1933 Act Registration No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14AE
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective [ ] Post-Effective
Amendment No. Amendment No.
EVERGREEN SELECT EQUITY TRUST
(Evergreen Select Core Equity Income Fund)
(Exact name of registrant as specified in charter)
Area Code and Telephone Number: (617) 210-3200
200 Berkeley Street
Boston, Massachusetts 02116
----------------------------------------
(Address of Principal Executive Offices)
Michael H. Koonce, Esq.
Evergreen Investment Management Company
200 Berkeley Street
Boston, Massachusetts 02116
----------------------------------------
(Name and address of agent for service)
Approximate date of proposed public offering: As soon as possible after the
effective date of this Registration Statement.
The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) of the Investment Company Act
of 1940 (File No. 333-36033); accordingly, no fee is payable herewith. Pursuant
to Rule 429, this Registration Statement relates to the aforementioned
registration on Form N-1A. A Rule 24f-2 Notice for the Registrant's most recent
fiscal year ended June 30, 1999 was filed with the Commission on or about
September 28, 1999.
It is proposed that this filing will become effective on May 4, 2000
pursuant to Rule 488 of the Securities Act of 1933.
<PAGE>
EVERGREEN SELECT EQUITY TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
Location in Prospectus/Proxy
Item of Part A of Form N-14 Statement
- ---------------------------- ----------------------------------
1. Beginning of Registration Statement Cross Reference Sheet; Cover Page
and Outside Front Cover Page of
Prospectus
2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
3. Fee Table, Synopsis Information and Summary; Risks
Risk Factors
4. Information About the Transaction Cover Page; Summary; Merger
Information; Information on
Shareholders' Rights; Voting
Information Concerning the Meeting;
Exhibit A (Agreement and Plan of
Reorganization)
5. Information about the Registrant Cover Page; Summary; Risks;
Merger Information; Information on
Shareholders' Rights; Additional
Information
6. Information about the Company Cover Page; Summary; Risks;
Being Acquired Merger Information; Information on
Shareholders' Rights; Voting
Information Concerning the Meeting;
Additional Information
7. Voting Information Cover Page; Summary; Information
on Shareholders' Rights; Voting
Information Concerning the Meeting;
Instructions for Voting and
Executing Proxy Cards
8. Interest of Certain Persons Financial Statements and Experts;
and Experts Legal Matters
9. Additional Information Required for Inapplicable
Reoffering by Persons Deemed to be
Underwriters
Item of Part B of Form N-14
- ---------------------------
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. Additional Information About the Statement of Additional Information
Registrant of Evergreen Select Equity Trust
dated December 1, 1999 as it relates
to Evergreen Select Special Equity
Fund
13. Additional Information about Statement of Additional Information
the Company Being Acquired of Evergreen Equity Trust dated
December 1, 1999 as it relates to
Evergreen Select Social Principles
Fund
14. Financial Statements Annual Report of Evergreen
Select Special Equity Fund and
Evergreen Select Social Principles
Fund dated June 30, 1999; Semi-
Annual Report (unaudited) of
Evergreen Select
Special Equity Fund and Evergreen
Select Social Principles Fund dated
December 31, 1999; Pro forma
financial statements (unaudited)
dated as of December 31, 1999
<PAGE>
Item of Part C of Form N-14
- ---------------------------
15. Indemnification Incorporated by Reference
to Part A Caption -
Information on Shareholders'
Rights - "Liability and
Indemnification of Trustees"
16. Exhibits Item 16. Exhibits
17. Undertakings Item 17. Undertakings
<PAGE>
EVERGREEN SELECT EQUITY TRUST
PART A
PROSPECTUS/PROXY
[This is the front cover]
LOGO
EVERGREEN SELECT SOCIAL PRINCIPLES FUND
200 Berkeley Street
Boston, MA 02116
May 26, 2000
Dear Shareholder,
As a shareholder of Evergreen Select Social Principles Fund ("Select Social
Principles Fund"), you are invited to vote on a proposal to merge Select Social
Principles Fund into Evergreen Select Special Equity Fund ("Select Special
Equity Fund"), another mutual fund within the Evergreen Family of Funds. The
Board of Trustees of Evergreen Select Equity Trust has approved the merger and
recommends that you vote FOR this proposal.
If approved by shareholders, this is how the merger will work:
o Your Fund will transfer its assets and liabilities to Select Special Equity
Fund.
o Select Special Equity Fund will issue new shares that will be distributed
to you in an amount equal to the value of your Select Social Principles
Fund shares. You will receive Institutional or Institutional Service shares
of Select Special Equity Fund, depending on the class of shares of Select
Social Principles Fund you currently hold. Although the number of shares
you hold may change, the total value of your investment will not change as
a result of the merger.
o You will not incur any sales loads or similar transaction charges as a
result of the merger.
The merger is intended to be tax-free for federal income tax purposes. Details
about Select Special Equity Fund's investment objective, portfolio management
team, performance, etc. along with additional information about the proposed
merger, are contained in the attached prospectus/proxy statement. Please take
the time to familiarize yourself with this information. Votes on the proposal
will be cast at a special meeting of Select Social Principles Fund's
shareholders to be held on July 14, 2000. Although you are welcome to attend the
meeting in person, you do not need to do so in order to vote your shares. If you
do not expect to attend the meeting, please complete, date, sign and return the
enclosed proxy card in the enclosed postage paid envelope, or vote via one of
the other methods mentioned below. Instructions on how to vote are included at
the end of the prospectus/proxy statement.
If you have any questions about the proposal or the proxy card, please call
Shareholder Communications Corporation, our proxy solicitor, at 800-645-8640.
You may record your vote by telephone by calling 800-645-8640. You may also FAX
your completed and signed proxy card (both front and back sides) or vote on the
Internet by following the voting instructions as outlined on you voting card. If
the Fund does not receive a sufficient number of votes in favor of the merger,
you may receive a telephone call from Shareholder Communications Corporation
requesting your vote. The expenses of the merger, including the costs of
soliciting proxies, will be paid by First Union National Bank.
Thank you for taking this matter seriously and participating in this important
process.
Sincerely,
[Signature]
William M. Ennis
President
Evergreen Funds
<PAGE>
EVERGREEN SELECT SOCIAL PRINCIPLES FUND
200 Berkeley Street
Boston, Massachusetts 02116
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 14, 2000
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Evergreen Select Social Principles Fund ("Select Social
Principles Fund"), a series of Evergreen Select Equity Trust, will be held at
the offices of the Evergreen Funds, 26th Floor, 200 Berkeley Street, Boston,
Massachusetts 02116, on July 14, 2000 at 2:00 p.m. for the following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization (the
"Plan") dated as of April 30, 2000, providing for the acquisition of all
the assets of Select Social Principles Fund by Evergreen Select Special
Equity Fund ("Select Special Equity Fund"), a series of Evergreen Select
Equity Trust, in exchange for shares of Select Special Equity Fund and the
assumption by Select Special Equity Fund of the identified liabilities of
Select Social Principles Fund. The Plan also provides for distribution of
these shares of Select Special Equity Fund to shareholders of Select Social
Principles Fund in liquidation and subsequent termination of Select Social
Principles Fund. A vote in favor of the Plan is a vote in favor of the
liquidation and dissolution of Select Social Principles Fund.
2. To transact any other business which may properly come before the Meeting
or any adjournment or adjournments thereof.
On behalf of Select Social Principles Fund, the Trustees of Evergreen
Select Equity Trust have fixed the close of business on April 28, 2000 as the
record date for the determination of shareholders of the Fund entitled to notice
of and to vote at the Meeting or any adjournment thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND IN PERSON ARE URGED TO SIGN WITHOUT DELAY AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE
ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By order of the Board of Trustees
Michael H. Koonce
Secretary
May 26, 2000
<PAGE>
INFORMATION RELATING TO THE PROPOSED MERGER
of
EVERGREEN SELECT SOCIAL PRINCIPLES FUND
into
EVERGREEN SELECT SPECIAL EQUITY FUND
This prospectus/proxy statement contains the information you should know before
voting on the proposed merger ("Merger") of your Fund into Evergreen Select
Special Equity Fund ("Select Special Equity Fund"). If approved, the Merger will
result in you receiving shares of Select Special Equity Fund in exchange for
your shares of Evergreen Select Social Principles Fund ("Select Social
Principles Fund"). The investment objectives of both Funds are similar. The
investment objective of Select Social Principles Fund is to seek long-term
capital growth. The investment objective of Select Special Equity Fund is to
seek capital growth.
Please read this prospectus/proxy statement carefully and retain it for future
reference. Additional information concerning each Fund and the Merger is
contained in the documents described in the box below, all of which have been
filed with the Securities and Exchange Commission ("SEC").
<TABLE>
<CAPTION>
MORE INFORMATION ABOUT THE FUNDS IS AVAILABLE
- ----------------------------------------------------------------- ---------------------------------------------------------------
See: How to get these documents:
- ----------------------------------------------------------------- ---------------------------------------------------------------
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Prospectus for both Funds, dated November 1, 1999, which The Funds make all of these documents available to you
accompanies this prospectus/proxy statement. free of charge if you:
o Call 800-645-8640, or
Statement of additional information for both Funds, dated o Write the Funds at 200 Berkeley Street, Boston,
November 1, 1999. Massachusetts 02116.
Annual Report for both Funds, dated June 30, 1999. You can also obtain any of these documents for a fee from the
SEC if you:
Semi-annual reports for both Funds, dated December 31, 1999. o Call the SEC at 800-SEC-0330,
Statement of additional information, dated May 26, 2000, which Or for free if you
relates to this prospectus/proxy statement and the Merger. o Go to the SEC Website (http://www.sec.gov)
To ask questions about this prospectus/proxy statement:
o Call 800-645-8640, or
o Write to the Funds at 200 Berkeley Street, Boston,
Massachusetts 02116.
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
Information relating to the Funds contained in the Funds' semi-annual reports,
annual report, prospectus and statement of additional information, as well as
the statement of additional information relating to this prospectus/proxy
statement, is incorporated by reference into this prospectus/proxy statement.
This means that such information is legally considered to be part of this
document.
The Securities and Exchange Commission has not determined that the
information in this prospectus/proxy statement is accurate or complete,
nor has it approved or disapproved these securities. Anyone who tells
you otherwise is committing a crime.
The shares offered by this prospectus/proxy statement are not deposits
of a bank, and are not insured, endorsed or guaranteed by the FDIC
or any government agency and involve investment risk, including
possible loss of your original investment.
The address of both Funds is 200 Berkeley Street, Boston, Massachusetts 02116
(Telephone: 800-343-2898).
PROSPECTUS/PROXY STATEMENT DATED MAY 26, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY................................................................................................ 3
What are the key features of the Merger?............................................................... 3
After the Merger, what class of shares of Select Special Equity Fund will I own?....................... 3
How do the Funds' investment objectives, principal investment strategies and risks
compare?............................................................................................... 3
How do the Funds' sales charges and expenses compare? Will I be able to buy, sell and exchange shares
the same way?........................................................................................... 4
How do the Funds' performance records compare?.......................................................... 5
Who will be the Investment Advisor and Portfolio Manager of my Fund after the Merger? What will the
advisory fee be after the Merger?....................................................................... 6
What will be the primary federal tax consequences of the Merger?........................................ 7
RISKS................................................................................................... 7
MERGER INFORMATION...................................................................................... 9
Reasons for the Merger.................................................................................. 9
Agreement and Plan of Reorganization...................................................................10
Federal Income Tax Consequences.........................................................................11
Pro-forma Capitalization................................................................................12
Distribution of Shares..................................................................................12
Purchase and Redemption Procedures......................................................................13
Exchange Privileges.....................................................................................13
Dividend Policy.........................................................................................13
INFORMATION ON SHAREHOLDERS' RIGHTS.....................................................................14
Form of Organization....................................................................................14
Capitalization..........................................................................................14
Shareholder Liability...................................................................................14
Shareholder Meetings and Voting Rights..................................................................14
Liquidation.............................................................................................15
Liability and Indemnification of Trustees...............................................................15
VOTING INFORMATION CONCERNING THE MEETING...............................................................15
Shareholder Information.................................................................................16
FINANCIAL STATEMENTS AND EXPERTS........................................................................17
LEGAL MATTERS...........................................................................................17
ADDITIONAL INFORMATION..................................................................................17
OTHER BUSINESS..........................................................................................17
INSTRUCTIONS FOR VOTING AND EXECUTING PROXY CARDS.....................................................18
EXHIBIT A...............................................................................................19
EXHIBIT B...............................................................................................
