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THE
EVERGREEN
FUND
SEMI-ANNUAL REPORT
MARCH 31, 1995 [LOGO]
<PAGE>
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DEAR FELLOW SHAREHOLDER:
This Semi-Annual Report for Evergreen Fund covers a period of positive
portfolio results. During the last weeks of 1994, we took advantage of buying
opportunities generated by widespread tax-loss selling. This environment
provided a number of timely purchases of undervalued growth stocks. By the end
of the first quarter, eight of these purchases resulted in gains of 20% to 56%,
and seventeen with gains of 10% to 20%. Cash for these and other new purchases
were generated primarily from profit taking in the shares of a number of large,
older positions, which no longer seemed to promise gains from undervaluation. In
accordance with our strategic program of moving toward smaller companies, most
of the issues newly purchased were in the small-to-medium market capitalization
range. (For performance information on the Fund, please see the table on the
fourth page of this report.)
Gains in the quarter ended March 31,1995, reflected not only a stronger
stock market environment, but also the benefits of the sizable portfolio changes
and shift in emphasis accomplished during the preceding two years. Our goal has
been to increase investment emphasis on exceptional entrepreneurial companies
with undervalued growth prospects. We accomplished this by taking advantage of
some major opportunities to acquire undervalued shares of growth companies when
entire industries fell into what we judged to be temporary investor disfavor.
The most prominent example was the health care industry during 1993, when its
prospects were viewed with widespread apprehension. We committed to shares in
technology-based companies during periods when institutional investors focused
their attention on competitive risks rather than on research-driven strengths
for new product building. Examples of such opportunities among technology
companies were purchases of shares of Autodesk, Boole & Babbage, Cisco Systems,
Coherent, Inc., Intel, Parametric Technology and Silicon Graphics. We built
positions in small companies which we believe would become the "category
killers" of the future retailing scene. Examples of such include Aaron Rents,
Leslie's Poolmart and Tommy Hilfiger. We continued our commitment to companies
with existing or potential dominant roles in productivity enhancements, such as
Paxar and Zebra Technologies (leaders in bar code technologies), and American
Business Information and Sensormatic Electronics (leaders in enhancing marketing
efficiency). Whether in telemarketing through EIS International, temporary help
through Personnel Management, or investment systems through The Bisys Group, we
focused on a broad range of services to increase the productivity and
profitability of a variety of industries.
We also continued our emphasis on opportunities for capitalizing on the
value of banking industry franchises through mergers and acquisitions.
Anticipation of mergers and acquisitions has brought many upward evaluations
since last year's passage of legislation to allow for interstate banking. Better
than double digit gains in the last six months were provided by several of the
Fund's holdings including American Federal Bank (FSB), Baybanks, Chittenden
Corp., First Empire State, First Fidelity Bancorporation, 1st Source Corp., and
United Carolina Bancshares. Negative performers included Benson Financial,
Central Fidelity Banks and Fort Wayne National, which declined over 15% each.
These declines reflected what we believe to be temporary negative developments.
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FIGURES REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS.
5/95
<PAGE>
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Merger and acquisition opportunities as a result of our purchasing
undervalued stocks continued to have favorable benefit in the recent months.
Sci-Med Life Systems was acquired by Boston Scientific for a gain of 25.9% from
the date of the acquisition announcement on November 8, 1994, to its acquisition
on February 24, 1995. Since the inception of Evergreen Fund on October 15, 1971,
a total of 273 Fund holdings have been acquired, with an average gain of 61.4%.
The three weakest sectors in the Fund's portfolio during the fiscal
half-year were home-building companies, specialty apparel retailers, and
automotive components or parts manufacturers. The home-building group was under
particularly severe pressure as interest rates were rising through November.
These shares were sold down in the weeks of tax-loss selling. While we took
advantage of the tax-loss selling to average a number of these issues at lower
prices, the declines were often quite substantial. For example, M/I
Schottenstein Homes declined 33.9% during the six-month period, Sundance Homes
declined 19.1%, and Toll Brothers declined 11.7%. The automotive components
group was weak as evidence mounted that higher interest rates and reduced
consumer demand were slowing automobile sales, leading to declining production.
This impacted Excel Industries, Masland Corp., and Superior Industries
International, which declined 15.6%, 22.4%, and 10.1%, respectively. The
specialty retail group suffered from a very disappointing Christmas season and
has not shown meaningful evidence of improvement since. Thus, in the six- month
period under review, the Fund experienced major declines from American Eagle
Outfitters, 20.2%, Campo Electronics Appliances & Computers, 40.8%, Cato Corp.,
41.9%, and Fingerhut Companies, 48.5%. The Fund's position in Fingerhut was
increased on weakness, given our very positive long-range forecast for the
company, and belief that its difficulties primarily reflected unsuccessful and,
since closed, new ventures. We have used subsequent strength to reduce positions
in some of the other issues in these fields. Our long-term experience is that
many of these sharp fall-offs, especially in the shares of smaller companies in
specialty areas, tend to be significantly overdone with investors ignoring
potential earnings power. We seek, whenever possible, to take advantage of such
declines through additional buying.
