<PAGE>
EVERGREEN
DOMESTIC GROWTH
FUNDS
(Photos of the side of a building, bottles with liquid in them, the American
flag, Wall St. sign, and mountains appear on this page)
1995 Annual Report
(EVERGREEN TREE LOGO)
EVERGREEN
FUNDS
<PAGE>
EVERGREEN DOMESTIC GROWTH FUNDS
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
(Photo of bottles) A Review of the Past Year
and Prospects for the Future.............................................. 1
EVERGREEN AGGRESSIVE A Report From Your Portfolio Manager...................................... 3
GROWTH FUND Results to Date........................................................... 5
Statement of Investments.................................................. 6
</TABLE>
<TABLE>
<C> <S> <C>
Statement of Assets and Liabilities....................................... 7
Statement of Operations................................................... 8
Statement of Changes in Net Assets........................................ 9
Financial Highlights...................................................... 10
</TABLE>
<TABLE>
<C> <S> <C>
(Photo of Wall St.) EVERGREEN FUND A Report From Your Portfolio Manager...................................... 11
Results to Date........................................................... 13
Statement of Investments.................................................. 14
</TABLE>
<TABLE>
<C> <S> <C>
Statement of Assets and Liabilities....................................... 18
Statement of Operations................................................... 19
Statement of Changes in Net Assets........................................ 20
Financial Highlights...................................................... 21
</TABLE>
<TABLE>
<C> <S> <C>
(Photo of side of building) EVERGREEN LIMITED A Report From Your Portfolio Manager...................................... 22
MARKET FUND, INC. Results to Date........................................................... 24
Statement of Investments.................................................. 25
</TABLE>
<TABLE>
<C> <S> <C>
Statement of Assets and Liabilities....................................... 28
Statement of Operations................................................... 29
Statement of Changes in Net Assets........................................ 30
Financial Highlights...................................................... 31
</TABLE>
<TABLE>
<C> <S> <C>
(Photo of American Flag) EVERGREEN U.S. A Report From Your Portfolio Manager...................................... 32
REAL ESTATE Results to Date........................................................... 34
EQUITY FUND Statement of Investments.................................................. 35
</TABLE>
B
<TABLE>
<C> <S> <C>
Statement of Assets and Liabilities....................................... 36
Statement of Operations................................................... 37
Statement of Changes in Net Assets........................................ 38
Financial Highlights...................................................... 39
</TABLE>
<TABLE>
<C> <S> <C>
Combined Notes to Financial Statements.................................... 40
Report of Independent Accountants --
Price Waterhouse LLP...................................................... 49
Report of Ernst & Young LLP,
Independent Auditors...................................................... 50
Trustees/Directors and Officers........................................... IBC
</TABLE>
<PAGE>
EVERGREEN DOMESTIC GROWTH FUNDS
A REVIEW OF THE PAST YEAR
AND PROSPECTS FOR THE FUTURE
BY STEPHEN A. LIEBER, CHAIRMAN OF
EVERGREEN ASSET MANAGEMENT CORP.
In projecting the outlook for the United States
economy in the final months of 1995, one central fact
dominates the discussion; inflation is being held to (Photo of Stephen A.
the very low single digits. For a nation which has, Lieber)
for over twenty-five years, been
preoccupied in all economic forecasting with apprehension over the outlook for
inflation, this is a period of remarkable calm. Instead of concerns over
inflation, the dominant anxiety with which investors look to the future, is now
that of the price level of securities; stocks and bonds. That price level,
however, is a reflection of changing perceptions of the inflation risk.
Comparison of inflation rates, interest rates, and equity valuation, at the
beginning of the long-bull market which began in the summer of 1982, clarifies
these points. The inflation rate fell from 7.2% in the second quarter of 1982,
to 2.5% in the third quarter of 1995. Thirty-year U.S. Treasury Bond yields fell
from 12.97% to 6.52%, and 90-day U.S. Treasury Bill rates from 11.91% to 5.31%,
while price/earnings ratios have risen (on the S&P 500 Stock Index) from 7.8
times to 16.6 times. Clearly, both bonds and stocks are worth more in this
environment of lowered inflation and reduced inflationary expectations.
Thus far, in 1995, the hoped for "soft landing" of the economy into a slower,
non-inflationary expansion has been achieved. The issue of its future course is,
however, open to analysis and debate. There can be little debate over today's
cautious policies. There is a broad acceptance of the need to sustain low
leverage financial policies; minimizing the build-up of debt by both government
and industry, accelerating productivity gains, and economizing resources. This
is not only an anti-inflationary mentality, but it is also a conservative,
counter-expansionary economic growth policy. Politicians are prouder of
cut-backs than of expansion in public services. Businessmen boast of "re-
engineering" which results in lay-offs, rather than of hiring. When new
facilities are built, they are described as enhancers of productivity, not just
as producers of products or services. Business and labor alike think of their
pricing as competing in the world market. Industry wants to sell in the world
markets, and labor does not want to be outpriced by alternative manufacturing
sources in low labor cost countries. These policies push productivity,
price-restraint, and wage-restraint.
Policies of restraint, evident in so many sectors of the economy, lead some
observers to apprehensions that they will be over-done. If consumer demand slows
and business inventories build, it is argued, then a cycle of manufacturing
cutbacks will lead to accelerating lay-offs and another recessionary period. The
counter-argument holds that there are enough dynamic growth potentials on the
horizon for consumer products and services, and for increasing exports, so that
this negative prediction will not be realized. This positive point of view looks
to the increasing demand for American products, particularly technologically
sophisticated consumer and capital goods products, and the output of our
multi-national corporations which sell products in developing countries to
accelerate demand for our exports. It holds that the rapid technological change,
notably in electronics and communications, is bringing enough new demand from
both the industrial and the consumer sectors to act as the catalyst for overall
consumer and industrial goods demand growth.
Whether the "soft landing" scenario continues in the next few months, and the
economy shows modest expansion, or a slowdown begins to emerge, the likelihood
is that inflation will remain under control. This provides for a continuing
pattern of the recently lowered interest rate levels. Whether long-term and
short-term interest rates move significantly lower than today's 6.3%, 30-year
U.S. Treasury Bonds, and 5.5%, 1-year U. S. Treasury Bills, depends not only on
the strengthening or weakening of the domestic economy, but also on the
comparative interest rates being paid by other major industrial nations, and the
stability of the dollar. Our interest rates must be in equilibrium with others,
when adjusted for their inflation rates and the values of our currency.
Presently, the trends in
1
<PAGE>
EVERGREEN DOMESTIC GROWTH FUNDS
A REVIEW OF THE PAST YEAR AND
PROSPECTS FOR THE FUTURE -- (CONTINUED)
the major industrial countries, Germany and Japan, suggest continued slower
growth than that recently experienced by the American economy, with prospective
declining inflationary trends. This should enable the United States Federal
Reserve to retain sufficient flexibility, so that rates can be brought down if
the economy slows too rapidly and, thus, to sustain our economic strength
without being externally pressured toward unreasonably high interest rates.
We believe that the general level of valuation of both stocks and bonds is
likely to be sustained. Individual equity issues will, of course, reflect
prevailing business conditions. Emphasis in owning equities, we believe, should
be on powerful business franchises, companies with both leadership and dynamic
growth characteristics, providing vital services or products. On average, the
level of equities valuation is in line with current interest rate trends, but,
it is apparent that large sectors of the market are priced on highly optimistic
growth expectations. These sectors and issues are subject to quick and major
downward revaluation to the extent that their businesses fail to show strong
evidence of continued high growth rates. As the economy remains slower than over
the past two years, it will evidently be more difficult to show extraordinary
growth rates. Therefore, we anticipate a renewed interest in those businesses
which are undervalued in terms of their growth potential, especially those
beginning, or, in process of, programs for profit margin improvement and profits
growth.
We continue to believe that the merger and acquisition trend will continue,
as larger companies seek to capitalize on opportunities for economies of scale
and synergies through mergers and acquisitions. This movement, already strong,
is expected to broaden as a deregulatory atmosphere continues to develop through
new legislative initiatives.
In summary, we anticipate an environment where careful selection of equities
and careful analysis of current economic trends in fixed income investing will
combine to sustain rewarding long-term investment programs.
2
<PAGE>
EVERGREEN AGGRESSIVE GROWTH FUND
(Photo of bottles)
A REPORT FROM YOUR
PORTFOLIO MANAGER
HAROLD R. IRELAND, JR.
We are pleased to present you with the annual report for
Evergreen Aggressive Growth Fund (formerly known as ABT Emerging (Photo of
Growth Fund) for the fiscal year ended September 30, 1995. The Harold R.
Fund's fiscal year-end changed from October 31, to September 30, Ireland, Jr.)
so that it would coincide with those of Evergreen's other
domestic growth funds.
For this period under review, the eleven months since October
31, 1994, the Fund's total return was 25.4%*, (Class A shares at
NAV), as compared with 21.7% for the Russell 2000 Index**. The
table below compares the Fund's average annual compound
returns with those of the Lipper Capital Appreciation Funds'
Average*** and the Russell 2000 Index:
<TABLE>
<CAPTION>
EVERGREEN AGGRESSIVE LIPPER
PERIOD ENDED GROWTH FUND CAPITAL APPRECIATION
9/30/95 (CLASS A, NAV) FUNDS AVERAGE RUSSELL 2000 INDEX
<S> <C> <C> <C>
1-Year 28.2% 25.2% 23.4%
3-Year 17.6% 15.9% 19.0%
5-Year 25.8% 17.9% 21.7%
10-Year 17.0% 14.6% 12.8%
</TABLE>
The Fund's Class A shares are subject to a 4.75% front end sales charge,
which is not reflected in the performance figures above. If reflected,
performance would be lower. The Fund's 1-, 3-, 5-, and 10-year average annual
returns as of September 30, 1995, for its Class A shares with the maximum 4.75%
front-end sales charge, were 22.1%, 15.7%, 24.5%, and 15.6%, respectively. (For
additional performance information, please see page five.)
We are concentrating the Fund's sector weightings in four industries whose
prospects we believe to be dynamic. The Fund continued to be heavily weighted in
the technology and computer sectors. We think these industries continue to be an
area that show dynamic increases in sales and earnings. Together, these two
sectors comprised 28.7% of the Fund's net assets at its fiscal year-end. Of the
Fund's six current holdings in these sectors, four appreciated dramatically,
while the two others each lost about one-third of their value, for the eleven
months through September 30, 1995.
<TABLE>
<S> <C>
Cisco Systems +129%
Atmel Corp. + 83%
Parametric Technology + 71%
Microsoft Corporation + 43%
Sensormatic Electronics - 39%
American Power Conversion - 34%
</TABLE>
Restructuring and downsizing of large mature companies to get costs in line
with a slowdown in business being booked, favors technology over people. The
efficiencies related to this restructuring is fueling corporate profits. On the
consumer side, both new purchases of PCs and upgrades are at growth trends
double those of the recent past. While some believe that these trends will be
short-lived, we believe that technology will continue to be the place to be in
the 1990s. The reason being greater top and bottom line growth as compared with
other industries.
FIGURES REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS.
* PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDEND AND CAPITAL GAIN
DISTRIBUTIONS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE.
INVESTORS SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL
COST. ALL PERFORMANCE FIGURES INCLUDE 12B-1 EXPENSES, UP TO AN ANNUAL
MAXIMUM OF .75 OF 1% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR CLASS A
SHARES. FOR THE FORSEEABLE FUTURE, HOWEVER, MANAGEMENT INTENDS TO LIMIT SUCH
PAYMENTS ON THE CLASS A SHARES TO .25 OF 1%.
** AN UNMANAGED REINVESTED INDEX.
*** SOURCE: LIPPER ANALYTICAL SERVICES, INC., AN INDEPENDENT MUTUAL FUNDS
PERFORMANCE MONITOR. PERFORMANCE FIGURES FOR THE LIPPER AVERAGE INCLUDE THE
REINVESTMENT OF INCOME DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, BUT DO NOT
INCLUDE ANY SALES CHARGES. AS OF 9/30/95 THERE WERE 153 CAPITAL APPRECIATION
FUNDS IN THIS AVERAGE.
3
<PAGE>
EVERGREEN AGGRESSIVE GROWTH FUND
(Photo of bottles)
We believe that specialty retail, the Fund's most weighted sector, at 22.1%
of net assets, continues to show promise. Of the five issues in the portfolio,
four rose in price and one declined during the past eleven months.
<TABLE>
<S> <C>
Danka Business Systems, ADR* + 85%
Fastenal Company + 62%
Office Depot + 22%
AutoZone + 6%
Home Depot - 12%
</TABLE>
The theme here is offering the consumer a better value. The companies
involved are consolidating their respective industries, taking market share away
from weaker corporate entities. Office products, building products,
do-it-yourself auto parts, construction fasteners, and copying and office
equipment are businesses included in this area. The health sector, at 19.9% of
net assets, includes the world's first and second largest generic drug
companies, a prominent HMO, a hospital management company and the world's
leading pacemaker company.
SCREENING CRITERIA
Evergreen Aggressive Growth Fund's stock selection process is unusually
rigorous. The criterion that we use in this selection process is both
quantitative and qualitative and favors those companies that have historically
produced, and that we believe will continue to produce, superior business
momentum -- both top and bottom line. For example, the sales growth of a company
during any five-year period, along with earnings growth, must be at least 20%
annually. Also, return on equity should be in the 20% range, and long-term debt
must be less than one-third of capitalization. The company must have inside
ownership and a top-notch management team that has a business plan. We are
looking for companies that show leadership with regard to the management and the
products or services offered. Mid-cap to larger companies are favored over small
cap issues. Lastly, we want these stocks to be liquid and priced at fair value
in relationhip to their projected rate.
CONCENTRATION
Many investors ask if 24 issues, the number of issues we currently own, is
ample diversification for a capital appreciation fund. We would agree that
investment in 24 securities would not be prudent if a portfolio manager were to
lower the selection criteria so as to include third, fourth or fifth-rate
companies. A concentrated portfolio forces the portfolio manager to maintain the
quality of issues owned. We believe that the companies in the Fund's portfolio
are the best in their respective businesses.
STYLE
In the investment world, there is much discussion about betas, P/E ratios,
price-to-book, and other measurements of investment risk. We generally hear less
about the integrity of a company, with regard to its products and management, or
how many economic cycles it has withstood or weathered successfully. It is our
belief that holding quality growth stocks over the long term, staying fully
invested through stock market swings, while weeding out those entities that are
not true "marathoners", is a viable investment style. Our low portfolio turnover
rate, 31%, which resulted in having less realized gain to pay to shareholders,
is a reflection of this strategy.
STRATEGY
Our investment strategy is not one of trying to predict future interest rates
or economic conditions that may affect the business cycle. Rather, our
investment strategy, for the most part, focuses on those companies with superior
5-year performance records. We believe that these companies' growth
characteristics and business momentum should carry them through any economic
expansion or contraction. Stock market leadership is generally by those
companies or industries who have or are expected to produce the most profit
growth. Specialty retail includes companies that are consolidating their
respective fields, taking consumer dollars away from weaker entities.
Thank you for investing in Evergreen Aggressive Growth Fund.
* INVESTMENT IN NON-U.S. SECURITIES INVOLVE ADDITIONAL RISKS SUCH AS CURRENCY
FLUCTUATIONS AND POLITICAL INSTABILITY.
4
<PAGE>
EVERGREEN AGGRESSIVE GROWTH FUND
(Photo of bottles)
RESULTS TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN AGGRESSIVE GROWTH FUND
The graphs below compare a $10,000 investment in the Evergreen Aggressive
Growth Fund (Class A, Class B, Class C and Class Y Shares) with a similar
investment in the NASDAQ Industrials Index ("Index").