</TABLE>
SUMMARY
This section summarizes the primary features and consequences of the Merger.
This summary is qualified in its entirety by reference to the additional
information contained elsewhere in this prospectus/proxy statement, in each
Fund's prospectus and statement of additional information and in the Agreement
and Plan of Reorganization.
What are the key features of the Merger?
The Agreement and Plan of Reorganization (the "Plan") sets forth the key
features of the Merger. For a complete description of the Merger, see the Plan,
attached as Exhibit A to this prospectus/proxy statement. The Plan generally
provides for the following:
o the transfer of all of the assets of Select Social Principles Fund in
exchange for shares of Select Special Equity Fund.
o the assumption by Select Special Equity Fund of the identified liabilities
of Select Social Principles Fund. (The identified liabilities consist only
of those liabilities reflected on Select Social Principles Fund's statement
of assets and liabilities determined immediately preceding the Merger.)
o the liquidation of Select Social Principles Fund by distributing shares of
Select Special Equity Fund to Select Social Principles Fund's shareholders.
The Merger is scheduled to take place on or about July 21, 2000.
After the Merger, what class of shares of Select Special Equity Fund will I own?
If you own this class of shares of Select Social Principles You will get this
class of shares of Select Special Equity
Fund: Fund:
Institutional Institutional
Institutional Service Institutional Service
The new shares you receive will have the same total value as your Select Social
Principles Fund shares as of the close of business on the day immediately prior
to the Merger.
The Trustees of Evergreen Select Equity Trust, including the Trustees who are
not "interested persons" (the "Independent Trustees"), as such term is defined
in the Investment Company Act of 1940 (the "1940 Act"), have concluded that the
Merger would be in the best interest of Select Social Principles Fund's
shareholders, and that their interest will not be diluted as a result of the
Merger. Accordingly, the Trustees have submitted the Plan for the approval of
Select Social Principles Fund's shareholders. The Trustees of Evergreen Select
Equity Trust have also approved the Plan on behalf of Select Special Equity
Fund.
How do the Funds' investment objectives, principal investment strategies and
risks compare?
The following table highlights the comparison between the Funds with respect to
their investment objectives and principal investment strategies as set forth in
each Fund's prospectus and statement of additional information:
<TABLE>
<CAPTION>
- ----------------------------- ---------------------------------------------- ----------------------------------------------------
Select Social Principles Fund Select Special Equity Fund
- ----------------------------- ---------------------------------------------- ----------------------------------------------------
- ----------------------------- ---------------------------------------------- ----------------------------------------------------
<S> <C> <C>
INVESTMENT OBJECTIVE To seek long-term capital growth. To seek capital growth.
- ----------------------------- ---------------------------------------------- ----------------------------------------------------
- ----------------------------- ---------------------------------------------- ----------------------------------------------------
PRINCIPAL INVESTMENT o Invests primarily in the equity o Invests primarily in the equity
STRATEGIES securities of mid-size companies that securities of small U.S. companies.
respect human rights, play a role in
local communities and produce useful o Portfolio managers choose stocks of
products in an environmentally sound companies that they expect will experience
way. Will not invest in companies that growth in earnings and price.
produce liquor, tobacco, weapons or
nuclear energy. o Strives to provide a return greater than
stock market indices such as the Russell 2000
o The Fund's stock selection is based Index by investing principally in a
on a diversified or blend style of diversified portfolio of common stocks of
equity management that allows it to domestic companies.
invest in both value and
growth-oriented securities. o May purchase stocks in initial public
offerings ("IPOs").
- ----------------------------- ---------------------------------------------- ----------------------------------------------------
</TABLE>
Each Fund may temporarily invest up to 100% of its assets in high quality money
market instruments in response to adverse economic, political or market
conditions. This strategy is inconsistent with the Fund's principal investment
strategy and investment goal, and if employed could result in a lower return or
loss of market opportunity.
The Funds have other investment policies, practices and restrictions which,
together with their related risks, are also set forth in each Fund's prospectus
and statement of additional information.
A portion of the securities held by Select Social Principles Fund may be
disposed of in connection with the Merger, which could result in additional
portfolio transaction costs to the Funds and capital gains to shareholders.
The principal risks of investing in Select Social Principles Fund are stock
market risk (when economic growth slows, or interest or inflation rates
increase, equity securities held by the Funds tend to decline in value and may
cause a decrease in dividends paid) and the particular risks associated with
investing in securities issued by mid-sized companies (investments primarily in
one category may decline in value if that category falls out of favor). The
principal risks of investing in Select Special Equity Fund are stock market
risk, the particular risks associated with investing in securities issued by
small companies and purchasing securities in IPOs (stocks purchased in IPOs have
a tendency to fluctuate in value significantly shortly after the IPO relative to
the price at which they were purchased). Compared to investing in your Fund,
investing in Select Special Equity Fund involves greater risk associated with
investing in small capitalization stocks and securities issued in IPOs. For a
detailed comparison of the Funds' risks, see the section entitled "Risks" below.
How do the Funds' sales charges and expenses compare? Will I be able to buy,
sell and exchange shares the same way?
Both Funds offer Institutional and Institutional Service shares. Neither class
of shares is subject to any sales charge. In addition, Select Special Equity
Fund offers Class A, Class B and Class C shares; however, none of these classes
are involved in the Merger. The procedures for buying, selling and exchanging
shares of the Funds are identical. For more information, see "Purchase and
Redemption Procedures" and "Exchange Privileges" below.
The following tables allow you to compare the expenses of the two Funds. The
table entitled "Select Special Equity Fund Pro Forma" also shows you what the
expenses are estimated to be assuming the Merger takes place.
Shareholder Fees (fees paid directly from your investment)
You pay no shareholder transaction fees.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- --- ----------------------------------------------------------
Select Social Principles Fund (based on actual expenses for the Select Special Equity Fund (restated to reflect
for the fiscal year ending June 30, 2000) current fiscal year ended June 30, 1999) fees
- ----------------------------------------------------------------- --- ----------------------------------------------------------
- --------------- ------------- --------- ---------- -------------- --- ------------ ------------- ------- ---------- ------------
Management 12b-1 Other Total Fund Management 12b-1 Other Total Fund
Fees Fees Expenses Operating Fees Fees Expenses Operating
Expenses* Expenses**
- --------------- ------------- --------- ---------- -------------- --- ------------ ------------- ------- ---------- ------------
- --------------- ------------- --------- ---------- -------------- --- ------------ ------------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.80% 0.00% 0.14% 0.94% Institutional 0.90% 0.00% 0.34% 1.24%
- --------------- ------------- --------- ---------- -------------- --- ------------ ------------- ------- ---------- ------------
- --------------- ------------- --------- ---------- -------------- --- ------------ ------------- ------- ---------- ------------
Institutional 0.80% 0.25% 0.14% 1.19% Institutional 0.90% 0.25% 0.34% 1.49%
Service Service
- --------------- ------------- --------- ---------- -------------- --- ------------ ------------- ------- ---------- ------------
</TABLE>
* From time to time, the Fund's investment advisor may, at its discretion,
reduce or waive its fees or reimburse the Fund for certain of its expenses in
order to reduce expense ratios. The Fund's investment advisor may cease these
waivers or reimbursements at any time. The Annual Fund Operating Expenses do not
reflect fee waivers and expense reimbursements. Including current fee waivers
and expense reimbursements and restating to reflect current fees, Total Fund
Operating Expenses were 0.84% for Institutional shares and 1.09% for
Institutional Service shares for the fiscal year ended 6/30/1999.
** From time to time, the Fund's investment advisor may, at its discretion,
reduce or waive its fees or reimburse the Fund for certain of its expenses in
order to reduce expense ratios. The Fund's investment advisor may cease these
waivers or reimbursements at any time. The Annual Fund Operating Expenses do not
reflect fee waivers and expense reimbursements. Including current fee waivers
and expense reimbursements, Total Fund Operating Expenses were 1.06% for
Institutional shares and 1.31% for Institutional Service shares for the fiscal
year ended 6/30/1999.
<PAGE>
- ----------------------------------------------------------------------------
Select Special Equity Fund
Pro Forma
(based on what the estimated combined expenses of Select Special Equity Fund
would have been for the 12 months ended December 31, 1999)
- ----------------------------------------------------------------------------
- ------------------ -------------- ---------- --------------- ---------------
Management 12b-1 Other Expenses Total Fund
Fees Fees Operating
Expenses***
- ------------------ -------------- ---------- --------------- ---------------
- ------------------ -------------- ---------- --------------- ---------------
Institutional 0.90% 0.00% 0.23% 1.13%
- ------------------ -------------- ---------- --------------- ---------------
- ------------------ -------------- ---------- --------------- ---------------
Institutional 0.90% 0.25% 0.23% 1.38%
Service
- ------------------ -------------- ---------- --------------- ---------------
*** From time to time, the Fund's investment advisor may, at its discretion,
reduce or waive its fees or reimburse the Fund for certain of its expenses in
order to reduce expense ratios. The Annual Fund Operating Expenses do not
reflect fee waivers and expense reimbursements. If the Merger takes place, the
Fund's investment advisor has agreed to waive the management fee and/or
reimburse expenses for a period of two years beginning in July 2000 in order to
limit Total Fund Operating Expenses at 0.98% for Institutional shares and 1.23%
for Institutional Service shares.
The table below shows examples of the total expenses you would pay on a $10,000
investment over one-, three-, five- and ten-year periods. The example is
intended to help you compare the cost of investing in Select Social Principles
Fund versus Select Special Equity Fund and for Select Special Equity Fund pro
forma, assuming the Merger takes place, and is for illustration only. The
example assumes a 5% average annual return, the imposition of the maximum sales
charge (if any) and that you reinvest all of your dividends.
Your actual costs may be higher or lower.
