Class C shares ($27,831,125 (divided by) 1,746,457 shares of beneficial interest outstanding)............... $ 15.94
Class Y shares ($801,643,370 (divided by) 50,044,581 shares of beneficial interest outstanding)............. $ 16.02
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
EVERGREEN FOUNDATION FUND
(photo of column)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1997 1996
<S> <C> <C>
INVESTMENT INCOME:
Dividends.................................................................................. $ 5,372,277 $ 15,724,373
Interest................................................................................... 11,448,392 48,429,872
Total investment income................................................................. 16,820,669 64,154,245
EXPENSES:
Advisory fee............................................................................... $ 3,246,270 $ 11,140,780
Distribution fee -- Class A Shares......................................................... 135,502 414,289
Distribution fee -- Class B Shares......................................................... 1,113,659 3,487,899
Shareholder services fee -- Class B Shares................................................. 371,220 1,162,633
Distribution fee -- Class C Shares......................................................... 51,839 152,488
Shareholder services fee -- Class C Shares................................................. 17,280 50,829
Registration and filing fees............................................................... 106,200 408,920
Custodian fee.............................................................................. 96,558 365,915
Transfer agent fee......................................................................... 424,194 1,331,778
Professional fees.......................................................................... 21,182 81,041
Reports and notices to shareholders........................................................ 220,700 294,100
Insurance.................................................................................. 4,832 41,820
Trustees' fees and expenses................................................................ 3,240 7,176
Miscellaneous.............................................................................. 12,582 21,600
Total expenses.......................................................................... 5,825,258 18,961,268
Net investment income......................................................................... 10,995,411 45,192,977
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions............................................... 7,808,618 21,629,530
Net change in unrealized appreciation (depreciation) of investments........................ (22,555,700) 96,176,448
Net realized and unrealized gain (loss) on investments........................................ (14,747,082) 117,805,978
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ (3,751,671) $162,998,955
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
EVERGREEN FOUNDATION FUND
(photo of column)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
MARCH 31, 1997 1996 1995
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 10,995,411 $ 45,192,977 $ 22,897,807
Net realized gain on investment transactions................ 7,808,618 21,629,530 9,385,074
Net change in unrealized appreciation (depreciation) of
investments.............................................. (22,555,700) 96,176,448 121,111,375
Net increase (decrease) in net assets resulting from
operations......................................... (3,751,671) 162,998,955 153,394,256
DISTRIBUTIONS TO SHAREHOLDERS:
FROM NET INVESTMENT INCOME:
Class A Shares.............................................. (1,460,563) (5,718,718) (1,908,188)
Class B Shares.............................................. (3,012,553) (12,786,120) (4,488,521)
Class C Shares.............................................. (138,668) (568,120) (170,820)
Class Y Shares.............................................. (5,968,305) (26,366,104) (16,164,235)
Total distributions from net investment income........ (10,580,089) (45,439,062) (22,731,764)
FROM NET REALIZED GAINS ON INVESTMENTS:
Class A Shares.............................................. -- (1,819,496) (993,303)
Class B Shares.............................................. -- (5,077,907) (2,824,116)
Class C Shares.............................................. -- (231,947) (113,415)
Class Y Shares.............................................. -- (7,335,097) (7,827,124)
Total distributions from net realized gains on
investments........................................... -- (14,464,447) (11,757,958)
Total distributions to shareholders................... (10,580,089) (59,903,509) (34,489,722)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold................................... 124,109,877 717,070,601 652,779,207
Proceeds from reinvestment of distributions................. 9,578,914 55,523,207 32,843,419
Payment for shares redeemed................................. (76,822,274) (301,222,020) (98,358,101)
Net increase resulting from Fund share transactions...... 56,866,517 471,371,788 587,264,525
Net increase in net assets............................ 42,534,757 574,467,234 706,169,059
NET ASSETS:
Beginning of period......................................... 1,612,156,090 1,037,688,856 331,519,797
End of period (including undistributed net investment income
of $441,087, $25,764, and $271,849, respectively)........ $1,654,690,847 $1,612,156,090 $1,037,688,856
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
EVERGREEN FOUNDATION FUND --
CLASS A AND B SHARES
(photo of column)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B
THREE THREE YEAR
MONTHS MONTHS ENDED
ENDED YEAR ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31, MARCH 31, 31,
1997** 1996 1995* 1997** 1996
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period..................................... $16.13 $15.12 $12.24 $16.07 $15.07
Income (loss) from investment operations:
Net investment income................................................... .12 .50 .44 .09 .40
Net realized and unrealized gain (loss) on investments.................. (.13) 1.16 3.14 (.13) 1.15
Total from investment operations..................................... (.01) 1.66 3.58 (.04) 1.55
Less distributions to shareholders from:
Net investment income................................................... (.12) (.50) (.47) (.09) (.40)
Net realized gain on investments........................................ -- (.15) (.23) -- (.15)
Total distributions.................................................. (.12) (.65) (.70) (.09) (.55)
Net asset value, end of period........................................... $16.00 $16.13 $15.12 $15.94 $16.07
TOTAL RETURN+............................................................ (.2%) 11.3% 29.7% (.3%) 10.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)................................. $220 $206 $107 $606 $570
Ratios to average net assets:
Expenses................................................................ 1.25%++ 1.24% 1.33%#++ 2.00%++ 1.99%
Net investment income................................................... 2.83%++ 3.39% 3.73%#++ 2.07%++ 2.64%
Portfolio turnover rate.................................................. 2% 10% 28% 2% 10%
Average commission rate paid per share................................... $.0670 $.0649 N/A $.0670 $.0649
<CAPTION>
1995*
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period..................................... $12.24
Income (loss) from investment operations:
Net investment income................................................... .36
Net realized and unrealized gain (loss) on investments.................. 3.09
Total from investment operations..................................... 3.45
Less distributions to shareholders from:
Net investment income................................................... (.39)
Net realized gain on investments........................................ (.23)
Total distributions.................................................. (.62)
Net asset value, end of period........................................... $15.07
TOTAL RETURN+............................................................ 28.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)................................. $296
Ratios to average net assets:
Expenses................................................................ 2.07%++
Net investment income................................................... 2.99%++
Portfolio turnover rate.................................................. 28%
Average commission rate paid per share................................... N/A
</TABLE>
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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 charges are not reflected.
++ 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 operating expenses and net investment income to average net assets would
have been the following:
<TABLE>
<CAPTION>
CLASS A
YEAR ENDED
DECEMBER 31,
1995*
<S> <C>
Expenses................................................................ 1.34%
Net investment income................................................... 3.72%
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
EVERGREEN FOUNDATION FUND --
CLASS C AND Y SHARES
(photo of column)
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS C CLASS Y
THREE MONTHS THREE MONTHS
ENDED YEAR ENDED ENDED
MARCH 31, DECEMBER 31, MARCH 31, YEAR ENDED DECEMBER 31,
1997** 1996 1995* 1997** 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............ $16.06 $15.07 $12.24 $16.14 $15.13 $12.27 $13.12 $11.98
Income (loss) from investment operations:
Net investment income......................... .09 .40 .34 .13 .54 .51 .42 .31
Net realized and unrealized gain (loss) on
investments................................. (.13) 1.14 3.09 (.13) 1.16 3.07 (.57) 1.55
Total from investment operations............ (.04) 1.54 3.43 -- 1.70 3.58 (.15) 1.86
Less distributions to shareholders from:
Net investment income......................... (.08) (.40) (.37) (.12) (.54) (.49) (.42) (.31)
Net realized gain on investments.............. -- (.15) (.23) -- (.15) (.23) (.28) (.41)
Total distributions......................... (.08) (.55) (.60) (.12) (.69) (.72) (.70) (.72)
Net asset value, end of period.................. $15.94 $16.06 $15.07 $16.02 $16.14 $15.13 $12.27 $13.12
TOTAL RETURN+................................... (.3%) 10.4% 28.5% 0.0% 11.5% 29.7% (1.1)% 15.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)....... $28 $27 $11 $802 $809 $623 $332 $240
Ratios to average net assets:
Expenses...................................... 2.00%++ 1.99% 2.23%#++ 1.00%+ 0.99% 1.07% 1.14% 1.20%
Net investment income......................... 2.07%++ 2.64% 2.83%#++ 3.07%+ 3.64% 3.89% 3.51% 2.81%
Portfolio turnover rate......................... 2% 10% 28% 2% 10% 28% 33% 60%
Average commission rate paid per share.......... $.0670 $.0649 N/A $.0670 $.0649 N/A N/A N/A
<CAPTION>
1992
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period............ $10.75
Income (loss) from investment operations:
Net investment income......................... .27
Net realized and unrealized gain (loss) on
investments................................. 1.83
Total from investment operations............ 2.10
Less distributions to shareholders from:
Net investment income......................... (.24)
Net realized gain on investments.............. (.63)
Total distributions......................... (.87)
Net asset value, end of period.................. $11.98
TOTAL RETURN+................................... 20.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)....... $64
Ratios to average net assets:
Expenses...................................... 1.40%#
Net investment income......................... 2.93%#
Portfolio turnover rate......................... 127%
Average commission rate paid per share.......... N/A
</TABLE>
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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 charges are not reflected.
