<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter to Shareholders ......................... 1
Evergreen Select Common Stock Fund
Fund at a Glance ............................ 3
Portfolio Manager Commentary ................ 4
Evergreen Select Equity Income Fund
Fund at a Glance ............................ 6
Portfolio Manager Commentary ................ 7
Evergreen Select Large Cap Blend Fund
Fund at a Glance ............................ 9
Portfolio Manager Commentary ................ 10
Evergreen Select Small Company Value
Fund
Portfolio Manager Commentary ................ 12
Evergreen Select Social Principles Fund
Fund at a Glance ............................ 14
Portfolio Manager Commentary ................ 15
Evergreen Select Strategic Growth
Fund
Fund at a Glance ............................ 17
Portfolio Manager Commentary ................ 18
Evergreen Select Strategic Value Fund
Fund at a Glance ............................ 20
Portfolio Manager Commentary ................ 21
Financial Highlights
Evergreen Select Common Stock Fund .......... 23
Evergreen Select Equity Income Fund ......... 24
Evergreen Select Large Cap Blend Fund ....... 25
Evergreen Select Small Company Value
Fund ..................................... 26
Evergreen Select Social Principles Fund ..... 27
Evergreen Select Strategic Growth Fund ...... 28
Evergreen Select Strategic Value Fund ....... 29
Schedule of Investments
Evergreen Select Common Stock Fund .......... 30
Evergreen Select Equity Income Fund ......... 32
Evergreen Select Large Cap Blend Fund ....... 34
Evergreen Select Small Company Value
Fund ..................................... 36
Evergreen Select Social Principles Fund ..... 38
Evergreen Select Strategic Growth Fund ...... 40
Evergreen Select Strategic Value Fund ....... 42
Statements of Assets and Liabilities ........... 44
Statements of Operations ....................... 45
Statements of Changes in Net Assets -
Period ended December 31, 1997 .............. 46
Combined Notes to Financial
Statements ..................................... 47
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Evergreen Funds
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Evergreen Funds is one of the nation's fastest growing investment companies
with more than $40 billion in assets under management.
With 85 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broader range of quality investment products
and services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This semiannual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
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Mutual Funds: ARE NOT FDIC INSURED May lose value o Are not bank guaranteed
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Evergreen Funds Distributor, Inc.
<PAGE>
Letter to Shareholders
February 1998
Dear Investors:
This marks the first investment report of the Evergreen Select Equity Trust.
The Evergreen Select Funds are designed to meet the unique needs of
institutional investors and high net worth individuals. These funds
offer the following:
o As an extension of First Capital
[Photgraph of Group's institutional offering, each Fund is
William M. Ennis] managed by a team of seasoned investment
professionals.
o Each Fund has a specific style and well
defined investment process which makes it
particularly suitable for implementing an asset
William M. Ennis allocation for an overall portfolio.
o Communication and servicing designed for
institutional and high net worth clients.
[Photograph of
David C. Francis] o The combination of Evergreen Select Equity
Trust, Fixed Income Trust, and Money Market
Funds represent a comprehensive line of 19
David C. Francis funds.
The Select Equity Trust's first report marks a generally rewarding period in
the capital markets. The returns of the benchmarks for most types of domestic
equity investment strategies were truly impressive, although the year was
punctuated by periods of volatility. In 1997, Standard & Poor's 500 Index rose
33.4%. In fact, it had reached a year-to-date performance figure of 35% in
early August before investors, perhaps fearing the lofty heights, started
re-evaluating. For the year, the Dow Jones Industrial Average climbed by 24.9%,
reaching a peak of 8,259 points before settling back just below 8,000 at year's
end. Small cap stocks also did well, although not quite as well as large cap
stocks. The NASDAQ Composite had a return of 21.64%, while the Russell 2000
Index had a return of a 22.4%.
The bond market was encouraged by a very strong dollar, growing evidence of
moderating economic growth, and remarkably constrained inflation considering
that the American economy was in the eighth year of an economic expansion. It
also provided impressive rewards. The 30-year Treasury, after peaking at a
7.17% interest rate in mid-April, finished the year at 5.92%. The total return
for the 30-year Treasury, as measured by the Lehman Brothers Long T-Bond Index,
was 14.8%.
Outside the U.S., the picture was less consistent, particularly in the emerging
markets and especially in Asia. Twin currency and financial crises in late
summer and the fall roiled the Asian markets, unleashing domino effects
throughout the world. In fact, Asian financial problems had a cooling effect on
the U.S. markets in late 1997, causing downward revisions in earnings'
forecasts, particularly in the technology industry, and encouraging a return to
large cap stocks. Evidence of a slowing economy and extraordinarily low
inflation (the Consumer Price Index rose by just 1.7% for the year) was cause
for confidence in the bond market during the final six months of 1997.
Capital market participants in early 1998 looked at generally favorable
domestic conditions. The environment was particularly encouraging to bond
market investors. The three successive, exceptionally strong years in the
equity market had left stock valuations at relatively high and, to at least
some observers, controversial levels.
We will not attempt to predict 1998's returns in this report. We assure you,
however, that the portfolios in the Evergreen Select Equity Trust will be
expertly managed, with an eye toward finding distinctive opportunities and
long-term value in today's complex and interdependent markets.
1
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In the following pages, the investment managers for each of the funds of the
Evergreen Select Equity Trust will report on their portfolios. We believe you
will find them informative. Thank you for your continued investment in
Evergreen Select Funds.
Sincerely,
/s/William M. Ennis
William M. Ennis
Managing Director
Evergreen Funds
/s/David C. Francis
David C. Francis, C.F.A.
Chief Investment Officer,
Managing Director
First Capital Group
2
<PAGE>
EVERGREEN
Select Common Stock Fund
Fund at a Glance as of December 31, 1997
PORTFOLIO PROFILE
Philosophy
Evergreen Select Common Stock Fund utilizes a diversified style of equity
management which capitalizes on opportunities in both value- and
growth-oriented stocks. In serving the investment needs of individual
investors, the Fund remains sensitive to tax implications.
Process
The Fund uses a bottom-up stock selection process, focusing on security
fundamentals rather than broad economic forecasts. The Fund is managed using a
team approach; investment managers locate attractive holdings using a unique
blend of quantitative and traditional fundamental analysis skills.
Benchmark
S & P 500 Index
PERFORMANCE AND RETURNS
</TABLE>
<TABLE>
<CAPTION>
Class I
<S> <C>
Performance Inception Date 12/31/81
Average Annual Returns
6 mos. 10.93%
1 year 27.31%
3 years 29.86%
5 years 16.86%
10 years 15.40%
Since Inception 15.87%
Cumulative Since Inception 955.61%
Distribution per share for the period* $ 0.09
</TABLE>
*The period from the Fund's inception on 11/24/97 through 12/31/97.
LONG TERM GROWTH
[Graph appears here with the following plot points]
12/87 12/89 12/91 12/93 12/95 12/97
Class I Shares 10,000 14,533 18,183 20,630 26,095 41,883
Standard & Poor's
500 Index 10,000 14,452 18,261 21,623 30,130 49,349
Comparison of change in value of a $10,000 investment in Evergreen Select
Common Stock Fund, Class I and the Standard & Poor's 500 Index.
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Performance information includes the
performance of the Fund's predecessor collective trust fund for periods before
the Fund's registration statement became effective on November 24, 1997.
Performance for the collective trust fund has been adjusted to include the
effect of estimated expenses based upon the mutual fund expense ratio as stated
in the Fund's current prospectus. Index returns do not reflect expenses, which
have been deducted from the Fund's return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, its performance
may have been adversely affected.
3
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EVERGREEN
Select Common Stock Fund
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Portfolio Manager Commentary
Portfolio Management Team
The Fund is managed by Mark C. Sipe and Hanspeter Giger who have over 31 years
of combined investment experience. Their disciplined approach assures
consistency of results and superior service.
[Photograph appears [Photograph appears
of Mark C. Sipe] of Hanspeter Giger]
Mark C. Sipe Hanspeter Giger
Performance
The Evergreen Select Common Stock Fund's total return exceeded that of the S&P
500 Index during the six-month period ending December 31, 1997: 10.90% versus
10.6%. Much of the stock market's performance continued to be driven by large
capitalization stocks, as had been the case in the year's earlier quarters,
although during the quarter ending September 30th small-cap stocks (as measured
by the S&P 600 Index) nearly doubled the gains of the large cap S&P 500 Index.
Large-caps took the lead again after the sharp October 27th market sell-off,
when investors appeared to strongly favor predictable earnings and the larger,
more liquid stocks. The Fund's broad diversification across the market
capitalization spectrum benefited it significantly during the first three months
of the period, but contributed to a lag in performance versus the index during
the final three.
Sector Activity
Basic Materials, Capital Goods, Energy, and Technology were among the
worst-performing sectors of the market during the six months ended December 31,
1997. The first two sectors experienced downward pressure late in the period due
to perceived links with Southeast Asia. For the Basic Materials, perceived
demand and pricing issues related to slowing economies and currency devaluation
sharply diminished interest in the group. For the Capital Goods stocks, concerns
about the possible infrastructure project delays or cancellations appeared to
contribute to that sector's underperformance. During the period, we reduced the
portfolio's weighting in both of these sectors.
Top 5 Sectors
-------------
(as a percentage of net assets)
Finance and Banks 15.0%
Information Services & Technology 12.3%
Healthcare Products & Services 12.2%
Food & Beverage Products 8.6%
Oil/Energy 8.0%
Investment Strategy
Technology was the single worst-performing sector in the final three months,
accounting for 11 of the 15 worst-performing stocks in the Fund during the
quarter ending December 31. This sector was also the most active in terms of
changes in the portfolio during the fiscal period, with many names added in the
first three months. Because we anticipate further turbulence in this area, we
have shifted away from less well-positioned names in favor of those whose
long-term outlooks, especially the Year 2000 issue, should greatly overshadow
potential volatility. Consistent with this strategy, stocks such as Cabletron
Systems, Cognos, Inc., and BMC Industries were sold.
The Energy sector was affected by a number of unrelated events and announcements
which led to a sharp fall in crude oil prices late in the period. Because we
expect this drop in prices to be relatively short-lived, no changes were made in
the Fund other than adding some
4
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EVERGREEN
Select Common Stock Fund
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Portfolio Manager Commentary
money to existing positions during the final months. For the entire period, the
Fund saw a net increase in the number of Energy stocks held. We expect strong
demand for energy products going forward and have focused on the consolidation
in refining capacity and expansion of exploration and development as areas of
concentration with the Fund's holdings in names such as Tosco, Diamond Offshore,
and Reading & Bates.
Not surprisingly, defensive sectors such as Utilities and Finance were the stars
of the increasingly volatile six- month period. Although underweighted in the
portfolio, Utility shares comprised 6 of the top 15 performing stocks in the
final three months. Highlighting this performance in the Fund were names such as
Utilicorp United (+28.8%), CMS Energy (+19.1%), and GPU, Inc. (17.2%). The
Financial sector, which continued to benefit from the low interest-rate
environment, saw net additions in the Fund's holdings, including NationsBank,
Fleet Financial Group, and KeyCorp. Consumer Cyclicals, another of the few
strong-performing market sectors during the period, was aided in the Fund by the
notable additions of Sunbeam and Federated Department Stores, as well as by
outstanding performances from Family Dollar Stores (+60%), Ford Motor Co.
(+28%), and Dayton Hudson Corp. (+27%).
Top 10 Holdings
----------------
(as a percentage of net assets)
General Electric Co. 3.1%
Computer Associates International, Inc. 2.2%
Ford Motor Co. 2.2%
International Business Machines Corp. 1.9%
GTE Corp. 1.9%
Philip Morris Companies, Inc. 1.8%
Cisco Systems, Inc. 1.8%
Sara Lee Corp. 1.8%
Coca Cola Co. (The) 1.6%
Texaco, Inc. 1.5%
Outlook
Overall market uncertainty, and therefore heightened volatility, is likely to
carry over into 1998, barring quick resolution of the Asian crisis. Current
expectations are for a moderation of economic growth, which would likely
contribute to a slowing rate of growth in corporate earnings. However, with low
interest rates and low inflation, the environment remains favorable for
continued strong profitability from corporate America. The Fund will continue to
emphasize stocks of companies where earnings growth is likely to exceed that of
the average company, or where unusual values appear to have been created as a
result of market volatility. A research-intensive process is applied in the
selection of stocks for the Fund, and we remain confident that this strategy
will continue to bear fruit over the long term.
5
<PAGE>
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EVERGREEN
Select Equity Income Fund
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Fund at a Glance as of December 31, 1997
PORTFOLIO PROFILE
Philosophy
Evergreen Select Equity Income Fund utilizes both value- and growth-oriented
stocks in pursuit of its objective: high current income and long-term capital
appreciation. The Fund provides investors a relative degree of safety by
emphasizing companies with below-average price-to-earnings ratios and higher
dividend yields relative to their industry groups.
Process
The Fund uses a bottom-up stock selection process, focusing on security
fundamentals rather than broad economic forecasts. The portfolio construction
process consists of a unique blend of quantitative and traditional fundamental
analysis skills.
Benchmark
S & P 500 Index
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PERFORMANCE AND RETURNS
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<TABLE>
<CAPTION>
Class I
<S> <C>
Performance Inception Date 12/31/78
Average Annual Returns
6 mos. 14.82%
1 year 28.56%
3 years 25.82%
5 years 15.69%
10 years 14.94%
Since Inception 15.12%
Cumulative Since Inception 1352.46%
Distribution per share for the period* $ 0.21
</TABLE>
*The period from the Fund's inception on 11/24/97 through 12/31/97.
LONG TERM GROWTH
[Graph appears here with the following plot points]
12/87 12/89 12/91 12/93 12/95 12/97
Class I Shares 10,000 15,385 18,940 20,781 26,731 40,252
Standard & Poor's
500 Index 10,000 14,452 18,261 21,623 30,130 49,249
Comparison of change in value of a $10,000 investment in Evergreen Select
Equity Income Fund, Class I and the Standard & Poor's 500 Index.
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Performance information includes the
performance of the Fund's predecessor collective trust fund for periods before
the Fund's registration statement became effective on November 24, 1997.
Performance for the collective trust fund has been adjusted to include the
effect of estimated expenses based upon the mutual fund expense ratio as stated
in the Fund's current prospectus. Index returns do not reflect expenses, which
have been deducted from the Fund's return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, its performance
may have been adversely affected.
6
<PAGE>
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EVERGREEN
Select Equity Income Fund
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Portfolio Manager Commentary
Portfolio Management
The Evergreen Select Equity Income Fund is managed by Paul A. DiLella who has 17
years of investment experience. In addition to managing First Union's Equity
Income Fund, Mr. DiLella is also responsible for the co-management of the
Evergreen Utility Fund. He also has research responsibility for the electric
utility, natural gas distribution, and REIT areas.
[Photograph of Pual A. DiLella appears here]
Paul A. DiLella
Performance
The Evergreen Select Equity Income Fund posted a total return of 14.8% for the
six-month period ended December 31, 1997. This return significantly outpaced the
10.6% total return of the S&P 500 Index. Strong performance relative to the S&P
500 can be attributed to favorable security selection, as well as to strong
sector weightings.
Top 5 Sectors
(as a percentage of net assets)
Utilities - Electric 18.9%
Oil/Energy 14.9%
Banks 13.9%
Treasury Notes & Bonds 7.4%
Healthcare Products & Services 6.2%
Favorable Sector Weightings
Stemming from the well-publicized crisis in Southeast Asia, equity investors
experienced a volatile six-month period. Consequently, defensive sectors such as
utilities and financials led the market during this uncertain environment. The
Fund's six-month returns benefited from the fact that the portfolio's top six
holdings are in these two sectors. Conversely, historically volatile sectors
such as technology tended to underperform, especially those companies with high
valuations and exposure to Asian markets.
The portfolio's overweighting in utilities aided returns as this sector
significantly outpaced the broad market, especially during the final three
months of 1997. During the fourth quarter, the S&P Utilities Index outperformed
the S&P 500 Index, 16.3% versus 2.9%. Within this sector, the purchase of
high-yielding UtiliCorp United proved timely, when its price increased over 22%
following its purchase in October 1997.
The Fund's underweighted position in technology and information services stocks
also contributed to strong relative performance because the technology sector
was extremely hard hit by the market's volatility. This weighting was reduced
from 5.6% to 2.0% over the six- month period.
7
<PAGE>
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EVERGREEN
Select Equity Income Fund
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Portfolio Manager Commentary
Investment Strategy
The strategy of the Evergreen Select Equity Income Fund is simple: provide
investors with high current income and long-term capital appreciation.
Consistent with this strategy, the portfolio manager strives to provide a
current yield higher than that of the S&P 500 Index. As of December 31, the
Fund's current yield was 3.3% versus the S&P 500 Index's yield of 1.6%. The
Fund's 30-day SEC yield was 2.44% as of December 31, 1997.