Looking forward, we believe that the business situation in 1995 will
encourage an acceleration of corporate merger and acquisition activity. Our view
is that the strengthening of balance sheets during the last three strong
recovery years gives a great many corporations the resources for major capital
expansions. Their choices will be whether to expand through the process of
capital investment in new facilities or through acquisition. With many
anticipating a slowing of the economy, we expect that more companies will make a
decision in favor of an immediate return on new investment through acquisitions,
rather than a delayed return through the building of additions to plants and
equipment. We anticipate that small-to-medium sized companies with leadership
business franchises, products, or technologies, may be sought by larger
companies in the months ahead.
We continue to emphasize the small-to-medium sized companies, since we seek
to benefit from both the growth potential and possible acquisition potential
favoring this corporate size range, as well as to participate in the vital
dynamics of the entrepreneurial leadership. At the end of the first half of the
year, 72.4% of the portfolio was in shares of companies with market
capitalizations of less than $2 billion. Over 35% was in the shares of companies
with market capitalizations of $500 million or less. The Fund's median market
capitalization is $358 million, despite the Fund's continued holdings of a few
large companies such as its major positions in the medical leaders, Johnson &
Johnson and Merck & Co., and financial leaders such as Federal Home Loan
Mortgage Corp. and Federal National Mortgage Association. We would note that all
<PAGE>
but two of the Fund's largest equity holdings reflect great growth during the
years they were held by the Fund. For example, First Empire State, the largest
holding, has appreciated 550% since the issue was first bought for the Fund ten
years ago. Barnett Banks shares have more than quadrupled in value since the
original purchase at the end of 1990, as First Florida Banks was merged into
Barnett Banks. Clear Channel Communications has appreciated 1,500% since the
acquisition of this broadcasting holding company in 1986. Stryker Corp. shares
have appreciated 1,200% since the Fund's purchase in 1981. Even the shares of
Lancaster Colony Corp., a maker of candlesticks, salad dressings and automotive
floor mats, which has grown from a very small company to one of considerable
size, have increased in value 450% over the last four years. Obviously, we have
been patient in seeking long-term rewards from undervalued smaller companies.
Our intensive, investment research-driven effort, in an attempt to achieve such
results, is currently being enhanced with added staff and new, updated internal
computer resources.
Our expectations for the balance of the year are positive. Economic data
and analytical information suggest that the rapid expansion of the economy has
passed its peak and that there is evidence of inventory accumulation. Inflation,
which has shown up over the last year in many raw material costs, is still not
widely being translated into significantly higher retail prices. Wage demands
are generally in line with recent low Consumer Price Index inflation rates and
do not reflect fears of increasing inflation. Thus, the tightness of the labor
market has not translated into pressures for wage increases. Yields on 30-year
U.S. Treasury bonds moved down from 8.16% in November, 1994, to 6.75% currently.
The unexpectedly sharp fall of the dollar has evidently led to more concern by
the central banks over the strong currency countries, Germany and Japan, than it
has to that of the United States. Those countries have lately reduced their
interest rates, while we have not increased ours to defend the dollar.
Stability, through a sustained but slowing growth rate, appears
increasingly likely. This should result in gradual lower real returns if
investors no longer require an inflation premium for dollar investment. The
dollar could soon regain its credibility, especially for trade surplus countries
such as Germany and Japan, and for those whose monies have fled the recent
instability of Mexico and other Latin American currencies. We think it highly
probable that the scenario described above will lead to sustained investment
liquidity and positive expectations in the U.S. securities markets. Selectivity
will obviously be central to investment success, especially as slow growth
demands a more intensive selection process. Slow growth, similarly, may bring
new interest to undervalued sectors of the market which have not shown the high
growth rates characteristic of those sectors whose growth outlook has been
enhanced by overall economic momentum. This may well bring increased attention
to longer-term values, and may result in less risk of an overheated, short-term
oriented equity market.
We appreciate the continued participation of investors who saw such modest
results through most of 1994. We are optimistic that recent trends foreshadow
returns on their investment in Evergreen Fund consistent with its historical
long-term results.
Sincerely,
/S/Stephen A. Lieber
Stephen A. Lieber
Chairman
Evergreen Asset
Management Corp.