++ 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 operating expenses and net investment income to average net assets would
have been the following:
<TABLE>
<CAPTION>
CLASS C CLASS Y
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995* DECEMBER 31, 1992
<S> <C> <C>
Expenses......................................... 2.37% 1.43%
Net investment income............................ 2.69% 2.90%
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
(photo of dam)
A REPORT FROM YOUR
PORTFOLIO MANAGERS
STEPHEN A. LIEBER
JAMES T. COLBY, III
Evergreen Tax Strategic Foundation Fund's fiscal year-end
was changed from December 31, to March 31. Evergreen Tax
Strategic Foundation Fund (Class Y, no-load shares) provided a (photo of Stephen
total return of 1.0%* for the three months ended March 31, A. Lieber)
1997. The Fund's twelve-month total return ended March 31, was
16.1%. Since its inception on November 2, 1993, the Fund (photo of James
(Class Y shares) has provided a 14.7% average annual total T. Colby, III)
return through March 31. The Fund retained its focus on
tax-efficiency. For each $10,000 invested in the Fund (Class Y
shares) on December 31, 1995, the overall return for calendar
1996 was $1,577, and the tax liability would be $94** for
investors in the 36% ordinary income tax bracket and the 28%
capital gains tax bracket (without reference to any possible
state tax payments). This small tax liability reflected both
the tax exempt bond investments*** of the portfolio, and the
concentration on strategies to reduce tax liability in the
half of the portfolio in equities. These strategies include
investment in companies with sizable share buy-back programs
in lieu of dividends, tax-deferred dividend payments, and
transactions entered into to offset realized capital gains.
The three-month and twelve-month total returns ended March 31,
for the Fund's Class A shares were -3.8% and 10.3%, respectively.
For the period since their inception on January 17, 1995, through
March 31, 1997, the Fund's Class A shares have provided an average
annual total return of 15.9%. For each $10,000 invested in the
Fund's Class A shares on December 31, 1995, the overall return
for calendar 1996 was $991 and the tax liability would be $88** for investors in
the 36% ordinary income tax bracket and the 28% capital gains tax bracket
(without reference to any possible state tax payments). (Please see page 46 for
additional performance information.)
The equity portfolio continued to power the Fund's performance despite the
sharp down-turn in equity markets at the end of the quarter. During the quarter,
equities provided a 2.7% return (exceeding the Standard & Poor's 500 Index+),
while the fixed income sector resulted in a 0.6% loss.
The top ten equity performers in the quarter ended March 31, were Kysor
Industrial Corp., +40%; Chemfab Corp., +29.4%; adidas AG++, +28.8%; FPIC
Insurance Group, Inc., +26.8%; Interchange Financial
FIGURES REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS.
* PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDEND AND CAPITAL GAIN
DISTRIBUTIONS, IF ANY. INVESTMENT RETURN, PRINCIPAL VALUE AND YIELD WILL
FLUCTUATE. INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.
THE FUND ALSO OFFERS CLASS B SHARES WHICH ARE SUBJECT TO A MAXIMUM 5%
CONTINGENT DEFERRED SALES CHARGE, CLASS C SHARES WHICH ARE SUBJECT TO A 1%
CONTINGENT DEFERRED SALES CHARGE WITHIN THE FIRST YEAR AFTER THE MONTH OF
PURCHASE. PERFORMANCE FOR THESE CLASSES OF SHARES MAY BE DIFFERENT.
** TAX LIABILITY WOULD BE LOWER FOR INVESTORS IN LOWER TAX BRACKETS AND HIGHER
FOR INVESTORS IN HIGHER TAX BRACKETS.
*** THIS INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES. SOME OF THIS INCOME MAY
BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX FOR CERTAIN INVESTORS.
+ THE S&P 500 IS AN UNMANAGED INDEX OF COMMON STOCKS IN INDUSTRY,
TRANSPORTATION, FINANCE, AND PUBLIC UTILITIES, DENOTING GENERAL MARKET
PERFORMANCE AS MONITORED BY STANDARD & POOR'S CORP. AN INVESTMENT CAN NOT BE
MADE IN AN INDEX.
++ INTERNATIONAL INVESTING MAY INVOLVE ADDITIONAL RISKS.
44
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
(photo of dam)
A REPORT FROM YOUR
PORTFOLIO MANAGERS -- (CONTINUED)
Services Corp., +23.7%; Williams Companies, Inc., +18.6%; Timken Co., +18.3%;
WestPoint Stevens, Inc., +15.5%; Payless ShoeSource, Inc., +15.3%, and Marsh &
McLennan Companies, Inc., +14.6%.
Merger and acquisition events continued to provide significant gains in
issues which were purchased as undervalued. The leader in this period was the
aforementioned Kysor Industrial Corp., whose acquisition was completed on March
10. The benefits of broad-ranging investment research into undervalued companies
were evident in the positive performance of the Fund's equity portfolio. The
largest equity positions purchased during the quarter were in the shares of
Westpoint Stevens, Inc., Amoco Corp., Nationwide Financial Services, Eli Lilly &
Co., and Merrill Lynch & Co., Inc. With our active portfolio management policy,
the Merrill Lynch & Co., Inc. shares were sold with a 25% gain during the
quarter, and the Eli Lilly & Co. shares were repurchased during market weakness
at the end of the quarter.
The tax exempt portfolio consisted of insured or triple A rated bonds+++,
generally of long duration, and short-term tax exempts used as cash equivalent
investments. At the end of the quarter, 4.3% of the Fund's net assets were in
tax exempt cash equivalents. The equity percentage of the portfolio continued
substantially as at the beginning of the year, 43% of the Fund's net assets.
Our anticipations are that the Fund will continue to benefit by our program
of purchasing and holding undervalued small-to-medium size capitalization
companies, and larger companies which either fall into temporary disfavor, or
are engaged in programs to enhance their earnings power. Our bond market
expectations are that rates will settle down at levels close to recent ones
after Federal Reserve policy becomes clearer, with a reasonable probability of
interest rate declines later in the year.
Recent market volatility illustrates an increasingly selective trend in the
markets, with a recognition that many issues had become fully valued, some
overvalued, while others are ignored. The intensity of our search for
undervalued growth opportunities should continue to produce significant gains
notwithstanding a volatile and often uncertain market. The power of valuable
corporate franchises, strong financials, vigorous research and marketing
programs, and, above all, able managements, is evident in a great many companies
which we regularly analyze and visit. We expect this research intensive effort
to be rewarding in the months ahead with further likelihood of gains from
re-valued growth trends, mergers and acquisitions, and profits generated through
innovative leadership. We have carefully maintained sizable cash reserves to be
able to buy shares on weakness, and have done so during each period of stock
market uncertainty. The Fund's fixed income position continues to be
concentrated in insured AAA rated tax exempt obligations which, we believe, will
be benefited when the present period of anxiety over inflation potentials is
past. The real returns of long-term Treasury bonds are currently approximately
5%, and we anticipate that when the Federal Reserve has made amply evident its
program to slow the growth of the economy in order to reduce the risk of
inflation, that inflation premium will decline and the Fund's primarily
long-term bond position will rise in value. Our goal is capital growth and
capital protection with a minimization of risk. We will continue to shape the
Evergreen Tax Strategic Foundation Fund's strategy to these purposes. We thank
our many existing shareholders and welcome the many new shareholders who have
joined us in this year.
+++ INSURED AS TO PAYMENT OF PRINCIPAL AND INTEREST. THE FUND ITSELF IS NOT
INSURED, NOR IS THE VALUE OF ITS SHARES GUARANTEED.
45
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
(photo of dam)
RESULTS TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN TAX STRATEGIC FOUNDATION FUND
The graphs below compare a $10,000 investment in the Evergreen Tax
Strategic Foundation Fund (Class A, Class B, Class C and Class Y Shares) with a
similar investment in the S&P 500 and the Lehman Municipal Bond Indexes
("Indexes").
(four graphs appear here, plot points are as follows:)
(customer to provide plot points)
Class A
1-Year Total Return=10.25%
Average Annual Compound
Return Since Inception=15.92%
Evergreen Tax Strategic Foundation Fund
S&P 500 Index
Lehman Brothers Municipal Bond Index
1/27/95* 3/95 9/95 3/96 9/96 3/97
Class B
1-Year Total Return=10.02%
Average Annual Compound
Return Since Inception=17.07%
Evergreen Tax Strategic Foundation Fund
S&P 500 Index
Lehman Brothers Municipal Bond Index
1/8/95* 3/95 9/95 3/96 9/96 3/97
Class C
1-Year Total Return=13.82%
Average Annual Compound
Return Since Inception=17.49%
Evergreen Tax Strategic Foundation Fund
S&P 500 Index
Lehman Brothers Municipal Bond Index
3/3/95* 9/95 3/96 9/96 3/97
Class Y
1-Year Total Return=16.14%
Average Annual Compound
Return Since Inception=14.65%
Evergreen Tax Strategic Foundation Fund
S&P 500 Index
Lehman Brothers Municipal Bond Index
11/2/93* 3/94 3/95 3/96 3/97
*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 March 31, 1997; (c) all
recurring fees (including investment advisory fees) net of fee waivers and
reimbursements were deducted; and (d) all dividends and distributions were
reinvested.
The Indexes are unmanaged 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.