CLASS A
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=22.1%
FIVE YEAR=24.5%
SINCE INCEPTION=16.5%
(Class A Average Annual Total Return chart appears here, plot points are as
follows)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/85 9/30/86 9/30/87 9/30/88 9/30/89 9/30/90 9/30/91 9/30/92 9/30/93 9/30/94 9/30/95
NASDAQ INDUSTRIALS 10,000 12,276 11,908 13,313 15,736 14,257 23,480 25,453 28,293 26,466 34,466
AGGRESSIVE GROWTH FUND 9,525 13,831 15,494 13,342 18,074 14,583 24,481 28,195 37,362 35,767 45,851
</TABLE>
CLASS B
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=4.7%
(Class B Average Annual Total Return chart appears here, plot points are as
follows)
7/7/95* 7/31/95 8/31/95 9/30/95
NASDAQ INDUSTRIALS 10,000 10,771 10,856 11,092
AGGRESSIVE GROWTH FUND 10,000 10,518 10,506 10,467
CLASS C
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=4.4%
(Class C Average Annual Total Return chart appears here, plot points are as
follows)
8/3/95* 8/31/95 9/30/95
NASDAQ INDUSTRIALS 10,000 10,079 10,298
AGGRESSIVE GROWTH FUND 10,000 10,128 10,442
CLASS Y
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=10.1%
(Class Y Average Annual Total Return chart appears here, plot points are as
follows)
7/11/95* 7/31/95 8/31/95 9/30/95
NASDAQ INDUSTRIALS 10,000 10,771 10,856 11,092
AGGRESSIVE GROWTH FUND 10,000 10,545 10,538 11,007
*Commencement of class operations.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE RESULTS. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY
INSURED.
For the purposes of the graphs and the accompanying tables, it has been
assumed that (a) the maximum sales charge of 4.75% was deducted from the initial
$10,000 investment in Class A Shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the investment in Class B
and Class C Shares, assuming full redemption on September 30, 1995; (c) all
recurring fees (including investment advisory fees) were deducted; and (d) all
dividends and distributions were reinvested.
The Index is an unmanaged index and includes the reinvestment of income,
but does not reflect the payment of transaction costs and advisory fees
associated with an investment in the Fund.
5
<PAGE>
EVERGREEN AGGRESSIVE GROWTH FUND
(SUCCESSOR TO ABT EMERGING GROWTH FUND)
(Photo of Bottles)
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 96.8%
AIRLINES -- 3.0%
70,000* ValueJet Airlines, Inc.............. $ 2,283,750
BUSINESS SERVICES -- 5.3%
55,000 First Data Corp..................... 3,410,000
22,500* Fiserv, Inc......................... 649,688
4,059,688
COMPUTERS -- 10.0%
165,000* American Power Conversion Corp...... 2,103,750
80,000* Cisco Systems, Inc.................. 5,520,000
7,623,750
ENTERTAINMENT -- 2.2%
33,000* Viacom, Inc......................... 1,641,750
ENVIRONMENTAL CONTROL -- 6.1%
200,000* Republic Waste Industries, Inc...... 4,625,000
FINANCIAL SERVICES -- 9.5%
70,000 Green Tree Financial Corp........... 4,270,000
120,000 Mercury Financial Co................ 2,925,000
7,195,000
HEALTH -- 19.9%
42,000* Health Management
Associates, Inc..................... 1,349,250
120,000 IVAX Corp........................... 3,615,000
88,000 Medtronic, Inc...................... 4,730,000
130,000 Mylan Labs, Inc..................... 2,600,000
25,000 Surgical Care Affiliates, Inc....... 581,250
46,900 United Healthcare Corp.............. 2,292,237
15,167,737
SPECIAL RETAIL -- 22.1%
110,000* AutoZone, Inc....................... 2,805,000
100,000 Danka Business Systems-ADR.......... 3,600,000
80,000 Fastenal Co......................... 2,920,000
81,000 Home Depot, Inc..................... 3,229,875
140,000* Office Depot, Inc................... 4,217,500
16,772,375
TECHNOLOGY -- 18.7%
100,000* Atmel Corp.......................... 3,375,000
42,000* Microsoft Corp...................... 3,801,000
75,000* Parametric Technology Corp.......... 4,612,500
105,000 Sensormatic Electronics Corp........ 2,415,000
14,203,500
TOTAL COMMON STOCKS
(COST $41,059,593).................. 73,572,550
WARRANTS -- 0%
806 Sound Advice, Inc.**
$8.70, expire 6/14/1999 --
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C> <C>
REPURCHASE AGREEMENT -- .5%
$392,000 State Street Bank & Trust,
5.25%, dated 9/29/95, due
10/2/95
Collateral -- $397,700
U.S. Treasury Bond,
8.78%, 2/15/19
(cost $392,000).......... $ 392,000
TOTAL INVESTMENTS
(COST $41,451,593)....... 97.3% 73,964,550
OTHER ASSETS AND
LIABILITIES -- NET....... 2.7 2,057,557
NET ASSETS................. 100.0% $76,022,107
</TABLE>
ADR-American Depository Receipts.
* Non-income producing security.
** No market quotation available, valued at fair value as determined in good
faith by the Fund's Trustees.
See accompanying notes to financial statements.
6
<PAGE>
EVERGREEN AGGRESSIVE GROWTH FUND
(SUCCESSOR TO ABT EMERGING GROWTH FUND)
(Photo of Bottles)
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $41,451,593)............................................................. $73,964,550
Cash........................................................................................................... 6,609
Receivable for securities sold................................................................................. 1,783,069
Receivable for Fund shares sold................................................................................ 378,956
Unamortized organization expenses and other assets............................................................. 25,205
Dividends and interest receivable.............................................................................. 13,527
Total assets................................................................................................ 76,171,916
LIABILITIES:
Accrued expenses............................................................................................... 75,669
Accrued advisory fee........................................................................................... 35,817
Payable for organization expense............................................................................... 25,500
Distribution fee payable....................................................................................... 6,728
Payable for Fund shares redeemed............................................................................... 6,095
Total liabilities........................................................................................... 149,809
NET ASSETS........................................................................................................ $76,022,107
NET ASSETS CONSIST OF:
Paid-in capital................................................................................................ $41,097,746
Accumulated net realized gain on investment transactions....................................................... 2,411,404
Net unrealized appreciation of investments..................................................................... 32,512,957
Net assets............................................................................................... $76,022,107
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($70,858,207 4,080,212 shares of beneficial interest outstanding)............................... $17.37
Sales charge -- 4.75% of offering price........................................................................ .87
Maximum offering price................................................................................... $18.24
Class B Shares ($2,858,023 164,752 shares of beneficial interest outstanding).................................. $17.35
Class C Shares ($416,489 24,064 shares of beneficial interest outstanding)..................................... $17.31
Class Y Shares ($1,889,388 108,715 shares of beneficial interest outstanding).................................. $17.38
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
EVERGREEN AGGRESSIVE GROWTH FUND
(SUCCESSOR TO ABT EMERGING GROWTH FUND)
(Photo of Bottles)
STATEMENT OF OPERATIONS
ELEVEN MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends (net of foreign withholding taxes of $1,052)....................................... $ 115,662
Interest..................................................................................... 94,070
Total investment income................................................................ 209,732
EXPENSES:
Advisory fee................................................................................. $ 354,856
Administrative personnel and service fees.................................................... 41,585
Distribution fee -- Class A Shares........................................................... 144,414
Distribution fee -- Class B Shares........................................................... 1,989
Shareholder services fee -- Class B Shares................................................... 609
Distribution fee -- Class C Shares........................................................... 87
Shareholder services fee -- Class C Shares................................................... 29
Transfer agent fee........................................................................... 133,552
Registration and filing fees................................................................. 53,043
Custodian fee................................................................................ 47,270
Professional fees............................................................................ 39,387
Insurance expense............................................................................ 24,723
Trustees' fees and expenses.................................................................. 16,570
Reports and notices to shareholders.......................................................... 9,233
Amortization of organization expense......................................................... 1,548
Miscellaneous................................................................................ 5,713
Total expenses......................................................................... 874,608
Net investment loss............................................................................. (664,876)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments............................................................. 2,713,044
Net change in unrealized appreciation of investments......................................... 12,941,978
Net gain on investments......................................................................... 15,655,022
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................ $ 14,990,146
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
EVERGREEN AGGRESSIVE GROWTH FUND
(SUCCESSOR TO ABT EMERGING GROWTH FUND)
(Photo of Bottles)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
ELEVEN MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
1995 OCTOBER 31, 1994
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss...................................................................... $ (664,876) $ (561,495)
Net realized gain (loss) on investments.................................................. 2,713,044 (196,528)
Net change in unrealized appreciation of investments..................................... 12,941,978 (1,007,198)
Net increase (decrease) resulting from operations..................................... 14,990,146 (1,765,221)
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAINS:
Class A Shares........................................................................... -- (934,221)
Total distributions to shareholders................................................ -- (934,221)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold................................................................ 12,332,626 21,670,407
Proceeds from reinvestment of distributions.............................................. -- 753,121
Payment for shares redeemed.............................................................. (15,935,716) (13,141,951)
Net increase (decrease) resulting from Fund share transactions........................ (3,603,090) 9,281,577
Net increase in net assets............................................................ 11,387,056 6,582,135
NET ASSETS:
Beginning of period...................................................................... 64,635,051 58,052,916
End of period............................................................................ $ 76,022,107 $ 64,635,051
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
EVERGREEN AGGRESSIVE GROWTH FUND
(SUCCESSOR TO ABT EMERGING GROWTH FUND)
(Photo of Bottles)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A SHARES#
ELEVEN MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED OCTOBER 31,
1995** 1994++ 1993++ 1992++ 1991++
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.......... $13.85 $14.44 $11.76 $12.22 $7.37
Income (loss) from investment operations:
Net investment loss......................... (.16) (.13) (.12) (.10) (.08)
Net realized and unrealized gain (loss) on
investments............................... 3.68 (.22) 3.06 1.84 5.59
Total income (loss) from investment
operations.............................. 3.52 (.35) 2.94 1.74 5.51
Less distributions to shareholders from
net realized gains.......................... -- (.24) (.26) (2.20) (.66)
Net asset value, end of period................ $17.37 $13.85 $14.44 $11.76 $12.22
TOTAL RETURN+................................. 25.4% (2.4%) 25.3% 17.4% 79.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............................. $70,858 $64,635 $58,053 $29,302 $23,509
Ratios to average net assets:
Expenses.................................... 1.47%++ 1.25% 1.31% 1.44% 1.59%
Net investment loss......................... (1.12%)++ (.92%) (.92%) (.93%) (.71%)
Portfolio turnover rate....................... 31% 59% 48% 46% 108%
<CAPTION>
CLASS B CLASS C CLASS Y
SHARES SHARES SHARES
JULY 7, AUGUST 3, JULY 11,
1995* 1995* 1995*
THROUGH THROUGH THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995** 1995** 1995**
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.......... $15.82 $16.42 $15.79
Income (loss) from investment operations:
Net investment loss......................... (.03) (.01) (.01)
Net realized and unrealized gain (loss) on
investments............................... 1.56 .90 1.60
Total income (loss) from investment
operations.............................. 1.53 .89 1.59
Less distributions to shareholders from
net realized gains.......................... -- -- --
Net asset value, end of period................ $17.35 $17.31 $17.38
TOTAL RETURN+................................. 9.7% 5.4% 10.1%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............................. $2,858 $416 $1,889
Ratios to average net assets:
Expenses.................................... 2.09%++ 2.09%++ 1.08%++
Net investment loss......................... (1.71%)++ (1.51%)++ (.71%)++
Portfolio turnover rate....................... 31% 31% 31%
</TABLE>
# Effective June 30, 1995, Evergreen Aggressive Growth Fund, a new series of
Evergreen Trust, acquired substantially all of the net assets of ABT Emerging
Growth Fund. ABT Emerging Growth Fund, which had a fiscal year that ended on
October 31 was the accounting survivor in the combination. Accordingly, the
information above includes the results of operations of ABT Emerging Growth
Fund prior to June 30, 1995.
* Commencement of class operations.
** The Fund changed its fiscal year end from October 31 to September 30.
++ Per share data based on average shares outstanding.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized. Due to the recent commencement of their offering, the ratios for
Class B, Class C and Class Y shares are not necessarily comparable to that of
Class A shares and are not necessarily indicative of future ratios.
See accompanying notes to financial statements.
10
<PAGE>
EVERGREEN FUND
(Photo of Wall St.)
A REPORT FROM YOUR
PORTFOLIO MANAGER
STEPHEN A. LIEBER
Evergreen Fund completed its 24th fiscal year on September (Photo of
30, 1995. Major investment strategies of Evergreen Fund Stephen A.
developed over recent years proved rewarding during this year. Lieber)
The Fund's concentration on investment in undervalued growth
opportunities was central to our favorable results. Banks, the
largest industry sector in the portfolio, had impressive results
during this period, reflecting growth in net income,
improvements in balance sheets, and the impact of a rapidly
rising trend of acquisitions in the course of a still growing
consolidation in the American financial industry. The
thirty-five banks held in the portfolio at the end of this
period, six of which were
purchased during the year, provided a 27.5% return for the
fiscal year. The second largest sector of the Fund's investment, health care
products and services, provided a 44.7% return. This return was especially
significant, since it was, in large part, the result of our judgment in 1993 to
increase health care commitments during a period when the industry was widely
regarded by investors with disfavor and apprehension because of that year's
health care plan debate. This is a meaningful illustration of our approach which
combines growth stock investing with investing on a value basis. Another example
of the same philosophy occurred in finance and insurance, where the Fund's
investments provided a 41.4% appreciation during the fiscal year. Most of these
equities were interest rate related and reflected our conclusion during the last
period of high rates, that a number of growth companies in the financial sector
were significantly undervalued. The largest single sector gain was in
information services and technology. This group, as a whole, provided a 64.0%
return for the twelve months. Similarly, the telecommunications services and
equipment sector provided a 62.3% return for this period. The Fund's weakest
results came from the environmental services, chemical and agricultural
products, and retailing and wholesale sectors, with returns of 0.1%, 0.4%, and
5.7%, respectively. Overall, the portfolio strength reflected appreciation in
the majority of the long-term holdings and incremental gains from a number of
recent purchases, notably in the technology sectors. While the Fund's total
return (Class Y, no-load shares) did not exceed that of the NASDAQ OTC
Composite*, it did exceed that of the Russell 2000.* (For additional performance
information, please see page 13.)
Evergreen Fund continued the transition of recent years of shifting emphasis
toward dynamic smaller companies. There is still a substantial role for larger
companies in the portfolio. Most of these large company shares have been
purchased during periods of extreme undervaluation, or have been held for many
years and have grown from being small companies to being large companies. During
the year, 66 new companies were added to the portfolio. The portfolio, as a
whole, has a small companies emphasis, with the median market capitalization
being $379 million. We believe the portfolio remains more conservatively valued
than the market as a whole.
These figures are consistent with the long-term Evergreen Fund strategy of
purchasing outstanding entrepreneurial growth companies at a valuation level
below that of the general market. We seek substantially more than average growth
at a valuation which is less than or equal to the market valuation. This policy,
we believe, helps to lower risk during periods of weaker markets with overall
substantial returns during periods of strength.
OUTSTANDING PERFORMERS
Diversity of opportunity is a characteristic of the Fund's broad portfolio
exposure. With a total of 226 equity securities, major opportunities were found
in a wide variety of companies and industries. For example, the six companies in
the portfolio which appreciated 100% or more during the fiscal year included one
FIGURES REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS.
* UNMANAGED INDICES OF SELECTED SECURITIES.
11
<PAGE>
EVERGREEN FUND
(Photo of Wall St.)
telecommunications technology provider, Coherent Communications Systems Corp.,
which appreciated 231.4%, three health care related enterprises, Boston
Scientific Corp., 250.6%, Coherent, Inc., 159.7%, and Idexx Laboratories,
159.3%, one computer network systems company, Cisco Systems, 115.5%, and one
provider of business-to-business marketing information, American Business
Information, 106.6%. Each issue was chosen within the program of detailed,
fundamental research which characterizes the Fund's investment process. Our
approach is both "top down", where we make our judgments as to the direction of
the economy and its impact on individual industries, and "bottom up" where we
look at individual companies for their unique abilities to provide rising
profits and improving quality.