The Fund's high yield portfolio structure is intended to provide a defensive
posture. A stable, high yield portfolio helps returns especially in periods of
volatility in which the market pays a premium for stable, high-dividend-paying
companies. It should be noted that for the 12 months ended December 31, 1997,
the Fund's total return of 28.6% exceeded the Lipper average of 16.4% for the 62
funds in the Income category.1
The recent shift among technology and utility weightings also exemplifies the
Fund's strategy. These sector changes are an effort to improve the Fund's
defensive posture as well as improve the Fund's yield. More utility companies
and fewer technology holdings generally translate into less volatile performance
and higher yield, fueling returns in a turbulent market environment.
1Lipper Analytical Services is an independent mutual fund rating company.
Top 10 Equity Holdings
-----------------------
(as a percentage of net assets)
Union Planters Corp. 3.3%
PacifiCorp 3.2%
First Tennessee National Corp. 2.9%
UtiliCorp United, Inc. 2.8%
CMS Energy Corp. 2.8%
CINergy Corp. 2.6%
Houston Industries, Inc. 2.5%
GPU, Inc. 2.5%
GTE Corp. 2.5%
Allegheny Energy, Inc. 2.5%
Outlook
Historically high valuation levels and the recent problems in Southeast Asia
increase the likelihood of volatility in the stock market. We believe that the
portfolio's current structure is well-suited for this particular market
environment. Despite the recent focus on financial crises in Asian markets, it
is important to remember that the greatest gains and losses will come from
individual stock selection. The Evergreen Select Equity Income Fund maintains a
portfolio of strongly managed companies whose defensive, income-oriented
characteristics seek to offer a relative degree of stability as well as
above-average current yield. We remain confident that our strategy will help
provide investors with solid, consistent returns over the long term.
8
<PAGE>
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EVERGREEN
Select Large Cap Blend Fund
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Fund at a Glance as of December 31, 1997
PORTFOLIO PROFILE
Philosophy
Evergreen Select Large Cap Blend Fund invests in large and mid-sized U.S.
companies, blending those that display both value and growth-oriented
characteristics. This philosophy holds that value and growth stocks tend to be
countercyclical, outperforming the broad market at different times.
Diversification between the two approaches tends to provide less volatile
investment results over time.
Process
Research and stock selection focus on companies of sound financial quality that
have strong management teams and maintain competitive leadership positions
within their respective industries. These companies are identified using a
fundamental, bottom-up stock selection process which is research-intensive.
Benchmark
S & P 500 Index
Performance And Returns
<TABLE>
<CAPTION>
Class I Class IC
<S> <C> <C>
Performance Inception Date 12/31/93 12/31/93
Average Annual Returns
6 mos. 15.18% 15.18%
1 year 30.50% 30.50%
3 years 34.05% 34.05%
Since Inception 22.95% 22.95%
Cumulative Since Inception 128.52% 128.52%
Distribution per share for the period* $ 0.01 $ 0.03
</TABLE>
*The period from the Fund's inception on 11/24/97 through 12/31/97.
LONG TERM GROWTH
[Graph appears here with the following plot points]
12/93 12/94 12/95 12/96 12/97
Class IC Shares 10,000 9,486 13,250 17,510 22,850
Standard & Poor's 500 Index 10,000 10,131 13,934 17,131 22,776
Comparison of change in value of a $10,000 investment in Evergreen Select Large
Cap Blend Fund, Class IC and the Standard & Poor's 500 Index.
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Performance information includes the
performance of the Fund's predecessor collective trust fund for periods before
the Fund's registration statement became effective on November 24, 1997.
Performance for the collective trust fund has been adjusted to include the
effect of estimated expenses based upon the mutual fund expense ratio as stated
in the Fund's current prospectus. Index returns do not reflect expenses, which
have been deducted from the Fund's return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, its performance
may have been adversely affected.
9
<PAGE>
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EVERGREEN
Select Large Cap Blend Fund
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Portfolio Manager Commentary
Portfolio Management Team
The Evergreen Select Large Cap Blend Fund is managed by a team of 4 portfolio
managers with over 90 years of combined investment experience. The team-oriented
approach incorporates multiple perspectives to identify the most attractive
opportunities in the market and ensures adherence to the style-specific
objectives.
[Photograph of Eric M. Wiegand appears here] [Photograph of Dean Hawes appears
here]
Eric M. Wiegand Dean Hawes
[Photograph of Eric M. Wiegand appears here] [Photograph of Dean Hawes appears
here]
Darryl Brown Steven Hoeft
Performance
The Evergreen Select Large Cap Blend Fund posted a total return of 15.2% for the
six-month period ended December 31, 1997. Generated in a rather turbulent market
environment, the Fund's strong returns compare very favorably to the 10.6% total
return of the S&P 500 Index. The Fund also outpaced the average return of 9.15%
for the general equity fund as measured by Lipper Analytical Services, an
independent mutual fund rating company. Performance was positively impacted by
favorable security selection and sector weightings in the health-care and
utility sectors, as well as an underweighted posture toward basic material
companies.
Investment Strategy
We have responded to the volatile market environment and turmoil in Asian
markets by scaling back the portfolio's risk profile, primarily during the final
months of the fiscal period. A more defensively oriented portfolio structure was
achieved by reducing two particular types of holdings: companies with high
price-to-earnings ratios and those with a heavy reliance on foreign markets for
earnings growth. Our decision to reduce Colgate Palmolive exemplifies our
strategy to mitigate the portfolio's risk profile. This multi-national company's
high price-to-earnings ratio and dependence on developing markets for earnings
growth, in our opinion, made this stock a risky investment. This prompted us to
reduce it during the latter part of the fiscal period.
Although the extent of the impact remains unclear, the financial turmoil in
Southeast Asia will likely hurt companies who depend on that region for their
earnings growth. We feel that the Fund will be best served by steering clear of
such companies; therefore, we have fashioned a portfolio which endeavors to
focus on more domestic-oriented companies and holdings with more attractive
valuations.
Top 5 Sectors
---------------
(as a percentage of net assets)
Healthcare Products & Services 18.8%
Banks 11.1%
Information Services & Technology 10.9%
Oil/Energy 7.5%
Utilities 7.4%
10
<PAGE>
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EVERGREEN
Select Large Cap Blend Fund
- -----------------------------------------------------------------------
Portfolio Manager Commentary
Sector Allocation Adjustments
Consistent with our lower risk strategy of diversifying between growth and value
stocks, we have also made some notable sector adjustments. During the reporting
period, the Fund has favored growth stocks over value stocks. Repositioned
sector weightings, however, have increased the value orientation within the
portfolio.
The Fund's utility weighting increased from 2.3% to 7.4% during the fiscal
period. We feel the utility sector's attractive valuation and domestic-oriented
earnings growth should insulate it from foreign crises and continue to fuel its
strong performance which began in the final months of 1997. In an effort to
bolster our utility weighting, CMS Energy and Pacificorp are two companies we
added during the period. Conversely, we decreased our exposure to information
services and technology companies. The slowdown in foreign markets could have a
very negative impact on high P/E technology companies which rely on Asian
markets to justify their lofty valuations; therefore, companies such as Ascend
Communications, Intel and Quantum Corporation were eliminated during the period.
Top 10 Equity Holdings
(as a percentage of net assets)
HBO & Co. 3.0%
Cendant Corp. 3.0%
American International Group, Inc. 3.0%
Tyco International Ltd. 2.8%
BankBoston Corp. 2.7%
General Electric Co. 2.7%
SmithKline Beecham Plc, ADR 2.7%
Tosco Corp. 2.7%
CINergy Corp. 2.7%
Masco Corp 2.6%
Outlook
Going forward, we expect our sector adjustments and the portfolio's lower risk
profile to benefit performance, especially if the stock market experiences
increased "Asia-induced" volatility. Specifically, the portfolio's repositioning
away from "foreign-dependent" companies should reduce the impact of the slowdown
in Asian markets. It is important to note, however, with the recent focus on
global economic forces we believe the greatest gains and losses will come from
choosing individual stocks. Consequently, we remain focused on maintaining a
portfolio of quality, strongly managed, industry-leading companies which
demonstrate the ability to meet and exceed earnings expectations.
11
<PAGE>
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EVERGREEN
Select Small Company Value Fund
- --------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
Nola Maddox Falcone heads up the Small Company Value Fund team which includes
Stephen A. Lieber and Gary R. Buesser. Ms. Falcone is President and Co-Chief
Executive Officer of Lieber & Co. and Evergreen Asset Management Corp. Stephen
A. Lieber is Chairman and Co-Chief Executive Officer of Lieber & Co. and
Evergreen Asset Management Corp. Gary A. Buesser joined Lieber & Co. as an
analyst in 1996. Previously, he was a Portfolio Manager/Analyst with Cowen Asset
Management and Shearson Lehman Brothers.
[Photograph appears here of Nola M. Falcone,CFA]
Nola M. Falcone, CFA
[Photograph appears here of [Photograph appears here of
Stephen A. Lieber] Gary R. Buesser]
Stephen A. Lieber Gary R. Buesser
New Fund
The Evergreen Select Small Company Value Fund began operations on December 22,
1997, moving quickly to be fully invested to take advantage of unusual values in
the small company stock market. We believe that late 1997 was an unusually
opportune period to be investing in undervalued small companies. Market
over-reaction to the Asian financial and currency crisis had caused the stock
prices of many small companies to fall to attractive levels relative to their
earnings. This was especially true in technology-related industries, including
production and semiconductor equipment and medical technology companies, and in
oil and gas production and services. In addition, the continuation of the
consolidation trends in the banking and utility industries created opportunities
to buy attractive companies at prices below the values that we believe could be
recognized in acquisitions.
Investment Strategy
The Fund employs a disciplined research process in seeking undervalued
stocks of small companies. We search for opportunities created by:
temporary dislocations in the market, such as the Asian crisis; the
introduction of new products or management teams that change the
earnings expectations of companies; or industry consolidation trends.
Increased industry consolidation through mergers and acquisitions has
been a very significant factor helping value investors in the small cap
stock market. On January 19, 1998, the New York Times estimated merger
and acquisition activity reached the $1 trillion level in 1997 and is
expected to continue through 1998.
At the close of the fiscal period on December 31, 1997, the Fund's
largest industry weighting was in banks and thrifts, at 15.0% of net
assets. We believed consolidation among banks and thrift institutions
would continue, and that the current stock prices of many small cap
banks were below the levels that could reasonably be expected in
takeovers.
Consolidation among gas and electric utilities also played a role in our
decision to emphasize those industries, which together accounted for
almost 4% of net assets at the close of the period. Among the portfolio
holdings were South Jersey Industries, UGI Corp. and Madison Gas &
Electric.
In general, the Asian currency and financial crisis caused investors to
fear a slowdown in corporate earnings growth. In a time of uncertainty,
they seemed to prefer large-cap, blue chip companies. This caused a
correction in the small cap stock market and among technology
12
<PAGE>
- ---------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- ---------------------------------------------------------------------------
Portfolio Manager Commentary
companies in general. Evergreen's team of 16 analysts was able to find a
number of undervalued companies with relatively lower price/earnings
ratios based on projected 1998 earnings growth rates, even considering
an economic slowdown caused by the Asian crisis. In particular, we found
opportunities in the energy services and semiconductor equipment
industries and among medical technology companies.
Top 5 Sectors
---------------
(as a percentage of net assets)
Banks and Thrifts 15.0%
Oil Field Services 10.5%
Healthcare Products & Services 7.9%
Electrical Equipment & Services 7.9%
Oil/Energy 7.2%
Semiconductor equipment companies purchased by the Fund included
Photronics, Inc., and Dupont Photomasks, Inc., both of which produce
masks or templates used in the manufacture of computer chips. We believe
both these companies have very strong growth patterns in place that
justify higher stock prices. In the technology area, the Fund also
established a position in BGS Systems, a software company that we found
undervalued in the market.
We believe several factors have led to an anticipated drag on demand for
energy. These factors include the Asian financial crisis, concerns about
Iraq's possible increase in production of oil and gas, and the increase
in OPEC's allowed production levels. Together, these factors have
created buying opportunities in the oil and gas service and oil
industries, where we were able to find a number of attractive companies.
These included Atwood Oceanics, Inc., Barrett Resources Corp., Hvide
Marine, Inc., and SEACOR SMIT, Inc. We anticipate there will be
consolidation in this industry with the development of "super
independents" and the focus on domestic acquisitions by the major oil
companies.
In the general medical technology area, our research helped us find
several companies with interesting products that should prove a catalyst
for earnings growth currently not recognized in the market prices of
their stocks. Among the medical-related companies with distinctive
product advantages were: ADAC Laboratories, which manufactures a new
nuclear imaging device to help doctors detect the spread of lung cancer;
EMPI, Inc., which has developed a new electro-therapy device to aid in
the treatment of incontinence by strengthening internal muscles; and
VISX, Inc., which produces a laser technology used to correct
near-sightedness.
Top 10 Holdings
------------------
(as a percentage of net assets)
ADAC Laboratories 3.1%
Hvide Marine, Inc. 3.0%
Maryland Federal Bancorp, Inc. 2.7%
CPI Corp. 2.2%
Russ Berrie & Co. Inc. 2.0%
Cliffs Drilling Co. 1.9%
Civic Bancorp 1.9%
Hancock Holding Co. 1.9%
SEACOR SMIT, Inc. 1.9%
Andrew Corp. 1.9%
Outlook
Looking toward the future, we believe that while there may be a slowing
in economic growth in 1998, there should not be a recession. Within this
context, we believe many small capitalization stocks continue to have
market prices lower than either their growth outlook or their potential
acquisition value would indicate.
13
<PAGE>
- ------------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- -------------------------------------------------------------------------
Fund at a Glance as of December 31, 1997
PORTFOLIO PROFILE
Philosophy
Evergreen Select Social Principles Fund invests in the stocks of
mid-sized U.S. companies with an average market capitalization of $3
billion. The Fund emphasizes companies that generally respect human
rights, play a role in local communities, and produce useful products in
an environmentally sound way. This philosophy holds that socially
conscious investing promotes responsible values without impairing
long-term performance.
Process
The Fund utilizes a fundamental, bottom-up stock selection process which
is research intensive. In addition, the Fund utilizes an external
Advisory Board whose role is to develop and continually review guiding
policies and principles of social investing. All holdings are
periodically reviewed to assure adherence to the Advisory Board
Standards.
Benchmark
S & P 400 Midcap Index
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class IC
<S> <C>
Performance Inception Date 5/31/88
Average Annual Returns
6 mos. 10.67 %
1 year 23.30 %
3 years 25.58 %
5 years 16.58 %
Since Inception 15.21 %
Cumulative Since Inception 288.24 %
Distribution per share for the period* $ 0.004
</TABLE>
*The period from the Fund's inception on 11/24/97 through 12/31/97.
LONG TERM GROWTH
[Graph appears here with the following plot points]
5/88 12/89 12/91 12/93 12/95 12/97
Class IC Shares 10,000 12,328 15,391 19,771 27,007 38,820
Standard &Poor's 400 Midcap
Index 10,000 14,728 14,603 17,868 21,701 34,583
Comparison of change in value of a $10,000 investment in Evergreen Select
Social Principles Fund, Class IC and the Standard & Poor's 400 Midcap Index.
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Performance information includes the
performance of the Funds predecessor collective trust fund for periods before
the Fund's registration statement became effective on November 24, 1997.
Performance for the collective trust fund has been adjusted to include the
effect of estimated expenses based upon the mutual fund expense ratio as stated
in the Fund's current prospectus. Index returns do not reflect expenses, which
have been deducted from the Fund's return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, its performance
may have been adversely affected.
14
<PAGE>
- -------------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- -------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
The Evergreen Select Social Principles Fund is managed by Eric M.
Wiegand and assistant manager, A. Jay Zelko, who have over 24 years of
combined investment experience. The team-oriented approach identifies
the most attractive opportunities in the market and ensures adherence to
the style-specific objectives.
[Photograph appears of Eric M.Wiegand] [Photograph appears of A. Jay Zelko]
Eric M. Wiegand A. Jay Zelko
Performance
The Evergreen Select Social Principles Fund posted a total return of 10.7%
for the six-month period ended December 31, 1997. Despite strong overall
equity returns, it was a difficult performance period for funds focusing
on mid- and small-capitalized stocks. This disparity was most pronounced
during the final three months of 1997, when the large cap S&P 500 Index
had a total return of 2.9% versus the midcap S&P 400 index return of 0.8%
and the small cap S&P 600 index return
of -3.1%.
