<PAGE>
JUNE 30, 1999
EQUITY FUNDS
Evergreen Select Equity Income Fund
Evergreen Select Secular Growth Fund
[LOGO OF EVERGREEN FUNDS APPEARS HERE]
<PAGE>
Table of Contents
Letter to Shareholders .................................................... 1
Evergreen Select Equity Income Fund
Fund at a Glance ..................................................... 2
Portfolio Manager Commentary ......................................... 3
Evergreen Select Secular Growth Fund
Fund at a Glance ..................................................... 5
Portfolio Manager Commentary ......................................... 6
Financial Highlights
Evergreen Select Equity Income Fund .................................. 8
Evergreen Select Secular Growth Fund ................................. 9
Schedule of Investments
Evergreen Select Equity Income Fund .................................. 10
Evergreen Select Secular Growth Fund ................................. 11
Statements of Assets and Liabilities ...................................... 12
Statements of Operations .................................................. 13
Statements of Changes in Net Assets ....................................... 14
Combined Notes to Financial Statements .................................... 16
Independent Auditors' Report .............................................. 22
Additional Information .................................................... 23
Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies with
over $70 billion in assets under management.
With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad 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 annual 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.
Mutual Funds: ARE NOT FDIC INSURED May lose value * Are not bank guaranteed
Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
August 1999
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Select Equity Funds annual report, which
covers the twelve-month period ended June 30, 1999.
[PHOTO OF WILLIAM M. ENNIS APPEARS HERE]
William M. Ennis
[PHOTO OF DAVID C. FRANCIS APPEARS HERE]
David C. Francis, C.F.A.
Continued Strength in the Domestic Economy
After stock markets around the world, including the United States, declined
dramatically last summer and into the early fall, the Federal Reserve's actions
to lower interest rates in late 1998 helped restore investor confidence. The
U.S. stock market rallied strongly during the final quarter of 1998 and into the
first half of 1999.
Throughout the period, the strong performance of large capitalization growth
stocks continued. Investors who focused on this small group of stocks,
particularly technology stocks, fared well. Currently, the stock market is
responding positively to the combination of low inflation, low interest rates
and low unemployment. The economy appears strong and investor confidence seems
high. We remain cautiously optimistic about the stock market.
Fund Merger
The Evergreen Select Equity Income Fund merged into the Evergreen Select Core
Equity Fund effective July 31, 1999. Although the investment strategy was
substantially the same, the Select Core Equity Fund has a different management
team. The next report you receive for your fund will be the Select Core Equity
Fund semiannual report.
Year 2000 Preparation /1/
At Evergreen, we continue to prepare ourselves to provide uninterrupted service
and communication with all of our shareholders throughout the end of 1999 and
right through the date change into the year 2000 and beyond. At the end of
August, when this report was finalized, we completed the testing of our internal
systems. In March, we successfully participated in industry-wide testing with
the Securities Industry Association. We are confident that our efforts will
enable our shareholders to receive the same Evergreen products and services we
deliver today.
As always, we encourage all shareholders to diversify their mutual fund
portfolios and we suggest you consult with your financial advisor for an
allocation strategy that helps you meet your investment goals and objectives.
Evergreen Funds offers a wide range of funds that includes multiple investment
styles to help you find one that is appropriate in your portfolio.
Thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
/s/ David C. Francis
David C. Francis, C.F.A.
Managing Director
Chief Investment Officer
First Capital Group - FUNB
1 The information above constitutes Year 2000 readiness disclosure.
1
<PAGE>
EVERGREEN
Select Equity Income Fund
Fund at a Glance as of June 30, 1999
- --------------------------------------------------------------------------------
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
Philosophy
Evergreen Select Equity Income Fund utilizes value-oriented stocks in pursuit of
its objective: high current income and long-term capital appreciation. The Fund
provides investors a 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
Standard and Poors 500 Index (S&P 500)
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/1/
- --------------------------------------------------------------------------------
Portfolio Inception Date: 12/31/78 Class I Class IS
Class Inception Date 11/24/97 03/11/98
Average Annual Returns
1 year -0.88% -1.13%
3 years 12.18% 11.93%
5 years 14.66% 14.39%
10 years 11.32% 11.05%
Since Portfolio Inception 13.77% 13.49%
12-month income dividends per share $2.14 $1.95
12-month capital gains distributions per share $6.00 $6.00
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Select Equit Income CPI S&P 500
6/30/89 1,000,000 1,000,000 1,000,000
6/30/90 1,147,247 1,046,728 1,164,872
6/30/91 1,240,627 1,095,890 1,251,018
6/30/92 1,366,524 1,129,734 1,418,818
6/30/93 1,485,517 1,163,570 1,612,176
6/30/94 1,474,595 1,192,587 1,634,859
6/30/95 1,736,197 1,228,848 2,061,084
6/30/96 2,069,494 1,262,232 2,596,963
6/30/97 2,577,460 1,291,700 3,498,084
6/30/98 2,947,826 1,313,457 4,553,155
6/30/99 2,921,629 1,339,243 5,589,898
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Equity Income Fund, Class I,the S&P 500 Index and The Consumer Price Index
(CPI).
The S&P 500 Index is an unmanaged index and does not include transaction costs
associated with buying and selling securities or any management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in an index.
/1/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.
Historical performance shown for Class IS from 11/24/97 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee.
If these fees had been reflected, returns would have been lower. Prior to
11/24/97, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTF's) performance, adjusted for estimated mutual fund
expenses. The CTF was not registered under the 1940 Act and was not subject to
certain investment restrictions. If the CTF had been registered, its performance
might have been adversely affected. Performance for the CTF has been adjusted to
include the effect of estimated mutual fund class gross expense ratios at the
time the CTF was converted to a mutual fund. If fee waivers and expense
reimbursements had been calculated into the mutual fund class expense ratio, the
total returns would be as follows: Class I - 3 year = 12.23%, 5 year = 14.73%,
10 year = 11.41% and since 12/31/78 = 13.87%; Class IS - 3 year = 11.99%, 5 year
= 14.47%, 10 year = 11.14 % and since 12/31/78 = 13.60%.
2
<PAGE>
EVERGREEN
Select Equity Income Fund
Portfolio Manager Commentary
Portfolio Management
Paul A. DiLella
Paul A. DiLella, who has 16 years of investment experience, manages the
Evergreen Select Equity Income Fund. He also has research responsibility in
electric utility, natural gas distribution, and REIT areas.
Performance
For the twelve months ended June 30, 1999, the Evergreen Select Equity Income
Fund Class I posted a -0.88% total return compared to the S&P 500 which returned
22.77%.