Example of Fund Expenses
<TABLE>
<CAPTION>
- ------------------------------------------------- -- ----------------------------------------------------
Select Social Principles Fund Select Special Equity Fund
- ------------------------------------------------- -- ----------------------------------------------------
- ------------------ ------------- ---------------- -- --------------- ---------------- -------------------
Institutional Institutional Institutional Institutional
Service Service
- ------------------ ------------- ---------------- -- --------------- ---------------- -------------------
- ------------------ ------------- ---------------- -- --------------- ---------------- -------------------
<S> <C> <C> <C> <C>
After 1 year $96 $121 After 1 year $126 $152
- ------------------ ------------- ---------------- -- --------------- ---------------- -------------------
- ------------------ ------------- ---------------- -- --------------- ---------------- -------------------
After 3 years $300 $378 After 3 years $393 $471
- ------------------ ------------- ---------------- -- --------------- ---------------- -------------------
- ------------------ ------------- ---------------- -- --------------- ---------------- -------------------
After 5 years $520 $654 After 5 years $681 $813
- ------------------ ------------- ---------------- -- --------------- ---------------- -------------------
- ------------------ ------------- ---------------- -- --------------- ---------------- -------------------
After 10 Years $1,155 $1,443 After 10 Years $1,500 $1,779
- ------------------ ------------- ---------------- -- --------------- ---------------- -------------------
</TABLE>
- -------------------------------------------------------------------------------
Select Special Equity Fund Pro Forma
- -------------------------------------------------------------------------------
- -------------------- ------------------------ ---------------------------------
Institutional Institutional Service
- -------------------- ------------------------ ---------------------------------
- -------------------- ------------------------ ---------------------------------
After 1 year $115 $140
- -------------------- ------------------------ ---------------------------------
- -------------------- ------------------------ ---------------------------------
After 3 years $359 $437
- -------------------- ------------------------ ---------------------------------
- -------------------- ------------------------ ---------------------------------
After 5 years $622 $755
- -------------------- ------------------------ ---------------------------------
- -------------------- ------------------------ ---------------------------------
After 10 Years $1,375 $1,657
- -------------------- ------------------------ ---------------------------------
How do the Funds' performance records compare?
The following charts show how each Fund has performed in the past. Past
performance is not an indication of future results.
Year-by-Year Total Return (%)
The chart below shows the percentage gain or loss for the oldest class of shares
of each Fund in each of the past ten calendar years. For both Funds the
performance shown is for the Institutional shares. It should give you a general
idea of the risks of investing in each Fund by showing how each Fund's return
has varied from year-to-year. This chart includes the effects of Fund expenses.
Because the expenses for the Institutional Service shares are greater than the
Institutional shares' expenses, the performance for the Institutional Service
shares would have been lower than the Institutional share performance shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ------ -------------------------------------------------------
Select Social Principles Fund* (Institutional) Select Special Equity Fund** (Institutional)
- ----------------------------------------------------------------- ------ -------------------------------------------------------
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
`90 `91 `92 `93 `94 `95 `96 `97 `98 `99 `90 `91 `92 `93 `94 `95 `96 `97 `98 `99
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50% 43.69 50% 74.31
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
40% 40% 34.44
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
30% 37.63 23.15 30% 26.25
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
20% 16.56 20% 19.49
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
10% 9.89 9.54 8.47 6.95 10% 5.65
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
0% 0%
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
- -10% -7.73 -0.94 -10%
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
- -20% -20%
- ------- ------ ----- ----- ---- ----- ----- ----- ---- ----- ---- ------ --- ----- ---- --- ---- ----- ------ ------ ---- ------
Best Quarter: __Quarter 199_ % Best Quarter: __Quarter 199_%
Worst Quarter: __Quarter 199_ % Worst Quarter: __Quarter 199_%
Year to date total return through 3/31/2000 is _%. Year to date total return through 3/31/2000 is _%.
</TABLE>
The next table lists each Fund's average annual total return by class over the
past one, five and ten years (as applicable) and since inception (through
12/31/1999), including applicable sales charges (if any). This table is intended
to provide you with some indication of the risks of investing in each Fund. At
the bottom of the table you can compare each Fund's performance with an
appropriate broad-based index. Compare Select Social Principles Fund's
performance with the Standard & Poor's MidCap 400 Index (S&P 400) which tracks
the stocks of 400 mid-size U.S. companies, and Select Special Equity Fund's
performance with the Russell 2000 Index (Russell 2000) which measures the
performance of 2000 small U.S. companies. Each is an unmanaged index and does
not include transaction costs associated with buying and selling securities nor
any mutual fund expenses. It is not possible to invest directly in an index.
Average Annual Total Return (for the period ended 12/31/1999)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- --- --------------------------------------------------------------
Select Social Principles Fund* Select Special Equity Fund**
- ----------------------------------------------------------------- --- --------------------------------------------------------------
- -------------- ----------- -------- ------- -------- ------------ --- ----------- ---------- ------- -------- -------- -------------
Inception Performance Inception Performance
Date of Since Date of Since
Class 1 year 5 year 10 year 5/31/1988 Class 1 year 5 year 10 year 3/15/1994
- -------------- ----------- -------- ------- -------- ------------ --- ----------- ---------- ------- -------- -------- -------------
- -------------- ----------- -------- ------- -------- ------------ --- ----------- ---------- ------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 11/24/1997 6.95% 18.14% 13.84% 13.88% Institutional 3/15/1994 74.31% 30.15% N/A 23.31%
- -------------- ----------- -------- ------- -------- ------------ --- ----------- ---------- ------- -------- -------- -------------
- -------------- ----------- -------- ------- -------- ------------ --- ----------- ---------- ------- -------- -------- -------------
Institutional 3/12/1998 6.68% 17.83% 13.56% 13.60% Institutional 3/15/1994 73.97% 29.88% N/A 23.08%
Service Service
- -------------- ----------- -------- ------- -------- ------------ --- ----------- ---------- ------- -------- -------- -------------
- -------------- ----------- -------- ------- -------- ------------ --- ----------- ---------- ------- -------- -------- -------------
S&P 400 14.72% 23.05% 17.32% 18.69% Russell 21.26% 16.69% N/A 13.24%
2000
- -------------- ----------- -------- ------- -------- ------------ --- ----------- ---------- ------- -------- -------- -------------
</TABLE>
* Historical performance shown for Institutional Service shares from 11/24/1997
to its inception is based on the performance of Institutional shares and has not
been adjusted to reflect the effect of the 0.25% 12b-1 fee applicable to
Institutional Service shares. Institutional shares pay no 12b-1 fee. If these
fees had been reflected, returns would have been lower. Prior to 11/24/1997, the
returns for Institutional and Institutional Service shares are based on the
Fund's predecessor common trust fund's (CTF) performance, adjusted for estimated
mutual fund expenses. The CTF was not registered under the 1940 Act and was not
subject to certain investment restrictions. If the CTF had been registered, its
performance might have been adversely affected. Performance for the CTF has been
adjusted to include the effect of estimated mutual fund class gross expense
ratios at the time the Fund was converted to a mutual fund. If fee waivers and
expense reimbursements in existence at the time of the conversion had been
calculated into the mutual fund class expense ratio, the total returns would be
as follows: Institutional shares - 5 year = 18.07%, 10 year = 13.75% and since
5/31/1988 = 13.78%; Institutional Service shares - 5 year = 17.76%, 10 year =
13.47% and since 5/31/1988 = 13.50%.
** Historical performance shown for Institutional shares prior to 7/27/1998 is
based on (1) the performance of the Class Y shares of the Fund's predecessor
fund, CoreFund Special Equity Fund, from 2/21/1995 to 7/26/1998 and (2) the
Class A shares of the Fund's predecessor fund from 3/15/1994 to 2/20/1995.
Historical performance shown for Institutional Service shares prior to 7/27/1998
is based on the Class A shares of the Fund's predecessor fund and reflects the
same 0.25% 12b-1 fee applicable to Institutional Service shares.
For a detailed discussion of the manner of calculating total return, please see
each Fund's statement of additional information. Generally, the calculations of
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment date.
Important information about Select Special Equity Fund is also contained in
management's discussion of Select Special Equity Fund's performance, attached as
Exhibit B to this prospectus/proxy statement. This information also appears in
Select Special Equity Fund's most recent Annual Report.
Who will be the Investment Advisor and Portfolio Manager of my Fund after the
Merger? What will the advisory fee be after the Merger?
Management of the Funds
The overall management of Select Special Equity Fund and Select Social
Principles Fund is the responsibility of, and is supervised by, the Board of
Trustees of Evergreen Select Equity Trust.
Investment Advisor Meridian Investment Company ("MIC") is the investment
Advisor to Select Special Equity Fund.
Facts about MIC:
o Is a subsidiary of First Union National Bank
("FUNB"), which is a subsidiary of First Union
Corporation ("First Union"), the 6th largest
bank holding company in the United States based
on total assets as of March 31, 2000.
o Has been managing money for over 15 years.
o Manages over $[5 billion] in assets, including
[$566.2 million] for 2 of the Evergreen Funds.
o Manages with its affiliates the Evergreen family
of mutual funds with assets of approximately
[$82.5 billion] as of March 31, 2000.
o Is located at 55 Valley Stream Parkway, Malvern,
Pennsylvania 19355.
Advisory Fees For its management and supervision of the daily
business affairs of Select Special Equity Fund, MIC
is entitled to receive an annual fee equal to: 0.90%
of average daily net assets.
MIC may, at its discretion, reduce or waive its fees or reimburse the Fund for
certain of its other expenses in order to reduce the expense ratios. Unless
otherwise agreed upon, MIC may also reduce or cease these voluntary waivers and
reimbursements at any time. If the Merger takes place, MIC has agreed to waive
expenses for a period of two years beginning July 2000 in order to limit Select
Special Equity Fund's Total Fund Operating Expenses at 0.98% for Institutional
shares and 1.23% for Institutional Service shares.
Portfolio Management Since October 1999, the day-to-day management of Select
Special Equity Fund has been handled by Jay
Zelko, Eric M. Teal and Timothy M. Stevenson. Each also
acts as co-manager to Select Social Principles Fund.
Mr. Zelko joined FUNB in April 1994. Mr. Zelko is an
equity portfolio manager within MIC who
maintains sector analytical and portfolio management
responsibilities. Mr. Zelko has been affiliated
with MIC as a portfolio manager since June 1999.
Mr. Teal, Vice President and quantitative equity
analyst, joined FUNB in September 1993 and currently
heads the Quantitative Analysis/Portfolio Management
Unit within FUNB. He has been affiliated with MIC as a
portfolio manager since October 1999.
Mr. Stevenson has been an investment professional since
August 1981. Mr. Stevenson joined FUNB in
November 1994 as a Senior Vice President and portfolio
manager. Mr. Stevenson has been affiliated
with MIC as a portfolio manager since October 1999.
What will be the primary federal tax consequences of the Merger?
Prior to or at the completion of the Merger, Select Social Principles Fund will
have received an opinion from Sullivan & Worcester LLP that the Merger has been
structured so that no gain or loss will be realized by the Fund or its
shareholders for federal income tax purposes as a result of receiving Select
Special Equity Fund shares in connection with the Merger. The holding period and
aggregate tax basis of shares of Select Special Equity Fund that are received by
Select Social Principles Fund's shareholders will be the same as the holding
period and aggregate tax basis of shares of the Fund previously held by such
shareholders, provided that shares of the Fund are held as capital assets. In
addition, the holding period and tax basis of the assets of Select Social
Principles Fund in the hands of Select Special Equity Fund as a result of the
Merger will be the same as in the hands of the Fund immediately prior to the
Merger, and no gain or loss will be recognized by Select Special Equity Fund
upon the receipt of the assets of the Fund in exchange for shares of Select
Special Equity Fund and the assumption by Select Special Equity Fund of Select
Social Principles Fund's identified liabilities.
RISKS
What are the primary risks of investing in each Fund?
An investment in each Fund is subject to certain risks. There is no assurance
that investment performance of either Fund will be positive and that the Funds
will meet their investment objectives. The following tables and discussions
highlight the primary risks associated with investment in each of the Funds.
- --------------------------------------------------------------------------------
Select Social Principles Fund Select Special Equity Fund
- --------------------------------------------------------------------------------
Both Funds are subject to Stock Market Risk. Both Funds invest a significant
portion of their assets in equity securities.
