<PAGE>
December 31, 1998
[ARTWORK APPEARS HERE]
Evergreen Select
Equity Growth Funds
Semiannual Report
[LOGO OF EVERGREEN FUNDS/TM/ APPEARS HERE]
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TABLE OF CONTENTS
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Letter to Shareholders .................................................. 1
Evergreen Select Core Equity Fund
Fund at a Glance ...................................................... 2
Portfolio Manager Commentary .......................................... 3
Evergreen Select Diversified Value Fund
Fund at a Glance ...................................................... 5
Portfolio Manager Commentary .......................................... 6
Evergreen Select Large Cap Blend Fund
Fund at a Glance ...................................................... 8
Portfolio Manager Commentary .......................................... 9
Evergreen Select Small Cap Growth Fund
Fund at a Glance ...................................................... 11
Portfolio Manager Commentary .......................................... 12
Evergreen Select Small Company Value Fund
Fund at a Glance ...................................................... 15
Portfolio Manager Commentary .......................................... 16
Evergreen Select Social Principles Fund
Fund at a Glance ...................................................... 20
Portfolio Manager Commentary .......................................... 21
Evergreen Select Special Equity Fund
Fund at a Glance ...................................................... 23
Portfolio Manager Commentary .......................................... 24
Evergreen Select Strategic Growth Fund
Fund at a Glance ...................................................... 27
Portfolio Manager Commentary .......................................... 28
Evergreen Select Strategic Value Fund
Fund at a Glance ...................................................... 30
Portfolio Manager Commentary .......................................... 31
Financial Highlights
Evergreen Select Core Equity Fund ..................................... 34
Evergreen Select Diversified Value Fund ............................... 35
Evergreen Select Large Cap Blend Fund ................................. 36
Evergreen Select Small Cap Growth Fund ................................ 38
Evergreen Select Small Company Value Fund ............................. 39
Evergreen Select Social Principles Fund ............................... 40
Evergreen Select Special Equity Fund .................................. 42
Evergreen Select Strategic Growth Fund ................................ 44
Evergreen Select Strategic Value Fund ................................. 45
Schedule of Investments
Evergreen Select Core Equity Fund ..................................... 46
Evergreen Select Diversified Value Fund ............................... 49
Evergreen Select Large Cap Blend Fund ................................. 51
Evergreen Select Small Cap Growth Fund ................................ 53
Evergreen Select Small Company Value Fund ............................. 55
Evergreen Select Social Principles Fund ............................... 58
Evergreen Select Special Equity Fund .................................. 60
Evergreen Select Strategic Growth Fund ................................ 62
Evergreen Select Strategic Value Fund ................................. 64
Statements of Assets and Liabilities .................................... 66
Statements of Operations ................................................ 68
Statements of Changes in Net Assets ..................................... 70
Combined Notes to Financial Statements .................................. 75
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Evergreen Funds
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Evergreen Funds is one of the nation's fastest growing investment companies with
over $50 billion in assets under management.
With over 70 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 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.
Mutual Funds: ARE NOT FDIC INSURED May lose value o Are not bank guaranteed
Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
February 1999
[PHOTO OF WILLIAM M. ENNIS
APPEARS HERE]
William M. Ennis
[PHOTO OF DAVID C. FRANCIS
APPEARS HERE]
David C. Francis, CFA
Dear Shareholders:
We are pleased to provide you the Evergreen Select Equity Funds semiannual
report covering the six months ended December 31, 1998.
Increased Market Volatility in 1998
During the year, interest rates declined while inflation was low and investors
became concerned about a possible slowdown in economic growth. Despite the
volatility that started in July, the market ended on a positive note, as
indicated by the Dow Jones Industrial Average posting an 18.1% gain and the S&P
500 returning 28.7% for the 12 months ended December 31, 1998. The financial
markets have certainly experienced increased volatility compared to a smoother
ride we saw in the past few years, and we anticipate the volatility will
continue. We encourage you to take this opportunity to talk to your financial
representative and review your investment time horizon to ensure you are on
track with your goals.
Introduction of the Euro
On January 1, 1999 eleven European countries adopted the euro as their currency.
Currently, the wholesale markets and government and financial sectors have
converted to the euro, and new securities will be issued in euro denomination
only. Full conversion to the new currency will not be completed until 2002.
At this point it is still unclear how the euro conversion will affect foreign
exchange rates, interest rates and the value of European securities, but we
believe the potential benefits to globally oriented investors are significant.
They include changes in currency risk, increased competition, and a central
bank. Foreign exchange risk may decrease for the countries participating in the
European Union; however, currency risk associated with rises and declines of the
value of the euro versus the dollar will still exist. Most noticeable for
investors will be the ability to compare the value of companies across the
European Union member countries without having to factor in the effect of
fluctuating currencies. Increased competition resulting from deregulation and
economic unification may produce a wave of merger and acquisition activity,
which could present attractive investment opportunities for those able to
identify the companies most inclined to benefit from restructuring. Finally, the
European Central Bank, comparable to the U.S. Federal Reserve, will provide
European Union countries with a unified monetary policy for the first time.
Year 2000/1/
We have been addressing the Year 2000 issue since February 1996 and have adopted
an industry best practices methodology for the project. Our team is on schedule
to complete the following milestones: Inventory and Assessment, Remediation,
Testing and Contingency. Although Evergreen Funds is striving to identify and
correct every issue under our control related to the Year 2000, it would be
impossible to guarantee a problem-free transition into the next millennium. Our
goal, however, is that our shareholders experience virtually no impact on the
products and services we deliver.
Thank you for your continued investment in Evergreen Select Funds.
Sincerely,
[SIGNATURE APPEARS HERE]
William M. Ennis
Managing Director
Evergreen Funds
/s/ David C. Francis, CFA
David C. Francis, CFA
Managing Director
Chief Investment Officer
First Capital Group
1 The information above constitutes Year 2000 readiness disclosure.
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EVERGREEN
Select Core Equity Fund
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Fund at a Glance as of December 31, 1998
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PORTFOLIO PROFILE
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Philosophy
Evergreen Select Core Equity 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
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PERFORMANCE AND RETURNS
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Class I Class IS
Average Annual Returns
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6 months 0.85% 0.73%
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1 year 12.97% 12.74%
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3 years 21.90% 21.63%
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5 years 17.99% 17.72%
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10 years 15.23% 14.95%
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Since Inception 15.60% 15.32%
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6-month income distributions per share $0.45 $0.31
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6-month capital gain distributions per share $7.83 $7.83
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LONG TERM GROWTH
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[LINE GRAPH APPEARS HERE]
Date Select Core Equity CPI S & P 500
---- ------------------ --- ---------
12/31/81 1,000,000 1,000,000 1,000,000
12/31/83 1,513,353 1,078,153 1,489,603
12/31/85 2,010,982 1,163,062 2,085,321
12/31/87 2,505,532 1,228,065 2,604,509
12/31/89 3,634,087 1,341,561 3,999,411
12/31/91 4,537,789 1,467,089 5,055,943
12/31/93 5,138,335 1,551,136 5,989,504
12/31/95 6,486,702 1,631,949 8,349,414
12/31/97 10,401,679 1,716,049 13,691,122
12/31/98 11,750,743 1,746,915 17,603,220
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Core Equity Fund Class I, the S&P 500 Index and the Consumer Price 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. Class I and IS performance information
includes the performance of the fund's predecessor common trust fund for the
periods before the Fund's registration statement became effective on 11/21/97.
Performance for the common trust fund has been adjusted to include the effect of
estimated mutual fund class gross expense ratios at the time the Fund was
converted to a mutual fund. If fee waivers and expense reimbursements had been
calculated into the mutual fund class expense ratio the average annual total
returns would be as follows: Class I--3 years = 21.96%; 5 years = 18.07%; 10
years = 15.32%; and since 12/31/81 = 15.69%. Class IS--3 years = 21.70%; 5 years
= 17.80%; 10 years = 15.05%; and since 12/31/81 = 15.42%. The Class IS share
performance for the period from 11/24/97 through 2/4/98 (class inception date)
is based upon the historical performance of the Class I shares, and therefore,
does not reflect 12b-1 fees. If 12b-1 fees had been included, performance for
the Class IS shares for this period would have been lower. Returns of Class I
and IS, since their respective commencement of class operations, were 13.68% and
10.04%, respectively. The return for Class IS is cumulative. The common 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 common trust fund had been registered under the 1940 Act, its
performance may have been adversely affected. Index returns do not reflect
expenses, which have been deducted from the Fund's return. It is not possible to
invest directly in an index.
2
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EVERGREEN
Select Core Equity 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.
[PHOTO OF MARK C. SIPE APPEARS HERE]
Mark C. Sipe
[PHOTO OF HANSPETER GIGER APPEARS HERE]
Hanspeter Giger
A Unique Year
The year just ended was one of increased volatility, particularly during the
second half. From Asian economic conditions and perceived spillover effects on
the domestic economy, to political scandal, U.S. bombings of Iraq, and internet
mania, there was more than enough to keep everyone on his or her toes. Keeping
pace with the market, as represented by the S&P 500, was the real challenge to
investors with diversified portfolios with significant holdings in stocks
outside the largest 50 stocks in the S&P 500.
Portfolio
Characteristics
---------------
Total Net Assets $1,892,837,747
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Number of Issues 121
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P/E Ratio 30.1x
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Beta 1.00
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A Narrow Market Advance
As highlighted in earlier Fund reports, the performance of the largest of the
large-capitalization stocks versus all other stocks was a strong theme that
continued in the last six months of 1998. This occurred despite a strong but
rapidly diminishing rally in smaller stocks, as represented by the Russell 2000
Index, which took place starting in early October and peaked just a month later.
For the year, the gap between the dollar-weighted S&P 500 and the equally
weighted index was a 21.4% spread, according to information provided by Salomon
Smith Barney. To further emphasize the performance disparity, the top 10 S&P
stocks by market cap were up over 68% versus the average stock in the index up
just under 13% in 1998. During the latter two quarters of the year, that same
comparison yielded a 23 percentage point disparity in favor of the S&P Top 10
over the average stock in the S&P 500 Index.
The Fund's Performance
The market cap phenomenon clearly affected the Evergreen Select Core Equity
Fund's performance during the first half of its fiscal year, as it delivered a
total return of 0.85% compared to the S&P 500's 9.35%. The Fund's performance
more closely tracked the average diversified equity fund, as measured by Lipper
Analytical Services, although it trailed the yardstick measure of 2.17% for the
fiscal period.
An analysis of the Fund's performance indicates that a significant portion of
its performance deficit relative to other large-cap-oriented funds was directly
attributable to the comparatively lower, dollar-weighted, median market cap of
its holdings. This comparison indicates it was not stock selection per se, but
underweightings in the portfolio's largest capitalization stocks relative to
their weightings in the S&P 500 that accounted for the bulk of the difference in
performance in both periods.
3
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EVERGREEN
Select Core Equity Fund
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Portfolio Manager Commentary
Top 5 Industry Allocation
-------------------------
(based on 12/31/98 net assets)
Information Services & Technology 17.5%
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Healthcare Products & Services 15.7%
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Food & Beverage Products 8.5%
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Oil/Energy 7.2%
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Finance & Insurance 6.6%
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Sector Activity and Stock Selection
Other factors, namely sector weightings and stock selection, clearly affected
the Fund's performance as well. During 1998, the technology, communications
services, and healthcare sectors led the market, and those same sectors were
also the stars in the Core Equity Fund's fiscal period. These can generally be
classified as the "growth" segments of the market.
Focusing specifically on the last two quarters, the dichotomy in performance can
be demonstrated in the Fund's holdings, where 13 of the top 20 stocks in the
Fund were technology names that were up 54% on average. Further, all but 4 of
the top 20 performing stocks came from the best-performing sectors mentioned
above, and the average market cap for all of the top 20 names was roughly $59
billion. Lastly, stock selection was a positive contributor in Technology and
Communications Services, although not so in Health Care, where the Fund was
under-represented in large-cap pharmaceutical company stocks versus the
benchmark.
Lagging sectors, which were common to the six-month period and the year, were
the generally more mature, or "value" segments, such as basic materials, energy,
transportation, and electric utilities. During the final two quarters of the
year, those sectors were joined by the financial stocks. Of the poorest
performers in the Fund during the same period, 11 of the 20 worst stocks came
from 3 of those 4 sectors, with the average stock in that group down 43%. The
average market capitalization of those same stocks was under $4 billion, and not
much higher for the bottom 20 names at $7 billion. In addition to the poor
showings of the sectors themselves, overweighted positions in basic materials
and energy also affected the performance of the Fund.
Top 10 Holdings
---------------
(based on 12/31/98 net assets)
General Electric Co. 3.8%
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Coca Cola Co. 3.2%
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International Business Machines Corp. 2.7%
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Phillip Morris Companies, Inc. 2.4%
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MCI WorldCom, Inc. 2.4%
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Intel Corp. 2.3%
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SmithKline Beecham Plc. A DR 1.9%
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Du Pont (E.I.) De Nemours & Co. 1.8%
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Microsoft Corp. 1.8%
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Compaq Computer Corp. 1.7%
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Looking ahead to 1999
The outlook for the stock market remains challenged by the issues of the day, in
particular the resilience of the U.S. economy in the face of difficulties
abroad. The direction and relative strength of corporate earnings will remain a
key focus for investors. Domestic economic conditions remain sound for now, with
interest rates and inflation supportive of continued, modest growth. In late
December, we began allocating the Fund's holdings in proportion to their
respective weighting within the market indices. We believe that while not
changing our stock selection criteria or process, this modification will help
overcome the primary factor causing our comparative performance shortfall in the
first half of the fiscal year. Thorough research of each equity investment going
into the Fund, focusing on business fundamentals as well as valuation will
continue to be the focus of our efforts over the long term.
4
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EVERGREEN
Select Diversified Value Fund
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Fund at a Glance as of December 31, 1998
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PORTFOLIO PROFILE
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Philosophy
The Evergreen Select Diversified Value Fund is a core fund with an emphasis on
traditional value, utilizing fundamental analysis to determine if a stock is
selling at a reasonable valuation level. The Fund seeks to capture the best
opportunities in a value universe by emphasizing securities with perceived
intrinsic value above current market levels due to temporary or anticipated
problems.
Process
Primarily, the Fund invests in undervalued companies using a "bottom-up"
approach that concentrates on analyzing security fundamentals rather than broad
economic forecasts. The Diversified Value team strives to produce a portfolio
that best controls risk and balances a risk/reward relationship.
Benchmark
S&P 500
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PERFORMANCE AND RETURNS
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Class I Class IS
Average Annual Returns
6 months -0.10% -0.25%
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1 year 8.69% 7.15%
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3 years 17.75% 17.19%
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5 years 17.11% 16.78%
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Since Inception 16.37% 16.16%
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6-month income distributions per share $0.13 $0.08
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6-month capital gain distributions per share $0.65 $0.65
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LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Select Diversified Value CPI S & P 500
---- ------------------------ --- ---------
1/31/91 1,000,000 1,000,000 1,000,000
12/31/91 1,211,029 1,024,510 1,250,238
12/31/92 1,311,716 1,053,923 1,345,474
12/31/93 1,439,063 1,083,202 1,481,090
12/31/94 1,468,867 1,112,184 1,500,655
12/31/95 1,941,881 1,139,636 2,064,651
12/31/96 2,314,959 1,178,306 2,538,595
12/31/97 2,916,951 1,198,366 3,385,553
12/31/98 3,170,531 1,219,921 4,352,940
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Diversified Value Fund Class I, the S&P 500 Index and the Consumer Price 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. Class I shares' historical
performance, prior to 1/22/98, is that of the original Evergreen Value Fund
Class Y. Class IS shares' historical performance, prior to 1/22/98, is that of
the original Evergreen Value Fund Class Y, and subsequently reflects that of the
original Class I shares and does not reflect 12b-1 fees. If 12b-1 fees had been
included, performance for the Class IS shares for these periods would have been
lower. Returns of Class I and IS, since their respective commencement of class
operations, were 10.61% and -2.43%, respectively. These returns are cumulative.
Index returns do not reflect expenses, which have been deducted from the Fund's
return. It is not possible to invest directly in an index.
5
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EVERGREEN
Select Diversified Value Fund
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Portfolio Manager Commentary
Portfolio Management Team
Jack Gray, Steve Hoeft, and Eric Teal, who have a combined 49 years of
investment experience, manage the Evergreen Select Diversified Value Fund. The
team employs rigorous fundamental analysis combined with a disciplined
quantitative approach to seek superior results and adherence to risk/reward
objectives.
[PHOTO OF JACK GRAY APPEARS HERE]
Jack Gray
[PHOTO OF STEVE HOEFT APPEARS HERE]
Steve Hoeft
[PHOTO OF ERIC TEAL APPEARS HERE]
Eric Teal
A Challenging Market Environment
It was extremely difficult for active strategies to outperform passive
strategies in 1998. Market leadership has been narrowing since the profit cycle
peaked in early 1995; in fact, the actual market-cap weighted S&P 500 index
outperformed the equal-weighted index by over 1500 basis points in 1998, the
largest margin since the "Nifty Fifty" period of the early-1970's. Despite
strong performance from the popular market indices, the average stock declined
during the year and the secondary averages were flat or negative.
Moreover, growth funds significantly outperformed value funds during this
period. This phenomenon is rather typical during a profit recession since only a
few growth companies are able to maintain their growth rates and, thus, these
stocks become too expensive for value funds, because by definition value
managers are contrarian and comparison shoppers. The profit cycle has been
decelerating since 1995 and growth has outperformed value during this period.
Portfolio
Characteristics
Total Net Assets $685,878,000
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Number of Issues 70
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P/E Ratio 23.6x
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Beta 0.99
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Fund Performance
For the six-month period, the Evergreen Diversified Value Fund posted a net
return of -0.1% versus 9.2 % for the S&P 500. The six months were broken into
two distinctly different periods: in the first three months, the Fund declined
- -16.3% versus the -10.3% decline for the S&P 500; and during the final three
months, the Fund returned +19.3% versus +21.3% for the index. The majority of
the underperformance occurred during the market correction in the third calendar
quarter. Lagging performance was due primarily to our defensive portfolio
posture-during a period when higher-risk strategies were rewarded-and
underweighting in the technology sector, rather than poor stock selection or
sector weighting. During the final three months, the Fund equaled or exceeded
the benchmark until the strong technology rally in December.
6
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EVERGREEN
Select Diversified Value Fund
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Portfolio Manager Commentary
Top 5 Industries
----------------
(based on 12/31/98 net assets)
Healthcare Products & Services 13.2%
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Food & Beverage Products 10.9%
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Information Services & Technology 10.4%
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Banks 7.2%
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Finance & Insurance 7.1%
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Stock Selection and Sector Weighting
Although the Fund's absolute performance was below the market, we hope the
positive stock selection trends of the fourth quarter carry into 1999.
Ironically, some of the Fund's worst performing stocks during the third quarter
of 1998 were the best performers in the fourth. Fortunately, we stuck with our
discipline and did not capitulate in the troughs; we enjoyed the rise back up
with Chase Manhattan and Bankers Trust, up 66% and 47%, respectively, after
declining 43% and 48% during the third quarter. Similarly, within the technology
area electronics maker Tellabs declined 44% during the third quarter, but
adherence to our discipline and strategy allowed us to view this decline as an
opportunity to increase the position and enjoy a 72% fourth quarter return.
From a sector standpoint, negative impacts to performance came from two major
areas: energy and health care. Positions in offshore oil-drillers negatively
impacted results as crude prices declined to a twelve-year low and oil
exploration and capital spending significantly declined. The Fund's overweight
in health care also penalized results during the quarter as HMOs around the
nation face Congressional cutbacks in Medicare reimbursements enacted last
summer. The Fund's technology positions in Nokia and Sun Microsystems, however,
appreciated significantly during the six months, up 65% and 97%, respectively.
Top 10 Holdings
---------------
(based on 12/31/98 net assets)
General Electric Co. 3.9%
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Pfizer, Inc. 3.7%
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Microsoft Corp. 3.4%
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International Business Machines Corp. 3.4%
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Tyco International Ltd. 3.3%
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GTE Corp. 3.3%
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Bestfoods 2.8%
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Cisco Systems, Inc. 2.7%
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Procter & Gamble Co. 2.7%
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Houston Industries, Inc. 2.6%
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Outlook
The robust performance of the S&P 500 was concentrated in the largest-cap growth
companies; thus, value managers suffered. This trend should reverse when the
profit cycle begins to accelerate and growth becomes plentiful; then value
should begin to outperform. The Fund, although diversified, with over 70 stocks,
has over 32% invested in the top 10 picks. Currently, the Fund does own some of
the largest growth technology companies like Microsoft and Cisco, as well as the
tried-and-true blue chips like General Electric and IBM. Past performance will
be a frail guide to future performance, and the Fund is now well positioned to
capture the return from both the value and growth sectors. Overall, the Fund
maintains its tilt toward value and continues to maintain defensive
characteristics with a below market beta and an overweighting in the more
defensive industries such as utilities and consumer staples. We believe the Fund
should perform well in most market environments.
7
<PAGE>
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EVERGREEN
Select Large Cap Blend Fund
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Fund at a Glance as of December 31, 1998
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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 which
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
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PERFORMANCE AND RETURNS
- --------------------------------------------------------------------------------
Class I Class IS Class IC
Average Annual Returns
- --------------------------------------------------------------------------------
6 months 1.05% 0.93% 1.05%
- --------------------------------------------------------------------------------
1 year 11.83% 11.60% 11.83%
- --------------------------------------------------------------------------------
3 years 24.39% 24.14% 24.39%
- --------------------------------------------------------------------------------
5 years 20.55% 20.28% 20.55%
- --------------------------------------------------------------------------------
Since Inception 20.55% 20.28% 20.55%
- --------------------------------------------------------------------------------
6-month income distributions per share $0.22 $0.17 $0.22
- --------------------------------------------------------------------------------
6-month capital gain distributions per share $5.18 $5.18 $5.18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
Date Select Large Cap Blend CPI S & P 500
---- ---------------------- --- ---------
12/31/93 1,000,000 1,000,000 1,000,000
12/31/94 947,696 1,026,756 1,013,210
12/31/95 1,322,476 1,052,099 1,394,008
12/31/96 1,746,010 1,087,799 1,714,004
12/31/97 2,276,496 1,106,318 2,285,852
12/31/98 2,545,662 1,126,217 2,939,011
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Large Cap Fund Class IC, the S&P 500 Index and the Consumer Price 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. Classes I, IC and IS performance
information includes the performance of the Fund's predecessor common trust fund
for the periods before the Fund's registration statement became effective on
11/21/97. Performance for the common trust fund has been adjusted to include the
effect of estimated mutual fund class gross expense ratios at the time the Fund
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 years = 24.46%; 5 years = 20.64%; and since
12/31/93 = 20.64%. Class IC--3 years = 24.47%; 5 years = 20.64%; and since
12/31/93 = 20.64%. Class IS--3 years = 24.21%; 5 years = 20.37%; and since
12/31/93 = 20.37%. The Class I share performance for the period from 11/24/97
through 12/19/98 (class inception date) is based upon the historical performance
of the Class IC shares. The Class IS share performance for the period from
11/24/97 through 3/11/98 (class inception date) is based upon the historical
performance of the Class IC shares and therefore does not reflect 12b-1 fees. If
12b-1 fees had been included, performance for the Class IS shares for this
period would have been lower. Returns of Class I, IC and IS, since their
respective commencement of class operations, were 14.39%, 12.97% and 3.12%,
respectively. The return for Class IS is cumulative. The common 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 common trust fund had been registered under the 1940 Act, its performance
may have been adversely affected. Index returns do not reflect expenses, which
have been deducted from the Fund's return. It is not possible to invest directly
in an index.
8
<PAGE>
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EVERGREEN
Select Large Cap Blend Fund
- --------------------------------------------------------------------------------
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.
[PHOTO OF ERIC WIEGAND APPEARS HERE]
[PHOTO OF DARRYL BROWN APPEARS HERE]
[PHOTO OF STEVE HOEFT APPEARS HERE]
[PHOTO OF DEAN HAWES APPEARS HERE]
Performance
For the six months ended December 31, 1998, the Evergreen Select Large Cap Blend
Fund Class I shares' 1.05% total return trailed the 9.35% return for the S&P 500
Index. Underlying the six-month returns were two distinctly different periods.
The Fund fell sharply, -15.3%, during the first three months before rebounding
sharply, up 19.3%, during the final three months.
The stock market's overwhelming growth bias combined with our reluctance as
managers to emphasize highly valued, growth-oriented companies was primarily
responsible for lagging performance during the six months, as high-expectation,
mega-cap, and typically expensive growth stocks, continued to dominate the
market.
Portfolio
Characteristics
---------------
Total Net Assets $511,226,714
- ------------------------------------------------------
Number of Issues 53
- ------------------------------------------------------
P/E Ratios 26x
- ------------------------------------------------------
Beta 1.03
- ------------------------------------------------------
Portfolio Adjustments
Within the portfolio's healthcare weighting, which increased modestly during the
six months, we sold SmithKline Beecham and purchased Warner Lambert, a
diversified and somewhat more recession-proof pharmaceutical company whose
product line-up includes Lipitor, Sudafed, Listerine and Rolaids. We sold mutual
fund firm T. Rowe Price after a solid run-up in price and used the proceeds to
purchase Fannie Mae, a financially strong, high-growth opportunity selling at an
attractive valuation.
From a sector standpoint, we have continued to de-emphasize energy and basic
material stocks. Both of these industries are experiencing tough times as energy
companies have been hurt by plummeting oil prices while basic material stocks,
we feel, may continue to struggle amid the global economic slowdown.
9
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Large Cap Blend Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Top 5 Industry Allocation
- -----------------------------------------------------------
(based on 12/31/98 net assets)
Healthcare Products & Services 15.9%
- -----------------------------------------------------------
Information Services & Technology 12.5%
- -----------------------------------------------------------
Banks 10.2%
- -----------------------------------------------------------
Finance & Insurance 7.8%
- -----------------------------------------------------------
Communications Systems & Services 6.6%
- -----------------------------------------------------------
Sector Activity
The Fund's exposure to communication services stocks had a positive impact on
performance during the period, as Century Telephone and MCI Worldcom posted six-
month returns of 47% and 48%, respectively. Finance companies were especially
affected by international turmoil in the opening months before rebounding
markedly in the final three months. The Fund's exposure to the financial
industry includes companies such as Mellon Bank, Fleet Financial and Merrill
Lynch.
The portfolio's strong technology weighting reflects our favorable long-term
outlook for this industry. As companies turn to technological solutions to
increase productivity (and profits), technology has emerged as the prominent
high-growth sector, a trend that we expect to continue. Within this area, we
purchased IBM--the quintessential mega-cap, highly visible technology company--
at roughly $124 in early October and watched it soar past $180 by year-end.
Other strong technology performers during the fiscal period include Cisco
Systems and Intel, which posted total returns of 51% and 60%, respectively.
Top 10 Holdings
---------------
(based on 12/31/98 net assets)
Microsoft Corp. 3.7%
- --------------------------------------------------------------------------
General Electric Co. 3.5%
- --------------------------------------------------------------------------
Compaq Computer Corp. 3.4%
- --------------------------------------------------------------------------
Cisco Systems, Inc. 3.4%
- --------------------------------------------------------------------------
Bristol-Myers Squibb Co. 3.3%
- --------------------------------------------------------------------------
MCI WorldCom, Inc. 3.2%
- --------------------------------------------------------------------------
Tyco International Ltd. 2.9%
- --------------------------------------------------------------------------
Johnson & Johnson 2.8%
- --------------------------------------------------------------------------
Pfizer, Inc. 2.7%
- --------------------------------------------------------------------------
GTE Corp. 2.6%
- --------------------------------------------------------------------------
Looking Ahead to 1999
Going forward, we anticipate a volatile investing environment as the effects of
the global economic crisis continue to filter back to U.S. financial markets. We
feel the portfolio is well positioned, however, for the current economic
climate. Adjustments made over the past several months have created a portfolio
with a growth rate substantially higher than the S&P 500, while simultaneously
enjoying attractive valuation levels--the Fund's price-to-earnings ratio is in
line with the index, while the portfolio's price-to-book ratio is at a
meaningful discount.
The portfolio will continue to emphasize industries that we believe are poised
for growth due to favorable underlying economic themes: sectors such as
healthcare and technology. Consistent with our long-term, bottom-up investment
strategy, the Fund will emphasize well-managed, industry-dominant companies with
reasonable valuation levels that demonstrate the ability to meet-and
exceed-earnings expectations.