Although the performance outpaced the S&P 500 index during the first three
months, it lagged substantially during the remainder of the fiscal period. The
stock market's overwhelming bias toward growth stocks was primarily responsible
for the Fund's lagging performance. The Fund's primary objective is to "seek
high current income", a strategy that dictates we invest in high dividend-paying
companies, typically in traditionally income-oriented sectors. Unfortunately, it
was these companies that lagged the most because investors ignored these areas
in favor of high-flying growth stocks. As a manager of a value-oriented fund, it
was frustrating to witness fundamentally strong, industry-leading companies with
exceptional valuations under-perform simply because they were "value" stocks.
Portfolio
Characteristics
---------------
Total Net Assets .................................... $147,095,148
Number of Issues .................................... 31
Market Environment
Despite the stock market's well-publicized climb, not all investors participated
in the market's extraordinary returns over the past year. For much of the fiscal
period, growth stocks--led by the high-flying technology sector--carried the
market to all-time highs, while value-oriented stocks lagged far behind.
It was only in the past three months that the market's advance began broadening,
with smaller stocks and value-oriented issues finally outpacing large cap growth
companies. Consider that during the past twelve months, large cap growth stocks
(measured by the Russell 1000 Growth Index) posted a 27.3% total return,
significantly outpacing the respectable 16.4% return of value stocks (Russell
1000 Value Index) and the 1.5% return of small cap stocks (Russell 2000 Index).
3
<PAGE>
EVERGREEN
Select Equity Income Fund
Portfolio Manager Commentary
Top 5 Industries
----------------
(as a percentage of net assets)
Information Services & Technology 17.6%
Banks 14.0%
Healthcare Products & Services 13.2%
Food & Beverage Products 10.6%
Utilities-Telephone 8.0%
Top 10 Holdings
---------------
(as a percentage of net assets)
Microsoft Corp. 6.1%
General Electric Co. 5.8%
International Business Machines Corp. 5.6%
GTE Corp. 5.1%
BankAmerica Corp. 5.0%
Coca Cola Co. 4.9%
Bristol-Myers Squibb Co. 4.8%
Chase Manhattan Corp. 4.4%
Home Depot, Inc. 4.4%
Philip Morris Companies, Inc. 4.4%
The Impending Merger and Its Benefits
It is important to note that this Fund merged into the Evergreen Select Core
Equity Fund in July. Existing shareholders should benefit in two specific ways
from the merger. First, due to its larger asset base of $1.9 billion,
shareholders of the Evergreen Select Equity Income Fund will benefit from a
lower Class I expense ratio--0.67% vs. 0.71%, for the year ended June 30, 1999.
In addition, with the Evergreen Select Core Equity Fund's blended investment
approach, shareholders may participate more fully in the overall market
regardless of the investment style in vogue, such as large cap growth was in
1998.
4
<PAGE>
EVERGREEN
Select Secular Growth Fund
Fund at a Glance as of June 30, 1999
- --------------------------------------------------------------------------------
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
Philosophy
The Evergreen Select Secular Growth Fund seeks to identify companies that are
positioned to capitalize upon favorable secular trends within the U.S. economy.
We accomplish this by using highly focused fundamental research along with
quantitative tools to select high quality, large cap growth companies that
exhibit consistent and accelerating earnings growth.
Process
Mr. Dalton and his team of dedicated analysts utilize a disciplined investment
process in order to construct a portfolio of large cap, high quality,
growth-oriented companies:
. Most ideas are generated by analysts on the Secular Growth Team
. Team meets daily to discuss buy/sell candidates, establish priorities and
discuss the market
. Recommendations are made by an analyst to the team; team leader makes final
decision
. Quantitative tools are used to verify or challenge recommendations
Benchmark
Russell 1000 Growth Index ("Russell 1000")
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/1/
- --------------------------------------------------------------------------------
Portfolio Inception Date: 02/26/99 Class I Class IS
Class Inception Date 02/26/99 02/26/99
Average Annual Returns
1 year N/A N/A
5 years N/A N/A
10 years N/A N/A
Cumulative Since Inception 0.14% 0.06%
12-month income dividends per share $0.15 $0.11
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Select Secular Growth CPI-US Value S&P 500
2/28/99 1,000,000 1,000,000 1,000,000
3/31/99 1,010,650 1,003,040 1,052,700
4/30/99 1,002,767 1,010,334 1,054,100
5/31/99 951,124 1,010,334 1,021,700
6/30/99 1,001,439 1,010,334 1,093,200
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Secular Growth Fund, Class I, the Russell 1000 Growth Index, and The Consumer
Priced Index (CPI).
The Russell 1000 Growth Index is an unmanaged index and does not include
transaction costs associated with buying and selling securities or any
management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in an index.
/1/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.
5
<PAGE>
EVERGREEN
Select Secular Growth Fund
Portfolio Manager Commentary
Portfolio Management
Stephen Dalton
Mr. Dalton is the portfolio manager of the Evergreen Select Secular Growth Fund
and has 15 years of investment management and research experience, managing
growth and balanced portfolios. In addition, he has covered the health care,
technology, retail, media and entertainment industries. Prior to joining First
Capital Group, Mr. Dalton was a Senior Portfolio Manager at CoreStates
Investment Advisors, which was acquired by First Union in 1998. Mr. Dalton is
supported by a team of three dedicated analysts with a combined 59 years of
investment experience.
Performance
We are pleased to announce the first annual report for the Evergreen Select
Secular Growth Fund. Since the Fund's inception date is February 26, 1999, it
does not have a complete year of performance history like the other fund in this
report. The Fund's total return since inception is 0.14% on Class I shares.
Portfolio
Characteristics
---------------
Total Net Assets $40,129,017
Number of Issues 46
P/E Ratio 48.0x
Beta 1.19
Market Environment
Technology is currently the portfolio's greatest sector weighting, reflecting
our view that this area represents the most significant secular trend driving
the U.S. economy. Underlying the Fund's technology exposure is an emphasis on
companies that address three specific themes within this sector:
. The demand for high speed access on the internet.
. Demand for increased bandwidth, which allows users to maximize the amount
of information that can be sent electronically.
. Increasing data management requirements, as companies search for more
efficient ways to store ever-increasing amounts of electronic information.
Another secular trend that we're poised to capitalize on is within the financial
services sector, where "Baby Boomers" are playing catch up in order to build a
sufficient retirement savings. Current holdings include: SunTrust Banks--a bank
located in the Southeast that provides investment trust and investment
services--and Morgan Stanley Dean Witter--a global provider of investment
products--two companies which we believe are well positioned to meet this strong
consumer demand.