May 26, 1995
<PAGE>
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PERFORMANCE AT A GLANCE
AVERAGE ANNUAL COMPOUNDED RATES OF RETURN
FOR PERIODS ENDED MARCH 31, 1995*
------------------------------------------
CLASS Y CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES
------- ------- ------- -------
3-month total return 11.6% 6.2% 6.3% 10.3%
6-month total return 9.1% 3.9% 3.9% 7.9%
12-month total return 14.8% 9.3% 9.7% 13.6%
5-year 11.3% 10.2% 10.9% 11.2%
10-year 11.7% 11.2% 11.7% 11.7%
Since Inception
on 10/15/71 15.9% 15.6% 15.9% 15.9%
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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 (except for Class Y shares) 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% of its aggregate average daily net assets attributable to
Class B shares and 1% of its aggregate average daily net assets attributable to
its 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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THE EVERGREEN FUND
STATEMENT OF INVESTMENTS
MARCH 31, 1995 (UNAUDITED)
COMMON STOCKS--99.6% SHARES VALUE
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BANKS--20.9%
Amcore Financial, Inc. 45,000 $866,250
American Federal Bank, FSB 50,000 712,500
AmSouth Bancorporation 28,300 891,450
Arrow Financial Corp. 101,196 1,606,487
++Barnett Banks, Inc. 273,320 12,436,060
++Baybanks, Inc. 190,000 12,255,000
*Benson Financial Corp. 40,000 420,000
Central Fidelity Banks, Inc. 30,000 783,750
Chittenden Corp. 216,250 5,081,875
Crestar Financial Corp. 28,700 1,262,800
++First Empire State Corp. 127,000 21,717,000
First Fidelity Bancorporation, Inc. 35,000 1,732,500
First Michigan Bank Corp. 242,575 5,943,088
1st Source Corp. 211,155 5,753,974
First State Bancorp 50,000 718,750
First United Bancorp 50,000 356,250
Fort Wayne National Corp. 183,350 4,744,181
Hibernia Corp. Cl. A 889,540 6,893,935
Intercontinental Bank 100,000 2,250,000
Magna Group, Inc. 67,779 1,355,580
North Fork Bancorporation, Inc. 245,000 3,920,000
Old Kent Financial Corp. 100,412 3,162,978
ONBANCorp, Inc. 131,000 3,340,500
One Valley Bancorp of
West Virginia, Inc. 21,500 626,188
*Riggs National Corp. 50,000 462,500
River Forest Bancorp 35,000 1,155,000
United Carolina Bancshares Corp. 117,500 3,407,500
Univest Corp. of Pennsylvania 31,428 1,099,980
USBanCorp, Inc. 10,000 207,500
Valley National Bancorp 16,000 410,000
West Coast Bancorp. New 29,400 426,300
Westamerica Bancorporation 115,900 3,853,675
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109,853,551
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HEALTH CARE PRODUCTS
& SERVICES--19.1%
Arbor Drugs, Inc. 50,000 1,187,500
*Biomet, Inc. 130,000 2,193,750
*Boston Scientific Corp. 130,398 3,211,051
Caremark International, Inc. 136,000 2,686,000
*Circon Corp. 30,000 585,000
*Coherent, Inc. 90,000 2,407,500
Columbia/HCA Healthcare Corp. 90,200 3,878,600
*Express Scripts, Inc. 40,000 1,120,000
*FHP International Corp. 54,828 1,617,426
*Foundation Health Corp. 28,974 945,277
*Idexx Laboratories, Inc. 120,000 4,980,000
Invacare Corp. 20,000 705,000
*Isomedix, Inc. 55,000 811,250
Johnson & Johnson 195,000 11,602,500
HEALTH CARE PRODUCTS
& SERVICES (CONTINUED)
*Living Centers of America, Inc. 104,600 3,935,575
McKesson Corp. 117,900 4,760,213
++Merck & Co., Inc. 500,000 21,312,500
Minntech Corp. 24,750 377,437
*Physician Corporation of America 50,000 1,125,000
*Physicians Health Services, Inc. 110,000 3,575,000
*Psicor, Inc. 90,000 1,091,250
*Regency Health Services, Inc. 44,200 585,650
*Ren Corp.-USA 40,000 640,000
*Salick Health Care, Inc. 90,000 3,285,000
*St. Jude Medical, Inc. 125,000 5,406,250
Stryker Corp. 226,500 10,362,375
*Sun Healthcare Group, Inc. 128,000 3,264,000
Superior Surgical
Manufacturing Co., Inc. 39,600 470,250
*Tecnol Medical Products, Inc. 75,750 1,439,250