10
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EVERGREEN
Select Small Cap Growth Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of December 31, 1998
- --------------------------------------------------------------------------------
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
Philosophy
The Fund seeks to provide shareholders with long-term growth of capital by
investing in small company stocks. We believe that the risk associated with
smaller company stocks can be managed effectively by diversification and careful
attention to valuation.
Process
The Fund manager uses a fundamental, bottom-up stock selection process which is
research-intensive. The Fund generally invests in stocks of companies which have
market capitalization of $1 billion or less and above average long-term growth
rates. Our research process identifies buying opportunities in small company
stocks of high-quality companies that have a competitive advantage, are
growth-oriented, and are reasonably valued.
Benchmark
Russell 2000 Growth Index
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- --------------------------------------------------------------------------------
Class I
Performance Inception Date 12/30/95
- -----------------------------------------------------------------------
Average Annual Returns
- -----------------------------------------------------------------------
6 months -4.03%
- -----------------------------------------------------------------------
1 year 2.21%
- -----------------------------------------------------------------------
3 years 9.85%
- -----------------------------------------------------------------------
Since Inception 9.82%
6-month capital gain distributions per share $0.02
- -----------------------------------------------------------------------
LONG TERM GROWTH
- -----------------------------------------------------------------------
Date Select Small Cap Growth CPI Russell 2000
---- ----------------------- --- ------------
12/31/95 1,000,000 1,000,000 1,000,000
6/30/96 1,148,000 1,021,174 1,103,599
12/31/96 1,204,471 1,033,932 1,164,945
6/30/97 1,231,868 1,045,015 1,283,778
12/31/97 1,296,802 1,051,534 1,425,436
6/30/98 1,381,010 1,062,616 1,495,657
12/31/98 1,325,415 1,070,448 1,389,114
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Small Cap Growth Fund, Class I, the Russell 2000 Index and the Consumer Price
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. The Russell 2000 Growth Index is an
unmanaged index and does not include transaction costs associated with buying
and selling securities or any management fees.
11
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- --------------------------------------------------------------------------------
EVERGREEN
Select Small Cap Growth Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management
The Evergreen Select Small Cap Growth Fund is managed by Thomas L. Holman. Mr.
Holman is a member of the Small Cap Growth Team at Evergreen Investment
Management Co., where he manages the Fund and separately managed, small-cap
growth accounts. His research responsibilities are focused on telecommunication
service companies. Prior to joining Evergreen in 1997, Mr. Holman was a
portfolio manager and securities analyst at Invista Capital Management. He
developed quantitative models and had co-management responsibility for several
small- and mid-cap portfolios. As an analyst, he was a generalist, covering a
wide variety of industries, including technology, telecommunications equipment,
media services, basic industry, consumer staples and retail. Mr. Holman received
both his B.S. and M.B.A degrees from Iowa State University.
[PHOTO OF TOM HOLMAN APPEARS HERE]
Performance
The Evergreen Select Small Company Growth Fund had a total return of -4.03%
during the six-month period that ended on December 31, 1998. This was consistent
with the performance of the Russell 2000 Growth Index, a commonly used benchmark
for small company growth stock performance, which had a return of -4.01% during
the same six-month period.
Portfolio
Characteristics
---------------
Total Net Assets $66,641,069
- -------------------------------------------------------------
Number of Issues 66
- -------------------------------------------------------------
P/E Ratios 38.3x
- -------------------------------------------------------------
Beta 1.35
- -------------------------------------------------------------
Environment
The six months were composed of two, distinct and sharply contrasting periods
for small company stocks: uncertainty and falling prices in the first three
months; and renewed confidence and a strong rally during the second three
months.
The July-September period was characterized by concerns that the problems in
Asia, Russia and Latin America could send the global economy into a tailspin.
These worries caused the U.S. small company stock market to suffer its worst
price loss in 20 years. The Russell 2000 Growth Index lost 22.4% of its value in
the three-month period of July through September.
The October-December period marked a reversal, and the small company stock
market surged, propelled principally by the Federal Reserve's three successive
cuts in short-term interest rates, followed by similar actions by European
monetary authorities. These actions calmed the fears that a global recession
could occur and set the stage for the dramatic rebound in stock prices,
including small company stock prices. The Russell 2000 Growth Index rebounded
with a 23.64% return during the three months, and the Fund did even better, with
a 25.29% return.
12
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Cap Growth Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Strategy
In the summer and through most of the fall, we focused on investments in
domestic companies, particularly in defensive industries that were least likely
to be affected by the problems that began in Asia. We invested in education
companies, advertising firms, and health care companies. Within the broad
technology sector, we avoided any company with an Asian exposure. As values were
created by the market correction in the third quarter, we built the Fund's
technology position back up, first investing in companies that were not affected
by Asia. Among the technology companies in which we invested during this period
was PMC Sierra, a communications semi-conductor manufacturer. Its total return
during the fourth quarter was 98%. In addition, we invested in two
semi-conductor equipment companies. PRI Automation had a 108% return for the
Fund in the fourth quarter, and Asyt Technology had a 191% return during the
same three months. When the market started to turn positive, it appeared that
semi-conductor-related companies were especially attractive. While their stock
prices had been pummeled as a result of fears about Asia, the prospects for the
industry were turning very positive because of low inventories and strong
demand.
Top 5 Industries
----------------
(based on 12/31/98 net assets)
Information Services & Technology 20.2%
- ---------------------------------------------------------------
Electrical Equipment & Services 8.1%
- ---------------------------------------------------------------
Education 8.0%
- ---------------------------------------------------------------
Healthcare Products & Services 7.3%
- ---------------------------------------------------------------
Telecommunication Services & Equipment 6.8%
- ---------------------------------------------------------------
We also maintained investments in European fiber companies that were benefiting
from the expansion in the telecommunications industry on the Continent. One
investment, Esprit, which we discussed in the June 30 Annual Report, was
purchased at prices ranging from $14 to $17 per share. On December 31, its stock
was trading at $47 per share as a result of its pending acquisition by Global
Telesystems Group.
When discussing technology, it is hard to avoid mentioning the Internet stocks,
which have dominated headlines in the popular press because of the explosive,
short-term performance of several stocks. While the huge returns generated by
these highfliers can be seductive, these returns come with significant risk. We
believe the Internet is a viable means of doing business and will have a
significant effect on consumer and business behavior; however, we also believe
the stock prices of some companies are extreme. In managing this Fund, we have
focused on companies that facilitate web-based activities in general, rather
than companies relying on the popularity of one web site. Two investments
illustrate this focus. Exodus Communications creates and operates websites for
other businesses to use. During the fourth quarter, this stock rose 163%.
Another example is Broadvision. This company produces the software that allows
other companies to conduct financial transactions over the Internet in a safe
environment. This company's stock rose 203% during the fourth quarter. We like
both these companies because they have clear business plans and provide products
and services that add discernible value to their clients.
In the defensive industries such as education and healthcare, we have tried to
find companies with strong positions in their market niches and demonstrated
earnings growth. Strayer Education, which operates colleges granting associates
and bachelors degrees in the Washington, D.C., area, is a good example. This is
a very profitable business with long-term revenue and profit outlooks that are
easy to
13
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Cap Growth Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
forecast. Another example is Xomed, in the medical equipment field. This company
produces devices used in ear, nose and throat surgery. It is dominant in its
field and continues to demonstrate good growth.
The Fund had very strong performance from three companies in particular in the
healthcare field. They were Chatten, which provides over-the-counter
pharmaceuticals and personal care products; Barr Labs, a generic drug
manufacturer; and MiniMed, which provides diabetes management products.
Outlook
We see very strong potential in the small company stock market, even as we are
aware of the risks both from emerging markets and from optimism about domestic
stocks in general.
During the fourth quarter of 1998, small company stocks and large company stocks
performed very closely to each other. As a result, the valuation discrepancies
that existed at the end of the third quarter are still in effect. On a
price/earnings basis, small company stocks are as low as they have been for the
past 20 years in relation to large company stock prices. At the same time, many
small companies are sustaining their earnings growth. In contrast, larger
companies are more likely to face the prospect of a slowdown in earnings growth.
These larger companies are more likely to be affected by a slowing of global
economic growth, and they may be less likely to wring earnings improvements from
the productivity enhancements that have helped them in the last several years.
As investors seek out growth, we think the prices of small company stocks may
prove to be very attractive.
Top 10 Holdings
---------------
(based on 12/31/98 net assets)
Electronics for Imaging, Inc. 2.8%
- --------------------------------------------------------------------------------
Chattem, Inc. 2.7%
- --------------------------------------------------------------------------------
SIS Bancorp, Inc. 2.4%
- --------------------------------------------------------------------------------
Career Education Corp. 2.4%
- --------------------------------------------------------------------------------
Sipex Corp. 2.3%
- --------------------------------------------------------------------------------
Delphi Financial Group, Inc. 2.3%
- --------------------------------------------------------------------------------
Choicepoint, Inc. 2.3%
- --------------------------------------------------------------------------------
Scotts Co. (The) 2.2%
- --------------------------------------------------------------------------------
Maximus, Inc. 2.2%
- --------------------------------------------------------------------------------
Astec Industries, Inc. 2.1%
- --------------------------------------------------------------------------------
Small capitalization investing typically carries additional risks since small
companies generally have a higher risk failure. Although it may offer the
potential for greater long term results, it may also result in greater price
volatility.
14
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of December 31, 1998
- --------------------------------------------------------------------------------
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
Philosophy
The Evergreen Select Small Company Value Fund seeks capital appreciation by
investing in little-known and relatively small companies. This requires a
significant commitment to independent research by Evergreen's team of 18
analysts, who have an average 16 years' professional experience. The management
team seeks to identify small companies that are favorably priced and have both
entrepreneurial managements and catalysts for growth. The investment discipline
pays special attention to valuations and diversification by industry and company
to reduce the volatility associated with small cap stocks.
Process
The Fund's management team uses an intensive research process to assemble a
diversified stock portfolio of small companies that:
. Are potential merger and acquisition candidates;
. Have promising new products that can cause a dramatic change in earnings;
. Are "value-timing" candidates because, while their stock may be temporarily
out of favor, they offer the potential of good, long-term appreciation;
. Can benefit from re-structuring programs of management.
Benchmark
Russell 2000
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- --------------------------------------------------------------------------------
Class I
Average Annual Returns
- --------------------------------------------------------------------------------
6 months -12.24%
- --------------------------------------------------------------------------------
1 year -13.21%
- --------------------------------------------------------------------------------
Since Inception -10.87%
- --------------------------------------------------------------------------------
6-month income distribution per share $0.02
- --------------------------------------------------------------------------------
6-month capital gain distributions per share $0.03
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Select Small Co Value CPI Russell 2000 Value
---- --------------------- --- ------------------
12/31/97 1,000,000 1,000,000 1,000,000
2/28/98 1,025,174 1,003,700 1,041,300
4/30/98 1,074,818 1,007,400 1,088,900
6/30/98 989,078 1,010,500 1,044,400
8/31/98 752,604 1,013,000 811,800
10/31/98 806,675 1,015,500 883,100
12/31/98 867,941 1,018,000 935,500
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Small Company Value Fund Class I, the Russell 2000 Value Index and the Consumer
Price 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. The Russell 2000 Index is an unmanaged
index and does not include transaction costs associated with buying and selling
securities, or any management fees.
15
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
Nola Maddox Falcone heads the management team of the Evergreen Select Small
Company Value Team, which also includes Constance Unger (not pictured) and Peter
J. Kovalski. Nola M. Falcone is President and Co-Chief Executive Officer of
Lieber & Co. and Evergreen Asset Management Corp., with more than 30 years'
experience. Constance Unger joined Lieber and Co. as an analyst in 1998, with a
total of 12 years' experience in value investing. Previously, she served at
Segall Bryant & Hamill Investment Counselors, Society Asset Management and
Bankers Trust Co. Peter J. Kovalski, CFA, joined Lieber & Co as an analyst in
1992. Previously, he was an analyst with International Assets Advisory Corp.,
Williams Securities Group, Inc., Ryan Beck & Co., and Ayco/American Express.
[PHOTO OF NOLA MADDOX APPEARS HERE]
Nola Maddox
Falcone, CFA
[PHOTO OF PETER J. KOVALSKI APPEARS HERE]
Peter J. Kovalski, CFA
Performance
The Evergreen Select Small Company Value Fund had a total return of -12.24%
during the six-month period that ended on December 31, 1998. For the same
six-month period, the Russell 2000 Value Index, an index of small company value
stocks, had a return of -10.45%.
We attribute this underperformance to our small cap bias relative to the Russell
2000 Value Index; our overweighted position in the weak energy sector, which we
continued to reduce to an equal weighting by December 31, 1998; and a slight
overweight in the banks and financial services sector which performed below
average.
These returns were realized during a period in which large-company growth stocks
rose to high valuations in terms of price/earnings ratios while small company
value stocks tended to be ignored by many investors. We believe, however, that
this period created the conditions that play to the strength of Evergreen Asset
Management: finding value in overlooked securities. As we shall discuss in the
"Outlook" section, we believe we have had a great opportunity to acquire some
highly attractive, well managed companies with good earnings whose stocks were
overlooked because of the popularity of large company stocks.
Portfolio
Characteristics
---------------
Total Net Assets $98,112,412
- ----------------------------------------------------------------
Number of Holdings 147
- ----------------------------------------------------------------
P/E Ratio 14.2x
- ----------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Structure
During the six-month period, the Fund's managers saw extremely attractive values
in the technology sector. We were able to acquire a number of attractive
technology companies at relatively low prices. These values were created by a
business slowdown and a worldwide financial crisis, which caused a sharp
correction in technology stocks in general, especially among companies in
semi-conductor-related and personal computer-related areas. These values were
especially evident in the third and fourth quarters of 1998, when the Fund
increased its emphasis on technology. Among the strong performers were:
. Altron, which provides electronic contract manufacturing services to other
companies. Sanmina, a larger contract manufacturer, acquired Altron in
December, producing a 75.1% return for the Fund during the six-month period.
. Orbital Sciences, which makes satellite-launching and satellite-tracking
systems. The Fund invested in this company in September, and by December 31,
the investment had produced a 123.3% gain for the Fund.
Top 5 Industries
----------------
(based on 12/31/98 net assets)
Finance & Insurance 10.0%
- -------------------------------------------------------------------
Building, Construction & Furnishings 9.6%
- -------------------------------------------------------------------
Banks 9.3%
- -------------------------------------------------------------------
Consumer Products & Services 9.2%
- -------------------------------------------------------------------
Retailing & Wholesale 7.6%
- -------------------------------------------------------------------
The housing industry, which we highlighted in our last annual report for the
Fund, continued to provide opportunities, especially for the growing retirement
and first-time homeowner markets. Among the varied housing-related investments
that have already produced strong returns for the Fund are:
. Monaco Coach, manufacturer of recreational vehicles, which posted a return
for the fund of 36% during the six-month period.
. D.R. Horton, a manufacturer of single-family homes especially for first-time
buyers, returned 10% during the six months.
. CMAC, a mortgage insurance company, which was added to the Fund in September,
provided a 17.1% return by year's end.
The Fund also maintained an emphasis on the financial sector, although this
sector lagged the market for the six-month period. We believe the
under-performance of the sector during the six months will turn out to be a
temporary situation, as recession fears abate and merger-and-acquisition
activity resumes. Among the newer investments in the financial sector were:
. Pacific Century Financial Corp. In August, the Fund purchased this company,
formerly known as the Bancorp Hawaii, taking advantage of a very attractive
value created by investor concerns about the effects of the Asian crisis on
Hawaii. By December, the investment had produced a return of 56.2% for the
Fund.
. Waddell and Reed Financial, a smaller mutual fund and money management
company, added to the portfolio in August. By December 31, the investment had
produced a return of 41%.
. American Bankers Insurance Company, purchased in December. This company,
which has strong management and good growth, returned 8.5% for the Fund
despite being in the portfolio for less than a month.
17
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Healthcare companies also presented appealing opportunities during the six-month
period. Among the companies management added to the portfolio were:
. Visx, which produces laser systems for corrective eye surgery. Added to the
Fund's portfolio in October, this company produced an 81.5% return by
December 31.
. Care Matrix, which operates very high quality, assisted-living centers for
the aging. The Fund invested in Care Matrix on October 28. By December 31,
the investment had produced a return of 46.3%.
. Exactech, which manufactures implant devices and surgical instruments for
orthopedic surgery. This investment produced a 67.4% return for the Fund
during the six months.
In light of the market volatility, the Fund managers made timely investments
during the period in classic defensive industries, including consumer goods and
utilities. Among those investments were:
. Performance Food Group, a distributor of high-quality packaged food products
to such institutions as restaurants, cafeterias and hotels, had a return of
34.4% during the six-month period.
. J.M. Smuckers, Co., manufacturer of jams and jellies, had a return of 15.3%
since being added to the Fund's portfolio on October 28.
. Central Hudson Gas & Electric Company, based in New York State, had a return
of 10.6% since being added to the portfolio on November 27.
Other investments that positively contributed during the six months included:
. Sonic Automotive, Inc., which consolidates automobile dealerships. Based in
Charlotte, N.C., this company produced a return of 102.5% for the Fund during
the six months.
. Prime Hospitality, which owns and operates lodging chains for extended stay.
This stock had been hurt by fears of a possible recession. The investment
returned 21.4% for the Fund since being added to the portfolio on November
30.
. CompX International, which produces ergonomic devices for offices, had a
return of 21.5% for the six months.
During the six-month period, seven companies in the Fund were acquired by other
companies, and three other companies were the subjects of merger-and-acquisition
announcements. Depuy Inc. was acquired by Johnson & Johnson; Cliffs Drilling Co.
was acquired by R&B Falcon; and Sanmina Corp. purchased Altron Inc. In addition,
Camco International was acquired by Schlumberger; Dime Financial Corp. was
acquired by Hubco Inc.; Beverly Bancorporation was acquired by St. Paul Bancorp
Inc.; and Maryland Federal Bancorp Inc. was acquired by BB&T. Pending were:
P.N.B. Financial, which is to be acquired by Western Bank Corporation;
Interstate Johnson Lane Inc., a regional brokerage firm based in Charlotte,
N.C., which is to be acquired by Wachovia Bank; and St. John Knits, a high-end
women's apparel manufacturer, which has a pending offer to be taken private.
18
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Top 10 Holdings
---------------
(based on 12/31/98 net assets)
Sanmina Corp. 2.1%
- --------------------------------------------------------------------------
Fair Isaac & Co. Inc. 1.9%
- --------------------------------------------------------------------------
SMART Modular Technologies, Inc. 1.8%
- --------------------------------------------------------------------------
Sonic Automotive, Inc. 1.8%
- --------------------------------------------------------------------------
Arvin Industries, Inc. 1.7%
- --------------------------------------------------------------------------
Morgan Keegan, Inc. 1.6%
- --------------------------------------------------------------------------
American Bankers Insurance Group, Inc. 1.5%
- --------------------------------------------------------------------------
Lancaster Colony Corp. 1.5%
- --------------------------------------------------------------------------
Genlyte Group, Inc. 1.4%
- --------------------------------------------------------------------------
Visx, Inc. 1.4%
- --------------------------------------------------------------------------
Outlook
The second half of 1998 continued to be a struggle generally for performance in
small company stocks, especially value issues. The Fund managers believe,
however, that the portfolio contains healthy companies, many with double-digit
earnings growth records, that have been purchased at attractive prices. The
economic conditions and relative values of small company stocks are as favorable
as they were prior to the rallies in 1967-68, 1975-76 and 1991-92, when small
companies led the equity markets. We believe we may be at a point in which the
small company stock market is poised to rally again because of a confluence of
positive factors, including:
. The easing of the money supply following three successive cuts in short-term
interest rates by the Federal Reserve;
. The superior earnings growth of small companies over large companies for the
last six calendar quarters;
. Extremely low valuations of small company stocks in relation to large-company
stocks--the lowest relative values in 20 years.
. The ability of large companies to improve their earnings growth by buying
fast-growing smaller companies at attractive prices.
While no one can predict the future direction of markets with any certainty, we
think the potential for superior small cap performance is strong.
Small capitalization investing typically carries additional risks since small
companies generally have a higher risk failure. Although it may offer the
potential for greater long term results, it may also result in greater price
volatility.
19
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of December 31, 1998
- --------------------------------------------------------------------------------
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 Mid Cap Index
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- --------------------------------------------------------------------------------
Class I Class IS Class IC
Average Annual Returns
- --------------------------------------------------------------------------------
6 months -0.42% -0.58% -0.42%
- --------------------------------------------------------------------------------
1 year 8.48% 8.24% 8.47%
- --------------------------------------------------------------------------------
3 years 15.89% 15.64% 15.88%
- --------------------------------------------------------------------------------
5 years 16.24% 15.97% 16.23%
- --------------------------------------------------------------------------------
10 years 14.85% 14.58% 14.85%
- --------------------------------------------------------------------------------
Since Inception 14.45% 14.18% 14.45%
- --------------------------------------------------------------------------------
6-month income distributions per share $0.10 $0.06 $0.10
- --------------------------------------------------------------------------------
6-month capital gain distributions $2.10 $2.10 $2.10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Select Social Principles CPI S & P 400 Midcap
---- ------------------------ --- ----------------
5/31/88 1,000,000 1,000,000 1,000,000
12/31/88 1,044,389 1,025,532 1,086,697
12/31/90 1,136,419 1,138,715 1,397,571
12/31/92 1,794,717 1,207,302 2,347,665
12/31/94 1,947,506 1,274,043 2,579,204
12/31/96 3,122,080 1,349,787 4,020,373
12/31/98 4,172,389 1,397,458 6,317,227
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Social Principles Fund Class IC, the S&P 400 Midcap Index and the Consumer Price
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. Classes I, IC and IS performance
information includes the performance of the Fund's predecessor common trust fund
for the periods before the Fund's registration statement became effective on
11/21/97. Performance for the common trust fund has been adjusted to include the
effect of estimated mutual fund class gross expense ratios at the time the Fund
was converted to a mutual fund. If fee waivers and expense reimbursements had
been calculated into the mutual fund class expense ratio the average annual
total returns would be as follows: Class I--3 years = 16.00%; 5 years = 16.35%;
and since 05/31/88 = 14.55%. Class IC--3 years = 15.97%; 5 years = 16.33%; and
since 05/31/88 = 4.55%. Class IS--3 years = 15.71%; 5 years = 16.06%; and since
05/31/88 = 14.40%. The Class IS share performance for the period from 11/24/97
through 03/12/98 (class inception date) is based upon the historical performance
of the Class IC shares and therefore does not reflect 12b-1 fees. If 12b-1 fees
had been included, performance for the Class IS shares for this period would
have been lower. Returns of Class I, IC and IS, since their respective
commencement of class operations, were 5.39%, 5.36% and .76%, respectively. The
return for Class IS is cumulative. The common 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 common trust
fund had been registered under the 1940 Act, its performance may have been
adversely affected. Index returns do not reflect expenses, which have been
deducted from the Fund's return. It is not possible to invest directly in an
index.
20
<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 22 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.
[PHOTO OF ERIC M. WIEGAND APPEARS HERE]
Eric M. Wiegand
[PHOTO OF A. JAY ZELKO APPEARS HERE]
A. Jay Zelko
Performance
For the six months ended December 31, 1998, the Evergreen Select Social
Principle Fund Class I shares' -0.42% total return trailed the 8.86% return for
the S&P Midcap 400 Index.
Portfolio
Characteristics
---------------
Total Net Assets $167,106,416
- -----------------------------------------------------------------
Number of Issues 62
- -----------------------------------------------------------------
P/E Ratio 22.7x
- -----------------------------------------------------------------
Beta 1.13
- -----------------------------------------------------------------
Market Environment
The last six months within the U.S. stock market consisted of two distinctly
different periods. Stocks suffered significant losses during the first half of
the fiscal period before rebounding sharply in the final three months. The
equity markets' initial decline stemmed from volatile international economies,
while the second half comeback was spurred by resilient U.S. economic growth,
emerging market stability and support by the Federal Reserve Board--in the form
of three interest rate cuts.
The S&P 500 Index and the S&P Midcap 400 Index posted six-month total returns of
9.35% and 8.86%, respectively. It is worth noting that the positive returns by
the S&P 400 Index were fueled by an exceptional performance of one of its
holdings: America Online. This single company soared over 550% for the entire
year, driving the performance of the S&P 400 Midcap Index. Consequently,
managers who did not hold a market-weighting of this stock were at a distinct
disadvantage.
Top 5 Industry Allocation
-------------------------
(based on 12/31/98 net assets)
Information Services & Technology 15.6%
- ----------------------------------------------------------------
Healthcare Products & Services 15.4%
- ----------------------------------------------------------------
Finance & Insurance 9.9%
- ----------------------------------------------------------------
Retailing & Wholesale 5.9%
- ----------------------------------------------------------------
Utilities - Electric 5.4%
- ----------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Areas of Preference
The Fund's technology exposure was a major contributor to performance due to an
overweighted position as well as strong stock selection. As of December 31,
three of the Fund's top six holdings--and over 25% of the entire portfolio--were
represented by the technology sector. EMC Corp--the industry leader in data
storage--was one of our best performers, as evidenced by its nearly 90%
six-month return.
The healthcare sector represents the Fund's largest overweight relative to the
benchmark: 15% versus 10%, as of December 31. We believe the healthcare industry
will continue to benefit from advances in technology to aid the aging industrial
world population. In addition, we believe the healthcare industry offers
investors more stable and superior earnings growth than most industries. Our
largest healthcare holding, Biochem Pharma, a Canadian biotech company with very
strong financials, is uniquely positioned to capitalize on the advances in
biotechnology in bringing to market remedies to help fight some of the world's
critical diseases.
Strategic Sector Underweightings
In 1998, corporations began to be impacted by something they have not
experienced for a very long time: deflation. Deflation particularly affects
commodity producers, such as companies within the basic materials sector. The
Fund was fortunate to have completely avoided the basic material sector, which
was the second-poorest-performing industry behind energy. Energy, by far, was
the worst-performing industry in the index, declining over 45% for the year. We
were underweighted in energy for the entire year and our security selection
fared better than the index, but the companies were nevertheless impacted by
falling commodity prices and exploration budget cuts.
Top 10 Holdings
---------------
(based on 12/31/98 net assets)
EMC Corp. 4.7%
...........................................................................
Network Associates, Inc. 4.3%
...........................................................................
Century Telephone Enterprises, Inc. 3.3%
...........................................................................
Biochem Pharmaceuticals, Inc. 3.3%
...........................................................................
Allied Waste Industries, Inc. 3.0%
...........................................................................
Compuware Corp. 2.7%
...........................................................................
Elan Corp. Plc, ADR 2.6%
...........................................................................
Pediatrix Medical Group, Inc. 2.5%
...........................................................................
AFLAC, Inc. 2.3%
...........................................................................
Partnerre Ltd. 2.3%
...........................................................................
A Bright Outlook for Midcap Stocks
As we enter 1999, we continue to be optimistic about the prospects for mid-cap
equities. After four consecutive years of 20%-plus returns for the S&P 500, the
valuation gap between large-cap and mid-cap equities is at unprecedented levels,
and suggests a strong run by mid-cap stocks in the coming years.
Currently, the 1999 forecasted earnings growth for the S&P 500 is expected to
slow from its double-digit pace to 4%; and on the 1999 estimate, the
price-to-earnings multiple is 26.8, which is 6.7 times the growth rate.
Conversely, the S&P Midcap 400 Index has forecasted 1999 earnings growth at 19%
and its price-to-earnings multiple is 19.0, or 1.1 times its growth rate. To put
it another way, large-cap investors are paying over six times more for earnings
growth than mid-cap investors.
We believe this valuation disparity and the forecasted slower earnings growth
for the S&P 500, not to mention the mid-cap's own strong fundamentals, will
attract investors to mid-cap equities. We enthusiastically look forward to the
next few years.
22
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Special Equity Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of December 31, 1998
PORTFOLIO PROFILE
Philosophy
Evergreen Select Special Equity Fund aggressively seeks the highest possible
return by investing in companies with small market capitalizations.
Process
The Fund employs a "bottom-up" approach to investing, selecting stocks that have
passed a rigorous screening process which employs both qualitative and
quantitative analysis. To qualify for investment, a stock must meet high
expectations for return potential based on growth, value and momentum factors.
Benchmark
Russell 2000 Index
Performance and Returns
Class I Class IS
Average Annual Returns
................................................................................