- --------------------------------------------------------------------------------
The Funds' value will be affected by general economic conditions such as
prevailing economic growth, inflation and interest rates. When economic growth
slows, or interest or inflation rates increase, securities tend to decline in
value. Such events could also cause companies to decrease the dividends they
pay. If these events were to occur, the value of and dividend yield and total
return earned on a shareholder's investment in a Fund would likely decline. Even
if general economic conditions do not change, a shareholder's investment in a
Fund may decline in value if the particular sectors, industries or issuers in
which the Fund invests do not perform well.
<PAGE>
- --------------------------------------------------------------------------------
Select Social Principles Fund Select Special Equity Fund
- --------------------------------------------------------------------------------
Both Funds are subject to Market Capitalization Risk. Because Select Special
Equity Fund invests primarily in small market capitalization companies, its
market capitalization risk is greater than for Select Social Principles Fund,
which invests primarily in mid-sized companies.
- --------------------------------------------------------------------------------
Stocks fall into three broad market capitalization categories - large, medium
and small. Investing primarily in one category carries the risk that due to
current market conditions that category may be out of favor with investors. If
valuations of large capitalization companies appear to be greatly out of
proportion to the valuations of small or medium capitalization companies,
investors may migrate to the stocks of small and mid-sized companies causing a
Fund that invests in these companies to increase in value more rapidly than a
Fund that invests in larger, fully-valued companies. Investing in medium and
small capitalization companies may be subject to special risks associated with
narrower product lines, more limited financial resources, smaller management
groups, and a more limited trading market for their stocks as compared with
larger companies. As a result, stocks of small and medium capitalization
companies may decline significantly in market downturns. Additionally,
securities issued by small companies tend to fluctuate in value more
dramatically than those of larger companies.
- --------------------------------------------------------------------------------
Select Social Principles Fund Select Special Equity Fund
- --------------------------------------------------------------------------------
Both Funds are subject to Investment Style Risk. Select Social Principles
Fund invests in both "growth" and "value" securities while Select Special
Equity Fund invests primarily in growth securities.
- --------------------------------------------------------------------------------
Securities with different characteristics tend to shift in and out of favor
depending upon market and economic conditions as well as investor sentiment. A
Fund may outperform or underperform other funds that employ a different style. A
Fund may also employ a combination of styles that impact its risk
characteristics. Examples of different styles include growth and value
investing. Growth stocks may be more volatile than other stocks because they are
more sensitive to investor perceptions of the issuing company's growth of
earnings potential. Growth oriented funds will typically underperform when value
investing is in favor. Value stocks are those which are out of favor or
undervalued in comparison to their peers due to adverse business developments or
other factors. Value oriented funds will typically underperform when growth
investing is in favor.
- --------------------------------------------------------------------------------
Select Social Principles Fund Select Special Equity Fund
- --------------------------------------------------------------------------------
o Is not subject to IPO Risk. o Is subject to IPO Risk.
- --------------------------------------------------------------------------------
As part of its investment strategy, Select Special Equity Fund may purchase
stocks in IPOs. Stocks purchased in IPOs have a tendency to fluctuate in value
significantly shortly after the IPO relative to the price at which they were
purchased. These fluctuations could impact the net asset value and return earned
on the Fund's shares.
Are there any other risks of investing in each Fund?
Each Fund may invest up to 10% of its assets in foreign securities, including
securities issued by foreign branches of U.S. banks and foreign banks, Canadian
commerical paper and Europaper (U.S. dollar-denominated commerical paper of
foreign issuers), American Depositary Receipts, European Depositary Receipts and
Global Depositary Receipts.
A Fund's investment in non-U.S. securities could expose it to certain unique
risks of foreign investing, For example, political turmoil and economic
instability in the countries in which the Fund invests could adversely affect
the value of a shareholder's investment. In addition, if the value of any
foreign currency in which the Fund's investments are denominated declines
relative to the U.S. dollar, the value of and total return earned on a
shareholder's investment in the Fund may decline as well. Certain foreign
countries have less developed and less regulated securities markets and
accounting systems than the U.S. This may make it harder to get accurate
information about a security or company, and increase the likelihood that an
investment will not perform as well as expected.
Both Funds may invest in a variety of derivative instruments including options
and futures. Derivatives are financial contracts whose value is based on an
underlying asset, such as a stock or a bond, or an underlying economic factor,
such as an index or an interest rate. Small price movements in the underlying
asset can result in immediate and substantial gains or losses in the value of
derivatives. Options and futures can be used to increase return and to hedge a
Fund's portfolio against changes in the market value of securities owned or
intended to be purchased. Although this is intended to increase returns, these
practices may actually reduce returns or increase volatility.
Portfolio turnover for Select Special Equity Fund has been higher than that for
Select Social Principles Fund due to the portfolio manager's active portfolio
management style. High portfolio turnover may cause a Fund to realize capital
gains which, if realized and distributed by the Fund, may be taxable to
shareholders as ordinary income. High portfolio turnover may also result in
correspondingly greater brokerage commissions and other transaction costs, which
will be borne directly by the Fund and its shareholders.
MERGER INFORMATION
Reasons for the Merger
At a regular meeting held on March 23-24, 2000, all of the Trustees of Evergreen
Select Equity Trust, including the Independent Trustees, considered and approved
the Merger; they determined that it was in the best interest of shareholders of
Select Social Principles Fund and that the interests of existing shareholders of
Select Social Principles Fund will not be diluted as a result of the
transactions contemplated by the Merger.
Before approving the Plan, the Trustees reviewed various factors about the Funds
and the proposed Merger. The Trustees considered among other things:
o the terms and conditions of the Merger;
o whether the Merger would result in the dilution of shareholders' interests;
o expense ratios, fees and expenses of Select Special Equity Fund and Select
Social Principles Fund;
o the comparative performance records of each Fund;
o compatibility of the Funds' investment objectives and principal investment
strategies;
o the fact that FUNB will bear the expenses incurred by Select Social
Principles Fund and Select Special Equity Fund in connection with the
Merger;
o the fact that Select Special Equity Fund will assume the identified
liabilities of Select Social Principles Fund;
o the fact that the Merger is expected to be tax-free for federal income tax
purposes; and
o alternatives available to shareholders of Select Social Principles Fund,
including the ability to redeem their shares.
During their consideration of the Merger, the Trustees met with Fund counsel and
counsel to the Independent Trustees regarding the legal issues involved.
In approving the Merger, the Trustees considered the relative size of Select
Social Principles Fund as well as investment style. The Trustees evaluated the
potential economies of scale associated with larger mutual funds and concluded
that operational efficiencies may be achieved by combining Select Social
Principles Fund with Select Special Equity Fund. As of December 31, 1999, Select
Special Equity Fund's total assets were approximately $186.8 million and Select
Social Principles Fund's total assets were approximately $106.7 million. Over
1999, Select Social Principles Fund's total assets declined by approximately
33%. By merging the Fund into Select Special Equity Fund, shareholders of Select
Social Principles Fund would have the benefit of a larger fund with greater
investment flexibility than Select Social Principles Fund, which is more
conservative in nature.
The Trustees considered the relative performance of each Fund. The performance
of Select Special Equity Fund has been consistently higher than the performance
of Select Social Principles Fund. The Trustees also considered the relative
expenses of the Funds. Currently, the expense ratio of Select Social Principles
Fund is lower that that of Select Special Equity Fund. If the Merger takes
place, MIC has agreed to waive expenses for a period of two years beginning July
2000 in order to limit Total Fund Operating Expenses of the combined fund at
0.98% for Institutional shares and 1.23% for Institutional Service shares. This
expense limit as well as the efficiencies achieved in operating a larger mutual
fund would bring the expenses of the combined fund more into line with current
expenses of Select Social Principles Fund.
In addition, the Trustees considered the fact that MIC has indicated that absent
the Merger it would propose liquidating Select Social Principles Fund due to its
lack of size and relative underperformance. For the one-year period ended
February 29, 2000, the total return for the Institutional shares of Select
Social Principles Fund was 28.27% while that for the Institutional shares of
Select Special Equity Fund was 86.12%. The Trustees recognized that most of the
shareholders of Select Social Principles Fund purchased shares because of the
Fund's socially-conscious investment philosophy. Although Select Special Equity
Fund does not utilize this investment philosophy, the Merger presents a method
intended to be tax-free, by which shareholders of Select Social Principles Fund
can have their assets moved to a similar Fund within the Evergreen Family of
Funds. If shareholders of Select Social Principles Fund do not wish to own
shares of a fund that does not utilize a socially-conscious investment
philosophy, they can redeem their shares before or after the Merger.
Accordingly, for the reasons noted above and recognizing that there can be no
assurance that any economies of scale or other benefits will be realized, the
Trustees believe that the proposed Merger would be in the best interest of each
Fund and its shareholders.
Agreement and Plan of Reorganization
The following summary is qualified in its entirety by reference to the Plan
(Exhibit A hereto).
The Plan provides that Select Special Equity Fund will acquire all of the assets
of Select Social Principles Fund in exchange for shares of Select Special Equity
Fund and the assumption by Select Special Equity Fund of the identified
liabilities of Select Social Principles Fund on or about July 21, 2000 or such
other date as may be agreed upon by the parties (the "Closing Date"). Prior to
the Closing Date, Select Social Principles Fund will endeavor to discharge all
of its known liabilities and obligations. Select Special Equity Fund will not
assume any liabilities or obligations of Select Social Principles Fund other
than those reflected in an unaudited statement of assets and liabilities of
Select Social Principles Fund prepared as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on the
business day immediately prior to the Closing Date (the "Valuation Time"). The
number of full and fractional shares of each class of Select Special Equity Fund
to be received by the shareholders of Select Social Principles Fund will be
determined by multiplying the number of full and fractional shares of the
corresponding class of Select Social Principles Fund by a factor which shall be
computed by dividing the net asset value per share of the respective class of
shares of Select Social Principles Fund by the net asset value per share of the
respective class of shares of Select Special Equity Fund. Such computations will
take place as of the Valuation Time. The net asset value per share of each class
will be determined by dividing assets, less liabilities, in each case
attributable to the respective class, by the total number of outstanding shares.
State Street Bank and Trust Company, the custodian for the Funds, will compute
the value of each Fund's respective portfolio securities. The method of
valuation employed will be consistent with the procedures set forth in the
prospectus and statement of additional information of Select Special Equity
Fund, Rule 22c-1 under the 1940 Act, and with the interpretations of such Rule
by the SEC's Division of Investment Management.
At or prior to the Closing Date, Select Social Principles Fund will have
declared a dividend and distribution which, together with all previous dividends
and distributions, shall have the effect of distributing to the Fund's
shareholders (in shares of the Fund, or in cash, as the shareholder has
previously elected) all of the Fund's net investment company taxable income for
the taxable period ending on the Closing Date (computed without regard to any
deduction for dividends paid), all of the Fund's net tax exempt income and all
of its net capital gains realized in all taxable periods ending on the Closing
Date (after the reductions for any capital loss carryforward).
As soon after the Closing Date as conveniently practicable, Select Social
Principles Fund will liquidate and distribute pro rata to shareholders of record
as of the close of business on the Closing Date the full and fractional shares
of Select Special Equity Fund received by Select Social Principles Fund. Such
liquidation and distribution will be accomplished by the establishment of
accounts in the names of Select Social Principles Fund's shareholders on Select
Special Equity Fund's share records of its transfer agent. Each account will
represent the respective pro rata number of full and fractional shares of Select
Special Equity Fund due to the Fund's shareholders. All issued and outstanding
shares of Select Social Principles Fund, including those represented by
certificates, will be canceled. The shares of Select Special Equity Fund to be
issued will have no preemptive or conversion rights. After these distributions
and the winding up of its affairs, Select Social Principles Fund will be
terminated.