46
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
(photo of dam)
STATEMENT OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCK -- 42.7%
BANKS -- 7.9%
19,500 Bank of Boston Corp.................. $ 1,306,500
10,000 Barnett Banks, Inc................... 465,000
26,250 Beverly Bancorporation, Inc.......... 498,750
7,000 Cape Cod Bank & Trust Co............. 189,000
5,000 Comerica, Inc........................ 281,875
2,400 First Empire State Corp.............. 768,000
11,000 First of America Bank Corp........... 657,250
1,500 First Union Corp. **................. 121,687
1,100 Interchange Financial
Services Corp........................ 33,550
20,000* Nationwide Financial
Services, Inc........................ 515,000
10,000 Seacoast Banking Corp. of
Florida Cl. A........................ 282,500
4,837 SouthTrust Corp...................... 174,737
10,100 Standard Federal Bank Corp........... 585,800
5,879,649
BUILDING, CONSTRUCTION &
FURNISHINGS -- 1.1%
25,000 Clayton Homes, Inc................... 318,750
10,700 La-Z-Boy Inc......................... 366,475
15,000* Southern Energy Homes, Inc........... 155,625
840,850
BUSINESS EQUIPMENT & SERVICES -- .9%
3,000* Cisco Systems, Inc................... 144,375
2,000 International Business
Machines Corp........................ 274,750
5,000 Lucent Technologies, Inc............. 263,750
682,875
CHEMICALS & AGRICULTURAL
PRODUCTS -- 1.0%
2,000 Du Pont (E. I.) De Nemours........... 212,000
2,000 MacDermid, Inc....................... 69,500
11,000 Morton International, Inc............ 464,750
746,250
CONSUMER PRODUCTS & SERVICES -- 2.6%
10,000 adidas AG ADS, 144A.................. 551,250
5,000 General Motors Corp.................. 276,875
8,000 International Flavors &
Fragrances, Inc...................... 350,000
2,000* National Processing, Inc............. 16,000
10,500 Toro Co. (The)....................... 357,000
6,000 V. F. Corp........................... 401,250
1,952,375
<CAPTION>
SHARES VALUE
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
DIVERSIFIED COMPANIES -- .8%
11,000 Dover Corp........................... $ 577,500
ELECTRICAL EQUIPMENT
& ELECTRONICS -- 5.6%
6,000 AMP, Inc............................. 206,250
6,000 Baldor Electric Co................... 150,750
5,000* Gateway 2000, Inc.................... 256,250
20,000 Harman International
Industries, Inc...................... 670,000
18,000 Hewlett-Packard Co................... 958,500
12,000 Intel Corp........................... 1,669,500
11,800 Park Electrochemical Corp............ 269,925
4,181,175
ENERGY -- 1.5%
5,000 Amoco Corp........................... 433,125
10,000 Equitable Resources, Inc............. 306,250
7,500 Williams Company, Inc. (The)......... 333,750
1,073,125
FINANCE & INSURANCE -- 4.4%
10,000 Countrywide Credit
Industries, Inc...................... 247,500
3,000 Enhance Financial Services
Group, Inc........................... 118,500
10,000 FBL Financial Group, Inc............. 260,000
12,000 Federal National Mortgage
Association.......................... 433,500
20,000* FPIC Insurance Group, Inc............ 342,500
5,000 Legg Mason, Inc...................... 211,250
3,000 Marsh & McLennan Co., Inc............ 339,750
13,000 North American Mortgage Co........... 264,875
13,000 PHH Corp............................. 599,625
10,000 Wilmington Trust Corp................ 425,000
3,242,500
HEALTHCARE PRODUCTS &
SERVICES -- 2.6%
7,000 Abbott Laboratories.................. 392,875
4,000 American Home Products Corp.......... 240,000
2,000 Beckman Instruments, Inc............. 84,000
8,250* Bio-Rad Laboratories, Inc.
Cl. A................................ 210,375
5,000 Lilly (Eli) & Co..................... 411,250
5,000* Lincare Holdings, Inc................ 206,250
3,000 Medtronic, Inc....................... 186,750
5,000 Shared Medical System Corp........... 232,500
1,964,000
</TABLE>
47
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
(photo of dam)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCK -- CONTINUED
<C> <S> <C>
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES -- 2.9%
3,300 Applied Power, Inc. Class A.......... $ 138,600
5,000 Cadmus Communications Corp........... 70,625
7,500* Chemfab Corp......................... 135,938
8,000 Fisher Scientific
International, Inc................... 353,000
10,000 Furon Co............................. 212,500
9,900 Snap-on, Inc......................... 383,625
8,000 Timken Co. (The)..................... 428,000
10,000* UCAR International, Inc.............. 396,250
2,118,538
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- .5%
10,000 Belo (A.H.) Corp..................... 370,000
REAL ESTATE -- 5.3%
1,500* Alexander's, Inc..................... 103,875
20,000 Brandywine Realty Trust REIT......... 405,000
12,000 Capstead Mortgage Corp. REIT......... 244,500
21,400 Continental Homes Holding
Corp................................. 355,775
40,000 CWM Mortgage Holdings, Inc. REIT..... 775,000
13,300 Gables Residential Trust REIT........ 344,250
438* Homestead Village Properties,
Inc.................................. 7,391
293* Homestead Village Properties,
Inc. Warrants, $10 expiring
10/29/97............................. 2,124
15,000* Interstate Hotels Co................. 423,750
2,000* John Q. Hammons Hotels, Inc. Class
A.................................... 18,000
14,000 Patriot American Hospitality,
Inc. REIT............................ 339,500
20,000 Prentiss Properties Trust REIT....... 507,500
3,485 Security Capital Pacific Trust REIT.. 84,947
25,000 Sunstone Hotel Investors, Inc. REIT.. 328,125
3,939,737
RETAILING & WHOLESALE -- 2.5%
8,000 Avnet, Inc........................... 451,000
11,000 Lowe's Companies, Inc................ 411,125
8,200 Mercantile Stores Co., Inc........... 380,275
10,000* Payless Shoesource, Inc.............. 418,750
20,000* Southern Electronics Corp............ 172,500
1,833,650
TEXTILE & APPAREL -- .8%
15,000 WestPoint Stevens, Inc............... 571,875
<CAPTION>
SHARES VALUE
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
THRIFT INSTITUTIONS -- .9%
18,000 Bank United Corp..................... $ 531,000
15,000 BankUnited Financial Corp............ 157,500
688,500
UTILITIES -- ELECTRIC -- .3%
9,900 TNP Enterprises, Inc................. 211,613
UTILITIES -- TELEPHONE -- 1.1%
10,000* 360 Communications Co................ 172,500
15,000 Frontier Corp........................ 268,125
8,000 GTE Corp............................. 373,000
813,625
TOTAL COMMON STOCK
(COST $25,474,204)................... 31,687,837
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
MUNICIPAL OBLIGATIONS -- 54.9%
LONG TERM -- 50.6%
ALASKA -- 1.3%
$1,000,000 Alaska Hsg. Fin. Corp. Mtge. RB, 1996
Ser. A 6.05%, 12/1/17 (MBIA).......... 992,910
ARIZONA -- .7%
500,000 City of Tucson GO Refunding Bonds,
Ser. 1995 5.70%, 7/1/08 (FGIC)........ 516,815
CALIFORNIA -- 4.4%
500,000 California Edl. Facs. Auth. RB
(Carnegie Institution of Washington),
Ser. A 5.60%, 10/1/23................. 474,260
1,000,000 Los Angeles Cnty. Metropolitan
Transportation Authority Refunding,
Ser. A 5.00%, 7/1/21 (FGIC)........... 874,130
1,000,000 San Francisco City & Cnty
International Airport Revenue 5.70%,
5/1/26 (MBIA)......................... 957,580
1,000,000 State of California Various Purpose GO
5.90%, 4/1/23 (FGIC).................. 996,050
3,302,020
COLORADO -- 3.6%
500,000 Arapahoe Cnty. Pub. Hwy. Auth. Capital
Imp. Trust Fund Hwy. RB (E-470 Proj.)
6.15%, 8/31/26 (MBIA)................. 513,175
1,475,000 Colorado Health Facilities Authority
Revenue 6.88%, 2/15/23................ 1,642,191
</TABLE>
48
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
(photo of dam)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
MUNICIPAL OBLIGATIONS -- CONTINUED
COLORADO -- CONTINUED
<C> <S> <C>
$ 500,000 School Dist. No. 1 in the City & Cnty.
of Denver GO Refunding Bonds, Ser.
1994A 6.50%, 6/1/10 (MBIA)............ $ 553,800
2,709,166
DELAWARE -- 1.5%
1,000,000 Delaware Econ. Dev. Auth. Hosp. RB
(The Osteopathic Hosp. Assoc. of
Delaware/Riverside Hosp.), Escrowed to
Maturity, Ser. A 6.50%, 1/1/08........ 1,104,970
FLORIDA -- 4.1%
300,000 Dade Cnty. Aviation RRB, Ser. 1995A
6.10%, 10/1/11 (AMBAC)................ 313,725
2,000,000 Florida St. Board Of Education Capital
Outlay Series C
6.63%, 6/1/22......................... 2,182,200
500,000 Orange Cnty. Hlth. Facs. Auth. Hosp.
RB (Orlando Regional Healthcare Sys.),
Ser. 1996B 6.25%, 10/1/16 (MBIA)...... 535,795
3,031,720
GEORGIA -- 1.4%
1,000,000 Dalton Utilities RRB 6.00%, 1/1/08
(MBIA)................................ 1,062,610
ILLINOIS -- .7%
500,000 Forest Preserve Dist. of Cook Cnty. GO
Ltd. Tax Bonds, Ser. 1996 5.80%,
11/1/16 (MBIA)........................ 489,555
MASSACHUSETTS -- 3.6%
250,000 Massachusetts Hsg. Fin. Agcy. Hsg.
Proj. RRB, 1993 Ser. A 5.95%, 10/1/08
(AMBAC)............................... 256,878
250,000 Massachusetts Bay Trans. Auth. General
Trans. Sys. Bonds, Ser. 1994A 7.00%,
3/1/08................................ 286,662
2,000,000 Massachusetts St Prerefunded @ $101 GO
(Collaterialized in US Treasuries)
6.50%, 6/1/13......................... 2,167,520
2,711,060
MICHIGAN -- 2.0%
1,000,000 Detroit Michigan Series A
6.80%, 4/1/15......................... 1,124,790
300,000 Michigan Muni. Bond Auth. Local Govt.