MERGERS AND ACQUISITIONS
The search for undervaluation within the broader strategies remains central
to the Fund's investment process. The proof of undervaluation which is often
provided by corporate acquisitions of Fund holdings at prices substantially in
excess of market levels is, for us, a demonstration that we have, indeed,
selected truly undervalued companies. During the fiscal year, sixteen issues
among the Fund holdings were either acquired, merged, or have acquisition bids
pending. These bring the total number of such transactions among Fund portfolio
companies since inception of the Fund in October, 1971, to 283. All of the
acquisitions of portfolio companies that were completed were at prices in excess
of cost; ranging from 294% for First Financial Management Corp., whose
acquisition was completed in October, 1995, held since 1989, to 3.4% for Magma
Power Co., held since 1993. A continuing long-term trend among companies
acquired during the fiscal year was in the financial industry. Examples of such
companies include: Coral Gables Fedcorp, First Colonial Bankshares, and
Intercontinental Bank. Since inception, forty-seven of the Fund's bank and
thrift industry holdings have been acquired, or have received an acquisition
offer, with an average gain of 113.3% on completed acquisitions. The Fund's
holdings are largely of regional and community banks, each of which we believe
represents an undervalued opportunity for larger institutions to establish a
strong franchise. We focus our analysis on the quality of the individual banks,
and their growth opportunity in terms of the strength of their franchise and
customer base. The portfolio sector with the greatest number of acquisitions
during the fiscal year was health care. These included: Intergroup Healthcare
Corp., Medicine Shoppe International, REN Corp.-USA, Sci-Med Life Systems, and
Zenith Laboratories. Each of the health care companies acquired represented a
uniquely effective industry product or service franchise of value to prospective
acquirers planning to build major companies. We believe that the portfolio
continues to include a number of holdings which can play an important
synergistic role in the expansion of larger companies seeking unique products,
business franchises or management strengths.
OUTLOOK
The Fund's strategies for the new fiscal year continue to focus on the search
for excellent entrepreneurial management in securities we believe to be
undervalued with growth opportunities. Notwithstanding the slowing of the
economy, we believe there are an ample number of companies meeting these
growth-oriented qualifications. Strong products and services which create new
demand is, in our view, going to be the main focus of the investment search in a
less ebullient economy. Liquidity is likely to remain high due to the lower
interest rates and the restraints being imposed on a budget-conscious business
and governmental community. Liquidity for investment should also remain high so
long as low inflation rates and modest growth continues to characterize the
economy. We anticipate a period when corporations are likely to be generating
enough free cash to add to the demand for equities through buybacks, which may
well offset the supply through new issues. In this environment, the dynamic
leaders in a broad variety of segments of industries and sectors of the economy
will stand out as beacons to attract investors who find an otherwise uninspiring
trend of corporate profits. Our aim is to hold and buy the profits leaders,
especially when we consider them comparatively undervalued.
We appreciate the broadening investor interest in the Evergreen Fund over the
past fiscal year, and welcome the many new shareholders who have joined it.
12
<PAGE>
EVERGREEN FUND
(Photo of Wall St.)
RESULTS TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN FUND
The graphs below compare a $10,000 investment in the Evergreen Fund (Class
A, Class B, Class C and Class Y Shares) with a similar investment in the Russell
2000 and NASDAQ OTC Indices ("Indices").
CLASS A
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=23.7%
(Class A Average Annual Total Return chart appears here, plot points are as
follows)
1/3/95* 3/31/95 6/30/95 9/30/95
RUSSELL 2000 10,000 10,461 11,441 12,572
NASDAQ OTC 10,000 10,884 12,450 13,934
EVERGREEN FUND 9,525 10,671 11,498 12,374
CLASS B
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=24.3%
(Class B Average Annual Total Return chart appears here, plot points are as
follows)
1/3/95* 3/31/95 6/30/95 9/30/95
RUSSELL 2000 10,000 10,461 11,441 12,572
NASDAQ OTC 10,000 10,884 12,450 13,934
EVERGREEN FUND 10,000 11,186 12,038 12,432
CLASS C
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=28.3%
(Class C Average Annual Total Return chart appears here, plot points are as
follows)
1/3/95* 3/31/95 6/30/95 9/30/95
RUSSELL 2000 10,000 10,461 11,441 12,572
NASDAQ OTC 10,000 10,884 12,450 13,934
EVERGREEN FUND 10,000 11,186 12,038 12,832
CLASS Y
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=26.8%
FIVE YEAR=18.7%
SINCE INCEPTION=12.8%
(Class Y Average Annual Total Return chart appears here, plot points are as
follows)
<TABLE>
<CAPTION>
9/30/85 9/30/86 9/30/87 9/30/88 9/30/89 9/30/90 9/30/91 9/30/92 9/30/93 9/30/94 9/30/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RUSSELL 2000 10,000 12,202 15,789 14,083 17,109 12,462 18,081 19,696 26,223 26,926 33,221
NASDAQ OTC 10,000 12,509 15,876 13,865 16,910 12,317 18,838 20,857 27,275 27,326 37,432
EVERGREEN FUND 10,000 13,087 16,033 15,734 18,880 14,088 20,251 21,302 24,673 26,192 33,208
</TABLE>
*Commencement of class operations.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE RESULTS. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY
INSURED.
For the purposes of the graphs and the accompanying tables, it has been
assumed that (a) the maximum sales charge of 4.75% was deducted from the initial
$10,000 investment in Class A Shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the investment in Class B
and Class C Shares, assuming full redemption on September 30, 1995; (c) all
recurring fees (including investment advisory fees), net of fee waivers and
reimbursements, were deducted; and (d) all dividends and distributions were
reinvested.
The Indices are an unmanaged indices and include the reinvestment of
income, but do not reflect the payment of transaction costs and advisory fees
associated with an investment in the Fund.
13
<PAGE>
EVERGREEN FUND
(Photo of Wall St.)
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 84.5%
BANKS -- 18.4%
45,000 Amcore Financial, Inc.................. $ 1,023,750
50,000 American Federal Bank, FSB............. 762,500
28,300 AmSouth Bancorporation................. 1,075,400
101,196 Arrow Financial Corp................... 1,796,229
110,000 Bank of Boston Corp.................... 5,238,750
273,320 Barnett Banks, Inc..................... 15,476,745
190,000 Baybanks, Inc.......................... 14,416,250
40,000 Benson Financial Corp.................. 750,000
30,000 Central Fidelity Banks, Inc............ 975,000
210,312 Chittenden Corp........................ 5,362,956
50,000 Cole Taylor Financial
Group, Inc............................. 1,162,500
28,700 Crestar Financial Corp................. 1,603,612
5,000 Evergreen Bancorp, Inc................. 106,250
127,000 First Empire State Corp................ 24,130,000
244,703 First Michigan Bank Corp............... 6,423,453
45,000 First Palm Beach Bancorp., Inc......... 1,096,875
301,732 1st Source Corp........................ 6,788,970
50,000 First State Bancorp.................... 725,000
50,000 1st United Bancorp..................... 434,375
160,350 Fort Wayne National Corp............... 5,211,375
889,540 Hibernia Corp. Cl. A................... 9,006,592
100,000 Intercontinental Bank.................. 2,912,500
67,779 Magna Group, Inc....................... 1,643,640
210,000 North Fork
Bancorporation, Inc.................... 4,357,500
105,432 Old Kent Financial Corp................ 4,019,595
111,000 ONBANCorp, Inc......................... 3,607,500
21,500 One Valley Bancorp of West
Virginia, Inc.......................... 709,500
30,000* Riggs National Corp.................... 386,250
70,000 River Forest Bancorp................... 1,627,500
80,000 United Carolina
Bancshares Corp........................ 2,780,000
31,428 Univest Corp. of
Pennsylvania........................... 1,099,980
10,000 USBanCorp, Inc......................... 302,500
16,800 Valley National Bancorp................ 415,800
29,400 West Coast Bancorp..................... 521,850
115,900 Westamerica Bancorporation............. 4,462,150
132,412,847
BUILDING, CONSTRUCTION & FURNISHINGS --
3.1%
20,000* Champion Enterprises, Inc.............. 397,500
88,000 Continental Homes Holding Corp......... 1,848,000
220,900 Interface, Inc. Cl. A.................. 3,782,913
160,000 Juno Lighting, Inc..................... 2,440,000
<CAPTION>
SHARES VALUE
<C> <S> <C>
BUILDING, CONSTRUCTION & FURNISHINGS
(CONTINUED)
38,000 Kaufman & Broad Home Corp.............. $ 479,750
90,800 La-Z-Boy Chair Co...................... 2,712,650
72,200* M/I Schottenstein Homes, Inc........... 740,050
92,650 Medusa Corp............................ 2,617,363
100,000* Redman Industries, Inc................. 2,600,000
85,700 Ryland Group, Inc...................... 1,328,350
50,000* Southern Energy Homes, Inc............. 793,750
158,200 Standard Pacific Corp.................. 1,107,400
90,000* Sundance Homes, Inc.................... 241,875
48,000* Toll Brothers, Inc..................... 906,000
21,995,601
BUSINESS EQUIPMENT & SERVICES -- 2.2%
52,500* Boole & Babbage, Inc................... 1,581,563
88,700 Bowne & Co., Inc....................... 1,796,175
30,000* Cisco Systems, Inc..................... 2,070,000
40,000 EIS International, Inc................. 715,000
104,800* Gradco Systems, Inc.................... 235,800
16,700 HON Industries, Inc.................... 484,300
30,000* In Focus Systems, Inc.................. 738,750
10,000* Intuit, Inc............................ 470,000
14,850* Personnel Management, Inc.............. 137,363
60,600 Pitney Bowes, Inc...................... 2,545,200
100,000 Sensormatic Electronics Corp........... 2,300,000
50,000* Zebra Technologies Corp................ 2,662,500
15,736,651
CHEMICALS & AGRICULTURAL PRODUCTS --
1.6%
30,000 Nalco Chemical Co...................... 1,023,750
349,568 Schulman (A.), Inc..................... 8,739,200
45,000 Sigma-Aldrich Corp..................... 2,182,500
11,945,450
CONSUMER PRODUCTS & SERVICES -- 4.2%
70,000 Aaron Rents, Inc. Cl. B................ 1,242,500
105,000* American Business Information, Inc..... 2,126,250
185,030 Anthony Industries, Inc................ 3,492,441
60,000 Arctco, Inc............................ 765,000
71,333* Barry (R.G.) Corp...................... 1,230,497
25,000* Children's Discovery Centers of
America, Inc........................... 293,750
65,000* Circle K Corp.......................... 1,348,750
155,300 Crown Crafts, Inc...................... 2,018,900
30,000 Franklin Electric Co., Inc............. 967,500
60,600 Garan, Inc............................. 1,037,775
55,650 Harman International
Industries, Inc........................ 2,726,850
28,750 Kellwood Co............................ 592,969
</TABLE>
14
<PAGE>
EVERGREEN FUND
(Photo of Wall St.)
STATEMENT OF INVESTMENTS -- (CONTINUED)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS (CONTINUED)
<C> <S> <C>
CONSUMER PRODUCTS & SERVICES
(CONTINUED)
252,777 Lancaster Colony Corp.................. $ 8,594,418
30,000* LoJack Corp............................ 495,000
45,000* Nautica Enterprises, Inc............... 1,541,250
50,000* Recovery Engineering, Inc.............. 731,250
23,000 Roto-Rooter, Inc....................... 851,000
30,056,100
ENVIRONMENTAL SERVICES -- .4%
69,000* Handex Corp............................ 491,625
30,000 Watts Industries, Inc. Cl.A............ 746,250
100,000* Western Waste Industries, Inc.......... 2,000,000
3,237,875
FINANCE & INSURANCE -- 9.5%
172,200 Allmerica Property
& Casualty Cos., Inc................... 4,111,275
189,400 AMBAC, Inc............................. 8,333,600
63,200 Countrywide Credit Industries, Inc..... 1,485,200
141,600 Executive Risk, Inc.................... 3,327,600
126,900 Federal Home Loan
Mortgage Corp.......................... 8,771,963
159,500 Federal National
Mortgage Association................... 16,508,250
60,000 First American Financial Corp.......... 1,447,500
97,000 John Nuveen Co. (The) Cl. A............ 2,400,750
70,900 MBIA, Inc.............................. 4,998,450
253,800 MGIC Investment Corp................... 14,530,050
23,992 Providian Corp......................... 995,668
66,852* Resource Bancshares
Mortgage Group, Inc.................... 1,019,493
20,000 State Auto Financial Corp.............. 450,000
68,379,799
FOOD PRODUCTS -- .1%
16,500+ Coca-Cola Bottling Co.
Consolidated Cl. B..................... 581,625
FOOD RETAILING & DISTRIBUTION -- .5%
55,405 Cracker Barrel Old
Country Store, Inc..................... 1,115,025
134,000 Seaway Food Town, Inc.**............... 2,110,500
3,225,525
HEALTH CARE PRODUCTS & SERVICES --
15.5%
75,000 Arbor Drugs, Inc....................... 1,406,250
15,000 Arrow International, Inc............... 648,750
130,000* Biomet, Inc............................ 2,242,500
68,298* Boston Scientific Corp................. 2,911,202
141,000 Caremark International, Inc............ 3,031,500
30,000* Circon Corp............................ 603,750
90,000* Coherent, Inc.......................... 3,285,000
<CAPTION>
SHARES VALUE
<C> <S> <C>
HEALTH CARE PRODUCTS & SERVICES
(CONTINUED)
90,200 Columbia/HCA Healthcare Corp........... $ 4,385,975
40,000* Express Scripts, Inc................... 1,760,000
54,828* FHP International Corp................. 1,322,725
28,974* Foundation Health Corp................. 1,104,634
230,000* Idexx Laboratories, Inc................ 8,567,500
20,000 Invacare Corp.......................... 960,000
55,000* Isomedix, Inc.......................... 804,375
195,000 Johnson & Johnson...................... 14,454,375
104,600* Living Centers of America, Inc......... 3,477,950
30,000* Maxxim Medical, Inc.................... 480,000
117,900 McKesson Corp.......................... 5,305,500
500,000 Merck & Co., Inc....................... 28,000,000
30,000* Mid Atlantic
Medical Services, Inc.................. 588,750
24,750 Minntech Corp.......................... 408,375
20,000* Physician Corporation of America....... 315,000
90,000* Psicor, Inc............................ 1,012,500
90,000* Regency Health Services, Inc........... 933,750
25,000* Regeneron Pharmaceuticals, Inc......... 390,625
20,000* Ren Corp.-USA.......................... 397,500
45,000* Salick Health Care, Inc................ 1,642,500
75,000* St. Jude Medical, Inc.................. 4,743,750
226,500 Stryker Corp........................... 10,560,563
128,000* Sun Healthcare Group, Inc.............. 1,648,000
39,600 Superior Surgical
Manufacturing Co., Inc................. 410,850
75,750* Tecnol Medical Products, Inc........... 1,458,188
50,000* Tenet Healthcare Corp.................. 868,750
20,000 United Healthcare Corp................. 977,500
111,108,587
INDUSTRIAL SPECIALTY PRODUCTS -- 6.4%
50,000* Adflex Solutions, Inc.................. 1,118,750
55,000 Breed Technologies, Inc................ 1,093,125
25,000* Chemfab Corp........................... 481,250
72,500* Dionex Corp............................ 3,788,125
98,000 Fisher Scientific
International, Inc..................... 3,172,750
182,000 Fuller (H.B.) Co....................... 5,733,000
85,000* Galey & Lord Inc....................... 1,168,750
15,000 Greenbrier Companies, Inc.............. 168,750
140,800 Leggett & Platt, Inc................... 3,467,200
90,000 Masland Corp........................... 1,338,750
122,900* Material Sciences Corp................. 2,166,113
33,900 Nacco Industries, Inc. Cl. A........... 2,012,813
66,000* Osmonics, Inc.......................... 1,163,250
174,687* Paxar Corp............................. 2,401,946
19,500 Roanoke Electric Steel Corp............ 302,250
28,300 Smith (A.O.) Corp...................... 732,263
50,000 Superior Industries
International, Inc..................... 1,343,750
</TABLE>
15
<PAGE>
EVERGREEN FUND
(Photo of Wall St.)