6 months 0.02% -0.16%
................................................................................
1 year 5.65% 5.31%
................................................................................
3 years 16.81% 16.46%
................................................................................
Since Inception 14.73% 14.52%
................................................................................
6-month capital gain distributions per share $1.18 $1.18
................................................................................
LONG TERM GROWTH
Date Select Special Equity CPI Russell 2000
---- --------------------- --- ------------
3/31/94 1,000,000 1,000,000 1,000,000
12/31/94 973,184 1,016,984 1,008,548
12/31/95 1,308,487 1,042,086 1,295,342
12/31/96 1,651,991 1,077,446 1,509,003
12/31/97 1,973,744 1,095,788 1,846,428
12/31/98 2,085,183 1,115,498 1,799,378
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Special Equity Fund Class I, the Russell 2000 Index and the Consumer Price
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. Historical performance prior to
7/27/98 is that of their predecessor funds, CoreFund Special Equity Fund Class Y
for Class I; and Corefund Special Equity Fund Class A for Class IS. Returns of
Class I and IS, since their respective commencement of class operations, were
21.28% and 14.52%, respectively. Index returns do not reflect expenses, which
have been deducted from the Fund's return. It is not possible to invest directly
in an index.
23
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Special Equity Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management
The Evergreen Select Special Equity Fund is managed by Joseph E. Stocke, CFA.
Mr. Stocke joined Meridian Investment Company in 1983 as an assistant investment
officer and since 1990 has been a senior investment manager of equities.
[PHOTO APPEARS HERE]
Joseph E. Stocke CFA
Performance
Evergreen Select Special Equity Fund Class I produced a total return of 0.02%
for the six months ended December 31, 1998, outpacing its benchmark, the Russell
2000 Index which generated a total return of -7.12%. The Fund's performance was
particularly strong relative to its benchmark in the second half of the fiscal
period. During that time, Evergreen Select Special Equity Fund returned 28.15%
versus 16.31% for the Russell 2000 Index, with over 80% of the Fund's sectors
outperforming those in the Index.
Portfolio
Characteristics
---------------
Total Net Assets $75,090,287
.............................................................
Number of Holdings 106
.............................................................
P/E Ratio 21.0x
.............................................................
Beta 1.25
.............................................................
Environment
Small-to-mid-capitalization investors endured significant price volatility over
the past six months before stocks staged a dramatic turnaround in the fourth
quarter of 1998. Equities ended the year on a strong note, however, with
remarkable fourth quarter performance.
The third quarter of 1998 marked the worst quarterly decline for the stock
market in nearly a decade, with August representing the largest single monthly
decline since the October 1987 crash. Smaller capitalization stocks bore the
brunt of the correction, as investors sought the perceived relative safety of
larger companies. The market's retreat resulted from a combination of both
national and international factors, including historically high stock
valuations, anticipated higher inflation from strong employment growth,
increasing global political and financial instability, and equity mutual fund
withdrawals.
The stock market regained stability in the fourth quarter, however, and went on
to reach new highs. A combination of factors restored investor confidence. The
Federal Reserve Board lowered interest rates three times to keep U.S. economic
growth strong enough to re-stimulate foreign economies, with numerous foreign
central banks following suit. Stock prices strengthened further on reports of
resilient, domestic economic activity and steadier emerging market economies.
Additionally, the low level of inflation has continued to provide support for
stock valuations.
24
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Special Equity Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Top 5 Industries
----------------
(based on 12/31/98 net assets)
Healthcare Products & Services 15.6%
............................................................................
Information Services & Technology 14.6%
............................................................................
Retailing & Wholesale 12.5%
............................................................................
Telecommunication Services & Equipment 9.4%
............................................................................
Building, Construction & Furnishings 6.5%
............................................................................
Investment Strategy
We continued to employ a "bottom-up" investment strategy, building the portfolio
one stock at a time. Over the past six months, the Fund dramatically
outperformed the Russell 2000 Index in several industries, contributing greatly
to the Fund's performance. These included Technology, Consumer Cyclicals and
Communications. Led by internet-related companies, the Fund's Technology
holdings significantly outperformed its Russell 2000 counterparts in both the
third and fourth quarters. Beyond.com Corp and VeriSign Corp. produced triple
digit returns in the fourth quarter. We expect to continue to emphasize many
Internet-related companies, particularly in light of the rapid adoption of many
Internet-related services.
After a weak performance in the third quarter on concerns that a global economic
slowdown would dampen U.S. economic growth, Consumer Cyclicals rebounded
admirably in the fourth quarter. Ticketmaster Online Citysearch--whose price
rose 300% in the fourth quarter--led the returns in the Fund's Consumer
Cyclicals holdings. The sector also benefited from strong sales in computer
games and an increasing interest in sophisticated home entertainment centers.
Competitive local exchange carriers (CLECs) drove performance in the Fund's
Communications sector. The capital-intensive CLECs underperformed in the third
quarter when market volatility in both the equity and high yield bond markets
impeded their ability to raise capital. CLECs snapped back in the fourth quarter
when global economies and financial markets stabilized, easing investors'
concerns.
The Fund underperformed the Russell 2000 Index in several areas, including
Capital Goods, Energy and Financial Services. We believe their impact on total
performance was minimal, however.
Top 10 Holdings
---------------
(based on 12/31/98 net assets)
Metronet Communications Corp. 3.6%
............................................................................
Pacific Sunwear of California 3.4%
............................................................................
Abercrombie & Fitch Co. 2.6%
............................................................................
Brookdale Living Communities, Inc. 2.4%
............................................................................
Scios, Inc. 2.4%
............................................................................
Williams Sonoma, Inc. 2.4%
............................................................................
MIPS Technologies, Inc. 2.1%
............................................................................
Gildan Activewear, Inc. 2.1%
............................................................................
Chirex, Inc. 1.9%
............................................................................
Verio, Inc. 1.9%
............................................................................
25
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Special Equity Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Outlook
We anticipate challenges in the months ahead, but believe small-to-mid-
capitalization stocks can offer significant opportunity. Investors' strong
demand for large capitalization stocks has created a dramatic divergence in the
performance between large and small-to-mid-capitalization companies. This has
created a disparity in their valuations, making the stocks of many small-to-mid-
capitalization companies extremely attractive on a relative basis.
With equities having completed their first-ever four-year string of 20%+
returns, we are especially conscious of the obstacles to achieving higher stock
prices. We believe the flat earnings growth in 1998 will not satisfy investors
in 1999. We will continue to closely monitor the factors affecting earnings
growth, focusing on higher volumes, restructuring and lower spending. We expect
consumer spending to remain brisk in the first quarter of 1999, although overall
economic growth could slow later in the year as companies cut back on capital
expenditures as they focus on the "Year 2000" issue. Further, in our opinion,
the global situation has not been fully resolved. Longer term, a slowdown in
international economic growth could dampen the U.S. economy. Despite these
challenges, we recognize the positive factors that propelled the stock market to
the level it has reached and expect them to remain solid influences in 1999.
These include low interest rates and negligible inflation, relatively high
consumer confidence, low unemployment and solid consumer and housing sectors.
26
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of December 31, 1998
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 that exhibit
strong current fundamentals, histories of superior earnings/dividend growth and
rising earnings expectations.
Benchmark
Russell 1000 Growth Index
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- --------------------------------------------------------------------------------
Class I Class IS
Average Annual Returns
- --------------------------------------------------------------------------------
6 months 6.45% 6.27%
- --------------------------------------------------------------------------------
1 year 24.41% 23.99%
- --------------------------------------------------------------------------------
3 years 26.32% 25.92%
- --------------------------------------------------------------------------------
Since Inception 29.18% 28.79%
- --------------------------------------------------------------------------------
6-month income dividends per share $0.06 $0.02
- --------------------------------------------------------------------------------
6-month capital gain distributions per share $3.26 $3.26
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
Date Select Strat Growth CPI Russell 1000 Growth
---- ------------------- --- -------------------
12/31/94 1,000,000 1,000,000 1,000,000
12/31/95 1,381,697 1,024,683 1,371,851
12/31/96 1,713,288 1,059,452 1,689,055
12/31/97 2,238,685 1,077,488 2,203,996
12/31/98 2,785,622 1,096,869 3,057,038
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Strategic Growth Fund Class I, the Russell 1000 Index and the Consumer Price
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. Classes I and IS performance
information includes the performance of the Fund's predecessor common trust fund
for the periods before the Fund's registration statement became effective on
11/21/97. Performance for the common trust fund has been adjusted to include the
effect of estimated mutual fund class gross expense ratios at the time the Fund
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 years = 26.37%; and since 12/31/94 = 29.24%. Class
IS--3 years = 26.00%; and since 12/31/94 = 28.88%. The Class IS share
performance for the period from 11/24/97 through 2/27/98 (class inception date)
is based upon the historical performance of the Class I shares and therefore
does not reflect 12b-1 fees. If 12b-1 fees had been included, performance for
the Class IS shares for this period would have been lower. Returns of Class I
and IS, since their respective commencement of class operations, were 23.45% and
13.44%, respectively. The return for Class IS is cumulative. The common 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 common trust fund had been registered under the 1940 Act, its
performance may have been adversely affected. Index returns do not reflect
expenses, which have been deducted from the Fund's return. It is not possible to
invest directly in an index.
27
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
David M. Chow, Timothy M. Stevenson and W. Shannon Reid manage the Evergreen
Select Strategic Growth Fund. They have over 29 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.
[PHOTO APPEARS HERE]
David M. Chow
[PHOTO APPEARS HERE]
Timothy M. Stevenson
[PHOTO APPEARS HERE]
W. Shannon Reid
Performance
For the six months ended December 31, the Evergreen Select Strategic Growth Fund
Class I shares had a 6.45% total return compared to 15.22% return for the
Russell 1000 Growth Index, and 9.35% return for the S&P 500 Index. Underlying
the indices' strong returns was a narrow advance in which a select few stocks
surged ahead while the majority of issues lagged.
Portfolio
Characteristics
---------------
Total Net Assets $540,624,265
- ------------------------------------------------------------------
Number of Issues 65
- ------------------------------------------------------------------
P/E Ratio 33.1x
- ------------------------------------------------------------------
Beta 1.06
- ------------------------------------------------------------------
Strategies which worked during the period included a focus on mega-
capitialization stocks, concentration of holdings in a limited number of stocks,
and sector bets. While these strategies have the potential for high rewards,
they also have high risk. The philosophy under which the Fund operates is to
hold a diversified portfolio of approximately sixty companies across the entire
sector spectrum. We believe over time this approach will produce higher returns
with lower risk than the more aggressive strategies mentioned above.
The past six months were divided into two distinctly different periods: a sharp
decline in the first half stemming from international turmoil was followed by an
exceptional recovery during the final three months. Resilient domestic economic
growth, emerging market stability and support by the Federal Reserve Board--in
the form of three interest rate cuts--renewed investor confidence and fueled the
market's rally in the final months of 1998. In fact, the last three months of
1998 witnessed the strongest quarterly advance of the past twenty years. The
rally was led by large capitalization technology and internet related issues as
evidenced by the NASDAQ Composite's nearly 30% return.
28
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Top 5 Industry Allocation
-------------------------
(based on 12/31/98 net assets)
Healthcare Products & Services 22.1%
- --------------------------------------------------------------------------
Information Services & Technology 20.5%
- --------------------------------------------------------------------------
Retailing & Wholesale 6.5%
- --------------------------------------------------------------------------
Communication Systems & Services 6.3%
- --------------------------------------------------------------------------
Building, Construction & Furnishings 6.1%
- --------------------------------------------------------------------------
Investment Strategy
As a policy, we do not make large sector bets. Generally, portfolio positions
are limited to 80% to 120% of the sector weightings for the benchmark Russell
1000 Growth Index.
As of December 31, 1998, one of the largest sector weightings was technology.
Four of the Fund's top 10 holdings, Microsoft (5.0%), America Online (4.3%),
Cisco systems (3.7%) and Intel (3.6%) fall in this sector. We continue to expect
robust earnings growth from the leading companies in this sector.
The consumer non-cyclicals sector accounts for 31.9% of the Fund versus 35.5% of
the benchmark. While we maintain a healthy 15.5% position in the pharmaceuticals
subsector, such as Pfizer (4.0%), Merck & Co. (3.7%), and Bristol Myers Squibb
(3.4%), we continue to be underweighted in the food and beverage and home
products industries.
The consumer cyclicals sector, at 16.5% of the Fund, is overweighted versus the
benchmark's 14.6% weight. We believe selected companies in this category will be
beneficiaries of a strong domestic economy and lack of overseas exposure.
Examples include Home Depot, Costco, and Centex.
In the financials sector, the Fund is currently underweighted compared to the
benchmark, 4.7% versus 10.7%. We are currently looking for opportunities in this
area, however.
The sectors mentioned above-technology, consumer non-cyclicals, consumer
cyclicals, and financials-account for 89.9% of the Fund's holdings and 92.4% of
our benchmark, the Russell 1000 Growth Index. In the remaining sectors, we have
a slight overweight in utilities (3.2% versus 2.4%) due to ownership of AT&T and
SBC Communications. We believe that the management of these telecommunication
utilities will be able to take advantage of the opportunities that deregulation
and new technologies offer. We are underweighted in basic materials (1.1% versus
2.0%) and the industrials (2.0% versus 2.6%), due to their exposure to a weak
worldwide economy and the general lack of growth characteristics within those
industries.
Top 10 Holdings
---------------
(based on 12/31/98 net assets)
Microsoft Corp. 5.0%
- --------------------------------------------------------------------------.
General Electric Co. 4.7%
- --------------------------------------------------------------------------.
America Online, Inc. 4.3%
- --------------------------------------------------------------------------.
Pfizer, Inc. 4.0%
- --------------------------------------------------------------------------.
Cisco Systems, Inc. 3.7%
- --------------------------------------------------------------------------.
Merck & Co. 3.7%
- --------------------------------------------------------------------------.
Intel Corp. 3.6%
- --------------------------------------------------------------------------.
Bristol-Myers Squibb Co. 3.4%
- --------------------------------------------------------------------------.
Shering-Plough Corp. 3.2%
- --------------------------------------------------------------------------.
Procter & Gamble Co. (The) 2.5%
- --------------------------------------------------------------------------.
Outlook
Looking ahead, we anticipate a challenging equity environment as a sluggish
worldwide economy leads to slowing revenue growth and reduced pricing power. We
believe the narrow market leadership is symptomatic of investors' concerns
toward these weakening fundamentals. Consequently, we will maintain an emphasis
on market-leading companies with histories of stable, predictable earnings
growth.
29
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of December 31, 1998
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Class I Class IS
Average Annual Returns
- --------------------------------------------------------------------------------
6 months -2.06% -2.17%
- --------------------------------------------------------------------------------
1 year 6.32% 6.12%
- --------------------------------------------------------------------------------
3 years 20.87% 20.62%
- --------------------------------------------------------------------------------
5 years 19.05% 18.79%
- --------------------------------------------------------------------------------
10 years 15.53% 15.26%
- --------------------------------------------------------------------------------
Since Inception 17.24% 16.96%
- --------------------------------------------------------------------------------
6-month income dividends per share $1.62 $1.34
- --------------------------------------------------------------------------------
6-month capital gain distributions per share $4.89 $4.89
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Select Strat Value Russell 1000 Value CPI
---- ------------------ ------------------ ---
12/31/81 1,000,000 1,000,000 1,000,000
12/31/83 1,668,457 1,540,001 1,078,153
12/31/85 2,258,314 2,229,813 1,163,062
12/31/87 2,893,528 2,688,654 1,228,065
12/31/89 4,352,496 4,145,349 1,341,561
12/31/91 4,617,231 4,747,790 1,467,089
12/31/93 6,243,909 6,382,794 1,551,136
12/31/95 8,457,795 8,654,954 1,631,949
12/31/97 14,050,659 14,233,243 1,716,049
12/31/98 14,937,975 16,457,931 1,746,915
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Strategic Value Fund Class I, the Russell 1000 Value Index and the Consumer
Price 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. Class I and IS performance information
includes the performance of the Fund's predecessor common trust fund for the
periods before the Fund's registration statement became effective on 11/21/97.
Performance for the common trust fund has been adjusted to include the effect of
estimated mutual fund class gross expense ratios at the time the Fund 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 years = 20.95%; 5 years = 19.15%; 10 years = 15.64%; and
since 12/31/81 = 17.35%. Class IS - 3 years = 20.68%; 5 years = 18.87%; 10 years
= 15.36%; and since 12/31/81 = 17.06%. The Class IS share performance for the
period from 11/24/97 through 3/11/98 (class inception date) is based upon the
historical performance of the Class I shares and therefore does not reflect
12b-1 fees. If 12b-1 fees had been included, performance for the Class IS shares
for this period would have been lower. Returns of Class I and IS, since their
respective commencement of class operations, were 10.54% and -0.54%,
respectively. The return for Class IS is cumulative. The common 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 common trust fund had been registered under the 1940 Act, its performance
may have been adversely affected. Index returns do not reflect expenses, which
have been deducted from the Fund's return. It is not possible to invest directly
in an index.
30
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
The Evergreen Select Strategic Value Fund is managed by a team of 3 portfolio
managers with over 61 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.
[PHOTO OF ELIZABETH SMITH APPEARS HERE]
Elizabeth Smith
[PHOTO OF JACK GRAY APPEARS HERE]
Jack Gray
[PHOTO OF TIM O'GRADY APPEARS HERE]
Tim O'Grady
Portfolio
Characteristics
---------------
Total Net Assets $349,788,510
- --------------------------------------------------------------
Number of Issues 52
- --------------------------------------------------------------
P/E Ratio 17.2x
- --------------------------------------------------------------
Beta 0.87
- --------------------------------------------------------------
Performance
For the six months ended December 31, 1998, the Evergreen Select Strategic Value
Fund's -2.1% total return trailed the 3.10% return for the Russell 1000 Value
Index. The Fund struggled during the first half of the period before rebounding
sharply during the final three months. In fact, the Fund's 16.9% total return
during the final three months outpaced the 16.6% return of the Russell 1000
Value Index.
Market Environment
The past six months were divided into two distinctly different periods: stocks
posted negative returns during the first three months before rebounding sharply
in the final half of the period. Although the market's fundamentals haven't
changed materially during the six months, the headlines have and so has investor
sentiment in what has turned out to be a remarkable pendulum swing from a
bearish to a bullish outlook. One reason for this shift was the Federal Reserve
Board, which strongly conveyed in late September the message of a more
accommodative Federal Reserve policy, as evidenced by three interest rate cuts
in the last four months.
31
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
A Tough Ride For Value Stocks
Underlying the market's advance, growth stocks continue to far outpace
value-oriented issues, a trend that has been evident for some time as we have
described in previous reports. In part, this trend is attributable to consistent
and reliable earnings growth, a characteristic generally associated with larger
capitalization growth companies.
Areas of Strength
The Fund's performance edge in the last three months can be found in two
sectors: technology and financial services. Regarding technology, our decision
to overweight this group proved correct, as did security selection. In fact, two
of the portfolio's top six holdings, Sun Microsystems and Intel, posted
six-month returns of 97% and 60%, respectively. We have been consistently
positive versus the benchmark's sector weighting, carrying a specific or point
range of 150% to the index. For the most part, our portfolio exposures are
limited to industry leaders.
Despite a bumpy ride for financial services stocks during the initial part of
the period, this sector rebounded to make a solid contribution to performance in
the final three months, as evidenced by Fleet Financial and PNC Bank which
posted total returns of 22% and 21%, respectively. During the latest bank
correction we provided an analysis of the key investment variables impacting the
group and suggested investors may have been overreacting.
Top 5 Industries
----------------
(based on 12/31/98 net assets)
Banks 15.3%
- ------------------------------------------------------------------------
Finance & Insurance 14.4%
- ------------------------------------------------------------------------
Oil/Energy 11.3%
- ------------------------------------------------------------------------
Information Services & Technology 10.4%
- ------------------------------------------------------------------------
Utilities - Electric 8.3%
- ------------------------------------------------------------------------
Portfolio Adjustments
Consequently, we looked at the current depressed bank valuation environment as
an opportunity to reposition our holdings. A "relief rally" in selected
holdings, whose business models are more vulnerable to the economy, presented us
an opportunity to remove them as positions within the portfolio. For example,
Bankers Trust and Lehman Brothers were, in our estimation, vulnerable to further
sharp earnings estimate reductions, as their mix of business was vulnerable to
prevailing economic conditions. On the other hand our willingness to remove both
Union Planters and the "new" Bank of America is founded in the belief both
companies will be challenged by very difficult integration endeavors related to
recent acquisitions.
Action was taken in the fourth quarter to increase our exposure in the utility
sector, currently at 15%. Based on the market's current valuation, we believe
the era of higher beta, lower yielding securities that have dominated the past
eight quarters may be coming to an end, and utility companies are poised to
rebound.
Within the technology sector, we added Motorola. Here, we believe to have
identified a company in the midst of a turnaround in its three major businesses:
cellular handsets, pagers and semiconductors. We partially funded the purchase
of Motorola through the sale proceeds of Nokia, as we elected to trim back our
position in the company based on an outsized position due to price appreciation.
32
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary
Top 10 Holdings
---------------
(based on 12/31/98 net assets)
Bristol-Myers Squibb Co. 3.6%
- -------------------------------------------------------------------------
Sun Microsystems, Inc. 3.6%
- -------------------------------------------------------------------------
Philip Morris Companies, Inc. 3.6%
- -------------------------------------------------------------------------
Mobil Corp. 3.5%
- -------------------------------------------------------------------------
International Business Machines Corp. 3.4%
- -------------------------------------------------------------------------
Intel Corp. 3.4%
- -------------------------------------------------------------------------
Century Telephone Enterprises, Inc. 3.4%
- -------------------------------------------------------------------------
Fleet Financial Group, Inc. 3.3%
- -------------------------------------------------------------------------
Citigroup, Inc. 3.3%
- -------------------------------------------------------------------------
Chase Manhattan Corp. 3.3%
- -------------------------------------------------------------------------
Going Forward
As we enter 1999, consensus belief is the United States economy will move toward
a moderately lower plane of economic activity with current levels of inflation
and a neutral-to-downward bias in both short- and long-term interest rates.
January is traditionally the strongest month of the year and we see no reason to
take exception to the rule this year. Beyond January, however, the going may get
difficult from several perspectives.
Both the year and decade (so far) were extremely favorable for equity returns.
Year returns approached three times their historical annual rate and the current
decade has now surpassed the "Fabulous Fifties." Our sense is that 1999 may be
the initial year of a more balanced or "average" period for equity prices.
Average, however, is not insignificant given a 10.5% long-term return for
equities, especially in the current inflation environment.
33
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Core Equity Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (a)
<S> <C> <C>
CLASS I
Net asset value beginning of period $ 92.59 $82.97
---------- ------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.44 0.51
.........................................................................
Net realized and unrealized gains or losses
on securities 0.25 9.62
---------- ------
.........................................................................
Total from investment operations 0.69 10.13
---------- ------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.45) (0.51)
.........................................................................
Net realized gains on securities (7.83) 0
---------- ------
.........................................................................
Total distributions (8.28) (0.51)
---------- ------
.........................................................................
Net asset value end of period $ 85.00 $92.59
---------- ------
.........................................................................
Total return 0.85% 12.23%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $1,868,254 $1,952
.........................................................................
Ratios to average net assets:
Expenses 0.67%+ 0.70%+
.........................................................................
Expenses, excluding fee credits 0.67%+ 0.70%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 0.77%+ 0.82%+
.........................................................................
Net investment income 1.04%+ 0.96%+
.........................................................................
Portfolio turnover rate 27% 22%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (b)
<S> <C> <C>
CLASS IS
Net asset value beginning of period $ 87.33 $80.21
------- ------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.32 0.27
.........................................................................
Net realized and unrealized gains or losses
on securities 0.22 7.16
------- ------
.........................................................................
Total from investment operations 0.54 7.43
------- ------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.31) (0.31)
.........................................................................
Net realized gains on securities (7.83) 0
------- ------
.........................................................................
Total distributions (8.14) (0.31)
------- ------
.........................................................................
Net asset value end of period $ 79.73 $87.33
------- ------
.........................................................................
Total return 0.73% 9.27%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $24,584 $ 18
.........................................................................
Ratios to average net assets:
Expenses 0.92%+ 0.95%+
.........................................................................
Expenses, excluding fee credits 0.92%+ 0.95%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 1.02%+ 1.12%+
.........................................................................
Net investment income 0.82%+ 0.60%+
.........................................................................
Portfolio turnover rate 27% 22%
.........................................................................
</TABLE>
+ Annualized.
(a) For the period from November 24, 1997 (commencement of class operations) to
June 30, 1998.
(b) For the period from February 4, 1998 (commencement of class operations) to
June 30, 1998.
See Combined Notes to Financial Statements.
34
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Diversified Value Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (a)
<S> <C> <C>
CLASS I
Net asset value beginning of period $ 26.22 $ 23.81
-------- --------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.12 0.14
.........................................................................
Net realized and unrealized gains or
losses on securities (0.16) 2.41
-------- --------
.........................................................................
Total from investment operations (0.04) 2.55
-------- --------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.13) (0.14)
.........................................................................
Net realized gains on securities (0.65) 0
-------- --------
.........................................................................
Total distributions (0.78) (0.14)
-------- --------
.........................................................................
Net asset value end of period $ 25.40 $ 26.22
-------- --------
.........................................................................
Total return (0.10%) 10.72%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $684,509 $797,352
.........................................................................
Ratios to average net assets:
Expenses 0.63%+ 0.68%+
.........................................................................
Expenses, excluding fee credits 0.63%+ 0.68%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 0.73%+ 0.78%+
.........................................................................
Net investment income 1.00%+ 1.24%+
.........................................................................
Portfolio turnover rate 28% 56%
.........................................................................
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (b)
<S> <C> <C>
CLASS IS
Net asset value beginning of period $ 25.93 $ 26.56
-------- --------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.06 0.06
.........................................................................
Net realized and unrealized gains or
losses on securities (0.14) (0.64)
-------- --------
.........................................................................
Total from investment operations (0.08) (0.58)
-------- --------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.08) (0.05)
.........................................................................
Net realized gains on securities (0.65) 0
-------- --------
.........................................................................
Total distributions (0.73) (0.05)
-------- --------
.........................................................................
Net asset value end of period $ 25.12 $ 25.93
-------- --------
.........................................................................
Total return (0.25%) (2.19%)
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $ 1,369 $ 210
.........................................................................
Ratios to average net assets:
Expenses 0.88%+ 0.93%+
.........................................................................
Expenses, excluding fee credits 0.88%+ 0.93%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 0.98%+ 1.03%+
.........................................................................
Net investment income 0.79%+ 0.80%+
.........................................................................
Portfolio turnover rate 28% 56%
.........................................................................
</TABLE>
+ Annualized.
(a) For the period from January 22, 1998 (commencement of class operations) to
June 30, 1998.
(b) For the period from March 31, 1998 (commencement of class operations) to
June 30, 1998.
See Combined Notes to Financial Statements.
35
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Large Cap Blend Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (a)
<S> <C> <C>
CLASS I
Net asset value beginning of period $ 50.74 $ 44.59
------- --------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.25 0.19
.........................................................................
Net realized and unrealized gains or
losses on securities 0.22 6.18
------- --------
.........................................................................
Total from investment operations 0.47 6.37
------- --------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.22) (0.22)
.........................................................................
Net realized gains on securities (5.18) 0
------- --------
.........................................................................
Total distributions (5.40) (0.22)
------- --------
.........................................................................
Net asset value end of period $ 45.81 $ 50.74
------- --------
.........................................................................
Total return 1.05% 14.31%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $18,541 $723,850
.........................................................................
Ratios to average net assets:
Expenses 0.69%+ 0.71%+
.........................................................................
Expenses, excluding fee credits 0.69%+ 0.71%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 0.79%+ 0.83%+
.........................................................................
Net investment income 0.93%+ 0.78%+
.........................................................................
Portfolio turnover rate 17% 42%
.........................................................................
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (b)
<S> <C> <C>
CLASS IS
Net asset value beginning of period $ 50.74 $ 49.75
------- --------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.18 0.08
.........................................................................
Net realized and unrealized gains or
losses on securities 0.24 1.00
------- --------
.........................................................................
Total from investment operations 0.42 1.08
------- --------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.17) (0.09)
.........................................................................
Net realized gains on securities (5.18) 0
------- --------
.........................................................................