Top 5 Sectors
--------------
(as a percentage of net assets)
Healthcare Products & Services 14.1%
Information Services & Technology 13.2%
Banks 7.5%
Finance & Insurance 6.8%
Utilities - Electric 5.3%
Investment Strategy
In response to market volatility stemming from problems in Southeast
Asia, we have shifted the portfolio toward a more defensive posture.
Consistent with this strategy, we emphasized companies which, generally,
had less debt as well as attractive valuations. For example, the "debt-
to-capitalization" ratio for the Fund is 25% versus 33% for our
benchmark, the S&P 400 Index. Despite a reduced risk profile, the Fund
maintains a solid growth orientation, as evidenced by the long-term
growth rate of 20.8% versus 16.0% for the S&P 400 Index.
Also, we favor companies which are in a position to exploit a particular niche
in the market. An example is General Nutrition Companies, one of the Fund's
current holdings. General Nutrition has experienced strong growth primarily
because it is the only nationwide specialty retailer of its kind, supplying
vitamin and mineral supplements, sports nutrition products and herbs. "Niche"
companies generally have more dependable earnings growth - due to less direct
competition - and are less likely to be negatively impacted from a slowdown in
economic growth.
Sector Allocation Shifts
Two notable sector adjustments were made during the fiscal period:
decreased exposure to technology and information services and an
increased utility weighting. We felt that the potential negative impact
from devalued currencies in Southeast Asia, as well as high relative
valuations, justified a reduction in technology-related companies.
Ascend Communications and Dell Computer are two technology holdings we
eliminated.
Conversely, we view the Fund's bulked-up utility weighting as a way to
insulate the portfolio from turmoil in Asian markets while
simultaneously strengthening our defensive posture. Attractive
valuations and non-foreign earnings growth should provide this sector a
degree of immunity from the "Asian flu," and allow utility companies to
continue their strong performance which began in the final months of
1997.
15
<PAGE>
- ---------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- ----------------------------------------------------------------------
Portfolio Manager Commentary
Top 10 Holdings
---------------
(as a percentage of net assets)
Newpark Resources, Inc. 2.8%
HEALTHSOUTH Corp. 2.7%
Comair Holdings, Inc. 2.7%
General Nutrition Companies, Inc. 2.6%
HBO & Co. 2.6%
Network Associates, Inc. 2.4%
Partnerre Ltd. 2.4%
SouthTrust Corp. 2.2%
EMC Corp. 2.1%
AGCO Corp. 2.0%
Future Opportunities
Going forward, one of our particular areas of interest is in the
environmental field. Well-managed companies involved in activities such
as waste management and recycling are poised to benefit as Americans
become increasingly aware of environmental issues. Well-publicized
reports of global warming and air pollution can serve to benefit
companies which unveil creative and effective solutions to deal with
these problems. Capitalizing on America's increasing environmental
focus, we purchased American Disposal Services as well as Allied Waste
Industries, two companies which provided solid gains during the quarter.
We will continue to explore this area for opportunities going forward.
Outlook
As a result of recent sector adjustments, individual stock selection and
a more defensive-oriented structure, we feel the Fund is well positioned
going into 1998. Investors' preference of large, dominant, liquid
companies has created a "valuation gap" which has produced very
attractive valuations for small- and mid-cap stocks. As this disparity
narrows, we expect the resurgence of mid-capitalization stocks to
positively impact performance, as investors return their focus to
earnings and business fundamentals rather than size and liquidity.
16
<PAGE>
- ------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- -------------------------------------------------------------------------
Fund at a Glance as of December 31, 1997
PORTFOLIO PROFILE
Philosophy
Evergreen Select Strategic Growth Fund is a growth-style equity product
that emphasizes large and mid-sized U.S. companies. We believe that
superior long-term returns can be achieved through a disciplined
approach of investing in stocks with excellent historical and future
earnings growth.
Process
The Fund is managed by two investment professionals who utilize a unique
blend of quantitative and qualitative fundamental analysis. This
bottom-up stock selection process is research- intensive and identifies
companies which exhibit strong current fundamentals, histories of
superior earnings/dividend growth and rising earnings expectations.
Benchmark
Russell 1000 Growth Index
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class I
<S> <C>
Performance Inception Date 12/31/94
Average Annual Returns
6 mos. 16.96%
1 year 30.78%
3 years 30.94%
Since Inception 30.94%
Cumulative Since Inception 124.50%
Distribution per share for the period* $ 0.01
</TABLE>
*The period from the Fund's inception on 11/24/97 through 12/31/97.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
[Graph appears here with the following plot points]
12/94 12/95 12/96 12/97
Class I Shares 10,000 13,850 17,191 22,482
Russell 1000 Growth Index 10,000 13,505 16,384 21,132
Comparison of change in value of a $10,000 investment in Evergreen Select
Strategic Growth Fund, Class I and the Russell 1000 Growth Index.
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Performance information includes the
performance of the Fund's predecessor collective trust fund for periods before
the Fund's registration statement became effective on November 24, 1997.
Performance for the collective trust fund has been adjusted to include the
effect of estimated expenses based upon the mutual fund expense ratio as stated
in the Fund's current prospectus. Index returns do not reflect expenses, which
have been deducted from the Fund's return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, its performance
may have been adversely affected.
17
<PAGE>
- --------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- --------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
The Evergreen Select Strategic Growth Fund is managed by Timothy M.
Stevenson and W. Shannon Reid. They have over 31 years' combined
investment experience and boast a unique blend of quantitative and
traditional fundamental analysis skills. Their disciplined approach
assures consistency of results and superior service.
[Photograph of Timothy M. Stevenson] [Photograph of W. Shannon Reid]
Timothy M. Stevenson W. Shannon Reid
Performance
The Evergreen Select Strategic Growth Fund posted a total return of
17.0% for the six-month period ended December 31, 1997. The Fund
significantly outpaced the 9.2% total return for the benchmark Russell
1000 Growth Index during the same time period. Strong performance can be
attributed to individual stock selection and timely sell decisions
rather than a heavy concentration in any particular economic sector. The
Fund's position in cash and equivalents during the period averaged
approximately 5%.
Top 5 Sectors
(as a percentage of net assets)
Healthcare Products & Services 18.0%
Information Services & Technology 15.7%
Finance & Insurance 12.2%
Food & Beverage Products 9.8%
Consumer Products & Services 7.6%
Investment Strategy
The Fund strives to achieve superior investment returns by owning a
diversified portfolio of established companies which seek to produce
superior and sustainable earnings growth. Our quantitative and
qualitative fundamental analysis identifies companies which exhibit
histories of superior earnings and dividend growth, strong current
fundamentals and rising earnings expectations.
Equally important as the "buy decision" is deciding when to sell a
particular holding. Growth stocks are inherently high expectation
stocks. A deterioration in fundamentals typically leads to a negative
price response; therefore, we continuously monitor business
fundamentals, earnings trends and market expectations of positions held
in the Fund.
Outlook
Overall market uncertainty, and therefore heightened volatility, is
likely to carry over into 1998, barring quick resolution of the Asian
economic turmoil. Within the portfolio we have reduced or eliminated our
positions in some technology and other multinational companies which
either compete against companies in that region or depend on the region
for a significant portion of their earnings growth. Our analysis
indicates that the limited upside potential for these stocks is
outweighed by potential earnings disappointments. Examples include Texas
Instruments, Oracle, Intel and Dupont. Conversely, we have increased our
emphasis on companies with domestically oriented earnings growth such as
Home Depot, CompUSA, Patterson Dental and Lincare Holdings.
18
<PAGE>
- -----------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- -----------------------------------------------------------------------
Portfolio Manager Commentary
The net effect of these changes has been to reduce the average market
capitalization for the Fund and lower its price-to-earnings ratio from
28.8 to 27.5 during the six- month period. From a sector standpoint, we
maintain a slight overweighting in consumer cyclicals, finance and
business services. Slightly underweighted sectors include consumer
staples and technology.
Going forward, we anticipate the portfolio's lower risk profile and
reduced exposure to multinational companies to benefit performance,
especially if the stock market experiences increased "Asia-induced"
volatility. Despite the recent focus on turmoil in foreign markets, we
believe it is important to remember that individual stock selection
remains the most important determinant of performance. With that in
mind, we continue to invest in U.S. companies which are judged to have
superior and sustainable earnings growth prospects.
Top 10 Holdings
----------------
(as a percentage of net assets)
Coca Cola Co. (The) 3.7%
Bristol-Myers Squibb Co. 2.8%
Microsoft Corp. 2.7%
Philip Morris Companies, Inc. 2.7%
Proctor & Gamble Co. (The) 2.6%
Tyco International Ltd. 2.3%
Computer Horizons Corp. 2.1%
Shering-Plough Corp. 2.1%
PMC-Sierra, Inc. 2.1%
Cendant Corp. 2.0%
19
<PAGE>
- ------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- ------------------------------------------------------------------
Fund at a Glance as of December 31, 1997
PORTFOLIO PROFILE
Philosophy
Evergreen Select Strategic Value Fund is a value-style equity product
which emphasizes large and mid-capitalization U.S. companies. This
philosophy holds that stocks, over time, can become mispriced relative
to their true value and that attractive opportunities can be identified
through a combination of quantitative analysis and rigorous fundamental
research.
Process
Following the initial screen by our proprietary model which determines
that a stock is selling at a reasonable valuation level, the Strategic
Value team employs a labor-intensive research effort in order to dig
deep for clues to uncover value. Qualitative factors which are analyzed
include industry leadership, quality of management, the company's
current competitive position and future earnings prospects.
Benchmark
Russell 1000 Value Index
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class I
<S> <C>
Performance Inception Date 12/31/81
Average Annual Returns
6 mos. 14.46%
1 year 32.29%
3 years 30.44%
5 years 20.64%
10 years 17.23%
Since Inception 18.07%
Cumulative Since Inception 1327.29%
Distribution per share for the period* $ 0.10
</TABLE>
*The period from the Fund's inception on 11/24/97 through 12/31/97.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
[Graph appears here of the follow plot points]
<TABLE>
<CAPTION>
12/87 12/89 12/91 12/93 12/95 12/97
<S> <C> <C> <C> <C> <C> <C>
Class I Shares 10,000 15,072 16,021 21,708 29,464 49,038
Russell 1000 Value Index 10,000 14,237 16,967 20,413 25,793 40,154
</TABLE>
Comparison of change in value of a $10,000 investment in Evergreen Select
Strategic Value Fund, Class I and the Russell 1000 Value Index.
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Performance information includes the
performance of the Fund's predecessor collective trust fund for periods before
the Fund's registration statement became effective on November 24, 1997.
Performance for the collective trust fund has been adjusted to include the
effect of estimated expenses based upon the mutual fund expense ratio as stated
in the Fund's current prospectus. Index returns do not reflect expenses, which
have been deducted from the Fund's return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, its performance
may have been adversely affected.
20
<PAGE>
- ------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- -------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
The Evergreen Select Strategic Value Fund is managed by a team of 4
portfolio managers with over 82 years of combined investment experience
and expertise in value equity analysis and management. The team-oriented
approach incorporates multiple perspectives to identify the most
attractive opportunities in the market and ensures adherence to the
style-specific objectives.
[Photograph of Don Rains] [Photograph of Jack Gray]
Don Rains Jack Gray
[Photograph of Elizabeth Smith] [Photograph of Tim O'Grady]
Elizabeth Smith Tim O'Grady
Performance
The Evergreen Select Strategic Value Fund posted a total return of 14.5%
for the six-month period ended December 31, 1997. This performance was
achieved in a rather volatile market environment and compares very
favorably to the 14.9% total return of the Russell 1000 Value Index as
well as the S&P 500 Index's 10.6% return. The fiscal period was divided
into two distinct and very different intervals. The portfolio
capitalization structure and sector weightings which benefited
performance during the first three months hampered returns during the
final quarter. Overall, it was a positive period with the Fund
outperforming its benchmark, the Russell 1000 Value Index.
Top 5 Sectors
--------------
(as a percentage of net assets)
Banks 23.0%
Oil/Energy 13.3%
Finance & Insurance 12.8%
Information Services & Technology 6.3%
Utilities - Electric 5.8%
Utility Sector
Over the past three-to-five years, the utility sector has essentially
become a non-performing asset class, that is, up until the final months
of 1997. Historically, we have carried a sixty percent relative
weighting in the utility group. During the final and volatile months of
1997, investors sought out calmer waters by moving into the utility
sector in the face of Southeast Asia's economic turmoil, awaiting a
better tide in the form of a clearer perspective on the crisis. Whereas
our utility underweighting enhanced returns in the third quarter, this
major rotation into utilities contributed to the performance edge of the
Russell 1000 Value Index during the fourth quarter, with its stronger
utility representation versus the Evergreen Select Strategic Value Fund.
Although we still maintain an underweighted position, we have made a
prudent decision to move a little closer to our benchmark weighting by
purchasing Pinnacle West and UtiliCorp United during the fiscal period.
Technology Sector
The Fund's weighting in technology and in particular in the individual
companies that constitute our sector weighting, enhanced performance
early in the period but had a negative impact during the fourth quarter.
The market's negative reaction to technology stocks was swift and
decisive. From our perspective it is important to look through the
near-term environment and focus the Fund on core technology companies
with good
21
<PAGE>
- ----------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- ----------------------------------------------------------------------------
Portfolio Manager Commentary
long-term growth prospects. Our sense is that the technology sector is
one of the few pure growth sectors in today's economy. While short-term
performance results may be interrupted or delayed over narrow time
periods, longer term we feel the Fund is properly structured to
participate in the future growth prospects facing the industry.
The Market's Rotation
The trend that developed in the first part of the period when market
leadership was led by small-to-mid-capitalization companies, reversed
itself during the final three months. The rebound in the market was
largely centered around large capitalization shares, because investors
were willing to pay a premium for both security and liquidity. The
Fund's average market capitalization during the quarter stood at
approximately $26 billion compared to $33.5 billion for the Russell 1000
Value Index. Much like the previously mentioned sector weightings, this
capitalization disparity fueled the Fund's strong 13.2% third quarter
total return while hampering the fourth quarter return of 1.1%.
Top 10 Holdings
(as a percentage of net assets)
Philip Morris Companies, Inc. 3.0%
Century Telephone Enterprises, Inc. 2.9%
Union Planters Corp. 2.8%
Chase Manhattan Corp. 2.7%
Williams Companies, Inc. (The) 2.7%
Citicorp 2.7%
Bristol-Myers Squibb Co. 2.7%
First Chicago NBD Corp. 2.6%
PNC Bank Corp. 2.6%
Summit Bancorp 2.5%
Outlook
In viewing the background for equities, we continue to carry forward our
1997 operating assumptions of moderate economic growth without pricing
pressure into 1998. Our sense is that the Standard and Poor's 500 Index
will do well to match its long-term return of 10.4% per year in 1998.
Corporate earnings hold the key. Given current equity valuations, and
without further declines in interest rates, investors must see
conclusive evidence of an acceptable earnings pattern throughout 1998.
With it, a case can be made for higher equity prices, without it,
equities look vulnerable and could go through a corrective phase. This
places us squarely in the cautious bull camp.
22
<PAGE>
- --------------------------------------------------------------------------
EVERGREEN
Select Common Stock Fund
- --------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended
December 31, 1997
- -------------------------------------------------------------------------------
CLASS I*
- -------------------------------------------------------------------------------
<S> <C>
Net asset value beginning of period $ 82.97
=========
Income from investment operations:
Net investment income 0.11
Net realized and unrealized gain on investments 0.05
---------
Total from investment operations 0.16
---------
Distributions to shareholders from:
Net investment income (0.09)
----------
Total distributions (0.09)
----------
Net asset value end of period $ 83.04
==========
Total Return 0.20%
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 0.70%+
Total expenses, excluding fee waiver and expense reimbursement 0.83%+
Net investment income 1.31%+
Portfolio turnover rate 4%
Average commission rate per share $ 0.0492
Net assets end of period (millions) $ 1,887
</TABLE>
+ Annualized.
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
23
<PAGE>
- ---------------------------------------------------------------------------
EVERGREEN
Select Equity Income Fund
- ---------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended
December 31, 1997
- ------------------------------------------------------------------------------------------
CLASS I*
- -------------------------------------------------------------------------------------------
<S> <C>
Net asset value beginning of period $ 87.31
=========
Income from investment operations:
Net investment income 0.26
Net realized and unrealized gain on investments and written call options 3.25
---------
Total from investment operations 3.51
---------
Distributions to shareholders from:
Net investment income (0.21)
----------
Total distributions (0.21)
----------
Net asset value end of period $ 90.61
==========
Total Return 4.03%
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 0.77%+
Total expenses, excluding fee waiver and expense reimbursement 0.88%+
Net investment income 2.88%+
Portfolio turnover rate 5%
Average commission rate per share $ 0.0573
Net assets end of period (thousands) $ 207,354
</TABLE>
+ Annualized.
