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EVERGREEN
AMERICAN
RETIREMENT
FUND
----------------------
SEMI-ANNUAL
JUNE 30, 1995
THE EVERGREEN FUNDS [LOGO]
<PAGE>
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Dear Fellow Shareholder:
Evergreen American Retirement Fund completed the first half of its 1995
fiscal year on June 30, with a net asset value per share of $11.67 for the Class
Y (no-load) shares. (Please see the third page of this letter for performance
information).
EQUITY REVIEW
Stocks and convertible securities accounted for 73.2% of the Fund's assets
at mid-year. The Fund's best performing industry groups for the six months were
regional banks, healthcare, and chemicals. Regional bank shares responded to
declining interest rates coupled with takeover speculation, fueled by ongoing
industry consolidation. Slower U.S. growth also benefitted the healthcare group
which tends to have stable earnings regardless of the economic environment. The
performance of the chemical stocks was led by a substantial gain in the shares
of W.R. Grace during the first six months. Grace shares rose when top management
was swept out by the board and a major business unit was slated for spin-off in
October, thus leaving the remaining chemical business as a tempting takeover
target.
Not surprisingly, the Fund's weakest performing stocks were generally those
related to consumer spending. Suppliers to the retail industry, such as apparel
and furniture companies, were especially hard hit. In the second half, however,
the retail environment is expected to improve. The Federal Reserve's interest
rate cut in early July should spur retail sales by allaying consumer fears of
impending recession and job loss.
At 10.2% of the portfolio, energy stocks remain the Fund's largest industry
exposure. Despite OPEC's threats in June to boost oil production, we are still
optimistic on the prospects for this group. World oil demand, excluding the
former Soviet Union, is likely to rise at least 2% in 1995 and 2.5% in 1996,
fueled by strong growth in Asia. Cost-cutting and restructuring will continue to
aid earnings growth in 1995, raising the likelihood of dividend increases.
Acquisitions of two companies held in the portfolio were announced during
the period under review. Paco Pharmaceutical Services was taken over by West Co.
for $12.25 per share in cash. The Fund's position was established sixteen months
earlier at an average cost of $10.28 per share. The acquisition of Michigan
National Corp. by National Australian Bank for $110 per share in cash is
currently pending and expected to close later this year. The Fund originally
purchased shares of Michigan National in October, 1994, at $58.75 each.
FIXED INCOME REVIEW
Shortly after the Fed's half percent hike in the Federal Fund's rate to
6.0% on February 1, fixed income markets concluded that this was probably the
last rate increase for awhile. Prices of fixed income securities rose through
most of the first half with the yield on 30-year U.S. Treasurys falling from
7.88% to 6.62% at June 30. As the interest rate increases by the Federal Reserve
Board during 1994 and early 1995 took hold, U.S. Gross Domestic Product (GDP)
growth slowed to 2.7% in the first quarter, down from 5.1% in the fourth
quarter. Retail sales in general, and sales of autos and housing in particular,
slumped in the spring and an inventory correction began that dragged down
industrial production and payroll employment during the second quarter. As signs
of economic weakness mounted in May and June, several economists began
forecasting a recession. With inflation remaining subdued and economic growth
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FIGURES REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS
8/95
<PAGE>
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slowing dramatically, the Federal Reserve reduced the Federal Funds' rate from
6.00% to 5.75% at its July 6 meeting. Recent data suggests that the inventory
correction may have run its course and consumers, who account for two-thirds of
GDP, are spending more. This could set the stage for renewed growth in the
second half of 1995, although the strength of the pickup is as yet unclear. In
light of the Fund's very conservative approach, the fixed income portfolio
remains heavily weighted in the intermediate maturity sector of the market.