*Tenet Healthcare Corp. 50,000 793,750
-----------
100,354,354
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FINANCE & INSURANCE--10.8%
Allmerica Property
& Casualty Cos., Inc. 172,200 3,293,325
++AMBAC, Inc. 189,400 7,694,375
Cole Taylor Financial Group, Inc. 50,000 937,500
Countrywide Credit Industries, Inc. 25,000 434,375
Executive Risk, Inc. 150,000 2,493,750
Federal Home Loan
Mortgage Corp. 126,900 7,677,450
Federal National
Mortgage Association 166,500 13,548,937
Household International, Inc. 2,400 104,400
John Nuveen Co. (The) Cl. A 90,000 2,137,500
MBIA, Inc. 80,900 5,086,587
Mercury General Corp. 20,000 575,000
MGIC Investment Corp. 253,800 10,342,350
National RE Corp. 32,500 950,625
Providian Corp. 23,992 842,719
*Resource Bancshares
Mortgage Group, Inc. 55,125 606,375
State Auto Financial Corp. 20,000 335,000
-----------
57,060,268
-----------
INDUSTRIAL SPECIALTY
PRODUCTS--9.3%
Breed Technologies, Inc. 55,000 1,203,125
*Dionex Corp. 72,500 2,918,125
Fisher Scientific International, Inc.73,000 2,171,750
Flair Corp. 20,000 365,000
Fuller (H.B.) Co. 182,000 6,961,500
Leggett & Platt, Inc. 70,400 2,956,800
Masland Corp. 90,000 1,158,750
<PAGE>
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THE EVERGREEN FUND
STATEMENT OF INVESTMENTS (continued)
MARCH 31, 1995 (UNAUDITED)
COMMON STOCKS--(continued) SHARES VALUE
------- -------
INDUSTRIAL SPECIALTY
PRODUCTS (CONTINUED)
*Material Sciences Corp. 147,900 $ 2,477,325
Nacco Industries, Inc. Cl. A 40,000 2,180,000
*Osmonics, Inc. 66,000 1,089,000
*Paxar Corp. 154,750 1,895,687
Smith (A.O.) Corp. 57,600 1,296,000
Superior Industries International,
Inc. 89,600 2,284,800
Tecumseh Products Co. Cl. A 178,400 8,830,800
Tecumseh Products Co. Cl. B 57,800 2,861,100
Teleflex, Inc. 91,600 3,686,900
*Truck Components, Inc. 100,000 906,250
Walbro Corp. 160,300 3,005,625
Wescast Industries, Inc. 50,000 400,000
Worthington Industries, Inc. 13,000 258,375
----------
48,906,912
----------
INFORMATION SERVICES
& TECHNOLOGY--6.1%
*Atmel Corp. 25,000 965,625
Autodesk, Inc. 120,000 5,055,000
*Bisys (The) Group, Inc. 25,000 565,625
*C U C International, Inc. 25,000 971,875
First Financial Management Corp. 93,679 6,768,308
HBO & Co. 55,000 2,392,500
Intel Corp. 86,000 7,299,250
*Keane, Inc. 30,000 727,500
Micron Technology, Inc. 5,000 380,000
Molex, Inc. 38,750 1,385,312
*Parametric Technology Corp. 45,000 1,800,000
*Silicon Graphics, Inc. 90,000 3,195,000
*Three-Five Systems, Inc. 15,000 393,750
----------
31,899,745
----------
RETAILING & WHOLESALE--5.3%
Blair Corp. 41,800 1,447,325
*Burlington Coat Factory Warehouse 60,000 622,500
*Campo Electronics, Appliances
& Computers, Inc. 60,000 405,000
Cato Corp. Cl. A 45,000 286,875
++Dillard Department Stores,
Inc. Cl. A 300,000 8,287,500
Fingerhut Companies, Inc. 268,800 3,192,000
*Forstmann & Co., Inc. 26,300 118,350
*Jones Apparel Group, Inc. 50,000 1,350,000
*Leslie's Poolmart 85,225 1,320,987
Lillian Vernon Corp. 51,000 1,051,875
Medicine Shoppe International, Inc. 154,000 4,658,500
Mercantile Stores Co., Inc. 98,900 4,413,412
*Sportmart, Inc. Cl. A 60,000 367,500
*Tommy Hilfiger Corp. 20,000 440,000
----------
27,961,824
----------
CONSUMER PRODUCTS
& SERVICES--5.0%
Aaron Rents, Inc. Cl. B 70,000 962,500
*American Business Information, Inc. 80,000 1,740,000
Anthony Industries, Inc. 42,530 691,113
*Barry (R.G) Corp. 28,500 345,563
*Children's Discovery
Centers of America, Inc. 25,000 393,750
Crown Crafts, Inc. 135,300 2,300,100
*Deckers Outdoor Corp. 125,700 1,877,644
Franklin Electric Co., Inc. 30,000 1,005,000
*Galey & Lord, Inc. 85,000 1,030,625
Garan, Inc. 60,600 1,083,225
Harman International Industries, Inc.48,000 1,782,000
Kellwood Co. 28,750 535,469
Lancaster Colony Corp. 297,777 10,571,084
*Nautica Enterprises, Inc. 30,000 937,500
*Recovery Engineering, Inc. 35,000 586,250