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
24
<PAGE>
- ------------------------------------------------------------------------------
EVERGREEN
Select Large Cap Blend Fund
- ------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended December 31, 1997
- ---------------------------------------------------------------------------------------------
CLASS I** CLASS IC*
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value beginning of period $ 44.59 $ 45.05
============ ============
Income from investment operations:
Net investment income 0.02 0.04
Net realized and unrealized gain on investments 1.45 0.99
------------ ------------
Total from investment operations 1.47 1.03
------------ ------------
Distributions to shareholders from:
Net investment income (0.01) (0.03)
------------ ------------
Total distributions (0.01) (0.03)
------------ ------------
Net asset value end of period $ 46.05 $ 46.05
============ ============
Total Return 3.30% 2.28%
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 0.71%+ 0.71%+
Total expenses, excluding fee waiver and expense reimbursement 0.85%+ 0.85%+
Net investment income 0.77%+ 0.78%+
Portfolio turnover rate 5% 5%
Average commission rate per share $ 0.0564 $ 0.0564
Net assets end of period (thousands) $ 267 $ 467,014
</TABLE>
+ Annualized.
* For the period from November 24, 1997 (commencement of Class operations) to
December 31, 1997.
** For the period from December 19, 1997 (commencement of Class operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
25
<PAGE>
- ---------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- ---------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended
December 31, 1997
- -----------------------------------------------------------------------------
CLASS IS*
- -----------------------------------------------------------------------------
<S> <C>
Net asset value beginning of period $ 10.00
=========
Income from investment operations:
Net investment income 0.01
Net realized and unrealized gain on investments 0.23
---------
Total from investment operations 0.24
---------
Distributions to shareholders from:
Net investment income 0
---------
Total distributions 0
---------
Net asset value end of period $ 10.24
=========
Total Return 2.40%
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 1.00%+
Total expenses, excluding fee waiver and expense reimbursement 1.46%+
Net investment income 3.05%+
Portfolio turnover rate 3%
Average commission rate per share $ 0.0604
Net assets end of period (thousands) $ 25,894
</TABLE>
+ Annualized.
* For the period from December 23, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
26
<PAGE>
- --------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- --------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended December 31, 1997
- -------------------------------------------------------------------------------------------------
CLASS I* CLASS IC*
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value beginning of period $ 36.65 $ 36.65
============= =============
Income loss from investment operations:
Net investment loss (0.01) (0.01)
Net realized and unrealized loss on investments (0.85) (0.84)
Total from investment operations (0.86) (0.85)
------------- -------------
Distributions to shareholders:
In excess of net investment income 0# 0#
------------- -------------
Total distributions 0 0
------------- -------------
Net asset value end of period $ 35.79 $ 35.80
============= =============
Total Return (2.34%) (2.34%)
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 0.86%+ 0.86%+
Total expenses, excluding fee waiver and expense reimbursement 1.00%+ 1.00%+
Net investment loss (0.13%)+ (0.13%)+
Portfolio turnover rate 5% 5%
Average commission rate per share $ 0.0526 $ 0.0526
Net assets end of period (thousands) $ 117 $ 156,921
</TABLE>
+ Annualized.
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
# Amount is less than one cent per share.
See Combined Notes to Financial Statements.
27
<PAGE>
- -------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- -------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended
December 31, 1997
- --------------------------------------------------------------------------------
CLASS I*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value beginning of period $ 32.45
=========
Income from investment operations:
Net investment income 0.02
Net realized and unrealized gain on investments 0.43
---------
Total from investment operations 0.45
---------
Distributions to shareholders from:
Net investment income (0.01)
----------
Total distributions (0.01)
----------
Net asset value end of period $ 32.89
==========
Total Return 1.39%
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 0.72%+
Total expenses, excluding fee waiver and expense reimbursement 0.87%+
Net investment income 0.54%+
Portfolio turnover rate 43%
Average commission rate per share $ 0.0581
Net assets end of period (thousands) $ 275,399
</TABLE>
+ Annualized.
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
28
<PAGE>
- -----------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- -----------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
Period Ended
December 31, 1997
- ---------------------------------------------------------------------------------
CLASS I*
- ----------------------------------------------------------------------------------
<S> <C>
Net asset value beginning of period $ 203.35
==========
Income from investment operations:
Net investment income 0.18
Net realized and unrealized gain on investments 6.19
----------
Total from investment operations 6.37
----------
Distributions to shareholders from:
Net investment income (0.10)
-----------
Total distributions (0.10)
-----------
Net asset value end of period $ 209.62
===========
Total Return 3.13%
Ratios/Supplemental Data
Ratios to average net assets:
Net expenses 0.75%+
Total expenses, excluding fee waiver and expense reimbursement 0.85%+
Net investment income 0.84%+
Portfolio turnover rate 1%
Average commission rate per share $ 0.0605
Net assets end of period (thousands) $ 183,368
</TABLE>
+ Annualized.
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
29
<PAGE>
- --------------------------------------------------------------------------
EVERGREEN
Select Common Stock Fund
- ---------------------------------------------------------------------------
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 95.8%
Automotive
Equipment &
Manufacturin - 2.7%
275,000 Arvin Industries, Inc. ..... $ 9,160,938
850,000 Ford Motor Co. ............. 41,384,375
------------
50,545,313
-------------
Banks - 9.9%
435,000 Banc One Corp. ........... 23,625,937
210,000 BankBoston Corp. ......... 19,726,875
195,000 Bankers Trust Corp. ..... 21,925,313
230,000 Chase Manhattan Corp. ... 25,185,000
320,000 First Chicago NBD Corp. ... 26,720,000
225,000 Fleet Financial Group Corp. .. 16,860,938
200,000 KeyCorp................ 14,162,500
375,000 NationsBank Corp. ........... 22,804,687
250,000 SouthTrust Corp. ............ 15,859,375
-------------
186,870,625
--------------
Building,
Construction &
Furnishings - 1.8%
310,000 * American Standard Companies,
Inc. ...................... 11,876,875
435,000 Masco Corp. ............... 22,130,625
--------------
34,007,500
---------------
Capital
Goods - 1.6%
230,000 Case Corp. ............. 13,900,625
460,000 LucasVarity Plc - ADR.... 16,042,500
------------
29,943,125
--------------
Chemical &
Agricultural
Products - 3.6%
150,000 * Cytec
Industries, Inc. ..... 7,040,625
120,000 Dow Chemical Co. 12,180,000
430,000 Du Pont (E.I.)
De Nemours & Co. ...... 25,826,875
150,000 Pioneer
Hi-Bred
Internationa Inc. ........ 16,087,500
165,000 Union Carbide Corp. ...... 7,084,688
--------------
68,219,688
--------------
Communicatio
Systems &
Services - 1.8%
600,000 Cisco Systems, Inc. ....... 33,450,000
-----------
Consumer Products &
Services - 4.6%
300,000 Black & Decker Corp. ...... 11,718,750
425,000 * Fruit Of The
Loom, Inc. Cl. A ......... 10,890,625
120,000 Gillette Co. (The)....... 12,052,500
175,000 Nike, Inc. Cl. B ........ 6,868,750
355,000 Stanley Works........... 16,751,562
385,000
Sunbeam-Oste Co., Inc.... 16,218,125
220,000 Whirlpool Corp. ......... 12,100,000
-------------
86,600,312
-------------
Diversified Companies - 0.5%
210,000 Tyco
Internationa Ltd. ......... 9,463,125
-----------
Electrical
Equipment &
Services - 3.1%
790,000 General Electric Co. .... 57,966,250
-----------
Finance &
Insurance - 5.1%
275,000 Allmerica
Financial Corp. ..... 13,732,812
185,000 Allstate Corp. (The)...... 16,811,875
100,000 Loews Corp. .............. 10,612,500
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Finance & Insurance - continued
320,000 Morgan
Stanley,
Dean Witter,
Discover & Co. ..... $18,920,000
135,000 PMI Group, Inc. (The).... 9,762,188
360,000 Providian
Financial Corp............ 16,267,500
171,000 UNUM Corp. ............... 9,298,125
------------
95,405,000
--------------
Food &
Beverage
Products - 8.6%
440,000 Coca Cola Co. (The)....... 29,315,000
560,000 Conagra, Inc. ............ 18,375,000
340,000 Fortune Brands, Inc....... 12,601,250
770,000 Philip
Morris
Companies, Inc. .......... 34,890,625
520,000 RJR Nabisco
Holdings Corp. ........... 19,500,000
240,000 * Safeway, Inc. ............ 15,180,000
590,000 Sara Lee Corp. ........... 33,224,375
-------------
163,086,250
-------------
Healthcare
Products &
Services - 12.2%
370,000 Abbott Laboratories....... 24,258,125
290,000 * Amgen, Inc. .............. 15,696,250
385,000 * Boston
Scientific
Corp. .................... 17,661,875
230,000 Bristol-Myer
Squibb Co. ............... 21,763,750
250,000 * FPA Medical
Management, Inc. ......... 4,656,250
270,000 HBO & Co. ................ 12,960,000
450,000 Health
Management
Associates,
Inc. ..................... 11,362,500
620,000 HEALTHSOUTH Corp. ........ 17,205,000
210,000 * Lincare
Holdings, Inc. ........... 11,970,000
720,000 * MedPartners, Inc. ........ 16,110,000
260,000 Pfizer, Inc. .............. 19,386,250
200,000 Schering-Plo Corp. ........ 12,425,000
300,000 SmithKline
Beecham Plc, ADR .......... 15,431,250
630,000 Tenet Healthcare Corp. ..... 20,868,750
190,000 Teva
Pharmaceutic
Industries
Ltd.,
ADR ......................... 8,989,375
--------------
230,744,375
--------------
Industrial
Specialty
Products &
Services - 0.5%
160,000 * Sealed Air Corp. ........... 9,880,000
-------------
Information
Services &
Technology 2.3%
365,000 * 3Com Corp. ................. 12,752,187
200,000 * Adaptec, Inc. .............. 7,425,000
180,000 Altera Corp. ................ 5,962,500
200,000 * Applied
Materials, Inc. ............. 6,025,000
400,000 * Cadence
Design
Systems, Inc. ............... 9,800,000
470,000 Compaq
Computer Corp. ............... 26,525,625
787,500 Computer
Associates
Internationa
Inc. ........................ 41,639,062
90,000 * Dell Computer Corp. ......... 7,560,000
270,000 Intel Corp. ................. 18,967,500
340,000 International
Business Machines Corp. ..... 35,551,250
150,000 * Microsoft Corp. ............. 19,387,500
140,000 * Networks
Associates, Inc. ............ 7,402,500
190,000 * Quantum Corp. ............... 3,811,875
80,000 * Sanmina Corp. ............... 5,420,000
200,000 * SCI Systems, Inc. .......... 8,712,500
200,000 * Synopsys, Inc. ............. 7,150,000
</TABLE>
30
<PAGE>
- ----------------------------------------------------------------------
EVERGREEN
Select Common Stock Fund
- ----------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C> <C>
COMMON STOCKS - continued
Information Services &
Technology - continued
175,000 Varian Associates, Inc. ............ $ 8,848,438
--------------
232,940,937
---------------
Metal Products & Services - 1.4%
110,000 Aluminum Co. of America ............ 7,741,250
285,000 Crown Cork & Seal Co., Inc. ........ 14,285,625
485,000 LTV Corp. .......................... 4,728,750
--------------
26,755,625
---------------
Oil/Energy - 8.0%
145,000 Ashland, Inc. ...................... 7,784,687
530,000 Enron Corp. ........................ 22,028,125
130,000 Mobil Corp. ........................ 9,384,375
350,000 Phillips Petroleum Co. ............. 17,018,750
300,000 Sonat, Inc. ........................ 13,725,000
520,000 Texaco, Inc. ....................... 28,275,000
460,000 Tosco Corp. ........................ 17,393,750
460,000 Ultramar Diamond Shamrock Corp. .... 14,662,500
580,000 YPF Sociedad Anonima, ADR .......... 19,828,750
--------------
150,100,937
--------------
Oil Field Services - 2.0%
500,000 Diamond Offshore Drilling, Inc. .... 24,062,500
350,000 * Reading & Bates Corp. .............. 14,656,250
--------------
38,718,750
--------------
Real Estate - 0.9%
460,000 FelCor Suite Hotels, Inc. REIT ..... 16,330,000
--------------
Retailing & Wholesale - 4.2%
375,000 Dayton Hudson Corp. ................ 25,312,500
545,000 Family Dollar Stores, Inc. ......... 15,975,313
380,000 * Federated Department Stores, Inc. .. 16,363,750
475,000 Sears, Roebuck & Co. ............... 21,493,750
--------------
79,145,313
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Telecommunication Services &
Equipment - 0.7%
190,000 * Nokia Corp., ADR ................... $ 13,300,000
---------------
Transportation - 1.7%
210,000 Burlington Northern Santa Fe ....... 19,516,875
435,000 Norfolk Southern Corp. ............. 13,403,438
--------------
32,920,313
--------------
Utilities - Electric - 4.7%
670,000 CINergy Corp. ..................... 25,669,375
555,000 CMS Energy Corp. ................... 24,454,687
555,000 GPU, Inc. .......................... 23,379,375
390,000 UtiliCorp United, Inc. ............. 15,136,875
---------------
88,640,312
---------------
Utilities - Telephone - 3.9%
440,000 Century Telephone Enterprises, Inc. 21,917,500
680,000 GTE Corp. .......................... 35,530,000
500,000 * LCI International, Inc. ............ 15,375,000
--------------
72,822,500
----------------
Total Common Stocks
(cost $1,238,668,263)............... 1,807,856,250
----------------
SHORT-TERM INVESTMENTS - 4.2%
Money Market Shares - 4.2%
78,662,448 Valiant General Fund ............... 78,662,448
----------------
Total Short-Term Investments
(cost $78,662,448)................. 78,662,448
---------------
Total Investments -
(cost $1,317,330,711)..... 100.0% 1,886,518,698
Other Assets and
Liabilities - Net ........ 0.0 341,192
------- --------------
Net Assets ............... 100.0% $1,886,859,890
====== ==============
</TABLE>
* Non-income producing securities.
Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
31
<PAGE>
- ----------------------------------------------------------------------
EVERGREEN
Select Equity Income Fund
- ----------------------------------------------------------------------
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 80.4%
Aerospace &
Defense - 0.7%
20,000 United Technologies
Corp. ................ $ 1,456,250
-------------
Automotive Equipment &
Manufacturing - 2.4%
100,000 Ford Motor Co. ........ 4,868,750
---------------
Banks - 13.9%
50,000 BankBoston Corp. ..... 4,696,875
45,000 Bankers Trust Corp. .... 5,059,687
90,000 First Tennessee
National Corp. ......... 6,007,500
80,000 PNC Bank Corp. ......... 4,565,000
30,000 Summit Bancorp (b) ..... 1,597,500
100,000 Union Planters Corp..... 6,793,750
-------------
28,720,312
-------------
Building, Construction
& Furnishings - 2.5%
100,000 * American Standard
Companies, Inc. ........ 3,831,250
21,607 Southdown, Inc. ........ 1,274,813
------------
5,106,063
-------------
Chemical & Agricultural
Products - 0.9%
19,000 Dow Chemical Co. .... 1,928,500
--------------
Consumer Products &
Services - 1.2%
100,000 * Fruit Of The Loom, Inc.
Cl. A ............... 2,562,500
---------------
Electrical Equipment &
Services - 2.5%
70,000 General Electric Co. .... 5,136,250
-------------
Food & Beverage
Products - 4.5%
100,000 Philip Morris
Companies, Inc. ......... 4,531,250
130,000 RJR Nabisco Holdings
Corp. .................... 4,875,000
-------------
9,406,250
--------------
Healthcare Products &
Services - 6.2%
48,000 American Home Products
Corp. ................... 3,672,000
50,000 Bristol-Myers Squibb
Co. ..................... 4,731,250
200,000 * MedPartners, Inc. ...... 4,475,000
------------
12,878,250
-------------
Information Services &
Technology - 2.0%
40,000 International Business
Machines
Corp. .................. 4,182,500
------------
Metal Products &
Services - 2.0%
60,000 Aluminum Co. of America 4,222,500
-------------
Oil/Energy - 12.4%
440,000 Chesapeake Energy Corp. .. 3,327,500
125,000 Enron Corp. .............. 5,195,312
85,000 Phillips Petroleum Co. ... 4,133,125
110,000 Sonat, Inc. .............. 5,032,500
70,000 Texaco, Inc. ............. 3,806,250
125,000 YPF Sociedad Anonima,
ADR ...................... 4,273,438
-----------
25,768,125
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C>
COMMON STOCKS - continued
Real Estate - 2.0%
100,000 Avalon Properties, Inc.