Total distributions (5.35) (0.09)
------- --------
.........................................................................
Net asset value end of period $ 45.81 $ 50.74
------- --------
.........................................................................
Total return 0.93% 2.17%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $ 313 $ 301
.........................................................................
Ratios to average net assets:
Expenses 0.94%+ 0.96%+
.........................................................................
Expenses, excluding fee credits 0.94%+ 0.96%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 1.04%+ 1.08%+
.........................................................................
Net investment income 0.68%+ 0.57%+
.........................................................................
Portfolio turnover rate 17% 42%
.........................................................................
</TABLE>
+ Annualized.
(a) For the period from December 19, 1997 (commencement of class operations) to
June 30, 1998.
(b) For the period from March 12, 1998 (commencement of class operations) to
June 30, 1998.
See Combined Notes to Financial Statements.
36
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Large Cap Blend Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (a)
<S> <C> <C>
CLASS IC
Net asset value beginning of period $ 50.74 $ 45.05
-------- --------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.25 0.23
.........................................................................
Net realized and unrealized gains or
losses on securities 0.22 5.70
-------- --------
.........................................................................
Total from investment operations 0.47 5.93
-------- --------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.22) (0.24)
.........................................................................
Net realized gains on securities (5.18) 0
-------- --------
.........................................................................
Total distributions (5.40) (0.24)
-------- --------
.........................................................................
Net asset value end of period $ 45.81 $ 50.74
-------- --------
.........................................................................
Total return 1.05% 13.18%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $492,372 $497,534
.........................................................................
Ratios to average net assets:
Expenses 0.69%+ 0.71%+
.........................................................................
Expenses, excluding fee credits 0.69%+ 0.71%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 0.79%+ 0.83%+
.........................................................................
Net investment income 0.92%+ 0.80%+
.........................................................................
Portfolio turnover rate 17% 42%
.........................................................................
</TABLE>
+ Annualized.
(a) For the period from November 24, 1997 (commencement of class operations) to
June 30, 1998.
See Combined Notes to Financial Statements.
37
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Cap Growth Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Six Months Ended February 28,
December 31, 1998 Period Ended -------------------- Period ended
(Unaudited) # June 30, 1998 (c) 1998 # 1997 (b) # June 30, 1996 (a)
<S> <C> <C> <C> <C> <C>
CLASS I
Net asset value
beginning of period $ 13.12 $ 13.23 $ 11.28 $11.65 $10.00
------- ------- ------- ------ ------
.........................................................................
Income from investment
operations
.........................................................................
Net investment income (0.04) (0.03) (0.06) (0.04) (0.03)
.........................................................................
Net realized and
unrealized gains or
losses on securities (0.49) (0.08) 2.48 (0.16) 1.68
------- ------- ------- ------ ------
.........................................................................
Total from investment
operations (0.53) (0.11) 2.42 (0.20) 1.65
------- ------- ------- ------ ------
.........................................................................
Less distributions from
Net realized gains on
securities (0.02) 0 (0.47) (0.17) 0
------- ------- ------- ------ ------
.........................................................................
Net asset value end of
period $ 12.57 $ 13.12 $ 13.23 $11.28 $11.65
------- ------- ------- ------ ------
.........................................................................
.........................................................................
Total return (4.03%) (0.83%) 21.67% (1.75%) 16.50%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period
(thousands) $66,641 $69,283 $47,524 $2,888 $2,446
.........................................................................
Ratios to average net
assets:
Expenses 1.07%+ 1.01%+ 0.92% 1.00%+ 1.00%+
.........................................................................
Expenses, excluding fee
credits 1.07%+ 1.01%+ N/A N/A N/A
.........................................................................
Expenses, excluding fee
credits, waivers and
reimbursements N/A N/A 0.95% 2.53%+ 2.81%+
.........................................................................
Net investment income (0.69%)+ (0.62%)+ (0.48%) (0.57%)+ (0.45%)+
.........................................................................
Portfolio turnover rate 75% 54% 166% 123% 57%
.........................................................................
</TABLE>
+ Annualized.
# Net investment income (loss) based on average shares outstanding during the
period.
(a) For the period from December 28, 1995 (commencement of class operations) to
June 30, 1996.
(b) For the eight-month period ended February 28, 1997. The fund changed its
fiscal year end from June 30 to February 28, effective February 28, 1997.
(c) For the four-month period ended June 30, 1998. The fund changed its fiscal
year end from February 28 to June 30, effective June 30, 1998.
See Combined Notes to Financial Statements.
38
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (a)
<S> <C> <C>
CLASS I
Net asset value beginning of period $ 10.09 $ 10.00
------- -------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.01 0.04
.........................................................................
Net realized and unrealized gains or
losses on securities (1.25) 0.09
------- -------
.........................................................................
Total from investment operations (1.24) 0.13
------- -------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.02) 0
.........................................................................
Net realized gains on securities (0.03) (0.04)
------- -------
.........................................................................
Total distributions (0.05) (0.04)
------- -------
.........................................................................
Net asset value end of period $ 8.80 $ 10.09
------- -------
.........................................................................
Total return (12.24%) 1.28%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $98,112 $77,647
.........................................................................
Ratios to average net assets:
Expenses 0.99%+ 1.01%+
.........................................................................
Expenses, excluding fee credits 0.98%+ 1.00%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 1.09%+ 1.26%+
.........................................................................
Net investment income 0.18%+ 0.68%+
.........................................................................
Portfolio turnover rate 13% 23%
.........................................................................
</TABLE>
+ Annualized.
(a) For the period from December 23, 1997 (commencement of class operations) to
June 30, 1998.
See Combined Notes to Financial Statements.
39
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (a)
<S> <C> <C>
CLASS I
Net asset value beginning of period $ 38.96 $ 36.65
-------- --------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.08 0.03
.........................................................................
Net realized and unrealized gains or
losses on securities (0.37) 2.32
-------- --------
.........................................................................
Total from investment operations (0.29) 2.35
-------- --------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.10) (0.04)
.........................................................................
Net realized gain on securities (2.10) 0
-------- --------
.........................................................................
Total distributions (2.20) (0.04)
-------- --------
.........................................................................
Net asset value end of period $ 36.47 $ 38.96
-------- --------
.........................................................................
Total return (0.42%) 6.41%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $ 3,006 $ 2,405
.........................................................................
Ratios to average net assets:
Expenses 0.83%+ 0.86%+
.........................................................................
Expenses, excluding fee credits 0.83%+ 0.86%+
.........................................................................
Expenses, excluding fee credits,
waivers and reimbursements 0.93%+ 0.99%+
.........................................................................
Net investment income 0.47%+ 0.19%+
.........................................................................
Portfolio turnover rate 4% 24%
.........................................................................
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended*
(Unaudited) June 30, 1998
<S> <C> <C>
CLASS IS
Net asset value beginning of period $ 38.94 $ 38.44
-------- --------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.03 (0.01)
.........................................................................
Net realized and unrealized gains or
losses on securities (0.37) 0.52
-------- --------
.........................................................................
Total from investment operations (0.34) 0.51
-------- --------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.06) (0.01)
.........................................................................
Net realized gain on securities (2.10) 0
-------- --------
.........................................................................
Total distributions (2.16) (0.01)
-------- --------
.........................................................................
Net asset value end of period $ 36.44 $ 38.94
-------- --------
.........................................................................
Total return (0.58%) 1.32%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $ 118 $ 205
.........................................................................
Ratios to average net assets:
Expenses 1.08%+ 1.11%+
.........................................................................
Expenses, excluding fee credits 1.08%+ 1.11%+
.........................................................................
Expenses, excluding fee credits,
waivers and reimbursements 1.18%+ 1.24%+
.........................................................................
Net investment income 0.17%+ (0.12%)+
.........................................................................
Portfolio turnover rate 4% 24%
.........................................................................
</TABLE>
+ Annualized.
(a) For the period from November 24, 1997 (commencement of class operations) to
June 30, 1998.
(b) For the period from March 12, 1998 (commencement of class operations) to
June 30, 1998.
See Combined Notes to Financial Statements.
40
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (a)
<S> <C> <C>
CLASS IC
Net asset value beginning of period $ 38.95 $ 36.65
-------- --------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.08 0.03
.........................................................................
Net realized and unrealized gains or
losses on securities (0.37) 2.31
-------- --------
.........................................................................
Total from investment operations (0.29) 2.34
-------- --------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.10) (0.04)
.........................................................................
Net realized gain on securities (2.10) 0
-------- --------
.........................................................................
Total distributions (2.20) (0.04)
-------- --------
.........................................................................
Net asset value end of period $ 36.46 $ 38.95
-------- --------
.........................................................................
Total return (0.42%) 6.38%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $163,982 $177,187
.........................................................................
Ratios to average net assets:
Expenses 0.83%+ 0.86%+
.........................................................................
Expenses, excluding fee credits 0.83%+ 0.86%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 0.93%+ 0.99%+
.........................................................................
Net investment income 0.47%+ 0.12%+
.........................................................................
Portfolio turnover rate 4% 24%
.........................................................................
</TABLE>
+ Annualized.
(a) For the period from November 24, 1997 (commencement of class operations) to
June 30, 1998.
See Combined Notes to Financial Statements.
41
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Special Equity Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Years ended June 30, Period ended October 31,
Six Months Ended -------------------------------- -------------------------------
December 31, 1998 1998 1997 Institutional Class Prior Class
(Unaudited) (e)# (e) (e) 1996 (c)(d)(e) 1995 (b)(e) 1994 (a)(e)
<S> <C> <C> <C> <C> <C> <C>
CLASS I
Net asset value
beginning of period $ 11.25 $ 11.27 $ 11.86 $ 11.42 $ 9.37 $ 10.00
------- ------- ------- ------- ------- -------
.........................................................................
Income from investment
operations
.........................................................................
Net investment income (0.01) (0.05) 0.02 0.07 0.12 0.06
.........................................................................
Net realized and
unrealized gains or
losses on securities (0.06) 1.52 1.81 2.13 2.12 (0.63)
------- ------- ------- ------- ------- -------
.........................................................................
Total from investment
operations (0.07) 1.47 1.83 2.20 2.24 (0.57)
------- ------- ------- ------- ------- -------
.........................................................................
Less distributions from
.........................................................................
Net investment income 0 0 (0.03) (0.07) (0.12) (0.06)
Net realized gains on
securities (1.18) (1.49) (2.39) (1.69) (0.07) 0
------- ------- ------- ------- ------- -------
.........................................................................
Total distributions (1.18) (1.49) (2.42) (1.76) (0.19) (0.06)
------- ------- ------- ------- ------- -------
.........................................................................
Net asset value end of
period $ 10.00 $ 11.25 $ 11.27 $ 11.86 $ 11.42 $ 9.37
------- ------- ------- ------- ------- -------
.........................................................................
.........................................................................
Total return 0.02% 14.23% 17.94% 22.27% 24.44% (5.72%)
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period
(thousands) $72,254 $73,981 $71,980 $63,680 $57,396 $10,069
.........................................................................
Ratios to average net
assets:
Expenses 1.05%+ 1.10% 0.84% 0.34%+ 0.32% 0.15%+
.........................................................................
Expenses, excluding fee
credits 1.05%+ N/A N/A N/A N/A N/A
.........................................................................
Expenses, excluding fee
credits, waivers and
reimbursements 1.84%+ 1.86% 1.82% 1.79%+ 1.97% 2.10%+
.........................................................................
Net investment income (0.18%)+ (0.48) 0.19% 0.94%+ 1.14% 1.06%+
.........................................................................
Portfolio turnover rate 48% 62% 74% 72% 129% 39%
.........................................................................
</TABLE>
+ Annualized.
# Net investment income based on average shares outstanding during the period.
(a) For the period from March 15, 1994 (commencement of class operations) to
October 31, 1994.
(b) On February 21, 1995, the Shares of the Fund were redesignated as either
Retail or Institutional Shares. On that date, the Fund's net investment in-
come, expenses and distributions for the period November 1, 1994 through
February 20, 1995 were allocated to each class of Shares. The basis for the
allocation was the relative net assets of each class of Shares as of Febru-
ary 21, 1995. The results were combined with the results of operations and
distributions for each applicable class for the period February 21, 1995
through October 31, 1995. For the year ended October 31, 1995, the Finan-
cial Highlights' ratio of expenses, net investment income, total return,
and the per share investment activities and distributions reflect this al-
location. Also, on April 15, 1996, the Conestoga Equity Fund was acquired
by CoreFunds, Inc. At that time the Institutional Class Shares of the Fund
were exchanged for Class Y Shares and the Retail Class of Shares of the
Fund were exchanged for Class A Shares.
(c) The per share amount for the Fund for the year ended June 30, 1996 repre-
sents the period from November 1, 1995 to June 30, 1996. All prior years
are for the periods November 1 to October 31.
(d) On April 15, 1996, the Conestoga Special Equity Fund was acquired by
CoreFunds, Inc. At that time the Retail Class Shares of the Fund were ex-
changed for Class A shares.
(e) On July 24, 1998, the assets and certain liabilities of CoreFund Special
Equity Fund ("CoreFund") were acquired by Evergreen Select Special Equity
Fund ("Special Equity Fund"). Shareholders of CoreFund, Class Y became own-
ers of that number of shares of Special Equity Fund, Class I having an ag-
gregate net asset value equal to the aggregate net asset value of their
shares of CoreFund immediately prior to the close of business on July 24,
1998. CoreFund is the accounting survivor, its basis of accounting for as-
sets and liabilities and its operating results for the periods prior to
July 24, 1998 have been carried forward in these financial statements.
See Combined Notes to Financial Statements.
42
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Special Equity Fund Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Years ended June 30, Period ended October 31,
Six Months Ended --------------------------------- -------------------------------
December 31, 1998 Institutional Class Prior Class
(Unaudited) (e)# 1998 (e) 1997 (e) 1996 (c)(d)(e) 1995 (b)(e) 1994 (a)(e)
<S> <C> <C> <C> <C> <C> <C>
CLASS IS
Net asset value
beginning of period $11.18 $11.25 $11.85 $11.42 $ 9.37 $ 10.00
------ ------ ------ ------ ------- -------
.........................................................................
Income from investment
operations
.........................................................................
Net investment income (0.02) (0.10) 0 0.08 0.12 0.06
.........................................................................
Net realized and
unrealized gains or
losses on securities (0.07) 1.52 1.81 2.11 2.12 (0.63)
------ ------ ------ ------ ------- -------
.........................................................................
Total from investment
operations (0.09) 1.42 1.81 2.19 2.24 (0.57)
------ ------ ------ ------ ------- -------
.........................................................................
Less distributions from
.........................................................................
Net investment income 0 0 (0.02) (0.07) (0.12) (0.06)
Net realized gains on
securities (1.18) (1.49) (2.39) (1.69) (0.07) 0
------ ------ ------ ------ ------- -------
.........................................................................
Total distributions (1.18) (1.49) (2.41) (1.76) (0.19) (0.06)
------ ------ ------ ------ ------- -------
.........................................................................
Net asset value end of
period $ 9.91 $11.18 $11.25 $11.85 $ 11.42 $ 9.37
------ ------ ------ ------ ------- -------
.........................................................................
.........................................................................
Total return (0.16%) 13.78% 17.73% 22.14% 24.44% (5.72%)
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period
(thousands) $2,837 $2,981 $2,347 $1,144 $57,396 $10,069
.........................................................................
Ratios to average net
assets:
Expenses 1.30%+ 1.35% 1.14% 0.37%+ 0.32% 0.15%+
.........................................................................
Expenses, excluding fee
credits 1.30%+ N/A N/A N/A N/A N/A
.........................................................................
Expenses, excluding fee
credits, waivers and
reimbursements 2.09%+ 2.11% 2.07% 1.82%+ 1.97% 2.10%+
.........................................................................
Net investment income (0.48%)+ (0.73) (0.12%) 0.91%+ 1.14% 1.06%+
.........................................................................
Portfolio turnover rate 48% 62% 74% 72% 129% 39%
.........................................................................
</TABLE>
+ Annualized.
# Net investment income based on average shares outstanding during the period.
(a) For the period from March 15, 1994 (commencement of class operations) to
October 31, 1994.
(b) On February 21, 1995, the Shares of the Fund were redesignated as either
Retail or Institutional Shares. On that date, the Fund's net investment in-
come, expenses and distributions for the period November 1, 1994 through
February 20, 1995 were allocated to each class of Shares. The basis for the
allocation was the relative net assets of each class of Shares as of Febru-
ary 21, 1995. The results were combined with the results of operations and
distributions for each applicable class for the period February 21, 1995
through October 31, 1995. For the year ended October 31, 1995, the Finan-
cial Highlights' ratio of expenses, net investment income, total return,
and the per share investment activities and distributions reflect this al-
location. Also, on April 15, 1996, the Conestoga Equity Fund was acquired
by CoreFunds, Inc. At that time the Institutional Class Shares of the Fund
were exchanged for Class Y Shares and the Retail Class of Shares of the
Fund were exchanged for Class A Shares.
(c) The per share amount for the Fund for the year ended June 30, 1996 repre-
sents the period from November 1, 1995 to June 30, 1996. All prior years
are for the periods November 1 to October 31.
(d) On April 15, 1996, the Conestoga Special Equity Fund was acquired by
CoreFunds, Inc. At that time the Retail Class Shares of the Fund were ex-
changed for Class A shares.
(e) On July 24, 1998, the assets and certain liabilities of CoreFund Special
Equity Fund ("CoreFund") were acquired by Evergreen Select Special Equity
Fund ("Special Equity Fund"). Shareholders of CoreFund, Class A and Class B
became owners of that number of shares of Special Equity Fund, Class IS
having an aggregate net asset value equal to the aggregate net asset value
of their shares of CoreFund immediately prior to the close of business on
July 24, 1998. CoreFund is the accounting survivor, its basis of accounting
for assets and liabilities and its operating results for the periods prior
to July 24, 1998 have been carried forward in these financial statements.
See Combined Notes to Financial Statements.
43
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (a)
<S> <C> <C>
CLASS I
Net asset value beginning of period $ 38.41 $ 32.45
-------- --------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.05 0.04
.........................................................................
Net realized and unrealized gains or
losses on securities 2.35 5.96
-------- --------
.........................................................................
Total from investment operations 2.40 6.00
-------- --------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.06) (0.04)
.........................................................................
Net realized gains on securities (3.26) 0
-------- --------
.........................................................................
Total distributions (3.32) (0.04)
-------- --------
.........................................................................
Net asset value end of period $ 37.49 $ 38.41
-------- --------
.........................................................................
Total return 6.45% 18.53%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $528,827 $321,532
.........................................................................
Ratios to average net assets:
Expenses 0.71%+ 0.72%+
.........................................................................
Expenses, excluding fee credits 0.71%+ 0.72%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 0.82%+ 0.84%+
.........................................................................
Net investment income 0.31%+ 0.19%+
.........................................................................
Portfolio turnover rate 59% 80%
.........................................................................
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) # June 30, 1998 (b)
<S> <C> <C>
CLASS IS
Net asset value beginning of period $ 38.36 $ 36.10
-------- --------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.01 (0.08)
.........................................................................
Net realized and unrealized gains or
losses on securities 2.32 2.34
-------- --------
.........................................................................
Total from investment operations 2.33 2.26
-------- --------
.........................................................................
Less distributions from
.........................................................................
Net investment income (0.02) 0
.........................................................................
Net realized gains on securities (3.26) 0
-------- --------
.........................................................................
Total distributions (3.28) 0
-------- --------
.........................................................................
Net asset value end of period $ 37.41 $ 38.36
-------- --------
.........................................................................
Total return 6.27% 6.29%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $ 11,797 $ 2,373
.........................................................................
Ratios to average net assets:
Expenses 0.96%+ 0.97%+
.........................................................................
Expenses, excluding fee credits 0.96%+ 0.97%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 1.08%+ 1.09%+
.........................................................................
Net investment income 0.06%+ (0.27%)+
.........................................................................
Portfolio turnover rate 59% 80%
.........................................................................
</TABLE>
+ Annualized.
# Net investment income based on average shares outstanding during the period.
(a) For the period from November 24, 1997 (commencement of class operations) to
June 30, 1998.
(b) For the period from February 27, 1998 (commencement of class operations) to
June 30, 1998.
See Combined Notes to Financial Statements.
44
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (a)
<S> <C> <C>
CLASS I
Net asset value beginning of period $ 226.02 $ 203.35
-------- --------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 1.54 1.60
.........................................................................
Net realized and unrealized gains or
losses on securities (6.36) 22.67
-------- --------
.........................................................................
Total from investment operations (4.82) 24.27
-------- --------
.........................................................................
Less distributions from
.........................................................................
Net investment income (1.62) (1.60)
.........................................................................
Net realized gains on securities (4.89) 0
-------- --------
.........................................................................
Total distributions (6.51) (1.60)
-------- --------
.........................................................................
Net asset value end of period $ 214.69 $ 226.02
-------- --------
.........................................................................
Total return (2.06%) 11.95%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $348,059 $287,194
.........................................................................
Ratios to average net assets:
Expenses 0.71%+ 0.75%+
.........................................................................
Expenses, excluding fee credits 0.71%+ 0.75%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 0.81%+ 0.85%+
.........................................................................
Net investment income 1.46%+ 1.26%+
.........................................................................
Portfolio turnover rate 13% 12%
.........................................................................
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998 (b)
<S> <C> <C>
CLASS IS
Net asset value beginning of period $ 226.04 $ 223.08
-------- --------
.........................................................................
Income from investment operations
.........................................................................
Net investment income 1.15 0.61
.........................................................................
Net realized and unrealized gains or
losses on securities (6.21) 3.13
-------- --------
.........................................................................
Total from investment operations (5.06) 3.74
-------- --------
.........................................................................
Less distributions from
.........................................................................
Net investment income (1.34) (0.78)
.........................................................................
In excess of net investment income (4.89) 0
-------- --------
.........................................................................
Total distributions (6.23) (0.78)
-------- --------
.........................................................................
Net asset value end of period $ 214.75 $ 226.04
-------- --------
.........................................................................
Total return (2.17%) 1.68%
.........................................................................
Ratios/supplemental data
.........................................................................
Net assets end of period (thousands) $ 1,730 $ 1,327
.........................................................................
Ratios to average net assets:
Expenses 0.96%+ 1.00%+
.........................................................................
Expenses, excluding fee credits 0.96%+ 1.00%+
.........................................................................
Expenses, excluding fee credits, waivers
and reimbursements 1.06%+ 1.10%+
.........................................................................
Net investment income 1.21%+ 0.93%+
.........................................................................
Portfolio turnover rate 13% 12%
.........................................................................
</TABLE>
+ Annualized.
(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.
See Combined Notes to Financial Statements.
45
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Core Equity Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 98.4%
Automotive Equipment & Manufacturing - 1.6%
235,000 Arvin Industries, Inc. ........................... $ 9,796,563
360,000 Ford Motor Co. ................................... 21,127,500
--------------
30,924,063
--------------
Banks - 5.8%
425,000 Bank One Corp. ................................... 21,701,562
525,000 Bankamerica Corp. ................................ 31,565,625
225,000 BankBoston Corp. ................................. 8,760,938
55,000 Bankers Trust Corp. .............................. 4,699,063
335,000 Chase Manhattan Corp. ............................ 22,800,937
225,000 Fleet Financial Group, Inc. ...................... 10,054,687
300,000 KeyCorp .......................................... 9,600,000
--------------
109,182,812
--------------
Building, Construction &
Furnishings - 0.2%
150,000 Masco Corp. ...................................... 4,312,500
--------------
Business Equipment &
Services - 1.2%
115,000 *Compuware Corp. ................................. 8,984,375
1,100,000 *Office Max, Inc. ................................ 13,475,000
--------------
22,459,375
--------------
Capital Goods - 0.9%
158,600 Case Corp. ....................................... 3,459,463
135,000 Deere & Co. ...................................... 4,471,875
285,000 LucasVarity Plc, ADR.............................. 9,547,500
--------------
17,478,838
--------------
Chemical & Agricultural
Products - 2.1%
300,000 *Cytec Industries, Inc. .......................... 6,375,000
645,000 Du Pont (E. I.) De Nemours & Co. ................. 34,225,312
--------------
40,600,312
--------------
Communication Systems &
Services - 5.0%
340,000 *Cisco Systems, Inc. ............................. 31,556,250
625,000 *MCI WorldCom, Inc. .............................. 44,843,750
270,000 *Tellabs, Inc. ................................... 18,511,875
--------------
94,911,875
--------------
Consumer Products &
Services - 2.6%
225,000 *Fruit Of The Loom, Inc. Cl. A.................... 3,107,812
200,000 Gillette Co. ..................................... 9,662,500
375,000 Premark International, Inc. ...................... 12,984,375
355,000 Stanley Works..................................... 9,851,250
250,000 Whirlpool Corp. .................................. 13,843,750
--------------
49,449,687
--------------
Diversified Companies - 1.3%
335,000 Tyco International Ltd. .......................... 25,271,563
--------------
Electrical Equipment &
Services - 3.8%
700,000 General Electric Co. ............................. 71,443,750
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Environmental Services - 1.9%
610,000 *Allied Waste Industries, Inc. ................... $ 14,411,250
460,000 Waste Management, Inc. ........................... 21,447,500
--------------
35,858,750
--------------
Finance & Insurance - 6.6%
215,000 Allmerica Financial Corp. ........................ 12,443,125
475,000 Allstate Corp. ................................... 18,346,875
125,000 American International Group, Inc. ............... 12,078,125
235,000 *Amerin Corp. .................................... 5,551,875
200,000 Citigroup, Inc. .................................. 9,900,000
218,000 Franklin Resources, Inc. ......................... 6,976,000
150,000 Loews Corp. ...................................... 14,737,500
265,000 MGIC Investment Corp. ............................ 10,550,312
250,000 Morgan Stanley, Dean Witter, Discover & Co. ...... 17,750,000
155,000 PMI Group, Inc. .................................. 7,653,125
120,000 Providian Financial Corp. ........................ 9,000,000
--------------
124,986,937
--------------
Food & Beverage
Products - 8.5%
165,000 Bestfoods......................................... 8,786,250
900,000 Coca Cola Co. .................................... 60,187,500
150,000 Conagra, Inc. .................................... 4,725,000
280,000 Fortune Brands, Inc. ............................. 8,855,000
850,000 Philip Morris Companies, Inc. .................... 45,475,000
520,000 RJR Nabisco Holdings Corp. ....................... 15,437,500
200,000 *Safeway, Inc. ................................... 12,187,500
170,000 Sara Lee Corp. ................................... 4,791,875
--------------
160,445,625
--------------
Healthcare Products &
Services - 15.8%
450,000 Abbott Laboratories............................... 22,050,000
305,000 *Amgen, Inc. ..................................... 31,891,562
600,000 *Boston Scientific Corp. ......................... 16,087,500
75,000 Bristol-Myers Squibb Co. ......................... 10,035,938
270,000 *Covance, Inc. ................................... 7,863,750
300,000 HBO & Co. ........................................ 8,606,250
305,000 *Health Management Associates,
Inc. Cl. A....................................... 6,595,625
320,000 *HEALTHSOUTH Corp. ............................... 4,940,000
250,000 Johnson & Johnson................................. 20,968,750
260,000 *Lincare Holdings, Inc. .......................... 10,546,250
125,000 Merck & Co., Inc. ................................ 18,460,937
215,000 Mylan Laboratories, Inc. ......................... 6,772,500
175,000 Pfizer, Inc. ..................................... 21,951,562
430,000 Schering-Plough Corp. ............................ 23,757,500
525,000 SmithKline Beecham Plc, ADR....................... 36,487,500
540,000 *Tenet Healthcare Corp. .......................... 14,175,000
265,000 Teva Pharmaceutical Industries
Ltd., ADR........................................ 10,782,188
350,000 Warner-Lambert Co. ............................... 26,315,625
--------------
298,288,437
--------------
</TABLE>
46
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Core Equity Fund
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Industrial Specialty Products &
Services - 0.3%
152,500 Trinity Industries, Inc. ..................... $ 5,871,250
--------------
Information Services &
Technology - 17.5%
375,000 *Adaptec, Inc. ............................... 6,585,938
270,000 *Altera Corp. ................................ 16,436,250
425,000 *Applied Materials, Inc. ..................... 18,142,188
400,000 *Cadence Design Systems, Inc. ................ 11,900,000
765,000 Compaq Computer Corp. ........................ 32,082,187
260,000 Computer Associates
International, Inc. ......................... 11,082,500
135,000 *Comverse Technology, Inc. ................... 9,585,000
320,000 *Dell Computer Corp. ......................... 23,420,000
360,000 Intel Corp. .................................. 42,682,500
280,000 International Business Machines Corp. ........ 51,730,000
245,000 *Microsoft Corp. ............................. 33,978,437
250,000 *Network Associates, Inc. .................... 16,562,500
470,000 *Oracle Systems Corp. ........................ 20,268,750
390,000 *Quantum Corp. ............................... 8,287,500
200,000 *SCI Systems, Inc. ........................... 11,550,000
200,000 *Synopsys, Inc. .............................. 10,850,000
175,000 Varian Associates, Inc. ...................... 6,628,125
--------------
331,771,875
--------------
Metal Products &
Services - 0.8%
65,000 Aluminum Co. of America....................... 4,846,563
195,000 Crown Cork & Seal Co., Inc. .................. 6,008,437
425,000 Titanium Metals Corp. ........................ 3,612,500
--------------
14,467,500
--------------
Oil/Energy - 7.2%
280,000 Anadarko Petroleum Corp. ..................... 8,645,000
395,000 Elf Aquitaine, ADR............................ 22,366,875
465,000 Enron Corp. .................................. 26,534,062
100,000 Mobil Corp. .................................. 8,712,500
725,000 *Newpark Resources, Inc. ..................... 4,939,063
210,000 Phillips Petroleum Co. ....................... 8,951,250
325,000 Texaco, Inc. ................................. 17,184,375
460,000 Tosco Corp. .................................. 11,902,500
460,000 Ultramar Diamond Shamrock Corp. .............. 11,155,000
590,000 YPF SA, ADR................................... 16,483,125
--------------
136,873,750
--------------
Oil Field Services - 1.0%
380,000 Diamond Offshore Drilling, Inc. .............. 9,001,250
488,000 *R & B Falcon Corp. .......................... 3,721,000
335,000 *Weatherford International, Inc. ............. 6,490,625
--------------
19,212,875
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Paper & Packaging - 1.1%
255,000 Bowater, Inc. .................................... $ 10,566,562
185,000 *Sealed Air Corp. ................................ 9,446,563
--------------
20,013,125
--------------
Real Estate - 1.3%
460,000 FelCor Lodging Trust Inc. REIT.................... 10,608,750
500,000 Simon Property Group Inc. REIT.................... 14,250,000
--------------
24,858,750
--------------
Retailing & Wholesale - 5.0%
300,000 Dayton Hudson Corp. .............................. 16,275,000
890,000 Family Dollar Stores, Inc. ....................... 19,580,000
235,000 *Federated Department Stores, Inc. ............... 10,237,187
300,000 Liz Claiborne, Inc. .............................. 9,468,750
260,000 Lowe's Companies, Inc. ........................... 13,308,750
450,000 *Reebok International Ltd. ....................... 6,693,750
215,000 Sears, Roebuck & Co. ............................. 9,137,500
560,000 *Toys R Us, Inc. ................................. 9,450,000
--------------
94,150,937
--------------
Telecommunication Services &
Equipment - 1.1%
175,000 Nokia Corp. ADR................................... 21,076,563
--------------
Transportation - 0.9%
300,000 Burlington Northern Santa Fe Corp. ............... 10,125,000
125,000 Kansas City Southern Industries, Inc. ............ 6,148,438
--------------
16,273,438
--------------
Utilities - Electric - 2.7%
510,000 Cinergy Corp. .................................... 17,531,250
290,000 CMS Energy Corp. ................................. 14,046,875
430,000 GPU, Inc. ........................................ 19,000,625
--------------
50,578,750
--------------
Utilities - Telephone - 1.9%
82,500 Century Telephone Enterprises, Inc. .............. 5,568,750
475,000 GTE Corp. ........................................ 30,875,000
--------------
36,443,750
--------------
Utilities - 0.3%
325,000 MCN Corp. ........................................ 6,195,313
--------------
Total Common Stocks
(cost $1,332,770,480)............................ 1,863,402,400
--------------
</TABLE>
See Combined Notes to Financial Statements.