Roto-Rooter, Inc. 23,000 609,500
----------
26,451,323
----------
PUBLISHING, BROADCASTING
& ENTERTAINMENT--3.5%
*Clear Channel Communications, Inc. 214,250 12,747,875
Grupo Televisa, S.A. GDS 38,000 631,750
*Multimedia, Inc. 2,000 75,750
Wiley, (John) & Sons, Inc. Cl. A 95,000 4,940,000
----------
18,395,375
----------
BUILDING, CONSTRUCTION
& FURNISHINGS--3.4%
Continental Homes Holding Corp. 88,000 1,078,000
Interface, Inc. Cl. A 220,900 3,092,600
Juno Lighting, Inc. 160,000 3,130,000
Kaufman & Broad Home Corp. 20,000 237,500
La-Z-Boy Chair Co. 90,800 2,531,050
*M/I Schottenstein Homes, Inc. 65,200 440,100
Medusa Corp. 92,650 2,258,344
*Redman Industries, Inc. 100,000 1,937,500
Ryland Group, Inc. 85,700 1,231,938
*Southern Energy Homes, Inc. 35,000 402,500
Standard Pacific Corp. 137,200 891,800
*Sundance Homes, Inc. 103,000 321,875
*Toll Brothers, Inc. 25,000 290,625
----------
17,843,832
----------
REAL ESTATE--3.0%
*Alexander's, Inc. 138,760 7,284,900
Carr Realty Corp. 100 1,737
Chelsea GCA Realty, Inc. 54,000 1,397,250
Clayton Homes, Inc. 60,000 1,027,500
*FRP Properties, Inc. 47,400 995,400
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COMMON STOCKS--(continued) SHARES VALUE
------- -------
REAL ESTATE (CONTINUED)
Horizon Outlet Centers, Inc. 50,000 $ 1,112,500
*Host Marriott Corp. 80,000 950,000
Irvine Apartment Communities, Inc. 40,000 625,000
Oasis Residential, Inc. 40,000 910,000
Webb (Del) Corp. 39,200 735,000
Wellsford Residential Property Trust 30,500 636,687
----------
15,675,974
----------
BUSINESS EQUIPMENT
& SERVICES--2.9%
*Boole & Babbage, Inc. 52,500 1,496,250
Bowne & Co., Inc. 101,400 1,635,075
*Cisco Systems, Inc. 30,000 1,143,750
*EIS International, Inc. 40,000 670,000
*Gradco Systems, Inc. 104,800 353,700
HON Industries Inc. 20,000 540,000
*In Focus Systems, Inc. 15,000 390,000
McGrath Rent Corp. 33,000 503,250
*Merisel, Inc. 104,430 482,989
*Personnel Management, Inc. 14,850 245,025
Pitney Bowes, Inc. 115,700 4,165,200
Sensormatic Electronics Corp. 40,000 1,120,000
*Zebra Technologies Corp. 60,000 2,460,000
----------
15,205,239
----------
CHEMICALS & AGRICULTURAL
PRODUCTS--2.6%
Nalco Chemical Co. 30,000 1,008,750
Schulman (A.), Inc. 349,568 10,661,824
Sigma-Aldrich Corp. 55,000 2,131,250
----------
13,801,824
----------
TRANSPORTATION--2.5%
Atlantic Southeast Airlines, Inc. 135,000 2,497,500
*Chicago & North Western
Transportation Co. 110,000 3,822,500
*Heartland Express, Inc. 94,166 2,613,106
Skywest, Inc. 95,000 1,413,125
TNT Freightways Corp. 100,000 2,375,000
Wabash National Corp. 18,800 615,700
----------
13,336,931
----------
THRIFT INSTITUTIONS--1.6%
BSB Bancorp, Inc. 99,750 2,793,000
Collective Bancorp, Inc. 70,000 1,268,750
*Dime Financial Corp.** 255,000 2,550,000
Glacier Bancorp, Inc. 30,250 555,844
*Hawthorne Financial Corp. 73,500 330,750
Sandwich Co-Operative Bank 55,000 838,750
----------
8,337,094
----------
TELECOMMUNICATION SERVICES
& EQUIPMENT--0.7%
*Aspect Telecommunications Corp. 25,000 918,750
*Boston Technology, Inc. 35,000 551,250
*Coherent Communications
Systems Corp. 25,000 484,375
*Level One Communications, Inc. 35,000 586,250
*Vertex Communications Corp. 110,000 1,457,500
-----------
3,998,125
-----------
PAPER & PACKAGING--0.7%
St. Joe Paper Co. 6,500 402,187
Wausau Paper Mills Co. 148,530 3,304,792
-----------
3,706,979
-----------
ENVIRONMENTAL SERVICES--0.7%
*Handex Environmental Recovery, Inc. 147,000 1,157,625
Watts Industries, Inc. Cl. A 40,000 880,000
*Western Waste Industries, Inc. 100,000 1,612,500
-----------
3,650,125
-----------
FOOD RETAILING
& DISTRIBUTION--0.6%
Cracker Barrel Old Country
Store, Inc. 55,405 1,239,687
**Seaway Food Town, Inc. 134,000 1,842,500
-----------
3,082,187
-----------
ENERGY--0.1%
*TransTexas Gas Corp. 50,000 562,500
-----------
FOOD PRODUCTS--0.1%
+ *Coca-Cola Bottling Co.