REIT .................. $ 3,093,750
30,000 FelCor Suite Hotels, Inc.
REIT ................... 1,065,000
------------
4,158,750
-------------
Transportation - 1.8%
40,280 Burlington Northern
Santa Fe (b) ........... 3,743,523
-------------
Utilities-Electric - 18.9%
160,000 Allegheny Energy, Inc. ... 5,200,000
140,000 CINergy Corp. ............ 5,363,750
130,000 CMS Energy Corp. ......... 5,728,125
125,000 GPU, Inc. ................ 5,265,625
198,000 Houston Industries, Inc. .. 5,284,125
240,000 PacifiCorp ................ 6,555,000
150,000 UtiliCorp United, Inc. .... 5,821,875
-------------
39,218,500
---------------
Utilities-Gas - 2.5%
120,000 NICOR, Inc. .............. 5,062,500
------------
Utilities-Telephone -4.0%
100,000 GTE Corp. ................ 5,225,000
100,000 * LCI International, Inc.... 3,075,000
-------------
8,300,000
-------------
Total Common Stocks
(cost $120,963,607) 166,719,523
-------------
CONVERTIBLE PREFERRED - 8.1%
Capital Goods - 1.4%
20,000 Case Corp.
4.50%, Series A, 144A .. 2,872,500
-------------
Oil/Energy - 2.5%
65,000 Tosco Financing Trust
5.75%, 144A ............ 4,208,750
15,000 Tosco Financing Trust
5.75% ................. 971,250
------------
5,180,000
--------------
Paper &
Packaging - 2.5%
110,000 Crown Cork & Seal Co., Inc.
4.50%, MIPS ............ 5,170,000
------------
Real Estate - 1.7%
125,000 Felcor Suite Hotels,
Inc. .................. 3,578,125
-------------
Total Convertible
Preferred
(cost $16,314,485) ..... 16,800,625
-------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C>
CONVERTIBLE DEBENTURES - 2.8%
Building, Construction &
Furnishings - 0.8%
$ 1,500,000 Masco Corp.
5.25%, 2/15/12 ............. 1,792,500
-----------
Information Services &
Technology - 2.0%
4,000,000 Adaptec, Inc.
4.75%, 2/1/04, 144A ........ 4,120,000
-----------
Total Convertible Debentures
(cost $5,518,684) .......... 5,912,500
-----------
</TABLE>
32
<PAGE>
- ------------------------------------------------------------------------------
EVERGREEN
Select Equity Income Fund
- ------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 7.4%
Treasury Notes & Bonds - 7.4%
U.S. Treasury Notes
$ 2,000,000 6.125%, 7/31/00 ........... $ 2,020,626
2,000,000 6.125%, 9/30/00 ........... 2,021,876
2,000,000 6.125%, 12/31/01 .......... 2,027,502
1,500,000 6.50%, 4/30/99 ............ 1,516,876
2,000,000 6.50%, 8/31/01 ............ 2,050,002
500,000 6.625%, 6/30/01 ........... 514,219
1,940,000 6.875%, 7/31/99 ........... 1,974,557
1,000,000 7.25%, 2/15/98 ............ 1,002,188
500,000 7.25%, 5/15/04 ............ 539,844
1,000,000 7.75%, 11/30/99 ........... 1,037,188
600,000 7.875%, 4/15/98 ........... 604,313
-----------
Total U.S. Government & Agency
Obligations (cost $15,044,108) 15,309,191
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 1.3%
Money Market Shares - 1.2%
2,417,606 Valiant General Fund ... $2,417,606
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C>
Repurchase Agreement - 0.1%
$ 249,191 Dresdner Bank AG
6.25%, dated 12/31/97, due 1/2/98,
maturity value $249,278 (cost
$249,191) (a)...................... 249,191
-----------
Total Short-Term Investments
(cost $2,666,797).................. 2,666,797
----------
Total Investments -
(cost $160,507,681)..... 100.0% 207,408,636
Other Assets and
Liabilities - Net ...... 0.0 (54,860)
------- ------------
Net Assets .............. 100.0% $207,353,776
======= ============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1997, the repurchase agreement was collateralized by:
$255,000 U.S. Treasury Notes, 5.875%, 11/15/99; value including accrued
interest -$257,541.
(b) All or a portion of these securities have been segregated to cover open
written call options.
Summary of Abbreviations:
ADR American Depository Receipts
MIPS Monthly Income Preferred Shares
REIT Real Estate Investment Trust
144A Securities that may be resold to "qualified institutional buyers" under
Rule 144A of the Securities Act of 1933. These securities have been
determined to be liquid under guidelines established by the Board of
Trustees.
COVERED CALL OPTIONS WRITTEN
<TABLE>
<CAPTION>
Shares Subject
Common Stocks/Expiration Date/Exercise Price to Call Contracts Value
- ---------------------------------------------- --------------- ----------- -----------
<S> <C> <C> <C>
Burlington Northern, 1/18/98, $100.00 40,000 400 $ 2,500
Summit Bancorp, 1/18/98, $40.00 30,000 200 360,000
--------
Total (premiums received $233,192) $362,500
========
</TABLE>
See Combined Notes to Financial Statements.
33
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Large Cap Blend Fund
- -------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 95.4%
Automotive Equipment &
Manufacturing - 2.5%
131,900 Ford Motor Co. ......... $ 6,421,881
84,940 General Motors Corp. ... 5,149,488
------------
11,571,369
-------------
Banks - 11.1%
209,000 Banc One Corp. ......... 11,351,312
135,200 BankBoston Corp. ....... 12,700,350
60,070 Bankers Trust Corp. .... 6,754,121
51,200 Chase Manhattan Corp. .. 5,606,400
83,000 First Chicago NBD
Corp. .................. 6,930,500
25,000 Fleet Financial Group,
Inc. ................... 1,873,437
98,900 Union Planters Corp..... 6,719,019
--------------
51,935,139
--------------
Building, Construction &
Furnishings - 2.6%
242,400 Masco Corp. ........... 12,332,100
------------
Capital Goods - 1.2%
91,470 Case Corp. ........... 5,528,218
------------
Communication Systems &
Services - 1.2%
99,000 Cisco Systems, Inc. .... 5,519,250
------------
Consumer Products &
Services - 5.6%
413,800 * Cendant Corp. .......... 14,224,375
82,000 Colgate-Palmolive Co. .. 6,027,000
125,350 Stanley Works .......... 5,914,953
-----------
26,166,328
------------
Diversified Companies - 4.9%
243,000 AlliedSignal, Inc. ...... 9,461,813
293,000 Tyco International Ltd. .. 13,203,312
------------
22,665,125
-----------
Electrical Equipment &
Services - 2.7%
172,560 General Electric Co. ..... 12,661,590
------------
Finance & Insurance - 5.7%
68,800 Allstate Corp. (The)...... 6,252,200
127,050 American International
Group, Inc. ............. 13,816,687
118,500 Travelers Group, Inc. ... 6,384,188
-----------
26,453,075
------------
Food & Beverage
Products - 5.1%
92,910 Coca Cola Co. (The)...... 6,190,129
253,400 Philip Morris
Companies, Inc. ......... 11,482,187
111,200 Sara Lee Corp. .......... 6,261,950
-------------
23,934,266
--------------
Healthcare Products &
Services - 18.8%
124,000 Bristol-Myers Squibb
Co..................... 11,733,500
296,700 HBO & Co. ............. 14,241,600
418,000 HEALTHSOUTH Corp. ..... 11,599,500
172,885 Johnson & Johnson ..... 11,388,800
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Healthcare Products &
Services - continued
203,590 * Lincare Holdings, Inc. ... $11,604,630
98,870 Pfizer, Inc. ............ 7,371,994
244,875 SmithKline Beecham Plc,
ADR ..................... 12,595,758
148,000 * Universal Health ....... 7,455,500
-------------
Services, Inc. Cl. B .... 87,991,282
----------------
Information Services &
Technology - 10.9%
185,265 * 3Com Corp. ............. 6,472,696
121,100 * Adaptec, Inc. .......... 4,495,837
184,310 Compaq Computer Corp.... 10,401,996
192,500 * EMC Corp. ............. 5,281,719
488,000 * Iomega Corp. ......... 6,069,500
43,835 * Microsoft Corp. ......... 5,665,674
124,000 * Networks Associates,
Inc. ................... 6,556,500
90,480 * Sanmina Corp. .......... 6,130,020
-------------
51,073,942
-------------
Metal Products &
Services - 2.4%
161,400 Aluminum Co. of America... 11,358,525
-------------
Oil/Energy - 7.5%
78,000 Mobil Corp. ............. 5,630,625
197,400 Texaco, Inc. ............ 10,733,625
330,825 Tosco Corp. ............ 12,509,321
174,700 YPF Sociedad Anonima,
ADR .................... 5,972,556
------------
34,846,127
------------
Oil Field Services - 2.3%
108,590 Diamond Offshore
Drilling, Inc. .......... 5,225,894
135,000 * Reading & Bates Corp. ... 5,653,125
------------
10,879,019
------------
Real Estate - 1.0%
137,800 FelCor Suite Hotels,
Inc. REIT................ 4,891,900
-------------
Retailing & Wholesale - 1.3%
138,415 * Federated Department
Stores, Inc. ............ 5,960,496
------------
Transportation - 1.2%
58,600 Burlington Northern ..... 5,446,137
-------------
Santa Fe
Utilities - Electric - 5.3%
323,700 CINergy Corp. .......... 12,401,756
145,600 CMS Energy Corp. ...... 6,415,500
220,000 PacifiCorp ............ 6,008,750
--------------
24,826,006
----------------
Utilities - Telephone - 2.1%
87,700 Century Telephone Enterprises,
Inc. ................... 4,368,556
75,000 SBC Communications,
Inc. ................... 5,493,750
--------------
9,862,306
---------------
Total Common Stocks
(cost $334,568,746)..... 445,902,200
------------
</TABLE>
34
<PAGE>
- -------------------------------------------------------------------
EVERGREEN
Select Large Cap Blend Fund
- --------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 4.5%
Money Market Shares - 0.5%
2,109,452 Valiant General Fund ... $2,109,452
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C> <C>
Repurchase Agreement - 4.0%
$18,642,672 Dresdner Bank AG
6.25%, dated 12/31/97, due 1/2/98,
maturity value $18,649,145 (cost
$18,642,672) (a)................. 18,642,672
----------
Total Short-Term Investments
(cost $20,752,124)............... 20,752,124
----------
Total Investments -
(cost $355,320,870)..... 99.9% 466,654,324
Other Assets and
Liabilities - Net ...... 0.1 626,520
------ -------------
Net Assets ............. 100.0% $467,280,844
====== ===============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1997, the repurchase agreement was collateralized by:
$5,017,000 U.S. Treasury Notes, 9.25%, 8/15/98; value including accrued
interest -$5,299,194, $3,205,000 U.S. Treasury Notes, 5.875%, 11/15/99; value
including accrued interest - $3,236,939 and $10,140,000 U.S. Treasury Notes,
6%, 7/31/02; value including accrued interest - $10,481,574.
Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
35
<PAGE>
- ----------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- -----------------------------------------------------------------
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 82.4%
Banks - 9.4%
2,500 ABC Bancorp ........... $ 49,375
7,500 Beverly
Bancorporation, Inc. .... 171,562
800 Britton & Koontz
Capital Corp. ............ 17,600
25,000 * Civic Bancorp ............ 487,500
20,000 First State Bancorp ...... 427,500
15,000 Granite State
Bankshares, Inc........... 401,250
8,000 Hancock Holding Co........ 484,000
10,000 Seacoast Banking Corp.
of Florida Cl. A ......... 385,000
------------
2,423,787
------------
Building, Construction &
Furnishings - 4.7%
20,000 * Eagle Hardware &
Garden, Inc. .......... 387,500
10,000 La-Z-Boy Chair Co. .... 431,250
10,000 * US Home Corp. ......... 392,500
-------------
1,211,250
----------------
Communication Systems &
Services - 1.9%
20,000 * Andrew Corp. ....... 480,000
-------------
Consumer Products &
Services - 7.0%
25,000 CPI Corp. .......... 565,625
20,000 Russ Berrie & Co.,
Inc. ............... 525,000
30,000 Stride Rite Corp. .. 360,000
15,000 York Group, Inc. ... 365,625
--------------
1,816,250
--------------
Electrical Equipment &
Services - 7.9%
1,800 BGS Systems, Inc. ..... 63,000
10,000 * Dupont Photomasks,
Inc. .................. 348,750
10,000 * Hadco Corp. ........ 452,500
10,000 Harman International
Industries, Inc. ....... 424,375
17,000 * Photronic, Inc. .... 412,250
15,000 * SMART Modular
Technologies, Inc. ...... 345,000
------------
2,045,875
------------
Finance &
Insurance - 5.2%
20,000 Frontier Insurance
Group, Inc. ............. 457,500
25,000 * Grand Premier
Financial, Inc. .......... 356,250
11,400 Interstate/Johnson
Lane, Inc. .............. 302,100
8,800 Meadowbrook Insurance
Group, Inc. ............. 229,350
--------------
1,345,200
--------------
Healthcare Products &
Services - 7.9%
40,000 * ADAC Laboratories ...... 790,000
20,000 * Empi, Inc. ............. 395,000
7,000 * Maxxim Medical, Inc. . 152,250
15,000 * VISX, Inc. ......... 331,875
20,000 Vital Signs, Inc. .. 390,000
-----------
2,059,125
-------------
Industrial Specialty
Products & Services - 1.8%
27,700 Met-Pro Corp. ...... 457,050
-------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Metal Products &
Services - 1.2%
20,000 * Steel Dynamics, Inc. ...... $ 320,000
----------
Oil/Energy - 7.2%
15,000 * Barrett Resources
Corp....................... 453,750
5,000 Berry Petroleum Co.
Cl. A...................... 87,188
4,000 Cabot Oil & Gas Corp.
Cl. A .................... 77,750
40,000 * COHO Energy, Inc. ........ 365,000
10,000 * Nuevo Energy Co. ........ 407,500
15,000 Quaker State Corp. ..... 213,750
20,000 Southwestern Energy Co. ... 257,500
------------
1,862,438
------------
Oil Field
Services - 10.5%
10,000 * Atwood Oceanics, Inc..... 473,750
10,000 * Cliffs Drilling Co. ..... 498,750
30,000 * Hvide Marine, Inc. Cl. A... 772,500
2,000 Lufkin Industries,
Inc. ...................... 71,500
20,000 * Offshore Logistics,
Inc. ...................... 427,500
8,000 * SEACOR SMIT, Inc. ......... 482,000
----------
2,726,000
------------
Real Estate - 4.3%
10,000 Brandywine Realty
Trust REIT ............... 251,250
10,000 Eastgroup Properties,
Inc. REIT ............... 216,250
10,000 Gables Residential
Trust REIT .............. 276,250
12,500 Innkeepers USA Trust
REIT .................... 193,750
10,000 Sunstone Hotel Investors,
Inc.REIT ................ 172,500
------------
1,110,000
------------
Retailing &
Wholesale - 3.0%
10,000 * Anntaylor Stores Corp. .... 133,750
12,000 * Cole National Corp.
Cl. A .................... 359,250
10,000 * Petco Animal Supplies,
Inc. ..................... 240,000
2,500 Seaway Food Town, Inc. ... 47,500
-----------
780,500
-----------
Textile &
Apparel - 0.1%
2,000 Superior Surgical
Manufacturing Co.,
Inc. ............... 32,000
------------
Thrift
Institutions - 5.6%
20,000 Horizon Financial
Corp. .............. 355,000
20,000 Maryland Federal
Bancorp, Inc. ....... 700,000
20,000 Monterey Bay Bancorp,
Inc. ................. 390,000
---------------
1,445,000
---------------
Transportation - 1.1%
13,000 * Airnet Systems, Inc. .... 279,500
-----------
Utilities - Electric - 1.8%
20,000 Madison Gas & Electric
Co. ................... 460,000
Utilities - Gas - 1.8%
1,300 South Jersey
Industries, Inc. ....... 39,406
15,000 UGI Corp. .......... 439,688
------------
479,094
------------
Total Common Stocks
(cost $20,746,284).. ... 21,333,069
------------
</TABLE>
36
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- -------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS - 51.5%
Government Agency Notes &
Bonds - 51.5%
13,390,000 Federal Home Loan Mortgage
5.74%, 1/23/98 ................... $ 13,343,031
------------
Total Short-Term Investments
(cost $13,343,031)................ 13,343,031
------------
Total Investments -
(cost $34,089,315)...... 133.9% 34,676,100
Other Assets and
Liabilities - Net ...... (33.9) (8,781,740)
------- -------------
Net Assets ............. 100.0% $ 25,894,360
======= =============
</TABLE>
* Non-income producing securities.