STATEMENT OF INVESTMENTS -- (CONTINUED)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS (CONTINUED)
<C> <S> <C>
INDUSTRIAL SPECIALTY PRODUCTS
(CONTINUED)
147,200 Tecumseh Products Co. Cl. A............ $ 7,065,600
57,800 Tecumseh Products Co. Cl. B............ 2,673,250
91,600 Teleflex, Inc.......................... 3,709,800
50,000 Wescast Industries, Inc................ 550,000
45,651,485
INFORMATION SERVICES & TECHNOLOGY --
6.4%
50,000* Atmel Corp............................. 1,687,500
120,000 Autodesk, Inc.......................... 5,250,000
37,500* CUC International, Inc................. 1,307,813
20,000* Data Translation, Inc.................. 355,000
50,000* Dialogic Corp.......................... 1,237,500
93,679 First Financial
Management Corp........................ 9,145,412
10,000* Franklin Electronic Publishers, Inc.... 393,750
55,000 HBO & Co............................... 3,437,500
180,000 Intel Corp............................. 10,822,500
35,000* Intersolv Inc.......................... 704,375
20,000* Lam Research Corp...................... 1,195,000
48,437 Molex, Inc............................. 1,755,859
50,000* Mylex Corp............................. 850,000
90,000* NetManage, Inc......................... 2,137,500
45,000* Parametric Technology Corp............. 2,767,500
80,000* Silicon Graphics, Inc.................. 2,750,000
15,500* Three-Five Systems, Inc................ 404,937
46,202,146
PAPER & PACKAGING -- .9%
65,000 Avery Dennison Corp.................... 2,730,000
6,500 St. Joe Paper Co....................... 413,562
148,530 Wausau Paper Mills Co.................. 3,601,852
6,745,414
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- 3.6%
214,250* Clear Channel
Communications, Inc.................... 16,229,437
50,000* EZ Communications, Inc. Cl. A.......... 962,500
38,000 Grupo Televisa S.A. GDS................ 760,000
130,800* Jacor Communications, Inc.............. 2,027,400
95,000 Wiley, (John) & Sons, Inc., Cl. A...... 5,581,250
25,560,587
REAL ESTATE -- 2.9%
138,760* Alexander's, Inc....................... 8,360,290
46,200 Apartment Investment
& Management Co........................ 970,200
54,000 Chelsea GCA Realty, Inc................ 1,613,250
80,000 Clayton Homes, Inc..................... 1,900,000
47,400* FRP Properties, Inc.................... 1,030,950
50,000 HGI Realty, Inc........................ 1,200,000
80,000* Host Marriott Corp..................... 990,000
40,000 Irvine Apartment Communities, Inc...... 705,000
<CAPTION>
SHARES VALUE
<C> <S> <C>
REAL ESTATE (CONTINUED)
25,000 Lennar Corp............................ $ 543,750
85,000* U.S. Home Corp......................... 2,125,000
29,300 Webb (Del) Corp........................ 553,038
30,500 Wellsford Residential
Property Trust......................... 651,937
20,643,415
RETAILING & WHOLESALE -- 5.0%
33,000 Blair Corp............................. 1,122,000
35,000* Burlington Coat Factory Warehouse...... 463,750
300,000 Dillard Department
Stores, Inc. Cl. A..................... 9,562,500
25,000 Dollar General Corp.................... 734,375
268,800 Fingerhut Companies, Inc............... 4,334,400
26,300* Forstmann & Co., Inc................... 21,369
50,000 Heilig-Meyers Co....................... 1,162,500
50,000* Jones Apparel Group, Inc............... 1,781,250
126,236* Leslie's Poolmart...................... 2,051,339
42,000 Lillian Vernon Corp.................... 561,750
43,300 Lowe's Companies, Inc.................. 1,299,000
154,000 Medicine Shoppe
International, Inc..................... 6,814,500
98,900 Mercantile Stores Co., Inc............. 4,450,500
60,500* Michaels Stores, Inc................... 983,125
7,000 Nike, Inc. Cl. B....................... 777,875
36,120,233
TELECOMMUNICATION SERVICES &
EQUIPMENT -- 1.0%
70,000* Aspect Telecommunications Corp......... 1,890,000
85,000* Boston Technology Inc.................. 1,285,625
50,000* Coherent Communications
Systems Corp........................... 1,375,000
35,000* Level One Communications, Inc.......... 822,500
110,000* Vertex Communications Corp............. 1,897,500
7,270,625
THRIFT INSTITUTIONS -- 1.4%
99,750 BSB Bancorp, Inc....................... 3,117,187
70,000 Collective Bancorp, Inc................ 1,811,250
255,000* Dime Financial Corp.**................. 2,964,375
33,275 Glacier Bancorp, Inc................... 690,456
73,500* Hawthorne Financial Corp............... 271,031
55,000 Sandwich Co-Operative Bank............. 1,017,500
9,871,799
TRANSPORTATION -- 1.3%
135,000 Atlantic Southeast Airlines, Inc....... 3,155,625
94,166* Heartland Express, Inc................. 2,754,355
75,000 Skywest, Inc........................... 1,425,000
110,000 TNT Freightways Corp................... 2,076,250
9,411,230
OTHER SECURITIES -- .1%................ 526,757
Total Common Stocks
(cost $323,546,172).................... 606,683,751
</TABLE>
16
<PAGE>
EVERGREEN FUND
(Photo of Wall St.)
STATEMENT OF INVESTMENTS -- (CONTINUED)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS -- 15.3%
COMMERCIAL PAPER -- 5.4%
$10,000 Allergan, Inc.
5.77%, 11/14/95............ $ 9,929,478
2,000 American Home
Products Corp.
5.74%, 10/27/95............ 1,991,709
11,000 IBM Credit Corp.
5.73%, 10/13/95............ 10,978,990
1,200 Mid-South Capital Corp.
5.78%, 10/10/95............ 1,198,266
National Rural Utilities
Cooperative Finance Corp.
2,000 5.65%, 11/03/95............ 1,989,642
6,000 5.75%, 11/13/95............ 5,958,792
2,000 Sherwood Medical Co.
5.75%, 10/27/95............ 1,991,694
3,000 Whirpool Financial Corp.
5.75%, 10/16/95............ 2,992,812
Xerox Corp.
1,400 5.70%, 11/2/95............. 1,392,906
800 5.74%, 10/5/95............. 799,490
39,223,779
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 9.9%
$50,000 Federal Farm Credit Bank
5.73%, 10/20/95............ $ 49,848,792
Federal National
Mortgage Co.
16,500 5.61%, 10/25/95............ 16,438,290
4,505 5.63%, 10/10/95............ 4,498,659
70,785,741
TOTAL SHORT-TERM INVESTMENTS
(COST $110,009,520)........ 110,009,520
TOTAL INVESTMENTS
(COST $433,555,692)........ 99.8% 716,693,271
OTHER ASSETS AND
LIABILITIES -- NET......... .2 1,083,044
NET ASSETS................. 100.0% $717,776,315
</TABLE>
* Non-income producing security.
** Investment in non-controlled affiliate-holding over 5% of outstanding voting
securities. During the year ended September 30, 1995, the Fund recognized
$65,600 in dividend income from these securities.
+ No market quotation available, valued at fair value as determined in good
faith by the Fund's Trustees.
17
<PAGE>
EVERGREEN FUND
(Photo of Wall St.)
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $433,555,692)........................................................... $716,693,271
Cash.......................................................................................................... 797,121
Receivable for Fund shares sold............................................................................... 4,577,967
Receivable for securities sold................................................................................ 1,492,841
Dividends receivable.......................................................................................... 952,700
Prepaid expenses.............................................................................................. 66,014
Due from Adviser.............................................................................................. 2,588
Total assets............................................................................................ 724,582,502
LIABILITIES:
Payable for Fund shares redeemed.............................................................................. 3,458,570
Payable for securities purchased.............................................................................. 2,390,270
Accrued advisory fee.......................................................................................... 573,085
Accrued expenses.............................................................................................. 338,176
Distribution fee payable...................................................................................... 46,086
Total liabilities....................................................................................... 6,806,187
NET ASSETS....................................................................................................... $717,776,315
NET ASSETS CONSIST OF:
Paid-in capital............................................................................................... $407,400,987
Undistributed net investment income........................................................................... 1,963,316
Accumulated net realized gain on investment transactions...................................................... 25,274,433
Net unrealized appreciation of investments.................................................................... 283,137,579
Net assets.............................................................................................. $717,776,315
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($29,437,126 1,893,623 shares of beneficial interest outstanding).............................. $ 15.55
Sales charge -- 4.75% of offering price....................................................................... .78
Maximum offering price.................................................................................. $ 16.33
Class B Shares ($74,153,577 4,791,802 shares of beneficial interest outstanding).............................. $ 15.48
Class C Shares ($1,946,908 125,742 shares of beneficial interest outstanding)................................. $ 15.48
Class Y Shares ($612,238,704 39,282,153 shares of beneficial interest outstanding)............................ $ 15.59
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
EVERGREEN FUND
(Photo of Wall St.)
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends.................................................................................... $ 8,360,789
Interest..................................................................................... 1,252,872
Total investment income................................................................... 9,613,661
EXPENSES:
Advisory fee................................................................................. $5,472,439
Distribution fee -- Class A Shares........................................................... 21,713
Distribution fee -- Class B Shares........................................................... 160,792
Shareholder services fee -- Class B Shares................................................... 53,597
Distribution fee -- Class C Shares........................................................... 3,738
Shareholder services fee -- Class C Shares................................................... 1,246
Transfer agent fee........................................................................... 421,005
Custodian fee................................................................................ 136,003
Registration and filing fees................................................................. 105,320
Professional fees............................................................................ 98,993
Reports and notices to shareholders.......................................................... 76,052
Trustees' fees and expenses.................................................................. 57,870
Insurance expense............................................................................ 4,001
Miscellaneous................................................................................ 66,469
Total operating expenses.................................................................. 6,679,238
Interest expense............................................................................. 326,552
Less: Expense reimbursements................................................................. (24,130)
Net expenses.............................................................................. 6,981,660
Net investment income........................................................................... 2,632,001
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments............................................................. 27,142,401
Net change in unrealized appreciation of investments......................................... 107,314,951
Net gain on investments......................................................................... 134,457,352
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................ $137,089,353
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
EVERGREEN FUND
(Photo of Wall St.)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1995 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................................... $ 2,632,001 $ 2,281,759
Net realized gain on investments.................................................... 27,142,401 72,013,209
Net change in unrealized appreciation of investments................................ 107,314,951 (36,681,720)
Net increase resulting from operations........................................... 137,089,353 37,613,248
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- Class Y Shares............................................. (2,383,433) (3,823,912)
Net realized gain on investments -- Class Y Shares.................................. (70,360,416) (25,464,732)
Total distributions to shareholders.............................................. (72,743,849) (29,288,644)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold........................................................... 1,350,882,223 1,081,247,408
Proceeds from reinvestment of distributions......................................... 66,336,031 27,023,906
Payment for shares redeemed......................................................... (1,289,695,764) (1,247,930,329)
Net increase (decrease) resulting from Fund share transactions...................... 127,522,490 (139,659,015)
Net increase (decrease) in net assets............................................ 191,867,994 (131,334,411)
NET ASSETS:
Beginning of year................................................................... 525,908,321 657,242,732
End of year (including undistributed net investment income of $1,963,316 and
$1,714,748, respectively)......................................................... $ 717,776,315 $ 525,908,321
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
EVERGREEN FUND
(Photo of Wall St.)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JANUARY 3, 1995* THROUGH CLASS Y SHARES
SEPTEMBER 30, 1995
CLASS A CLASS B CLASS C YEAR ENDED SEPTEMBER 30,
SHARES SHARES SHARES 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........................... $11.97 $11.97 $11.97 $14.62 $14.46 $13.10 $13.32
Income (loss) from investment operations:
Net investment income (loss)................................. .01 (.02) (.01) .10 .07 .09 .09
Net realized and unrealized gain on investments.............. 3.57 3.53 3.52 3.10 .79 1.96 .55
Total income from investment operations.................... 3.58 3.51 3.51 3.20 .86 2.05 .64
Less distributions to shareholders from:
Net investment income........................................ -- -- -- (.07) (.09) (.07) (.17)
Net realized gains on investments............................ -- -- -- (2.16) (.61) (.62) (.69)
Total distributions........................................ -- -- -- (2.23) (.70) (.69) (.86)
Net asset value, end of period................................. $15.55 $15.48 $15.48 $15.59 $14.62 $14.46 $13.10
TOTAL RETURN**................................................. 29.9% 29.3% 29.3% 26.8% 6.2% 15.8% 5.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)........................ $29 $74 $2 $612 $526 $657 $772
Ratios to average net assets:
Operating expenses........................................... 1.70% +# 2.32%+# 2.12%+# 1.16% 1.13% 1.11% 1.13%
Interest expense............................................. .01% + .01%+ .01%+ .06% .09% .01% --
Net investment income (loss)................................. .13% +# (.48%)+# (.31%)+# .53% .40% .60% .56%
Portfolio turnover rate........................................ 19% 19% 19% 19% 19% 21% 32%
<CAPTION>
1991
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period........................... $9.66
Income (loss) from investment operations:
Net investment income (loss)................................. .17
Net realized and unrealized gain on investments.............. 3.93
Total income from investment operations.................... 4.10
Less distributions to shareholders from:
Net investment income........................................ (.18)
Net realized gains on investments............................ (.26)
Total distributions........................................ (.44)
Net asset value, end of period................................. $13.32
TOTAL RETURN**................................................. 43.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)........................ $755
Ratios to average net assets:
Operating expenses........................................... 1.15%
Interest expense............................................. --
Net investment income (loss)................................. 1.45%
Portfolio turnover rate........................................ 35%
</TABLE>
* Commencement of class operations.
** Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
+ Annualized. Due to the recent commencement of their offering, the ratios for
Class A, Class B and Class C shares are not necessarily comparable to that of
Class Y shares and are not necessarily indicative of future ratios.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of operating expenses and net investment income (loss) to average net assets,
exclusive of any applicable state expense limitations, would have been the
following:
<TABLE>
<CAPTION>
JANUARY 3, 1995*
THROUGH
SEPTEMBER 30, 1995
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
<S> <C> <C> <C>
Operating expenses........................................................... 1.75% 2.34% 5.31%
Net investment income (loss)................................................. .08% (.50% ) (3.50%)
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
EVERGREEN LIMITED MARKET FUND, INC.
(Photo of side of building)
A REPORT FROM YOUR
PORTFOLIO MANAGER
DERRICK E. WENGER
Evergreen Limited Market Fund completed its thirteenth fiscal (Photo of
year on September 30, 1995. The Fund's return for the fiscal Derrick E.
year was substantially below its historical average annual Wenger)
return. We regard this divergence from trend as an interruption
rather than as a new direction. It is, therefore, appropriate
that this report discuss this underperformance as compared with
the historical compounded return.
In the first quarter of the fiscal year, the Fund was
negatively impacted by extensive tax-loss selling, which
particularly struck less active, non-institutional sectors of
the stock market. With the Fund's very small company orientation
(median market capitalization of
the portfolio, $49 million), our holdings proved rather
vulnerable. During the next six months, these companies, which are generally
quite small, and we believe financially solid rather than spectacular, failed to
attract market interest. The market focus moved toward those companies that are
generally volatile and have exceptionally high growth rates, in contrast with
the low price/earnings ratio and high book-to-market values which have been the
hallmark of Evergreen Limited Market Fund. A reversal of trend began to take
place in the course of the summer so that, by the fiscal fourth quarter, the
Fund was showing improvement. For its fiscal year, the Fund's total return was
exceeded by the total returns of both the NASDAQ OTC Composite* and the Russell
2000.* (For additional performance information, please see page 24.)
The Fund's management made the decision to stay with the value-oriented
long-term investment approach which has characterized the Fund's success since
inception. Within this context, we have made significant efforts to improve the
performance by adding new investments which we believe will revitalize
performance. We have also made efforts to intensify our sell discipline so that
it may more effectively avoid the impact of this volatile market's abrupt
changes of investor sentiment.
PORTFOLIO PERFORMANCE
The Fund had its share of outstanding performers. Three portfolio holdings
provided appreciation of over 100% for the fiscal year: JLG Industries, 168.2%,
Mercer International, 105.4%, and Oxford Resources, 102.0%. Appreciation of 90%
or better was provided by Springfield Institution for Savings, 93.2%, and
Northern Technologies, 90.0%. A number of holdings provided appreciation of more
than 50% including: National Dentex, 66.9%, Orthopedic Technology, 66.7%,
Continental Waste Industries, 66.5%, DonKenny Inc., 64.5%, Right Management
Consultants, 62.0%, Supreme International, 57.9%, Motorcar Parts and
Accessories, 56.1%, and Benson Financial Corporation, 51.3%.
Substantial gains were realized in the course of the fiscal year. Examples of
such include: Cannon Express, Cl.B, 386.5%, held four and one-half years;
Consolidated Products, 162.9%, held seven year and three quarter years;
Pediatric Services of America, 154.2%, held eight months; Kenneth Cole
Productions, 134.0%, held five months, and Wireless Telecom Group, 113.2% held
four months.