As we discussed in the 1994 Annual Report, effective this year, the Fund's
income dividend distribution is moving to a level consistent with the yields on
the issues held in the portfolio. Previously, the Fund's policy was to attempt
to maintain a stable dividend payout. The equity portfolio continues to be
managed defensively, emphasizing dividend-paying stocks with above-market
yields. Our belief remains that this change may benefit shareholders through an
enhanced total return, especially during periods of rising interest rates.
However, Evergreen American Retirement Fund's objectives have not changed; they
remain conservation of capital, current income, and growth.
Very truly yours,
/s/ Stephen A. Lieber /s/ Irene O'Neill
Stephen A. Lieber Irene O'Neill
Chairman Portfolio Manager
Evergreen Asset
Management Corp.
July 15, 1995
<PAGE>
PERFORMANCE AT A GLANCE
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Performance for periods ended June 30, 1995*
CLASS Y CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES
------- ------- ------- -------
6-month total return +11.8% +6.4% +6.3% +10.3%
12-month total return +12.8% +7.4% +7.3% +11.3%
5-year average annual
compound return +10.4% +9.3% +10.0% +10.3%
Average Annual compounded return
since inception on 03/14/88 +9.7% +9.0% +9.6% +9.6%
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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 adopted a multi-class distribution arrangement to
issue 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, 1.00% of its
aggregate average daily net assets attributable to each its Class B 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 waiving 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.
<PAGE>
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STATEMENT OF INVESTMENTS
June 30, 1995 (UNAUDITED)
SHARES/
PRINCIPAL
EQUITY SECURITIES+--73.1% AMOUNT VALUE
--------- -----
BANKS--5.4%
BancorpSouth, Inc. 10,000 $ 387,500
Cape Cod Bank & Trust Co. 8,000 292,000
Citizens Bancorp 15,000 438,750
++First Union Corp. 4,000 181,000
Michigan National Corp. 2,886 306,998
ONBANCorp, Inc.
6.75% Convertible 7,000 182,875
Preferred Series B
Summit Bancorporation 16,500 350,625
----------
2,139,748
----------
BUILDING & CONSTRUCTION--3.3%
Cemex, S.A. de C.V.**
Convertible Subordinated Notes
4.25% Due 11/01/97 $400,000 306,000
Interface, Inc.
Convertible Debenture
8.00% Due 09/15/13 $300,000 294,000
Medusa Corp.
Convertible Debenture
6.00% Due 11/05/03 $450,000 441,000
Southdown, Inc.
2.875% Cumulative Convertible
Preferred Series D 7,000 287,875
----------
1,328,875
----------
BUSINESS EQUIPMENT
& SERVICES--2.6%
Dun & Bradstreet Corp. 15,000 787,500
Reynolds & Reynolds
Co. Cl. A 8,000 236,000
----------
1,023,500
----------
CHEMICALS--4.0%
Dow Chemical Co. 2,000 143,750
Eastman Chemical Co. 8,000 476,000
Grace (W.R.) & Co. 6,000 368,250
Imperial Chemical
Industries PLC-ADR 4,000 195,000
Praxair, Inc. 5,000 125,000
Stepan Co. 15,600 267,150
----------
1,575,150
----------
COMMUNICATION SYSTEMS
PRODUCTS & SERVICES-- 0.6%
* Airtouch Communications, Inc. 5,500 156,750
Allen Group, Inc. 3,000 88,875
----------
245,625
----------
CONSUMER PRODUCTS
& SERVICES--2.7%
* ADT, Inc. 2,130 25,027
* Automated Security
Holdings PLC-ADR 52,649 78,973
Flexsteel Industries, Inc. 20,000 205,000
Max & Erma's Restaurants, Inc.
Convertible Debenture
8.00% Due 09/01/04 $320,000 318,400
Minnesota Mining
& Manufacturing Co. 2,000 114,500
SCI Finance LLC
$3.125 Term Convertible
Shares, Series A 5,000 303,750
----------
1,045,650
----------
ELECTRICAL EQUIPMENT
& ELECTRONICS--3.6%
Cooper Industries, Inc.