Consolidated Cl. B 16,500 482,625
-----------
OTHER--0.7% 3,579,975
-----------
TOTAL INVESTMENTS
(COST $320,502,856) 99.6% 524,146,762
OTHER ASSETS AND LIABILITIES--NET .4 2,122,683
---- -----------
TOTAL NET ASSETS 100.0% $526,269,445
==== ===========
*Non-income producing.
**Investment in non-controlled affiliate-holding over 5% of outstanding voting
securities.
+No market quotation available, valued at fair value as determined in good
faith by the Fund's Trustees.
++A portion of these securities are designated as collateral to secure the
outstanding borrowings under the line of credit arrangement. The value of
these securities designated as collateral at March 31, 1995, is $9,313,053.
<PAGE>
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EVERGREEN FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995 (UNAUDITED)
ASSETS:
Investments at market value (identified cost $320,502,856) $524,146,762
Cash 13,739
Receivable for Fund shares sold 8,769,685
Receivable for investment securities sold 8,691,282
Dividends receivable 912,411
Prepaid expenses 89,820
- --------------------------------------------------------------------------------
Total assets 542,623,699
- --------------------------------------------------------------------------------
LIABILITIES:
Loan payable 7,300,000
Payable for Fund shares repurchased 5,796,690
Payable for investment securities purchased 2,534,023
Payable to Adviser 42,961
Accrued advisory fee 429,334
Accrued expenses 251,246
- --------------------------------------------------------------------------------
Total liabilities 16,354,254
- --------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital 308,181,568
Undistributed net investment income 487,311
Accumulated net realized gain on investment transactions 13,956,660
Net unrealized appreciation of investments 203,643,906
- --------------------------------------------------------------------------------
Net assets $526,269,445
================================================================================
CALCULATION OF NET ASSET VALUE PER SHARE:
CLASS A SHARES
Net asset value per share
($5,544,508/413,542 shares of beneficial interest outstanding) $13.41
Sales charge--4.75% of offering price 0.67
-----
Maximum offering price $14.08
=====
CLASS B SHARES
Net asset value per share
($12,307,819/919,118 shares of beneficial interest outstanding) $13.39
=====
CLASS C SHARES
Net asset value per share
($407,786/30,459 shares of beneficial interest outstanding) $13.39
=====
CLASS Y SHARES
Net asset value per share
($508,009,332/37,855,516 shares of beneficial interest outstanding) $13.42
=====
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 4,189,363
Interest 73,457
- --------------------------------------------------------------------------------
Total income 4,262,820
EXPENSES:
Advisory fee $2,421,532
Distribution fee--Class A shares 1,040
Distribution & services fees--Class B shares 10,203
Distribution & services fees--Class C shares 320
Interest 305,401
Transfer agent fee 148,005
Custodian fee 58,785
Professional fees 43,223
Trustees' fees and expenses 29,263
Reports and notices to shareholders 28,006
Registration and filing fees 25,728
Insurance 22,346
Other 16,551
---------
3,110,403
Less: expense reimbursement (3,579)
---------
Total expenses 3,106,824
- --------------------------------------------------------------------------------
Net investment income 1,155,996
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 15,824,628
Net increase in unrealized appreciation of investments 27,821,278
- --------------------------------------------------------------------------------
Net gain on investments 43,645,906
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $44,801,902
================================================================================
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN FUND
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, 1995 SEPTEMBER 30,
(UNAUDITED) 1994
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,155,996 $ 2,281,759
Net realized gain on investments 15,824,628 72,013,209
Net increase (decrease) in unrealized
appreciation of investments 27,821,278 (36,681,720)
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 44,801,902 37,613,248
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class Y shares (2,383,433) (3,823,912)
Net realized gains on investment transactions--
Class Y shares (70,360,416) (25,464,732)
- --------------------------------------------------------------------------------
Total distributions to shareholders (72,743,849) (29,288,644)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net increase (decrease) resulting from Fund
share transactions 28,303,071 (139,659,015)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets 361,124 (131,334,411)
NET ASSETS:
Beginning of year 525,908,321 657,242,732
- --------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $487,311 and
$1,714,748, respectively) $526,269,445 $525,908,321
================================================================================
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995 (UNAUDITED)
NOTE 1--APPROVAL AND ISSUANCE OF MULTIPLE CLASSES OF SHARES
The Evergreen Fund (the "Fund") is registered under the Investment Company Act
of 1940, as amended (the "Act"), as a diversified, open-end management
investment company. On December 13, 1994, the Fund's shareholders, among other
things, approved amendments to the Declaration of Trust to permit the issuance
of additional classes of shares. On December 27, 1994, the Securities and
Exchange Commission approved the application to issue additional classes of
shares. In connection with the adoption of the multiple class distribution
program, the Trustees have designated the existing shares of the Fund as Class Y
(no-load) shares and have created three new classes of shares designated Class
A, Class B and Class C 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. Class
C shares are offered with a 1% contingent deferred sales charge on shares
redeemed during the first year of sale. 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 2--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 are valued at the last reported sales
price on an exchange which is the primary market for such securities, or, if no
sales were reported, as in the case of most securities traded over-the-counter,
the mean between the last reported bid and asked price. Unlisted securities for
which market quotations are readily available are valued at a price quoted by
one or more brokers. Securities or other assets for which market quotations are
not readily available are valued at fair value as determined in good faith by
the Trustees. Short-term obligations 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.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from distributions determined under generally
accepted accounting principles.