47
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Core Equity Fund
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 4.2%
Repurchase Agreement - 2.2%
$40,867,256 Dresdner Bank AG 4.25%,
dated 12/31/98, due 1/4/99,
maturity value $40,886,554
(cost $40,867,256) (a)..... $ 40,867,256
--------------
U.S. Government Agency
Obligations - 0.1%
U.S. Treasury Bills
1,500,000 3.80%, 1/28/99.............. 1,495,725
100,000 3.85%, 1/21/99.............. 99,785
--------------
1,595,510
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C> <C>
Money Market Shares - 1.9%
36,666,002 Valiant General Fund
(cost, $36,666,002)........... 36,666,002
--------------
Total Short-Term Investments
(cost $79,128,768)............ 79,128,768
--------------
Total Investments
(cost $1,411,899,248).. 102.6% 1,942,531,168
Other Assets and
Liabilities - net...... (2.6) (49,693,421)
------ --------------
Net Assets.............. 100.0% $1,892,837,747
====== ==============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1998, the repurchase agreement was collateralized by:
$37,135,000 U.S. Treasury Inflation Index Notes, 3.625%, 4/15/28;
value including accrued interest - $36,475,561 and $10,790,000 U.S.
Treasury STRIP, 8/5/12; value including accrued interest -
$5,213,728.
Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust
STRIP Separate Trading of Registered Interest and Principle of Securities
48
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Diversified Value Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 96.8%
Aerospace & Defense - 1.1%
140,000 Raytheon Co. Cl. A............................... $ 7,236,250
------------
Automotive Equipment
& Manufacturing - 0.9%
125,000 Goodyear Tire & Rubber Co. ...................... 6,304,688
------------
Banks - 7.2%
219,996 Bank One Corp. .................................. 11,233,546
200,000 Bankamerica Corp. ............................... 12,025,000
70,000 BankBoston Corp. ................................ 2,725,625
75,000 Chase Manhattan Corp. ........................... 5,104,687
98,400 Fleet Financial Group, Inc. ..................... 4,397,250
250,000 PNC Bank Corp. .................................. 13,531,250
------------
49,017,358
------------
Building, Construction &
Furnishings - 0.7%
170,000 Masco Corp. ..................................... 4,887,500
------------
Business Equipment &
Services - 0.7%
60,000 *Compuware Corp. ................................ 4,687,500
------------
Chemical & Agricultural
Products - 1.6%
205,400 Du Pont (E. I.) De Nemours & Co. ................ 10,899,038
------------
Communication Systems &
Services - 6.2%
200,000 *Cisco Systems, Inc. ............................ 18,562,500
200,000 *MCI WorldCom, Inc. ............................. 14,350,000
140,000 *Tellabs, Inc. .................................. 9,598,750
------------
42,511,250
------------
Consumer Products &
Services - 3.7%
200,000 Procter & Gamble Co. ............................ 18,262,500
132,600 Whirlpool Corp. ................................. 7,342,725
------------
25,605,225
------------
Diversified Companies - 3.3%
300,000 Tyco International Ltd. ......................... 22,631,250
------------
Electrical Equipment &
Services - 5.2%
259,900 General Electric Co. ............................ 26,526,044
150,000 Motorola, Inc. .................................. 9,159,375
------------
35,685,419
------------
Environmental Services - 0.5%
80,000 Waste Management, Inc. .......................... 3,730,000
------------
Finance & Insurance - 7.1%
420,600 Allstate Corp. .................................. 16,245,675
170,000 Citigroup, Inc. ................................. 8,415,000
215,000 Countrywide Credit Industries, Inc. ............. 10,790,312
65,000 Loews Corp. ..................................... 6,386,250
65,000 Merrill Lynch & Co., Inc. ....................... 4,338,750
80,000 Price (T.) Rowe & Associates, Inc. .............. 2,740,000
------------
48,915,987
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Food & Beverage Products - 10.9%
363,300 Bestfoods............................................ $ 19,345,725
224,800 Coca Cola Co. ....................................... 15,033,500
266,700 Fortune Brands, Inc. ................................ 8,434,387
265,000 Philip Morris Companies, Inc. ....................... 14,177,500
200,000 *Safeway, Inc. ...................................... 12,187,500
200,000 Sara Lee Corp. ...................................... 5,637,500
------------
74,816,112
------------
Healthcare Products &
Services - 13.2%
100,000 Bristol-Myers Squibb Co. ............................ 13,381,250
145,000 Johnson & Johnson.................................... 12,161,875
250,000 *Lincare Holdings, Inc. ............................. 10,140,625
203,500 Pfizer, Inc. ........................................ 25,526,531
170,000 SmithKline Beecham Plc, ADR.......................... 11,815,000
180,000 *Tenet Healthcare Corp. ............................. 4,725,000
170,000 Warner-Lambert Co. .................................. 12,781,875
------------
90,532,156
------------
Information Services &
Technology - 10.4%
200,000 Compaq Computer Corp. ............................... 8,387,500
100,000 Intel Corp. ......................................... 11,856,250
124,900 International Business Machines Corp. ............... 23,075,275
170,000 *Microsoft Corp. .................................... 23,576,875
50,000 *Sun Microsystems, Inc. ............................. 4,281,250
------------
71,177,150
------------
Manufacturing - Distributing - 0.5%
50,000 Philips Electronics NV............................... 3,384,375
------------
Metal Products & Services - 1.5%
40,955 Aluminum Co. of America.............................. 3,053,707
328,000 USX United States Steel Group........................ 7,544,000
------------
10,597,707
------------
Natural Gas - 0.5%
100,000 El Paso Energy Corp. Delaware........................ 3,481,250
------------
Oil/Energy - 6.4%
90,000 Atlantic Richfield Co. .............................. 5,872,500
170,000 Cabot Corp. ......................................... 4,749,375
170,000 Mobil Corp. ......................................... 14,811,250
130,000 Tosco Corp. ......................................... 3,363,750
100,000 Ultramar Diamond Shamrock Corp. ..................... 2,425,000
225,000 Williams Companies, Inc. ............................ 7,017,188
200,000 YPF SA, ADR.......................................... 5,587,500
------------
43,826,563
------------
Oil Field Services - 0.5%
71,500 Diamond Offshore Drilling, Inc. ..................... 1,693,656
225,000 *R & B Falcon Corp. ................................. 1,715,625
------------
3,409,281
------------
Paper & Packaging - 1.1%
180,000 Bowater, Inc. ....................................... 7,458,750
------------
</TABLE>
49
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Diversified Value Fund
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Retailing & Wholesale - 2.4%
99,000 Dayton Hudson Corp. ................................. $ 5,370,750
110,000 Family Dollar Stores, Inc. .......................... 2,420,000
200,000 *Federated Department Stores, Inc. .................. 8,712,500
------------
16,503,250
------------
Telecommunication Services &
Equipment - 1.0%
57,900 Nokia Corp. ADR...................................... 6,973,331
------------
Textile & Apparel - 0.9%
129,300 V. F. Corp. ......................................... 6,060,938
------------
Transportation - 1.5%
300,000 Burlington Northern Santa Fe Corp. .................. 10,125,000
------------
Utilities - Electric - 3.3%
554,300 Houston Industries, Inc. ............................ 17,806,887
125,000 PacifiCorp........................................... 2,632,813
50,000 Pinnacle West Capital Corp. ......................... 2,118,750
------------
22,558,450
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Telephone - 4.5%
120,000 Century Telephone Enterprises, Inc. ................. $ 8,100,000
346,000 GTE Corp. ........................................... 22,490,000
------------
30,590,000
------------
Total Common Stocks
(cost $581,758,909)................................. 663,605,778
------------
PREFERRED STOCKS - 1.8%
Printing, Publishing, Broadcasting &
Entertainment - 1.8%
510,200 News Corp. Ltd. ADR
(cost $11,451,485).................................. $ 12,595,563
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<C> <S> <C> <C>
SHORT-TERM INVESTMENT - 1.4%
Repurchase Agreement - 1.4%
$9,834,588 Dresdner Bank AG
4.25%, dated 12/31/98, due 1/4/99, maturity value
$9,839,232 (cost $9,834,588)(a)..................... 9,834,588
------------
Total Investments
(cost $603,044,982)......................... 100.0% 686,035,929
Other Assets and
Liabilities - net........................... 0.0 (157,459)
------ ------------
Net Assets................................... 100.0% $685,878,470
====== ============
</TABLE>
* Non-income producing securities.
(a) At December 31,1998, the repurchase agreement was collateralized by:
$9,975,000 U.S. Treasury Inflation Index Notes, 3.625%, 1/15/08;
value including accrued interest - $10,033,783.
Summary of Abbreviations:
ADR American Depository Receipts
See Combined Notes to Financial Statements.
50
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Large Cap Blend Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 96.6%
Automotive Equipment &
Manufacturing - 1.1%
108,000 Goodyear Tire & Rubber Co. ......................... $ 5,447,250
------------
Banks - 10.2%
236,780 Bank One Corp. ..................................... 12,090,579
190,000 Bankamerica Corp. .................................. 11,423,750
248,400 BankBoston Corp. ................................... 9,672,075
60,070 Bankers Trust Corp. ................................ 5,132,231
164,000 Fleet Financial Group, Inc. ........................ 7,328,750
96,775 Mellon Bank Corp. .................................. 6,653,281
------------
52,300,666
------------
Building, Construction &
Furnishings - 2.0%
361,000 Masco Corp. ........................................ 10,378,750
------------
Business Equipment &
Services - 1.7%
112,800 *Compuware Corp. ................................... 8,812,500
------------
Chemical & Agricultural
Products - 1.0%
95,000 Du Pont (E. I.) De Nemours & Co. ................... 5,040,938
------------
Communication Systems &
Services - 6.6%
187,050 *Cisco Systems, Inc. ............................... 17,360,578
231,000 *MCI WorldCom, Inc. ................................ 16,574,250
------------
33,934,828
------------
Consumer Products &
Services - 3.7%
145,900 Procter & Gamble Co. ............................... 13,322,494
97,600 Whirlpool Corp. .................................... 5,404,600
------------
18,727,094
------------
Diversified Companies - 2.9%
196,000 Tyco International Ltd. ............................ 14,785,750
------------
Electrical Equipment &
Services - 3.4%
172,560 General Electric Co. ............................... 17,611,905
------------
Environmental Services - 2.4%
262,500 Waste Management, Inc. ............................. 12,239,062
------------
Finance & Insurance - 7.8%
279,600 Allstate Corp. ..................................... 10,799,550
224,500 Citigroup, Inc. .................................... 11,112,750
180,250 Federal National Mortgage Association............... 13,338,500
68,500 Merrill Lynch & Co., Inc. .......................... 4,572,375
------------
39,823,175
------------
Food & Beverage Products - 6.5%
113,500 Bestfoods........................................... 6,043,875
162,850 Coca Cola Co. ...................................... 10,890,594
106,200 Philip Morris Companies, Inc. ...................... 5,681,700
173,600 *Safeway, Inc. ..................................... 10,578,750
------------
33,194,919
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products &
Services - 15.9%
124,000 Bristol-Myers Squibb Co. ...................... $ 16,592,750
330,400 HBO & Co. ..................................... 9,478,350
515,000 *HEALTHSOUTH Corp. ............................ 7,950,312
172,885 Johnson & Johnson.............................. 14,500,729
142,180 *Lincare Holdings, Inc. ....................... 5,767,176
110,870 Pfizer, Inc. .................................. 13,907,256
131,000 *Quintiles Transnational Corp. ................ 6,992,125
82,600 Warner-Lambert Co. ............................ 6,210,488
------------
81,399,186
------------
Information Services &
Technology - 12.4%
417,800 Compaq Computer Corp. ......................... 17,521,487
64,200 Intel Corp. ................................... 7,611,713
45,500 International Business Machines Corp. ......... 8,406,125
138,000 *Microsoft Corp. .............................. 19,138,875
121,000 *Network Associates, Inc. ..................... 8,016,250
138,000 *Quantum Corp. ................................ 2,932,500
------------
63,626,950
------------
Metal Products &
Services - 1.0%
71,000 Aluminum Co. of America........................ 5,293,937
------------
Oil / Energy - 4.4%
78,000 Mobil Corp. ................................... 6,795,750
197,400 Texaco, Inc. .................................. 10,437,525
183,700 YPF SA, ADR.................................... 5,132,119
------------
22,365,394
------------
Paper & Packaging - 1.1%
134,600 Bowater, Inc. ................................. 5,577,487
------------
Printing, Publishing, Broadcasting &
Entertainment - 1.8%
247,200 News Corp, Ltd. ............................... 6,535,350
41,700 Omnicom Group, Inc. ........................... 2,418,600
------------
8,953,950
------------
Real Estate - 0.7%
153,800 FelCor Lodging Trust Inc. REIT................. 3,547,013
------------
Retailing & Wholesale - 2.4%
157,200 Dayton Hudson Corp. ........................... 8,528,100
164,400 Family Dollar Stores, Inc. .................... 3,616,800
------------
12,144,900
------------
Transportation - 1.3%
189,000 Burlington Northern Santa Fe Corp. ............ 6,378,750
------------
Utilities - Electric - 2.2%
323,700 Cinergy Corp. ................................. 11,127,187
------------
</TABLE>
51
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Large Cap Blend Fund
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Telephone - 4.1%
112,500 Century Telephone Enterprises, Inc. ................ $ 7,593,750
207,700 GTE Corp. .......................................... 13,500,500
------------
21,094,250
------------
Total Common Stocks
(cost $367,996,341)................................ 493,805,841
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 3.4%
Repurchase Agreement - 3.4%
$17,500,209 Dresdner Bank AG
4.25%, dated 12/31/98, due 1/4/99, maturity
value $17,508,473 (cost $17,500,209) (a)..... 17,500,209
------------
</TABLE>
<TABLE>
<CAPTION>
Shares
<C> <S> <C> <C>
Money Market Shares - 0.0%
1,661 Valiant General Fund
(cost $1,661)..................................... 1,661
------------
Total Investments
(cost $385,498,211)........................ 100.0% $511,307,711
Other Assets and
Liabilities - net.......................... 0.0 (80,997)
----- ------------
Net Assets................................. 100.0% $511,226,714
===== ============
</TABLE>
* Non-income producing securities
(a) At December 31,1998, the repurchase agreement was collateralized by:
$7,730,000 U.S. Treasury Notes, 5.875%, 7/31/99; value including
accrued interest-$7,971,996, $9,524,000 U.S. Treasury Notes, 6.00%,
8/15/99; value including accrued interest - $9,815,720, and $65,000
U.S. Treasury Notes, 5.625%, 11/30/99; value including accrued
interest - $65,880.
Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
52
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Cap Growth Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 99.6%
Advertising & Related Services - 2.0%
51,100 * ADVO, Inc. ............................................ $ 1,347,763
-----------
Aerospace & Defense - 1.6%
12,900 Alliant Techsystems, Inc. ............................... 1,063,444
-----------
Automotive Equipment &
Manufacturing - 1.2%
25,200 Midas, Inc. ............................................. 784,350
-----------
Banks - 2.4%
34,300 SIS Bancorp, Inc. ....................................... 1,574,584
-----------
Building, Construction &
Furnishings - 2.2%
22,100 * CompX International, Inc. Cl. A........................ 582,888
31,300 * Wackenhut Corrections Corp. ........................... 895,962
-----------
1,478,850
-----------
Business Equipment & Services - 4.7%
27,400 Abacus Direct Corp. ..................................... 1,254,406
30,200 * Hagler Bailly, Inc. ................................... 620,988
49,400 * Market Facts, Inc. .................................... 1,241,175
-----------
3,116,569
-----------
Chemical & Agricultural Products - 1.8%
33,800 OM Group, Inc. .......................................... 1,233,700
-----------
Communication Systems &
Services - 1.0%
10,400 * Exodus Communications, Inc. ........................... 671,450
-----------
Consumer Products & Services - 4.9%
37,300 * Chattem, Inc. ......................................... 1,778,743
38,500 * Scotts Co. (The) Cl. A................................. 1,479,844
-----------
3,258,587
-----------
Education - 8.0%
43,646 * Bright Horizons Family Solutions, Inc. ................ 1,183,898
52,400 * Career Education Corp. ................................ 1,572,000
69,100 * CBT Group Public Ltd. ................................. 1,032,181
76,500 * Computer Learning Centers, Inc. ....................... 509,203
29,000 Strayer Education, Inc. ................................. 1,019,531
-----------
5,316,813
-----------
Electrical Equipment & Services - 8.1%
43,300 * Artisan Components, Inc. .............................. 228,678
39,500 * Asyst Technologies, Inc. .............................. 807,281
49,800 * Atmel Corp. ........................................... 761,006
55,200 * DII Group, Inc. ....................................... 1,266,150
29,800 * Pri Automation, Inc. .................................. 769,213
43,600 * Sipex Corp. ........................................... 1,546,438
-----------
5,378,766
-----------
Finance & Insurance - 4.9%
33,200 Annuity & Life Re, Ltd. ................................. 888,100
29,467 * Delphi Financial Group, Inc. .......................... 1,545,176
25,000 * Telebanc Financial Corp. .............................. 854,687
-----------
3,287,963
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Finance - 1.9%
20,900 Investors Financial Services Corp. ..................... $ 1,247,469
-----------
Healthcare Products &
Services - 7.3%
35,200 Ballard Medical Products................................ 855,800
24,100 * Barr Labs Inc. ....................................... 1,156,800
7,300 * Minimed Inc. ......................................... 765,587
37,750 * Renal Care Group, Inc. ............................... 1,094,750
30,150 * Xomed Surgical Products, Inc. ........................ 964,800
-----------
4,837,737
-----------
Industrial Specialty Products &
Services - 5.1%
31,500 Kaydon Corp. ........................................... 1,261,969
37,200 Roper Industries, Inc. ................................. 757,950
28,900 Superior Telecom, Inc. ................................. 1,365,525
-----------
3,385,444
-----------
Information Services &
Technology - 20.1%
19,000 * Applied Micro Circuits Corp. ......................... 646,000
18,100 * Broadvision, Inc. .................................... 585,422
23,300 * Choicepoint, Inc. .................................... 1,502,850
52,900 * DA Consulting Group, Inc. ............................ 1,127,431
47,300 * Electronics for Imaging, Inc. ........................ 1,890,522
51,000 * FileNet Corp. ........................................ 584,906
32,100 * Forrester Research, Inc. ............................. 1,405,378
22,800 * Kronos Inc. .......................................... 1,013,887
39,500 * Maximus, Inc. ........................................ 1,461,500
13,700 * Mercury Interactive Corp. ............................ 865,669
13,200 * PMC Sierra, Inc. ..................................... 832,013
22,900 * Progress Software Corp. .............................. 774,306
12,600 * Usweb Corp. .......................................... 331,538
18,400 * Verio, Inc. .......................................... 409,400
-----------
13,430,822
-----------
Leisure & Tourism - 2.1%
43,300 * Steiner Leisure Ltd. ................................. 1,384,247
-----------
Machinery - Diversified - 3.6%
25,300 Astec Industries, Inc. ................................. 1,407,313
64,000 * Rental Service Corp. ................................. 1,004,000
-----------
2,411,313
-----------
Manufacturing - Distributing - 2.0%
52,000 * National R. V. Holdings, Inc. ........................ 1,339,000
-----------
Oil/Energy - 1.3%
30,500 * Newfield Exploration Co. ............................. 636,688
32,400 * Seven Seas Petroleum, Inc. ........................... 216,675
-----------
853,363
-----------
Oil Field Services - 1.0%
34,800 * Core Laboratories NV ................................. 665,550
-----------
Printing, Publishing, Broadcasting & Entertainment -
3.4%
42,900 * Big Flower Holdings, Inc. ............................ 946,481
40,700 * Hearst-Argyle Television, Inc. ....................... 1,343,100
-----------
2,289,581
-----------
</TABLE>
53
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Cap Growth Fund
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Retailing & Wholesale - 1.1%
18,300 * Ann Taylor Stores Corp. ................................ $ 721,706
----------
Telecommunication Services &
Equipment - 6.8%
57,100 *Antec Corp............................................... 1,152,706
72,800 *Boston Communications Group.............................. 928,200
15,800 *Esprit Telecom Group, Plc, ADR........................... 745,562
40,200 *ITC Deltacom............................................. 610,538
48,700 *Viatel, Inc. ............................................ 1,118,578
----------
4,555,584
----------
Transportation - 1.1%
41,600 *Covenant Transport, Inc. Cl. A .......................... 743,600
----------
Total Common Stocks
(cost $56,609,307)....................................... 66,378,255
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS - 1.1%
Repurchase Agreement - 1.1%
$714,000 EIMC Joint Repurchase Agreement Investments in
repurchase agreements, in a joint trading account,
dated 12/31/98, 5.02%, due 1/4/99, maturity value
$714,398 (cost $714,000) (a)......................... $ 714,000
-----------
Total Investments
(cost $57,323,307).......................... 100.7% 67,092,255
Other Assets and
Liabilities - net........................... (0.7) (451,186)
------- -----------
Net Assets................................... 100.0% $66,641,069
======= ===========
</TABLE>
* Non-income producing securities.
(a) The repurchase agreements are fully collateralized by the U.S.
government and/or agency obligations based on market prices plus
accrued interest at December 31, 1998.
Summary of Abbreviations:
ADR American Depository Receipt
See Combined Notes to Financial Statements.