6
<PAGE>
EVERGREEN
Select Secular Growth Fund
Portfolio Manager Commentary
In-home entertainment is another theme we have positioned the portfolio to
exploit. Armed with higher wages and increasing discretionary income, consumers
have shown a willingness to spend money on entertainment. Time Warner, Yahoo!
and America Online are three industry-leading companies that provide products
and services to satisfy consumers' in-home recreational appetite.
Top 5 Industries
----------------
(as a percentage of net assets)
Information Services & Technology 24.3%
Communications Systems & Services 14.0%
Healthcare Products & Services 12.7%
Printing, Publishing, Broadcasting & Entertainment 12.3%
Retailing & Wholesale 10.5%
Portfolio Activity
During the past three months, we took advantage
of price weakness in the internet franchise to initiate a position in Verisign.
Verisign provides the infrastructure to secure communications and commerce over
the internet.
Among retail stocks, we reduced exposure to a
modest overweighting. This reduction was in response to the anticipated seasonal
retail slowdown, as well as higher interest rates that could potentially dampen
consumer spending. The portfolio currently has an under-weighting in healthcare
as a result of slower earnings growth in this sector, while maintaining zero
exposure to basic industry and energy stocks.
Top 10 Holdings
---------------
(as a percentage of net assets)
Sun Microsystems, Inc. 3.9%
Time Warner, Inc. 3.8%
Inktomi Corp. 3.5%
Comcast Corp. Cl. A 3.4%
Yahoo, Inc. 3.4%
EMC Corp. 3.4%
America Online, Inc. 3.2%
Cisco Systems, Inc. 3.2%
MCI Worldcom, Inc. 3.0%
Qwest Communications International, Inc. 2.9%
Outlook
Looking ahead, we anticipate a turbulent second half of the year with large cap
growth stocks re-establishing its leadership role as investors maintain a strong
focus on earnings growth. We expect interest rates to plateau near current
levels, then gently and gradually recede by year-end.
From a sector standpoint, we remain committed to technology and communication
services stocks, but are freshening and diversifying our holdings, with new
emphasis in software enablers for the Internet. In our opinion, this is an
emerging--and increasingly important--secular trend within the Internet
megatrend. We will continue to avoid the PC hardware subsector as well as more
average--weighted positions among communication services stocks.
7
<PAGE>
EVERGREEN
Select Equity Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended June
30,
-------------------
1999 1998 (a)
- --------------------------------------------------------------------------------
CLASS I
- --------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 89.03 $ 87.31
======== ========
Income from investment operations
Net investment income 2.22 1.50
Net realized and unrealized gains or losses on
securities (3.33) 1.73
-------- --------
Total from investment operations (1.11) 3.23
-------- --------
Distributions to shareholders from
Net investment income (2.14) (1.51)
Net realized gains (6.00) 0
-------- --------
Total distributions to shareholders (8.14) (1.51)
-------- --------
Net asset value, end of period $ 79.78 $ 89.03
======== ========
Total return (0.88%) 3.70%
Ratios and supplemental data
Net assets, end of period (thousands) $145,826 $204,248
Ratios to average net assets
Expenses* 0.71% 0.78%+
Net investment income 2.81% 2.80%+
Portfolio turnover rate 112% 51%
</TABLE>
<TABLE>
<CAPTION>
Year Ended June
30,
-----------------
1999 1998 (b)
- --------------------------------------------------------------------------------
CLASS IS
- --------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $89.05 $90.83
====== ======
Income from investment operations
Net investment income 2.03 0.65
Net realized and unrealized losses on securities (3.34) (1.69)
------ ------
Total from investment operations (1.31) (1.04)
------ ------
Distributions to shareholders from
Net investment income (1.95) (0.74)
Net realized gains (6.00) 0
------ ------
Total distributions to shareholders (7.95) (0.74)
------ ------
Net asset value, end of period $79.79 $89.05
====== ======
Total return (1.13%) (1.16%)
Ratios and supplemental data
Net assets, end of period (thousands) $1,269 $1,497
Ratios to average net assets
Expenses* 0.96% 1.04%+
Net investment income 2.48% 2.46%+
Portfolio turnover rate 112% 51%
</TABLE>
(a) For the period from November 24, 1997 (commencement of class operations) to
June 30, 1998.
(b) For the period from March 11, 1998 (commencement of class operations) to
June 30, 1998.
+ Annualized.
* The ratio of expenses to average net assets includes fee waivers and
excludes fee credits.
See Combined Notes to Financial Statements.
8
<PAGE>
EVERGREEN
Select Secular Growth Fund
Financial Highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Period Ended
June 30, 1999 (a)
- --------------------------------------------------------------------------------
CLASS I
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $100.00
=======
Income from investment operations
Net investment income 0.15
Net realized and unrealized losses on securities (0.01)
-------
Total from investment operations 0.14
-------
Distributions to shareholders from
Net investment income (0.15)
-------
Total distributions to shareholders (0.15)
-------
Net asset value, end of period $ 99.99
=======
Total return 0.14%
Ratios and supplemental data
Net assets, end of period (thousands) $40,128
Ratios to average net assets
Expenses* 0.71%+
Net investment income 0.18%+
Portfolio turnover rate 65%
</TABLE>
<TABLE>
<CAPTION>
Period Ended
June 30, 1999 (a)
- --------------------------------------------------------------------------------
CLASS IS
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $100.00
=======
Income from investment operations
Net investment income 0.21
Net realized and unrealized losses on securities (0.15)
-------
Total from investment operations 0.06
-------
Distributions to shareholders from
Net investment income (0.11)
-------
Total distributions to shareholders (0.11)
-------
Net asset value, end of period $ 99.95
=======
Total return 0.06%
Ratios and supplemental data
Net assets, end of period (thousands) $ 1
Ratios to average net assets
Expenses* 0.96%+
Net investment income 0.63%+
Portfolio turnover rate 65%
</TABLE>
(a) For the period from February 26, 1999 (commencement of class operations) to
June 30, 1999.
+ Annualized.
* The ratio of expenses to average net assets includes fee waivers and
excludes fee credits.
See Combined Notes to Financial Statements.
