EVERGREEN
FOUNDATION
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1995
THE EVERGREEN FUNDS [LOGO]
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Dear Fellow Shareholder: July 17, 1995
During the first half of 1995, Evergreen Foundation Fund (Class Y, no-load
shares) continued its record of leadership performance among balanced funds. The
Fund's total return for the six months ended June 30, 1995, was +16.8%+, as
compared with +13.7% for the Lipper Balanced Funds Average++ of 212 balanced
funds. The Fund's total return was #1 among all 56 balanced funds tracked by
Lipper Analytical Services, for the period since its inception on January 2,
1990, through June 30, 1995. Evergreen Foundation Fund also ranked #1 among 59
balanced funds tracked by Lipper for the five-year period ended June 30. The
Fund was ranked #15 by Lipper among 170 balanced funds for the 12 months ended
June 30. The chart below compares the Fund's performance (Class Y, no-load
shares) with that of the Lipper Balanced Fund's Average. (Please see the fourth
page of this letter for additional performance information.)
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PERFORMANCE AS OF JUNE 30, 1995+
(Class Y, No-load Shares)
LIPPER
EVERGREEN BALANCED
FOUNDATION FUNDS
FUND AVERAGE
---------- --------
One-year total return +20.0% +16.0%
Three-year total return +49.0% +32.8%
Three-year average annual
compound return +14.2% +9.9%
Five-year total return +114.1% +64.3%
Five-year average annual
compound return +16.5% +10.4%
Total return since
inception on 1/2/90 +133.2% +67.1%
Average annual compound
return since inception +16.7% +9.7%
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The Fund provided a rewarding program of asset allocation. The largest
sector, common stocks, accounting for 48.5% of the portfolio at June 30,
provided a total return of +21.0% during the first half of 1995. The long-term
bond holdings, 29.6% of net assets, provided a total return of +17.1%. The
short-term cash equivalent holdings, 19.4% of net assets, provided a total
return of +3.1%.
STOCKS
The common stock performance during the first half of the year was led by
the Fund's three largest holdings in the semi-conductor segment of the
electronic technology industry: Intel Corp., +95.7%, Micron Technology, +91.3%,
and Texas Instruments, +87.9%. Intel is the Fund's largest equity holding,
accounting for 2.9% of Fund assets. The current position was initiated in 1992,
when we recognized that the shares represented an under-appreciated growth
opportunity. Investment in these shares illustrated our basic strategy of
commitment to equities which we see as offering unusual growth when investors,
in general, are unenthusiastic or even skeptical about these opportunities.
Similarly, in the residential construction finance sector, the Fund benefited
from three major increases: Countrywide Credit Industries, +61.3%, Capstead
Mortgage Corp., +58.1%, and MGIC Investment Corp., +40.8%. The third group in
the top performers for the first half illustrated yet another aspect of this
search for undervalued growth: banks with strong business franchises and
excellent business turnaround strategies. Here, the Fund's top gainers were
Baybanks, +50.1%, Bank of Boston, +44.5%, Citicorp, +38.3%, and Cape Cod Bank &
Trust, +37.6%.
We had our disappointments as well. Most notable in terms of decline were
the two issues representing our small commitment in Mexican companies*,
purchased after last year's great fall of the Mexican stock market and the peso.
Each of the issues, Grupo Sidek, S.A. de C.V., -56.1%, and Telefonos de Mexico,
S.A.., de C.V., -24.8%, has, subsequent to the end of the first half,
experienced a sizable recovery, although they are still well down from their
highs prior to the onset of the Mexican financial crisis. Negative results were
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FIGURES REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE FUTURE RESULTS.
+ Performance figures include reinvestment of income dividends and capital gain
distributions. Investment return and principal value will fluctuate.
Investors' shares, when redeemed, may be worth more or less than their
original cost.
++ Source: Lipper Analytical Services Inc., an independent mutual funds
performance monitor. Rankings do not take into consideration the effect of
sales charges.
* International investing may involve certain additional risks such as currency
fluctuations and political instability.
8/95
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also encountered in the managed care sector with a decline of 18.1% in U.S.
HealthCare, Inc., and 17.4% in Living Centers of America, Inc. Again, each of
these has had a significant recovery since the end of the first half.
The outstanding overall sector for the equity portfolio during the first
half of the year was electronics with an actual as-weighted performance of
+76.6%. Next, were the banks with an actual as-weighted performance of +28.3%.
The weakest performing group was telephone utilities, -5.0%.
New commitments made during 1995 were all viewed as undervalued growth
opportunities and focused particularly on companies where we believed there was
a misperception as to the corporate growth dynamics. The largest single purchase
was in the shares of Texas Instruments Inc., made early in the year at a time
when security analysts had not focused on the rapidly growing demand
possibilities for its memory chips as a result of the greater memory requirement
needed for Intel's Pentium chip. To this writing, the price of the shares has
more than doubled from our first purchase in February. Of a quite different
nature was another large purchase, PPG Industries, Inc. Its shares were
comparatively depressed as interest rates were close to their recent peaks and
investors generally assumed that its primary earning power was in paints and
glass for construction and cars. We believed that the market was
under-estimating much improved profitability of its very substantial,
international chemical operations. These shares have risen 13% since initial
purchase, to this writing. The same kind of fundamental analysis, together with
broader industry and economic forecasting of future demand, was reflected in the
other commitments made during the six months, whether they were H & R Block,
Hewlett-Packard, Procter & Gamble, Burlington Northern, or Associated Estates
Realty Corp.
The underlying theme of our equity purchases continued to be the search for
undervaluation as a means of reducing portfolio risk and increasing potential
appreciation when normal valuation returns.
Another facet of undervaluation, characteristic of the experience in the
Evergreen Funds, is that of the benefits of mergers or acquisitions. During the
six months, one transaction was announced among portfolio holdings: the
acquisition of Lin Broadcasting Corp. by AT&T Corp. at $127.50 per share. Since
the end of the fiscal period, a major bank merger has been announced involving
one of the Fund holdings, First Chicago Corp., which is to be merged with NBD
Bancorp, Inc. At this writing, it is selling at a 29% increase over the Fund's
first purchase.