Summary of Abbreviations:
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
37
<PAGE>
- ----------------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- -----------------------------------------------------------------------------
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 95.6%
Banks - 7.5%
25,000 BankBoston Corp. ............... $2,348,437
54,000 SouthTrust Corp. ............... 3,425,625
57,000 Summit Bancorp ................. 3,035,250
44,000 Union Planters Corp. ........... 2,989,250
------------
11,798,562
-------------
Building, Construction &
Furnishings - 2.6%
52,000 Medusa Corp. ................... 2,174,250
55,000 * NCI Building Systems, Inc. ..... 1,952,500
------------
4,126,750
-------------
Business Equipment &
Services - 1.4%
54,000 * Robert Half International, Inc. .. 2,160,000
------------
Capital Goods - 2.1%
110,000 AGCO Corp. ..................... 3,217,500
-------------
Consumer Products &
Services - 1.0%
40,000 * Starbucks Corp. ................ 1,535,000
------------
Environmental Services - 2.4%
80,000 * Allied Waste Industries, Inc. .. 1,865,000
53,000 American Disposal Services, Inc. . 1,934,500
------------
3,799,500
------------
Finance & Insurance - 6.8%
40,000 AFLAC, Inc. .................... 2,045,000
18,000 Franklin Resources, Inc. ....... 1,564,875
85,000 Money Store, Inc. .............. 1,785,000
80,000 Partnerre Ltd. ................. 3,710,000
40,000 ReliaStar Financial Corp. ...... 1,647,500
------------
10,752,375
-------------
Food & Beverage Products - 3.0%
38,000 Dean Foods Co. ................. 2,261,000
85,000 Richfood Holdings, Inc. ........ 2,401,250
-------------
4,662,250
-------------
Healthcare Products &
Services - 14.1%
32,000 * Boston Scientific Corp. ........ 1,468,000
80,000 Genesis Health Ventures, Inc. .. 2,110,000
84,000 HBO & Co. ...................... 4,032,000
38,000 * HealthCare COMPARE Corp. ....... 1,942,750
150,000 * HEALTHSOUTH Corp. .............. 4,162,500
36,000 * Lincare Holdings, Inc. ......... 2,052,000
120,000 * Orthodontic Centers America, Inc. 1,995,000
62,000 * Pediatrix Medical Group, Inc. .. 2,650,500
30,000 * Safeskin Corp. ................. 1,702,500
-----------
22,115,250
------------
Industrial Specialty Products &
Services - 2.5%
32,000 Magna Group, Inc. Cl. A ........ 2,010,000
70,000 Roper Industries, Inc. ......... 1,977,500
----------
3,987,500
----------
Information Services &
Technology - 13.2%
48,000 * 3Com Corp. ..................... 1,677,000
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Information Services & Technology - continued
75,000 * Adaptec, Inc. .................. $2,784,375
120,000 * EMC Corp. ...................... 3,292,500
120,000 * Iomega Corp. ................... 1,492,500
72,000 * Networks Associates, Inc. ...... 3,807,000
62,000 * PMC-Sierra, Inc. ............... 1,922,000
58,000 * Remedy Corp. ................... 1,218,000
30,000 * Sanmina Corp. .................. 2,032,500
60,000 * Uniphase Corp. ................. 2,482,500
-----------
20,708,375
-------------
Leisure & Tourism - 3.4%
55,000 Brunswick Corp. ................ 1,667,187
62,000 Callaway Golf Co. .............. 1,770,875
90,000 * Cannondale Corp. ............... 1,957,500
---------------
5,395,562
---------------
Oil/Energy - 3.0%
51,000 Sonat, Inc. .................... 2,333,250
75,000 Ultramar Diamond Shamrock Corp. 2,390,625
------------
4,723,875
-----------
Oil Field Services - 4.9%
250,000 * Newpark Resources, Inc. ........ 4,375,000
85,000 * Pride International, Inc. ...... 2,146,250
22,000 Tidewater, Inc. ................ 1,212,750
-----------
7,734,000
-------------
Paper & Packaging - 1.6%
95,000 Rock Tennessee Co. Cl. A ....... 1,947,500
27,500 Wausau Mosinee Paper Corp. ...... 553,438
-----------
2,500,938
----------
Pharmaceuticals - 3.8%
150,000 Biochem Pharmaceuticals, Inc ... 3,131,250
56,000 * Elan Corp., Plc-ADR ............. 2,866,500
----------
5,997,750
----------
Real Estate - 3.1%
70,000 FelCor Suite Hotels, Inc. REIT ... 2,485,000
56,000 * Promus Hotel Corp. ............. 2,352,000
----------
4,837,000
----------
Retailing & Wholesale - 5.2%
50,000 Dollar General Corp. ........... 1,812,500
78,000 Family Dollar Stores, Inc. ..... 2,286,375
120,000 * General Nutrition Companies, Inc. 4,080,000
----------
8,178,875
----------
Telecommunication Services &
Equipment - 2.2%
65,000 * Pairgain Technologies, Inc. .... 1,259,375
42,000 * Tellabs, Inc. .................. 2,220,750
----------
3,480,125
----------
Textile & Apparel - 1.4%
55,000 Unifi, Inc. .................... 2,237,813
------------
Transportation - 2.7%
172,500 Comair Holdings, Inc. .......... 4,161,562
----------
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- --------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Utilities - Electric - 5.3%
80,000 CINergy Corp. .................... $ 3,065,000
68,000 Sierra Pacific Resources ......... 2,550,000
68,000 UtiliCorp United, Inc. ........... 2,639,250
------------
8,254,250
------------
Utilities - Telephone - 2.4%
38,000 Century Telephone Enterprises, Inc. 1,892,875
62,000 * LCI International, Inc. .......... 1,906,500
------------
3,799,375
-------------
Total Common Stocks
(cost $105,495,473)............... 150,164,187
-------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 2.9%
Money Market Shares - 1.6%
2,532,984 Valiant General Fund ............. $ 2,532,984
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C> <C>
Repurchase Agreement - 1.3%
$ 2,055,158 Dresdner Bank AG
6.25%, dated 12/31/97, due 1/2/98,
maturity value $2,055,872 (cost
$2,055,158) (a).................. 2,055,158
---------
Total Short-Term Investments
(cost $4,588,142)................ 4,588,142
---------
Total Investments -
(cost $110,083,615)..... 98.5% 154,752,329
Other Assets and
Liabilities - Net ...... 1.5 2,286,093
------- -----------
Net Assets ............. 100.0% $157,038,422
======= ===============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1997 the repurchase agreement was collateralized by:
$2,080,000 U.S. Treasury Notes, 5.875%, 11/15/99; value including accrued
interest - $2,100,728.
Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
39
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 94.7%
Aerospace & Defense - 3.1%
55,264 Thiokol Corp. ...... $ 4,490,200
55,550 United Technologies
Corp.............. 4,044,734
-----------
8,534,934
-----------
Automotive Equipment &
Manufacturing - 1.7%
98,716 Ford Motor Co. ..... 4,806,235
-----------
Building, Construction &
Furnishings - 4.3%
66,325 Centex Corp. ....... 4,174,329
74,610 Home Depot, Inc. (The) 4,392,664
56,701 Southdown, Inc. .... 3,345,359
-----------
11,912,352
-----------
Business Equipment &
Services - 2.8%
142,995 * AccuStaff, Inc. .... 3,288,885
109,570 * Robert Half
International, Inc. 4,382,800
-----------
7,671,685
-----------
Communication Systems &
Services - 1.3%
14,298 Cisco Systems, Inc. 797,114
50,789 * Tellabs, Inc. ...... 2,685,468
-----------
3,482,582
-----------
Consumer Products &
Services - 7.6%
160,731 * Cendant Corp. ...... 5,525,128
267,045 * Foodmaker, Inc. .... 4,022,365
88,740 Procter & Gamble Co. 7,082,561
(The)
105,750 Universal Corp. .... 4,348,969
-----------
20,979,023
-----------
Diversified
Companies - 2.3%
141,434 Tyco International
Ltd............... 6,373,370
-----------
Electrical Equipment &
Services - 0.3%
11,200 General Electric Co. . 821,800
-----------
Finance &
Insurance - 12.2%
52,225 American Express Co. . 4,661,081
67,755 EXEL Ltd. .......... 4,293,973
58,725 Merrill Lynch & Co.,
Inc................. 4,283,255
81,602 MGIC Investment Corp. 5,426,533
78,900 Morgan Stanley, Dean
Witter, Discover
& Co. .............. 4,664,963
83,768 Price (T.) Rowe &
Associates, Inc. ... 5,266,913
117,295 SunAmerica, Inc. ... 5,014,361
-----------
33,611,079
-----------
Food & Beverage
Products - 9.8%
153,200 Coca Cola Co. (The) 10,206,950
131,760 Interstate Bakeries
Corp. .............. 4,924,530
164,400 Philip Morris
Companies, Inc. .... 7,449,375
69,130 * Safeway, Inc. ...... 4,372,473
-----------
26,953,328
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Healthcare Products &
Services - 18.0%
12,242 Abbott Laboratories $ 802,616
80,173 Bristol-Myers Squibb
Co. ................. 7,586,370
96,415 HBO & Co. ........... 4,627,920
110,330 Health Care &
Retirement Corp. .... 4,440,783
201,796 Health Management
Associates, Inc. .... 5,095,349
12,540 Johnson & Johnson .. 826,073
74,000 * Lincare Holdings, Inc. 4,218,000
8,501 Merck & Co., Inc. .. 903,231
105,000 * Patterson Dental Co. . 4,751,250
11,025 Pfizer, Inc. ......... 822,052
122,700 * Quintiles
Transnational Corp. .. 4,708,612
93,991 Schering-Plough Corp. 5,839,191
100,100 * Universal Health
Services, Inc. Cl. B 5,042,537
-----------
49,663,984
-----------
Hotel/Lodging - 1.7%
236,145 * Prime Hospitality
Corp. .............. 4,811,454
-----------
Industrial Specialty
Products &
Services - 1.5%
90,800 Parker Hannifin Corp. . 4,165,450
-----------
Information Services &
Technology - 15.7%
58,241 * BMC Software, Inc. . 3,822,066
85,569 * Cadence Design
Systems, Inc. ...... 2,096,440
60,902 Compaq Computer Corp. 3,437,157
128,930 * Computer Horizons
Corp. ............... 5,866,315
39,547 * Dell Computer Corp. . 3,321,948
10,540 Intel Corp. ........ 740,435
297,470 * Iomega Corp. ....... 3,699,783
57,688 * Microsoft Corp. .... 7,456,174
182,530 * PMC-Sierra, Inc. ... 5,658,430
71,070 * Sanmina Corp. ...... 4,814,992
60,537 * Sun Microsystems, Inc. 2,413,913
-----------
43,327,653
-----------
Metal Products &
Services - 0.8%
65,908 USX United States
Steel Group ......... 2,059,625
-----------
Oil Field Services - 3.1%
59,270 * BJ Services Co., Inc. 4,263,736
124,070 Ensco International,
Inc. ................ 4,156,345
-----------
8,420,081
-----------
Publishing,
Broadcasting &
Entertainment - 3.6%
63,650 McGraw-Hill Companies,
Inc. ................. 4,710,100
140,685 * Valassis
Communications, Inc. 5,205,345
-----------
9,915,445
-----------
Retailing & Wholesale - 4.9%
147,980 * CompUSA, Inc. ...... 4,587,380
109,100 * Costco Companies, Inc. 4,868,588
113,760 TJX Co., Inc. (The) 3,910,500
-----------
13,366,468
-----------
Total Common Stocks
(cost $225,579,855). 260,876,548
-----------
</TABLE>
40
<PAGE>
- -------------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- -------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 3.4%
Money Market Shares - 2.8%
7,781,054 Valiant General Fund ... $7,781,054
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C> <C>
Repurchase Agreement - 0.6%
$ 1,549,746 Dresdner Bank AG
6.25%, dated 12/31/97, due 1/2/98,
maturity value $1,550,284 (cost
$1,549,746) (a).................. 1,549,746
---------
Total Short-Term Investments
(cost $9,330,800)................ 9,330,800
---------
Total Investments
(cost $234,910,655)..... 98.1% 270,207,348
Other Assets and
Liabilities - Net ...... 1.9 5,191,182
----- ------------
Net Assets ............. 100.0% $275,398,530
===== ============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1997, the repurchase agreement was collateralized by:
$1,570,000 U.S. Treasury Notes, 5.875%, 11/15/99; value including accrued
interest -$1,585,646.
See Combined Notes to Financial Statements.
41
<PAGE>
- -----------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- ----------------------------------------------------------------------
Schedule of Investments
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 96.1%
Automotive Equipment &
Manufacturing - 1.4%
40,000 Goodyear Tire & Rubber Co. (The) .. $ 2,545,000
-----------
Banks - 23.0%
48,000 BankBoston Corp. .................. 4,509,000
45,300 Chase Manhattan Corp. ............. 4,960,350
38,900 Citicorp .......................... 4,918,419
57,000 First Chicago NBD Corp. ........... 4,759,500
30,000 Fleet Financial Group, Inc. ....... 2,248,125
110,000 Hibernia Corp. Cl. A .............. 2,069,375
29,000 NationsBank Corp. ................. 1,763,563
83,000 PNC Bank Corp. .................... 4,736,187
39,000 SouthTrust Corp. .................. 2,474,063
87,150 Summit Bancorp .................... 4,640,737
75,500 Union Planters Corp. .............. 5,129,281
-----------
42,208,600
------------
Business Equipment &
Services - 0.9%
42,000 * Stratus Computer, Inc. ............ 1,588,125
-----------
Capital Goods - 1.6%
50,000 Case Corp. ........................ 3,021,875
------------
Chemical & Agricultural
Products - 1.0%
18,750 Dow Chemical Co. .................. 1,903,125
-----------
Electrical Equipment &
Services - 0.7%
56,000 Silicon Valley Group, Inc. ........ 1,267,000
-----------
Finance & Insurance - 12.8%
22,700 Allstate Corp. (The) .............. 2,062,863
61,500 Countrywide Credit Industries,Inc. 2,636,813
36,225 Lehman Brothers Holdings, Inc. .... 1,847,475
29,400 Loews Corp. ....................... 3,120,075
61,900 Merrill Lynch & Co., Inc. ......... 4,514,831
55,000 Nationwide Financial Services,
Inc. Cl. A ........................ 1,986,875
83,600 ReliaStar Financial Corp. ......... 3,443,275
70,500 Travelers Group, Inc. ............. 3,798,187
-----------
23,410,394
-----------
Food & Beverage Products - 3.7%
36,000 Fortune Brands, Inc. .............. 1,334,250
119,350 Philip Morris Companies, Inc. ..... 5,408,047
-----------
6,742,297
-----------
Healthcare Products &
Services - 4.3%
51,600 Bristol-Myers Squibb Co. .......... 4,882,650
88,600 * Tenet Healthcare Corp. ............ 2,934,875
-----------
7,817,525
-----------
Information Services &
Technology - 6.3%
47,000 Intel Corp. ....................... 3,301,750
43,300 International Business Machines Corp. 4,527,556
92,000 * Sun Microsystems, Inc. ............ 3,668,500
------------
11,497,806
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
Manufacturing - Distributing - 2.0%
61,500 Philips Electronics NV ............ $ 3,720,750
-----------
Metal Products & Services - 3.6%
70,000 * Alumax, Inc. ...................... 2,380,000
37,600 Aluminum Co. of America ........... 2,646,100
50,000 USX United States Steel Group ..... 1,562,500
-----------
6,588,600
------------
Oil/Energy - 13.3%
33,400 Atlantic Richfield Co. ............ 2,676,175
105,500 Cabot Corp. ....................... 2,914,437
155,000 Chesapeake Energy Corp. ........... 1,172,188
63,840 Mobil Corp. ....................... 4,608,450
33,600 Texaco, Inc. ...................... 1,827,000
108,000 Tosco Corp. ....................... 4,083,750
66,000 Ultramar Diamond Shamrock Corp. .... 2,103,750
173,950 Williams Companies, Inc. (The) .... 4,935,831
-----------
24,321,581
-----------
Oil Field Services - 3.7%
44,600 Diamond Offshore Drilling, Inc. ... 2,146,375
110,000 * Reading & Bates Corp. ............. 4,606,250
------------
6,752,625
-------------
Retailing & Wholesale - 1.5%
62,000 Sears, Roebuck & Co. .............. 2,805,500
------------
Telecommunication Services &
Equipment - 2.1%
54,700 Nokia Corp., ADR .................. 3,829,000
-----------
Textile & Apparel - 1.8%
70,000 V. F. Corp. ....................... 3,215,625
------------
Transportation - 1.8%
36,000 Burlington Northern Santa Fe ...... 3,345,750
------------
Utilities - Electric - 5.8%
108,402 Houston Industries, Inc. .......... 2,892,978
138,000 PacifiCorp ........................ 3,769,125
48,000 Pinnacle West Capital Corp. ........ 2,034,000
52,000 UtiliCorp United, Inc. ............ 2,018,250
------------
10,714,353
-------------
Utilities - Gas - 1.9%
84,000 NICOR Inc. ........................... 3,543,750
------------
Utilities - Telephone - 2.9%
105,500 Century Telephone Enterprises, Inc. . 5,255,219
------------
Total Common Stocks
(cost $123,690,859)................ 176,094,500
------------
</TABLE>
42
<PAGE>
- -------------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- -------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 4.6%
Money Market Shares - 1.8%
3,356,893 Valiant General Fund ... $3,356,893
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
Repurchase Agreement - 2.8%
$ 5,116,538 Dresdner Bank AG
6.25%, dated 12/31/97, due 1/2/98,
maturity value $5,118,315 (cost
$5,116,538) (a)................... 5,116,538
------------
Total Short-Term Investments
(cost $8,473,431)................. 8,473,431
----------
Total Investments -
(cost $132,164,289)..... 100.7% 184,567,931
Other Assets and
Liabilities - Net ...... ( 0.7) (1,199,723)
------ ------------
Net Assets ............. 100.0% $183,368,208
====== ============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1997, the repurchase agreement was collateralized by:
$5,050,000 U.S. Treasury Notes, 6%, 7/31/02; value including accrued interest -
$5,220,163.