9
<PAGE>
EVERGREEN
Select Equity Funds
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 95.8%
Automotive Equipment & Manufacturing - 3.8%
100,000 Ford Motor Co. ...................................... $ 5,643,750
------------
Banks - 14.0%
75,000 Bank One Corp. ...................................... 4,467,187
100,000 BankAmerica Corp. ................................... 7,331,250
75,000 Chase Manhattan Corp. ............................... 6,496,875
50,000 Fleet Financial Group, Inc. ......................... 2,218,750
------------
20,514,062
------------
Consumer Products & Services - 2.0%
40,000 Whirlpool Corp. ..................................... 2,960,000
------------
Diversified Companies - 3.5%
55,000 Tyco International Ltd. ............................. 5,211,250
------------
Electrical Equipment & Services - 5.8%
75,000 General Electric Co. ................................ 8,475,000
------------
Food & Beverage Products - 10.6%
115,000 Coca Cola Co. ....................................... 7,187,500
160,000 Philip Morris Companies, Inc. ....................... 6,430,000
45,000 *United States Foodservice........................... 1,918,125
------------
15,535,625
------------
Healthcare Products & Services - 13.2%
100,000 Bristol-Myers Squibb Co. ............................ 7,043,750
70,000 Mylan Laboratories, Inc. ............................ 1,855,000
85,000 SmithKline Beecham Plc, ADR.......................... 5,615,312
70,000 Warner-Lambert Co. .................................. 4,856,250
------------
19,370,312
------------
Information Services & Technology - 17.6%
188,000 Compaq Computer Corp. ............................... 4,453,250
64,000 International Business Machines Corp................. 8,272,000
100,000 *Microsoft Corp. .................................... 9,018,750
100,000 *Network Associates, Inc. ........................... 1,468,750
73,000 *Oracle Systems Corp. ............................... 2,710,125
------------
25,922,875
------------
Oil/Energy - 5.4%
35,000 Enron Corp. ......................................... 2,861,250
125,000 MCN Energy Group, Inc. .............................. 2,593,750
40,000 Texaco, Inc. ........................................ 2,500,000
------------
7,955,000
------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - continued
Oil Field Services - 1.5%
35,000 Schlumberger Ltd. .................................. $ 2,229,063
------------
Real Estate - 3.1%
100,000 FelCor Lodging Trust, Inc. REIT..................... 2,075,000
100,000 Simon Property Group, Inc. REIT..................... 2,537,500
------------
4,612,500
------------
Retailing & Wholesale - 4.4%
100,000 Home Depot, Inc. ................................... 6,443,750
------------
Transportation - 1.3%
62,000 Burlington Northern Santa Fe Corp. ................. 1,922,000
------------
Utilities - Electric - 1.6%
75,000 Cinergy Corp. ...................................... 2,400,000
------------
Utilities - Telephone - 8.0%
75,000 AT&T Corp. ......................................... 4,185,938
100,000 GTE Corp. .......................................... 7,575,000
------------
11,760,938
------------
Total Common Stocks (cost $119,627,246)............. 140,956,125
------------
SHORT-TERM INVESTMENTS - 4.4%
Money Market Shares - 0.0%
1,775 Valiant General Fund (cost $1,775).................. 1,775
------------
<CAPTION>
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT - 4.4%
$6,432,573 Dresdner Bank AG 4.75%, purchased 6/30/1999,
maturing 7/1/1999, maturity value $6,433,422 (cost
$6,432,573) (a).................................... 6,432,573
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $126,061,594)......................... 100.2% 147,390,473
Other Assets and
Liabilities - net........................... (0.2) (295,325)
----- ------------
Net Assets................................... 100.0% $147,095,148
===== ============
</TABLE>
(a) At June 30, 1999, the repurchase agreement was fully collateralized
by $6,360,000 U.S. Treasury Notes 6.63%, 4/30/2002; value including
accrued interest--$6,564,994.
* Non-income producing security.
Summary of Abbreviations
ADR American Depository Receipt
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
10
<PAGE>
EVERGREEN
Select Secular Growth Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 94.6%
Banks - 3.4%
8,300 BB&T Corp. ............................................. $ 304,506
15,900 Mellon Bank Corp. ...................................... 578,363
4,700 Northern Trust Corp. ................................... 455,900
-----------
1,338,769
-----------
Communication Systems &
Services - 14.0%
19,860 Global Crossing Ltd. ................................... 846,533
9,300 Level 3 Communications, Inc. ........................... 558,581
12,911 Lucent Technologies, Inc. .............................. 870,686
13,925 * MCI WorldCom, Inc. ................................... 1,198,420
16,800 * Metromedia Fiber Network, Inc. ....................... 603,750
35,600 * Qwest Communications International, Inc. ............. 1,177,025
4,300 VeriSign, Inc. ......................................... 370,875
-----------
5,625,870
-----------
Electrical Equipment & Services - 2.2%
7,850 General Electric Co. ................................... 887,050
-----------
Finance & Insurance - 9.7%
7,450 American International Group, Inc. ..................... 872,116
19,500 Federal Home Loan Mortgage Corp. ....................... 1,131,000
14,350 Federal National Mortgage Assoc. ....................... 981,181
4,400 Morgan Stanley, Dean Witter & Co. ...................... 451,000
4,250 Schwab (Charles) & Co., Inc. ........................... 466,969
-----------
3,902,266
-----------
Healthcare Products & Services - 12.7%
15,600 Bristol-Myers Squibb Co. ............................... 1,098,825
14,600 Cardinal Health, Inc. .................................. 936,225
6,100 Lilly (Eli) & Co. ...................................... 436,913
12,900 Medtronic, Inc. ........................................ 1,004,587
9,575 Merck & Co., Inc. ...................................... 708,550
17,400 Schering-Plough Corp. .................................. 922,200
-----------
5,107,300
-----------
Information Services & Technology - 24.3%
11,600 * America Online, Inc. ................................. 1,281,800
11,900 At Home Corp. .......................................... 641,856
3,300 DoubleClick, Inc. ...................................... 302,775
25,000 * EMC Corp. ............................................ 1,375,000
13,950 * Gateway, Inc. ........................................ 823,050
10,800 Inktomi Corp. .......................................... 1,420,200
10,850 * Microsoft Corp. ...................................... 978,534
22,600 * Sun Microsystems, Inc. ............................... 1,556,575
8,010 Yahoo, Inc. ............................................ 1,379,723
-----------
9,759,513
-----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - continued
Printing, Publishing, Broadcasting & Entertainment -
12.3%
15,700 CBS Corp. ............................................ $ 681,969
35,900 Comcast Corp. Cl. A................................... 1,379,906
9,300 * Cox Communications, Inc. Cl. A...................... 342,356
33,200 * Infinity Broadcasting Corp. ........................ 987,700
20,850 Time Warner, Inc. .................................... 1,532,475
-----------
4,924,406
-----------
Retailing & Wholesale - 10.5%
3,900 * Best Buy Co., Inc. ................................. 263,250
7,000 * Costco Companies, Inc. ............................. 560,438
6,100 Dayton Hudson Corp. .................................. 396,500
30,200 Family Dollar Stores, Inc. ........................... 724,800
9,550 Gap, Inc. ............................................ 481,081
8,300 Home Depot, Inc. ..................................... 534,831
12,300 Wal-Mart Stores, Inc. ................................ 593,475
22,150 Walgreen Co. ......................................... 650,656
-----------
4,205,031
-----------
Telecommunication Services & Equipment - 3.2%
19,750 * Cisco Systems, Inc. ................................ 1,270,172
-----------
Transportation - 2.3%
29,850 Southwest Airlines Co. ............................... 929,081
-----------
Total Common Stocks (cost $37,300,459)................ 37,949,458
-----------
<CAPTION>
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS - 1.5%
Repurchase Agreement - 1.5%
$618,280 Dresdner Bank AG 4.75%, purchased 6/30/1999, maturing
7/1/1999, maturity value $618,362 (cost $618,280)
(a).................................................. 618,280
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments - (cost $37,918,739)........... 96.1% 38,567,738
Other Assets and Liabilities - net............... 3.9 1,561,279
----- -----------
Net Assets....................................... 100.0% $40,129,017
===== ===========
</TABLE>
(a) At June 30, 1999, the repurchase agreement was collateralized by
$575,000 U.S. Treasury Notes 7.50%, 02/15/2005; value including
accrued interest--$632,414.