Convertible Debenture
7.05% Due 01/01/15 $272,000 283,900
Emerson Electric Co. 1,000 71,500
Hubbell, Inc. Cl. B 5,528 329,282
Joslyn Corp. 20,000 525,000
Thomas & Betts Corp. 3,000 205,125
----------
1,414,807
----------
ENERGY--10.2%
Amoco Corp. 8,000 533,000
Atlantic Richfield Co. 4,000 439,000
Exxon Corp. 7,700 543,812
Kerr-McGee Corp. 3,000 160,875
Mobil Corp. 5,000 480,000
Panhandle Eastern Corp. 4,000 97,500
Seitel, Inc.
Convertible Debenture
9.00% Due 03/31/02 $100,000 335,000
Texaco, Inc. 6,000 393,750
Valero Energy Corp.
$3.125 Cumulative
Convertible Preferred 5,000 230,000
Williams Companies, Inc. 20,000 697,500
YPF Sociedad
Anonima-ADR 5,000 94,375
----------
4,004,812
----------
<PAGE>
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SHARES/
PRINCIPAL
EQUITY SECURITIES (CONTINUED) AMOUNT VALUE
--------- -----
FINANCE & INSURANCE--4.1%
Allstate Corp. (The)
6.76% Exchangeable
Notes Due 04/15/98 $ 10,000 $ 407,500
Equitable Co., Inc.
Convertible Debenture
6.125% Due 12/15/24 $100,000 102,500
Hartford Steam Boiler
Inspection & Insurance Co. 8,000 355,000
Hilb, Rogal & Hamilton Co. 27,000 337,500
Provident Life & Accident
Insurance Co. of America Cl. B 1,500 34,875
Transamerica Corp. 3,000 174,750
Trenwick Group, Inc.
Convertible Debenture
6.00% Due 12/15/99 $200,000 203,000
----------
1,615,125
----------
HEALTH CARE PRODUCTS
& SERVICES--5.6%
ADAC Laboratories 20,000 242,500
Bristol-Myers Squibb Co. 7,000 476,875
FHP International Corp.
5.00% Cumulative Convertible
Preferred Series A 10,000 237,500
Shared Medical Systems Corp. 14,000 561,750
U.S. Healthcare, Inc. 6,000 183,750
Warner-Lambert Co. 2,500 215,937
Zeneca Group PLC-ADR 5,333 273,316
----------
2,191,628
----------
INDUSTRIAL, COMMERCIAL GOODS
& SERVICES--3.8%
Elco Industries, Inc. 18,000 337,500
Federal-Mogul Corp. 14,700 268,275
Graco, Inc. 15,000 403,125
Harris Corp. 5,000 258,125
Kenetech Corp.
8.25% Convertible Preferred
Depositary Shares 15,000 210,000
----------
1,477,025
----------
METAL PRODUCTS
& SERVICES--2.2%
Insteel Industries, Inc. 20,000 150,000
Lindberg Corp. 42,000 275,625
Phelps Dodge Corp. 5,000 295,000
Quanex Corp.
6.88% Convertible Exchangeable
Preferred Depositary Shares 6,000 142,500
----------
863,125
----------
PAPER & PACKAGING--3.5%
Albany International Corp.
Convertible Debenture
5.25% Due 03/15/02 $150,000 144,750
International Paper Co.
Convertible Debenture
5.75% Due 09/23/02 $100,000 124,000
James River Corp. of Virginia
9.00% Cumulative Convertible
Preferred Series P 20,000 495,000
Stone Container Corp.
$1.75 Cumulative Convertible
Preferred Series E 10,000 242,500
Westvaco Corp. 8,000 354,000
----------
1,360,250
----------
PUBLISHING, BROADCASTING
& ENTERTAINMENT--4.9%
AMC Entertainment, Inc.
$1.75 Cumulative
Convertible Preferred 15,000 416,250
* Cox Communications, Inc. 2,460 47,663
Granite Broadcasting Corp.