Summary of Abbreviations:
ADR American Depository Receipts
NV Naamloze (Dutch for "corporation")
See Combined Notes to Financial Statements.
43
<PAGE>
- -------------------------------------------------------------------------------
EVERGREEN
Select Equity Funds
- -------------------------------------------------------------------------------
Statements of Assets and Liabilities
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Common Equity Large Cap
Stock Income Blend
Fund Fund Fund
----------------- ----------------- -----------------
<S> <C> <C> <C>
Assets
Investments at value (identified
cost - $1,317, 330,711,
$160,507,681, $355,320,870,
$34,089,315, $110,083,615,
$234,910,655, and
$132,164,289, respectively).......... $1,886,518,698 $ 207,408,636 $ 466,654,324
Cash ................................. 12,655 0 0
Receivable for investments sold ...... 428,404 0 2,374,898
Receivable for Fund shares sold ...... 0 10,264 134,956
Dividends and interest receivable..... 3,505,182 804,363 611,766
Prepaid expenses and other
assets .............................. 59,883 59,883 91,711
- --------------------------------------- -------------- ------------- -------------
Total assets ....................... 1,890,524,822 208,283,146 469,867,655
- --------------------------------------- -------------- ------------- -------------
Liabilities
Distributions payable ................ 1,586,356 410,452 202,819
Payable for investments
purchased ........................... 905,874 0 2,084,758
Written call options, at value
(premiums received,
$233,192)............................ 0 362,500 0
Payable for Fund shares
repurchased ......................... 0 26,530 17,907
Advisory fee payable ................. 911,818 102,093 218,883
Due to affilliates ................... 52,025 5,679 12,774
Due to custodian ..................... 0 0 0
Accrued expenses and other
liabilities ......................... 208,859 22,116 49,670
- --------------------------------------- -------------- ------------- -------------
Total liabilities .................. 3,664,932 929,370 2,586,811
- --------------------------------------- -------------- ------------- -------------
Net assets ............................ $1,886,859,890 $ 207,353,776 $ 467,280,844
======================================= ============== ============= =============
Net assets represented by
Paid-in capital ...................... $1,327,403,572 $ 157,975,221 $ 341,829,262
Undistributed net investment
income (loss) ....................... 453,038 118,305 104,450
Accumulated distributions in
excess of net investment
income .............................. 0 0 0
Accumulated net realized gain
(loss) on investments ...............
and written options ................. (10,184,707) 2,488,603 14,013,678
Net unrealized appreciation on
investments and written
options ............................. 569,187,987 46,771,647 111,333,454
- --------------------------------------- -------------- ------------- -------------
Total net assets ................... $1,886,859,890 $ 207,353,776 $ 467,280,844
======================================= ============== ============= =============
Net assets consist of
Class I .............................. 1,886,859,890 207,353,776 266,571
Class IC ............................. 0 0 467,014,273
- --------------------------------------- -------------- ------------- -------------
Total net assets ................... $1,886,859,890 $ 207,353,776 $ 467,280,844
======================================= ============== ============= =============
Shares outstanding
Class I .............................. 22,721,226 2,288,364 5,788
Class IC ............................. 0 0 10,140,612
======================================= ============== ============= =============
Net asset value per share .............
Class I .............................. $ 83.04 $ 90.61 $ 46.05
======================================= ============== ============= =============
Class IC ............................. $ - $ - $ 46.05
======================================= ============== ============= =============
<CAPTION>
Small Social Strategic Strategic
Company Value Principles Growth Value
Fund Fund Fund Fund
--------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Assets
Investments at value (identified
cost - $1,317, 330,711,
$160,507,681, $355,320,870,
$34,089,315, $110,083,615,
$234,910,655, and
$132,164,289, respectively).......... $34,676,100 $154,752,329 $ 270,207,348 $ 184,567,931
Cash ................................. 266,963 0 0 0
Receivable for investments sold ...... 565,606 791,274 9,095,870 0
Receivable for Fund shares sold ...... 0 2,316,000 326,927 66,030
Dividends and interest receivable..... 1,400 90,915 213,469 208,986
Prepaid expenses and other
assets .............................. 50 93,213 59,883 59,883
- --------------------------------------- ----------- ------------ ------------- -------------
Total assets ....................... 35,510,119 158,043,731 279,903,497 184,902,830
- --------------------------------------- ----------- ------------ ------------- -------------
Liabilities
Distributions payable ................ 0 0 77,828 62,675
Payable for investments
purchased ........................... 9,609,469 782,279 4,206,128 1,270,852
Written call options, at value
(premiums received,
$233,192)............................ 0 0 0 0
Payable for Fund shares
repurchased ......................... 0 116,000 36,138 91,366
Advisory fee payable ................. 4,993 84,828 120,538 84,336
Due to affilliates ................... 228 4,255 7,974 6,028
Due to custodian ..................... 0 0 26,328 0
Accrued expenses and other
liabilities ......................... 1,069 17,947 30,033 19,365
- --------------------------------------- ----------- ------------ ------------- -------------
Total liabilities .................. 9,615,759 1,005,309 4,504,967 1,534,622
- --------------------------------------- ----------- ------------ ------------- -------------
Net assets ............................ $25,894,360 $157,038,422 $ 275,398,530 $ 183,368,208
======================================= =========== ============ ============= =============
Net assets represented by
Paid-in capital ...................... $25,288,662 $111,127,810 $ 218,352,464 $ 129,551,102
Undistributed net investment
income (loss) ....................... 19,063 (21,880) 65,861 65,039
Accumulated distributions in
excess of net investment
income .............................. 0 (17,278) 0 0
Accumulated net realized gain
(loss) on investments ...............
and written options ................. (150) 1,281,055 21,683,512 1,348,425
Net unrealized appreciation on
investments and written
options ............................. 586,785 44,668,715 35,296,693 52,403,642
- --------------------------------------- ----------- ------------ ------------- -------------
Total net assets ................... $25,894,360 $157,038,422 $ 275,398,530 $ 183,368,208
======================================= =========== ============ ============= =============
Net assets consist of
Class I .............................. 25,894,360 117,458 275,398,530 183,368,208
Class IC ............................. 0 156,920,964 0 0
- --------------------------------------- ----------- ------------ ------------- -------------
Total net assets ................... $25,894,360 $157,038,422 $ 275,398,530 $ 183,368,208
======================================= =========== ============ ============= =============
Shares outstanding
Class I .............................. 2,528,866 3,282 8,372,519 874,765
Class IC ............................. 0 4,383,820 0 0
======================================= =========== ============ ============= =============
Net asset value per share .............
Class I .............................. $ 10.24 $ 35.79 $ 32.89 $ 209.62
======================================= =========== ============ ============= =============
Class IC ............................. $ - $ 35.80 $ - $ -
======================================= =========== ============ ============= =============
</TABLE>
See Combined Notes to Financial Statements.
44
<PAGE>
- -------------------------------------------------------------------------------
EVERGREEN
Select Equity Funds
- -------------------------------------------------------------------------------
Statements of Operations
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Common Equity Large Cap
Stock Income Blend
Fund* Fund* Fund*
---------------- ------------- --------------
<S> <C> <C> <C>
Investment income
Interest ..................................... $ 499,482 $ 156,329 $ 62,188
Dividends (net foreign withholding taxes
of $41,828 and $1,101 for the
Common Stock Fund and the Social
Principles Fund, respectively) .............. 3,407,950 611,664 643,291
- ------------------------------------------------ -------------- ---------- ------------
Total income ................................ 3,907,432 767,993 705,479
- ------------------------------------------------ -------------- ---------- ------------
Expenses
Advisory fee ................................. 1,361,397 147,347 332,566
Administrative services fees ................. 63,985 6,917 15,630
Transfer agent fees .......................... 97 97 97
Registration fees ............................ 109,819 18,498 32,761
Professional fees ............................ 5,475 2,891 3,328
Trustees' fees ............................... 4,683 479 1,136
Miscellaneous ................................ 58,995 8,751 15,990
- ------------------------------------------------ -------------- ---------- ------------
Total expenses .............................. 1,604,451 184,980 401,508
Less: Fee waiver ............................. (243,054) (22,898) (64,191)
- ------------------------------------------------ -------------- ---------- ------------
Net expenses ................................ 1,361,397 162,082 337,317
- ------------------------------------------------ -------------- ---------- ------------
Net investment income (loss) ................. 2,546,035 605,911 368,162
================================================ ============== ========== ============
Net realized and unrealized gain (loss)
on investments and written call
options
Net realized gain (loss) on investments ...... (10,184,707) 2,488,603 14,013,678
- ------------------------------------------------ -------------- ---------- ------------
Net change in unrealized appreciation
(depreciation) on:
Investments ................................. 11,330,549 5,076,606 (3,996,452)
Written options ............................. 0 (92,500) 0
- ------------------------------------------------ -------------- ---------- ------------
Net change in unrealized appreciation
(depreciation) on investments and
written options ............................. 11,330,549 4,984,106 (3,996,452)
- ------------------------------------------------ -------------- ---------- ------------
Net realized and unrealized gain (loss) on
investments and written options ............. 1,145,842 7,472,709 10,017,226
- ------------------------------------------------ -------------- ---------- ------------
Net increase (decrease) in net assets
resulting from operations ................... $ 3,691,877 $8,078,620 $ 10,385,388
================================================ ============== ========== ============
<CAPTION>
Small Social Strategic Strategic
Company Value Principles Growth Value
Fund** Fund* Fund* Fund*
--------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
Investment income
Interest ..................................... $ 23,904 $ 28,354 $ 121,818 $ 33,596
Dividends (net foreign withholding taxes
of $41,828 and $1,101 for the
Common Stock Fund and the Social
Principles Fund, respectively) .............. 1,400 86,146 228,746 255,621
- ------------------------------------------------- -------- ------------ -------------- ----------
Total income ................................ 25,304 114,500 350,564 289,217
- ------------------------------------------------- -------- ------------ -------------- ----------
Expenses
Advisory fee ................................. 5,617 126,864 195,518 127,008
Administrative services fees ................. 206 5,217 9,662 5,969
Transfer agent fees .......................... 22 97 97 97
Registration fees ............................ 2,036 16,399 24,917 17,054
Professional fees ............................ 673 2,822 3,072 2,845
Trustees' fees ............................... 0 383 775 413
Miscellaneous ................................ 555 6,985 9,777 7,556
- ------------------------------------------------- -------- ------------ -------------- ----------
Total expenses .............................. 9,109 158,767 243,818 160,942
Less: Fee waiver ............................. (2,868) (22,387) (42,750) (24,862)
- ------------------------------------------------- -------- ------------ -------------- ----------
Net expenses ................................ 6,241 136,380 201,068 136,080
- ------------------------------------------------- -------- ------------ -------------- ----------
Net investment income (loss) ................. 19,063 (21,880) 149,496 153,137
================================================= ======== ============ ============== ==========
Net realized and unrealized gain (loss)
on investments and written call
options
Net realized gain (loss) on investments ...... (150) 1,281,055 21,683,512 1,348,426
- ------------------------------------------------- -------- ------------ -------------- ----------
Net change in unrealized appreciation
(depreciation) on:
Investments ................................. 586,785 (4,938,293) (18,054,180) 4,008,835
Written options ............................. 0 0 0 0
- ------------------------------------------------- -------- ------------ -------------- ----------
Net change in unrealized appreciation
(depreciation) on investments and
written options ............................. 586,785 (4,938,293) (18,054,180) 4,008,835
- ------------------------------------------------- -------- ------------ -------------- ----------
Net realized and unrealized gain (loss) on
investments and written options ............. 586,635 (3,657,238) 3,629,332 5,357,261
- ------------------------------------------------- -------- ------------ -------------- ----------
Net increase (decrease) in net assets
resulting from operations ................... $605,698 $ (3,679,118) $ 3,778,828 $5,510,398
================================================= ======== ============ ============== ==========
</TABLE>
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
** For the period from December 23, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
45
<PAGE>
- -------------------------------------------------------------------------------
EVERGREEN
Select Equity Funds
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the period ended December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Common Equity Large Cap
Stock Income Blend
Fund* Fund* Fund*
----------------- --------------- ---------------
<S> <C> <C> <C>
Operations
Net investment income (loss) ....... $ 2,546,035 $ 605,911 $ 368,162
Net realized gain (loss) on
investments ....................... (10,184,707) 2,488,603 14,013,678
Net change in unrealized
appreciation (depreciation) on
investments and written
options ........................... 11,330,549 4,984,106 (3,996,452)
- ------------------------------------- -------------- ------------ ------------
Net increase (decrease) in net
assets resulting from
operations ........................ 3,691,877 8,078,620 10,385,388
- ------------------------------------- -------------- ------------ ------------
Distributions to shareholders
from
Net investment income
Class I ........................... (2,092,997) (487,606) (45)
Class IC .......................... 0 0 (263,667)
In excess of net investment
income
Class I ........................... 0 0 0
Class IC .......................... 0 0 0
- ------------------------------------- -------------- ------------ ------------
Total distributions to
shareholders ..................... (2,092,997) (487,606) (263,712)
- ------------------------------------- -------------- ------------ ------------
Capital share transactions
Proceeds from shares sold .......... 1,900,796,102 202,103,957 465,060,360
Proceeds from reinvestment of
distributions ..................... 4,529 1,483 13
Payment for shares redeemed ........ (15,539,621) (2,342,678) (7,901,205)
- ------------------------------------- -------------- ------------ ------------
Net increase in net assets
resulting from capital share
transactions ..................... 1,885,261,010 199,762,762 457,159,168
- ------------------------------------- -------------- ------------ ------------
Total increase in net assets ..... 1,886,859,890 207,353,776 467,280,844
Net assets
Beginning of period ................ 0 0 0
- ------------------------------------- -------------- ------------ ------------
End of period ...................... $1,886,859,890 $207,353,776 $467,280,844
===================================== ============== ============ ============
Undistributed net investment
income (Accumulated
distributions in excess of
net investment income) ............. $ 453,038 $ 118,305 $ 104,450
===================================== ============== ============ ============
<CAPTION>
Small Social Strategic Strategic
Company Value Principles Growth Value
Fund** Fund* Fund* Fund*
--------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Operations
Net investment income (loss) ....... $ 19,063 $ (21,880) $ 149,496 $ 153,137
Net realized gain (loss) on
investments ....................... (150) 1,281,055 21,683,512 1,348,426
Net change in unrealized
appreciation (depreciation) on
investments and written
options ........................... 586,785 (4,938,293) (18,054,180) 4,008,835
- -------------------------------------- ----------- ------------ ------------- ------------
Net increase (decrease) in net
assets resulting from
operations ........................ 605,698 (3,679,118) 3,778,828 5,510,398
- -------------------------------------- ----------- ------------ ------------- ------------
Distributions to shareholders
from
Net investment income
Class I ........................... 0 0 (83,635) (88,098)
Class IC .......................... 0 0 0 0
In excess of net investment
income
Class I ........................... 0 (13) 0 0
Class IC .......................... 0 (17,265) 0 0
- -------------------------------------- ----------- ------------ ------------- ------------
Total distributions to
shareholders ..................... 0 (17,278) (83,635) (88,098)
- -------------------------------------- ----------- ------------ ------------- ------------
Capital share transactions
Proceeds from shares sold .......... 25,288,662 162,038,326 276,519,796 179,703,016
Proceeds from reinvestment of
distributions ..................... 0 0 5,807 2,941
Payment for shares redeemed ........ 0 (1,303,508) (4,822,266) (1,760,049)
- -------------------------------------- ----------- ------------ ------------- ------------
Net increase in net assets
resulting from capital share
transactions ..................... 25,288,662 160,734,818 271,703,337 177,945,908
- -------------------------------------- ----------- ------------ ------------- ------------
Total increase in net assets ..... 25,894,360 157,038,422 275,398,530 183,368,208
Net assets
Beginning of period ................ 0 0 0 0
- -------------------------------------- ----------- ------------ ------------- ------------
End of period ...................... $25,894,360 $157,038,422 $ 275,398,530 $183,368,208
====================================== =========== ============ ============= ============
Undistributed net investment
income (Accumulated
distributions in excess of
net investment income) ............. $ 19,063 $ (39,158) $ 65,861 $ 65,039
====================================== =========== ============ ============= ============
</TABLE>
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
** For the period from December 23, 1997 (commencement of operations) to
December 31, 1997.