54
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 97.4%
Automotive Equipment &
Manufacturing - 2.9%
40,000 Arvin Industries, Inc. .............................. $ 1,667,500
60,000 Wabash National Corp. ............................... 1,218,750
------------
2,886,250
------------
Banks - 9.4%
10,000 ABC Bancorp.......................................... 126,250
9,500 Bank of Commerce..................................... 159,125
19,500 Britton & Koontz Capital Corp. ...................... 386,344
27,500 BSB Bancorp, Inc. ................................... 904,062
67,400 *Civic Bancorp....................................... 893,050
56,910 Commercial Bankshares, Inc. ......................... 1,308,930
50,000 Cowlitz Bancorp...................................... 393,750
15,000 First Liberty Financial Corp. ....................... 315,000
20,000 First State Bancorp.................................. 415,000
30,000 Granite State Bankshares, Inc. ...................... 705,000
14,000 Hancock Holding Co. ................................. 637,000
10,815 Hubco, Inc. ......................................... 325,802
50,000 Independent Bankshares, Inc. ........................ 575,000
10,000 Pacific Century Financial Corp. ..................... 243,750
7,000 *PNB Financial Group................................. 200,375
75,000 *Pointe Financial Corp. ............................. 773,438
29,800 Seacoast Banking Corp. of Florida Cl. A.............. 845,575
------------
9,207,451
------------
Building, Construction &
Furnishings - 9.7%
6,700 *Beazer Homes USA, Inc. ............................. 167,500
47,000 *CompX International, Inc. Cl. A..................... 1,239,625
20,000 *Crossmann Communities, Inc. ........................ 552,500
20,000 D.R. Horton, Inc. ................................... 460,000
60,000 *Gehl Co. ........................................... 922,500
75,000 *Genlyte Group, Inc. ................................ 1,406,250
17,000 *Knoll, Inc. ........................................ 503,625
25,000 *Koala Corp. ........................................ 434,375
50,000 La-Z-Boy Chair Co. .................................. 890,625
22,500 *Monaco Coach Corp. ................................. 596,250
75,000 Shelby Williams Industries, Inc. .................... 900,000
40,100 *Stanley Furniture Co., Inc. ........................ 731,825
30,000 *Toll Brothers, Inc. ................................ 676,875
------------
9,481,950
------------
Business Equipment &
Services - 0.3%
9,000 *Zebra Technologies Corp. Cl. A...................... 258,750
------------
Communication Systems &
Services - 0.9%
20,000 *Orbital Sciences Corp. ............................. 885,000
------------
Consumer Products &
Services - 9.3%
40,000 CPI Corp. ........................................... 1,060,000
20,000 Harman International Industries, Inc. ............... 762,500
45,000 Lancaster Colony Corp. .............................. 1,445,625
50,000 *LoJack Corp. ....................................... 593,750
35,000 Matthews International Corp. Cl. A................... 1,102,500
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Consumer Products &
Services - continued
45,000 *Maxwell Shoe, Inc. Cl. A............................ $ 492,187
60,000 *North Face, Inc. ................................... 780,000
66,000 *Rock Of Ages Corp. Cl. A............................ 940,500
20,000 Russ Berrie & Co., Inc. ............................. 470,000
30,000 St. John Knits, Inc. ................................ 780,000
70,000 York Group, Inc. .................................... 665,000
------------
9,092,062
------------
Electronic Equipment &
Services - 6.9%
40,000 Boston Acoustics, Inc. .............................. 1,060,000
5,000 *Electro Scientific Industries, Inc. ................ 226,562
27,800 *Hadco Corp. ........................................ 973,000
33,632 *Sanmina Corp. ...................................... 2,102,000
65,000 *SMART Modular Technologies, Inc. ................... 1,803,750
85,000 *Vicon Industries, Inc. ............................. 626,875
------------
6,792,187
------------
Electrical Equipment &
Services - 0.1%
15,000 *Ortel Corp. ........................................ 131,250
------------
Finance & Insurance - 10.0%
30,000 American Bankers Insurance Group, Inc. .............. 1,451,250
20,000 CMAC Investment Corp. ............................... 918,750
2,500 Dain Rauscher Corp. ................................. 73,750
17,000 *Farm Family Holdings, Inc. ......................... 578,000
11,000 Fidelity National Financial, Inc. ................... 335,500
32,000 Frontier Insurance Group, Inc. ...................... 412,000
38,500 Grand Premier Financial, Inc. ....................... 471,625
36,400 Interstate/Johnson Lane, Inc. ....................... 1,139,775
10,000 LandAmerica Financial Group, Inc. ................... 558,125
32,300 Meadowbrook Insurance Group, Inc. ................... 530,931
85,500 Morgan Keegan, Inc. ................................. 1,608,469
17,200 Raymond James Financial, Inc. ....................... 363,350
60,000 State Auto Financial Corp. .......................... 742,500
27,700 Waddell & Reed Financial, Inc. Cl. A................. 656,144
------------
9,840,169
------------
Food & Beverage Products - 1.6%
30,000 *Performance Food Group Co. ......................... 843,750
25,700 Smucker (J. M.) Co. ................................. 568,613
5,000 Smucker (J. M.) Co. Cl. A............................ 123,750
------------
1,536,113
------------
Healthcare Products &
Services - 7.6%
20,000 *Acuson Corp. ....................................... 297,500
40,000 *ADAC Laboratories................................... 798,750
95,000 *Air Methods Corp. .................................. 255,312
10,000 *Alcide Corp. ....................................... 151,250
41,000 *Carematrix Corporation.............................. 1,255,625
40,000 *Empi, Inc. ......................................... 1,000,000
140,000 *Encore Medical Corp. ............................... 393,750
100,000 *Exactech, Inc. ..................................... 1,300,000
</TABLE>
55
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products &
Services - continued
40,000 *Hologic, Inc. ..................................... $ 485,000
3,500 *Maxxim Medical, Inc. .............................. 104,125
16,000 *Visx, Inc. ........................................ 1,399,000
------------
7,440,312
------------
Industrial Specialty Products &
Services - 2.3%
15,000 Donaldson, Inc. .................................... 311,250
25,000 Graco, Inc. ........................................ 737,500
4,500 Hach Co. Cl. A...................................... 46,125
55,000 Met-Pro Corp. ...................................... 687,500
20,000 Robbins & Myers, Inc. .............................. 442,500
------------
2,224,875
------------
Information Services &
Technology - 4.6%
20,000 *Axent Technologies, Inc. .......................... 611,250
20,000 *Etec Systems, Inc. ................................ 800,000
40,000 Fair Issac & Co., Inc. ............................. 1,847,500
33,200 *Micros Systems, Inc. .............................. 1,091,450
10,000 *Tecnomatix Technologies Ltd. ...................... 175,000
------------
4,525,200
------------
Machinery - Diversified - 0.8%
41,250 Hardinge, Inc. ..................................... 760,547
------------
Oil/Energy - 2.0%
20,000 *Barrett Resources Corp. ........................... 480,000
30,000 Berry Petroleum Co. Cl. A........................... 425,625
32,000 Cabot Oil & Gas Corp. Cl. A......................... 480,000
50,000 *COHO Energy, Inc. ................................. 140,625
28,000 *Nuevo Energy Co. .................................. 322,000
20,000 Southwestern Energy Co. ............................ 150,000
------------
1,998,250
------------
Oil Field Services - 1.9%
13,000 *Atwood Oceanics, Inc. ............................. 221,000
10,300 Lufkin Industries, Inc. ............................ 190,550
20,000 *Oceaneering International, Inc. ................... 300,000
20,000 *Offshore Logistics, Inc. .......................... 237,500
27,200 *R & B Falcon Corp. ................................ 207,400
10,000 *SEACOR SMIT, Inc. ................................. 494,375
30,000 *Tuboscope, Inc. ................................... 243,750
------------
1,894,575
------------
Printing, Publishing, Broadcasting & Entertainment -
1.8%
43,900 Banta Corp. ........................................ 1,201,762
1,900 Bowne & Co., Inc. .................................. 33,963
20,000 *Infinity Broadcasting Corp. ....................... 547,500
------------
1,783,225
------------
Real Estate - 1.0%
15,000 Eastgroup Properties, Inc. REIT..................... 276,562
20,000 *Lodgian, Inc. ..................................... 97,500
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Real Estate - continued
50,000 *Prime Hospitality Corp. ........................... $ 528,125
4,100 Sunstone Hotel Investors, Inc. REIT................. 38,694
------------
940,881
------------
Retailing & Wholesale - 7.6%
22,000 *Cole National Corp. Cl. A.......................... 376,750
65,000 *Duckwall-ALCO Stores, Inc. ........................ 853,125
50,000 *Finish Line, Inc. Cl. A............................ 400,000
25,000 *Footstar, Inc. .................................... 625,000
71,000 Freds Inc. ......................................... 1,065,000
63,500 *Lithia Motors, Inc. ............................... 1,047,750
100,000 *S & K Famous Brands, Inc. ......................... 928,125
30,000 Seaway Food Town, Inc. ............................. 495,000
50,000 *Sonic Automotive, Inc. ............................ 1,721,875
------------
7,512,625
------------
Telecommunication Services & Equipment - 3.0%
69,300 *Antec Corp. ....................................... 1,394,663
60,000 *Aspect Telecommunications Corp. ................... 1,035,000
50,000 *Comdial Corp. ..................................... 440,625
4,000 Hickory Tech Corp. ................................. 52,000
------------
2,922,288
------------
Textile & Apparel - 1.7%
70,000 *Gerber Childrenswear, Inc. ........................ 608,125
30,000 Oxford Industries, Inc. ............................ 847,500
18,100 Superior Uniform Group, Inc. ....................... 262,450
------------
1,718,075
------------
Thrift Institutions - 4.8%
18,000 Highland Bancorp, Inc. ............................. 567,000
75,400 Horizon Financial Corp. ............................ 951,925
14,200 Mech Financial, Inc. ............................... 394,050
25,000 Monterey Bay Bancorp, Inc. ......................... 357,813
42,500 *Quaker City Bancorp, Inc. ......................... 680,000
48,371 St. Paul Bancorp, Inc. ............................. 1,316,598
29,000 Teche Holding Co. .................................. 445,875
------------
4,713,261
------------
Transportation - 1.7%
13,000 *Airnet Systems, Inc. .............................. 186,875
35,000 ASA Holdings, Inc. ................................. 1,067,500
25,700 *Heartland Express, Inc. ........................... 449,750
------------
1,704,125
------------
Utilities - Electric - 1.3%
10,000 Central Hudson Gas & Electric Corp. . 447,500
10,000 Madison Gas & Electric Co. ......................... 227,500
22,500 MDU Resources Group, Inc. .......................... 592,031
------------
1,267,031
------------
Utilities - Gas - 4.2%
10,000 Eastern Enterprises................................. 437,500
25,000 Indiana Energy, Inc. ............................... 615,625
26,600 Northwest Natural Gas Co. .......................... 688,275
20,000 NUI Corp. .......................................... 536,250
</TABLE>
56
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Small Company Value Fund
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Gas - continued
10,000 Providence Energy Corp. ............................. $ 210,000
30,000 South Jersey Industries, Inc. ....................... 785,625
35,000 UGI Corp. ........................................... 831,250
------------
4,104,525
------------
Total Common Stocks
(cost $103,150,841)................................. 95,620,977
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 4.8%
Commercial Paper - 3.2%
$1,645,000 Exxon Imperial US, Inc. 4.83%, 1/25/99.............. $ 1,639,703
1,470,000 Island Finance Puerto Rico, Inc. 5.55%, 1/22/99,
(LOC: NorwestCorp.)................................ 1,465,241
------------
3,104,944
------------
U.S. Government Agency
Obligations - 1.6%
175,000 Federal Home Loan Bank Discount Notes 5.05%,
1/13/99............................................ 174,705
1,410,000 Federal National Mortgage Association Discount Notes
5.07%, 1/19/99..................................... 1,406,426
------------
1,581,131
------------
Total Short-Term Investments
(cost $4,686,075).................................. 4,686,075
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments
(cost $107,836,916).......................... 102.2% 100,307,052
Other Assets and
Liabilities - net............................ (2.2) (2,194,640)
------ ------------
Net Assets ................................... 100.0% $ 98,112,412
====== ============
</TABLE>
* Non-Income Producing Securities.
Summary of Abbreviations:
REIT Real Estate Investment Trust
LOC Letter of Credit
See Combined Notes to Financial Statements.
57
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 99.6%
Advertising & Related Services - 2.0%
88,000 *Ha Lo Industries Inc. ................................ $ 3,311,000
------------
Aerospace & Defense - 1.1%
87,500 *BE Aerospace, Inc. ................................... 1,837,500
------------
Banks - 4.8%
44,000 BankBoston Corp. ...................................... 1,713,250
30,000 Mellon Bank Corp. ..................................... 2,062,500
81,000 SouthTrust Corp. ...................................... 2,991,938
27,500 Summit Bancorp......................................... 1,201,406
------------
7,969,094
------------
Building, Construction & Furnishings - 4.9%
90,000 Masco Corp. ........................................... 2,587,500
110,000 *NCI Building Systems, Inc. ........................... 3,093,750
42,000 Southdown, Inc. ....................................... 2,485,875
------------
8,167,125
------------
Business Equipment & Services - 4.3%
56,700 *Compuware Corp. ...................................... 4,429,687
40,000 *Consolidated Graphics, Inc. .......................... 2,702,500
------------
7,132,187
------------
Communication Systems & Services - 0.9%
23,000 *Tellabs, Inc. ........................................ 1,576,938
------------
Consumer Products & Services - 1.0%
29,100 Whirlpool Corp. ....................................... 1,611,413
------------
Education - 1.0%
52,000 *Apollo Group, Inc. ................................... 1,761,500
------------
Electronic Equipment & Services - 2.1%
55,000 *Sanmina Corp. ........................................ 3,437,500
------------
Environmental Services - 3.0%
215,000 *Allied Waste Industries, Inc. ........................ 5,079,375
------------
Finance & Insurance - 9.9%
89,000 AFLAC, Inc. ........................................... 3,916,000
50,000 Annuity & Life Re, Ltd. ............................... 1,343,750
112,500 Conseco, Inc. ......................................... 3,438,281
32,100 Countrywide Credit Industries, Inc. ................... 1,611,019
85,000 Partnerre Ltd. ........................................ 3,888,750
50,000 ReliaStar Financial Corp. ............................. 2,306,250
------------
16,504,050
------------
Food & Beverage Products - 2.5%
54,000 Dean Foods Co. ........................................ 2,203,875
95,000 Richfood Holdings, Inc. ............................... 1,971,250
------------
4,175,125
------------
Healthcare Products & Services - 15.4%
88,000 *Boston Scientific Corp. .............................. 2,359,500
63,000 *Elan Corp Plc, ADR.................................... 4,382,437
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products & Services - continued
20,000 HBO & Co. ............................................. $ 573,750
230,000 *HEALTHSOUTH Corp. .................................... 3,550,625
29,000 *Lincare Holdings, Inc. ............................... 1,176,313
120,000 *Orthodontic Centers America, Inc. .................... 2,332,500
70,000 *Pediatrix Medical Group, Inc. ........................ 4,195,625
67,000 *Quintiles Transnational Corp. ........................ 3,576,125
83,000 *Safeskin Corp. ....................................... 2,002,375
32,000 *Universal Health Services, Inc. Cl. B................. 1,660,000
------------
25,809,250
------------
Industrial Specialty Products & Services - 2.4%
38,000 Magna International, Inc. Cl. A........................ 2,356,000
78,500 Roper Industries, Inc. ................................ 1,599,437
------------
3,955,437
------------
Information Services & Technology - 15.6%
113,000 *Adaptec, Inc. ........................................ 1,984,563
33,000 *Edwards (J.D.) & Co. ................................. 936,375
93,000 *EMC Corp. ............................................ 7,905,000
108,000 *Network Associates, Inc. ............................. 7,155,000
43,500 *PMC-Sierra, Inc. ..................................... 2,745,937
104,000 *Quantum Corp. ........................................ 2,210,000
27,000 *Uniphase Corp. ....................................... 1,873,125
22,000 Veritas Software Corp. ................................ 1,318,625
------------
26,128,625
------------
Manufacturing - Distributing - 0.9%
37,000 *Teradyne, Inc. ....................................... 1,567,875
------------
Oil/Energy - 3.5%
310,000 *Newpark Resources, Inc. .............................. 2,111,875
56,000 Sonat, Inc. ........................................... 1,515,500
95,000 Ultramar Diamond Shamrock Corp. ....................... 2,303,750
------------
5,931,125
------------
Paper & Packaging - 1.1%
106,000 Rock Tennessee Co. Cl. A............................... 1,795,375
------------
Pharmaceuticals - 3.3%
190,000 *BioChem Pharma, Inc. ................................. 5,438,750
------------
Printing, Publishing, Broadcasting &
Entertainment - 0.5%
15,700 Omnicom Group, Inc. ................................... 910,600
------------
Real Estate - 1.0%
75,000 FelCor Lodging Trust Inc. REIT......................... 1,729,688
------------
Retailing & Wholesale - 5.9%
57,600 Dollar General Corp. .................................. 1,360,800
156,000 Family Dollar Stores, Inc. ............................ 3,432,000
102,000 *General Nutrition Companies, Inc. .................... 1,657,500
60,000 *Starbucks Corp. ...................................... 3,367,500
------------
9,817,800
------------
</TABLE>
58
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Social Principles Fund
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Telecommunication Services & Equipment - 1.8%
60,000 *Qwest Communications
International, Inc. .................................. $ 3,000,000
------------
Transportation - 2.0%
100,000 Comair Holdings, Inc. ................................. 3,375,000
------------
Utilities - Electric - 5.4%
95,000 Cinergy Corp. ......................................... 3,265,625
68,000 Sierra Pacific Resources............................... 2,584,000
85,000 UtiliCorp United, Inc. ................................ 3,118,437
------------
8,968,062
------------
Utilities - Telephone - 3.3%
81,000 Century Telephone Enterprises, Inc. ................... 5,467,500
------------
Total Common Stocks
(cost $118,325,220)................................... 166,457,894
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 0.4%
Repurchase Agreement - 0.4%
$605,242 Dresdner Bank AG 4.25%, dated 12/31/98, due 1/4/99,
maturity value $605,313 (cost $605,242)(a).......... $ 605,242
------------
<CAPTION>
Shares
<C> <S> <C>
Money Market Shares - 0.0%
62,842 Valiant General Fund (Cost $62,842).................. 62,842
------------
Total Short-Term Investments
(cost $668,084)..................................... 668,084
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments
(cost $118,993,304)........................... 100.0% 167,125,978
Other Assets and
Liabilities - net............................. 0.0 (19,562)
------ ------------
Net Assets..................................... 100.0% $167,106,416
====== ============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1998, the repurchase agreement was collateralized by:
$1,280,000 U.S. Treasury STRIPS, 8/15/12; value including accrued
interest - $618,867
Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust
STRIP Separate Trading of Registered Interest and Principle of Securities
See Combined Notes to Financial Statements.
59
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Special Equity Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 91.1%
Advertising & Related
Services - 0.5%
11,400 *Young & Rubicam, Inc................................. $ 369,075
-----------
Building, Construction &
Furnishings - 6.4%
45,000 *Comfort Systems USA, Inc............................. 804,375
50,000 *Group Maintenance America Corp....................... 606,250
25,000 Oakwood Homes Corp.................................... 379,687
27,500 *Royal Group Technologies Ltd......................... 613,594
35,000 *Shaw Group, Inc...................................... 280,000
70,000 *Standard Pacific Corp................................ 988,750
44,180 *Winsloew Furniture, Inc.............................. 1,170,770
-----------
4,843,426
-----------
Business Equipment &
Services - 1.6%
67,500 *Imagemax, Inc........................................ 135,000
32,500 *Metamor Worldwide, Inc............................... 812,500
46,500 *Vision Twenty One, Inc............................... 244,125
-----------
1,191,625
-----------
Capital Goods - 0.3%
10,000 *Case Corp............................................ 218,125
-----------
Communication Systems &
Services - 2.8%
28,000 *Mac Gray Corp........................................ 318,500
22,000 *Metromedia Fiber Network, Inc........................ 737,000
115,100 *VDI Media............................................ 1,093,450
-----------
2,148,950
-----------
Consumer Products &
Services - 0.4%
129,200 *Acme United Corp..................................... 290,700
-----------
Diversified Companies - 1.0%
20,000 National Service Industries, Inc...................... 760,000
-----------
Electronic Equipment &
Services - 0.3%
30,000 *Vicon Industries, Inc................................ 221,250
-----------
Electrical Equipment &
Services - 1.0%
65,000 *Magnetek, Inc........................................ 751,563
-----------
Finance & Insurance - 2.5%
46,500 Aames Financial Corp.................................. 148,219
11,160 *Affiliated Managers Group, Inc. ..................... 333,405
34,700 *Delta Financial Corp................................. 206,031
18,200 Everest Reinsurance Holdings, Inc..................... 708,662
83,000 *WFS Financial, Inc................................... 518,750
-----------
1,915,067
-----------
Food & Beverage Products - 1.9%
70,000 Chiquita Brands International, Inc. .................. 669,375
30,000 *Fresh Del Monte Produce.............................. 650,625
9,300 *Omega Protein Corp................................... 94,163
-----------
1,414,163
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products &
Services - 15.6%
45,000 *American Retirement Corp............................. $ 705,937
94,000 *Brookdale Living Communities, Inc.................... 1,833,000
46,500 *Cellegy Pharmaceuticals, Inc......................... 162,750
37,500 *Centennial Healthcare Corp........................... 581,250
68,000 *Chirex, Inc.......................................... 1,453,500
46,300 *Collagenex Pharmaceuticals, Inc...................... 445,637
80,000 *Computer Motion, Inc................................. 1,000,000
40,500 *Guilford Pharmaceuticals, Inc........................ 577,125
27,300 *Isis Pharmaceuticals, Inc............................ 353,194
45,000 *MedPartners, Inc..................................... 236,250
41,850 *Megabios Corp........................................ 214,481
105,000 *Pharmaceutical Resources, Inc........................ 498,750
75,000 *Progenics Pharmaceuticals, Inc....................... 928,125
47,400 *Resound Corp......................................... 177,750
12,500 *Roberts Pharmaceutical Corp.......................... 271,875
175,800 *Scios, Inc........................................... 1,823,925
85,000 *Titan Pharmaceuticals, Inc........................... 324,063
26,500 *Urologix, Inc........................................ 111,797
-----------
11,699,409
-----------
Industrial Specialty Products &
Services - 2.3%
55,800 *Building One Services Corp........................... 1,164,825
25,500 *United States Filter Corp............................ 583,313
-----------
1,748,138
-----------
Information Services &
Technology - 14.6%
46,400 *Abovenet Communications, Inc......................... 974,400
28,500 *Beyond Common Corp................................... 591,375
27,900 *Box Hill Systems Corp................................ 149,963
48,500 *Ciber, Inc........................................... 1,354,969
20,500 *Excite, Inc.......................................... 862,281
62,000 *Mecon, Inc........................................... 651,000
22,500 *Microage, Inc........................................ 345,938
100,700 *Mikohn Gaming Corp................................... 390,212
50,000 *MIPS Technologies, Inc............................... 1,600,000
75,000 *Mylex Corp........................................... 900,000
37,000 *Real Networks, Inc................................... 1,327,375
7,000 *Ticketmaster Online Citysearch....................... 392,000
63,500 *Verio, Inc........................................... 1,420,812
-----------
10,960,325
-----------
Metal Products & Services - 1.4%
25,000 Freeport McMoran Copper & Gold, Inc., Cl. B........... 260,938
37,890 Ispat International NV................................ 293,647
35,000 *RTI International Metals Inc......................... 490,000
-----------
1,044,585
-----------
Oil/Energy - 0.4%
42,500 *Newpark Resources, Inc............................... 289,531
-----------
</TABLE>
60
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Special Equity Fund
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Oil Field Services - 2.4%
65,300 *Bayard Drilling Tech, Inc........................... $ 326,500
9,000 *Callon Petroleum Co................................. 104,625
50,000 *Horizon Offshore, Inc............................... 275,000
65,000 *IRI International Corp.............................. 260,000
37,000 *Lone Star Technologies, Inc......................... 374,625
68,256 *Meridian Resource Corp.............................. 217,566
10,000 Tidewater, Inc....................................... 231,875
-----------
1,790,191
-----------
Printing, Publishing, Broadcasting &
Entertainment - 1.1%
75,000 *Big City Radio, Inc................................. 318,750
20,400 *SBS Broadcasting SA................................. 550,800
-----------
869,550
-----------
Real Estate - 3.4%
53,600 AMB Property Corp. REIT.............................. 1,179,200
27,500 Franchise Finance Corp. America REIT................. 660,000
41,800 Imperial Credit Commercial Mortgage Investment Corp.
REIT................................................ 391,875
31,500 *Prime Hospitality Corp.............................. 332,719
-----------
2,563,794
-----------
Retailing & Wholesale - 12.5%
27,500 *Abercrombie & Fitch Co. ............................ 1,945,625
46,300 *Bon Ton Stores, Inc................................. 353,038
9,300 *CDnow, Inc. ........................................ 167,400
92,100 *Drug Emporium, Inc.................................. 472,012
18,600 *Electronics Boutique Holdings Corp.................. 378,975
33,000 *General Nutrition Companies, Inc.................... 536,250
155,000 *Pacific Sunwear Of California....................... 2,538,125
60,000 *Paul Harris Stores, Inc............................. 487,500
23,000 *Tweeter Home Entertainment Group, Inc. ............. 661,250
45,200 *Williams Sonoma, Inc. .............................. 1,822,125
-----------
9,362,300
-----------
Telecommunication Services & Equipment - 9.4%
102,300 *Amnex, Inc.......................................... 38,363
70,000 *Clearnet Communications, Inc........................ 568,750
44,600 *Hybrid Networks, Inc................................ 27,875
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Telecommunication Services & Equipment - continued
50,000 *Hyperion Telecommunications, Inc., Cl. A............. $ 756,250
14,800 *Intermedia Communications, Inc....................... 255,300
81,500 *Metronet Communications Corp......................... 2,730,250
45,000 *MGC Communications, Inc.............................. 315,000
32,500 *NEXTLINK Communications, Inc., Cl. A................. 922,187
31,000 Scientific Atlanta, Inc............................... 707,187
50,000 *US LEC Corp. Cl. A................................... 740,625
-----------
7,061,787
-----------
Textile & Apparel - 2.1%
186,600 *Gildan Activewear, Inc............................... 1,562,775
-----------
Transportation - 5.7%
17,000 *Alaska Air Group, Inc................................ 752,250
30,000 *Amtran, Inc. ........................................ 813,750
105,000 *Arkansas Best Corp................................... 613,594
27,400 *Coach USA, Inc. ..................................... 950,437
45,000 *Genesee & Wyoming, Inc. ............................. 573,750
46,500 *Midway Airlines Corp. ............................... 558,000
-----------
4,261,781
-----------
Utilities - Telephone - 1.5%
10,000 *McLeod USA, Inc., Cl. A.............................. 312,500
65,000 *Star Telecommunications, Inc. ....................... 792,188
-----------
1,104,688
-----------
Total Common Stocks
(cost $71,859,538)................................... 68,442,798
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS - 9.6%
Repurchase Agreement - 9.6%
$7,186,801 Dresdner Bank AG 4.25%, dated 12/31/98, due
1/4/99, maturity value $7,187,649 (cost
$7,186,801)(a).................................... 7,186,801
-----------
Total Investments
(cost $79,046,339)........................ 100.7% 75,629,599
Other Assets and
Liabilities - net......................... (0.7) (539,313)
------ -----------
Net Assets................................. 100.0% $75,090,286
====== ===========
</TABLE>
* Non-income producing securities.
(a) At December 31, 1998, the repurchase agreement was collateralized by:
$7,290,000 U.S. Treasury Inflation Index Notes, 3.625%, 1/15/08;
value including accrued interest - $7,332,960.
Summary of Abbreviations:
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
61
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 98.4%
Advertising & Related Services - 1.6%
149,490 Omnicom Group, Inc.................................. $ 8,670,420
------------
Aerospace & Defense - 2.2%
126,640 Cordant Technologies, Inc. ......................... 4,749,000
63,650 United Technologies Corp. .......................... 6,921,938
------------
11,670,938
------------
Building, Construction & Furnishings - 6.1%
160,140 Centex Corp. ....................................... 7,216,309
109,295 Ethan Allen Interiors, Inc.......................... 4,481,095
135,740 Home Depot, Inc. ................................... 8,305,591
163,335 Mohawk Industries, Inc.............................. 6,870,278
103,790 Southdown, Inc...................................... 6,143,071
------------
33,016,344
------------
Business Equipment &
Services - 5.6%
30,000 Automatic Data Processing, Inc...................... 2,405,625
159,675 *Oracle Systems Corp................................ 6,885,984
122,670 Paychex, Inc........................................ 6,309,838
192,250 *Robert Half International, Inc. ................... 8,591,172
53,760 Xerox Corp.......................................... 6,343,680
------------
30,536,299
------------
Communication Systems & Services - 6.3%
218,135 *Cisco Systems, Inc................................. 20,245,655
123,850 Lucent Technologies, Inc. .......................... 13,623,500
------------
33,869,155
------------
Consumer Products &
Services - 4.4%
67,900 Clorox Co........................................... 7,931,569
24,400 Colgate-Palmolive Co................................ 2,266,150
149,780 Procter & Gamble Co. ............................... 13,676,786
------------
23,874,505
------------
Electrical Equipment &
Services - 5.7%
247,075 General Electric Co................................. 25,217,092
44,475 *Sofamor/Danek Group, Inc........................... 5,414,831
------------
30,631,923
------------
Finance & Insurance - 4.7%
59,835 American Express Co. ............................... 6,118,129
77,625 Exel Limited Hamilton............................... 5,821,875
113,375 Federal Home Loan Mortgage Corp. ................... 7,305,601
83,360 Federal National Mortgage Association............... 6,168,640
------------
25,414,245
------------
Food & Beverage Products - 3.1%
13,660 Coca Cola Co........................................ 913,513
45,751 Hershey Foods Corp. ................................ 2,845,140
118,700 *Safeway, Inc....................................... 7,233,281
197,750 Sara Lee Corp. ..................................... 5,574,078
------------
16,566,012
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products & Services - 22.1%
146,005 Abbott Laboratories................................ $ 7,154,245
42,000 American Home Products Corp. ...................... 2,365,125
101,700 *Arterial Vascular Engineering, Inc. .............. 5,339,250
135,315 Bristol-Myers Squibb Co............................ 18,106,838
52,500 Cardinal Health, Inc. ............................. 3,983,438
73,100 Guidant Corp....................................... 8,059,275
156,975 *Health Management Associates, Inc. Cl. A.......... 3,394,584
14,375 Johnson & Johnson.................................. 1,205,703
136,480 Merck & Co., Inc. ................................. 20,156,390
172,145 Pfizer, Inc........................................ 21,593,438
317,300 Schering-Plough Corp. ............................. 17,530,825
96,435 *Universal Health Services, Inc. Cl. B............. 5,002,566
77,375 Warner-Lambert Co.................................. 5,817,633
------------
119,709,310
------------
Information Services & Technology - 20.5%
143,750 America Online, Inc. .............................. 23,000,000
203,805 *Computer Horizons Corp. .......................... 5,426,308
109,115 *Compuware Corp.................................... 8,524,609
179,795 *Dell Computer Corp................................ 13,158,747
37,700 *EMC Corp.......................................... 3,204,500
165,500 Intel Corp......................................... 19,622,094
87,650 Keane Inc. ........................................ 3,500,522
194,725 *Microsoft Corp. .................................. 27,005,924
217,850 *Unisys Corp....................................... 7,502,209
------------
110,944,913
------------
Leisure & Tourism - 2.2%
177,050 Carnival, Corp. Cl. A.............................. 8,498,400
90,600 Royal Caribbean Cruises Ltd. ...................... 3,352,200
------------
11,850,600
------------
Oil Field Services - 2.1%
261,000 Diamond Offshore Drilling, Inc..................... 6,182,438
176,600 Halliburton Co. ................................... 5,231,775
------------
11,414,213
------------
Paper & Packaging - 1.1%
127,320 Avery Dennison Corp................................ 5,737,358
------------
Printing, Publishing, Broadcasting &
Entertainment - 0.4%
30,500 Gannett Co., Inc. ................................. 1,967,250
------------
Retailing & Wholesale - 6.5%
100,595 *Costco Companies, Inc............................. 7,261,702
90,600 Dayton Hudson Corp................................. 4,915,050
324,540 Family Dollar Stores, Inc.......................... 7,139,880
69,750 Gap, Inc. ......................................... 3,923,437
241,700 TJX Co., Inc....................................... 7,009,300
84,000 Walgreen Co........................................ 4,919,250
------------
35,168,619
------------
Transportation - 0.7%
66,190 AMR Corp. ......................................... 3,930,031
------------
</TABLE>
62
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Growth Fund
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Telephone - 3.1%
98,150 AT&T Corp.......................................... $ 7,385,788
177,860 SBC Communications, Inc. .......................... 9,537,742
------------
16,923,530
------------
Total Common Stocks
(cost $370,821,123)............................... 531,895,665
------------
<CAPTION>
Principal
Amount
<C> <S> <C>
SHORT-TERM INVESTMENTS - 2.0%
Repurchase Agreement - 2.0%
$10,486,587 Dresdner Bank AG 4.25%, dated 12/31/1998, due
1/4/99, maturity value $10,491,539
(cost $10,486,587) (a)............................ 10,486,587
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
Money Market Shares - 0.0%
183,607 Valiant General Fund (cost $183,607)................ $ 183,607
------------
Total Short-Term Investments
(cost $10,670,194)................................. 10,670,194
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments
(cost $381,491,317)........................ 100.4% 542,565,859
Other Assets and Liabilities - net.......... (0.4) (1,941,594)
------ ------------
Net Assets.................................. 100.0% $540,624,265
====== ============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1998, the repurchase agreement was collateralized by:
$9,935,000 U.S. Treasury Notes 5.625%, 11/30/99; value including
accrued interest--$10,069,525 and $1,300,000 U.S. Treasury STRIP,
8/15/12; value including accrued interest - $628,160.