$1.938 Convertible Preferred 10,300 437,750
McGraw-Hill, Inc. 4,000 303,500
Time Warner, Inc.
Convertible Debenture
8.75% Due 01/10/15 $600,000 627,750
Times-Mirror Co. Cl. A 2,803 66,922
Times-Mirror Co.
$1.374 Convertible
Preferred Series B 1,197 28,578
----------
1,928,413
----------
REAL ESTATE--0.8%
Post Properties, Inc. 10,000 302,500
----------
RETAILING & DISTRIBUTION--5.1%
Baker (J.), Inc.
Convertible Debenture
7.00% Due 06/01/02 $40,000 35,800
Big B, Inc.
Convertible Debenture
6.50% Due 03/15/03 $200,000 239,000
K Mart Corp. 25,000 365,625
Mercantile Stores Co., Inc. 8,000 372,000
Penney (J.C.) Co., Inc. 8,000 384,000
Russ Berrie & Co., Inc. 30,000 416,250
TJX Companies, Inc.
$3.125 Convertible
Preferred Series C 5,000 210,938
----------
2,023,613
----------
<PAGE>
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STATEMENT OF INVESTMENTS (CONTINUED)
June 30, 1995 (UNAUDITED)
SHARES/
PRINCIPAL
EQUITY SECURITIES (CONTINUED) AMOUNT VALUE
--------- -----
TEXTILE & APPAREL--4.3%
Garan, Inc. 12,200 $ 204,350
Guilford Mills, Inc.
Convertible Debenture
6.00% Due 09/15/12 $300,000 288,000
Kellwood Co. 23,000 391,000
Oxford Industries, Inc. 20,000 365,000
VF Corp. 8,000 430,000
----------
1,678,350
----------
TRANSPORTATION--1.5%
Burlington Northern, Inc.
6.25% Cumulative Convertible
Preferred Series A 3,000 202,500
Union Pacific Corp. 7,000 387,625
----------
590,125
----------
UTILITIES--ELECTRIC--3.1%
Illinova Corp. 10,000 253,750
Public Service Enterprise
Group, Inc. 15,000 416,250
TNP Enterprises, Inc. 20,000 322,500
Unicom Corp. 8,000 213,000
----------
1,205,500
----------
UTILITIES--GAS--0.2%
Ensearch Corp.
Convertible Debenture
6.375% Due 04/01/02 $100,000 98,000
----------
UTILITIES--TELEPHONE--1.6%
AT&T Corp. 2,521 133,928
Philippine Long Distance
Telephone Co.
Global Depositary Shares
7.00% Convertible
Preferred Series III 5,000 321,875
Sprint Corp.
8.25% Convertible Preferred 5,000 173,750
----------
629,553
----------
TOTAL EQUITY SECURITIES
(COST $25,678,135) 28,741,374
----------
LONG TERM--2.4%
Nationsbank Corp.
6.50% Due 08/15/03 $1,000,000 970,870
----------
INTERMEDIATE TERM--8.9%
American General
Finance Corp.
Senior Notes
7.125% Due 12/01/99 1,000,000 1,023,079
Ford Motor Credit Co.
5.625% Due 12/15/98 1,000,000 975,170
GTE Southwest, Inc.
5.82% Due 12/01/99 1,000,000 974,464
PepsiCo, Inc.
6.875% Due 05/15/97 500,000 505,450
----------
3,478,163
----------
TOTAL CORPORATE OBLIGATIONS
(COST $4,501,740) 4,449,033
----------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS--14.3%
LONG-TERM-- 4.0%
U.S. Treasury Bonds
7.125% Due 02/15/23 1,500,000 1,583,904
----------
INTERMEDIATE-TERM-- 9.6%
Federal Agricultural Mortgage Corp.