We believe that these realized and unrealized gains indicate that the
underlying strategy of the Fund and our continuing fundamental research may
provide for the long-term results in line with the Fund's historical trends.
FIGURES REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS.
*UNMANAGED INDICES OF SELECTED SECURITIES.
22
<PAGE>
EVERGREEN LIMITED MARKET FUND, INC.
(Photo of side of building)
The negative pressures in the portfolio predominantly reflected shorter term
operating trends of businesses faced with reduced demand or unusual competition.
The primary area of weakness was in the consumer sector, where we have
historically enjoyed a strong position in the retailing and apparel industry.
Issues such as Eateries Inc., Rocky Shoes and Boots, Oneita Industries, Holson
Burnes Group, Chic by H.I.S., and American Sensors, experienced declines of 20%
to 40%, (many of them suddenly upon the publication of an adverse earnings
trend), bringing our overall consumer products actual as-weighted performance to
- -14.1% for the fiscal year. Similarly, the Fund's holdings in companies purely
engaged in retailing produced a return of -14.2%, with the greatest declines
being in 50-OFF Stores, -65.3%, and Model Imperial, -66.4%. Regrettably, as a
result of redemption pressures during the fiscal year, we were not as free to
average as we had been historically when our practice was always to keep
reasonable liquidity in order to be able to snap up bargains during liquidation
of issues with comparatively thin markets.
MERGER AND ACQUISITION TRENDS
The Fund continued to benefit from the long-term trend wherein larger
companies seek to acquire smaller specialty businesses with excellent business
franchises or products and services. During this fiscal year, three of our
financial institution holdings were acquired: F & C Bancshares Inc., with a
114.5% gain over seven years, Central Mortgage Bancshares, with a 50.8% gain
over twenty-five months, and Deerbank Corp., with a 40.7% gain over fifteen
months. Other companies that were acquired or received acquisition offers
included: DF & R Restaurants, which was sold after the acquisition was
announced, for a two-month gain of 121.9%, Insituform Mid-America, also sold
after the acquisition was announced, for a nine-month gain of 32.9%, and
Triconex Corp., with a 23.9% gain in a six-month holding period. We believe that
the degree of undervaluation and unrealized growth opportunity in the Fund's
broad list of holdings should help provide a continuation of this acquisition
trend. Since inception, the Fund has experienced 66 mergers and acquisitions
(pending and completed) of portfolio holdings, with an average gain of 63.3% on
completed acquisitions.
DYNAMIC OPPORTUNITIES
The large number of new issues brought to the stock market in 1995 will, we
expect, provide many exceptional opportunities for long-term appreciation. This
may not, typically, be the result of purchase on initial offering. Instead, we
find that, frequently, after the enthusiastic investor reception of new issues
quickly drives fully priced stocks to a level of overvaluation within a few
months, the companies are unable to meet investors exaggerated expectations. The
shares are then sold down, often carelessly. Our experience is that upon such
declines, particularly during periods of tax-loss selling, we are able to
establish positions at prices substantially below the new issue level, and well
below the highs. Over the years, this has provided some of the better long-term
gain opportunities for the Fund.
OUTLOOK
We are encouraged by the number of, in our opinion, attractive values we have
been able to add to the Fund in recent months. The recovery in the Fund's
performance in the last quarter of the fiscal year gives us positive
expectations that as the outflow of funds from the portfolio is stemmed, we
shall have more opportunities for new purchases to help reestablish the Fund's
outstanding long-term record. We thank our shareholders for their continuing
interest and conviction about the extraordinary opportunities available for
investment in America's smaller, quality companies.
23
<PAGE>
EVERGREEN LIMITED MARKET FUND, INC.
(Photo of side of building)
RESULTS TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN LIMITED MARKET FUND
The graphs below compare a $10,000 investment in the Evergreen Limited
Market Fund (Class A, Class B, Class C and Class Y Shares) with a similar
investment in the Russell 2000 and NASDAQ OTC Indices ("Indices").
CLASS A
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=11.3%
(Class A Average Annual Total Return chart appears here, plot points are as
follows)
1/3/95* 3/31/95 6/30/95 9/30/95
RUSSELL 2000 10,000 10,461 11,441 12,572
NASDAQ OTC 10,000 10,884 12,450 13,934
LIMITED MARKET FUND 9,525 9,912 10,232 11,127
CLASS B
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=11.1%
(Class B Average Annual Total Return chart appears here, plot points are as
follows)
1/3/95* 3/31/95 6/30/95 9/30/95
RUSSELL 2000 10,000 10,461 11,441 12,572
NASDAQ OTC 10,000 10,884 12,450 13,934
LIMITED MARKET FUND 10,000 10,387 10,698 11,112
CLASS C
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=15.2%
(Class C Average Annual Total Return chart appears here, plot points are as
follows)
1/3/95* 3/31/95 6/30/95 9/30/95
RUSSELL 2000 10,000 10,461 11,441 12,572
NASDAQ OTC 10,000 10,884 12,450 13,934
LIMITED MARKET FUND 10,000 10,387 10,704 11,518
CLASS Y
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=4.7%
FIVE YEAR=14.4%
SINCE INCEPTION=12.8%
(Class Y Average Annual Total Return chart appears here, plot points are as
follows)
<TABLE>
<CAPTION>
9/30/85 9/30/86 9/30/87 9/30/88 9/30/89 9/30/90 9/30/91 9/30/92 9/30/93 9/30/94 9/30/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RUSSELL 2000 10,000 12,202 15,789 14,083 17,109 12,462 18,081 19,696 26,223 26,926 33,221
NASDAQ OTC 10,000 12,509 15,876 13,865 16,910 12,317 18,838 20,857 27,275 27,326 37,432
LIMITED MARKET FUND 10,000 13,518 17,018 16,011 20,167 17,108 23,735 25,952 31,296 31,957 33,478
</TABLE>
*Commencement of class operations.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE RESULTS. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY
INSURED.
For the purposes of the graphs and the accompanying tables, it has been
assumed that (a) the maximum sales charge of 4.75% was deducted from the initial
$10,000 investment in Class A Shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the investment in Class B
and Class C Shares, assuming full redemption on September 30, 1995; (c) all
recurring fees (including investment advisory fees), net of fee waivers and
reimbursements, were deducted; and (d) all dividends and distributions were
reinvested.
The Indices are unmanaged indices and include the reinvestment of income,
but do not reflect the payment of transaction costs and advisory fees associated
with an investment in the Fund.
24
<PAGE>
EVERGREEN LIMITED MARKET FUND, INC.
(Photo of side of building)
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 97.5%
BANKS -- 17.2%
40,000 Abington Savings Bank.................. $ 640,000
25,000 Bank of New Hampshire Corp............. 781,250
50,000 Benson Financial Corp.................. 937,500
9,000 Cape Cod Bank & Trust Co............... 353,250
83,900 Cornerstone Bank+...................... 896,681
20,000 Hudson Chartered Bancorp, Inc.......... 330,000
7,000 Letchworth Independent
Bancshares Corp........................ 198,625
10,000* Letchworth Independent
Bancshares Corp.
Warrants Expiring 12/31/97............. 51,250
70,000 Main Street Community Bancorp, Inc..... 1,172,500
11,000 Merchants Bancorp, Inc................. 294,250
100,000* SC Bancorp............................. 606,250
30,000 Seacoast Banking Corporation of
Florida................................ 660,000
42,500* Springfield Institution for Saving..... 653,437
79,000 State Financial Services Corp.......... 1,303,500
321,500* Surety Capital Corp.................... 1,527,125
3,625 Susquehanna Bancshares, Inc............ 100,593
60,500* United Security Bancorp................ 612,562
36,000 West Coast Bancorp, Inc................ 540,000
11,658,773
BUILDING & CONSTRUCTION -- 2.4%
65,000* Cameron Ashley, Inc.................... 617,500
8,800 JLG Industries, Inc.................... 396,000
37,500* Southern Energy Homes, Inc............. 595,312
1,608,812
COMMUNICATION SYSTEMS & SERVICES -- .2%
10,500* Tel-Save Holdings, Inc................. 161,437
CONSUMER PRODUCTS -- 16.7%
151,000* American Sensors, Inc.................. 1,057,000
72,000* Ashworth, Inc.......................... 576,000
16,300* Bollinger Industries, Inc.............. 59,169
25,500* Boyds Wheels, Inc...................... 178,500
98,000* Celebrity, Inc......................... 686,000
85,000* Chic By H.I.S., Inc.................... 680,000
51,000* Conso Products Company................. 841,500
23,600* Donnkenny, Inc......................... 663,750
144,000* Geerlings & Wade, Inc.................. 1,332,000
110,000* Gotham Apparel Corp.+.................. 13,750
147,800* Holson Burnes Group, Inc............... 554,250
40,000* Motorcar Parts and Accessories, Inc.... 555,000
30,300* Norton McNaughton, Inc................. 674,175
160,500* Oneita Industries, Inc................. 1,363,881
30,000* River Oaks Furniture, Inc.............. 277,500
<CAPTION>
SHARES VALUE
<C> <S> <C>
CONSUMER PRODUCTS (CONTINUED)
52,100* Rocky Shoes & Boots, Inc............... $ 345,163
44,000* Simmons Outdoor Corp................... 297,000
10,200 Sport Supply Group, Inc................ 124,950
9,025* Sport Supply Group, Inc. Warrants
Expiring 12/15/98...................... 19,178
15,000* Sport-Haley, Inc....................... 142,500
32,000* Supreme International Corp............. 608,000
47,900 Wolf (Howard B.), Inc.................. 311,350
11,360,616
CONSUMER SERVICES -- 3.0%
25,000* Children's Discovery Center of America,
Inc.................................... 293,750
234,000* Eateries, Inc.+........................ 672,750
120,000* Noble Roman's, Inc..................... 562,750
105,000* Summit Family Restaurants, Inc......... 492,188
2,021,438
ENERGY -- 1.3%
238,000* Frontier Oil Exploration Co............ 550,375
22,300 KCS Energy, Inc........................ 320,562
870,937
FINANCE & INSURANCE -- 2.3%
60,000 Amvestors Financial Corp............... 690,000
10,000* Financial Federal Corp................. 205,000
20,000* Oxford Resources Corp.................. 468,250
12,800 Titan Holdings, Inc.................... 196,800
1,560,050
HEALTH CARE PRODUCTS & SERVICES -- 3.9%
38,400 Allied Health Care Product, Inc........ 702,225
4,600* Fresenius USA, Inc..................... 71,875
4,000* Gelman Sciences, Inc................... 88,000
96,500* Hosposable Products, Inc.+............. 699,625
148,000* Mediware Information Systems, Inc.+.... 148,000
1,000* National Dentex Corp................... 17,500
79,200* Orthopedic Technology, Inc............. 564,300
70,000* Quidel Corp............................ 385,000
2,676,525
INDUSTRIAL & COMMERCIAL
SERVICES -- 10.2%
88,000* AG Services of America, Inc............ 880,000
1,000* Consolidated Graphics, Inc............. 21,500
10,000* Continental Waste Industries, Inc...... 172,500
49,950 Falcon Products, Inc................... 699,300
70,000* Handex Corp............................ 498,750
88,200* Heist (C.H.) Corp...................... 705,538
200,000* Integrated Waste Services, Inc......... 375,000
</TABLE>
25
<PAGE>
EVERGREEN LIMITED MARKET FUND, INC.
(Photo of side of building)
STATEMENT OF INVESTMENTS -- (CONTINUED)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
INDUSTRIAL & COMMERCIAL SERVICES (CONTINUED)
70,000* Medar, Inc............................. $ 691,250
3,500 Northern Technologies
International Corp..................... 24,500
10,600* Right Management Consultants, Inc...... 360,400
40,000* SOS Staffing Services, Inc............. 330,000
89,200* Serv-Tech, Inc......................... 713,600
220,000* Utilx Corp............................. 605,000
106,200* Weston (Roy F.), Inc. Cl. A............ 584,100
174,000* Winston Resources, Inc................. 282,750
6,944,188
INDUSTRIAL SPECIALTY PRODUCTS -- 15.5%
43,000* Astec Industries, Inc.................. 483,750
20,400* Astrosystems, Inc...................... 109,650
87,585* Autocam Corp........................... 1,094,813
80,000* Ballantyne of Omaha, Inc............... 610,000
7,800* Chase Brass Industries, Inc............ 99,450
5,000* Computational Systems, Inc............. 81,250
32,500* Digitran Systems, Inc.**............... 32,500
78,000* Dynamic Materials Corp................. 170,625
60,000* Environmental Technologies Corp........ 727,500
31,000* Hilite Industries, Inc................. 282,875
105,500* Holopak Technologies, Inc.............. 764,875
10,000* JPE, Inc............................... 135,000
30,500* Liberty Technologies, Inc.............. 160,125
50,000* Mercer International, Inc.............. 1,250,000
27,600 Met-Pro Corp........................... 386,400
68,600* Mity-Lite, Inc......................... 591,675
2,400 Penn Engineering & Manufacturing
Corp................................... 220,800
100,000* R-B Rubber Products, Inc............... 450,000
60,000* Shaw Group, Inc........................ 547,500
55,000* Tower Automotive, Inc.................. 756,250
80,000 Wescast Industries, Inc................ 880,000
69,100* Zemex Corp............................. 665,087
10,500,125
RETAILING -- 11.5%
12,500* American Eagle Outfitters, Inc......... 174,805
80,900* Central Tractor Farm & Country, Inc.... 909,762
85,000* Duckwall-ALCO Stores, Inc.............. 935,000
135,000* Ernst Home Center, Inc................. 759,375
50,000* 50-OFF Stores, Inc..................... 87,500
<CAPTION>
SHARES VALUE
<C> <S> <C>
RETAILING (CONTINUED)
3,000* Grow Biz International, Inc............ $ 30,375
25,400 Michaels (J.), Inc..................... 273,050
244,200* Model Imperial, Inc.................... 675,299
62,000* Mothers Work, Inc...................... 1,030,750
177,000* Roberds, Inc........................... 2,212,500
64,400* Spec's Music, Inc...................... 209,300
40,000* Sportmart, Inc. Cl. A.................. 243,750
21,000* Trend-Lines, Inc....................... 278,250
7,819,716
TECHNOLOGICAL PRODUCTS &
SERVICES -- 9.4%
83,000* American Electronic Components, Inc.... 835,189
40,000* Aseco Corp............................. 680,000
19,600* Asyst Technologies, Inc................ 899,150
13,000* Continential Circuits Corp............. 175,500
40,000* GSE Systems, Inc....................... 560,000
6,000* Globalink, Inc......................... 62,250
40,000* Interactive Group, Inc................. 270,000
4,000* Paradigm Technology, Inc............... 123,000
89,000* Richey Electronics, Inc................ 778,750
20,000* SPSS, Inc.............................. 345,000
11,700* Semiconductor Packaging
Materials Co., Inc..................... 137,475
1,000* Smartflex Systems, Inc................. 17,000
10,000* Smith Micro Software, Inc.............. 98,750
81,500* Supertex, Inc.......................... 845,562
23,100* Viasoft, Inc........................... 300,300
10,000 Wireless Telecom Group................. 186,250
5,000* Zycon Corp............................. 61,250
6,375,426
THRIFT INSTITUTIONS -- .4%
8,000 BSB Bancorp, Inc....................... 250,000
TRANSPORTATION -- 3.5%
168,425* Cannon Express Inc. Cl. B.............. 1,536,878
25,000* Covenant Transport, Inc. Cl. A......... 367,188
90,000* OTR Express, Inc....................... 472,500
2,376,566
OTHER SECURITIES....................... 18
TOTAL COMMON STOCKS
(COST $63,387,399)..................... 66,184,627
</TABLE>
26
<PAGE>
EVERGREEN LIMITED MARKET FUND, INC.
(Photo of side of building)
STATEMENT OF INVESTMENTS -- (CONTINUED)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C> <C>
SHORT-TERM U.S. GOVERNMENT
& AGENCY OBLIGATIONS -- 4.0%
$ 400,000 Federal Home Loan Mortgage
Association, 5.64%,
10/11/95..................... $ 399,373
2,300,000 Federal National Mortgage
Association,
5.58%, 10/27/95.............. 2,290,731
TOTAL SHORT-TERM U.S.