Summary of Abbreviations:
STRIP Separate Trading of Registered and Interest and Principal of Secu-
rities.
See Combined Notes to Financial Statements.
63
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 95.6%
Aerospace & Defense - 1.0%
65,000 Raytheon Co. Cl. A.................................... $ 3,359,688
------------
Automotive Equipment &
Manufacturing - 1.3%
90,000 Goodyear Tire & Rubber Co............................. 4,539,375
------------
Banks - 15.3%
167,000 Chase Manhattan Corp.................................. 11,366,437
65,000 First American Corp................................... 2,884,375
255,000 Fleet Financial Group, Inc............................ 11,395,312
125,000 Mellon Bank Corp...................................... 8,593,750
115,000 PNC Bank Corp......................................... 6,224,375
135,000 SouthTrust Corp....................................... 4,986,563
185,000 Summit Bancorp........................................ 8,082,188
------------
53,533,000
------------
Capital Goods - 0.8%
125,000 Case Corp............................................. 2,726,563
------------
Consumer Products &
Services - 1.3%
75,000 Maytag Corp........................................... 4,668,750
------------
Electrical Equipment &
Services - 2.4%
140,000 Motorola, Inc......................................... 8,548,750
------------
Finance & Insurance - 14.4%
90,000 Allstate Corp......................................... 3,476,250
230,000 Citigroup, Inc........................................ 11,385,000
195,000 Countrywide Credit Industries, Inc.................... 9,786,562
80,000 Loews Corp............................................ 7,860,000
125,000 Merrill Lynch & Co., Inc.............................. 8,343,750
80,000 Nationwide Financial Services, Inc.
Cl. A................................................ 4,135,000
120,000 ReliaStar Financial Corp.............................. 5,535,000
------------
50,521,562
------------
Food & Beverage Products - 4.0%
55,000 Fortune Brands, Inc................................... 1,739,375
232,000 Philip Morris Companies, Inc.......................... 12,412,000
------------
14,151,375
------------
Healthcare Products &
Services - 5.1%
95,000 Bristol-Myers Squibb Co............................... 12,712,187
190,000 *Tenet Healthcare Corp................................ 4,987,500
------------
17,699,687
------------
Information Services & Technology - 10.4%
100,000 Intel Corp............................................ 11,856,250
65,000 International Business Machines Corp.................. 12,008,750
145,000 *Sun Microsystems, Inc................................ 12,415,625
------------
36,280,625
------------
Manufacturing -
Distributing - 2.5%
130,000 Philips Electronics NV................................ 8,799,375
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Metal Products & Services - 2.4%
95,000 Aluminum Co. of America.............................. $ 7,083,437
60,000 USX United States Steel Group........................ 1,380,000
------------
8,463,437
------------
Oil/Energy - 11.3%
190,000 Cabot Corp........................................... 5,308,125
140,000 Mobil Corp........................................... 12,197,500
80,000 Texaco, Inc.......................................... 4,230,000
210,000 Tosco Corp........................................... 5,433,750
130,000 Ultramar Diamond Shamrock Corp....................... 3,152,500
290,000 Williams Companies, Inc.............................. 9,044,375
------------
39,366,250
------------
Oil Field Services - 1.2%
95,000 Diamond Offshore Drilling, Inc....................... 2,250,313
270,000 *R & B Falcon Corp................................... 2,058,750
------------
4,309,063
------------
Real Estate - 0.7%
110,000 FelCor Lodging Trust Inc. REIT....................... 2,536,875
------------
Retailing & Wholesale - 1.5%
120,000 Sears, Roebuck & Co.................................. 5,100,000
------------
Telecommunication Services &
Equipment - 2.1%
60,500 Nokia Corp. ADR...................................... 7,286,469
------------
Textile & Apparel - 1.5%
115,000 V. F. Corp........................................... 5,390,625
------------
Transportation - 1.5%
160,000 Burlington Northern Santa Fe Corp.................... 5,400,000
------------
Utilities - Electric - 8.3%
155,000 GPU, Inc............................................. 6,849,062
160,000 Houston Industries, Inc.............................. 5,140,000
270,000 PacifiCorp........................................... 5,686,875
95,000 Pinnacle West Capital Corp. ......................... 4,025,625
90,000 Scana Corp........................................... 2,902,500
120,000 UtiliCorp United, Inc................................ 4,402,500
------------
29,006,562
------------
Utilities - Gas - 3.2%
110,000 El Paso Energy Corp. Delaware........................ 3,829,374
170,000 NICOR, Inc........................................... 7,182,500
------------
11,011,874
------------
Utilities - Telephone - 3.4%
175,000 Century Telephone Enterprises, Inc................... 11,812,500
------------
Total Common Stocks
(cost $271,012,850)................................. 334,512,405
------------
PREFERRED STOCKS - 1.7%
Printing, Publishing, Broadcasting & Entertainment -
1.7%
240,000 News Corp. Ltd. ADR
(cost $5,841,939)................................... 5,925,000
------------
</TABLE>
64
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Strategic Value Fund
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 2.6%
Repurchase Agreement - 1.6%
$5,471,616 Dresdner Bank AG 4.25%, dated 12/31/98, due 1/4/99,
maturity value $5,474,200 (cost $5,471,616)(a)..... $ 5,471,616
------------
</TABLE>
<TABLE>
<CAPTION>
Shares
<C> <S> <C>
Money Market Shares - 1.0%
3,540,742 Valiant General Fund
(cost $3,540,742)................................... 3,540,742
------------
Total Short-Term Investments
(cost $9,012,358)................................... 9,012,358
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments
(cost $285,867,147).......................... 99.9% 349,449,763
Other Assets and
Liabilities - net............................ 0.1 338,748
------ ------------
Net Assets.................................... 100.0% $349,788,511
====== ============
</TABLE>
* Non-income producing securities.
(a) At December 31, 1998, the repurchase agreement was collateralized by:
$5,415,000 U.S. Treasury Note, 5.875% 7/31/99; value including
accrued interest--$5,584,522.
Summary of Abbreviations:
ADR American Depository Receipt
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
65
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Equity Growth Fund
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Core Equity Diversified Value Large Cap Blend Small Cap
Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Identified cost of
securities............. $1,411,899,248 $603,044,982 $385,498,211 $ 57,323,307
Net unrealized gains
or losses............ 530,631,920 82,990,947 125,809,500 9,768,948
- ------------------------------------------------------------------------------------------
Market value of
securities............. $1,942,531,168 $686,035,929 $511,307,711 $ 67,092,255
Cash.................... 50,941 18,873 10,043 557
Receivable for
securities sold........ 144,427,614 2,594,151 0 140,451
Receivable for Fund
shares sold............ 183,550 114,769 67,641 34,025
Dividends and interest
receivable............. 2,633,888 809,615 695,987 5,513
Prepaid expenses and
other assets........... 30,368 47,990 51,526 56,340
- ------------------------------------------------------------------------------------------
Total assets.......... 2,089,857,529 689,621,327 512,132,908 67,329,141
- ------------------------------------------------------------------------------------------
Liabilities
Payable for securities
purchased.............. 191,382,287 1,018,125 0 613,315
Payable for Fund shares
repurchased............ 2,139,141 2,267,187 126,856 25,859
Distributions payable... 2,275,049 86,444 482,960 0
Advisory fee payable.... 950,484 288,028 251,185 41,960
Distribution Plan
expenses payable....... 5,470 758 34 0
Due to related
parties................ 52,465 15,378 10,768 622
Accrued expenses and
other liabilities...... 214,886 66,937 34,391 6,316
- ------------------------------------------------------------------------------------------
Total liabilities..... 197,019,782 3,742,857 906,194 688,072
- ------------------------------------------------------------------------------------------
Net assets.............. $1,892,837,747 $685,878,470 $511,226,714 $ 66,641,069
- ------------------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital......... $1,280,053,725 $634,517,525 $385,997,827 $ 67,545,623
Undistributed net
investment income...... (72,726) (29,707) 349,040 (205,787)
Accumulated net
realized gains or
losses on securities
and futures
contracts.............. 82,224,828 (31,600,295) (929,653) (10,467,715)
Net unrealized gains or
losses on securities,
futures contracts and
foreign currency
related transactions... 530,631,920 82,990,947 125,809,500 9,768,948
- ------------------------------------------------------------------------------------------
Total net assets...... $1,892,837,747 $685,878,470 $511,226,714 $ 66,641,069
- ------------------------------------------------------------------------------------------
Net assets consists of
Class I................. $1,868,254,237 $684,509,010 $ 18,540,910 $ 66,641,069
Class IS................ 24,583,510 1,369,460 313,312 --
Class IC................ -- -- 492,372,492 --
- ------------------------------------------------------------------------------------------
$1,892,837,747 $685,878,470 $511,226,714 $ 66,641,069
- ------------------------------------------------------------------------------------------
Shares outstanding
Class I................. 21,978,928 26,945,869 404,715 5,303,684
Class IS................ 308,337 54,525 6,839 --
Class IC................ -- -- 10,747,462 --
- ------------------------------------------------------------------------------------------
Net asset value per
share
Class I................. $ 85.00 $ 25.40 $ 45.81 $ 12.57
- ------------------------------------------------------------------------------------------
Class IS................ $ 79.73 $ 25.12 $ 45.81 --
- ------------------------------------------------------------------------------------------
Class IC................ -- -- $ 45.81 --
- ------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
66
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Equity Growth Funds
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (continued)
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Small Company Social Principles Special Equity Strategic Growth Strategic Value
Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Identified cost of
securities............. $107,836,916 $118,993,304 $79,046,339 $381,491,317 $285,867,147
Net unrealized gains
or losses............ (7,529,864) 48,132,674 (3,416,740) 161,074,542 63,582,616
- -----------------------------------------------------------------------------------------------------------
Market value of
securities............. $100,307,052 $167,125,978 $75,629,599 $542,565,859 $349,449,763
Cash.................... 75,880 0 0 0 0
Receivable for
securities sold........ 0 0 0 0 0
Receivable for Fund
shares sold............ 6,399 20,180 7,602 183,249 541,061
Dividends and interest
receivable............. 67,208 114,555 38,375 320,713 522,890
Prepaid expenses and
other assets........... 35,176 42,870 23,531 40,010 20,379
- -----------------------------------------------------------------------------------------------------------
Total assets.......... 100,491,715 167,303,583 75,699,107 543,109,831 350,534,093
- -----------------------------------------------------------------------------------------------------------
Liabilities
Payable for securities
purchased.............. 2,289,610 0 370,974 500,940 0
Payable for Fund shares
repurchased............ 0 46,615 144,291 1,651,865 193,583
Distributions payable... 12,661 27,960 0 15,256 339,880
Advisory fee payable.... 62,112 93,694 40,647 250,410 173,209
Distribution Plan
expenses payable....... 0 12 847 1,228 450
Due to related
parties................ 2,211 3,957 11,834 14,899 11,685
Accrued expenses and
other liabilities...... 12,709 24,929 40,228 50,968 26,775
- -----------------------------------------------------------------------------------------------------------
Total liabilities..... 2,379,303 197,167 608,821 2,485,566 745,582
- -----------------------------------------------------------------------------------------------------------
Net assets.............. $ 98,112,412 $167,106,416 $75,090,286 $540,624,265 $349,788,511
- -----------------------------------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital......... $109,383,584 $118,232,366 $73,494,964 $378,095,036 $295,216,044
Undistributed net
investment income...... (43,067) (24,739) (67,553) 6,631 (125,799)
Accumulated net
realized gains or
losses on securities
and futures
contracts.............. (3,698,241) 766,011 5,079,615 1,448,056 (8,884,351)
Net unrealized gains or
losses on securities,
futures contracts and
foreign currency
related transactions... (7,529,864) 48,132,778 (3,416,740) 161,074,542 63,582,616
- -----------------------------------------------------------------------------------------------------------
Total net assets...... $ 98,112,412 $167,106,416 $75,090,286 $540,624,265 $349,788,510
- -----------------------------------------------------------------------------------------------------------
Net assets consists of
Class I................. $ 98,112,412 $ 3,006,342 $72,253,775 $528,827,307 $348,058,612
Class IS................ -- 117,819 2,836,511 11,796,958 1,729,898
Class IC................ -- 163,982,255 -- -- --
- -----------------------------------------------------------------------------------------------------------
$ 98,112,412 $167,106,416 $75,090,286 $540,624,265 $349,788,510
- -----------------------------------------------------------------------------------------------------------
Shares outstanding
Class I................. 11,148,518 82,430 7,228,217 14,107,268 1,621,252
Class IS................ -- 3,234 286,241 315,304 8,056
Class IC................ -- 4,497,865 -- -- --
- -----------------------------------------------------------------------------------------------------------
Net asset value per
share
Class I................. $ 8.80 $ 36.47 $ 10.00 $ 37.49 $ 214.69
- -----------------------------------------------------------------------------------------------------------
Class IS................ -- $ 36.44 $ 9.91 $ 37.41 $ 214.75
- -----------------------------------------------------------------------------------------------------------
Class IC................ -- $ 36.46 -- -- --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
67
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Equity Growth Funds
- --------------------------------------------------------------------------------
Statements of Operations
Six Months Ended December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Core Equity Diversified Value Large Cap Blend Small Cap
Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income
Dividends (net of
foreign withholding
taxes of $70,570,
$14,417, $4,629 and $0,
respectively).......... $ 13,370,403 $ 5,276,709 $3,306,107 $ 63,066
Interest................ 2,203,554 325,185 509,423 49,210
- ----------------------------------------------------------------------------------------
Total income........... 15,573,957 5,601,894 3,815,530 112,276
- ----------------------------------------------------------------------------------------
Expenses
Advisory fee............ 6,379,443 2,071,009 1,660,032 237,738
Administrative service
fees................... 247,377 93,526 63,509 4,273
Distribution Plan
expenses............... 26,213 1,201 367 0
Trustees' fees and
expenses............... 18,328 6,439 4,004 156
Transfer agent fees..... 10,401 303,100 377 143
Custodian fees.......... 234,193 16,076 61,759 11,961
Printing and postage.... 67,772 15,911 6,528 15,596
Registration and filing
fees................... 55,084 6,123 56,302 29,680
Professional fees....... 16,303 5,398 17,696 14,698
Other................... 15,959 3,383 4,327 5,069
- ----------------------------------------------------------------------------------------
Expenses............... 7,071,073 2,522,166 1,874,901 319,314
Less: Fee credits..... (4,164) (1,191) (7,642) (1,585)
Fee waivers and/or
reimbursement ..... (912,714) (345,168) (237,147) 0
- ----------------------------------------------------------------------------------------
Net expenses........... 6,154,195 2,175,807 1,630,112 317,729
- ----------------------------------------------------------------------------------------
Net investment income... 9,419,762 3,426,087 2,185,418 (205,453)
- ----------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities,
futures contracts and
foreign currency
related transactions
Net realized gains or
losses on:
Securities............. 72,711,219 (31,620,092) (531,552) (8,949,205)
Futures contracts...... 11,184,610 0 0 0
- ----------------------------------------------------------------------------------------
Net realized gains or
losses on securities
and futures contracts.. 83,895,829 (31,620,092) (531,552) (8,949,205)
Net change in unrealized
gains or losses on
securities, futures
contracts and foreign
currency related
transactions........... (80,456,198) 19,505,324 5,267,850 6,359,977
- ----------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities,
futures contracts and
foreign currency
related transactions... 3,439,631 (12,114,768) 4,736,298 (2,589,228)
- ----------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations........ $ 12,859,393 $ (8,688,681) $6,921,716 $(2,794,681)
- ----------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
68
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Equity Growth Funds
- --------------------------------------------------------------------------------
Statements of Operations (continued)
Six Months Ended December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Small Company Social Principles Special Equity Strategic Growth Strategic Value
Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income
Dividends (net of
foreign withholding
taxes of $0, $2,457,
$701, $0 and $3,353,
respectively).......... $ 360,701 $ 847,794 $ 134,787 $ 1,735,063 $ 2,910,709
Interest................ 95,529 184,314 161,244 630,206 399,187
- ----------------------------------------------------------------------------------------------------------
Total income........... 456,230 1,032,108 296,031 2,365,269 3,309,896
- ----------------------------------------------------------------------------------------------------------
Expenses
Advisory fee............ 351,749 633,322 508,576 1,625,524 1,068,539
Administrative service
fees................... 10,420 21,211 7,503 61,908 40,766
Distribution Plan
expenses............... 0 149 3,317 10,194 1,688
Trustees' fees and
expenses............... 150 1,074 270 5,092 1,017
Transfer agent fees..... 264 991 12,856 71,022 2,155
Custodian fees.......... 12,641 18,356 10,988 53,970 40,312
Printing and postage.... 2,492 15,287 9,973 19,606 5,619
Registration and filing
fees................... 38,243 36,982 39,687 61,767 53,792
Professional fees....... 8,660 8,744 25,189 13,822 10,976
Other................... 214 1,570 9,550 1,973 15,218
- ----------------------------------------------------------------------------------------------------------
Expenses............... 424,833 737,686 627,909 1,924,878 1,240,082
Less: Fee credits..... (1,406) (406) (824) (1,971) (831)
Fee waivers and/or
reimbursement...... (39,083) (79,165) (267,577) (270,593) (152,649)
- ----------------------------------------------------------------------------------------------------------
Net expenses........... 384,344 658,115 359,508 1,652,314 1,086,602
- ----------------------------------------------------------------------------------------------------------
Net investment income... 71,886 373,993 (63,477) 712,955 2,223,294
- ----------------------------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities,
futures contracts and
foreign currency
related transactions
Net realized gains or
losses on:
Securities............. (3,647,253) 3,804,798 8,266,213 12,573,140 (8,878,429)
Futures contracts...... 0 0 0 0 0
- ----------------------------------------------------------------------------------------------------------
Net realized gains or
losses on securities
and futures
contracts.............. (3,647,253) 3,804,798 8,266,213 12,573,140 (8,878,429)
Net change in
unrealized gains or
losses on securities,
futures contracts and
foreign currency
related transactions... (4,915,651) (5,520,883) (9,282,571) 24,102,610 2,816,743
- ----------------------------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities,
futures contracts and
foreign currency
related transactions... (8,562,904) (1,716,085) (1,016,358) 36,675,750 (6,061,686)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............. $(8,491,018) $(1,342,092) $(1,079,835) $37,388,705 $(3,838,392)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
69
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Equity Growth Funds
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
Six Months Ended December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Core Equity Diversified Value Large Cap Blend Small Cap
Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income... $ 9,419,762 $ 3,426,087 $ 2,185,418 $ (205,453)
Net realized gains or
losses on securities
and futures contracts.. 83,895,829 (31,620,092) (531,552) (8,949,205)
Net change in unrealized
gains or losses on
securities, futures
contracts and foreign
currency related
transactions........... (80,456,198) 19,505,324 5,267,850 6,359,977
- ------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ 12,859,393 (8,688,681) 6,921,716 (2,794,681)
- ------------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class I................ (9,421,674) (3,536,588) (62,565) 0
Class IS............... (86,725) (4,041) (869) 0
Class IC............... 0 0 (1,821,413) 0
Net realized gain on
securities
Class I................ (160,679,308) (17,317,740) (1,840,649) (100,814)
Class IS............... (2,314,063) (34,597) (31,945) 0
Class IC............... 0 0 (50,455,977) 0
- ------------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (172,501,770) (20,892,966) (54,213,418) (100,814)
- ------------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 99,156,908 44,543,255 32,461,636 1,660,748
Payment for shares
redeemed............... (144,321,152) (146,810,903) (37,244,777) (1,508,429)
Net asset value of
shares issued in
reinvestment of
distributions.......... 126,984,431 20,165,669 51,434,980 100,757
- ------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... 81,820,187 (82,101,979) 46,651,839 253,076
- ------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... (77,822,190) (111,683,626) (639,863) (2,642,419)
Net assets
Beginning of period..... 1,970,659,937 797,562,096 511,866,577 69,283,488
- ------------------------------------------------------------------------------------------
End of period........... $1,892,837,747 $ 685,878,470 $511,226,714 $66,641,069
- ------------------------------------------------------------------------------------------
Undistributed net
investment income...... $ (72,726) $ (29,707) $ 349,040 $ (205,787)
- ------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
70
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Equity Growth Funds
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
Six Months Ended December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Small Company Social Principles Special Equity Strategic Growth Strategic Value
Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income... $ 71,886 $ 373,993 $ (63,477) $ 712,955 $ 2,223,294
Net realized gains or
losses on securities
and futures contracts.. (3,647,253) 3,804,798 8,266,213 12,573,140 (8,878,429)
Net change in unrealized
gains or losses on
securities, futures
contracts and foreign
currency related
transactions........... (4,915,651) (5,520,883) (9,282,571) 24,102,610 2,816,743
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ (8,491,018) (1,342,092) (1,079,835) 37,388,705 (3,838,392)
- -----------------------------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class I................ (184,266) (7,306) 0 (786,024) (2,415,992)
Class IS............... 0 (178) 0 (5,471) (8,865)
Class IC............... 0 (451,814) 0 0 0
Net realized gain on
securities
Class I................ (363,011) (157,473) (7,643,649) (42,795,680) (7,731,471)
Class IS............... 0 (6,402) (298,735) (947,112) (36,622)
Class IC............... 0 (8,960,042) 0 0 0
- -----------------------------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (547,277) (9,583,215) (7,942,384) (44,534,287) (10,192,950)
- -----------------------------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 29,814,465 9,051,284 9,144,666 67,969,011 89,544,959
Payment for shares
redeemed............... (824,940) (19,884,893) (10,175,745) (90,243,239) (22,220,226)
Net asset value of
shares issued in
reinvestment of
distributions.......... 514,381 9,067,592 7,935,176 40,396,433 7,974,726
Shares issued in
acquisition of CoreFund
Equity Growth Fund..... 0 0 0 205,742,310 0
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... 29,503,906 (1,766,017) 6,904,097 223,864,515 75,299,459
- -----------------------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... 20,465,611 (12,691,324) (2,118,122) 216,718,933 61,268,117
Net assets
Beginning of period..... 77,646,801 179,797,740 77,208,408 323,905,332 288,520,393
- -----------------------------------------------------------------------------------------------------------
End of period........... $98,112,412 $167,106,416 $75,090,286 $540,624,265 $349,788,510
- -----------------------------------------------------------------------------------------------------------
Undistributed net
investment income...... $ (43,067) $ (24,739) $ (67,553) $ 6,631 $ (125,799)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
71
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Equity Growth Funds
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
Year ended June 30, 1998
<TABLE>
<CAPTION>
Core Diversified Large Cap
Equity Value Blend Small Cap
Fund (a) Fund (b) Fund (a) Fund (c)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income... $ 11,215,922 $ 4,518,633 $ 2,329,360 $ (130,149)
Net realized gain on
securities and written
options................ 161,218,815 17,369,461 51,925,395 407,197
Net change in
unrealized gain or
loss on securities..... 53,230,680 63,485,623 5,211,744 (1,425,687)
- ------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............ 225,665,417 85,373,717 59,466,499 (1,148,639)
- ------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class I................ (11,166,520) (4,502,185) (29,968) 0
Class IS............... (29,555) (1,220) (475) 0
Class IC............... 0 0 (2,357,277) 0
Net realized gains on
securities*
Class I................ 0 0 0 0
Class IS............... 0 0 0 0
Class IC............... 0 0 0 0
- ------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (11,196,075) (4,503,405) (2,387,720) 0
- ------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 1,978,861,338 844,178,135 502,787,135 24,034,367
Payment of shares
redeemed............... (222,735,836) (130,961,973) (48,017,312) (1,126,600)
Proceeds from
reinvestment of
distributions.......... 65,093 3,475,622 17,975 --
- ------------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions.......... 1,756,190,595 716,691,784 454,787,798 22,907,767
- ------------------------------------------------------------------------------------
Total increase in net
assets............... 1,970,659,937 797,562,096 511,866,577 21,759,128
Net assets
Beginning of period..... -- -- -- 47,524,360
- ------------------------------------------------------------------------------------
End of period........... $1,970,659,937 $ 797,562,096 $511,866,577 $69,283,488
- ------------------------------------------------------------------------------------
Undistributed net
investment income...... $ 15,911 $ 84,835 $ 48,469 $ (334)
- ------------------------------------------------------------------------------------
</TABLE>
(a) For the period from November 24, 1997 (commencement of operations) to June
30, 1998.
(b) For the period from January 22, 1998 (commencement of operations) to June
30, 1998.
(c) For the period from March 1, 1998 to June 30, 1998. The Fund changed its
fiscal year ended from February 28 to June 30, 1998.
See Combined Notes to Financial Statements.
72
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Equity Growth Funds
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
Year ended June 30, 1998
<TABLE>
<CAPTION>
Small Social Special Strategic Strategic
Company Principles Equity Growth Value
Fund (b) Fund (a) Fund Fund (a) Fund (a)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income... $ 158,103 $ 119,251 $ (396,076) $ 334,100 $ 1,678,953
Net realized gain on
securities and written
options................ 302,967 6,082,094 11,241,857 32,617,708 7,762,171
Net change in
unrealized gain or
loss on securities..... (2,614,213) 4,046,653 (654,231) 17,033,702 12,371,066
- ----------------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............. (2,153,143) 10,247,998 10,191,550 49,985,510 21,812,190
- ----------------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class I................ (152,163) (1,626) 0 (325,046) (1,676,451)
Class IS............... 0 (42) 0 0 (2,273)
Class IC............... 0 (160,897) 0 0 0
Net realized gains on
securities(1)
Class I................ 0 0 (9,099,479) 0 0
Class IS............... 0 0 (364,614) 0 0
Class IC............... 0 0 -- 0 0
- ----------------------------------------------------------------------------------------------
Total distributions to
shareholders........... (152,163) (162,565) (9,464,093) (325,046) (1,678,724)
- ----------------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 86,504,946 181,779,780 14,069,175 341,558,248 284,680,865
Payment of shares
redeemed............... (6,702,683) (12,070,972) (20,704,096) (67,348,327) (16,580,621)
Proceeds from
reinvestment of
distributions.......... 149,844 3,499 8,789,058 34,947 286,683
- ----------------------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions.......... 79,952,107 169,712,307 2,154,137 274,244,868 268,386,927
- ----------------------------------------------------------------------------------------------
Total increase in net
assets............... 77,646,801 179,797,740 2,881,594 323,905,332 288,520,393
Net assets
Beginning of period..... -- -- 74,326,814 -- --
- ----------------------------------------------------------------------------------------------
End of period........... $77,646,801 $179,797,740 $77,208,408 $323,905,332 $288,520,393
- ----------------------------------------------------------------------------------------------
Undistributed net
investment income...... $ 69,313 $ 60,566 $ (4,076) $ 85,171 $ 75,764
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Distributions from net realized capital gains for the Special Equity Fund
for the year ended June 30, 1998 are those of the CoreFund. Amounts shown
for Class I have been reclassified from Class Y of the CoreFund. Amounts
shown for Class IS reflect the combination and reclassification of Class A
and Class B of the CoreFund.