* Non-income producing security.
See Combined Notes to Financial Statements.
11
<PAGE>
EVERGREEN
Select Equity Funds
Statements of Assets and Liabilities
June 30, 1999
<TABLE>
<CAPTION>
Equity Secular
Income Growth
Fund Fund
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Identified cost of securities................. $126,061,594 $37,918,739
Net unrealized gains on securities............ 21,328,879 648,999
- -------------------------------------------------------------------------------
Market value of securities.................... 147,390,473 38,567,738
Receivable for Fund shares sold............... 0 1,555,744
Dividends and interest receivable............. 262,132 9,715
Prepaid expenses and other assets............. 10,778 42,349
- -------------------------------------------------------------------------------
Total assets................................. 147,663,383 40,175,546
- -------------------------------------------------------------------------------
Liabilities
Payable for Fund shares redeemed.............. 470,876 13,000
Advisory fee payable.......................... 73,065 678
Distribution Plan expenses payable............ 129 1
Due to other related parties.................. 3,032 660
Accrued expenses and other liabilities........ 21,133 32,190
- -------------------------------------------------------------------------------
Total liabilities............................ 568,235 46,529
- -------------------------------------------------------------------------------
Net assets.................................... $147,095,148 $40,129,017
- -------------------------------------------------------------------------------
Net assets represented by
Paid-in capital............................... $124,239,677 $39,510,490
Undistributed (overdistributed) net investment
income....................................... (2,447) 10,878
Accumulated net realized gains or losses on
securities................................... 1,529,039 (41,350)
Net unrealized gains on securities............ 21,328,879 648,999
- -------------------------------------------------------------------------------
Total net assets.............................. $147,095,148 $40,129,017
- -------------------------------------------------------------------------------
Net assets consists of
Class I....................................... $145,826,191 $40,128,016
Class IS...................................... 1,268,957 1,001
- -------------------------------------------------------------------------------
Total net assets.............................. $147,095,148 $40,129,017
- -------------------------------------------------------------------------------
Shares outstanding
Class I....................................... 1,827,933 401,318
Class IS...................................... 15,903 10
- -------------------------------------------------------------------------------
Net asset value per share
Class I....................................... $ 79.78 $ 99.99
- -------------------------------------------------------------------------------
Class IS...................................... $ 79.79 $ 99.95
- -------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
12
<PAGE>
EVERGREEN
Select Equity Funds
Statements of Operations
Year Ended June 30, 1999
<TABLE>
<CAPTION>
Equity Secular
Income Growth
Fund Fund (a)
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment income
Dividends...................................... $ 5,492,441 $ 19,542
Interest....................................... 736,064 25,932
- --------------------------------------------------------------------------------
Total investment income........................ 6,228,505 45,474
- --------------------------------------------------------------------------------
Expenses
Advisory fee................................... 1,240,256 36,383
Distribution Plan expenses..................... 3,178 1
Administrative services fees................... 46,279 1,305
Transfer agent fee............................. 1,987 34
Trustees' fees and expenses.................... 2,973 16
Custodian fee.................................. 52,745 3,835
Registration and filing fees................... 49,291 24,004
Professional fees.............................. 16,864 27,762
Other.......................................... 26,534 9,040
- --------------------------------------------------------------------------------
Total expenses................................ 1,440,107 102,380
Less: Fee credits............................. (7,631) (536)
Fee waivers and/or expense
reimbursements........................ (176,881) (65,459)
- --------------------------------------------------------------------------------
Net expenses.................................. 1,255,595 36,385
- --------------------------------------------------------------------------------
Net investment income.......................... 4,972,910 9,089
- --------------------------------------------------------------------------------
Net realized and unrealized gains or losses on
securities
Net realized gains or losses on securities..... 1,300,304 (41,350)
Net change in unrealized gains or losses on
securities................................... (11,035,720) 648,999
- --------------------------------------------------------------------------------
Net realized and unrealized gains or losses on
securities................................... (9,735,416) 607,649
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations.............................. $ (4,762,506) $616,738
</TABLE>
- --------------------------------------------------------------------------------
(a) For the period from February 26, 1999 (commencement of operations) to June
30, 1999.
See Combined Notes to Financial Statements.
13
<PAGE>
EVERGREEN
Select Equity Funds
Statements of Changes in Net Assets
Year Ended June 30, 1999
<TABLE>
<CAPTION>
Equity Secular
Income Growth
Fund Fund (a)
- -------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income.......................... $ 4,972,910 $ 9,089
Net realized gains or losses on securities..... 1,300,304 (41,350)
Net change in unrealized gains or losses on
securities.................................... (11,035,720) 648,999
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations.................... (4,762,506) 616,738
- --------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class I....................................... (4,792,315) (7,798)
Class IS...................................... (30,216) (1)
Net realized gains
Class I....................................... (13,379,242) 0
Class IS...................................... (96,788) 0
- --------------------------------------------------------------------------------
Total distributions to shareholders........... (18,298,561) (7,799)
- --------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold...................... 15,870,867 39,940,669
Payment for shares redeemed.................... (62,146,708) (425,994)
Net asset value of shares issued in
reinvestment of distributions................. 10,686,855 5,403
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share transactions.... (35,588,986) 39,520,078
- --------------------------------------------------------------------------------
Total increase (decrease) in net assets...... (58,650,053) 40,129,017
Net assets
Beginning of period............................ 205,745,201 --
- --------------------------------------------------------------------------------
End of period.................................. $147,095,148 $40,129,017
- --------------------------------------------------------------------------------
Undistributed (overdistributed) net investment
income........................................ $ (2,447) $10,878
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(a) For the period from February 26, 1999 (commencement of operations) to June
30, 1999.