Loan Prog. RB, Ser 1994G 6.55%,
11/1/08 (AMBAC)....................... 326,400
1,451,190
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
MISSOURI -- 2.7%
$ 500,000 Missouri Hsg. Dev. Commission Single
Family Mtge. RB (Homeownership Loan
Prog.), 1996 Ser. D 6.00%, 9/1/17
(Collaterialized by GNMA or FNMA
Certificates)......................... $ 495,325
1,000,000 Missouri Hsg. Dev. Commission Single
Family Mtge. RB (Homeownership Loan
Prog.), 1996 Ser. B 6.25%, 9/1/15
(Collaterialized by GNMA or FNMA
Certificates)......................... 1,011,320
500,000 St. Louis Muni. Fin. Corp. Leasehold
Revenue Imp. Bonds, Ser. 1996A 5.95%,
2/15/16 (AMBAC)....................... 507,155
2,013,800
NEVADA -- 1.4%
1,000,000 Clark Cnty. Las Vegas McCarran Int'l
Arpt. Passenger Fac. Charge RB, 1992
Ser. A 6.00%, 7/1/22 (AMBAC).......... 1,002,800
NEW HAMPSHIRE -- 1.6%
1,230,000 New Hampshire Higher Educational &
Health Crotched Mountain Rehab Center
5.88%, 1/1/20......................... 1,206,433
NEW YORK -- 7.0%
1,245,000 Metro Transportation Authority
Transport Facility Ser. L 6.63%,
7/1/14................................ 1,367,134
245,000 New York St. Med. Care Facs. Fin.
Agcy. Mental Hlth. Svcs. Facs. Imp.
RB, 1992 Ser. B 6.25%, 8/15/10
(AMBAC)............................... 254,952
500,000 New York St. Med. Care Facs. Fin.
Agcy. Mental Hlth. Svcs. Facs. Imp.
RB, 1995 Ser. A 6.00%, 2/15/25
(MBIA)................................ 494,620
500,000 New York St. Mortgage Agency Revenue
Amt Homeowner Mortgage Series 63
5.60%, 4/1/10 (AMT)................... 492,930
1,000,000 New York St. Thruway Auth. General RB,
Ser. C 6.00%, 1/1/25 (FGIC)........... 1,003,550
250,000 Port Auth. of New York and New Jersey
Consolidated Bonds, Ninety-Seventh
Ser. Second Installment (AMT) 7.00%,
7/15/05 (FGIC)........................ 284,110
250,000 State of New York Mtge. Agcy.
Homeowner Mtge. RB, Ser. 44 (AMT)
6.60%, 4/1/03......................... 260,553
</TABLE>
49
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
(photo of dam)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
MUNICIPAL OBLIGATIONS -- CONTINUED
NEW YORK -- CONTINUED
<C> <S> <C>
$1,000,000 State of New York Mtge. Agcy.
Homeowner Mtge. RB, Ser. 56 (AMT)
5.88%, 10/1/19........................ $1,008,500
5,166,349
NORTH CAROLINA -- .6%
500,000 North Carolina St. Univ. Raleigh
Centennial Campus B 5.13%, 12/15/16
(AMBAC)............................... 462,950
NORTH DAKOTA -- 1.4%
1,000,000 Mercer Cnty. Poll. Ctrl. RRB (Basin
Elec. Pwr. Cooperative-Antelope Valley
Unit 1 & Common Facs.), Second 1995
Ser. 6.05%, 1/1/19 (AMBAC)............ 1,012,370
OHIO -- 1.0%
700,000 Board of Ed. Beavercreek Local Sch.
Dist. (Cnty. of Greene) Sch. Imp.
Bonds (Unltd. Tax GO), Ser. 1996
6.60%, 12/1/15 (FGIC)................. 779,135
PENNSYLVANIA -- 5.1%
1,965,000 Pennsylvania Intragovernmental
Cooperative Authority Special Tax
Revenue 6.80%, 6/15/12................ 2,143,009
1,450,000 Pennsylvania Intragovernmental
Cooperative Philadelphia Funding
Program 7.00%, 6/15/14................ 1,643,097
3,786,106
TENNESSEE -- .5%
300,000 The Hlth. & Edl. Facs. Board of the
City of Bristol Hosp. RRB (Bristol
Mem. Hosp.), Ser. 1993 6.75%, 9/1/07
(FGIC)................................ 337,020
TEXAS -- 2.2%
1,000,000 City of Houston Wtr. Conveyance Sys.
Contract COP, Ser. 1993J 6.13%,
12/15/09 (AMBAC)...................... 1,069,740
500,000 City of Houston Wtr. Conveyance Sys.
Contract COP, Ser. 1993H 7.50%,
12/15/10 (AMBAC)...................... 593,720
1,663,460
UTAH -- .7%
500,000 Salt Lake City Hosp. RB (IHC
Hospitals, Inc.) 6.30%, 2/15/15....... 520,175
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
WEST VIRGINIA -- 1.3%
$1,000,000 West Virginia St. Hsg. Dev. Fund Hsg.
Fin. (Ser. A) 6.05%, 5/1/27........... $ 990,360
WISCONSIN -- 1.1%
800,000 Southeast Wi Pro Baseball Park 5.80%,
12/15/26.............................. 786,568
PUERTO RICO -- .7%
500,000 Puerto Rico Hsg. Bank & Fin. Agcy.
Affordable Hsg. Mtge. Subsidy Prog.
Single Family Mtge. RB, Portfolio I
(AMT) 5.85%, 4/1/09 (Collaterialized
by GNMA, FNMA & FHLMC Certificates)... 500,750
TOTAL LONG TERM
(COST $37,663,408).................... 37,600,292
Short Term -- 4.3%
GEORGIA -- 1.5%
1,100,000 Hapeville Dev. Auth. Indl. Dev. RB
(Hapeville Hotel Ltd. Partnership
Proj.), Ser. 1985 4.00% -- VRDN (LOC:
Swiss Bank Corp.)..................... 1,100,000
NEW YORK -- 1.7%
800,000 City of New York Ser B1 Subser B7, GO,
Fiscal 1995 Ser. B Sub-Ser. B-4
4.00% -- VRDN (MBIA).................. 800,000
500,000 New York City Municipal Water Finance
Authority Water And Sewer Series C
Mandatory Tender Upon Exp/Term Of
Liquidity 4.00% 6/15/23 -- VRDN
(FGIC)................................ 500,000
1,300,000
PENNSYLVANIA -- .4%
300,000 Schuylkill Cnty. Industrial
Development Dates Westwood Energy
Property Project 4.00%
11/1/09 -- VRDN....................... 300,000
WYOMING -- 0.7%
500,000 Lincoln Cnty. Poll. Ctrl. RB Exxon
Corp., Ser. 1984B 3.90% 11/1/14 --
VRDN.................................. 500,000
TOTAL SHORT TERM
(COST $3,200,000)..................... 3,200,000
TOTAL MUNICIPAL OBLIGATIONS
(COST $40,863,408).................... 40,800,292
</TABLE>
50
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
(photo of dam)
STATEMENT OF INVESTMENTS -- (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
MUTUAL FUND SHARES -- 0.0% (A)
20,000 Federated Tax Free Obligations
Fund (at net asset value)
(COST $20,000)...................... $ 20,000
TOTAL INVESTMENTS --
(COST $66,357,612)......... 97.6 % 72,508,129
OTHER ASSETS AND
LIABILITIES -- NET......... 2.4 1,766,520
NET ASSETS --................ 100 % $74,274,649
</TABLE>
* Non-income producing security.
** At March 31, 1997 and December 31, 1996 the Fund owned 1,500 shares of common
stock of First Union Corp. at a cost of $57,890. During the three months
ended March 31, 1997 and year ended December 31, 1996 the Fund earned $870
and $3,300, respectively, in dividend income from this investment. These
shares were purchased by the Fund prior to the aquistion of the investment
adviser and Lieber & Company by First Union.
(a) Less than one tenth of one percent.
The following abbreviations are used in this portfolio:
ADS -- American Depositary Shares
AMT -- Subject to Alternative Minimum Tax
COP -- Certificate of Participation
FHLMC -- Federal Home Loan Mortgage Corp.
FNMA -- Federal National Mortgage Corp.
GO -- General Obligations
GNMA -- Government National Mortgage Corp.
LOC -- Letter of Credit
RB -- Revenue Bonds
REIT -- Real Estate Investment Trust
RRB -- Refunding Revenue Bonds
VRDN -- Variable Rate Demand Notes are payable on demand at par on no more than
seven calendar days' notice given by the Fund to the issuer or other parties not
affiliated with the issuer. These notes normally incorporate an irrevocable
letter of credit or line of credit from a major bank. Interest rates presented
for these securities are those in effect as of March 31, 1997.
Municipal bond insurance companies:
AMBAC -- American Municipal Bond Assurance Corp.
FGIC -- Financial Guarantee Insurance Corp.
MBIA -- Municipal Bond Insurance Association
144A -- Rule 144A securites are restricted as to resale to
qualified institutional investors.
See accompanying notes to financial statements.
51
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
(photo of dam)
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $66,357,612)............................................................. $72,508,129
Cash........................................................................................................... 3,196
Receivable for Fund shares sold................................................................................ 1,239,344
Dividends and interest receivable.............................................................................. 699,167
Unamortized organization expense............................................................................... 12,848
Prepaid expenses............................................................................................... 48,891
Total assets............................................................................................. 74,511,575
LIABILITIES:
Payable for Fund shares purchased.............................................................................. 55,810
Accrued advisory fee........................................................................................... 53,951
Distribution fee payable....................................................................................... 54,937
Accrued expenses............................................................................................... 72,228
Total liabilities........................................................................................ 236,926
NET ASSETS........................................................................................................ $74,274,649
NET ASSETS CONSISTS OF:
Paid-in capital................................................................................................ $67,230,732
Undistributed net investment income............................................................................ 30,456
Accumulated undistributed net realized gains on investment transactions........................................ 862,944
Net unrealized appreciation of investments..................................................................... 6,150,517
Net assets............................................................................................... $74,274,649
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A shares ($15,039,475 (divided by) 1,108,365 shares of beneficial interest outstanding).................. $13.57
Sales charge -- 4.75% of offering price........................................................................ 0.68
Maximum offering price...................................................................................... $14.25
Class B shares ($38,838,228 (divided by) 2,864,713 shares of beneficial interest outstanding).................. $13.56
Class C shares ($5,085,504 (divided by) 375,744 shares of beneficial interest outstanding)..................... $13.53
Class Y shares ($15,311,442 (divided by) 1,124,861 shares of beneficial interest outstanding).................. $13.61
</TABLE>
See accompanying notes to financial statements.