7.03% Due 05/26/98 700,000 718,047
U.S. Treasury Notes
7.50% Due 12/31/96 3,000,000 3,073,126
----------
3,791,173
----------
<PAGE>
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STATEMENT OF INVESTMENTS (CONTINUED)
June 30, 1995 (UNAUDITED)
SHARES/
U.S. GOVERNMENT & AGENCY PRINCIPAL
OBLIGATIONS (CONTINUED) AMOUNT VALUE
--------- -----
SHORT-TERM --0.7%
Federal Home Loan Bank
5.90% Due 07/14/95 $100,000 $ 99,787
Federal Home Loan Mortgage Corp.
5.90% Due 07/10/95 150,000 149,779
----------
249,566
----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (COST $5,625,347) 5,624,643
----------
TOTAL INVESTMENTS
(COST $35,805,222) 98.8% 38,815,050
OTHER ASSETS & LIABILITIES--NET 1.2 490,665
----- -----------
TOTAL NET ASSETS 100.0% $39,305,715
===== ===========
ADR- American Depositary Receipts.
*Non-income producing.
**Exempt from registration under rule 144A of the Securities Act of 1933.
This security may be resold in transactions exempt from registration,
normally to qualified institutional investors. At June 30, 1995 this
security represented 0.8% of net assets.
+ Represents common stock investments unless otherwise indicated. The
breakdown of total equity securities by security type is as follows:
Common Stocks 50.3%
Convertible Preferred Stocks 10.6
Convertible Debentures 9.8
Convertible Preferred Depositary Shares .9
Real Estate Investment Trusts .8
Limited Liability Partnerships .8
----
Total Equity Securities 73.2%
====
++ See note 4.
See accompanying notes to financial statements.
<PAGE>
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STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (UNAUDITED)
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ASSETS:
Investments at market value (identified cost $35,805,222) $38,815,050
Receivable for Fund shares sold 240,822
Receivable from Adviser 7,566
Dividends and interest receivable 371,490
Prepaid expenses 64,901
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Total assets 39,499,829
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LIABILITIES:
Due to custodian bank 66,640
Payable for Fund shares repurchased 45,492
Accrued Advisory fee 24,261
Accrued expenses 57,721
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Total liabilities 194,114
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NET ASSETS:
Paid-in capital 36,531,415
Undistributed net investment income 2,087
Accumulated net realized loss on investment transactions (237,615)
Net unrealized appreciation of investments 3,009,828
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Net assets $39,305,715
================================================================================
CALCULATION OF NET ASSET VALUE PER SHARE:
CLASS A SHARES
Net asset value per share
($158,050/13,547 shares of beneficial interest outstanding) $11.67
Sales charge--4.75% of offering price 0.58
------
Maximum offering price $12.25
======
CLASS B SHARES
Net asset value per share
($953,371/81,821 shares of beneficial interest outstanding) $11.65
======
CLASS C SHARES
Net asset value per share
($9,070/778 shares of beneficial interest outstanding) $11.66
======
CLASS Y SHARES
Net asset value per share
($38,185,224/3,271,637 shares of beneficial interest outstanding) $11.67
======
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See accompanying notes to financial statements.
<PAGE>
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STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends $ 570,192
Interest 495,054
- --------------------------------------------------------------------------------
Total income 1,065,246
Expenses:
Advisory fee $141,014
Distribution fee-Class A shares 113
Distribution and shareholder services
fees-Class B shares 2,276
Distribution and shareholder services
fees-Class C shares 39
Custodian fee 29,565
Transfer agent fee 26,176
Registration and filing fees 25,528
Professional fees 19,284
Trustees' fees and expenses 8,164
Reports and notices to shareholders 7,781
Insurance 4,994
Other 984
--------
266,008
Less expense reimbursement (22,731)
--------
Total expenses 243,277
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Net investment income 821,969
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 65,504
Net change in unrealized appreciation (depreciation)
of investments 3,360,089
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Net gain on investments 3,425,593
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,247,562
================================================================================
See accompanying notes to financial statements.