FIXED INCOME
The fixed income investment allocation of the Fund has continued to be in
U.S. Government or Agency obligations. During the half year, we purchased $84
million of additional U.S. Treasury obligations, the bulk of which was in
maturities of 20 years or more. Toward the end of the period, a purchase was
also made in an issue with an intermediate (9-year) maturity with the aim of
benefiting by any decline in short-to-intermediate rates which might occur as
short-term rates are reduced. The Federal Funds rate reduction occurred after
the end of the quarter, with a one-quarter percent cut. We have basically
positioned the Fund with a long maturity profile, which continues to be offset
by a quite significant cash equivalent position. Our strategy during the six
months was to closely monitor economic conditions and interest rates, and to add
to our long-term or intermediate holdings as we saw prospective rate declines.
Overall, during the six months, long-term U.S. Treasury yields declined from
7.87% to 6.64%.
We are continuing a program of concentration in U.S. Treasury obligations
as the lowest risk sector of the bond market, where changes in interest rates
can most readily be taken advantage of through the utmost liquidity and lowest
trading costs in the bond market.
The convertible bond segment of the portfolio remained comparatively small,
as we saw few exceptional new opportunities for capital appreciation with above
average return and minimal risk. The largest new holding acquired during the
period was in the convertible bonds of Time Warner, Inc., 8.75% due 1/10/15. We
believe that Time Warner has the ingredients to develop as an undervalued growth
asset, and that the most prudent investment vehicle for participating in this
highly leveraged company is through these convertible debentures.
Entering the second half of the year, we see a widening search for dynamic,
high-reward investment opportunities. The search will, we believe, intensify as
investors seek out the most promising sectors and companies for new equity
investment in a less ebullient economy. The leaders of the first half, notably
technologies, are being looked upon by many as vulnerable, particularly given
the recent sizable gains. Much depends on interest rates. Industrial and
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financial sectors, which by historical standards are conservatively valued, can
gain accelerated growth dynamics if credit is significantly stimulated. The
areas for renewed strength with such stimulus include those relating to housing,
credit retailing, and lending. But, what if Federal Reserve policy takes a very
cautious approach? Minor adjustments in interest rates to facilitate domestic
stability without disturbing foreign holders of dollars is, we think, a likely
course. The Federal Reserve will be testing the international markets, judging
reactions to the pending legislation on Federal budget reductions, to the pace
of American growth, and to the still quiescent, but visible trends of inflation.
Outstanding growth opportunities, we judge, are likely to continue to
emerge from the highly innovative, fast-moving technological sectors of the
market. Such opportunities may well be stimulated by mergers, as companies
position themselves for product and service variety in an environment where
business franchise values are a stronger asset than tangible properties. The
Lotus Development Corp. acquisition proposed by IBM and the Computer Associates
International bid for Legent Corp. may well be the forerunners of a series of
such transactions on the part of both hardware and software companies whose
continuing leadership requires dominance in specific software or information
sources. Merger and acquisition activity will likely continue to accelerate, we
believe, as public companies seek to strengthen their business franchises and
product offerings without facing the lag time of large new capital investments
or product development. Recently improved stock prices will facilitate this kind
of merger and acquisition, as will the much improved balance sheets of
companies, the result of four years of rising income. The lower dollar also
provides many value opportunities for acquisitions by foreign acquirers.
Financial institutions will continue their trends of consolidation, with similar
goals of expansion of franchises and enhancement of earnings opportunity in
mind.
The foregoing trends should support a broadening of investor focus, once
again evaluating smaller companies as candidates for acquisition when they hold
an especially strong product or service position in a growing business sector.
Investors will seek companies which offer rising productivity, franchise
strengthening, and strength of near-term growth trends.
Over the months ahead, we expect a greater than usual investor
concentration on current economic trends. The fact that the Federal Funds rate
was reduced by one-quarter percent has begged the question of whether it is a
lagging move which is but a prelude to a significant series of further cuts, or
whether it is an accommodation to a slight slow-down. With this issue of Federal
Reserve interest rate trends basically opened, but unresolved, the likelihood is
that every employment figure, every inventory figure, every business capital
investment, and consumer sentiment figure, will be studied and discussed to find
the basis for future investment trends. Just as the one-quarter percent
reduction created a quick market shift, with buying in cyclical stocks and
selling in defensive consumer-income-related growth stocks, so each apparent
shift or confirmation of trends is likely to create new volatilities for the
stock market. In this environment, and considering the current historically high
level of the stock indices, a continuing volatility of prices and volume can be
expected. Careful positioning for corporate earnings growth and business values
will be required for effective portfolio management in what may well become an
often distracting, very short-term-oriented equity investment environment. The
fixed income markets will also, of course, be impacted by these same short-term
trend shift, although we believe the fixed income markets will likely sustain
their strength in this environment of subdued inflation and cooled economic
growth.
We greatly appreciate the continued interest of Evergreen Foundation Fund
shareholders, and we welcome a growing number of new investors in the Fund. The
first half of 1995 has been a very rewarding period for all shareholders. We are
confident that our essentially defensive investment policies, together with our
search for undervalued growth, can meet the challenge which you have given us.
Very truly yours,
/s/ Stephen A. Lieber
Stephen A. Lieber
Chairman
Evergreen Asset
Management Corp.
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PERFORMANCE AT A GLANCE
Performance for periods ended June 30, 1995*
Lipper
Class Y Class A Class B Class C Balanced Funds
Shares Shares Shares Shares Average**
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6-month total return +16.8% +11.2% +11.2% +15.2% +13.7%
12-month total return +20.0% +14.2% +14.4% +18.3% +16.0%
3-year average annual
compound return +14.2% +12.3% +13.2% +14.0% +9.9%
5-year average annual
compound return +16.5% +15.3% +16.1% +16.3% +10.4%
Average annual compound
return since inception
on 1/2/90 +16.7% +15.6% +16.5% +16.5% +9.7%
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FIGURES REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS.
* Performance figures include reinvestment of income dividends and capital gain
distributions. Investment return and principal value will fluctuate. Investors'
shares, when redeemed, may be worth more or less than their original cost.
Effective 1/3/95, the Fund issued additional classes of shares, designated as
Class A, Class B and Class C. The Fund's performance for its Class A shares
(subject to a maximum front-end sales charge of 4.75%), its Class B shares
(subject to a maximum contingent deferred sales charge of 5%) and its Class C
shares (subject to a 1% contingent deferred sales charge within the first year
of purchase) for the period prior to 1/3/95, has been calculated based on the
performance of the existing no-load (Class Y) shares as adjusted for any
front-end or back-end sales charges.