The consummation of the Merger is subject to the conditions set forth in the
Plan, including approval by Select Social Principles Fund's shareholders,
accuracy of various representations and warranties and receipt of opinions of
counsel, including opinions with respect to those matters referred to in
"Federal Income Tax Consequences" below. Notwithstanding approval of Select
Social Principles Fund's shareholders, the Plan may be terminated (a) by the
mutual agreement of Select Social Principles Fund and Select Special Equity
Fund; or (b) at or prior to the Closing Date by either party (i) because of a
breach by the other party of any representation, warranty, or agreement
contained therein to be performed at or prior to the Closing Date if not cured
within 30 days, or (ii) because a condition to the obligation of the terminating
party has not been met and it reasonably appears that it cannot be met.
Whether or not the Merger is consummated, FUNB will pay the expenses incurred by
Select Social Principles Fund and Select Special Equity Fund in connection with
the Merger (including the cost of any proxy-soliciting agent). No portion of the
expenses will be borne directly or indirectly by Select Social Principles Fund,
Select Special Equity Fund or their shareholders.
If Select Social Principles Fund shareholders do not approve the Merger, the
Trustees will consider other possible courses of action that may be in the best
interest of shareholders including possible liquidation of the Fund.
Federal Income Tax Consequences
The Merger is intended to qualify for federal income tax purposes as a tax-free
reorganization under section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). As a condition to the closing of the Merger, Select Social
Principles Fund will receive an opinion from Sullivan & Worcester LLP to the
effect that, on the basis of the existing provisions of the Code, U.S. Treasury
regulations issued thereunder, current administrative rules, pronouncements and
court decisions, for federal income tax purposes, upon consummation of the
Merger:
(1) The transfer of all of the assets of Select Social Principles Fund
solely in exchange for shares of Select Special Equity Fund and the
assumption by Select Special Equity Fund of the identified liabilities,
followed by the distribution of Select Special Equity Fund's shares by
Select Social Principles Fund in dissolution and liquidation of Select
Social Principles Fund, will constitute a " reorganization" within the
meaning of section 368(a)(1)(C) of the Code, and Select Special Equity
Fund and Select Social Principles Fund will each be a "party to a
reorganization" within the meaning of section 368(b) of the Code;
(2) No gain or loss will be recognized by Select Social Principles Fund on
the transfer of all of its assets to Select Special Equity Fund solely
in exchange for Select Special Equity Fund's shares and the assumption
by Select Special Equity Fund of the identified liabilities of Select
Social Principles Fund or upon the distribution of Select Special
Equity Fund's shares to Select Social Principles Fund's shareholders in
exchange for their shares of Select Social Principles Fund;
(3) The tax basis of the assets transferred will be the same to Select
Special Equity Fund as the tax basis of such assets to Select Social
Principles Fund immediately prior to the Merger, and the holding period
of such assets in the hands of Select Special Equity Fund will include
the period during which the assets were held by Select Social
Principles Fund;
(4) No gain or loss will be recognized by Select Special Equity Fund upon
the receipt of the assets from Select Social Principles Fund solely in
exchange for the shares of Select Special Equity Fund and the
assumption by Select Special Equity Fund of the identified liabilities
of Select Social Principles Fund;
(5) No gain or loss will be recognized by Select Social Principles Fund's
shareholders upon the issuance of the shares of Select Special Equity
Fund to them, provided they receive solely such shares (including
fractional shares) in exchange for their shares of Select Social
Principles Fund; and
(6) The aggregate tax basis of the shares of Select Special Equity Fund,
including any fractional shares, received by each of the shareholders
of Select Social Principles Fund pursuant to the Merger will be the
same as the aggregate tax basis of the shares of Select Social
Principles Fund held by such shareholder immediately prior to the
Merger, and the holding period of the shares of Select Special Equity
Fund, including fractional shares, received by each such shareholder
will include the period during which the shares of Select Social
Principles Fund exchanged therefor were held by such shareholder
(provided that the shares of Select Social Principles Fund were held as
a capital asset on the date of the Merger).
Opinions of counsel are not binding upon the Internal Revenue Service or the
courts. If the Merger is consummated but does not qualify as a tax-free
reorganization under the Code, a shareholder of Select Social Principles Fund
would recognize a taxable gain or loss equal to the difference between his or
her tax basis in his or her Fund shares and the fair market value of Select
Special Equity Fund shares he or she received. Shareholders of Select Social
Principles Fund should consult their tax advisors regarding the effect, if any,
of the proposed Merger in light of their individual circumstances. Since the
foregoing discussion relates only to the federal income tax consequences of the
Merger, shareholders of Select Social Principles Fund should also consult their
tax advisors as to the state and local tax consequences, if any, of the Merger.
Any capital loss carryforwards of Select Social Principles Fund will be
available to Select Special Equity Fund to offset capital gains recognized after
the Merger subject to limitations imposed by the Code. These limitations provide
generally that the amount of loss carryforward may be used in any year following
the Closing Date in an amount equal to the value of all of the outstanding stock
of Select Social Principles Fund immediately prior to the Merger, multiplied by
a long-term tax-exempt bond rate determined monthly by the Internal Revenue
Service. A capital loss carryforward may generally be used without any limit to
offset gains recognized during the five-year period beginning on the date of the
Merger on the sale of assets transferred by Select Social Principles Fund to
Select Special Equity Fund pursuant to the Merger, to the extent of the excess
of the value of any such asset on the Closing Date over its tax basis.
Pro-forma Capitalization
The following table sets forth the capitalizations of Select Social Principles
Fund and Select Special Equity Fund as of December 31, 1999 and the
capitalization of Select Special Equity Fund on a pro forma basis as of that
date, giving effect to the proposed acquisition of assets at net asset value.
The pro forma data reflects an exchange ratio of approximately 1.9947 and 2.0163
Institutional and Institutional Service shares, respectively, of Select Special
Equity Fund issued for each Institutional and Institutional Service share,
respectively, of Select Social Principles Fund.
Capitalization of Select Social Principles Fund, Select Special Equity Fund
and Select Special Equity Fund (Pro Forma)
<TABLE>
<CAPTION>
Select Special Equity Fund
Net Assets Select Social Principles Fund Select Special Equity Fund (After Merger)
<S> <C> <C> <C>
Institutional $106,611,192 $144,593,189 $251,204,381
Institutional Service $51,733 $6,928,475 $6,980,208
Class A N/A $12,340,316 $12,340,316
Class B N/A $14,437,244 $14,437,244
Class C N/A $8,506,283 $8,506,283
--- ---------- ----------
Total Net Assets $106,662,925 $186,805,507 $293,468,432
Net Asset Value Per Share
Institutional $29.79 $14.93 $14.93
Institutional Service $29.71 $14.74 $14.74
Class A N/A $14.72 $14.72
Class B N/A $14.70 $14.70
Class C N/A $14.70 $14.70
Shares Outstanding
Institutional 3,578,768 9,681,898 16,820,538
Institutional Service 1,741 470,141 473,651
Class A N/A 838,202 838,202
Class B N/A 982,262 982,262
Class C N/A 578,462 578,462
--- ------- -------
All Classes 3,580,509 12,550,965 19,693,115
</TABLE>
The table set forth above should not be relied upon to reflect the number of
shares to be received in the Merger; the actual number of shares to be received
will depend upon the net asset value and number of shares outstanding of each
Fund at the time of the Merger.
Distribution of Shares
Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund Services
("BISYS"), acts as underwriter of shares of Select Special Equity Fund and
Select Social Principles Fund. EDI distributes each Fund's shares directly or
through broker-dealers, banks (including FUNB), or other financial
intermediaries. Each Fund offers both Institutional and Institutional Service
shares. In addition, Select Special Equity Fund offers Class A, Class B and
Class C shares. These classes of shares are not involved in the Merger. Each
class has a separate distribution arrangement and bears its own distribution
expenses. (See "Shareholder Servicing-Related Expenses" below.)
In the proposed Merger, Select Social Principles Fund shareholders will receive
shares of Select Special Equity Fund having the same class designation, and the
same arrangements with respect to the imposition of Rule 12b-1 distribution and
service fees, as the shares they currently hold. The Merger will be effected at
net asset value.
Neither the Institutional nor the Institutional Service shares of Select Special
Equity Fund and Select Social Principles Fund have an initial or contingent
deferred sales charge. Institutional Service shares of both Funds are subject to
an annual service fee of up to 0.25% of the average daily net assets of the
class for personal services rendered to shareholders and/or the maintenance of
accounts. A more detailed description of the shareholder servicing arrangements
applicable to Institutional Service shares can be found below and is contained
in the Select Special Equity Fund and Select Social Principles Fund prospectus
and in the Funds' statement of additional information.
Shareholder Servicing-Related Expenses. Each Fund has adopted a Rule 12b-1 plan
with respect to its Institutional Service shares under which the class may pay
for shareholder servicing-related expenses at an annual rate which may not
exceed 0.75% of the average daily net assets attributable to the class. Payments
with respect to Institutional Service shares are currently limited to 0.25% of
average daily net assets attributable to the class. This amount may be increased
to the full plan rate for each Fund by the Trustees without shareholder
approval. Consistent with the requirements of Rule 12b-1 and the applicable
rules of the National Association of Securities Dealers, Inc., following the
Merger, Select Special Equity Fund may make shareholder servicing-related
payments with respect to Select Social Principles Fund shares sold prior to the
Merger.
Additional information regarding the Rule 12b-1 plans adopted by each Fund with
respect to its Institutional Service shares is included in its prospectus and
statement of additional information.
No Rule 12b-1 plan has been adopted for the Institutional shares of either Fund.
Purchase and Redemption Procedures
Information concerning applicable shareholder servicing-related fees is provided
above. Investments in the Funds are not insured. The minimum initial purchase
requirement for Institutional or Institutional Service shares of each Fund is $1
million, which may be waived in certain situations. There is no minimum for
subsequent purchases of shares of either Fund. For more information, see "How To
Chose the Share Class That Best Suits You" in the Funds' prospectus. Each Fund
provides for telephone, mail or wire redemption of shares at net asset value, as
next determined after receipt of a redemption request on each day the NYSE is
open for trading. Additional information concerning purchases and redemptions of
shares, including how each Fund's net asset value is determined, is contained in
the Funds' prospectus. The Funds may, at their discretion, pay your redemption
proceeds with securities instead of cash. However, each Fund is obligated to
redeem shares solely in cash, up to the lesser of $250,000 or 1% of a Fund's
total net assets during any 90-day period for any one shareholder. The Funds
reserve the right to redeem any account valued, as a result of a redemption, at
less than $1 million. All funds invested in each Fund are invested in full and
fractional shares. The Funds reserve the right to reject any purchase order.
Exchange Privileges
Holders of shares of a class of each Fund may exchange their shares for shares
of the same class of any other Evergreen Select fund. Each Fund limits exchanges
to five per calendar year and three per calendar quarter. An exchange that
represents an initial investment in another Evergreen Select fund must amount to
at least $1 million. The current exchange privileges, and the requirements and
limitations attendant thereto, are described in each Fund's prospectus and
statement of additional information.
Dividend Policy
Each Fund distributes its investment company taxable income monthly and its net
realized gains at least annually to shareholders of record on the dividend
record date. Dividends and distributions are reinvested in additional shares of
the same class of the respective Fund, or paid in cash, as a shareholder has
elected. See each Fund's prospectus for further information concerning dividends
and distributions.