<PAGE>
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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 $ 821,969 $ 2,106,165
Net realized gain (loss) on investments 65,504 (224,124)
Net change in unrealized appreciation
(depreciation) of investments 3,360,089 (3,049,986)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 4,247,562 (1,167,945)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME
Class A shares (1,986) --
Class B shares (8,417) --
Class C shares (145) --
Class Y shares (819,277) (2,092,261)
- --------------------------------------------------------------------------------
Total distributions from net investment
income (829,825) (2,092,261)
- --------------------------------------------------------------------------------
IN EXCESS OF NET INVESTMENT INCOME
Class A shares (446) --
Class B shares (3,500) --
Class C shares (15) --
- --------------------------------------------------------------------------------
Total distributions in excess of net
investment income (3,961) --
- --------------------------------------------------------------------------------
Total distributions to shareholders (833,786) (2,092,261)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net increase (decrease) resulting from
Fund share transactions (1,284,000) 3,100,635
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets 2,129,776 (159,571)
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 37,175,939 37,335,510
- --------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $2,087 and
$13,904, respectively) $39,305,715 $37,175,939
================================================================================
See accompanying notes to financial statements.
<PAGE>
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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
NOTE 1--ORGANIZATION
The Evergreen American Retirement Fund (the "Fund"), is a portfolio of the
Evergreen American Retirement Trust (the "Trust"). The Trust was organized in
the Commonwealth of Massachusetts as a Massachusetts business trust on December
18, 1987. 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 March 14, 1988.
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. Securities listed on an exchange 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, when held by the Fund, 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 Funds' 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. At December 31,1994 the Fund had a net capital loss carryover of
approximately $30,800 which will be available through December 31, 2002 to
offset future capital gains, if any, to the extent provided by the Treasury
regulations. To the extent that this carryover is used to offset future
capital gains, it is probable that the gains so offset will not be
distributed to shareholders.
Capital losses incurred after October 31, within a Fund's fiscal year are
deemed to arise on the first business day of the following fiscal year. The
Fund incurred and will elect to defer such capital losses of approximately
$209,500 at December 31, 1994.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded on
the ex-distribution date. The amount of distributions from net investment
<PAGE>
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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
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
Evergreen Asset Management Corp. (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 .75 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
$7,577 for each class. 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 $32,364 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 4,000 shares of common stock of First Union at
a cost of $106,108. During the six months ended June 30, 1995, the Fund earned
$3,680 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%.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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
shareholders 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 $8,852,778 and $10,426,385,
respectively, for the six months ended June 30, 1995. The aggregate cost of
investments owned at June 30, 1995, for Federal income tax purposes is
$35,868,017 due to sales of certain portfolio securities on which losses are
deferred for Federal income tax purposes. Gross unrealized appreciation and
depreciation of securities at June 30, 1995, was $4,413,501 and $1,466,468,
respectively, resulting in net unrealized appreciation for Federal income tax
purposes of $2,947,033.