Performance data prior to 1/3/95 does not reflect any 12b-1 fees, and if
reflected the returns would be lower. Performance data beginning from 1/3/95
reflects actual performance including 12b-1 fees.
The Fund may incur 12b-1 expenses up to an annual maximum of .75 of 1% of its
aggregate average daily net assets attributable to Class A shares and 1% of its
aggregate average daily net assets attributable to each of its Class B shares
and Class C shares. For the foreseeable future, however, management intends to
limit such payments on the Class A shares to .25 of 1% of the Fund's aggregate
average daily net assets.
The adviser is currently absorbing a portion of the expenses for the Fund's
Class A, B and C shares. Had expenses not been absorbed, returns for Class A, B,
and C shares would have been lower.
** Source: Lipper Analytical Services, Inc., an independent mutual funds
performance monitor.
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STATEMENT OF INVESTMENTS
June 30, 1995 (unaudited)
COMMON STOCKS--48.5% SHARES VALUE
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BANKS--8.4%
AmSouth Bancorporation 16,600 $ 541,575
BancFirst Corp. 40,000 610,000
Bank of Boston Corp. 185,000 6,937,500
Bankers Trust New York Corp. 60,000 3,720,000
Barnett Banks, Inc. 36,500 1,870,625
Baybanks, Inc. 55,000 4,358,750
CB Bancshares, Inc. 20,000 610,000
Cape Cod Bank & Trust Co. 30,500 1,113,250
Central Fidelity Banks, Inc. 55,000 1,677,500
Citicorp 60,000 3,472,500
Crestar Financial Corp. 48,500 2,376,500
Family Bancorp 35,000 778,750
First Chicago Corp. 55,000 3,293,125
First Security Corp. 5,000 140,000
First Union Corp.** 58,500 2,647,125
Hibernia Corp. Cl. A 70,801 628,358
Meridian Bancorp, Inc. 110,000 3,781,250
Mississippi Valley Bancshares, Inc. 25,000 550,000
Morgan (J.P.) & Co., Inc. 50,000 3,506,250
Seacoast Banking Corporation
of Florida Cl. A 78,000 1,443,000
State Street Boston Corp. 30,000 1,106,250
U.S. Trust Corp. 35,000 2,520,000
Victoria Bankshares, Inc. 18,000 463,500
-----------
48,145,808
-----------
BUSINESS EQUIPMENT
& SERVICES--0.8%
International Business Machines
Corp. 26,000 2,496,000
Pitney Bowes, Inc. 52,600 2,018,525
-----------
4,514,525
-----------
CHEMICALS--1.3%
Fuller (H.B.) Co. 40,000 1,480,000
Nalco Chemical Co. 40,000 1,455,000
PPG Industries, Inc. 75,000 3,225,000
Praxair, Inc. 20,000 500,000
Sigma-Aldrich Corp. 15,000 736,875
-----------
7,396,875
-----------
CONSUMER PRODUCTS
& SERVICES--4.7%
American Greetings Corp. Cl. A 25,000 734,375
Armstrong World Industries, Inc. 77,000 3,859,625
Block (H.& R.), Inc. 50,000 2,056,250
C P C International, Inc. 35,000 2,161,250
* Consolidated Products, Inc. 21,192 275,496
Kellwood Co. 22,500 382,500
Kimberly-Clark Corp. 62,000 3,712,250
* Lin Broadcasting Corp. 5,000 632,500
* Lin Television Corp. 2,500 84,062
Minnesota Mining
& Manufacturing Co. 47,000 2,690,750
* Nautica Enterprises, Inc. 22,700 822,875
Procter & Gamble Co. 20,000 1,437,500
Scott Paper Co. 60,000 2,970,000
Whirlpool Corp. 60,700 3,338,500
-----------
25,157,933
-----------
ELECTRICAL EQUIPMENT
& ELECTRONICS--5.1%
Avnet, Inc. 50,000 2,418,750
* Cisco Systems, Inc. 25,000 1,264,063
Hewlett-Packard Co. 18,000 1,341,000
Intel Corp. 262,200 16,600,538
Micron Technology, Inc. 16,000 878,000
Motorola, Inc. 10,000 671,250
Texas Instruments, Inc. 47,000 6,292,125
-----------
29,465,726
-----------
ENERGY--0.4%
Exxon Corp. 30,000 2,118,750
-----------
FINANCE & INSURANCE--5.7%
AMBAC, Inc. 52,300 2,098,537
American International Group, Inc. 28,000 3,192,000
Capstead Mortgage Corp. 20,000 537,500
Countrywide Credit Industries,
Inc. 105,250 2,210,250
Countrywide Mortgage
Investments, Inc. 45,000 573,750
Federal Home Loan
Mortgage Corp. 10,000 687,500
Federal National
Mortgage Association 100,900 9,522,437
Hartford Steam Boiler Inspection
& Insurance Co. 41,000 1,819,375
Household International, Inc. 35,800 1,772,100
John Nuveen Co. (The) Cl. A 108,000 2,592,000
MBIA, Inc. 40,000 2,660,000
MGIC Investment Corp. 120,600 5,653,125
Raymond James Financial, Inc. 30,300 587,062
-----------
33,905,636
-----------
HEALTH CARE PRODUCTS
& SERVICES--6.3%
* Alza Corp. 107,500 2,512,812
Bristol-Myers Squibb Co. 50,000 3,406,250
Caremark International, Inc. 170,000 3,400,000
Columbia/HCA Healthcare Corp. 40,000 1,730,000
Johnson & Johnson 51,000 3,448,875
Lilly (Eli) & Co. 42,000 3,297,000
* Lincare Holdings, Inc. 65,000 1,726,563
* Living Centers of America, Inc. 15,000 406,875
McKesson Corp. 69,600 3,253,800
Merck & Co., Inc. 74,758 3,663,142
Pfizer, Inc. 25,000 2,309,375
Schering-Plough Corp. 86,000 3,794,750