GOVERNMENT & AGENCY
OBLIGATIONS
(COST $2,690,104)............ 2,690,104
TOTAL INVESTMENTS
(COST $66,077,503)...... 101.5% 68,874,731
OTHER ASSETS AND
LIABILITIES -- NET...... (1.5) (982,760)
NET ASSETS................. 100.0% $67,891,971
</TABLE>
* Non-income producing security.
** Valued at fair value as determined in good faith by the Fund's Board of
Directors.
+ Investment in non-controlled affiliate-holdings over 5% of outstanding voting
securities. During the year ended September 30, 1995, the Fund recognized
$3,910 in dividend income from these securities. None of these securities
were sold.
See accompanying notes to financial statements.
27
<PAGE>
EVERGREEN LIMITED MARKET FUND, INC.
(Photo of side of building)
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $66,077,503)............................................................. $68,874,731
Receivable for securities sold................................................................................. 1,511,931
Receivable for Fund shares sold................................................................................ 46,810
Prepaid expenses............................................................................................... 40,851
Dividends receivable........................................................................................... 18,704
Due from Adviser............................................................................................... 8,420
Total assets............................................................................................. 70,501,447
LIABILITIES:
Due to custodian bank.......................................................................................... 52,218
Payable for securities purchased............................................................................... 2,340,475
Accrued expenses............................................................................................... 95,476
Payable for Fund shares redeemed............................................................................... 62,720
Accrued advisory fee........................................................................................... 57,193
Distribution fee payable....................................................................................... 1,394
Total liabilities........................................................................................ 2,609,476
NET ASSETS........................................................................................................ $67,891,971
NET ASSETS CONSIST OF:
Paid-in capital................................................................................................ $63,432,101
Accumulated net realized gain on investment transactions....................................................... 1,662,642
Net unrealized appreciation of investments..................................................................... 2,797,228
Net assets............................................................................................... $67,891,971
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($1,089,220 59,169 shares outstanding).......................................................... $ 18.41
Sales charge -- 4.75% of offering price........................................................................ .92
Maximum offering price................................................................................... $ 19.33
Class B Shares ($2,020,378 110,394 shares outstanding)......................................................... $ 18.30
Class C Shares ($61,567 3,363 shares outstanding).............................................................. $ 18.31
Class Y Shares ($64,720,806 3,513,698 shares outstanding)...................................................... $ 18.42
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
EVERGREEN LIMITED MARKET FUND, INC.
(Photo of side of building)
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends...................................................................................... $ 370,183
Interest....................................................................................... 27,212
Total investment income..................................................................... 397,395
EXPENSES:
Advisory fee...................................................................................... $800,642
Distribution fee -- Class A Shares................................................................ 1,429
Distribution fee -- Class B Shares................................................................ 8,649
Shareholder services fee -- Class B Shares........................................................ 2,883
Distribution fee -- Class C Shares................................................................ 303
Shareholder services fee -- Class C Shares........................................................ 101
Custodian fee..................................................................................... 84,089
Registration and filing fees...................................................................... 72,982
Transfer agent fee................................................................................ 72,182
Professional fees................................................................................. 51,861
Reports and notices to shareholders............................................................... 26,700
Insurance expense................................................................................. 13,226
Directors' fees and expenses...................................................................... 10,680
Miscellaneous..................................................................................... 4,514
1,150,241
Less: Fee waivers and expense reimbursements...................................................... (48,100)
Net expenses................................................................................... 1,102,141
Net investment loss.................................................................................. (704,746)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments.................................................................. 2,480,633
Net change in unrealized appreciation of investments.............................................. (99,059)
Net gain on investments.............................................................................. 2,381,574
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................. $1,676,828
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
EVERGREEN LIMITED MARKET FUND, INC.
(Photo of side of building)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED FOUR MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss.................................................................. $ (704,746) $ (219,094)
Net realized gain on investments..................................................... 2,480,633 5,921,027
Net change in unrealized appreciation of investments................................. (99,059) (3,012,423)
Net increase resulting from operations............................................ 1,676,828 2,689,510
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAINS:
Class Y Shares....................................................................... (15,681,527) --
Total distributions to shareholders............................................... (15,681,527) --
FUND SHARE TRANSACTIONS:
Proceeds from shares sold............................................................ 30,951,369 64,053,556
Proceeds from reinvestment of distributions.......................................... 14,048,986 --
Payment for shares redeemed.......................................................... (62,443,458) (63,760,491)
Net increase (decrease) resulting from Fund share transactions.................... (17,443,103) 293,065
Net increase (decrease) in net assets............................................. (31,447,802) 2,982,575
NET ASSETS:
Beginning of period.................................................................. 99,339,773 96,357,198
End of period (including net investment loss of $536,569 at September 30, 1994)...... $67,891,971 $99,339,773
</TABLE>
See accompanying notes to financial statements.
30
<PAGE>
EVERGREEN LIMITED MARKET FUND, INC.
(Photo of side of building)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
JANUARY 3, JANUARY 3, JANUARY 3, CLASS Y SHARES
1995* 1995* 1995* FOUR MONTHS YEAR
THROUGH THROUGH THROUGH YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, MAY 31,
1995 1995 1995 1995 1994** 1994
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period... $ 15.76 $ 15.76 $ 15.76 $21.74 $21.20 $20.87
Income (loss) from investment
operations:
Net investment income (loss)......... (.10) (.20) (.20) (.23) (.05) (.07)
Net realized and unrealized gain on
investments........................ 2.75 2.74 2.75 .59 .59 1.67
Total income from investment
operations....................... 2.65 2.54 2.55 .36 .54 1.60
Less distributions to shareholders
from:
Net investment income................ -- -- -- -- -- --
Net realized gains................... -- -- -- (3.68) -- (1.27)
Total distributions................ -- -- -- (3.68) -- (1.27)
Net asset value, end of period......... $ 18.41 $ 18.30 $ 18.31 $18.42 $21.74 $21.20
TOTAL RETURN+.......................... 16.8% 16.1% 16.2% 4.8% 2.6% 7.6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)............................. $ 1,089 $ 2,020 $62 $64,721 $99,340 $96,357
Ratios to average net assets:
Expenses............................. 1.51%++# 2.26%++# 2.25%++# 1.36% 1.37%++ 1.26%
Net investment income (loss)......... (1.03%)++# (1.77%)++# (1.76%)++# (.87%) (.70%)++ (.33%)
Portfolio turnover rate................ 84% 84% 84% 84% 36% 89%
<CAPTION>
1993 1992
<S> <<C> <C>
PER SHARE DATA:
Net asset value, beginning of period... $21.02 $18.81
Income (loss) from investment
operations:
Net investment income (loss)......... (.03) .02
Net realized and unrealized gain on
investments........................ 1.57 3.33
Total income from investment
operations....................... 1.54 3.35
Less distributions to shareholders
from:
Net investment income................ -- (.14)
Net realized gains................... (1.69) (1.00)
Total distributions................ (1.69) (1.14)
Net asset value, end of period......... $20.87 $21.02
TOTAL RETURN+.......................... 7.5% 18.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)............................. $80,605 $62,172
Ratios to average net assets:
Expenses............................. 1.24% 1.25%
Net investment income (loss)......... (.07%) .22%
Portfolio turnover rate................ 29% 55%
</TABLE>
* Commencement of class operations.
** The Fund changed its fiscal year end from May 31 to September 30.
+ Total return is calculated for the periods indicated and is not annualized.
Initial sales charge or contingent deferred sales charges are not reflected.
++ Annualized. Due to the recent commencement of their offering, the ratios for
Class A, Class B and Class C shares are not necessarily comparable to that of
Class Y shares and are not necessarily indicative of future ratios.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment loss to average net assets, exclusive of any
applicable state expense limitations, would have been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
JANUARY 3, JANUARY 3, JANUARY 3,
1995* 1995* 1995*
THROUGH THROUGH THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1995
<S> <C> <C> <C>
Expenses.............................................. 4.33% 3.66% 41.34%
Net investment loss................................... (3.85%) (3.18%) (40.85%)
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
EVERGREEN U.S. REAL ESTATE EQUITY FUND
(Photo of flag)
A REPORT FROM YOUR
PORTFOLIO MANAGER
SAMUEL A. LIEBER
Evergreen U.S. Real Estate Equity Fund ended its fiscal year
on September 30, 1995. While the Fund's twelve-month total (Photo of
return (Class Y, no-load shares) lagged that of the Standard and Samuel A.
Poor's 500 Reinvested Index*, it dramatically exceeded that of Lieber)
the Lipper Real Estate Funds Average of 20 real estate funds
tracked by Lipper Analytical Services**. In fact, Evergreen U.S.
Real Estate Equity Fund (Class Y, no-load shares) ranked #1***
among these funds, based on its twelve-month total return
through September 30. The Fund's total return also surpassed
that of the unmanaged Wilshire Real Estate Securities Index* for
the twelve-month period. (For additional performance
information, please see page 34.)
In the Fund's prior annual report, we wrote that "...the opportunities for
profitably investing in real estate investment trusts (REITs) and homebuilders
have rarely been better". We believe that this is still true for homebuilding
shares. While many REITs also are attractively valued, changes in some share
prices and the economy itself has led us to be more cautious regarding certain
sectors and companies. We believe that the stock market has not fully adjusted
to the recent interest rate volatility and the rapidly growing REIT stock
issuance, creating inefficient pricing of future growth or current value. We are
not willing to pay a large premium to underlying property asset values. Risk
reduction and return can both be enhanced when stocks are bought at prices which
underestimate current and prospective property values. For example, the Fund's
five largest REITs are selling at low multiples: 10x to 11x this year's cash
flow numbers, under 10x next year's; with dividend yields typically from 7.5% to
over 8%. In addition, these REITs are growing a minimum of 10% to 15% based not
only on what we project, but also on research analyst consensus numbers.
The portfolio's construction and emphasis is apparent in its sector
diversification: 68.4% REITs, 23.2% homebuilders, 4.2% operating companies.
Further, the geographic distribution emphasizes the Sunbelt as well as the West.
We are combining our approach of emphasizing growth areas with searching for
situations we feel are undervalued or areas which may recover and, hence,
provide significant value.
In response to changing opportunities, we have made a few significant changes
over the past year. We believe office and industrial REIT's are overvalued, so
we have reduced this sector investment from 10.3% of net assets at September 30,
1994, to 3.4% at September 30, 1995. We have added to self-storage facilities
(7.1% compared with 3.0%) and most notably hotel REITs and lodging companies
(18.9% vs. 8.6%). We have also started to pick up over-sold shopping center
REITs where concern over poor retail sales is perhaps overdiscounted, creating
value timing opportunities.
Homebuilder stocks remain the largest single sector of this diversified
portfolio. The homebuilding market has been rather volatile after benefiting
from previously pent-up demand being released by historically low interest rates
in 1993. Homebuilders then experienced a contraction as interest rates rose
precipitously during the fourth quarter of 1994. Today, however, interest rates
have declined to levels not seen since the beginning of 1994. This combined with
high levels of employment and a general absence of home price inflation, has
lead to demand absorbing a significant amount of the available inventory of both
existing and newly constructed homes. As a result, homebuilders have enjoyed
strong new orders and solid backlogs. Many of the medium-size builders in the
Fund dominate their local markets yet still trade at prospective P/E multiples
below 10x.
FIGURES REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS.
INVESTMENT CONCENTRATION IN ONE INDUSTRY MAY INCREASE THE RISKS THAT WOULD
OTHERWISE BE DECREASED IN MORE DIVERSE INVESTMENTS.
* UNMANAGED INDICES OF SELECTED SECURITIES
** LIPPER ANALYTICAL SERVICES, INC., IS AN INDEPENDENT MUTUAL FUNDS PERFORMANCE
MONITOR
*** RANKINGS FOR THE FUND'S CLASS A, CLASS B, AND CLASS C SHARES ARE NOT
AVAILABLE AS THOSE SHARE CLASSES DID NOT EXIST FOR THE FULL TIME PERIOD.
32
<PAGE>
EVERGREEN U.S. REAL ESTATE EQUITY FUND
(Photo of flag)
We believe Evergreen U.S. Real Estate Equity Fund's investment strategy, which
emphasizes sectors that we believe are positioned for growth over the next few
years, such as factory outlet centers, self-storage facilities and hotels, will
continue to be successful when augmented by our value timing approach.
33
<PAGE>
EVERGREEN U.S. REAL ESTATE EQUITY FUND
(Photo of flag)
RESULTS TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN U.S. REAL ESTATE EQUITY FUND
The graphs below compare a $10,000 investment in the Evergreen U.S. Real
Estate Equity Fund (Class A, Class B, Class C and Class Y Shares) with a similar
investment in the Wilshire Real Estate and S&P 500 Indices ("Indices").
CLASS A
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=18.1%
(Class A Average Annual Total Return chart appears here. Plot points are as
follows)
3/10/95* 3/31/95 6/30/95 9/30/95
S & P 500 INDEX 10,000 10,975 12,012 12,965
WILSHIRE REAL ESTATE INDEX 10,000 10,058 10,491 10,989
US REAL ESTATE EQUITY FUND 9,525 9,618 10,766 11,811
CLASS B
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=18.7%
(Class B Average Annual Total Return chart appears here. Plot points are as
follows)
3/7/95* 3/31/95 6/30/95 9/30/95
S & P 500 INDEX 10,000 10,975 12,012 12,965
WILSHIRE REAL ESTATE INDEX 10,000 10,058 10,491 10,989
US REAL ESTATE EQUITY FUND 10,000 10,109 11,295 11,872
CLASS C
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION=4.4%
(Class C Average Annual Total Return chart appears here. Plot points are as
follows)
7/12/95* 7/31/95 8/31/95 9/30/95
S & P 500 INDEX 10,000 10,975 12,012 12,965
WILSHIRE REAL ESTATE INDEX 10,000 10,161 10,285 10,474
US REAL ESTATE EQUITY FUND 10,000 10,000 10,212 10,436
CLASS Y
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR=17.6%
SINCE INCEPTION=8.7%
(Class Y Average Annual Total Return chart appears here. Plot points are as
follows)
<TABLE>
<CAPTION>
9/1/93* 9/30/93 9/30/94 9/30/95
<S> <C> <C> <C> <C>
S & P 500 INDEX 10,000 9,924 10,286 13,333
WILSHIRE REAL ESTATE INDEX 10,000 10,455 9,890 10,819
US REAL ESTATE EQUITY FUND 10,000 10,350 10,117 11,900
</TABLE>
*Commencement of class operations.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE RESULTS. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY
INSURED.
For the purposes of the graphs and the accompanying tables, it has been
assumed that (a) the maximum sales charge of 4.75% was deducted from the initial
$10,000 investment in Class A Shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the investment in Class B
and Class C Shares, assuming full redemption on September 30, 1995; (c) all
recurring fees, (including investment advisory fees), net of fee waivers and
reimbursements, were deducted; and (d) all dividends and distributions were
reinvested.
The Indices are unmanaged indices and include the reinvestment of income,
but do not reflect the payment of transaction costs and advisory fees associated
with an investment in the Fund.