ALLOCATION OF EXPENSES: Expenses specifically identifiable to a class of shares
are charged to that class. Other expenses common to the Fund as a whole are
primarily allocated 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 and distributions to
shareholders are recorded on the ex-dividend date and interest income is
recorded on the accrual basis.
NOTE 3--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 payable monthly, for the performance of
its services at an annual rate of 1% of the daily net assets of the Fund. For
the six months ended March 31, 1995, the Adviser voluntarily reimbursed Class A,
Class B and Class C shares for certain Class specific expenses in the amount of
$1,129, $1,225 and 1,225, respectively. The Adviser may, at its discretion,
revise or cease these voluntary expense reimbursements at any time.
Total operating expenses of the Fund, exclusive of taxes, interest, brokerage
fees, 12b-1 distribution and shareholder services fees and extraordinary
expenses are subject to the most restrictive of expense limitations, as may be
amended from time to time, under the rules and regulations of states where the
Fund is authorized to sell its shares. If in any fiscal year such operating
expenses exceed the most restrictive expense limitation then in effect, the
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995 (UNAUDITED) (CONTINUED)
Adviser will reimburse the Fund for the amount of such excess. For the six
months ended March 31, 1995, the Fund's expenses did not exceed the most
restrictive limitation in effect.
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 and American Stock Exchanges. For transactions
executed during the six months ended March 31, 1995, the Fund incurred brokerage
commissions of $138,736 with Lieber & Company. Lieber & Company is reimbursed by
the Adviser, at no additional expense to the Fund, for its cost of providing
investment advisory services to the Adviser.
NOTE 4--PORTFOLIO TRANSACTIONS
Cost of purchases and proceeds from sales of investments, other than short-term
obligations, aggregated $54,460,690 and $68,943,702, respectively, for the six
months ended March 31, 1995.
The aggregate cost of investments owned at March 31, 1995 for Federal income tax
purposes is $320,920,560 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 $219,956,244 and $16,730,042,
respectively, resulting in net unrealized appreciation for Federal income tax
purposes of $203,226,202.
NOTE 5--DISTRIBUTION AND SHAREHOLDER SERVICES FEES
The Fund has adopted for each of 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% for 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 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 of up to .25 of 1%
of average daily net assets may constitute a shareholder service fee. The Fund
has entered into a Shareholder Services Agreement with First Union Brokerage
Services ("FUBS"), an affiliate of the Adviser, whereby the Fund will compensate
FUBS for certain services provided to shareholders and/or for the maintenance of
shareholder accounts relating to the Fund's Class B and Class C shares. Such
fees are accrued daily and paid monthly.
NOTE 6--FINANCING AGREEMENT
The Fund has a financing agreement with its custodian State Street Bank and
Trust Company (the "Bank"), which provides the Fund with a line of credit, in
the aggregate amount of the lesser of $35,000,000 or 5% of the value of the
Fund's net assets, to be accessed for temporary or emergency purposes.
Borrowings under the line of credit bear interest at 1% above the Bank's cost of
funds as set periodically by the Bank and are secured by securities pledged by
the Fund. During the six months ended March 31, 1995, the Fund had borrowings
outstanding for 130 days under the line of credit and incurred $294,890 in
interest charges related to these borrowings. In addition, the Fund incurred
$10,511 in interest charges relating to other borrowings with the Bank. The
Fund's average amount of debt outstanding during the period aggregated
$12,547,692 at a weighted average interest rate of 6.60%. The Fund had
$7,300,000 in outstanding borrowings at March 31, 1995.