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STATEMENT OF INVESTMENTS (CONTINUED)
June 30, 1995 (unaudited)
COMMON STOCKS--CONTINUED SHARES VALUE
------ -----
HEALTH CARE PRODUCTS
& SERVICES--CONTINUED
Shared Medical Systems Corp. 9,200 $ 369,150
* Therapeutic Discovery Corp. Units++ 1,750 13,343
U.S. Healthcare, Inc. 87,500 2,679,687
-----------
36,011,622
-----------
INDUSTRIAL, COMMERCIAL GOODS
& SERVICES--3.5%
Briggs & Stratton Corp. 25,000 862,500
Chrysler Corp. 122,000 5,840,750
General Electric Co. 161,000 9,076,375
Ingersoll-Rand Co. 15,000 573,750
Paccar, Inc. 44,000 2,057,000
* Strattec Security Corp. 6,000 73,500
Superior Surgical
Manufacturing Co., Inc. 44,900 471,450
Tecumseh Products Co. Cl. A 12,000 528,000
Trinity Industries, Inc. 25,000 831,250
-----------
20,314,575
-----------
REAL ESTATE
& CONSTRUCTION--7.6%
* Alexander's, Inc. 20,000 1,110,000
Amli Residential Properties Trust 10,000 190,000
Arbor Property Trust 53,400 387,150
Associated Estates Realty Corp. 14,000 295,750
Bay Apartment Communities, Inc. 93,500 1,823,250
Bradley Real Estate, Inc. 10,000 161,250
Cali Realty Corp. 35,000 678,125
Carr Realty Corp. 36,500 629,625
Centex Corp. 37,600 1,062,200
Columbus Realty Trust 82,000 1,537,500
Continental Homes Holding Corp. 87,800 1,525,525
DeBartolo Realty Corp. 120,000 1,755,000
Essex Property Trust, Inc. 105,200 1,906,750
Factory Stores of America, Inc. 72,300 1,482,150
FelCor Suite Hotels, Inc. 45,000 1,147,500
Gables Residential Trust 100,200 2,054,100
Glimcher Realty Trust 100,000 2,075,000
* Grupo Sidek, S.A. de
C.V. Sponsored ADR 147,000 679,875
Horizon Outlet Centers, Inc. 96,800 2,250,600
Irvine Apartment Communities, Inc. 5,000 86,250
JP Realty, Inc. 30,000 615,000
Kranzco Realty Trust 140,000 2,502,500
Liberty Property Trust 15,000 294,375
* M/I Schottenstein Homes, Inc. 10,000 87,500
McArthur/Glen Realty Corp. 69,400 1,014,975
* Miles Homes, Inc. 95,000 178,125
Mills Corp. 65,000 1,291,875
Security Capital Industrial Trust 65,000 1,056,250
Security Capital Pacific Trust 111,992 1,945,861
Sovran Self Storage, Inc. 100,000 2,300,000
Spieker Properties, Inc. 50,000 1,118,750
* Starwood Lodging Trust
Paired Shares+ 42,500 $ 998,750
Storage Equities, Inc. 90,000 1,473,750
Storage USA, Inc. 32,900 933,537
Tanger Factory Outlet Centers, Inc. 57,900 1,469,212
Taubman Centers, Inc. 50,000 475,000
Tucker Properties Corp. 72,900 883,912
Urban Shopping Centers, Inc. 25,000 518,750
Vornado Realty Trust 10,000 348,750
-----------
42,344,472
-----------
RETAILING & DISTRIBUTION--2.1%
Borders Group, Inc. 60,000 862,500
Fingerhut Companies, Inc. 63,900 998,437
Home Depot, Inc. 25,000 1,015,625
Lowe's Companies, Inc. 55,000 1,643,125
* Marisa Christina, Inc. 50,000 718,750
Mercantile Stores Co., Inc. 134,400 6,249,600
Penney (J.C.) Co., Inc. 50,000 2,400,000
-----------
13,888,037
-----------
THRIFT INSTITUTIONS--0.4%
BSB Bancorp, Inc. 62,250 1,867,500
Standard Federal Bancorporation 20,000 672,500
-----------
2,540,000
-----------
TRANSPORTATION--1.1%
Burlington Northern, Inc. 30,000 1,901,250
Roadway Services, Inc. 47,000 2,220,750
Union Pacific Corp. 40,000 2,215,000
-----------
6,337,000
-----------
UTILITIES-ELECTRIC--0.3%
TNP Enterprises, Inc. 31,100 501,487
Texas Utilities Co. 40,000 1,375,000
-----------
1,876,487
-----------
UTILITIES-TELEPHONE--0.8%
GTE Corp. 40,000 1,365,000
Southern New England
Telecommunications, Corp. 32,600 1,149,150
Telefonos de Mexico, S.A.
de C.V. Sponsored ADR 80,000 2,370,000
-----------
4,884,150
-----------
TOTAL COMMON STOCKS
(COST $241,117,037) 278,901,596
-----------
CONVERTIBLE
PREFERRED STOCKS--0.3%
ELECTRICAL EQUIPMENT
& ELECTRONICS--0.3%
Westinghouse Electric Corp.
$1.30 Cumulative Series C
(COST $1,568,800) 100,000 1,500,000
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CONVERTIBLE PRINCIPAL
DEBENTURES--2.2% AMOUNT VALUE
--------- -----
BUILDING & CONSTRUCTION--0.4%
Continental Homes Holding Corp.
6.875% Due 03/15/02 $ 600,000 $ 554,250
Engle Homes, Inc.
7.00% Due 03/01/03 500,000 430,000
Interface, Inc.
8.00% Due 09/15/13 1,300,000 1,274,000
-----------
2,258,250
-----------
CONSUMER PRODUCTS
& SERVICES--0.8%
Bell Sports Corp.
4.25% Due 11/15/00 1,770,000 1,323,075
Time Warner, Inc.
8.75% Due 01/10/15 3,000,000 3,138,750
-----------
4,461,825
-----------
ENERGY--0.2%
Seitel, Inc.
9.00% Due 03/31/02 400,000 1,340,000
-----------
ENVIRONMENTAL
SERVICES--0.1%
Weston (Roy F.) Inc.
7.00% Due 04/15/02 300,000 249,000
-----------
HEALTH CARE PRODUCTS
SERVICES--0.1%
Maxxim Medical, Inc.
6.75% Due 03/01/03 750,000 757,500
Regency Health Services, Inc.