After the Merger, shareholders of Select Social Principles Fund who have elected
to have their dividends and/or distributions reinvested will have dividends
and/or distributions received from Select Special Equity Fund reinvested in
shares of Select Special Equity Fund. Shareholders of Select Social Principles
Fund who have elected to receive dividends and/or distributions in cash will
receive dividends and/or distributions from Select Special Equity Fund in cash
after the Merger, although they may, after the Merger, elect to have such
dividends and/or distributions reinvested in additional shares of Select Special
Equity Fund.
Both Select Special Equity Fund and Select Social Principles Fund have qualified
and intend to continue to qualify to be treated as regulated investment
companies under the Code. To remain qualified as a regulated investment company,
a Fund must distribute 90% of its taxable and tax-exempt income. While so
qualified, so long as each Fund distributes all of its net investment company
taxable and tax-exempt income and any net realized gains to shareholders, it is
expected that a Fund will not be required to pay any federal income taxes on the
amounts so distributed. A 4% nondeductible excise tax will be imposed on amounts
not distributed if a Fund does not meet certain distribution requirements by the
end of each calendar year. Each Fund anticipates meeting such distribution
requirements.
INFORMATION ON SHAREHOLDERS' RIGHTS
Form of Organization
Evergreen Select Equity Trust is an open-end management investment company
registered with the SEC under the 1940 Act, which continuously offers shares to
the public. Evergreen Select Equity Trust is organized as a Delaware business
trust and is governed by its Declaration of Trust, By-Laws, and a Board of
Trustees and by applicable Delaware and federal law. Select Special Equity Fund
and Select Social Principles Fund are series of Evergreen Select Equity Trust.
Capitalization
The beneficial interests in Select Special Equity Fund and Select Social
Principles Fund are represented by an unlimited number of transferable shares of
beneficial interest, $.001 par value per share. Evergreen Select Equity Trust's
Declaration of Trust permits the Trustees to allocate shares into an unlimited
number of series, and classes thereof, with rights determined by the Trustees,
all without shareholder approval. Fractional shares may be issued by either
Fund. Each Fund's shares represent equal proportionate interests in the assets
belonging to the Fund. Shareholders of each Fund are entitled to receive
dividends and other amounts as determined by the Trustees. Shareholders of each
Fund vote separately, by class, as to matters, such as approval of or amendments
to Rule 12b-1 distribution plans, that affect only their particular class and by
Fund as to matters, such as approval of or amendments to investment advisory
agreements or proposed mergers, that affect only their particular Fund.
Shareholder Liability
Under Delaware law, shareholders of a Delaware business trust are entitled to
the same limitation of personal liability extended to stockholders of Delaware
corporations. Other than in a limited number of states, no similar statutory or
other authority limiting business trust shareholder liability exists in any
other state. As a result, to the extent that Evergreen Select Equity Trust or a
shareholder is subject to the jurisdiction of courts in those states, it is
possible that a court may not apply Delaware law, and may thereby subject
shareholders of Evergreen Select Equity Trust to liability. To guard against
this risk, the Declaration of Trust of Evergreen Select Equity Trust (a)
provides that any written obligation of the Trust may contain a statement that
such obligation may only be enforced against the assets of the Trust or the
particular series in question and the obligation is not binding upon the
shareholders of the Trust; however, the omission of such a disclaimer will not
operate to create personal liability for any shareholder; and (b) provides for
indemnification out of Trust property of any shareholder held personally liable
for the obligations of the Trust. Accordingly, the risk of a shareholder of
Evergreen Select Equity Trust incurring financial loss beyond that shareholder's
investment because of shareholder liability is limited to circumstances in
which: (i) the court refuses to apply Delaware law; (ii) no contractual
limitation of liability was in effect; and (iii) the Trust itself is unable to
meet its obligations. In light of Delaware law, the nature of the Trust's
business, and the nature of its assets, the risk of personal liability to a
shareholder of Evergreen Select Equity Trust is remote.
Shareholder Meetings and Voting Rights
Evergreen Select Equity Trust on behalf of Select Special Equity Fund and Select
Social Principles Fund is not required to hold annual meetings of shareholders.
However, a meeting of shareholders for the purpose of voting upon the question
of removal of a Trustee must be called when requested in writing by the holders
of at least 10% of the outstanding shares of Evergreen Select Equity Trust. In
addition, Evergreen Select Equity Trust is required to call a meeting of
shareholders for the purpose of electing Trustees if, at any time, less than a
majority of the Trustees then holding office were elected by shareholders.
Evergreen Select Equity Trust does not currently intend to hold regular
shareholder meetings. Cumulative voting is not permitted. Except when a larger
quorum is required by applicable law, with respect to both Funds, 25% of the
outstanding shares entitled to vote constitutes a quorum for consideration of a
matter. For each Fund, a majority (greater than 50%) of the votes cast and
entitled to vote is sufficient to act on a matter (unless otherwise specifically
required by the applicable governing documents or other law, including the 1940
Act).
Under the Declaration of Trust of Evergreen Select Equity Trust, each share of
Select Special Equity Fund and Select Social Principles Fund will be entitled to
one vote for each dollar of net asset value applicable to such share.
Liquidation
In the event of the liquidation of Select Special Equity Fund or Select Social
Principles Fund, the shareholders are entitled to receive, when and as declared
by the Trustees, the excess of the assets belonging to such Fund or attributable
to the class over the liabilities belonging to the Fund or attributable to the
class. In either case, the assets so distributable to shareholders of the Fund
will be distributed among the shareholders in proportion to the number of shares
of a class of the Fund held by them and recorded on the books of the Fund.
Liability and Indemnification of Trustees
Under the Declaration of Trust of Evergreen Select Equity Trust, a Trustee is
liable to the Trust and its shareholders only for such Trustee's own willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of the office of Trustee or the discharge of such
Trustee's functions. As provided in the Declaration of Trust, each Trustee of
the Trust is entitled to be indemnified against all liabilities against him or
her, including the costs of litigation, unless it is determined that the Trustee
(i) did not act in good faith in the reasonable belief that such Trustee's
action was in or not opposed to the best interest of the Trust; (ii) had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard of
such Trustee's duties; and (iii) in a criminal proceeding, had reasonable cause
to believe that such Trustee's conduct was unlawful (collectively, "disabling
conduct"). A determination that the Trustee did not engage in disabling conduct
and is, therefore, entitled to indemnification may be based upon the outcome of
a court action or administrative proceeding or by (a) a vote of a majority of
those Trustees who are neither "interested persons" within the meaning of the
1940 Act nor parties to the proceeding or (b) an independent legal counsel in a
written opinion. The Trust may also advance money for such litigation expenses
provided that the Trustee undertakes to repay the Trust if his or her conduct is
later determined to preclude indemnification and certain other conditions are
met.
The foregoing is only a summary of certain characteristics of the operations of
the Declaration of Trust of Evergreen Select Equity Trust, its By-Laws and
Delaware law and is not a complete description of those documents or law.
Shareholders should refer to the provisions of such Declaration of Trust,
By-Laws and Delaware law directly for more complete information.
VOTING INFORMATION CONCERNING THE MEETING
This prospectus/proxy statement is being sent to shareholders of Select Social
Principles Fund in connection with a solicitation of proxies by the Trustees of
Evergreen Select Equity Trust, to be used at the Special Meeting of Shareholders
(the "Meeting") to be held at 2:00 p.m., July 14, 2000, at the offices of the
Evergreen Funds, 200 Berkeley Street, 26th Floor, Boston, Massachusetts 02116,
and at any adjournments thereof. This prospectus/proxy statement, along with a
Notice of the Meeting and a proxy card, is first being mailed to shareholders of
Select Social Principles Fund on or about May 26, 2000. Only shareholders of
record as of the close of business on April 28, 2000 (the "Record Date") will be
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
If the enclosed form of proxy is properly executed and returned in time to be
voted at the Meeting, the proxies named therein will vote the shares represented
by the proxy in accordance with the instructions marked thereon. Unmarked
proxies will be voted FOR the proposed Merger and FOR any other matters deemed
appropriate. Proxies that reflect abstentions and "broker non-votes" (i.e.,
shares held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or the persons entitled to vote and (ii) the
broker or nominee does not have discretionary voting power on a particular
matter) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but will not have the effect
of being counted as votes against the Plan, which must be approved by a majority
of the votes cast and entitled to vote. A proxy may be revoked at any time on or
before the Meeting by written notice to the Secretary of Evergreen Select Equity
Trust at the address set forth on the cover of this prospectus/proxy statement.
Unless revoked, all valid proxies will be voted in accordance with the
specifications thereon or, in the absence of such specifications, FOR approval
of the Plan and the Merger contemplated thereby.
Approval of the Merger will require the affirmative vote of a majority (greater
than 50%) of Select Social Principles Fund's shares voted and entitled to vote
at the Meeting, assuming a quorum (at least 25% of the Fund's outstanding shares
entitled to vote) is present.
In voting for the Merger, all classes of Select Social Principles Fund will vote
together as if they were a single class, and each share will be entitled to one
vote for each dollar of net asset value applicable to such share.
Proxy solicitations will be made primarily by mail, but proxy solicitations may
also be made by telephone, through the Internet or personal solicitations
conducted by officers and employees of FUNB, its affiliates or other
representatives of Select Social Principles Fund (who will not be paid for their
soliciting activities). In addition, proxy solicitations may be made by
Shareholder Communications Corporation, the Fund's proxy solicitor. If you wish
to participate in the Meeting, you may submit the proxy card included with this
prospectus/proxy statement, vote by telephone, fax or by the Internet or attend
in person. (See the back of this prospectus/proxy statement for voting
instructions.) Any proxy given by you is revocable.
If Select Social Principles Fund shareholders do not vote to approve the Merger,
the Trustees will consider other possible courses of action in the best interest
of shareholders, including the possible liquidation of the Fund. In the event
that sufficient votes to approve the Merger are not received before the Meeting,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies. In determining whether to adjourn the
Meeting, the following factors may be considered: the percentage of votes
actually cast, the percentage of negative votes actually cast, the nature of any
further solicitation and the information to be provided to shareholders with
respect to the reasons for the solicitation. Any such adjournment will require
an affirmative vote by the holders of a majority of the shares present in person
or by proxy at the Meeting. The persons named as proxies will vote upon such
adjournment after consideration of all circumstances which may bear upon a
decision to adjourn the Meeting.
A shareholder who objects to the proposed Merger will not be entitled under
either Delaware law or the Declaration of Trust of Evergreen Select Equity Trust
to demand payment for, or an appraisal of, his or her shares. However,
shareholders should be aware that the Merger as proposed is not expected to
result in recognition of gain or loss to shareholders for federal income tax
purposes and that, if the Merger is consummated, shareholders will be free to
redeem the shares of Select Special Equity Fund which they receive in the
transaction at their then-current net asset value. Shares of Select Social
Principles Fund may be redeemed at any time prior to the consummation of the
Merger. Shareholders of Select Social Principles Fund may wish to consult their
tax advisors as to any differing consequences of redeeming Fund shares prior to
the Merger or exchanging such shares in the Merger.
Select Social Principles Fund does not hold annual shareholder meetings. If the
Merger is not approved, shareholders wishing to submit proposals to be
considered for inclusion in a proxy statement for a subsequent shareholder
meeting should send their written proposals to the Secretary of Evergreen Select
Equity Trust at the address set forth on the cover of this prospectus/proxy
statement so that they will be received by the Fund in a reasonable period of
time prior to the meeting.
The votes of the shareholders of Select Special Equity Fund are not being
solicited by this prospectus/proxy statement and are not required to carry out
the Merger.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES. Please
advise Select Social Principles Fund whether other persons are beneficial owners
of shares for which proxies are being solicited and, if so, the number of copies
of this prospectus/proxy statement needed to supply copies to the beneficial
owners of the respective shares.