52
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
(photo of dam)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED YEAR ENDED
MARCH DECEMBER
31, 1997 31, 1996
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest......................................................................................... $456,048 $ 1,156,135
Dividends (Net of foreign withholding taxes of $0 and $68)....................................... 149,560 434,437
Total investment income....................................................................... 605,608 1,590,572
EXPENSES:
Advisory fee..................................................................................... $143,945 $ 354,958
Distribution fee -- Class A Shares............................................................... 8,004 16,426
Distribution fee -- Class B Shares............................................................... 62,195 131,282
Shareholder services fee -- Class B Shares....................................................... 20,732 43,761
Distribution fee -- Class C Shares............................................................... 8,824 16,493
Shareholder services fee -- Class C Shares....................................................... 2,941 5,498
Professional fees................................................................................ 14,036 9,263
Custodian fee.................................................................................... 6,750 79,350
Reports and notices to shareholders.............................................................. 5,642 36,507
Registration and filing fees..................................................................... 5,575 59,282
Transfer agent fee............................................................................... 5,540 56,591
Amortization of organization expenses............................................................ 1,964 7,986
Insurance........................................................................................ 1,367 7,789
Trustees' fees and expenses...................................................................... 1,113 5,179
Miscellaneous.................................................................................... 412 3,643
Total expenses............................................................................. 289,040 834,008
Less: Fee waivers and expense reimbursements..................................................... -- (101,890)
Net expenses............................................................................... 289,040 732,118
Net investment income............................................................................... 316,568 858,454
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions..................................................... 865,777 1,133,442
Net change in unrealized appreciation (depreciation) of investments.............................. (916,721) 4,531,613
Net realized and unrealized gain (loss) on investments........................................... (50,944) 5,665,055
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................. $265,624 $ 6,523,509
</TABLE>
See accompanying notes to financial statements.
53
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
(photo of dam)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
THREE MONTHS ENDED DECEMBER 31,
MARCH 31, 1997 1996 1995
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................... $ 316,568 $ 858,454 $ 456,792
Net realized gain on investments transactions....................... 865,777 1,133,442 671,486
Net change in unrealized appreciation (depreciation) of
investments...................................................... (916,721) 4,531,613 2,607,309
Net increase in net assets resulting from operations............. 265,624 6,523,509 3,735,587
DISTRIBUTIONS TO SHAREHOLDERS:
FROM NET INVESTMENT INCOME:
Class A Shares...................................................... (69,706) (163,381) (34,215)
Class B Shares...................................................... (123,210) (306,929) (72,776)
Class C Shares...................................................... (16,785) (42,461) (4,715)
Class Y Shares...................................................... (78,613) (342,618) (346,086)
Total distributions from net investment income................... (288,314) (855,389) (457,792)
IN EXCESS OF NET INVESTMENT INCOME:
Class A Shares...................................................... -- (121) (162)
Class B Shares...................................................... -- (226) (345)
Class C Shares...................................................... -- (31) (22)
Class Y Shares...................................................... -- (253) (1,644)
Total distributions in excess of net investment income........... -- (631) (2,173)
FROM NET REALIZED GAINS ON INVESTMENTS:
Class A Shares...................................................... -- (209,265) (77,951)
Class B Shares...................................................... -- (555,359) (199,612)
Class C Shares...................................................... -- (82,045) (14,445)
Class Y Shares...................................................... -- (303,414) (490,453)
Total distributions from net realized gains on investments....... -- (1,150,083) (782,461)
Total distributions to shareholders.............................. (288,314) (2,006,103) (1,242,426)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold........................................... 17,462,938 32,091,878 10,412,208
Proceeds from reinvestment of distributions......................... 211,565 1,574,099 1,158,751
Payment for shares redeemed......................................... (1,659,842) (3,143,238) (1,396,543)
Net increase resulting from Fund share transactions.............. 16,014,661 30,522,739 10,174,416
Net increase in net assets....................................... 15,991,971 35,040,145 12,667,577
NET ASSETS:
Beginning of period................................................. 58,282,678 23,242,533 10,574,956
End of period (including undistributed (distributions in excess of)
net investment income of $30,456, ($631) and $0, respectively)... $ 74,274,649 $58,282,678 $23,242,533
</TABLE>
See accompanying notes to financial statements.
54
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND --
CLASS A AND B SHARES
(photo of dam)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
YEAR
CLASS A ENDED
YEAR ENDED DECEMBER
THREE MONTHS ENDED DECEMBER 31, THREE MONTHS ENDED 31,
MARCH 31, 1997++ 1996 1995* MARCH 31, 1997++ 1996
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........................ $13.50 $12.20 $10.44 $13.49 $12.19
Income from investment operations:
Net investment income..................................... .07 .27 .29 .05 .19
Net realized and unrealized gain on investments........... .06+++ 1.59 2.24 .06+++ 1.59
Total from investment operations........................ .13 1.86 2.53 .11 1.78
Less distributions to shareholders from:
Net investment income..................................... (.06) (.28) (.31) (.04) (.20)
Net realized gains on investments......................... -- (.28) (.46) -- (.28)
Total distributions..................................... (.06) (.56) (.77) (.04) (.48)
Net asset value, end of period.............................. $13.57 $13.50 $12.20 $13.56 $13.49
TOTAL RETURN**.............................................. 1.0% 15.4% 24.8% 0.8% 14.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................... $ 15,039 $11,166 $2,702 $ 38,838 $28,007
Ratios to average net assets:
Expenses.................................................. 1.38%+ 1.52%# 1.75%#+ 2.14%+ 2.27%#
Net investment income..................................... 2.30%+ 2.39%# 2.79%#+ 1.55%+ 1.64%#
Portfolio turnover rate..................................... 29% 88% 110% 29% 88%
Average commission rate paid per share...................... $.0656 $.0648 N/A $.0656 $.0648
<CAPTION>
1995*
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period........................ $10.31
Income from investment operations:
Net investment income..................................... .22
Net realized and unrealized gain on investments........... 2.37
Total from investment operations........................ 2.59
Less distributions to shareholders from:
Net investment income..................................... (.25)
Net realized gains on investments......................... (.46)
Total distributions..................................... (.71)
Net asset value, end of period.............................. $12.19
TOTAL RETURN**.............................................. 25.6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................... $6,559
Ratios to average net assets:
Expenses.................................................. 2.50%#+
Net investment income..................................... 2.03%#+
Portfolio turnover rate..................................... 110%
Average commission rate paid per share...................... N/A
</TABLE>
* For the period from January 17, 1995 and January 6, 1995 (commencement of
class A and class B operations, respectively) to December 31, 1995.
** 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 charges are not reflected.
+ Annualized.
++ The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+++ The per share amount is not in accord with the net realized and unrealized
gain (loss) for the period due to the timing of the sales of fund shares and
the amount of per share realized and unrealized gains and losses at such
time.
# 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 (loss) to average
net assets would have been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995* 1996 1995*
<S> <C> <C> <C> <C>
Expenses.......................................................... 1.76% 5.02% 2.51% 3.65%
Net investment income (loss)...................................... 2.15% (.48%) 1.40% .88%
</TABLE>
See accompanying notes to financial statements.
55
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND --
CLASS C AND Y SHARES
(photo of dam)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C CLASS Y
THREE MONTHS ENDED YEAR ENDED YEAR ENDED
MARCH 31, DECEMBER 31, THREE MONTHS ENDED DECEMBER 31,
1997++ 1996 1995* MARCH 31, 1997++ 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........ $13.47 $12.19 $10.69 $13.54 $12.22 $10.27
Income from investment operations:
Net investment income....................... .06 .18 .22 .09 .34 .35
Net realized and unrealized gain on
investments............................... .05+++ 1.58 1.99 .05+++ 1.56 2.39
Total from investment operations.......... .11 1.76 2.21 .14 1.90 2.74
Less distributions to shareholders from:
Net investment income....................... (.05) (.20) (.25) (.07) (.30) (.33)
Net realized gains on investments........... -- (.28) (.46) -- (.28) (.46)
Total distributions....................... (.05) (.48) (.71) (.07) (.58) (.79)
Net asset value, end of period.............. $13.53 $13.47 $12.19 $13.61 $13.54 $12.22
TOTAL RETURN**.............................. 0.8% 14.5% 21.2% 1.0% 15.8% 27.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)... $5,086 $4,108 $496 $ 15,311 $15,002 $13,485
Ratios to average net assets:
Expenses.................................. 2.13%+ 2.25%# 2.50%#+ 1.13%+ 1.30%# 1.50%#
Net investment income..................... 1.55%+ 1.64%# 2.07%#+ 2.54%+ 2.63%# 3.06%#
Portfolio turnover rate..................... 29% 88% 110% 29% 88% 110%
Average commission rate paid per share...... $.0656 $.0648 N/A $.0656 $.0648 N/A
<CAPTION>
1994 1993*
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........ $10.31 $10.00
Income from investment operations:
Net investment income....................... .27 .05
Net realized and unrealized gain on
investments............................... .08 .31
Total from investment operations.......... .35 .36
Less distributions to shareholders from:
Net investment income....................... (.27) (.05)
Net realized gains on investments........... (.12) --
Total distributions....................... (.39) (.05)
Net asset value, end of period.............. $10.27 $10.31
TOTAL RETURN**.............................. 3.4% 3.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)... $10,575 $5,424
Ratios to average net assets:
Expenses.................................. 1.49%# .00%#+
Net investment income..................... 2.87%# 3.65%#+
Portfolio turnover rate..................... 245% 25%
Average commission rate paid per share...... N/A N/A
</TABLE>
* For the period from March 3, 1995, to December 31, 1995 and November 2, 1993
to December 31, 1993 (commencement of class C and class Y operations,
respectively).