6.50% Due 07/15/03 200,000 203,000
-----------
960,500
-----------
RETAILING & WHOLESALE--0.6%
Avnet, Inc.
6.00% Due 04/15/12 2,000,000 2,295,000
Big B, Inc.
6.50% Due 03/15/03 800,000 956,000
-----------
3,251,000
-----------
TOTAL CONVERTIBLE
DEBENTURES
(COST $11,946,725) 12,520,575
-----------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS--32.5%
LONG TERM--29.6%
Federal National
Mortgage Association
8.10% Due 08/12/19 1,000,000 1,120,741
Tennessee Valley Authority
7.25% Due 07/15/43 8,000,000 7,730,800
U.S. Treasury Bonds
13.75% Due 08/15/04 2,000,000 3,027,500
8.375% Due 08/15/08 15,000,000 16,907,790
10.00% Due 05/15/10 7,000,000 8,852,802
10.625% Due 08/15/15 1,000,000 1,434,686
7.25% Due 05/15/16 39,000,000 41,535,000
8.125% Due 08/15/19 30,000,000 35,006,250
8.50% Due 02/15/20 2,000,000 2,426,250
8.125% Due 05/15/21 15,000,000 17,550,000
8.00% Due 11/15/21 4,000,000 4,623,750
7.625% Due 11/15/22 7,000,000 7,818,125
U.S. Treasury Notes
7.25% Due 05/15/04 13,000,000 13,877,500
7.25% Due 08/15/04 8,000,000 8,545,000
-----------
170,456,194
-----------
SHORT TERM--2.9%
Federal Home Loan
Mortgage Association
5.90% Due 07/20/95 16,713,000 16,660,957
-----------
TOTAL U.S. GOVERNMENT
& AGENCY OBLIGATIONS
(COST $180,745,918) 187,117,151
-----------
COMMERCIAL PAPER--15.8%
American Home Food
Products, Inc.
6.00% Due 07/26/95 8,830,000 8,793,208
AT&T Corp.
5.92% Due 08/10/95 1,800,000 1,788,160
BMW U.S. Capital Corp.
5.95% to 5.97%
Due 07/17 to 08/02/95 7,470,000 7,437,261
Bell Atlantic Financial
Services, Inc.
5.93% Due 07/10/95 580,000 579,140
Consolidated Coal Co.
6.00% Due 07/21/95 4,900,000 4,883,667
Dayton Hudson Corp.
6.00% Due 07/17/95 1,300,000 1,296,533
Deutsche Bank Financial, Inc.
5.90% Due 07/06/95 1,200,000 1,199,017
Golden Managers
Acceptance Corp.
6.00% Due 07/19 to 07/26/95 9,700,000 9,662,033
Heinz, H.J. Co.
5.92% to 5.93%
Due 08/01 to 08/07/95 5,500,000 5,471,426
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
June 30, 1995 (unaudited)
COMMERCIAL PAPER--CONTINUED SHARES VALUE
------ -----
Hercules, Inc.
5.87% Due 08/22/95 $ 1,300,000 $ 1,288,977
IBM Credit Corp.
5.93% Due 07/14/95 3,500,000 3,492,505
Massachusetts College
of Pharmacy & Allied
Health Services
5.98% Due 07/07/95 680,000 679,322
Merrill Lynch & Co., Inc.
5.97% Due 08/03/95 4,500,000 4,475,374
Sherwood Medical Co.
6.00% Due 08/09/95 10,900,000 10,829,150
Sonoco Products Co.
5.90% to 5.95%
Due 07/06 to 07/11/95 8,800,000 8,788,622
Supplier Managers
Acceptance Corp.
5.98% to 6.00%
Due 07/05 to 07/19/95 8,600,000 8,576,536
Whirlpool Corp.
5.98% Due 07/28/95 4,500,000 4,479,819
Xerox Corp.
5.85% Due 07/06/95 7,300,000 7,294,069
------------
TOTAL COMMERCIAL PAPER
(COST $91,014,819) 91,014,819
------------
TOTAL INVESTMENTS
(COST $526,393,299) 99.3% 571,054,141
OTHER ASSETS
& LIABILITIES--NET 0.7 4,305,336
----- ------------
TOTAL NET ASSETS 100.0% $575,359,477
*Non-income producing.
ADR-American Depositary Receipts.
**See Note 4.
+Consists of one share Starwood Lodging Trust and one share Starwood Lodging
Corp. common stock.
++Consists of one share Therapeutic Discovery Corp. common and one Alza Corp.