Shareholder Information
As of the Record Date, the following number of each class of shares of
beneficial interest of Select Social Principles Fund was outstanding:
Class of Shares Number of Shares
Institutional ____
Institutional Service ____
All Classes ____
As of the Record Date, the officers and Trustees of Evergreen Select Equity
Trust beneficially owned as a group less than 1% of the outstanding shares of
Select Social Principles Fund and Select Special Equity Fund. To Evergreen
Select Equity Trust's knowledge, the following persons owned beneficially or of
record more than 5% of Select Social Principles Fund's total outstanding shares
as of the Record Date:
<PAGE>
Name and Address Class No. of Shares Percentage of Shares Percentage of Shares
of Class Before Merger of Class After Merger
- ---------------- ----- ------------- ----------------------- -------------------
To Evergreen Select Equity Trust's knowledge, the following persons owned
beneficially or of record more than 5% of Select Special Equity Fund's total
outstanding shares as of the Record Date:
Name and Address Class No. of Shares Percentage of Shares Percentage of Shares
of Class Before Merger of Class After Merger
- ---------------- ----- ------------- ----------------------- -------------------
FINANCIAL STATEMENTS AND EXPERTS
The Annual Report of Select Special Equity Fund as of June 30, 1999, and the
financial statements and financial highlights for the periods indicated therein,
have been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The Annual Report of Select Social Principles Fund as of June 30, 1999, and the
financial highlights and financial statements for the periods indicated therein,
have been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein and upon the authority of said firm as experts
in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Select Special Equity
Fund will be passed upon by Sullivan & Worcester LLP, Washington, D.C.
ADDITIONAL INFORMATION
Select Social Principles Fund and Select Special Equity Fund are each subject to
the informational requirements of the Securities Exchange Act of 1934 and the
1940 Act, and in accordance therewith file reports and other information
including proxy material, and charter documents with the SEC. These items can be
inspected and copies obtained at the Public Reference Facilities maintained by
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
Regional Offices located at Northwest Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New York,
New York 10048.
OTHER BUSINESS
The Trustees of Evergreen Select Equity Trust do not intend to present any other
business at the Meeting. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying form of proxy will
vote thereon in accordance with their judgment.
THE TRUSTEES OF EVERGREEN SELECT EQUITY TRUST RECOMMEND APPROVAL OF THE PLAN AND
ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR
OF APPROVAL OF THE PLAN.
May 26, 2000
<PAGE>
INSTRUCTIONS FOR VOTING AND EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to you
and may help to avoid the time and expense involved in validating your vote if
you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the
Registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party signing
should conform exactly to a name shown in the Registration on the proxy
card.
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy card
should be indicated unless it is reflected in the form of Registration. For
example:
REGISTRATION VALID SIGNATURE
CORPORATE ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp. John Doe, Treasurer
c/o John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith John B. Smith, Jr.,
Executor
After completing your proxy card, return it in the enclosed postage paid
envelope.
OTHER WAYS TO VOTE YOUR PROXY
<TABLE>
<S><C> <C>
Vote By Telephone: Vote By Internet:
1. Read the prospectus/proxy statement and have your 1. Read the prospectus/proxy statement and have your
proxy card at hand. proxy card at hand.
2. Call toll-free 800-645-8640. 2. Go to website www.proxyvote.com or to the
"Proxy Voting" link on www.evergreen-funds.com.
3. Enter the 12-digit control number found on your proxy card. 3. Enter the 12-digit control number found on your proxy card.
4. Follow the simple recorded instructions. 4. Follow the simple instructions.
</TABLE>
Vote By Fax:
1. Read the prospectus/proxy statement and have your proxy card at
hand.
2. Fax both front and back sides of your proxy card by calling
800-451-8683.
The above methods of voting are generally available 24 hours a day. Do not mail
the proxy card if you are voting by telephone, fax or the internet.
If you have any questions about the proxy card, please call Shareholder
Communications Corporation, our proxy solicitor, at 800-645-8640.
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 30th day of April, 2000, by and between Evergreen Select Equity Trust, a
Delaware business trust, with its principal place of business at 200 Berkeley
Street, Boston, Massachusetts 02116 (the "Trust"), with respect to its Evergreen
Select Special Equity Fund series (the "Acquiring Fund"), and the Trust, with
respect to its Evergreen Select Social Principles Fund series (the "Selling
Fund").
This Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of (i) the transfer of all of
the assets of the Selling Fund in exchange solely for Institutional and
Institutional Service shares of beneficial interest, $.001 par value per share,
of the Acquiring Fund (the "Acquiring Fund Shares"); (ii) the assumption by the
Acquiring Fund of the identified liabilities of the Selling Fund; and (iii) the
distribution, after the Closing Date hereinafter referred to, of the Acquiring
Fund Shares to the shareholders of the Selling Fund in liquidation of the
Selling Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are each a separate
investment series of an open-end, registered investment company of the
management type and the Selling Fund owns securities that generally are assets
of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial
interest;
WHEREAS, the Trustees of the Trust have determined that the exchange of
all of the assets of the Selling Fund for Acquiring Fund Shares and the
assumption of the identified liabilities of the Selling Fund by the Acquiring
Fund on the terms and conditions hereinafter set forth are in the best interests
of the Acquiring Fund's shareholders;
WHEREAS, the Trustees of the Trust have determined that the Selling
Fund should exchange all of its assets and the identified liabilities for
Acquiring Fund Shares and that the interests of the existing shareholders of the
Selling Fund will not be diluted as a result of the transactions contemplated
herein;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR
THE ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND
LIABILITIES AND LIQUIDATION OF THE SELLING FUND
1.1 THE EXCHANGE. Subject to the terms and conditions herein set forth
and on the basis of the representations and warranties contained herein, the
Selling Fund agrees to transfer all of the Selling Fund's assets as set forth in
paragraph 1.2 to the Acquiring Fund. The Acquiring Fund agrees in exchange
therefor (i) to deliver to the Selling Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, computed in the manner and as of the
time and date set forth in paragraphs 2.2 and 2.3; and (ii) to assume the
identified liabilities of the Selling Fund, as set forth in paragraph 1.3. Such
transactions shall take place on the Closing Date provided for in paragraph 3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of the Selling Fund to be
acquired by the Acquiring Fund shall consist of all property, including, without
limitation, all cash, securities, commodities, interests in futures and
dividends or interest receivables, that is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books of the Selling Fund
on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of Selling Fund's
assets as of the date thereof. The Selling Fund hereby represents that as of the
date of the execution of this Agreement there have been no changes in its
financial position as reflected in said financial statements other than those
occurring in the ordinary course of its business in connection with the purchase
and sale of securities and the payment of its normal operating expenses. The
Selling Fund reserves the right to sell any of such securities, but will not,
without the prior written approval of the Acquiring Fund, acquire any additional
securities other than securities of the type in which the Acquiring Fund is
permitted to invest.
The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a list of the securities, if any, on the
Selling Fund's list referred to in the second sentence of this paragraph that do
not conform to the Acquiring Fund's investment objectives, policies, and
restrictions. The Selling Fund will, within a reasonable period of time prior to
the Closing Date, furnish the Acquiring Fund with a list of its portfolio
securities and other investments. In the event that the Selling Fund holds any
investments that the Acquiring Fund may not hold, the Selling Fund, if requested
by the Acquiring Fund, will dispose of such securities prior to the Closing
Date. In addition, if it is determined that the Selling Fund and the Acquiring
Fund portfolios, when aggregated, would contain investments exceeding certain
percentage limitations imposed upon the Acquiring Fund with respect to such
investments, the Selling Fund if requested by the Acquiring Fund will dispose of
a sufficient amount of such investments as may be necessary to avoid violating
such limitations as of the Closing Date. Notwithstanding the foregoing, nothing
herein will require the Selling Fund to dispose of any investments or securities
if, in the reasonable judgment of the Selling Fund, such disposition would
adversely affect the tax-free nature of the Reorganization or would violate the
Selling Fund's fiduciary duty to its shareholders.
1.3 LIABILITIES TO BE ASSUMED. The Selling Fund will endeavor to
discharge all of its known liabilities and obligations prior to the Closing
Date. The Acquiring Fund shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and Liabilities of the
Selling Fund prepared on behalf of the Selling Fund, as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall assume only those liabilities of the Selling Fund reflected in such
Statement of Assets and Liabilities and shall not assume any other liabilities,
whether absolute or contingent, known or unknown, accrued or unaccrued, all of
which shall remain the obligation of the Selling Fund.
In addition, upon completion of the Reorganization, for purposes of
calculating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by the Acquiring Fund under the National
Association of Securities Dealers, Inc. Conduct Rule 2830 ("Aggregate NASD
Cap"), the Acquiring Fund will add to its Aggregate NASD Cap immediately prior
to the Reorganization the Aggregate NASD Cap of the Selling Fund immediately
prior to the Reorganization, in each case calculated in accordance with such
Rule 2830.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date
as is conveniently practicable (the "Liquidation Date"), (a) the Selling Fund
will liquidate and distribute pro rata to the Selling Fund's shareholders of
record, determined as of the close of business on the Valuation Date (the
"Selling Fund Shareholders"), the Acquiring Fund Shares received by the Selling
Fund pursuant to paragraph 1.1; and (b) the Selling Fund will thereupon proceed
to dissolve as set forth in paragraph 1.8 below. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Selling Fund on the books of the Acquiring
Fund to open accounts on the share records of the Acquiring Fund in the names of
the Selling Fund Shareholders and representing the respective pro rata number of
the Acquiring Fund Shares due such shareholders. All issued and outstanding
shares of the Selling Fund will simultaneously be canceled on the books of the
Selling Fund. The Acquiring Fund shall not issue certificates representing the
Acquiring Fund Shares in connection with such exchange.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Shares of the
Acquiring Fund will be issued in the manner described in the Prospectus/Proxy
Statement on Form N-14 which has been distributed to shareholders of the Selling
Fund as described in paragraph 4.1(o).
1.6 TRANSFER TAXES. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the Selling
Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the
Selling Fund is and shall remain the responsibility of the Selling Fund up to
and including the Closing Date and such later date on which the Selling Fund is
terminated.
1.8 TERMINATION. The Selling Fund shall be terminated promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on the New York Stock Exchange on the
business day next preceding the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the Trust's Declaration of Trust and the Acquiring Fund's then current
prospectus and statement of additional information or such other valuation
procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of the Acquiring
Fund Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Trust's Declaration of Trust and the
Acquiring Fund's then current prospectus and statement of additional
information.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares of
each class to be issued (including fractional shares, if any) in exchange for
the Selling Fund's assets shall be determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of the Selling Fund attributable to each of its
classes by the net asset value per share of the respective classes of the
Acquiring Fund determined in accordance with paragraph 2.2. Holders of
Institutional and Institutional Service shares of the Selling Fund will receive
Institutional and Institutional Service shares, respectively, of the Acquiring
Fund.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
State Street Bank and Trust Company in accordance with its regular practice in
pricing the shares and assets of the Acquiring Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The closing of the Reorganization (the "Closing")
shall take place on or about July 21, 2000 or such other date as the parties may
agree to in writing (the "Closing Date"). All acts taking place at the Closing
shall be deemed to take place simultaneously immediately prior to the opening of
business on the Closing Date unless otherwise provided. The Closing shall be
held as of 9:00 a.m. at the offices of the Evergreen Funds, 200 Berkeley Street,
Boston, MA 02116, or at such other time and/or place as the parties may agree.