See Combined Notes to Financial Statements.
46
<PAGE>
Combined Notes to Financial Statements (Unaudited)
1. ORGANIZATION
The Evergreen Select Equity Funds consist of Evergreen Select Common Stock Fund
("Common Stock"), Evergreen Select Equity Income Fund ("Equity Income"),
Evergreen Select Large Cap Blend Fund ("Large Cap"), Evergreen Select Small
Company Value Fund ("Small Company"), Evergreen Select Social Principles Fund
("Social Principles"), Evergreen Select Strategic Growth Fund ("Strategic
Growth") and Evergreen Select Strategic Value Fund ("Strategic Value"), each of
which is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as a diversified, open-end management investment company. Each of
the Funds is a separate series of Evergreen Select Equity Trust, a Delaware
business trust organized on September 17, 1997, and are collectively referred
to herein as the "Funds".
The Funds offer an Institutional Class of shares ("Class I") and an
Institutional Service Class of shares ("Class IS"). Additionally, Large Cap and
Social Principles offer an Institutional Charitable Class of shares ("Class
IC"). Each Class of shares is sold without a front-end sales charge or
contingent deferred sales charge. Class IS shares pay an ongoing service fee.
Class I and Class IS shares are available to institutional investors through
broker dealers, banks and other financial intermediaries. Class IC shares are
available only to those investors that qualify as a non-profit organization
under the Internal Revenue Code. Such organizations would include charitable
trusts, non-profit hospitals, private foundations, private schools and
colleges, public charities, religious entities and charitable remainder trusts.
2. CONVERSION INFORMATION
On November 24, 1997, the Common Stock, Equity Income, Strategic Growth and
Strategic Value Funds commenced operations of their respective Class I shares
as a result of a conversion of common trust funds managed by First Union
National Bank ("FUNB"), a subsidiary of First Union Corporation ("First
Union"). Also, the Large Cap and Social Principles Funds commenced operations
of their respective Class IC shares as a result of similar common trust fund
conversions. The following chart summarizes pertinent data related to each Fund
on the date of conversion:
<TABLE>
<S> <C> <C>
Common Equity
Stock Income
-------- -------
Shares issued ............................. 22,828,425 2,271,990
Net assets ................................ $ 1,894,078,143 $ 198,356,197
Net asset value per share ................. $ 82.97 $ 87.31
Unrealized appreciation of Investments .... $ 557,857,438 $ 41,787,541
<S> <C> <C> <C> <C>
Large Social Strategic Strategic
Cap Principles Growth Value
------ --------- -------- --------
Shares issued ............................. 10,264,770 4,293,581 5,750,026 831,617
Net assets ................................ $ 462,393,873 $ 157,379,236 $ 186,600,811 $ 169,109,520
Net asset value per share ................. $ 45.05 $ 36.65 $ 32.45 $ 203.35
Unrealized appreciation of Investments .... $ 115,329,906 $ 49,607,008 $ 53,350,873 $ 48,394,807
</TABLE>
The forgoing amounts are reflected in proceeds from shares sold in the
statements of changes in net assets.
3. ACQUISITION INFORMATION
Immediately following the common trust fund conversion, on November 24, 1997,
Strategic Growth acquired substantially all of the net assets of Equity Growth
Fund, a common trust fund managed by FUNB. The net assets were acquired through
a taxable exchange for 2,517,542 Class I shares of Strategic Growth, valued at
$32.45 per share. The acquired net assets consisted primarily of portfolio
securities with unrealized appreciation of $25,897,713. The aggregate net
assets of Equity Growth and Strategic Growth immediately prior to the
acquisition were $81,699,736 and $186,600,811, respectively. The aggregate net
assets and shares outstanding of Strategic Growth immediately after the
acquisition were $268,300,547 and 8,267,568, respectively.
4. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect amounts
reported herein. Actual results could differ from these estimates.
A. Valuation of Securities
Securities traded on a national securities exchange or included on the NASDAQ
National Market System ("NMS") are valued at the last reported sales price on
the exchange where primarily traded. Securities traded on an exchange or NMS
for which there has been no sale and other securities traded in the
over-the-counter market are valued at the mean between the last reported bid
and asked price. Securities for which market quotations are not readily
available, including restricted securities, are valued at fair value as
determined in good faith according to procedures approved by the Board of
Trustees.
47
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held by the custodian on the Fund's behalf. Each
Fund monitors the adequacy of the collateral daily and will 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 advisor to be creditworthy pursuant to guidelines established by the
Board of Trustees.
C. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums. Dividend income is recorded on the
ex-dividend date.
D. Options Written
Equity Income is authorized to write covered call options. When the Fund writes
an option, an amount equal to the premium received is recorded as a liability
and is subsequently adjusted to the current market value of the written option.
Premiums received from writing options, which expire unexercised, are treated
by the Fund on the expiration date as realized gains from investments. The
difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is treated as a realized
gain or loss. If a call option is exercised, the premium is added to the
proceeds from the sale of the underlying security in calculating the realized
gain or loss on the sale. If a put option is exercised, the premium reduces the
cost of the security purchased. The Fund as writer of an option bears the
market risk of an unfavorable change in the price of the security underlying
the written option.
E. Federal Taxes
The Funds intend to qualify as regulated investment companies under the
Internal Revenue Code of 1986, as amended (the "Code"). Thus, the Funds will
not incur any federal income tax liability since they are expected to
distribute all of their net investment company taxable income and net capital
gains, if any, to their shareholders. The Funds also intend to avoid any excise
tax liability by making the required distributions under the Code. Accordingly,
no provision for federal taxes is required. 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.
F. Distributions
Distributions from net investment income for the Funds are declared and paid
monthly. Distributions from net realized capital gains, if any, are paid at
least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles
G. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the
relative net assets of each class. Currently, class specific expenses are
limited to expenses incurred under the Distribution Plans for Class IS.
5. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with no par
value authorized. Shares of beneficial interest of the Funds are currently
divided into Class I, Class IS and/or Class IC. Transactions in shares of the
Funds were as follows:
48
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
COMMON STOCK
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997*
---------------------------------
Shares Amount
---------- -------------
Class I
Shares sold ............................................ 22,909,969 $1,900,796,102
Shares issued in reinvestment of distributions ......... 55 4,529
Shares redeemed ........................................ (188,798) (15,539,621)
- -------------------------------------------------------- ------------ ---------------
Net increase ........................................... 22,721,226 $1,885,261,010
======================================================== ============ ===============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations) to
December 31, 1997.
- --------------------------------------------------------------------------------
EQUITY INCOME
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997*
------------------------------
Shares Amount
--------- ------------
Class I
Shares sold ............................................ 2,314,872 $202,103,957
Shares issued in reinvestment of distributions ......... 16 1,483
Shares redeemed ........................................ (26,524) (2,342,678)
- -------------------------------------------------------- ----------- -------------
Net increase ........................................... 2,288,364 $199,762,762
======================================================== =========== =============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations) to
December 31, 1997.
- --------------------------------------------------------------------------------
LARGE CAP BLEND
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997
-------------------------------
Shares Amount
----------- -------
Class I**
Shares sold ............................................ 5,788 $ 260,000
Shares issued in reinvestment of distributions ......... 0 0
Shares redeemed ........................................ 0 0
- -------------------------------------------------------- ----------- --------------
Net increase (decrease) ................................ 5,788 260,000
- -------------------------------------------------------- ----------- --------------
Class IC*
Shares sold ............................................ 10,316,648 464,800,360
Shares issued in reinvestment of distributions ......... 1 13
Shares redeemed ........................................ (176,037) (7,901,205)
- -------------------------------------------------------- ----------- --------------
Net increase ........................................... 10,140,612 456,899,168
- -------------------------------------------------------- ----------- --------------
Net increase ........................................... 10,146,400 $457,159,168
======================================================== =========== ==============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations) to
December 31, 1997.
**For the period from December 19, 1997 (Commencement of Class operations) to
December 31, 1997.
- --------------------------------------------------------------------------------
SMALL COMPANY VALUE
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997*
---------------------------
Shares Amount
--------- -----------
Class I
Shares sold ............................................ 2,528,866 $25,288,662
Shares issued in reinvestment of distributions ......... 0 0
Shares redeemed ........................................ 0 0
- -------------------------------------------------------- ---------- ------------
Net increase ........................................... 2,528,866 $25,288,662
======================================================== ========== ============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations) to
December 31, 1997.
49
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
SOCIAL PRINCIPLES
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997
-----------------------------
Shares Amount
---------- --------
Class I*
Shares sold ............................................ 3,282 $ 117,459
Shares issued in reinvestment of distributions ......... 0 0
Shares redeemed ........................................ 0 0
- -------------------------------------------------------- ---------- -------------
Net increase ........................................... 3,282 117,459
- -------------------------------------------------------- ---------- -------------
Class IC*
Shares sold ............................................ 4,420,732 $161,920,867
Shares issued in reinvestment of distributions ......... 0 0
Shares redeemed ........................................ (36,912) (1,303,508)
- -------------------------------------------------------- ---------- -------------
Net increase ........................................... 4,383,820 160,617,359
- -------------------------------------------------------- ---------- -------------
Net increase ........................................... 4,387,102 $160,734,818
======================================================== ========== =============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations)
December 31, 1997.
- --------------------------------------------------------------------------------
STRATEGIC GROWTH
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997*
------------------------------
Shares Amount
--------- ------------
Class I
Shares sold ............................................ 8,522,477 $276,519,796
Shares issued in reinvestment of distributions ......... 177 5,807
Shares redeemed ........................................ (150,135) (4,822,266)
- -------------------------------------------------------- ----------- -------------
Net increase ........................................... 8,372,519 $271,703,337
======================================================== =========== =============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations) to
December 31, 1997.
- --------------------------------------------------------------------------------
STRATEGIC VALUE
<TABLE>
<S> <C> <C>
Period Ended
December 31, 1997*
----------------------------
Shares Amount
------- ------------
Class I
Shares sold ............................................ 883,304 $179,703,016
Shares issued in reinvestment of distributions ......... 14 2,941
Shares redeemed ........................................ (8,553) (1,760,049)
- -------------------------------------------------------- --------- -------------
Net increase ........................................... 874,765 $177,945,908
======================================================== ========= =============
</TABLE>
*For the period from November 24, 1997 (Commencement of Class operations) to
December 31, 1997.
6. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the period ended December 31, 1997:
<TABLE>
<S> <C> <C>
Cost of Proceeds
Purchases from Sales
----------- --------------
Common Stock* .............. $68,650,938 $97,627,717
Equity Income* ............. 13,675,609 10,719,427
Large Cap* ................. 20,275,895 40,959,788
Small Company** ............ 21,311,665 565,606
Social Principles* ......... 9,812,515 7,440,215
Strategic Growth* .......... 113,881,556 111,549,909
Strategic Value* ........... 7,505,122 2,061,976
</TABLE>
* For the period from November 24, 1997 (commencement of operations) to
December 31, 1997.
** For the period from December 23, 1997 (commencement of operations) to
December 31, 1997.
50
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
During the period ended December 31, 1997, the Equity Income Fund had the
following written call option activity:
<TABLE>
<S> <C> <C>
Number of
Contracts Premium
--- -----
Open written call options, beginning of period... 600 233,192
Options written ................................. 0 0
Options exercised ............................... 0 0
Options expired ................................. 0 0
--- -------
Open written call options, end of period ........ 600 233,192
=== =======
</TABLE>
7. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of The BISYS
Group Inc. ("BISYS") serves as principal underwriter to the Funds. Each Fund
has adopted a Distribution Plan for Class IS shares, as allowed by Rule 12b-1
of the 1940 Act. Distribution plans permit a fund to reimburse its principal
underwriter for costs related to selling shares of the fund and for various
other services. These costs, which consist primarily of commissions and service
fees to broker-dealers who sell shares of the fund, are paid by the fund
through expenses called "Distribution Plan expenses". Class IS, currently pays
a service fee equal to 0.25% of the average daily net asset of the class.
Distribution Plan expenses are calculated daily and paid monthly. During the
period ended December 31, 1997, no Distribution Plan expenses were incurred by
the Funds.
Each of the Distribution Plans may be terminated at any time by vote of the
Independent Trustees or by vote of a majority of the outstanding voting shares
of the respective class.
8. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED
TRANSACTIONS
The investment advisor to each Fund, other than Small Company, is First Union
National Bank ("FUNB"). Each Fund, other than Small Company, pays FUNB a fee
for its services as set forth below. The annual advisory fees are calculated
daily and paid monthly and are based on a percentage of average daily net
assets.
<TABLE>
<S> <C>
Annual
Advisory fee
----------------
Common Stock .............. 0.70%
Equity Income ............. 0.70%
Large Cap ................. 0.70%
Social Principles ......... 0.80%
Strategic Growth .......... 0.70%
Strategic Value ........... 0.70%
</TABLE>
Evergreen Asset Management Corp ("Evergreen Asset"), a subsidiary of First
Union, is the investment advisor to Small Company. Small Company pays Evergreen
Asset an annual fee of 0.90% of average daily net assets.
Leiber & Company, a subsidiary of First Union, is the investment sub-advisor to
Small Company and also provides brokerage services with respect to
substantially all security transactions effected on either the New York or
American Stock Exchanges. For the period ended December 31, 1997, Small Company
incurred $26,856 in brokerage commissions with Leiber & Company. Leiber &
Company is reimbursed by Evergreen Asset, at no additional cost to the Fund,
for its cost of providing investment advisory services.
Each investment advisor has voluntarily agreed to reduce the investment
advisory fee on each Fund by 0.10% and to reimburse a portion of each Fund's
annual operating expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses). For the period ended December 31, 1997, the investment
advisors voluntarily reduced their fees by the following amounts:
<TABLE>
<S> <C>
Fee
Reduction
-------
Common Stock ................ $ 243,054
Equity Income ............... 22,898
Large Cap Blend ............. 64,191
Small Company Value ......... 2,868
Social Principles ........... 22,387
Strategic Growth ............ 42,750
Strategic Value ............. 24,862
</TABLE>
51
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Evergreen Investment Services ("EIS"), a subsidiary of First Union, is the
administrator and BISYS Fund Services is sub-administrator to the Funds. As
administrator, EIS provides the Funds with facilities, equipment and personnel.
As sub-administrator to the Funds, BISYS Fund Services provides the officers of
the Funds. The administrator and sub-administrator for each Fund are entitled
to an annual fee based on the average daily net assets of the funds
administered by EIS for which First Union or its investment advisory
subsidiaries are also the investment advisers. The administration fee is
calculated by applying percentage rates, which start at 0.05% and decline to
0.01% per annum as net assets increase, to the average daily net asset value of
the Fund. The sub-administration fee is calculated by applying percentage
rates, which start at 0.01% and decline to .004% per annum as net assets
increase, to the average daily net asset value of the Fund.
Evergreen Service Company ("ESC"), a subsidiary of First Union, serves as the
transfer and dividend disbursing agent for the Funds.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
9. EXPENSE OFFSET ARRANGEMENT
The Funds have entered into an expense offset arrangement with their custodian.
The assets deposited with the custodian under this expense offset arrangement
could have been invested in income-producing assets.
10. DEFERRED TRUSTEES' FEES
Each Independent Trustee of the Funds may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Fund's Trustees' fees and
expenses. Trustees will be paid either in one lump sum or in quarterly
installments for up to ten years at their election, not earlier than either the
year in which the Trustee ceases to be a member of the Board of Trustees or
January 1, 2000. As of December 31, 1997, there were no balances outstanding in
the Trustee deferral accounts for the Funds.
52
<PAGE>
65660 542780
2/98
BULK RATE
U.S. POSTAGE
PAID
CHARLOTTE, NC
PERMIT NO. 136
(EVERGREEN FUNDS(SM) LOGO)
201 S. College St.
Charlotte, NC 28288