** 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 charges are not reflected.
+ Annualized.
++ The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+++ The per share amount is not in accord with the net realized and unrealized
gain (loss) for the period due to the timing of sales of fund shares and the
amount of per share realized and unrealized gains and losses at such time.
# 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 (loss) to average
net assets, exclusive of any applicable state expense limitations would have
been the following:
<TABLE>
<CAPTION>
CLASS C
CLASS Y
YEAR ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31,
1996 1995* 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C> <C>
Expenses................................................................ 2.48% 18.91% 1.56% 2.23% 2.41% 3.10%
Net investment income (loss)............................................ 1.41% (14.34%) 2.37% 2.33% 1.95% .54%
</TABLE>
See accompanying notes to financial statements.
56
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND NATURE OF OPERATIONS
The Evergreen Balanced Funds (the "Funds") are separate series of open-end
management investment companies registered under the Investment Company Act of
1940, as amended (the "Act"). The Balanced Funds consist of Evergreen American
Retirement Fund ("American Retirement"), Evergreen Balanced Fund ("Balanced"),
Evergreen Foundation Fund ("Foundation") and Evergreen Tax Strategic Foundation
Fund ("Tax Strategic") known collectively as the Funds.
American Retirement'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. Foundation's investment objectives,
in order of priority, are reasonable income, conservation of capital and capital
appreciation. Tax Strategic's investment objective is to maximize the after-tax
total return on its portfolio of investments by investing in equities as well as
municipal securities, which are exempt from Federal income tax.
NOTE 2 -- 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 other 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 following procedures approved by the Board of 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.
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. These differences are primarily due to differing
treatments for certain short-term losses and distributions received from real
estate investment trusts. To the extent these differences are permanent in
nature, such amounts are reclassified within the components of net assets.
57
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- continued
As of March 31, 1997, 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>
Balanced............... $(50,499) $ 50,499
Tax Strategic.......... 2,833 (2,833)
</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.
UNAMORTIZED ORGANIZATION EXPENSES -- The expenses of Tax Strategic incurred
in connection with its organization are being deferred and amortized over a
period of benefit not to exceed 60 months from the date it commenced operations.
USE OF ESTIMATES -- The preparation of the financial statements is in
accordance with generally accepted accounting principles which requires
management to make estimates and assumptions that affect the reported amounts
and disclosures. Actual results could differ from those estimates.
NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AGREEMENTS -- First Union National Bank of North
Carolina ("First Union"), Balanced's investment adviser, is entitled to an
annual fee of .50 of 1% of Balanced's average daily net assets pursuant to the
Fund's investment advisory agreement.
Pursuant to an agreement with American Retirement's, Foundation's and Tax
Strategic'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 American Retirement's, Foundation's and Tax
Strategic's average daily net assets, respectively, in accordance with the
following schedules:
<TABLE>
<CAPTION>
FOUNDATION AND AMERICAN
TAX STRATEGIC RETIREMENT
<S> <C> <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>
During the three months ended March 31, 1997, for American Retirement,
Evergreen Asset voluntarily reimbursed other expenses amounting to $90,000.
During the year ended December 31, 1996, for American Retirement and Tax
Strategic, Evergreen Asset voluntarily waived advisory fees of $24,841 and
$90,551, respectively, and voluntarily reimbursed other expenses amounting to
$3,400 and $11,339, respectively. Evergreen Asset can modify or terminate
voluntary waivers and reimbursements at any time.
58
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES -- continued
Lieber & Company, an affiliate of First Union, is the investment
sub-adviser to American Retirement, Foundation and Tax Strategic and also
provides brokerage services with respect to substantially all security
transactions of these Funds effected on the New York or American Stock
Exchanges. For the three months ended March 31, 1997, American Retirement,
Foundation and Tax Strategic incurred brokerage commissions of $11,925, $81,365
and $10,758 with Lieber & Company. For the year ended December 31, 1996,
American Retirement, Foundation and Tax Strategic incurred brokerage commissions
of $51,579, $680,252 and $50,033 with Lieber & Company. Lieber & Company is
reimbursed by Evergreen Asset, at no additional expense to these Funds, for its
cost of providing investment advisory services.
ADMINISTRATION AGREEMENT -- For the period through March 10, 1997,
Evergreen Asset furnished American Retirement, Foundation and Tax Strategic with
administrative services as part of their advisory agreements and accordingly,
these Funds did not pay a separate administration fee. Effective March 11, 1997,
Evergreen Keystone Investment Services (EKIS), a subsidiary of First Union,
began providing administrative services to the Funds. For the period through
December 31, 1996, Furman Selz LLC ("Furman Selz") was each of the Funds'
sub-administrator. As sub-administrator, Furman Selz provided the officers of
the Funds. Effective January 1, 1997, The BISYS Group, Inc. ("BISYS") acquired
Furman Selz' mutual fund unit and accordingly, BISYS Fund Services became
sub-administrator. For American Retirement, Foundation and Tax Strategic, Furman
Selz' or BISYS fee was paid by Evergreen Asset or EKIS and is not a fund
expense.
From January 1, 1997 to March 10, 1997, Evergreen Asset and from March 11,
1997, EKIS were Balanced's administrator and for the period from January 1, 1997
to March 31, 1997 BISYS was sub-administrator. Evergreen Asset and Furman Selz
were Balanced's administrator and sub-administrator, respectively, for the year
ended December 31, 1996. Evergreen Asset's/EKIS's and Furman Selz'/BISYS fees
for Balanced are based on the average daily net assets of all the funds
administered by Evergreen Asset or EKIS for which First Union, or its investment
advisory subsidiaries, is also investment adviser. These fees were 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 March 31, 1997, assets for which EKIS was the administrator for which
First Union, or its investment advisory subsidiaries, was investment adviser
totalled approximately $29 billion. At December 31, 1996, assets for which
Evergreen Asset was the administrator for which either Evergreen Asset or First
Union was investment adviser totalled approximately $17.0 billion.
PLANS OF DISTRIBUTION -- The Funds have adopted for their Class A, Class B,
and Class C shares, Distribution Plans (the "Plans") pursuant to Rule 12b-1
under the Act. 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.
59
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES -- continued
In connection with their Plans, American Retirement, Foundation and Tax
Strategic have entered into distribution agreements with Evergreen Keystone
Distributor, Inc. ("EKD") (formerly Evergreen Funds Distributor, Inc.), a
subsidiary of BISYS, whereby American Retirement, Foundation and Tax Strategic
will compensate EKD 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 Shares' 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. EKD has entered into a Shareholder Services Agreement with First
Union Brokerage Services ("FUBS"), an affiliate of First Union, whereby they
will compensate FUBS for certain services provided to shareholders and/or
maintenance of shareholder accounts relating to each of the Fund's Class B and
Class C Shares.
In connection with its plan, Balanced entered into a distribution agreement
with EKD whereby it will compensate EKD 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 A, B and C shareholders. Balanced has entered
into a shareholder services agreement with FUBS, and will pay FUBS, an annual
fee of up to .25 of 1% of the average net assets of its Class B and Class C
shares. This fee is designed to obtain certain services for shareholders and to
maintain shareholder accounts.
SALES CHARGES -- EKD 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 three months ended March 31, 1997 and year ended December 31,
1996:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
<S> <C> <C>
American Retirement $ 12,910 $20,024
Balanced 3,100 9,150
Foundation 53,267 57,736
Tax Strategic 16,111 25,078
</TABLE>
OTHER SERVICES WITH AFFILIATES -- State Street Bank & Trust Company ("State
Street") is the transfer agent, dividend disbursing agent and shareholder
servicing agent for the Funds. For certain accounts in American Retirement,
Balanced and Foundation, First Union has been sub-contracted by State Street to
maintain shareholder sub-account records, take fund purchase and redemption
orders and answer inquiries. For each account, First Union is entitled to a
monthly fee which totaled $4,276, $102,025 and $83,760 for American Retirement,
Balanced and Foundation, respectively, for the three months ended March 31, 1997
and which totaled $5,560, $187,538 and $151,484 for American Retirement,
Balanced and Foundation, respectively, for the year ended December 31, 1996.
NOTE 4 -- SHARES OF BENEFICIAL INTEREST
The Funds have an unlimited number of $0.0001 par value shares of
beneficial interest authorized. The shares are divided into classes which are
designated Class A, Class B, Class C and Class Y 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 the date of purchase. Class C shares are sold
with a contingent deferred sales charge of 1% for shares redeemed during the
first year after the month of purchase. 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 3) and have exclusive voting rights with respect to their
distribution plans.