See Combined Notes to Financial Statements.
14
<PAGE>
EVERGREEN
Select Equity Funds
Statement of Changes in Net Assets
Period Ended June 30, 1998
<TABLE>
<CAPTION>
Equity Income
Fund (a)
- -------------------------------------------------------------------------------
<S> <C>
Operations
Net investment income........................................... $ 3,454,381
Net realized gains on securities................................ 13,507,208
Net change in unrealized losses on securities................... (9,422,160)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations........... 7,539,429
- -------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class I........................................................ (3,466,746)
Class IS....................................................... (9,467)
- -------------------------------------------------------------------------------
Total distributions to shareholders............................ (3,476,213)
- -------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold....................................... 224,077,449
Payment for shares redeemed..................................... (22,411,624)
Net asset value of shares issued in reinvestment of
distributions.................................................. 16,160
- -------------------------------------------------------------------------------
Net increase in net assets resulting from capital share
transactions.................................................. 201,681,985
- -------------------------------------------------------------------------------
Total increase in net assets.................................. 205,745,201
Net assets
Beginning of period............................................. --
- -------------------------------------------------------------------------------
End of period................................................... $205,745,201
- -------------------------------------------------------------------------------
Undistributed net investment income............................. $ 46,652
</TABLE>
- --------------------------------------------------------------------------------
(a) For the period from November 24, 1997 (commencement of operations) to June
30, 1998.
See Combined Notes to Financial Statements.
15
<PAGE>
Combined Notes to Financial Statements
1. ORGANIZATION
The Evergreen Select Equity Funds consist of two separate series. The Evergreen
Select Equity Income Fund ("Equity Income Fund") and Evergreen Select Secular
Growth Fund ("Secular Growth Fund"), (collectively, the "Funds") are each sepa-
rate diversified series of Evergreen Select Equity Trust (the "Trust"), a Dela-
ware business trust organized on September 18, 1997. The Trust is an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act").
The Funds offer an Institutional Class of shares ("Class I") and an Institu-
tional Service Class of shares ("Class IS"). Each Class of shares is sold with-
out a front-end sales charge or contingent deferred sales charge. Class IS
shares pay an ongoing service fee.
2. CONVERSION INFORMATION
On November 24, 1997, the Equity Income Fund commenced operations of its Class
I shares as a result of a conversion of a common trust fund managed by First
Union National Bank ("FUNB"), a subsidiary of First Union Corporation ("First
Union"). The following summarizes pertinent data related to the Fund on the
date of conversion:
<TABLE>
<S> <C>
Shares issued....................................... 2,271,990
Net assets.......................................... $198,356,197
Net asset value per share........................... $ 87.31
Unrealized appreciation of investments.............. $ 41,786,759
</TABLE>
The above amounts are reflected in proceeds from shares sold in the statement
of changes in net assets and the capital shares transactions disclosure for the
period ended June 30, 1998.
3. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
The Funds value securities traded on an established securities exchange or in-
cluded on the Nasdaq National Market System ("NMS") at the last reported sales
price on the exchange where primarily traded. The Funds value securities traded
on an exchange or NMS for which there has been no sale and other securities
traded in the over-the-counter market at the mean between the last reported bid
and asked price. Securities for which valuations are not available from an in-
dependent pricing service, including restricted securities, are valued at fair
value as determined in good faith according to procedures established by the
Board of Trustees. Money market shares are valued at net asset value. 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 in a segregated account by the custodian on
the Fund's behalf. Collateral for certain tri-party repurchase agreements is
held at the counterparty's custodian in a segregated account for the benefit of
the Fund and the counterparty. Each Fund monitors the adequacy of the collat-
eral 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
16
<PAGE>
Combined Notes to Financial Statements (continued)
includes accretion of discounts and amortization of premiums. Dividend income
is recorded on the ex-dividend date or in the case of some foreign securities,
on the date thereafter when the Fund is made aware of the dividend. Foreign in-
come may be subject to foreign withholding taxes, which are accrued as applica-
ble. Capital gains realized on some foreign securities are subject to foreign
taxes, which are accrued as applicable.
D. Federal Taxes
The Funds qualify as regulated investment companies under the Internal Revenue
Code of 1986, as amended (the "Code"). As such, 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 fed-
eral 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.
E. Distributions
Distributions from net investment income for the Funds are declared and paid
monthly. Distributions from net realized capital gains, if any, are declared
and 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 accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles. The differences between financial statement amounts avail-
able for distribution and distributions made in accordance with income tax reg-
ulations are primarily due to differing treatment for certain distributions re-
ceived from real estate investment trusts and certain operating expenses. Cer-
tain distributions paid during previous years have been reclassified to conform
to current year presentation.
F. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. Currently, class specific expenses are limited
to expenses incurred under the Distribution Plans for Class IS.
4. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
FUNB is the investment advisor to each Fund. Each Fund 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 of each
Fund.
<TABLE>
<CAPTION>
Annual
Advisory fee
------------
<S> <C>
Equity Income Fund.................................. 0.70%
Secular Growth Fund................................. 0.70%
</TABLE>
FUNB has voluntarily agreed to reduce the investment advisory fee on each Fund
and to reimburse a portion of each Fund's annual operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses). For the pe-
riod ended June 30, 1999, FUNB voluntarily reduced its fee by $176,881 on the
Equity Income Fund. For Secular Growth Fund, FUNB reduced its fee by $36,383
and reimbursed $29,076 of operating expenses.
Evergreen Investment Services ("EIS"), a subsidiary of First Union, is the ad-
ministrator and The BISYS Group, Inc. ("BISYS") is sub-administrator to the
Funds. As administrator, EIS provides the Funds with facilities, equipment and
personnel. As sub-administrator to the Funds, BISYS provides the officers of
the Funds. Officers of the Funds and affiliated Trustees receive no compensa-
tion directly from 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 invest-
ment advisors. The administration fee is calculated by applying percentage
rates, which start
17
<PAGE>
Combined Notes to Financial Statements(continued)
at 0.05% and decline to 0.01% per annum as net assets increase, to the average
daily net assets of the Fund. The sub-administration fee is calculated by ap-
plying percentage rates, which start at 0.01% and decline to 0.004% per annum
as net assets increase, to the average daily net assets of the Fund.
For the period ended June 30, 1999, the Funds paid or accrued the following
amounts to EIS for administration fees and BISYS for sub-administration fees:
<TABLE>
<CAPTION>
Administration Sub-administration
Fee Fee
---------------------------------
<S> <C> <C>
Equity Income Fund............ $36,770 $9,509
Secular Growth Fund........... 1,039 266
</TABLE>
Evergreen Service Company ("ESC"), an indirect, wholly-owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the
Funds.
5. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of BISYS, serves
as principal underwriter to the Funds.
Each Fund has adopted Distribution Plans, as allowed by Rule 12b-1 of the 1940
Act, for Class IS shares. Distribution plans permit a Fund to compensate 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 "Distribution Plan expenses". Class IS currently pays a service
fee equal to 0.25% of the average daily net assets of the class. Distribution
Plan expenses are calculated daily and paid at least quarterly.
Each of the Distribution Plans may be terminated at any time by vote of the In-
dependent Trustees or by vote of a majority of the outstanding voting shares.
6. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class I and Class IS. Transactions in shares of the Funds were as
follows:
- --------------------------------------------------------------------------------
Equity Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
---------------------- -----------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold.................. 177,584 $ 14,183,866 2,538,811 $222,155,844
Shares redeemed.............. (778,817) (60,294,235) (244,829) (22,042,302)
Shares issued on reinvestment
of distributions............ 135,064 10,587,695 120 10,787
- -------------------------------------------------------------------------------
Net increase (decrease)...... (466,169) (35,522,674) 2,294,102 200,124,329
- -------------------------------------------------------------------------------
Class IS
Shares sold.................. 21,079 1,687,001 20,878 1,921,605
Shares redeemed.............. (23,255) (1,852,473) (4,122) (369,322)
Shares issued on reinvestment
of distributions............ 1,264 99,160 59 5,373
- -------------------------------------------------------------------------------
Net increase (decrease)...... (912) (66,312) 16,815 1,557,656
- -------------------------------------------------------------------------------
Net increase (decrease)...... $(35,588,986) $201,681,985
</TABLE>
- --------------------------------------------------------------------------------
(a) For Equity Income Fund, Class I and Class IS, the capital share activity is
for the period from November 24, 1997 and March 11, 1998, respectively,
(commencements of class operations) to June 30, 1998.
18
<PAGE>
Combined Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Secular Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
June 30, 1999 (b)
--------------------
Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C>
Class I
Shares sold............................................... 405,610 $39,939,701
Shares redeemed........................................... (4,346) (425,994)
Shares issued on reinvestment of distributions............ 54 5,402
- --------------------------------------------------------------------------------
Net increase.............................................. 401,318 39,519,109
- --------------------------------------------------------------------------------
Class IS
Shares sold............................................... 10 968
Shares issued on reinvestment of distributions............ 0 1
- --------------------------------------------------------------------------------
Net increase.............................................. 10 969
- --------------------------------------------------------------------------------
Net increase.............................................. $39,520,078
</TABLE>
- --------------------------------------------------------------------------------
(b) For Secular Growth Fund, Class I and Class IS, the capital share activity
is for the period from February 26, 1999 (commencement of class operations)
to June 30, 1999.
7. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the period ended June 30, 1999:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
-------------------------------------
<S> <C> <C>
Equity Income Fund........ $191,906,031 $241,956,669
Secular Growth Fund....... 41,229,915 3,888,098
</TABLE>
On June 30, 1999, the composition of unrealized appreciation and depreciation
on securities based on the aggregate cost of securities for federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net
Unrealized Unrealized Unrealized
Tax Cost Appreciation Depreciation Appreciation
--------------------------------------------------
<S> <C> <C> <C> <C>
Equity Income
Fund........... $125,959,651 $26,971,138 $5,540,316 $21,430,822
Secular Growth
Fund........... 38,092,342 1,763,494 1,288,098 475,396
</TABLE>
8. EXPENSE OFFSET ARRANGEMENTS
The Funds have entered into an expense offset arrangement with ESC and their
custodian whereby credits realized as a result of uninvested cash balances were
used to reduce a portion of each Fund's related expenses. The assets deposited
with ESC and the custodian under these expense-offset arrangements could have
been invested in income-producing assets. The amount of fee credits received by
each Fund and the impact on each Fund's expense ratio represented as a percent-
age of its average daily net assets were as follows:
<TABLE>
<CAPTION>
Total Fee % of Average
Credits Received Daily Net Assets
---------------------------------
<S> <C> <C>
Equity Income Fund............ $7,631 0.01%
Secular Growth Fund........... 536 0.01
</TABLE>
9. 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 install-
ments 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.
19
<PAGE>
Combined Notes to Financial Statements(continued)
10. FINANCING AGREEMENTS
Certain Evergreen Funds, State Street Bank and Trust Company ("State Street")
and a group of banks (collectively, the "Banks") entered into a financing
agreement dated December 22, 1997, as amended on November 20, 1998. Under this
agreement, the Banks provided an unsecured credit facility in the aggregate
amount of $400 million ($275 million committed and $125 million uncommitted).
The credit facility was allocated, under the terms of the financing agreement,
among the Banks. The credit facility was accessed by the Funds for temporary or
emergency purposes only and was subject to each Fund's borrowing restrictions.
Borrowings under this facility bear interest at 0.50% per annum above the Fed-
eral Funds rate. A commitment fee of 0.065% per annum will be incurred on the
unused portion of the committed facility, which was allocated to all of the
funds. For its assistance in arranging this financing agreement, the Capital
Markets Group of First Union was paid a one-time arrangement fee of $27,500.
State Street serves as administrative agent for the Banks, and as administra-
tive agent is entitled to a fee of $20,000 per annum which is allocated to all
of the Funds.
This agreement was amended and renewed on December 22, 1998. The amended fi-
nancing agreement became effective on December 22, 1998 among all of the Ever-
green Funds, State Street and The Bank of New York ("BONY"). Under this agree-
ment, State Street and BONY provide an unsecured credit facility in the aggre-
gate amount of $150 million ($125 million committed and $25 million uncommit-
ted). The remaining terms and conditions of the agreement are unaffected.
During the year ended June 30, 1999, the Funds had no borrowing under these
agreements.
11. DISTRIBUTIONS TO SHAREHOLDERS
On July 1, 1999, the Funds declared the following distributions from net in-
vestment income. The distributions were payable on July 2, 1999 to shareholders
of record on June 30, 1999. These distributions are not reflected in the accom-
panying financial statements.
<TABLE>
<CAPTION>
Class I Class IS
----------------
<S> <C> <C>
Equity Income Fund............................. $0.106 $0.090
Secular Growth Fund............................ 0.003 0.000
</TABLE>
12. SUBSEQUENT EVENTS
Common Trust Fund Conversion
Effective on the close of business July 9, 1999, Secular Growth Fund acquired
all of the assets and identified liabilities of certain common trust funds man-
aged by FUNB. The net assets, consisting primarily of portfolio securities,
were acquired either through a taxable or tax-free exchange for Class I shares
of the Secular Growth Fund.