34
<PAGE>
EVERGREEN U.S. REAL ESTATE EQUITY FUND
(Photo of flag)
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1995
SHARES/
PRINCIPAL
AMOUNT VALUE
EQUITY SECURITIES -- 95.8
REAL ESTATE INVESTMENT TRUSTS -- 68.4%
APARTMENTS -- 15.6%
7,000 Bay Apartment Communities, Inc......... $ 150,500
19,000 Columbus Realty Trust.................. 361,000
7,500 Evans Withycombe Residential, Inc...... 151,875
20,000 Gables Residential Trust............... 450,000
10,000 Irvine Apartment Communities, Inc...... 176,250
6,800 Post Properties, Inc................... 210,800
1,500,425
COMMUNITY SHOPPING CENTERS -- 6.3%
20,000 Alexander Haagen Properties, Inc....... 232,500
7,000 Kranzco Realty Trust................... 118,125
23,000 Tucker Properties Corp................. 255,875
606,500
FACTORY OUTLET CENTERS -- 11.3%
14,500 Chelsea GCA Realty, Inc................ 433,187
19,680 HGI Realty, Inc........................ 472,320
7,200 Tanger Factory Outlet Centers, Inc..... 179,100
1,084,607
HOTELS -- 16.0%
10,000 FelCor Suite Hotels, Inc............... 300,000
16,000 * Patriot American Hospitality, Inc...... 410,000
10,000 RFS Hotel Investors, Inc............... 152,500
15,367 * Starwood Lodging Trust................. 432,197
25,000 * Sunstone Hotel Investors, Inc.......... 240,625
1,535,322
SELF-STORAGE -- 7.1%
12,500 * Sovran Self Storage, Inc............... 310,937
20,000 Storage Equities, Inc.................. 372,500
683,437
OFFICE/INDUSTRIAL BUILDINGS -- 3.4%
65,000 * American Industrial Property........... 121,875
4,000 Highwoods Properties, Inc.............. 105,500
$100,000 Liberty Property Trust
Exchangeable Subordinated
Debentures 8.00%, 7/1/01............... 105,625
333,000
SHARES VALUE
SHOPPING MALLS -- 8.7%
4,500 * Alexander's, Inc....................... $ 271,125
25,000 Crown American Realty Trust............ 206,250
10,000 DeBartolo Realty Corp.................. 140,000
22,000 Taubman Centers, Inc................... 220,000
837,375
TOTAL REAL ESTATE INVESTMENT TRUSTS
(COST $6,047,518)...................... 6,580,666
COMMON STOCKS -- 27.4%
HOMEBUILDERS -- 23.2%
10,000 * Brewer (C.) Homes, Inc. Cl. A.......... 57,500
16,300 Continental Homes Holding Corp......... 342,300
15,200 Engle Homes, Inc....................... 133,000
20,000 * M/I Schottenstein Homes, Inc........... 205,000
90,300 * Presley Companies...................... 180,600
10,000 * Redman Industries, Inc................. 260,000
11,750 * Southern Energy Homes, Inc............. 186,532
32,000 Standard Pacific Corp.................. 224,000
8,500 * Toll Brothers, Inc..................... 160,438
41,200 * US Home Corp. Warrants CI. B........... 365,650
23,400 Washington Homes, Inc.................. 117,000
2,232,020
LODGING -- 2.9%
20,000 Kahler Realty Corp..................... 275,000
OTHER SECURITIES -- 1.3%............... 131,000
TOTAL COMMON STOCKS
(COST $2,709,270)...................... 2,638,020
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
(COST $8,756,788).......... 95.8 % 9,218,686
OTHER ASSETS AND
LIABILITIES -- NET......... 4.2 405,138
NET ASSETS.................... 100.0 % $9,623,824
</TABLE>
* Non-income producing security.
See accompanying notes to financial statements.
35
<PAGE>
EVERGREEN U.S. REAL ESTATE EQUITY FUND
(Photo of flag)
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $8,756,788).............................................................. $ 9,218,686
Cash........................................................................................................... 306,082
Receivable for securities sold................................................................................. 670,869
Dividends receivable........................................................................................... 72,833
Prepaid expenses............................................................................................... 51,957
Receivable for Fund shares sold................................................................................ 47,005
Unamortized organization expenses.............................................................................. 19,743
Due from Adviser............................................................................................... 11,714
Total assets................................................................................................ 10,398,889
LIABILITIES:
Payable for securities purchased............................................................................... 734,138
Accrued expenses............................................................................................... 40,634
Payable for Fund shares redeemed............................................................................... 223
Distribution fee payable....................................................................................... 70
Total liabilities........................................................................................... 775,065
NET ASSETS........................................................................................................ $ 9,623,824
NET ASSETS CONSIST OF:
Paid-in capital................................................................................................ $ 8,938,272
Undistributed net investment income............................................................................ 113,558
Accumulated net realized gain on investment transactions....................................................... 110,096
Net unrealized appreciation of investments..................................................................... 461,898
Net assets.................................................................................................. $ 9,623,824
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($4,943 433 shares of beneficial interest outstanding)....................................... $ 11.42
Sales charge -- 4.75% of offering price..................................................................... .57
Maximum offering price...................................................................................... $ 11.99
Class B Shares ($160,483 14,116 shares of beneficial interest outstanding).................................. $ 11.37
Class C Shares ($2,761 242 shares of beneficial interest outstanding)....................................... $ 11.41
Class Y Shares ($9,455,637 826,737 shares of beneficial interest outstanding)............................... $ 11.44
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
EVERGREEN U.S. REAL ESTATE EQUITY FUND
(Photo of flag)
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends..................................................................................... $ 327,467
Interest...................................................................................... 10,510
Total investment income.................................................................... 337,977
EXPENSES:
Advisory fee..................................................................................... $ 85,509
Distribution fee -- Class A Shares............................................................... 6
Distribution fee -- Class B Shares............................................................... 269
Shareholder services fee -- Class B Shares....................................................... 90
Distribution fee -- Class C Shares............................................................... 5
Shareholder services fee -- Class C Shares....................................................... 2
Custodian fee.................................................................................... 43,120
Registration and filing fees..................................................................... 42,872
Transfer agent fee............................................................................... 27,693
Professional fees................................................................................ 26,143
Reports and notices to shareholders.............................................................. 10,596
Trustees' fees and expenses...................................................................... 6,923
Amortization of organization expense............................................................. 6,760
Insurance expense................................................................................ 6,750
Miscellaneous.................................................................................... 355
257,093
Less: Fee waivers and expense reimbursements..................................................... (128,522)
Net expenses............................................................................... 128,571
Net investment income............................................................................... 209,406
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................................................................. 113,161
Net change in unrealized appreciation of investments............................................. 1,146,688
Net gain on investments............................................................................. 1,259,849
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ 1,469,255
</TABLE>
See accompanying notes to financial statements.
37
<PAGE>
EVERGREEN U.S. REAL ESTATE EQUITY FUND
(Photo of flag)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................................................. $ 209,406 $ 91,947
Net realized gain on investments....................................................... 113,161 83,042
Net change in unrealized appreciation (depreciation) of investments.................... 1,146,688 (870,461)
Net increase (decrease) resulting from operations................................... 1,469,255 (695,472)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- Class Y Shares........................................... (183,475) --
From net realized gain on investments -- Class Y Shares................................ (106,651) --
Total distributions to shareholders................................................. (290,126) --
FUND SHARE TRANSACTIONS:
Proceeds from shares sold.............................................................. 1,706,148 7,218,876
Proceeds from reinvestments of distributions........................................... 273,657 --
Payment for shares redeemed............................................................ (2,165,200) (2,503,707)
Net increase (decrease) resulting from Fund share transactions...................... (185,395) 4,715,169
Net increase in net assets.......................................................... 993,734 4,019,697
NET ASSETS:
Beginning of period.................................................................... 8,630,090 4,610,393
End of period (including undistributed net investment income of $113,558 and $87,627,
respectively)........................................................................ $ 9,623,824 $ 8,630,090
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
EVERGREEN U.S. REAL ESTATE EQUITY FUND
(Photo of flag)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES CLASS Y SHARES
MARCH 10, MARCH 7, JULY 12, NINE MONTHS
1995* THROUGH 1995* THROUGH 1995* THROUGH YEAR ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1995 1995 1994**
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period....... $ 9.21 $ 9.19 $ 10.87 $ 10.07 $ 10.71
Income (loss) from investment operations:
Net investment income.................... .18 .05 .08 .23 .11
Net realized and unrealized gain (loss)
on investments......................... 2.03 2.13 .46 1.46 (.75)
Total income (loss) from investment
operations........................... 2.21 2.18 .54 1.69 (.64)
Less distributions to shareholders from:
Net investment income.................... -- -- -- (.20) --
In excess of net investment income....... -- -- -- -- --
Net realized gains on investments........ -- -- -- (.12) --
Total distributions.................... -- -- -- (.32) --
Net asset value, end of period............. $ 11.42 $ 11.37 $ 11.41 $ 11.44 $ 10.07
TOTAL RETURN+.............................. 24.0% 23.7% 5.0% 17.6% (6.0%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)................................. $5 $160 $3 $ 9,456 $ 8,630
Ratios to average net assets:
Expenses................................. 1.78%++# 2.51%++# 2.49%++# 1.50%# 1.49%++
Net investment income.................... 3.13%++# 2.00%++# 2.55%++# 2.45%# 1.60%++
Portfolio turnover rate.................... 115% 115% 115% 115% 102%
<CAPTION>
SEPTEMBER 1, 1993*
THROUGH
DECEMBER 31, 1993
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period....... $10.00
Income (loss) from investment operations:
Net investment income.................... .04
Net realized and unrealized gain (loss)
on investments......................... .72
Total income (loss) from investment
operations........................... .76
Less distributions to shareholders from:
Net investment income.................... (.04)
In excess of net investment income....... (.01)
Net realized gains on investments........ --
Total distributions.................... (.05)
Net asset value, end of period............. $10.71
TOTAL RETURN+.............................. 7.6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)................................. $4,610
Ratios to average net assets:
Expenses................................. 0.44%++
Net investment income.................... 1.93%++
Portfolio turnover rate.................... 17%
</TABLE>
* Commencement of class operations.
** The Fund changed its fiscal year end from December 31 to September 30.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized. Due to the recent commencement of their offering, the ratios for
Class A, Class B and Class C shares are not necessarily comparable to that of
Class Y shares and are not necessarily indicative of future ratios.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income (loss) to average net assets, exclusive
of any applicable state expense limitations, would have been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y SHARES
SHARES SHARES SHARES SEPTEMBER 1,
MARCH 10, MARCH 7, JULY 12, NINE MONTHS 1993*
1995* THROUGH 1995* THROUGH 1995* THROUGH YEAR ENDED ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Expenses......... 364.74% 28.70% 421.54% 2.70% 2.65% 3.59%
Net investment
income
(loss)......... (359.83%) (24.19%) (416.50%) 1.25% .44% (1.21%)
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION
The Evergreen Domestic Equity Funds (the "Funds") are separate series of
open-end management companies registered under the Investment Company Act of
1940, as amended (the "Act"). The Evergreen Domestic Equity Funds consist of
Evergreen Aggressive Growth Fund ("Aggressive Growth"), Evergreen Fund, The
Evergreen Limited Market Fund, Inc. ("Limited Market") and Evergreen U.S. Real
Estate Equity Fund ("U.S. Real Estate"), known collectively as the Funds.
NOTE 2 -- ACQUISITION INFORMATION
Effective June 30, 1995, Aggressive Growth, a new series of the Evergreen
Trust formed for the purpose of acquiring substantially all of ABT Emerging
Growth Fund's net assets ("Emerging Growth's net assets"), issued 4,209,767 of
its Class A shares at $15.53 per share in exchange for Emerging Growth's net
assets valued at $65,368,158. The acquired net assets, in this non-taxable
transaction, primarily consisted of portfolio securities with unrealized
appreciation of $27,072,969. ABT Emerging Growth Fund's fiscal year ended
October 31. Because ABT Emerging Growth Fund contributed substantially all of
Aggressive Growth's net assets and shareholders, its basis of accounting for
assets and liabilities and its operating results for prior periods are carried
forward in the accompanying financial statements and financial highlights as the
accounting survivor. Accordingly, the accompanying financial statements of
Aggressive Growth for the eleven months ended September 30, 1995 include ABT
Emerging Growth Fund's results of operations for the period November 1, 1994
through June 30, 1995.
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. These policies are
in conformity with generally accepted accounting principles.
SECURITY VALUATIONS -- Investments in securities traded on a national
securities exchange or included on the NASDAQ National Market System ("NMS") are
valued at the last reported sale price. Securities traded on an exchange or NMS
for which there has been no sale and securities traded in the over-the-counter
market are valued at the mean between the last reported bid and asked price.
Securities for which market quotations are not readily available are valued at
their respective fair value as determined in good faith by the Board of
Trustees. Short-term investments are valued at amortized cost, which
approximates market value.
SECURITY TRANSACTIONS -- Security transactions are accounted for on the
date purchased or sold. Net realized gains or losses are determined on the
identified cost basis.
INVESTMENT INCOME AND EXPENSES -- Dividend income is recorded on the
ex-dividend date. Interest income and expenses are accrued daily.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the Federal Reserve Bank and are designated as being held
on each Fund's behalf by its custodian under a book-entry system. Each Fund
monitors the adequacy of the collateral on a daily basis, and can require the
seller to provide additional collateral in the event the market value of the
securities pledged falls below the carrying value of the repurchase agreement,
including accrued interest. Each Fund will only enter into repurchase agreements
with banks and other financial institutions which are deemed by the investment
adviser to be creditworthy pursuant to guidelines established by the Trustees.
DIVIDENDS TO SHAREHOLDERS -- Dividends from net investment income and net
realized capital gains on investments, if any, will be distributed at least
annually. Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from the amounts available for
distribution under generally accepted accounting principles. To the extent these
differences are permanent in nature, such amounts are reclassified within the
components of net assets.
40
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES -- continued
As of September 30, 1995, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED GAIN
INCOME ON INVESTMENTS
<S> <C> <C>
Aggressive Growth $664,876 $(105,112)
Evergreen Fund -- --
Limited Market 1,241,315 (1,241,315)
U.S. Real Estate -- --
</TABLE>
INCOME TAXES -- It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable net income and net realized capital
gains to its shareholders. Accordingly, no provisions for Federal income or
excise taxes are necessary. To the extent that realized capital gains can be
offset by capital loss carryforwards, it is each Fund's policy not to distribute
such gains.
Capital losses incurred after October 31, within the Fund's fiscal year are
deemed to arise on the first business day of the Fund's following fiscal year.
U.S. Real Estate incurred and will elect to defer $92,587 of these net capital
losses.
ALLOCATION OF EXPENSES -- Expenses specifically identifiable to a class of
shares are charged to that class. Expenses common to a Trust as a whole are
allocated to the funds in that Trust. Investment income, net of expenses (other
than class specific expenses) and realized and unrealized gains and losses are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
UNAMORTIZED ORGANIZATION EXPENSES -- The expenses of U.S. Real Estate and
Aggressive Growth incurred in connection with their organization are being
deferred and amortized over a period of benefit not to exceed 60 months from the
date they commenced operations.
REAL ESTATE INVESTMENT TRUSTS -- U.S. Real Estate owns shares of real
estate investment trusts ("REITs") which report information on the source of
their distributions annually. A portion of distributions received from REITs
during the year is estimated to be a return of capital and is recorded as a
reduction of their cost.
NOTE 4 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AGREEMENTS -- First Union National Bank of North
Carolina ("First Union") is entitled to an annual fee of .60 of 1% of Aggressive
Growth's average daily net assets pursuant to the Fund's investment advisory
agreement. Prior to June 30, 1995, Aggressive Growth paid an investment advisory
fee to Palm Beach Capital Management, Ltd. ("Palm Beach") of .60 of 1% of its
average daily net assets. First Union received $106,041 from advisory fees for
the period July 1, 1995 through September 30, 1995. Palm Beach received $248,815
from advisory fees for the period November 1, 1994 through June 30, 1995.
Pursuant to an agreement with Evergreen Fund's, Limited Market's and U.S.
Real Estate's investment adviser, Evergreen Asset Management Corp. ("Evergreen
Asset"), a wholly owned subsidiary of First Union, is entitled to an annual fee
based on each of Evergreen Fund's, Limited Market's and U.S. Real Estate's
average daily net assets, in accordance with the following schedule:
<TABLE>
<S> <C>
First $750 million 1.00%
Next $250 million 0.90%
Over $1 billion 0.80%
</TABLE>
41
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES -- continued
Evergreen Asset has agreed to reimburse U.S. Real Estate to the extent that
the Fund's operating expenses (including the investment advisory fee and
amortization of organization expenses but excluding interest, taxes, brokerage
commissions, 12b-1 distribution and shareholder services fees and extraordinary
expense) exceed 1.50% of its average daily net assets until the Fund's net
assets reach $15 million. For the year ended September 30, 1995, Evergreen Asset
waived all of its advisory fee and reimbursed $22,093 in expenses under this
limitation. In addition, for the year ended September 30, 1995, Evergreen Asset
voluntarily reimbursed certain class specific expenses amounting to $24,130,
$48,100 and $20,920 for Evergreen Fund, Limited Market and U.S. Real Estate,
respectively. Evergreen Asset can modify or terminate these voluntary waivers at
any time.
Lieber & Company, an affiliate of First Union, is the investment
sub-adviser to Evergreen Fund, Limited Market and U.S. Real Estate and also
provides brokerage services with respect to substantially all security
transactions executed on the New York or American Stock Exchanges. For
transactions executed during the year ended September 30, 1995, Evergreen Fund,
Limited Market and U.S. Real Estate incurred brokerage commissions of $252,069,
$125,347 and $69,835, respectively, with Lieber & Company. Lieber & Company is
reimbursed by Evergreen Asset, at no additional expense to the Funds, for its
cost of providing investment advisory services.