60
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- SHARES OF BENEFICIAL INTEREST -- continued
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR
ENDED*
THREE MONTHS ENDED YEAR ENDED DECEMBER
MARCH 31, 1997** DECEMBER 31, 1996 31, 1995
AMERICAN RETIREMENT SHARES AMOUNT SHARES AMOUNT SHARES
<S> <C> <C> <C> <C> <C>
CLASS A
Shares sold............................................. 326,820 $ 4,608,875 762,980 $10,140,786 103,126
Shares issued on reinvestment of distributions.......... 7,652 106,973 19,559 264,707 1,195
Shares redeemed......................................... (74,356) (1,044,019) (84,770) (1,127,903) (186)
Net increase............................................ 260,116 3,671,829 697,769 9,277,590 104,135
CLASS B
Shares sold............................................. 1,531,877 21,511,234 3,892,133 51,648,645 380,412
Shares issued on reinvestment of distributions.......... 33,372 464,195 81,733 1,103,810 4,314
Shares redeemed......................................... (124,007) (1,740,809) (175,385) (2,331,018) (6,548)
Net increase............................................ 1,441,242 20,234,620 3,798,481 50,421,437 378,178
CLASS C
Shares sold............................................. 25,543 360,283 100,739 1,334,965 8,507
Shares issued on reinvestment of distributions.......... 755 10,535 2,161 29,233 70
Shares redeemed......................................... (4,726) (66,693) (3,928) (53,590) --
Net increase............................................ 21,572 304,125 98,972 1,310,608 8,577
CLASS Y
Shares sold............................................. 87,120 1,231,385 287,843 3,807,908 280,323
Shares issued on reinvestment of distributions.......... 19,041 266,192 103,943 1,392,828 106,983
Shares redeemed......................................... (370,659) (5,263,594) (481,537) (6,415,509) (808,529)
Net decrease............................................ (264,498) (3,766,017) (89,751) (1,214,773) (421,223)
Total net increase resulting from Fund share
transactions.......................................... 1,458,432 $20,444,557 4,505,471 $59,794,862 69,667
<CAPTION>
AMERICAN RETIREMENT AMOUNT
<S> <C>
CLASS A
Shares sold............................................. $1,278,749
Shares issued on reinvestment of distributions.......... 14,909
Shares redeemed......................................... (2,372)
Net increase............................................ 1,291,286
CLASS B
Shares sold............................................. 4,651,965
Shares issued on reinvestment of distributions.......... 53,311
Shares redeemed......................................... (80,579)
Net increase............................................ 4,624,697
CLASS C
Shares sold............................................. 104,262
Shares issued on reinvestment of distributions.......... 878
Shares redeemed......................................... --
Net increase............................................ 105,140
CLASS Y
Shares sold............................................. 3,219,576
Shares issued on reinvestment of distributions.......... 1,270,557
Shares redeemed......................................... (9,380,520)
Net decrease............................................ (4,890,387)
Total net increase resulting from Fund share
transactions.......................................... $1,130,736
</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.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
61
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
YEAR ENDED*
THREE MONTHS ENDED YEAR ENDED DECEMBER
BALANCED MARCH 31, 1997** DECEMBER 31, 1996 31, 1995
CLASS A SHARES AMOUNT SHARES AMOUNT SHARES
<S> <C> <C> <C> <C> <C>
Shares sold.................................. 82,428 $ 1,093,429 450,824 $ 5,988,616 174,514
Shares issued on reinvestment of
distributions.............................. 26,899 354,264 372,747 4,905,076 228,390
Shares redeemed.............................. (223,885) (2,966,293) (680,925) (9,159,435) (883,230)
Net increase (decrease)...................... (114,558) (1,518,600) 142,646 1,734,257 (480,326)
CLASS B
Shares sold.................................. 165,348 2,196,560 529,783 7,095,087 331,882
Shares issued on reinvestment of
distributions.............................. 56,925 750,275 883,591 11,640,482 528,256
Shares redeemed.............................. (341,159) (4,533,333) (1,260,613) (16,901,766) (1,507,091)
Net increase (decrease)...................... (118,886) (1,586,498) 152,761 1,833,803 (646,953)
CLASS C
Shares sold.................................. 3,813 50,440 19,191 256,143 6,207
Shares issued on reinvestment of
distributions.............................. 128 1,683 2,215 28,991 1,346
Shares redeemed.............................. (3,891) (51,872) (16,775) (220,556) (2,122)
Net increase................................. 50 251 4,631 64,578 5,431
CLASS Y
Shares sold.................................. 3,764,660 49,606,477 16,615,288 221,340,376 13,282,634
Shares issued on reinvestment of
distributions.............................. 249,854 3,288,082 3,659,774 48,208,895 4,419,582
Shares redeemed.............................. (4,480,218) (59,399,461) (22,526,104) (302,083,357) (25,032,555)
Net decrease................................. (465,704) (6,504,902) (2,251,042) (32,534,086) (7,330,339)
Total net decrease resulting from Fund share
transactions............................... (699,098) ($9,609,749) (1,951,004) ($28,901,448) (8,452,187)
<CAPTION>
BALANCED
CLASS A AMOUNT
<S> <C>
Shares sold.................................. $ 2,180,996
Shares issued on reinvestment of
distributions.............................. 2,924,585
Shares redeemed.............................. (10,834,925)
Net increase (decrease)...................... (5,729,344)
CLASS B
Shares sold.................................. 4,113,278
Shares issued on reinvestment of
distributions.............................. 6,788,533
Shares redeemed.............................. (18,590,977)
Net increase (decrease)...................... (7,689,166)
CLASS C
Shares sold.................................. 78,623
Shares issued on reinvestment of
distributions.............................. 17,328
Shares redeemed.............................. (27,063)
Net increase................................. 68,888
CLASS Y
Shares sold.................................. 164,605,419
Shares issued on reinvestment of
distributions.............................. 56,436,034
Shares redeemed.............................. (313,833,958)
Net decrease................................. (92,792,505)
Total net decrease resulting from Fund share
transactions............................... ($106,142,127)
</TABLE>
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
62
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
YEAR
ENDED*
THREE MONTHS ENDED YEAR ENDED DECEMBER
FOUNDATION MARCH 31, 1997** DECEMBER 31, 1996 31, 1995
CLASS A SHARES AMOUNT SHARES AMOUNT SHARES
<S> <C> <C> <C> <C> <C>
Shares sold..................................... 1,573,527 $26,044,624 8,413,021 $126,479,881 7,433,192
Shares issued on reinvestment of
distributions................................. 85,926 1,413,485 474,763 7,335,750 194,159
Shares redeemed................................. (734,487) (12,146,536) (3,177,106) (47,846,922) (542,266)
Net increase.................................... 924,966 15,311,573 5,710,678 85,968,709 7,085,085
CLASS B
Shares sold..................................... 3,519,353 58,129,934 18,909,215 282,822,448 19,717,460
Shares issued on reinvestment of
distributions................................. 175,001 2,868,253 1,109,399 17,095,215 487,710
Shares redeemed................................. (1,205,547) (19,871,723) (4,174,149) (62,881,641) (543,554)
Net increase.................................... 2,488,807 41,126,464 15,844,465 237,036,022 19,661,616
CLASS C
Shares sold..................................... 176,251 2,897,772 1,165,822 17,413,787 761,087
Shares issued on reinvestment of
distributions................................. 6,429 105,303 43,393 668,629 19,172
Shares redeemed................................. (91,055) (1,506,028) (308,109) (4,629,756) (26,533)
Net increase.................................... 91,625 1,497,047 901,106 13,452,660 753,726
CLASS Y
Shares sold..................................... 2,229,198 37,037,547 19,300,331 290,354,485 18,505,940
Shares issued on reinvestment of
distributions................................. 315,233 5,191,873 1,977,198 30,423,613 1,558,776
Shares redeemed................................. (2,606,400) (43,297,987) (12,328,011) (185,863,701) (5,965,644)
Net increase (decrease)......................... (61,969) (1,068,567) 8,949,518 134,914,397 14,099,072
Total net increase resulting from Fund share
transactions.................................. 3,443,429 $56,866,517 31,405,767 $471,371,788 41,599,499
<CAPTION>
FOUNDATION
CLASS A AMOUNT
<S> <C>
Shares sold..................................... $103,904,500
Shares issued on reinvestment of
distributions................................. 2,828,216
Shares redeemed................................. (7,709,611)
Net increase.................................... 99,023,105
CLASS B
Shares sold..................................... 275,013,438
Shares issued on reinvestment of
distributions................................. 7,076,078
Shares redeemed................................. (7,846,692)
Net increase.................................... 274,242,824
CLASS C
Shares sold..................................... 10,573,728
Shares issued on reinvestment of
distributions................................. 277,286
Shares redeemed................................. (379,480)
Net increase.................................... 10,471,534
CLASS Y
Shares sold..................................... 263,287,541
Shares issued on reinvestment of
distributions................................. 22,661,839
Shares redeemed................................. (82,422,318)
Net increase (decrease)......................... 203,527,062
Total net increase resulting from Fund share
transactions.................................. $587,264,525
</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.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
63
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
YEAR
ENDED*
THREE MONTHS ENDED YEAR ENDED DECEMBER
TAX STRATEGIC MARCH 31, 1997** DECEMBER 31, 1996 31, 1995
CLASS A SHARES AMOUNT SHARES AMOUNT SHARES
<S> <C> <C> <C> <C> <C>
Shares sold............................................ 315,408 $ 4,371,432 652,149 $ 8,273,511 215,649
Shares issued on reinvestment of distributions......... 4,842 66,689 26,949 357,306 8,759
Shares redeemed........................................ (38,895) (539,727) (73,546) (929,252) (2,950)
Net increase........................................... 281,355 3,898,394 605,552 7,701,565 221,458
CLASS B
Shares sold............................................ 816,857 11,299,403 1,563,566 19,725,070 550,703
Shares issued on reinvestment of distributions......... 8,114 111,726 59,693 793,572 21,721
Shares redeemed........................................ (36,136) (499,992) (85,378) (1,087,302) (34,427)
Net increase........................................... 788,835 10,911,137 1,537,881 19,431,340 537,997
CLASS C
Shares sold............................................ 102,016 1,405,348 263,684 3,324,801 39,093