warrant exercisable for the purchase of 1/8 share Alza Corp. common at $65
per full share from 06/11/96 through 12/31/99.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments at market value (identified cost $526,393,299) $571,054,141
Receivable for investment securities sold 1,502,800
Receivable for Fund shares sold 6,865,547
Receivable from Adviser 2,624
Dividends and interest receivable 4,175,937
Prepaid expenses 75,631
- --------------------------------------------------------------------------------
Total assets 583,676,680
- --------------------------------------------------------------------------------
LIABILITIES:
Due to custodian bank 368,147
Payable for investment securities purchased 6,915,321
Payable for Fund shares repurchased 356,423
Accrued expenses 677,312
- --------------------------------------------------------------------------------
Total liabilities 8,317,203
- --------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital 527,902,914
Accumulated net realized gain on investment transactions 2,864,425
Distributions in excess of net investment income (68,704)
Net unrealized appreciation of investments 44,660,842
- --------------------------------------------------------------------------------
Net assets $575,359,477
================================================================================
CALCULATION OF NET ASSET VALUE PER SHARE:\
CLASS A SHARES
Net asset value per share
($38,291,003/2,744,856 shares of beneficial interest
outstanding) $13.95
Sales charge--4.75% of offering price 0.70
------
Maximum offering price $14.65
======
CLASS B SHARES
Net asset value per share
($116,556,678/8,371,585 shares of beneficial interest
outstanding) $13.92
======
CLASS C SHARES
Net asset value per share
($4,944,577/354,835 shares of beneficial interest outstanding) $13.93
======
CLASS Y SHARES
Net asset value per share
($415,567,219/29,765,554 shares of beneficial interest
outstanding) $13.96
======
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the
Six Months Ended June 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends $ 3,898,808
Interest 6,823,651
- --------------------------------------------------------------------------------
10,722,459
Expenses:
Advisory fee $1,884,758
Distribution fee-Class A shares 22,823
Distribution and shareholder services
fees-Class B shares 253,569
Distribution and shareholder services
fees-Class C shares 12,070
Transfer agent fee 246,665
Registration and filing fees 96,360
Reports and notices to shareholders 28,105
Custodian fee 48,679
Professional fees 24,568
Trustees' fees and expenses 6,644
Insurance expense 6,870
Other 7,677
---------
2,638,788
Less expense reimbursement (11,064)
---------
Total expenses 2,627,724
- --------------------------------------------------------------------------------
Net investment income 8,094,735
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 3,171,370
Net change in unrealized appreciation (depreciation)
of investments 57,446,064
- --------------------------------------------------------------------------------
Net gain on investments 60,617,434
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $68,712,169
================================================================================
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
UNAUDITED) DECEMBER 31, 1994
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 8,094,735 $ 10,250,344
Net realized gain on investments 3,171,370 9,121,276
Net change in unrealized appreciation
(depreciation) of investments 57,446,064 (22,489,557)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 68,712,169 (3,117,937)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME
Class A shares (437,566) --
Class B shares (1,101,715) --
Class C shares (46,524) --
Class Y shares (6,614,736) (10,200,009)
- --------------------------------------------------------------------------------
Total distributions from net investment
income (8,200,541) (10,200,009)
- --------------------------------------------------------------------------------
IN EXCESS OF NET INVESTMENT INCOME
Class A shares (14,626) --
Class B shares (52,243) --
Class C shares (1,835) --
- --------------------------------------------------------------------------------
Total distributions in excess of net
investment income (68,704) --
- --------------------------------------------------------------------------------
NET REALIZED GAINS ON INVESTMENTS
Class A shares (265,883) --
Class B shares (799,742) --
Class C shares (35,989) --
Class Y shares (3,585,159) (6,648,790)
- --------------------------------------------------------------------------------
Total distributions from net realized
gains on investments (4,686,773) (6,648,790)
- --------------------------------------------------------------------------------
Total distributions to shareholders (12,956,018) (16,848,799)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net increase resulting from Fund share
transactions 188,083,529 111,095,803
- --------------------------------------------------------------------------------
Net increase in net assets 243,839,680 91,129,067
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 331,519,797 240,390,730
- --------------------------------------------------------------------------------
End of period (including undistributed net
investment income/(distributions in
excess of net investment income) of
($68,704) and $105,806, respectively) $575,359,477 $331,519,797
================================================================================
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (unaudited)
NOTE 1--ORGANIZATION
The Evergreen Foundation Fund (the "Fund") is one of two portfolios of The
Evergreen Foundation Trust (the "Trust"). The Trust was organized in the
Commonwealth of Massachusetts as a Massachusetts business trust on October 19,
1989. The Fund is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a diversified open-end management investment company.
The Fund commenced investment operations on January 2, 1990.
NOTE 2--ISSUANCE OF MULTIPLE CLASSES OF SHARES
On January 3, 1995, the Fund adopted a multiple class distribution program and
created three new classes of shares designated Class A, Class B and Class C
shares. The then existing shares of the Fund were designated Class Y (no load)
shares. Class A shares are offered with a front-end sales charge of 4.75% which
will be reduced on purchases in excess of $100,000. Class B shares are offered
with a contingent deferred sales charge payable when shares are redeemed which
would decline from 5% to zero over a seven year period (after which it is
expected that they will convert to Class A shares). Class C shares are offered
with a contingent deferred sales charge of 1% on shares redeemed during the
first year of purchase. All four classes of shares have identical voting,
dividend, liquidation and other rights, except that certain classes bear
different distribution expenses (see Note 5) and have exclusive voting rights
with respect to their distribution plan.
NOTE 3--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
SECURITY VALUATION: Portfolio securities that are listed on a securities
exchange are valued at the last quoted sales price on the day the valuation
is made. Price information on listed securities is taken from the exchange
where the security is primarily traded. Such securities not traded on the
valuation date are valued at the mean between the bid and asked price.
Unlisted securities for which market quotations are readily available are
valued at a price quoted by one or more brokers. Debt securities (other than
short-term obligations) are normally valued on the basis of valuations
provided by a pricing service when such prices are believed to reflect the
value of such securities. Securities for which no quotations are readily
available are valued at fair value as determined in good faith by the
Trustees. Short-term obligations purchased with maturities of 60 days or less
are stated at amortized cost which approximates market value. Cost of
securities is determined and gains and losses are based upon the specific
identification method for both financial statement and Federal income tax
purposes.
FEDERAL TAXES: It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies, and to
distribute timely all of its taxable income and net capital gains to its
shareholders. Therefore, no Federal income or excise tax provision is
required.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded on
the ex-distribution date. The amount of distributions from net investment
income and net realized capital gains are determined in accordance with
Federal income tax regulations, which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital
accounts based on their Federal tax-basis treatment: temporary differences do
not require reclassification. Distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as distributions in excess of net
<PAGE>
- --------------------------------------------------------------------------------
investment income or net realized capital gains. To the extent distributions
exceed current and accumulated earnings and profits for Federal income tax
purposes, they are reported as distributions of paid-in capital.
ALLOCATION OF EXPENSES: Expenses specifically identifiable to the Fund or to
a class of shares are charged to the Fund or class. Other expenses common to
the Fund or the Trust as a whole, including the compensation of all
non-affiliated Trustees of the Trust, are primarily allocated to the Funds in
the Trust or to the classes in the Fund in proportion to net assets.
OTHER: Security transactions are accounted for on the trade date, the date
the order to buy or sell is executed. Dividend income is recorded on the
ex-dividend date and interest income is recognized on the accrual basis.
NOTE 4--ADVISORY FEE AND RELATED PARTY
TRANSACTIONS
The Adviser, an affiliate of Lieber & Company, is the investment adviser to the
Fund and also furnishes the Fund with administrative services. The Adviser,
which is an indirect, wholly-owned subsidiary of First Union Corporation,
succeeded on June 30, 1994 to the advisory business of the same name but under
different ownership. The Adviser is entitled to a fee, accrued daily and paid
monthly, for the performance of its services at an annual rate of .875 of 1% of
the daily net assets of the Fund. For the six months ended June 30, 1995, the
Adviser voluntarily reimbursed Class A, Class B and Class C shares for certain
class specific expenses in the amount of $2,040 for each of the Class A and
Class B shares and $6,984 for Class C shares. The Adviser may, at its
discretion, revise or cease these voluntary reimbursements at any time.