The following summarizes pertinent data related to the Funds on the date of the
acquisition:
<TABLE>
<CAPTION>
Evergreen
Total Total Net Fund Unrealized
Acquiring Evergreen Shares Assets NAV/Share Appreciation of
Fund Common Trust Fund Issued Acquired Class I Investments
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Secular Growth Fund CoreStates Growth Equity Fund 4,185,687 $433,994,394 $103.69 0
CoreStates Growth Equity Trust 1,194,440 $123,845,912 $36,115,475
CoreStates Charitable Equity Trust 1,069,362 $110,877,230 $31,871,390
CoreStates Growth & Income Fund 787,473 $ 81,649,376 0
--------- ------------ -----------
Total 7,236,962 $750,366,912 $67,986,865
========= ============ ===========
</TABLE>
Merger of Equity Income Fund
Effective the close of business on July 30, 1999, the assets and identified li-
abilities of Equity Income Fund were acquired by the Evergreen Select Core Eq-
uity Fund ("Core Equity Fund"), an open-end management
20
<PAGE>
Combined Notes to Financial Statements (continued)
investment company registered under the 1940 Act in an exchange of shares. The
net assets of the Equity Income Fund were exchanged through a tax-free exchange
for 14,454 Class IS shares and 1,629,831 Class I shares of Core Equity Fund.
The acquired net assets consisted primarily of portfolio securities with
unrealized appreciation of $15,463,739. Aggregate net assets of Equity Income
Fund and Core Equity Fund immediately before the acquisition were $132,358,403
and $2,449,655,426, respectively. The aggregate net assets of Core Equity Fund
after the acquisition were $2,582,013,829.
21
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders of
Evergreen Select Equity Trust:
We have audited the accompanying statements of assets and liabilities, includ-
ing the schedules of investments of the Evergreen Select Equity Income Fund and
the Evergreen Select Secular Growth Fund (the "Funds") as of June 30, 1999, and
the related statements of operations for the year or period then ended, the
statements of changes in net assets for each of the years or periods in the two
year period then ended and the financial highlights for each of the years or
periods as described on page 8 and 9. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ever-
green Select Equity Income Fund and Evergreen Select Secular Growth Fund as of
June 30, 1999, the results of their operations, changes in their net assets and
financial highlights for each of the years or periods described above in con-
formity with generally accepted accounting principles.
/s/ KPMG LLP
Boston, Massachusetts
August 6, 1999
22
<PAGE>
Additional Information (Unaudited)
YEAR 2000
Like other investment companies, the Funds could be adversely affected if the
computer systems used by the Funds' investment advisors and the Funds' other
service providers are not able to perform their intended functions effectively
after 1999 because of the inability of computer software to distinguish the
year 2000 from the year 1900. The Funds' investment advisors are taking steps
to address this potential year 2000 problem with respect to the computer sys-
tems that they use and to obtain satisfactory assurances that comparable steps
are being taken by the Funds' other major service providers. At this time, how-
ever, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Funds from this problem.
SPECIAL MEETING OF SHAREHOLDERS
On July 30, 1999 a Special Meeting of Shareholders for Select Equity Income
Fund was held to consider a number of proposals. On May 28, 1999, the record
date for the meeting, the Fund had net assets of $153,072,604 eligible to be
voted, of which $150,600,573 were voted at the meeting.
The following proposals were discussed and voted on:
1. To approve an Agreement and Plan of Reorganization whereby Evergreen Select
Core Equity Fund, a series of Evergreen Select Equity Trust, will (i)
acquire all of the assets of Equity Income in exchange for shares of
Evergreen Select Core Equity Fund; and (ii) assume the identified
liabilities of Equity Income, as substantially described in the accompanying
Prospectus/Proxy Statement.
<TABLE>
<CAPTION>
Percentage
of record Percentage
Net assets net assets of net
voted outstanding assets voted
---------------------------------------------
<S> <C> <C> <C>
Affirmative........ $150,536,429.13 98.343% 99.957%
Against............ 64,143.94 .042% .043%
Abstain............ .00 .000% .000%
--------------- ------ -------
Total............. $150,600,573.07 98.385% 100.000%
=============== ====== =======
</TABLE>
2. To consider and vote upon such other matters as may properly come before
said meeting or any adjournments thereof.
<TABLE>
<CAPTION>
Percentage
of record Percentage
Net assets net assets of net
voted outstanding assets voted
---------------------------------------------
<S> <C> <C> <C>
Affirmative........ $ 1,120,522.72 .732% .745%
Against............ 149,320,407.53 97.549% 99.245%
Abstain............ 14,871.78 .009% .010%
--------------- ------ -------
Total............. $150,455,802.03 98.290% 100.000%
=============== ====== =======
</TABLE>
- --------------------------------------------------------------------------------
FEDERAL TAX STATUS OF DISTRIBUTIONS
Pursuant to section 852 of the Internal Revenue Code, the Equity In-
come Fund has designated $11,194,062 as long-term 20% capital gain
distribution for the fiscal year ended June 30,1999. The per share
capital distribution is $4.98.
For corporate shareholders, the following percentages of ordinary in-
come dividends paid during the fiscal year ended June 30, 1999 quali-
fied for the dividends and received deductions.
<TABLE>
<S> <C>
Equity Income Fund........................................ 78.42%
Secular Growth Fund....................................... 5.85
</TABLE>
Shareholders are advised to use information received on Form 1099 to
determine their taxable long-term capital gain distribution rather
than the per share amounts presented above.
- --------------------------------------------------------------------------------
23
<PAGE>
EVERGREEN SELECT FUNDS
Money Market
Money Market Fund
Treasury Money Market Fund
100% Treasury Money Market Fund
Municipal Money Market Fund
Municipal Fixed Income
Intermediate Term Municipal Bond Fund
Taxable Fixed Income
International Bond Fund
Total Return Bond Fund
Income Plus Fund
Core Bond Fund
Fixed Income Fund
Adjustable Rate Fund
Limited Duration Fund
Growth and Income/Balanced
Balanced Fund
Growth
Special Equity Fund
Small Cap Growth Fund
Small Company Value Fund
Strategic Growth Fund
Core Equity Fund
Equity Index Fund
Large Cap Blend Fund
Strategic Value Fund
Diversified Value Fund
Social Principles Fund
Secular Growth Fund
11796 547174 08/99
[LOGO OF EVERGREEN FUNDS APPEARS HERE] BULK RATE
200 Berkeley Street U.S. POSTAGE
Boston, MA 02116 PAID
PERMIT NO. 19
HUDSON, MA