Shares issued on reinvestment of distributions......... 745 10,250 6,172 81,908 1,561
Shares redeemed........................................ (31,923) (445,521) (5,604) (70,810) --
Net increase........................................... 70,838 970,077 264,252 3,335,899 40,654
CLASS Y
Shares sold............................................ 27,768 386,755 63,086 768,496 92,229
Shares issued on reinvestment of distributions......... 1,657 22,900 26,475 341,313 66,375
Shares redeemed........................................ (12,744) (174,602) (84,857) (1,055,874) (84,665)
Net increase........................................... 16,681 235,053 4,704 53,935 73,939
Total net increase resulting from Fund share
transactions......................................... 1,157,709 $16,014,661 2,412,389 $30,522,739 874,048
<CAPTION>
TAX STRATEGIC
CLASS A AMOUNT
<S> <C>
Shares sold............................................ $ 2,527,734
Shares issued on reinvestment of distributions......... 105,291
Shares redeemed........................................ (36,239)
Net increase........................................... 2,596,786
CLASS B
Shares sold............................................ 6,364,106
Shares issued on reinvestment of distributions......... 260,033
Shares redeemed........................................ (407,693)
Net increase........................................... 6,216,446
CLASS C
Shares sold............................................ 457,822
Shares issued on reinvestment of distributions......... 18,761
Shares redeemed........................................ --
Net increase........................................... 476,583
CLASS Y
Shares sold............................................ 1,062,541
Shares issued on reinvestment of distributions......... 774,666
Shares redeemed........................................ (952,606)
Net increase........................................... 884,601
Total net increase resulting from Fund share
transactions......................................... $10,174,416
</TABLE>
* For Class A, Class B, and Class C shares, the Fund share transaction activity
reflects the period January 17, 1995, January 6, 1995, and March 3, 1995,
respectively (commencement of class operations) through December 31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
NOTE 5 -- INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of investments, excluding
short-term securities for the three months ended March 31, 1997 and year ended
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
PURCHASES SALES PURCHASES SALES
<S> <C> <C> <C> <C>
American Retirement.... $ 25,839,480 $ 9,477,392 $ 61,282,970 $ 10,474,200
Balanced............... 246,036,067 247,581,271 301,410,563 419,093,895
Foundation............. 62,412,840 24,762,245 435,891,619 116,921,520
Tax Strategic.......... 34,192,321 17,289,466 59,793,904 34,152,600
</TABLE>
On March 31, 1997, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost for federal
tax purposes was as follows:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION NET TAX COST
<S> <C> <C> <C> <C>
American Retirement.... $ 13,902,963 $ 3,014,733 $ 10,888,230 $ 117,680,684
Balanced............... 121,310,893 19,483,252 101,827,641 803,831,536
Foundation............. 238,227,950 56,382,716 181,845,234 1,462,625,716
Tax Strategic.......... 7,242,856 1,092,339 6,150,517 66,357,612
</TABLE>
64
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 6 -- CONCENTRATION OF CREDIT RISK
Tax Strategic invests the municipal bond portion of its portfolio in
obligations issued by states, territories and possessions of the United States
and by their political subdivisions and duly constituted authorities. The
issuers' abilities to meet their obligations may be affected by economic and
political developments in a specific state or region. Certain debt obligations
held in the Fund's municipal portfolio may be entitled to the benefit of standby
letters of credit or other guarantees of banks or other financial institutions.
NOTE 7 -- FINANCING AGREEMENT
Effective July 3, 1996, a financing agreement was put in place between all
of the Evergreen Funds and State Street. Under this agreement, State Street
provided an unsecured line of credit facility, in the aggregate amount of $100
million ($50 million committed and $50 million uncommitted), to be accessed by
the Funds for temporary or emergency purposes only and is subject to each
participating Fund's borrowing restrictions.
Effective October 31, 1996, a new financing agreement was put in place
between all of the Evergreen Funds and State Street, Societe Generale and ABN
AMRO Bank N.V. (collectively, the "Banks"). Under this agreement, the Banks
provide an unsecured line of credit facility in the aggregate amount of $225
million ($112.5 million committed and $112.5 million uncommitted) allocated
evenly between the Banks. Borrowings under these facilities bear interest at
.75% per annum above the Federal Funds rate. A commitment fee of .10% per annum
will be incurred on the unused portion of the committed facility which would be
allocated to all participating funds.
The Funds had no borrowings under the financing agreements during the three
months ended March 31, 1997 or the year ended December 31, 1996.
NOTE 8 -- DEFERRED TRUSTEE'S FEES
Each Trustee may defer any or all compensation related to performance of
duties as a Trustee of the Funds. Each Trustee's deferred balances are allocated
to deferral accounts which are included in the accrued expenses for each Fund.
The investment performance of the deferral accounts are based on the investment
performance of certain Evergreen Funds. Any gains earned or losses incurred in
the deferral accounts are reported in each Fund's Trustee's fees and expenses.
Trustees will be paid either in one lump sum or in quarterly installments for up
to ten years at their election, not earlier than either the year in which the
Trustee ceases to be a member of the Board of Trustees or January 1, 2000. As of
March 31, 1997, the value of the Trustees deferral accounts was $10,325,
$27,360, $8,650 and $3,583 for American Retirement, Balanced, Foundation and Tax
Strategic, respectively.
NOTE 9 -- CHANGE IN FISCAL YEAR
American Retirement, Balanced, Foundation and Tax Strategic have changed
their fiscal year end to March 31 from December 31, effective March 31, 1997.
NOTE 10 -- SUBSEQUENT EVENTS
Effective May 5, 1997, Evergreen Keystone Service Company, an affiliate of
First Union, became the Funds' transfer agent, dividend disbursement agent and
shareholder servicing agent.
65
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INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS OF
THE EVERGREEN AMERICAN RETIREMENT TRUST
EVERGREEN INVESTMENT TRUST
EVERGREEN FOUNDATION TRUST
We have audited the accompanying statements of assets and liabilities,
including the statements of investments of the Evergreen Balanced Funds listed
below as of March 31, 1997, and the related statements of operations, statements
of changes in net assets, and financial highlights for each of the years or
periods presented below:
EVERGREEN AMERICAN RETIREMENT FUND (ONE OF THE PORTFOLIOS CONSTITUTING THE
EVERGREEN AMERICAN RETIREMENT TRUST) -- statements of operations, changes in
net assets, and financial highlights for the three months ended March 31,
1997 and the year ended December 31, 1996. The statement of changes in net
assets for the year ended December 31, 1995 and the financial highlights for
each of the years or periods in the four-year period ended December 31, 1995
were audited by other auditors whose report dated February 15, 1996
expressed an unqualified opinion thereon.
EVERGREEN BALANCED FUND (ONE OF THE PORTFOLIOS CONSTITUTING EVERGREEN
INVESTMENT TRUST) -- statements of operations for the three months ended
March 31, 1997 and the year ended December 31, 1996, statements of changes
in net assets for the three months ended March 31, 1997 and each of the
years in the two-year period ended December 31, 1996, and financial
highlights for the three months ended March 31, 1997 and each of the years
in the five-year period ended December 31, 1996.
EVERGREEN FOUNDATION FUND (ONE OF THE PORTFOLIOS CONSTITUTING EVERGREEN
FOUNDATION TRUST) -- statements of operations, changes in net assets, and
financial highlights for the three months ended March 31, 1997 and the year
ended December 31, 1996. The statement of changes in net assets for the year
ended December 31, 1995 and the financial highlights for each of the years
or periods in the four-year period ended December 31, 1995 were audited by
other auditors whose report dated February 15, 1996 expressed an unqualified
opinion thereon.
EVERGREEN TAX STRATEGIC FOUNDATION FUND (ONE OF THE PORTFOLIOS CONSTITUTING
EVERGREEN FOUNDATION TRUST) -- statements of operations, changes in net
assets, and financial highlights for the three months ended March 31, 1997
and the year ended December 31, 1996. The statement of changes in net assets
for the year ended December 31, 1995 and the financial highlights for each
of the years or periods in the two-year period ended December 31, 1995 and
the period from November 2, 1993 (commencement of operations) through
December 31, 1993 were audited by other auditors whose report dated February
15, 1996 expressed an unqualified opinion thereon.
These financial statements and financial highlights are the responsibility
of the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Evergreen American Retirement Fund, Evergreen Balanced Fund, Evergreen
Foundation Fund, and Evergreen Tax Strategic Foundation Fund as of March 31,
1997, the results of their operations for three months ended March 31, 1997, the
changes in their net assets for the three months ended March 31, 1997 and for
the year ended December 31, 1996, and the financial highlights for each of the
years or periods specified in the first paragraph above in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
May 2, 1997
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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
George O. Martinez
Secretary
Sheryl Hirschfeld
Assistant Secretary
Stephen W. St. Clair
Assistant Treasurer
* These individuals are not trustees for Balanced.
+ Trustee Emeritus
FEDERAL INCOME TAX STATUS OF DISTRIBUTIONS
(UNAUDITED)
During the fiscal period ended March 31, 1997, 79.13% of total dividends from
net investment income paid by Tax Strategic were from tax-exempt interest
income.
For the corporate taxpayers, 57.39%, 37.48%, 42.49% and 48.23% of the ordinary
income distributions paid during the fiscal period ended March 31, 1997 by
American Retirement, Balanced, Foundation and Tax Strategic, respectively,
qualified for the corporate dividends received deduction.
<PAGE>
This report was prepared primarily for the information of fund shareholders. It
is authorized for distribution if preceded or accompanied by the fund's current
prospectus. The prospectus contains important information about the fund,
including fees and expenses. Read it carefully before you invest or send
money. For a free prospectus on other Evergreen Keystone Funds, contact your
financial adviser or call Evergreen Keystone.
NOT May lose value
FDIC No bank guarantee
INSURED
Evergreen Keystone Distributor, Inc.
Evergreen Keystone(SM) is a Service Mark of Evergreen Keystone Investment
Services, Inc. Copyright 1997.
49372 540980
5/97