NOTE 7--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 13,334 $147,732
Shares issued on
reinvestments
of distributions 212 2,431
- ----------------------------------------------------
Net increase 13,546 $150,163
====================================================
CLASS B*
Shares sold 81,856 $912,340
Shares issued on
reinvestments
of distributions 948 10,823
Shares redeemed (984) (11,506)
- ----------------------------------------------------
Net increase 81,820 $911,657
====================================================
CLASS C*
Shares sold 763 $8,197
Shares issued on
reinvestments
of distributions 14 159
- ----------------------------------------------------
Net increase 777 $8,356
====================================================
CLASS Y
Shares sold 195,445 $2,175,722
Shares issued on
reinvestments
of distributions 60,796 692,530
Shares redeemed (470,223) (5,222,428)
- ----------------------------------------------------
Net decrease (213,982) ($2,354,176)
====================================================
TOTAL NET DECREASE
RESULTING FROM FUND
SHARE TRANSACTIONS (117,839) ($1,284,000)
====================================================
YEAR ENDED
DECEMBER 31, 1994
- ----------------------------------------------------
SHARES DOLLARS
- ----------------------------------------------------
Shares sold 974,228 $11,089,665
Shares issued on
reinvestments
of distributions 162,452 1,774,030
Shares redeemed (869,600) (9,763,060)
- ----------------------------------------------------
Net increase 267,080 $ 3,100,635
====================================================
* For Class A, Class B and Class C shares, the Fund share transaction activity
reflects the period from January 3, 1995 (commencement of class operations)
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 $10.65 $10.65 $10.65
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .22 .18 .19
Net realized and unrealized gain
on investments 1.05 1.04 1.03
- -------------------------------------------------------------------------------------------
Total from investment operations 1.27 1.22 1.22
- -------------------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income (.22) (.18) (.19)
In excess of net investment income (.03) (.04) (.02)
- -------------------------------------------------------------------------------------------
Total distributions to shareholders (.25) (.22) (.21)
- -------------------------------------------------------------------------------------------
Net asset value, end of period $11.67 $11.65 $11.66
===========================================================================================
TOTAL RETURN** 12.0% 11.5% 11.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $158 $953 $9
Ratios to average net assets:
Expenses+ 1.42% 2.17% 2.15%
Net investment income+ 4.41% 3.70% 3.75%
Portfolio turnover rate++ 24% 24% 24%
===========================================================================================
</TABLE>
* Commencement of class operations.
** Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales 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 (loss) to average net assets would be
18.82% and (12.40%), respectively, for Class A Shares, 5.50% and .37%,
respectively, for Class B Shares and 198.27% and (192.37%), 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.
++ Portfolio turnover 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
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 ---------------------------------------------------------
PER SHARE DATA (UNAUDITED) 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.67 $11.60 $10.95 $10.52 $9.59 $10.41
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income 0.25 .60 .56 .66 .60 .60
Net realized and unrealized gain
(loss) on investments 1.00 (.93) .96 .55 1.15 (.66)
- ----------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.25 (.33) 1.52 1.21 1.75 (.06)
- ----------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
From net investment income (0.25) (.60) (.60) (.61) (.60) (.60)
From net realized gains _ _ (.24) (.17) (.22) (.16)
In excess of net realized gains _ _ (.03) _ _ _
- ----------------------------------------------------------------------------------------------------------------------
Total distributions (0.25) (.60) (.87) (.78) (.82) (.76)
======================================================================================================================
Net asset value, end of period $11.67 $10.67 $11.60 $10.95 $10.52 $9.59
TOTAL RETURN 11.8%+ (2.9)% 14.1% 11.8% 18.8% (.5)%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $38,185 $37,176 $37,336 $23,781 $15,632 $12,351
Ratios to average net assets:
Expenses 1.28%++ 1.28% 1.36% 1.51%* 1.50%* 1.50%*
Net investment income 4.38%++ 5.40% 5.13% 6.23%* 5.91%* 6.04%*
Portfolio turnover rate 24% 136% 92% 151% 97% 33%
======================================================================================================================
</TABLE>
+ Total Return is calculated for the six months ended June 30, 1995 and is not
annualized.
++ Annualized.
* Net of voluntary expense reimbursements by the Adviser. If the Fund had borne
all expenses that were voluntarily assumed by the Adviser, the annualized
ratios of expenses and net investment income to average net assets would have
been 1.59% and 6.15%, respectively for the year ended December 31, 1992,
1.82% and 5.59%, respectively, for the year ended December 31, 1991, and
1.95% and 5.59%, respectively, for the year ended December 31, 1990.
See accompanying notes to financial statements.
<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 AUDITORS
Ernst & Young 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 AMERICAN RETIREMENT FUND
2500 Westchester Avenue
Purchase, New York 10577
536580
<PAGE>