(a) For the period from November 24, 1997 (commencement of operations) to June
30, 1998.
(b) For the period from December 23, 1997 (commencement of operations) to June
30, 1998.
See Combined Notes to Financial Statements.
73
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Select Equity Growth Funds
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
Periods Ended February 28, 1998 and 1997
<TABLE>
<CAPTION>
Small Cap Fund
-----------------------
1998 1997 (a)
- -------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income............................... $ (134,192) $ (9,482)
Net realized gain or loss on securities............. (415,947) 398,376
Net change in unrealized gain or loss on
securities......................................... 4,981,029 (462,663)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations........................................ 4,430,890 (73,769)
- -------------------------------------------------------------------------------
Distributions to shareholders from
Net realized gains on securities.................... (1,657,057) (35,700)
- -------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold........................... 42,857,020 517,700
Payment of shares redeemed.......................... (2,634,970) 0
Proceeds from reinvestment of distributions......... 1,640,345 34,000
- -------------------------------------------------------------------------------
Net increase in net assets resulting from capital
share transactions................................. 41,862,395 551,700
- -------------------------------------------------------------------------------
Total increase in net assets........................ 44,636,228 442,231
Net assets
Beginning of period................................. 2,888,132 2,445,901
- -------------------------------------------------------------------------------
End of period....................................... $47,524,360 $2,888,132
- -------------------------------------------------------------------------------
Undistributed net investment income................. $ 320 $ 0
- -------------------------------------------------------------------------------
</TABLE>
(a) For the eight-month period ended February 28, 1997. The Fund changed its
fiscal year end from June 30 to the last day of February effective February
28, 1997.
See Combined Notes to Financial Statements.
74
<PAGE>
Combined Notes to Financial Statements (Unaudited)
1. ORGANIZATION
The Evergreen Select Equity Growth Funds consist of Evergreen Select Core
Equity Fund ("Core Equity Fund") (formerly Evergreen Select Common Stock Fund),
Evergreen Diversified Value Fund ("Diversified Value Fund"), Evergreen Select
Large Cap Blend Fund ("Large Cap Blend Fund"), Evergreen Select Small Cap
Growth Fund ("Small Cap Fund"), Evergreen Select Small Company Value Fund
("Small Company Fund"), Evergreen Select Social Principles Fund ("Social
Principles Fund"), Evergreen Select Special Equity Fund ("Special Equity
Fund"), Evergreen Select Strategic Growth Fund ("Strategic Growth Fund") and
Evergreen Select Strategic Value Fund ("Strategic Value Fund"), each of which
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as diversified, open-end management investment companies. Each of the
Funds is a separate series of Evergreen Select Equity Trust, a Delaware
business trust organized on September 18, 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
Blend Fund and Social Principles Fund 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. 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, in-
cluding restricted securities, are valued at fair value as determined in good
faith according to procedures approved by the Board of Trustees.
Investments in 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 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.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, certain Funds managed by Evergreen Investment Management Company
("EIMC") (formerly, Keystone Investment Management Company), may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are fully collateralized by
U.S. Treasury and/or federal agency obligations.
75
<PAGE>
Combined Notes to Financial Statements (Unaudited)(continued)
C. Futures Contracts
In order to gain exposure to or protect against changes in security values, the
Funds may buy and sell futures contracts.
The initial margin deposited with a broker when entering into a futures trans-
action is subsequently adjusted by daily payments or receipts as the value of
the contract changes. Such changes are recorded as unrealized gains or losses.
Realized gains or losses are recognized on closing the contract.
Risks of entering into futures contracts include (i) the possibility of an il-
liquid market for the contract, (ii) the possibility that a change in the value
of the contract may not correlate with changes in the value of the underlying
instrument or index, and (iii) the credit risk that the other party will not
fulfill their obligations under the contract. Futures contracts also involve
elements of market risk in excess of the amount reflected in the statement of
assets and liabilities.
D. Foreign Currency
The books and records of the Funds are maintained in United States (U.S.)
dollars. Foreign currency amounts are translated into United States dollars as
follows: market value of investments, other assets and liabilities at the daily
rate of exchange; purchases and sales of investments, income and expenses at
the rate of exchange prevailing on the respective dates of such transactions.
Net unrealized foreign exchange gain (loss) resulting from changes in foreign
currency exchange rates is a component of net unrealized gain or loss on
securities and foreign currency related transactions. Net realized foreign
currency gains or losses resulting from changes in exchange rates include
foreign currency gains and losses between trade date and settlement date on
securities transactions, foreign currency related transactions and the
difference between the amounts of interest and dividends recorded on the books
of the Fund and the amounts that are actually received and are included in
realized gain or loss on foreign currency related transactions. The portion of
foreign currency gains or losses related to fluctuations in exchange rates
between the initial purchase trade date and subsequent sale trade date is
included in realized gains or losses on securities.
E. 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 or in the case of some foreign securities, on the date
thereafter when the Fund is made aware of the dividend. Foreign income may be
subject to foreign withholding taxes which are accrued as applicable.
F. Federal Taxes
The Funds intend to continue 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.
G. 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.
Certain distributions paid during previous years have been reclassified to
conform with current year presentation.
76
<PAGE>
Combined Notes to Financial Statements (Unaudited)(continued)
H. 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.
3. CONVERSION INFORMATION
On November 24, 1997, the Core Equity Fund, Strategic Growth Fund and Strategic
Value Fund 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 Blend Fund and Social Principles Fund commenced operations of their
respective Class IC shares as a result of similar common trust fund conver-
sions. The following summarizes pertinent data related to each Fund on the date
of conversion:
<TABLE>
<CAPTION>
Core Large Cap
Equity Fund Blend Fund
---------------------------
<S> <C> <C>
Shares issued....................... 22,828,425 10,264,770
Net assets.......................... $1,894,078,143 $462,393,873
Net asset value per share........... $ 82.97 $ 45.05
Unrealized appreciation of
securities......................... $ 557,857,438 $115,329,906
</TABLE>
<TABLE>
<CAPTION>
Social Strategic Strategic
Principles Fund Growth Fund Value Fund
------------------------------------------
<S> <C> <C> <C>
Shares issued...... 4,293,581 5,750,026 831,617
Net assets......... $ 157,379,236 $ 186,600,811 $169,109,520
Net asset value per
share............. $ 36.65 $ 32.45 $ 203.35
Unrealized
appreciation of
securities........ $ 49,607,008 $ 53,350,873 $ 48,394,807
</TABLE>
The forgoing amounts are reflected in proceeds from shares sold in the state-
ments of changes in net assets.
4. IN-KIND TRANSACTION
On January 21, 1998, The Evergreen Value Fund, Class Y executed a redemption
in-kind transaction of $793,367,277. This transaction resulted in the liquida-
tion of substantially all of the net assets of the Evergreen Value Fund's Class
Y shares. In turn, the assets were transferred to Evergreen Select Diversified
Value Fund Class I share.
On January 22, 1998, Diversified Value Fund commenced operations of its Class I
share through in-kind purchases of 33,532,392 shares amounting to $793,367,277.
This amount is reflected in proceeds from shares sold in the statement of
changes in net assets. In exchange for these shares, investment securities, ex-
cluding cash and cash equivalents, with a cost and market value of $774,879,156
were contributed to the Diversified Value Fund. Additionally, Diversified Value
Fund received cash and cash equivalents of $23,488,121 to complete the transac-
tion.
5. ACQUISITIONS
Effective on the close of business July 24, 1998, Special Equity Fund acquired
all of the net assets and certain liabilities of the CoreFund Special Equity
Fund ("CoreFund") an open-end, management investment company, registered under
the 1940 Act through a tax-free exchange of shares. Shareholders of Class A,
Class B and Class Y shares of the CoreFund became owners of that number of full
and fractional shares of Class IS, Class IS and Class I shares, respectively,
of Special Equity Fund having an aggregate net asset value equal to the aggre-
gate net asset value of their shares of the CoreFund immediately prior to the
close of business on July, 24, 1998. The Special Equity Fund had no operations
prior to the acquisition. Since both the Special Equity Fund and the CoreFund
were similar funds, and the CoreFund contributed the majority of the net assets
and shareholders, its basis of accounting for assets and liabilities and its
operating results for prior periods are carried forward as the accounting sur-
vivor.
77
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Also, effective the close of business on July 24, 1998, Strategic Growth Fund
acquired the net assets of the CoreFund Equity Growth Fund, an open-end manage-
ment investment company registered under the 1940 Act in an exchange of shares.
The net assets were exchanged through a tax-free exchange for 186,381 Class IS
shares and 5,297,535 Class I shares of Strategic Growth Fund. The acquired net
assets consisted primarily of portfolio securities with unrealized appreciation
of $66,587,357. The aggregate nets assets of CoreFund Equity Growth Fund and
Strategic Growth Fund immediately before the acquisition were $205,742,310 and
$326,300,095, respectively. The aggregate net assets of Strategic Growth Fund
after the acquisition were $532,042,405.
Immediately following the common trust fund conversion, on November 24, 1997,
the Strategic Growth Fund acquired substantially all of the net assets of Eq-
uity Growth Fund ("Equity Growth"), 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 Fund, 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
Fund immediately prior to the acquisition were $81,699,736 and $186,600,811,
respectively. The aggregate net assets and shares outstanding of Strategic
Growth Fund immediately after the acquisition were $268,300,547 and 8,267,568,
respectively.
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, Class IS and/or Class IC. Transactions in shares of the
Funds were as follows:
Core Equity Fund
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998(a)
------------------------- --------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold............. 993,029 $ 84,232,798 23,538,750 $1,957,108,914
Shares redeemed......... (1,583,205) (135,721,094) (2,451,922) (219,096,830)
Shares issued in
reinvestment of
distributions.......... 1,481,823 125,093,753 453 40,719
- -------------------------------------------------------------------------------
Net increase............ 891,647 73,605,457 21,087,281 1,738,052,803
- -------------------------------------------------------------------------------
Class IS
Shares sold............. 183,318 14,924,110 250,305 21,752,424
Shares redeemed......... (107,555) (8,600,058) (41,914) (3,639,006)
Shares issued in
reinvestment of
distributions.......... 23,900 1,890,678 283 24,374
- -------------------------------------------------------------------------------
Net increase............ 99,663 8,214,730 208,674 18,137,792
- -------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions........... $ 81,820,187 $1,756,190,595
- -------------------------------------------------------------------------------
</TABLE>
(a) For Class I and Class IS, for the period from November 24, 1997 and Febru-
ary 4, 1998, respectively, (commencement of operations) to June 30, 1998.
78
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Diversified Value Fund
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998(a)
------------------------- -------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold.............. 1,823,892 $ 43,431,725 35,285,849 $ 843,364,554
Shares redeemed.......... (6,088,657) (146,785,799) (5,013,312) (130,385,842)
Shares issued in
reinvestment of
distributions........... 804,180 20,127,032 133,917 3,474,402
- --------------------------------------------------------------------------------
Net increase (decrease).. (3,460,585) $ (83,227,042) 30,406,454 716,453,114
- --------------------------------------------------------------------------------
Class IS
Shares sold.............. 45,913 $ 1,111,530 30,796 $ 813,581
Shares redeemed.......... (1,048) (25,104) (22,745) (576,131)
Shares issued in
reinvestment of
distributions........... 1,561 38,637 48 1,220
- --------------------------------------------------------------------------------
Net increase............. 46,426 1,125,063 8,099 238,670
- --------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from capital share
transactions............ $ (82,101,979) $ 716,691,784
- --------------------------------------------------------------------------------
(a) For Class I and Class IS, for the period from January 22, 1998 and March
31, 1998, respectively, (commencement of operations) to June 30, 1998.
Large Cap Blend Fund
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998(a)
------------------------- -------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold.............. 149,268 $ 6,928,154 281,458 $ 13,881,808
Shares redeemed.......... (60,798) (2,674,583) (5,242) (257,909)
Shares issued in
reinvestment of
distributions........... 39,690 1,805,848 339 16,702
- --------------------------------------------------------------------------------
Net increase............. 128,160 6,059,419 276,555 13,640,601
- --------------------------------------------------------------------------------
Class IS
Shares sold.............. 425 22,340 5,918 297,642
Shares redeemed.......... (234) (9,219) (1) (44)
Shares issued in
reinvestment of
distributions........... 721 32,797 10 475
- --------------------------------------------------------------------------------
Net increase............. 912 45,918 5,927 298,073
- --------------------------------------------------------------------------------
Class IC
Shares sold.............. 567,368 25,511,142 10,802,599 488,607,729
Shares redeemed.......... (715,057) (34,560,975) (997,016) (47,759,403)
Shares issued in
reinvestment of
distributions........... 1,089,552 49,596,335 16 798
- --------------------------------------------------------------------------------
Net increase............. 941,863 40,546,502 9,805,599 440,849,124
- --------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions............ $ 46,651,839 $ 454,787,798
- --------------------------------------------------------------------------------
</TABLE>
(a) For Class I, Class IS and IC, for the period from December 19, 1997, March
12, 1998 and November 24, 1997, respectively, (commencement of operations)
to June 30, 1998.
79
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Small Cap Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended February 28,
December 31, 1998 Year Ended ---------------------------------------
(Unaudited) June 30, 1998(a) 1998 1997(b)
-------------------- ---------------------- ---------------------- ---------------
Shares Amount Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class I
Shares sold............. 153,486 $1,660,748 1,770,376 $22,034,367 3,414,877 $42,857,020 43,108 $517,700
Shares redeemed......... (138,494) (1,508,429) (82,127) (1,126,600) (209,509) (2,634,970) 0 0
Shares issued in
reinvestment of
distributions.......... 8,734 100,757 0 0 130,289 1,640,345 2,944 34,000
- --------------------------------------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions........... $ 253,076 $20,907,767 $41,862,395 $551,700
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period from March 1, 1998 to June 30, 1998. The fund changed its
fiscal year end from from February 28 to June 30, effective June 30, 1998.
(b) For the eight-month period ended February 28, 1997. The Fund changed its
fiscal year end from June 30 to the last day of February, effective Febru-
ary 28, 1997.
Small Company Fund
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998(a)
---------------------- ----------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold................... 3,485,900 $29,814,465 8,353,679 $86,504,946
Shares redeemed............... (96,538) (824,940) (669,991) (6,702,683)
Shares issued in reinvestment
of distributions............. 61,254 514,381 14,214 149,844
- ------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share
transactions................. $29,503,906 $79,952,107
- ------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 23, 1997 (commencement of class operations) to
June 30, 1998.
Social Principles Fund
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998(a)
--------------------- -----------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold.................... 17,998 $ 631,572 61,760 $ 2,208,624
Shares redeemed................ (1,884) (65,100) (59) (2,272)
Shares issued in reinvestment
of distributions.............. 4,582 158,611 33 1,243
- -------------------------------------------------------------------------------
Net increase................... 20,696 725,083 61,734 2,207,595
- -------------------------------------------------------------------------------
Class IS
Shares sold.................... 796 28,294 5,274 207,403
Shares redeemed................ (3,026) (113,087) (1) (36)
Shares issued in reinvestment
of distributions.............. 190 6,579 1 42
- -------------------------------------------------------------------------------
Net increase (decrease)........ (2,040) (78,214) 5,274 207,409
- -------------------------------------------------------------------------------
Class IC
Shares sold.................... 243,886 8,391,418 4,876,095 179,363,747
Shares redeemed................ (551,623) (19,706,706) (327,340) (12,068,700)
Shares issued in reinvestment
of distributions.............. 256,787 8,902,402 60 2,256
- -------------------------------------------------------------------------------
Net increase (decrease)........ (50,950) (2,412,886) 4,548,815 167,297,303
- -------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from capital
share transactions............ $(1,766,017) $169,712,307
- -------------------------------------------------------------------------------
</TABLE>
(a) For Class I, Class IS and Class IC, for the period from November 24, 1997,
March 12, 1998 and November 24, 1997, respectively (commencement of opera-
tions) to June 30, 1998.
80
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Special Equity Fund
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Year Ended
(Unaudited) June 30, 1998(1)
----------------------- ------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold................ 860,672 $ 8,750,477 1,100,970 $ 12,968,366
Shares redeemed............ (1,020,356) (9,439,910) (1,727,770) (20,152,176)
Shares issued in
reinvestment of
distributions............. 812,275 7,643,511 816,325 8,424,468
- ------------------------------------------------------------------------------
Net increase............... 652,591 6,954,078 189,525 1,240,658
- ------------------------------------------------------------------------------
Class IS
Shares sold................ 38,928 $ 393,548 92,537 $ 1,100,809
Shares redeemed............ (73,214) (735,194) (47,881) (551,920)
Shares issued in
reinvestment of
distributions............. 31,295 291,665 35,511 364,590
- ------------------------------------------------------------------------------
Net increase (decrease).... (2,991) (49,981) 80,167 913,479
- ------------------------------------------------------------------------------
Net increase in net assets
resulting from capital
share transactions........ $ 6,904,097 $ 2,154,137
- ------------------------------------------------------------------------------
</TABLE>
(1) Capital share activity for the year ended June 30, 1998 is that of the
CoreFund. Amounts shown for Class I have been reclassified from Class Y of
the CoreFund. Amounts shown for Class IS reflect the combination and re-
classification of Class A and Class B of the CoreFund.
Strategic Growth Fund
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998(a)
------------------------ ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold............... 1,829,586 $ 65,172,974 447,254 $ 16,811,393
Shares redeemed........... (2,466,647) (88,997,444) (385,382) (14,145,118)
Shares issued in
reinvestment of
distributions............ 1,075,522 39,458,184 (385,382) (14,145,118)
Shares issued in
acquisition of CoreFund
Equity Growth Fund....... 5,297,535 198,759,540 (385,382) (14,145,118)
- -------------------------------------------------------------------------------
Net increase.............. 5,735,996 214,393,254 (708,892) (25,623,961)
- -------------------------------------------------------------------------------
Class IS
Shares sold............... 77,376 2,796,037 9,834,675 324,746,855
Shares redeemed........... (35,943) (1,245,795) (1,464,385) (53,203,209)
Shares issued in
reinvestment of
distributions............ 25,618 938,249 982 34,947
Shares issued in
acquisition of CoreFund
Equity Growth Fund....... 186,381 6,982,770 982 34,947
- -------------------------------------------------------------------------------
Net increase.............. 253,432 9,471,261 8,372,254 271,613,540
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from capital
share transactions....... $223,864,515 $245,989,579
- -------------------------------------------------------------------------------
</TABLE>
(a) For Class I and Class IS, for the period from November 24, 1997 and Febru-
ary 27, 1998, respectively (commencement of operations) to June 30, 1998.
Strategic Value Fund
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998(a)
--------------------- -----------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold................... 417,718 $88,584,094 1,344,196 $283,217,426
Shares redeemed............... (104,486) (21,636,962) (74,798) (16,435,232)
Shares issued in reinvestment
of distributions............. 37,357 7,935,135 1,265 284,542
- ------------------------------------------------------------------------------
Net increase.................. 350,589 74,882,267 1,270,663 267,066,736
- ------------------------------------------------------------------------------
Class IS
Shares sold................... 4,718 960,865 6,502 1,463,439
Shares redeemed............... (2,719) (583,264) (641) (145,389)
Shares issued in reinvestment
of distributions............. 187 39,591 9 2,141
- ------------------------------------------------------------------------------
Net increase.................. 2,186 417,192 5,870 1,320,191
- ------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share
transactions................. $75,299,459 $268,386,927
- ------------------------------------------------------------------------------
</TABLE>
(a) For Class I and Class IS, for the period from November 24, 1997 and March
11, 1998, respectively (commencement of operations) to June 30, 1998.
81
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
7. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (excluding short-term
investments) were as follows for the six months ended December 31, 1998:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
-------------------------
<S> <C> <C>
Core Equity Fund...................... $462,896,707 $512,562,944
Diversified Value Fund................ 185,631,910 286,432,134
Large Cap Blend Fund.................. 77,964,309 93,079,700
Small Cap Fund........................ 44,828,508 44,058,092
Small Company Fund.................... 49,581,262 10,004,969
Social Principles Fund................ 23,735,415 25,094,921
Special Equity Fund................... 29,993,775 36,473,684
Strategic Growth Fund................. 261,008,757 287,105,261
Strategic Value Fund.................. 119,034,717 38,674,273
</TABLE>
On July 24, 1998, Strategic Growth Fund acquired securities, excluding cash
equivalents, with an aggregate cost $139,199,312 from its acquisition of
CoreFund Equity Growth Fund.
As of June 30, 1998, Small Cap Fund had a capital loss carryover for federal
income tax purposes of $1,349,000 expiring in 2006.
8. 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. Dis-
tribution Plan expenses are calculated daily and paid monthly.
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 of
the respective class.
9. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED
TRANSACTIONS
The investment advisor to each Fund, other than Small Cap Fund, Small Company
Fund and Special Equity Fund is Evergreen Investment Management ("EIM"), for-
merly known as the Capital Markets Group, a division of FUNB. Each Fund, other
than Small Cap Fund, Small Company Fund and Special Equity Fund, pays EIM 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 as-
sets of each fund.
<TABLE>
<CAPTION>
Annual
Advisory fee
------------
<S> <C>
Core Equity Fund.................................... 0.70%
Diversified Value Fund.............................. 0.60%
Large Cap Blend Fund................................ 0.70%
Social Principles Fund.............................. 0.80%
Strategic Growth Fund............................... 0.70%
Strategic Value Fund................................ 0.70%
</TABLE>
EIMC, a wholly-owned subsidiary of First Union, is the investment advisor to
Small Cap Fund. In return for its services, EIMC is paid an annual advisory fee
equal to 0.80% of the Funds first $100 million of average daily net assets and
at reduced rates thereafter.
Evergreen Asset Management Corp. ("EAMC"), a subsidiary of First Union, is the
investment advisor to Small Company Fund. Small Company Fund pays EAMC an an-
nual fee of 0.90% of its average daily net assets.
82
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Leiber & Company, an affiliate of First Union, is the investment sub-advisor to
Small Company Fund.Leiber & Company provides these services at no additional
cost to the Fund.
Leiber & Company also provides brokerage services to Small Company Fund with
respect to substantially all security transactions effected on either the New
York or American Stock Exchanges. For the six months ended December 31, 1998,
Small Company Fund incurred $72,205, in brokerage commissions with Leiber &
Company.
Meridian Investment Company ("Meridian"), an indirect subsidiary of FUNB,
serves as investment advisor to Special Equity Fund. In return for its servic-
es, Meridian is paid an annual fee equal to 1.50% of average daily net assets
of Special Equity Fund. Currently, Meridian has voluntarily agreed to limit its
advisory fee to 0.74% of average daily net assets.
Each investment advisor, other than EIMC, has voluntarily agreed to waive a
portion of the investment advisory fee on each Fund and/or to reimburse a por-
tion of each Fund's annual operating expenses (excluding interest, taxes, bro-
kerage commissions and extraordinary expenses). For the six months ended Decem-
ber 31, 1998, the investment advisors voluntarily reduced their fees by the
following amounts:
<TABLE>
<S> <C>
Core Equity Fund........................................ $912,714
Diversified Value Fund.................................. 345,168
Large Cap Blend Fund.................................... 237,147
Small Company Fund...................................... 39,083
Social Principles Fund.................................. 79,165
Special Equity Fund..................................... 267,577
Strategic Growth Fund................................... 270,593
Strategic Value Fund.................................... 152,649
</TABLE>
Evergreen Investment Services ("EIS"), a subsidiary of First Union, serves as
the administrator and BISYS serves as sub-administrator to the Funds. As admin-
istrator, EIS provides the Funds with facilities, equipment and personnel. As
sub-administrator to the Funds, BISYS 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 invest-
ment advisors. The administration fee is calculated by applying percentage
rates, which start at 0.05% and decline to 0.01% per annum as net assets in-
crease, to the average daily net asset value of the Fund. The sub-administra-
tion 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 as-
set value of the Fund. EIS and BISYS provide administration and sub-administra-
tion services to Small Cap Fund at no cost to the Fund. For the six months
ended December 31, 1998, the following amounts were paid to EIS and BISYS for
providing their services:
<TABLE>
<CAPTION>
EIS BISYS
----------------
<S> <C> <C>
Core Equity Fund............................... $197,021 $50,356
Diversified Value Fund......................... 74,389 19,137
Large Cap Blend Fund........................... 50,426 13,083
Small Company Fund............................. 8,705 1,715
Social Principles Fund......................... 16,839 4,372
Special Equity Fund............................ 6,000 1,503
Strategic Growth Fund.......................... 49,329 12,579
Strategic Value Fund........................... 32,428 8,338
</TABLE>
For the six months ended December 31, 1998, Small Cap Fund reimbursed EIMC for
certain administrative and accounting expenses amounting to $4,273.
Evergreen Service Company ("ESC"), an indirect, wholly-owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the
Funds. The Funds have entered into an expense offset arrangement with ESC re-
lating to certain cash balances held at First Union for the benefit of the Ev-
ergreen Funds.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
10. 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.
83
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
11. 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.
12. FINANCING AGREEMENTS
Certain Evergreen Funds and State Street Bank and Trust ("SSB") and a group of
banks (collectively, the "Banks") entered into a financing agreement dated De-
cember 22, 1997, as amended on November 20, 1998. Under this agreement, the
Banks provide an unsecured credit facility in the aggregate amount of $400 mil-
lion ($275 million committed and $125 million uncommitted). The credit facility
is allocated, under the terms of the financing agreement, among the Banks. The
credit facility is to be accessed by the Funds for temporary or emergency pur-
poses only and is subject to each Fund's borrowing restrictions. Borrowings un-
der this facility bore interest at 0.50% per annum above the Federal Funds
rate. A commitment fee of 0.065% per annum was incurred on the unused portion
of the committed facility, which will be allocated to all funds. For its assis-
tance in arranging this financing agreement, the Capital Market Group of First
Union was paid a one-time arrangement fee of $27,500. SSB served as agent for
the Banks, and as administrative agent is entitled to a fee of $20,000 per an-
num which is allocated to all of the participating Funds.
On December 22, 1998, the financing agreement referenced above was amended and
renewed among all Evergreen Funds, SSB and Bank of New York ("BONY"). Under
this agreement, SSB 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 were unaffected.
During the six months ended December 31, 1998, the Funds had no borrowings un-
der these agreements.
13. 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.
84
<PAGE>
Evergreen Select Funds
Money Market Growth and Income/Balanced
Money Market Fund Equity Income Fund
Treasury Money Market Fund Balanced Fund
100% Treasury Money Market Fund
Municipal Money Market Fund Growth
Special Equity Fund
Municipal Fixed Small Cap Growth Fund
Income Small Company Value Fund
Intermediate Tax Exempt Bond Fund Strategic Growth Fund
Core Equity Fund
Taxable Fixed Equity Index Fund
Income Large Cap Blend Fund
International Bond Fund Strategic Value Fund
Total Return Bond Fund Diversified Value Fund
Income Plus Fund Social Principles Fund
Core Bond Fund
Fixed Income Fund
Adjustable Rate Fund
Limited Duration Fund
44158 542780 02/99
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[LOGO OF EVERGREEN FUNDS/TM/ APPEARS HERE] BULK RATE
U.S. POSTAGE
200 Berkeley Street PAID
Boston, MA 02116 PERMIT NO. 19
HUDSON, MA
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