Lieber & Company is the investment sub-adviser to the Fund and also provides
brokerage services with respect to substantially all security transactions of
the Fund effected on the New York or American Stock Exchanges. For transactions
executed during the six months ended June 30, 1995, the Fund incurred brokerage
commissions of $32,614 with Lieber & Company. For the six months ended June 30,
1995, Lieber & Company was reimbursed by the Adviser, at no additional expense
to the Fund, for its cost of providing investment advisory services to the
Adviser.
At June 30, 1995, the Fund owned 58,500 shares of common stock of First Union at
a cost of $2,358,441. During the six months ended June 30, 1995, the Fund earned
$53,820 in dividend income from this investment. These shares were purchased by
the Fund prior to the acquisition of the Adviser and Lieber & Company by First
Union.
NOTE 5--DISTRIBUTION AND SHAREHOLDER
SERVICES FEES
The Fund has adopted for each if its Class A, Class B and Class C shares, a
Distribution Plan (the "Plans") pursuant to Rule 12b-1 under the Act. Under the
terms of the Plans, the Fund may incur distribution-related and shareholder
servicing-related expenses which may not exceed, as a percentage of average
daily net assets on an annual basis, .75 of 1% of Class A shares and 1% for both
Class B and Class C shares. The payments under the Class A Plan will be
voluntarily limited to .25 of 1%.
In connection with the Plans, the Fund has entered into a distribution agreement
with Evergreen Funds Distributor, Inc. ("EFD"), a subsidiary of Furman Selz
Incorporated, whereby the Fund will compensate EFD for its services at a rate
which may not exceed, as a percentage of average daily net assets on an annual
basis, .25 of 1% for Class A shares and .75 of 1% for both Class B and Class C
shares. Such fees are accrued daily and paid monthly. The Agreement provides
that EFD will use such fees to finance activities that promote the sale of Class
A, Class B and Class C shares.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A portion of the payments under the Class B and Class C Plans, up to .25 of 1%
of average daily net assets may constitute a shareholder services fee. EFD has
entered into a Shareholder Services Agreement with First Union Brokerage
Services ("FUBS"), an affiliate of the Adviser, whereby EFD will compensate FUBS
for certain services provided to shareholders and/or for the maintenance of
shareholder's accounts relating to the Fund's Class B and Class C shares. Such
fees are accrued daily and paid monthly.
NOTE 6--PORTFOLIO TRANSACTIONS
Cost of purchases and proceeds from sales of investments other than short-term
and U.S. Government obligations aggregated $81,750,712 and $40,368,994,
respectively, for the six months ended June 30, 1995. Cost of purchases and
proceeds from sales of long-term U.S. Government obligations aggregated
$84,144,149 and $25,538,281, respectively, during the same period.
The aggregate cost of investments owned at June 30, 1995, for Federal income tax
purposes is $526,476,818 due to sales of certain portfolio securities on which
losses are deferred for Federal income tax purposes. Gross unrealized
appreciation and depreciation of securities was $53,557,043 and $8,979,720,
respectively, resulting in net unrealized appreciation for Federal income tax
purposes of $44,577,323.
NOTE 7--FINANCING AGREEMENT
The Fund has a financing agreement with State Street Bank and Trust Company (the
"Bank"), which provides the Fund with a line of credit, in the aggregate amount
of the lesser of $10,000,000 or 5% of the value of the Fund's net assets, to be
accessed for temporary or emergency purposes. Borrowings under the line bear
interest at 1% above the Bank's cost of funds as set periodically by the Bank
and are secured by securities pledged by the Fund. For the six months ended June
30, 1995, the Fund had no borrowings under the line of credit.
<PAGE>
- --------------------------------------------------------------------------------
NOTE 8--SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $.0001 par value shares of beneficial interest
authorized, divided into four classes, designated Class A, Class B, Class C and
Class Y shares. Transaction in shares of beneficial interest were as follows:
SIX MONTHS ENDED
JUNE 30, 1995
(UNAUDITED)
- ----------------------------------------------
SHARES DOLLARS
- ----------------------------------------------
CLASS A*
Shares sold 2,923,146 $38,319,533
Shares issued on
reinvestments of
distributions 51,682 702,887
Shares redeemed (229,973) (3,116,240)
- ----------------------------------------------
Net increase 2,744,855 $35,906,180
==============================================
CLASS B*
Shares sold 8,338,150 $109,635,002
Shares issued on
reinvestments
of distributions 139,590 1,896,062
Shares redeemed (106,156) (1,431,092)
- ----------------------------------------------
Net increase 8,371,584 $110,099,972
==============================================
CLASS C*
Shares sold 354,572 $4,632,469
Shares issued
on reinvestments
of distributions 6,132 83,103
Shares redeemed (5,870) (79,786)
- ----------------------------------------------
Net increase 354,834 $4,635,786
==============================================
CLASS Y
Shares sold 5,123,490 $68,712,839
Shares issued on
reinvestments
of distributions 713,035 9,615,937
Shares redeemed (3,098,928) (40,887,185)
- ----------------------------------------------
Net increase 2,737,597 $37,441,591
==============================================
TOTAL NET INCREASE
RESULTING FROM FUND
SHARE TRANSACTIONS 14,208,870 $188,083,529
==============================================
YEAR ENDED
DECEMBER 31, 1994
- ----------------------------------------------
SHARES DOLLARS
- ----------------------------------------------
CLASS Y
Shares sold 13,838,993 $176,755,199
Shares issued on
reinvestment
of distributions 1,277,157 15,798,795
Shares redeemed (6,406,804) (81,458,191)
- ----------------------------------------------
Net increase 8,709,346 $111,095,803
==============================================
* For Class A, Class B and Class C shares, the Fund share transaction activity
reflects the period from commencement of class operations, January 3, 1995
through June 30, 1995.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
FOR THE PERIOD JANUARY 3, 1995* THROUGH JUNE 30, 1995
-----------------------------------------------------
PER SHARE DATA CLASS A SHARES CLASS B SHARES CLASS C SHARES
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $12.24 $12.24 $12.24
- --------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .19 .16 .14
Net realized and unrealized gain
on investments 1.88 1.85 1.86
- --------------------------------------------------------------------------------------------------
Total from investment operations 2.07 2.01 2.00
- --------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income (.19) (.16) (.14)
In excess of net investment income (.04) (.04) (.04)
Net realized gains (.13) (.13) (.13)
- --------------------------------------------------------------------------------------------------
Total distributions (.36) (.33) (.31)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $13.95 $13.92 $13.93
==================================================================================================
TOTAL RETURN+ 16.7% 16.2% 16.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $38,291 $116,557 $4,945
Ratios to average net assets:
Expenses++ 1.33% 2.08% 2.27%
Net investment income++ 3.82% 3.10% 2.88%
Portfolio turnover rate** 18% 18% 18%
==================================================================================================
</TABLE>
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales or contingent deferred sales
charges are not reflected.