<PAGE>
- --------------------------------------------------------------------------------
NOTE 7--SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $.001 par value shares of beneficial interest
authorized, divided into four classes, designated Class A, Class B, Class C and
Class Y shares. Transactions in shares of beneficial interest were as follows:
SIX MONTHS ENDED
MARCH 31, 1995
- --------------------------------------------------------------------------------
SHARES AMOUNT
- --------------------------------------------------------------------------------
CLASS A*
Shares sold 418,503 $5,410,538
Shares redeemed (4,961) (64,747)
- --------------------------------------------------------------------------------
Net increase 413,542 $5,345,791
================================================================================
CLASS B*
Shares sold 921,100 $11,851,706
Shares redeemed (1,982) (25,478)
- --------------------------------------------------------------------------------
Net increase 919,118 $11,826,228
================================================================================
CLASS C*
Shares sold 30,622 $395,045
Shares redeemed (163) (2,061)
- --------------------------------------------------------------------------------
Net increase 30,459 $392,984
================================================================================
CLASS Y
Shares sold 47,053,162 $628,058,583
Shares issued on reinvest-
ment of distributions 5,626,158 66,336,999
Shares redeemed (50,792,139) (683,657,514)
- --------------------------------------------------------------------------------
Net increase 1,887,181 $ 10,738,068
================================================================================
Total net increase
resulting from Fund
share transactions 3,250,300 $28,303,071
================================================================================
YEAR ENDED
SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
SHARES AMOUNT
- --------------------------------------------------------------------------------
CLASS Y
Shares sold 74,919,356 $1,081,247,408
Shares issued on
reinvestment
of distributions 1,934,878 27,023,906
Shares redeemed (86,341,400) (1,247,930,329)
- --------------------------------------------------------------------------------
Net decrease resulting
from Fund share
transactions (9,487,166) $ (139,659,015)
================================================================================
* For Class A, Class B and Class C shares, the Fund share transaction activity
reflects the period January 3, 1995 (commencement of class operations) to
March 31, 1995.
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 3, 1995* THROUGH MARCH 31, 1995
-----------------------------------------------------------------
PER SHARE DATA CLASS A SHARES CLASS B SHARES CLASS C SHARES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $11.97 $11.97 $11.97
- -------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .01 (.01) (.01)
Net realized and unrealized gain on
investments 1.43 1.43 1.43
- -------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.44 1.42 1.42
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.41 $13.39 $13.39
===================================================================================================================
TOTAL RETURN** 12.0% 11.9% 11.9%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $5,545 $12,308 $408
Ratios to average net assets:+
Operating expenses 1.37% 2.12% 2.14%
Interest expense .16% .16% .16%
Net investment income .35% (.41)% (.35)%
Voluntary expense reimbursement++ .27% .12% 3.83%
Portfolio turnover rate# 11% 11% 11%
===================================================================================================================
</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 charges or contingent deferred
sales charges are not reflected.
+Annualized. Due to the recent commencement of their offering, the ratios for
Class A, Class B and Class C shares are not necessarily comparable to that of
the Class Y shares, and are not necessarily indicative of future ratios.
++This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
#Portfolio turnover rate is calculated for the six months ended March 31,
1995.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN FUND
FINANCIAL HIGHLIGHTS
CLASS Y SHARES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 1995 --------------------------------------------------------
PER SHARE DATA (UNAUDITED) 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $14.62 $14.46 $13.10 $13.32 $ 9.66 $14.01
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .04 .07 .09 .09 .17 .24
Net realized and unrealized gain (loss)
on investments .99 .79 1.96 .55 3.93 (3.62)
- ---------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.03 .86 2.05 .64 4.10 (3.38)
- ---------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income (.07) (.09) (.07) (.17) (.18) (.36)
Net realized gains on investments (2.16) (.61) (.62) (.69) (.26) (.61)
- ---------------------------------------------------------------------------------------------------------------------
Total distributions (2.23) (.70) (.69) (.86) (.44) (.97)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.42 $14.62 $14.46 $13.10 $13.32 $ 9.66
=====================================================================================================================
TOTAL RETURN 9.1%+ 6.2% 15.8% 5.2% 43.7% (25.4)%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(in millions) $508 $526 $657 $772 $755 $525
Ratios to average net assets:
Operating expenses 1,15%* 1.13% 1.11% 1.13% 1.15% 1.15%
Interest expense .13%* .09% .01% -- -- --
Net investment income .48%* .40% .60% .56% 1.45% 1.83%
Portfolio turnover rate 11% 19% 21% 32% 35% 39%
=====================================================================================================================
</TABLE>
*Annualized. +Total return calculated for the six months ended March 31, 1995 is
not annualized.
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 ACCOUNTANTS
Price Waterhouse LLP
DISTRIBUTOR
Evergreen Funds Distributor, Inc.
The investment adviser to the Evergreen Funds is
Evergreen Asset Management Corp., which is wholly-
owned by First Union National Bank of North Carolina.
Investments in the Evergreen Funds are not endorsed or
guaranteed by First Union, are not deposits or other
obligations of First Union, are not insured or
otherwise protected by the U.S. Government, the FDIC 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.
The financial information included herein is taken from
the records of the Fund without examination by the
Fund's independent accountants, who do not express an
opinion thereon.
THE EVERGREEN FUND
2500 Westchester Avenue
Purchase, New York 10577 #536049