ADMINISTRATION AGREEMENT -- Evergreen Asset furnishes Evergreen Fund,
Limited Market and U.S. Real Estate with administrative services as part of
their advisory agreements and accordingly, these Funds do not pay a separate
administration fee. Furman Selz, Incorporated ("Furman Selz") is each of the
Funds' sub-administrator. As sub-administrator, Furman Selz provides the
officers of the Funds. For Evergreen Fund, Limited Market and U.S. Real Estate,
Furman Selz' fee is paid by Evergreen Asset and is not a fund expense.
Until June 30, 1995, Palm Beach was Aggressive Growth's Administrator.
Pursuant to an administration agreement, Aggressive Growth paid $32,123 in
administration fees to Palm Beach. Effective June 30, 1995, Evergreen Asset
became the Fund's Administrator and Furman Selz became sub-administrator.
Officers of Furman Selz became officers of the Fund. Evergreen Asset's fee and
Furman Selz' fee for Aggressive Growth is based on the average daily net assets
of all the funds administered by Evergreen Asset for which First Union or
Evergreen Asset is also investment adviser. These fees are calculated at the
following annual rates:
<TABLE>
<CAPTION>
ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<C> <S>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% in excess of $30 billion
</TABLE>
<TABLE>
<CAPTION>
SUB-ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<C> <S>
0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% in excess of $25 billion
</TABLE>
At September 30, 1995, assets for which Evergreen Asset was the
administrator for which either Evergreen Asset or First Union was investment
adviser totaled approximately $10.1 billion.
PLANS OF DISTRIBUTION -- The Funds have adopted Distribution Plans (the
"Plans") pursuant to Rule 12b-1 under the Act for their Class A Shares, Class B
Shares, and Class C Shares (see note 5). Under the terms of the Plans, the Funds
may incur distribution-related and shareholder servicing expenses which may not
exceed an annual fee of .75 of 1% for Class A Shares
42
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES -- continued
and 1% for Class B and Class C Shares. For each of the Funds, the payments for
Class A Shares were voluntarily limited to .25 of 1% of average daily net
assets. Rule 12b-1 fees are accrued daily and paid monthly.
In connection with their plans, the Funds have entered into distribution
agreements with Evergreen Funds Distributor, Inc. ("EFD"), a subsidiary of
Furman Selz, whereby the Funds will compensate EFD for its services at a rate
which may not exceed an annual fee of .25 of 1% of Class A Shares' average daily
net assets and an annual fee of .75 of 1% of Class B and Class C Share's average
daily net assets, respectively. A portion of the payments for Class B and C
Shares, up to .25 of 1% may constitute a shareholder services fee. EFD has
entered into a Shareholder Services Agreement with First Union Brokerage
("FUBS"), an affiliate of First Union, whereby they will compensate FUBS for
certain services provided to shareholders and /or maintenance of shareholder
accounts relating to each of the Funds' Class B and Class C Shares.
SALES CHARGES -- EFD has advised the Funds that it has retained the
following amounts from front-end sales charges resulting from sales of Class A
Shares during the fiscal period ended September 30, 1995:
<TABLE>
<CAPTION>
FRONT-END
SALES
CHARGES
<S> <C>
Aggressive Growth $ 8,909
Evergreen Fund 72,923
Limited Market 495
U.S. Real Estate 131
</TABLE>
NOTE 5 -- SHARES OF BENEFICIAL INTEREST
Aggressive Growth, Evergreen Fund and U.S. Real Estate have an unlimited
number of shares of beneficial interest authorized. Limited Market has 25
million common shares authorized allocated equally to each of its classes of
shares sold. The par value of the Fund's shares are $.001, $.001, $.10, and
$.0001 for Aggressive Growth, Evergreen Fund, Limited Market and U.S. Real
Estate, respectively. The shares are divided into classes which are designated
Class Y, Class A, Class B, and Class C shares. Class A shares are sold with a
front-end sales charge of up to 4.75%. Class B shares are sold with a contingent
deferred sales charge which declines from 5% to zero depending on the period of
time the shares are held. Class B shares will automatically convert to Class A
shares after seven years of purchase. Class C shares are sold with a contingent
deferred sales charge of 1% during the first year. Class Y shares are sold
without a sales charge and are available only to investment advisory clients of
First Union and its affiliates, certain institutional investors or Class Y
shareholders of record of certain other funds managed by First Union and its
affiliates as of December 30, 1994. The classes have identical voting, dividend,
liquidation and other rights, except that Class A, Class B and Class C shares
bear distribution expenses (see Note 4) and have exclusive voting rights with
respect to their distribution plans.
43
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED* YEAR ENDED
SEPTEMBER 30, 1995 OCTOBER 31, 1994
AGGRESSIVE GROWTH SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold.................................................. 495,784 $ 7,228,522 1,539,650 $ 21,670,407
Shares issued on reinvestment of distributions............... -- -- 54,495 753,121
Shares redeemed.............................................. (1,083,263) (15,863,245) (945,351) (13,141,951)
Net increase (decrease)...................................... (587,479) (8,634,723) 648,794 9,281,577
CLASS B
Shares sold.................................................. 165,945 2,799,908 -- --
Shares redeemed.............................................. (1,193) (19,616) -- --
Net increase................................................. 164,752 2,780,292 -- --
CLASS C
Shares sold.................................................. 24,064 422,094 -- --
Net increase................................................. 24,064 422,094 -- --
CLASS Y
Shares sold.................................................. 111,806 1,882,102 -- --
Shares redeemed.............................................. (3,091) (52,855) -- --
Net increase................................................. 108,715 1,829,247 -- --
Total net increase (decrease) resulting from Fund share
transactions............................................... (289,948) ($ 3,603,090) 648,794 $ 9,281,577
</TABLE>
* For Class B Shares, Class C Shares and Class Y Shares, the Fund Share
transaction activity is for the period July 7, 1995, August 3, 1995 and July 11,
1995, each classes commencement of operations, respectively, through September
30, 1995.
44
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
YEAR ENDED* YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
EVERGREEN FUND SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold......................................... 2,116,988 $ 30,255,833 -- --
Shares redeemed..................................... (223,365) (3,375,528) -- --
Net increase........................................ 1,893,623 26,880,305 -- --
CLASS B
Shares sold......................................... 4,886,698 69,361,586 -- --
Shares redeemed..................................... (94,896) (1,403,566) -- --
Net increase........................................ 4,791,802 67,958,020 -- --
CLASS C
Shares sold......................................... 138,560 1,992,663 -- --
Shares redeemed..................................... (12,818) (190,022) -- --
Net increase........................................ 125,742 1,802,641 -- --
CLASS Y
Shares sold......................................... 89,763,450 1,249,272,141 74,919,356 $ 1,081,247,408
Shares issued on reinvestment of
distributions..................................... 5,626,158 66,336,031 1,934,878 27,023,906
Shares redeemed..................................... (92,075,790) (1,284,726,648) (86,341,400) (1,247,930,329)
Net increase (decrease)............................. 3,313,818 30,881,524 (9,487,166) (139,659,015)
Total net increase (decrease) resulting from Fund
share transactions................................ 10,124,985 $ 127,522,490 (9,487,166) ($ 139,659,015)
</TABLE>
* For Class A, B, and C shares, the Fund share transaction activity is for
the period January 3, 1995 (commencement of class operations) through September
30, 1995.
45
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
YEAR ENDED* YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
LIMITED MARKET
CLASS A
Shares sold.................................................. 68,006 $ 1,122,391 -- --
Shares redeemed.............................................. (8,837) (150,079) -- --
Net increase................................................. 59,169 972,312 -- --
CLASS B
Shares sold.................................................. 132,239 2,169,679 -- --
Shares redeemed.............................................. (21,845) (382,430) -- --
Net increase................................................. 110,394 1,787,249 -- --
CLASS C
Shares sold.................................................. 4,195 68,235 -- --
Shares redeemed.............................................. (832) (15,092) -- --
Net increase................................................. 3,363 53,143 -- --
CLASS Y
Shares sold.................................................. 1,558,531 27,591,064 3,073,194 $ 64,053,556
Shares issued on reinvestment of distributions............... 901,732 14,048,986 -- --
Shares redeemed.............................................. (3,515,593) (61,895,857) (3,049,291) (63,760,491)
Net increase (decrease)...................................... (1,055,330) (20,255,807) 23,903 293,065
Total net increase (decrease) resulting from Fund share
transactions............................................... (882,404) ($17,443,103) 23,903 $ 293,065
</TABLE>
* For Class A, B, and C shares, the Fund share transaction activity is for
the period January 3, 1995 (commencement of class operations) through September
30, 1995.
46
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
YEAR ENDED* NINE MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
U.S. REAL ESTATE
CLASS A
Shares sold.......................................................... 1,923 $ 18,771 -- --
Shares redeemed...................................................... (1,490) (14,411) -- --
Net increase......................................................... 433 $ 4,360 -- --
CLASS B
Shares sold.......................................................... 14,116 147,171 -- --
Shares redeemed...................................................... -- -- -- --
Net increase......................................................... 14,116 147,171 -- --
CLASS C
Shares sold.......................................................... 242 2,509 -- --
Shares redeemed...................................................... -- -- -- --
Net increase......................................................... 242 2,509 -- --
CLASS Y
Shares sold.......................................................... 161,434 1,537,697 666,009 $ 7,218,876
Shares issued on reinvestment of distributions....................... 30,172 273,657 -- --
Shares redeemed...................................................... (222,266) (2,150,789) (238,930) (2,503,707)
Net increase (decrease).............................................. (30,660) (339,435) 427,079 4,715,169
Total net increase (decrease) resulting from Fund share
transactions....................................................... (15,869) ($ 185,395) 427,079 $ 4,715,169
</TABLE>
* For Class A, Class B and Class C shares, the Fund share transaction
activity reflects the period from commencement of class operations March 10,
1995, March 7, 1995 and July 12, 1995, respectively, through September 30, 1995.
47
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 6 -- INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of investments, excluding
short-term securities for the period ended September 30, 1995 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Aggressive Growth..................................... $ 19,522,510 $ 22,757,503
Evergreen Fund........................................ 102,920,924 125,641,905
Limited Market........................................ 67,160,058 100,762,453
U.S. Real Estate...................................... 9,937,178 10,409,467
</TABLE>
On September 30, 1995, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost of investments
for federal tax purposes was as follows:
<TABLE>
<CAPTION>
FEDERAL TAX
APPRECIATION DEPRECIATION NET APPRECIATION COST
<S> <C> <C> <C> <C>
Aggressive Growth........... $ 32,996,707 $ 483,750 $ 32,512,957 $ 41,451,593
Evergreen Fund.............. 294,934,209 12,125,933 282,808,276 433,884,995
Limited Market.............. 10,018,169 7,443,999 2,574,170 66,300,561
U.S. Real Estate............ 917,310 471,577 445,733 8,772,953
</TABLE>
NOTE 7 -- FINANCING AGREEMENT
Evergreen 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 $25,000,000 or 5% of the value
of the Fund's net assets, to be accessed for temporary or emergency purposes.
Borrowings under the line of credit bear interest at 1% above the Bank's cost of
funds as set periodically by the Bank and are secured by securities pledged by
the Fund. During the year ended September 30, 1995, the Fund had borrowings
outstanding for 142 days under the line of credit and incurred $316,041 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
$12,243,662 at a weighted average interest rate of 6.64%. The Fund had no
outstanding borrowings at September 30, 1995.
NOTE 8 -- CONCENTRATION OF CREDIT RISK
Since U.S. Real Estate invests a substantial portion of its assets in
REITs, it may be more affected by economic developments in the real estate
industry than would a general equity fund.
NOTE 9 -- SUBSEQUENT EVENT
On June 18, 1995, First Fidelity Bancorporation ("First Fidelity") agreed
to merge with First Union on or about January 1, 1996.
On September 19, 1995, Evergreen Fund's management signed an agreement and
Plan of Reorganization to exchange substantially all of the net assets of FFB
Lexicon Small Company Fund, an investment company advised by a subsidiary of
First Fidelity, approximating $27 million at September 30, 1995, for shares of
Evergreen Fund. FFB Lexicon Small Company Fund's Trustees have called a special
meeting to consider the proposed transaction. If the fund transaction is
consummated, the reorganization is scheduled to take place on or about January
19, 1996.
48
<PAGE>
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<PAGE>
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<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND SHAREHOLDERS OF
EVERGREEN FUND,
EVERGREEN AGGRESSIVE GROWTH FUND AND
EVERGREEN U.S. REAL ESTATE EQUITY FUND
In our opinion, the accompanying Statements of Assets and Liabilities,
including the Statements of Investments, and the related Statements of
Operations and of Changes in Net Assets and the Financial Highlights present
fairly, in all material respects, the financial position of Evergreen Fund and
Evergreen Aggressive Growth Fund (constituting the Evergreen Trust) and
Evergreen U.S. Real Estate Equity Fund (one of the Evergreen Real Estate Equity
Trust Portfolios), (the "Funds"), at September 30, 1995, the results of
operations of Evergreen Aggressive Growth Fund for the eleven months in the
period then ended, the results of operations of Evergreen Fund and Evergreen
U.S. Real Estate Equity Fund for the year then ended, the changes in the net
assets of Evergreen Aggressive Growth Fund for the eleven months in the period
then ended, the changes in the net assets of Evergreen Fund for each of the two
years in the period then ended, the changes in the net assets of Evergreen U.S.
Real Estate Equity Fund for the year then ended and for the nine months in the
period ended September 30, 1994, and the financial highlights of Evergreen
Aggressive Growth Fund for the eleven months in the period then ended, and the
financial highlights of Evergreen Fund and Evergreen U.S. Real Estate Equity
Fund for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above. The Evergreen Aggressive Growth fund statement
of changes in net assets for the year ended October 31, 1994 and its financial
highlights for each of the four years in the period ended October 31, 1994 were
audited by other independent accountants, whose opinion thereon, dated November
29, 1994 was unqualified.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
November 21, 1995
49
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
THE TRUSTEES AND SHAREHOLDERS OF
EVERGREEN LIMITED MARKET FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Evergreen Limited Market Fund, Inc. including the statement of investments, as
of September 30, 1995 and the related statement of operations for the year then
ended, the statement of changes in net assets for year then ended and for the
four month period ended September 30, 1994, and the financial highlights for the
year ended September 30, 1995, the four month period ended September 30, 1994,
and each of the three years in the period ended May 31, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the overall accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Evergreen Limited Market Fund, Inc. at September 30, 1995, and the results of
its operations for the year then ended, the changes in its net assets for the
year then ended and for the four month period ended September 30, 1994, and the
financial highlights for the year ended September 30, 1995, the four month
period ended September 30, 1994 and each of the three years in the period ended
May 31, 1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
November 16, 1995
50
<PAGE>
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<PAGE>
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<PAGE>
TRUSTEES/DIRECTORS AND OFFICERS
TRUSTEES/DIRECTORS:
Mr. Laurence B. Ashkin
Mr. Foster Bam
Mr. James S. Howell, Chairman
Mr. Robert J. Jeffries
Mr. Gerald M. McDonnell
Mr. Thomas L. McVerry
Mr. William W. Pettit
Mr. Russell A. Salton, III M.D.
Mr. Michael S. Scofield
OFFICERS:
John J. Pileggi
President and Treasurer
Joan V. Fiore
Secretary
Sheryl Hirschfeld
Assistant Secretary
Donald E. Brostrom
Assistant Treasurer
Stephen W. St. Clair
Assistant Treasurer
FEDERAL INCOME TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
During the fiscal year ended September 30, 1995 the Evergreen Fund, Limited
Market and U.S. Real Estate paid $63,667,214, $10,687,111, and $1,309
respectively, of net long-term capital gain distributions.
For corporate taxpayers, 100%, 8% and 25% of the ordinary income
distributions paid during the fiscal year ended September 30, 1995 by Evergreen
Fund, Limited Market and U.S. Real Estate respectively, qualified for corporate
dividends received deduction.
<PAGE>
NOT May lose value
FDIC No bank guarantee
INSURED 537244
Evergreen Funds Distributor, Inc. 11/95