++ Annualized and net of voluntary expense reimbursements. If the Fund had borne
all expenses that were assumed by the Adviser, the annualized ratios of
expenses and net investment income to average net assets would be 1.35% and
3.80%, respectively, for Class A Shares, 2.09% and 3.09%, respectively, for
Class B Shares and 2.85% and 2.30%, respectively for Class C Shares. Due to
the recent commencement of their offering, the ratios for Class A, Class B
and Class C shares are not necessarily comparable to that of the Class Y
Shares, and are not necessarily indicative of future ratios.
* Commencement of class operations.
** Portfolio turnover rate is calculated for the six months period ended June
30, 1995.
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CLASS Y SHARES
FOR THE PERIOD
SIX MONTHS JANUARY 2, 1990*
ENDED YEAR ENDED DECEMBER 31, TO
JUNE 30, 1995 -------------------------------------- DECEMBER 31,
PER SHARE DATA (UNAUDITED) 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.27 $13.12 $11.98 $10.75 $8.95 $10.00
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .24 .42 .31 .27 .33 1.23 (b)
Net realized and unrealized gain (loss)
on investments 1.81 (.57) 1.55 1.83 2.77 (.59)
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.05 (.15) 1.86 2.10 3.10 .64
- -----------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income (.23) (.42) (.31) (.24) (.33) (1.17)
Net realized gains (.13) (.28) (.41) (.63) (.97) (.52)
- -----------------------------------------------------------------------------------------------------------------------
Total distributions (.36) (.70) (.72) (.87) (1.30) (1.69)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.96 $12.27 $13.12 $11.98 $10.75 $8.95
=======================================================================================================================
TOTAL RETURN++ 16.8% (1.1%) 15.7% 20.0% 36.4% 6.6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $416 $332 $240 $64 $11 $2
Ratios to average net assets:
Expenses 1.09%+ 1.14% 1.20% 1.40% (a) 1.20% (a) -- (a)
Net investment income 3.85%+ 3.51% 2.81% 2.93%(a) 2.86% (a) 15.07%(a)(b)+
Portfolio turnover rate 18% 33% 60% 127% 178% 131%
=======================================================================================================================
</TABLE>
+ Annualized.
++ Total Return is calculated for the periods indicated and is not annualized.
* Commencement of operations.
(a) Net of voluntary advisory fee waivers and expense reimbursements by the
Adviser. If the Fund had borne all expenses that were assumed or waived by
the Adviser, the annualized ratios of expenses and net investment income to
average net assets, exclusive of any applicable state expense limitations,
would be 1.43% and 2.90%, respectively, for the year ended December 31,
1992, 2.58% and 1.48%, respectively, for the year ended December 31, 1991,
and 3.64% and 11.43%, respectively, for the period January 2, 1990 to
December 31, 1990.
(b) Includes receipt of a special dividend representing $.62 per share net
investment income and 7.59% of average net assets.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN FAMILY OF FUNDS
DOMESTIC GROWTH FUNDS
U.S. Real Estate Equity Fund
Aggressive Growth Fund
Limited Market Fund
Evergreen Fund
International/Global Growth Funds
Global Real Estate Equity Fund
Emerging Markets Growth Fund
International Equity Fund
GROWTH AND INCOME FUNDS
Growth & Income Fund
Value Fund
Total Return Fund
Evergreen Foundation Fund
Balanced Fund
American Retirement Fund
SPECIALTY GROWTH AND INCOME FUNDS
Small Cap Equity Income Fund
Tax Strategic Foundation
Utility Fund
INCOME FUNDS
U.S. Government Fund
Fixed Income Fund
STATE TAX-FREE FUNDS
Florida High Income Municipal Bond Fund
Florida Municipal Bond Fund
Georgia Municipal Bond Fund
North Carolina Municipal Bond Fund
South Carolina Municipal Bond Fund
Virginia Municipal Bond Fund
TAX FREE FUNDS
High Grade Tax Free Fund
Short-Intermediate Municipal Fund-California
Short-Intermediate Municipal Fund
MONEY MARKET FUNDS
Money Market Fund
Tax Exempt Money Market Fund
Treasury Money Market Fund
<PAGE>
TRUSTEES
Laurence B. Ashkin
Foster Bam
James S. Howell
Robert J. Jeffries
Gerald M. McDonnell
Thomas L. McVerry
William Walt Pettit
Russell A. Salton, III, M.D.
Michael S. Scofield
INVESTMENT ADVISER
Evergreen Asset Management Corp.
2500 Westchester Avenue
Purchase, New York 10577
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Shereff, Friedman, Hoffman & Goodman
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
DISTRIBUTOR
Evergreen Funds Distributor, Inc.
The investment advisers to the Evergreen Funds are Capital Management Group
of First Union National Bank of North Carolina ("FUNB-NC") and Evergreen
Asset Management Corp., which is wholly owned by FUNB-NC. Investments in
the Evergreen Funds are not endorsed or guaranteed by First Union or its
subsidiaries, are not deposits or other obligations of First Union or its
subsidiaries, are not insured or otherwise protected by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other government
agency, and involve investment risks, including possible loss of principal.
The Evergreen Funds are sponsored and distributed by Evergreen Funds
Distributor, Inc., which is independent of Evergreen and First Union.
EVERGREEN FOUNDATION FUND
2500 Westchester Avenue
Purchase, New York 10577
536582
<PAGE>