3.2 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation
Date (a) the New York Stock Exchange or another primary trading market for
portfolio securities of the Acquiring Fund or the Selling Fund shall be closed
to trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Selling Fund is impracticable, the Valuation Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.3 TRANSFER AGENT'S CERTIFICATE. Evergreen Service Company, as
transfer agent for the Selling Fund, shall deliver at the Closing a certificate
of an authorized officer stating that its records contain the names and
addresses of the Selling Fund Shareholders and the number and percentage
ownership of outstanding shares owned by each such shareholder immediately prior
to the Closing. The Acquiring Fund shall issue and deliver or cause Evergreen
Service Company, its transfer agent, to issue and deliver a confirmation
evidencing the Acquiring Fund Shares to be credited on the Closing Date to the
Secretary of the Trust or provide evidence satisfactory to the Selling Fund that
such Acquiring Fund Shares have been credited to the Selling Fund's account on
the books of the Acquiring Fund. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, share certificates, if any,
receipts and other documents as such other party or its counsel may reasonably
request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE SELLING FUND. The Selling Fund represents
and warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a
Delaware business trust duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
(b) The Selling Fund is a separate investment series of a
Delaware business trust that is registered as an investment company classified
as a management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), is in
full force and effect.
(c) The current prospectus and statement of additional
information of the Selling Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) The Selling Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not result,
in violation of any provision of the Trust's Declaration of Trust or By-Laws or
of any material agreement, indenture, instrument, contract, lease, or other
undertaking to which the Selling Fund is a party or by which it is bound.
(e) The Selling Fund has no material contracts or other
commitments (other than this Agreement) that will be terminated with liability
to it prior to the Closing Date, except for liabilities, if any, to be
discharged or reflected in the Statement of Assets and Liabilities as provided
in paragraph 1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted
by the Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Selling Fund or any of its properties
or assets, which, if adversely determined, would materially and adversely affect
its financial condition, the conduct of its business, or the ability of the
Selling Fund to carry out the transactions contemplated by this Agreement. The
Selling Fund knows of no facts that might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
(g) The unaudited semi-annual financial statements of the
Selling Fund at December 31, 1999 are in accordance with generally accepted
accounting principles consistently applied, and such statements (copies of which
have been furnished to the Acquiring Fund) fairly reflect the financial
condition of the Selling Fund as of such date, and there are no known contingent
liabilities of the Selling Fund as of such date not disclosed therein.
(h) Since December 31, 1999 there has not been any material
adverse change in the Selling Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Selling Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquiring Fund. For the purposes of this subparagraph (h), a
decline in the net asset value of the Selling Fund shall not constitute a
material adverse change.
(i) At the Closing Date, all federal and other tax returns and
reports of the Selling Fund required by law to have been filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid, or provision shall have been made for the
payment thereof. To the best of the Selling Fund's knowledge, no such return is
currently under audit, and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, the Selling Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains.
(k) All issued and outstanding shares of the Selling Fund are,
and at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Selling Fund. All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.3. The Selling Fund does not have outstanding any
options, warrants, or other rights to subscribe for or purchase any of the
Selling Fund shares, nor is there outstanding any security convertible into any
of the Selling Fund shares.
(l) At the Closing Date, the Selling Fund will have good and
marketable title to the Selling Fund's assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.2 and full right, power, and authority to sell,
assign, transfer, and deliver such assets hereunder, and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act, other than as
disclosed to the Acquiring Fund and accepted by the Acquiring Fund.
(m) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Selling
Fund and, subject to approval by the Selling Fund's shareholders, this Agreement
constitutes a valid and binding obligation of the Selling Fund, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights and to general equity principles.
(n) The information furnished by the Selling Fund for use in
no-action letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with the
transactions contemplated hereby is accurate and complete in all material
respects and complies in all material respects with federal securities and other
laws and regulations thereunder applicable thereto.
(o) The Selling Fund has provided the Acquiring Fund with
information reasonably necessary for the preparation of a prospectus, which
included the proxy statement of the Selling Fund (the "Prospectus/Proxy
Statement"), all of which was included in a Registration Statement on Form N-14
of the Acquiring Fund (the "Registration Statement"), in compliance with the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act") and
the 1940 Act in connection with the meeting of the shareholders of the Selling
Fund to approve this Agreement and the transactions contemplated hereby. The
Prospectus/Proxy Statement included in the Registration Statement (other than
information therein that relates to the Acquiring Fund) does not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Acquiring Fund
represents and warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust that is registered as an investment company classified
as a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect.
(c) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring Fund is
a party or by which it is bound.
(e) Except as otherwise disclosed in writing to the Selling
Fund and accepted by the Selling Fund, no litigation, administrative proceeding
or investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect its financial condition and the conduct of its business or the
ability of the Acquiring Fund to carry out the transactions contemplated by this
Agreement. The Acquiring Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental body
that materially and adversely affects its business or its ability to consummate
the transactions contemplated herein.
(f) The unaudited semi-annual financial statements of the
Acquiring Fund at December 31, 1999 are in accordance with generally accepted
accounting principles consistently applied, and such statements (copies of which
have been furnished to the Selling Fund) fairly reflect the financial condition
of the Acquiring Fund as of such date, and there are no known contingent
liabilities of the Acquiring Fund as of such date not disclosed therein.
(g) Since December 31, 1999 there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Selling Fund. For the purposes of this subparagraph (g), a
decline in the net asset value of the Acquiring Fund shall not constitute a
material adverse change.
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid or provision shall have been made for the
payment thereof. To the best of the Acquiring Fund's knowledge, no such return
is currently under audit, and no assessment has been asserted with respect to
such returns.
(i) For each fiscal year of its operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains.
(j) All issued and outstanding Acquiring Fund Shares are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. The Acquiring Fund does not have outstanding any options,
warrants, or other rights to subscribe for or purchase any Acquiring Fund
Shares, nor is there outstanding any security convertible into any Acquiring
Fund Shares.
(k) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights and to general equity
principles.
(l) The Acquiring Fund Shares to be issued and delivered to
the Selling Fund, for the account of the Selling Fund Shareholders, pursuant to
the terms of this Agreement will, at the Closing Date, have been duly authorized
and, when so issued and delivered, will be duly and validly issued Acquiring
Fund Shares, and will be fully paid and non-assessable.
(m) The information furnished by the Acquiring Fund for use in
no-action letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with the
transactions contemplated hereby is accurate and complete in all material
respects and complies in all material respects with federal securities and other
laws and regulations applicable thereto.
(n) The Prospectus/Proxy Statement included in the
Registration Statement (only insofar as it relates to the Acquiring Fund) does
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
misleading.
(o) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act,
and such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Selling
Fund each will operate its business in the ordinary course between the date
hereof and the Closing Date, it being understood that such ordinary course of
business will include customary dividends and distributions.
5.2 INVESTMENT REPRESENTATION. The Selling Fund covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.3 APPROVAL BY SHAREHOLDERS. The Trust will call a meeting of the
shareholders of the Selling Fund to act upon this Agreement and to take all
other action necessary to obtain approval of the transactions contemplated
herein.
5.4 ADDITIONAL INFORMATION. The Selling Fund will assist the Acquiring
Fund in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Selling Fund shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Selling Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but
in any case within sixty days after the Closing Date, the Selling Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Selling Fund for
federal income tax purposes that will be carried over by the Acquiring Fund as a
result of Section 381 of the Code, and which will be reviewed by KPMG LLP and
certified by the Trust's President and Treasurer.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations, covenants, and warranties of the Acquiring
Fund contained in this Agreement shall be true and correct as of the date hereof
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by a duly authorized officer of the
Trust, in form and substance reasonably satisfactory to the Selling Fund and
dated as of the Closing Date, to such effect and as to such other matters as the
Selling Fund shall reasonably request.
6.2 The Selling Fund shall have received on the Closing Date an opinion
from Sullivan & Worcester LLP, counsel to the Acquiring Fund, dated as of the
Closing Date, in a form reasonably satisfactory to the Selling Fund, covering
the following points:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed, and
delivered by the Acquiring Fund and, assuming due authorization, execution and
delivery of this Agreement by the Selling Fund, is a valid and binding
obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) Assuming that a consideration therefor not less than the
net asset value thereof has been paid, the Acquiring Fund Shares to be issued
and delivered to the Selling Fund on behalf of the Selling Fund Shareholders as
provided by this Agreement are duly authorized and upon such delivery will be
legally issued and outstanding and fully paid and non-assessable, and no
shareholder of the Acquiring Fund has any preemptive rights in respect thereof.
(e) The Registration Statement, to such counsel's knowledge,
has been declared effective by the Commission and no stop order under the 1933
Act pertaining thereto has been issued, and to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the State of Delaware is required for consummation by
the Acquiring Fund of the transactions contemplated herein, except such as have
been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
(f) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Acquiring Fund is
a party or by which it is bound.
(g) Only insofar as they relate to the Acquiring Fund, the
descriptions in the Prospectus/Proxy Statement of statutes, legal and
governmental proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown.
(h) Such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.
(i) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Acquiring Fund or
any of its properties or assets and the Acquiring Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business, other
than as previously disclosed in the Registration Statement.
Such opinion shall contain such assumptions and limitations as shall be in the
opinion of Sullivan & Worcester LLP appropriate to render the opinions expressed
therein.
In this paragraph 6.2, references to the Prospectus/Proxy Statement
include and relate to only the text of such Prospectus/Proxy Statement and not
to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Selling Fund of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
7.1 All representations, covenants, and warranties of the Selling Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date, and the Selling Fund shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by a duly authorized
officer of the Trust, in form and substance satisfactory to the Acquiring Fund
and dated as of the Closing Date, to such effect and as to such other matters as
the Acquiring Fund shall reasonably request.
7.2 The Selling Fund shall have delivered to the Acquiring Fund a
statement of the Selling Fund's assets and liabilities, together with a list of
the Selling Fund's portfolio securities showing the tax costs of such securities
by lot and the holding periods of such securities, as of the Valuation Date,
certified by the Treasurer or Assistant Treasurer of the Trust.
7.3 The Acquiring Fund shall have received on the Closing Date an
opinion of Sullivan & Worcester LLP, counsel to the Selling Fund, in a form
satisfactory to the Acquiring Fund covering the following points:
(a) The Selling Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted.
(b) The Selling Fund is a separate investment series of a
Delaware business trust registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed and
delivered by the Selling Fund and, assuming due authorization, execution, and
delivery of this Agreement by the Acquiring Fund, is a valid and binding
obligation of the Selling Fund enforceable against the Selling Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the State of Delaware is required for consummation by the Selling Fund
of the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act, and as may be required under state
securities laws.
(e) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-laws, or any provision of
any material agreement, indenture, instrument, contract, lease or other
undertaking (in each case known to such counsel) to which the Selling Fund is a
party or by which it or any of its properties may be bound or, to the knowledge
of such counsel, result in the acceleration of any obligation or the imposition
of any penalty, under any agreement, judgment, or decree to which the Selling
Fund is a party or by which it is bound.
(f) Only insofar as they relate to the Selling Fund, the
descriptions in the Prospectus/Proxy Statement of statutes, legal and government
proceedings and material contracts, if any, are accurate and fairly present the
information required to be shown.
(g) Such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquired Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.
(h) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Selling Fund or
any of its respective properties or assets and the Selling Fund is neither a
party to nor subject to the provisions of any order, decree or judgment of any
court or governmental body, which materially and adversely affects its business
other than as previously disclosed in the Prospectus/Proxy Statement.
(i) Assuming that a consideration therefor of not less than
the net asset value thereof has been paid, and assuming that such shares were
issued in accordance with the terms of the Selling Fund's registration
statement, or any amendment thereto, in effect at the time of such issuance, all
issued and outstanding shares of the Selling Fund are legally issued and fully
paid and non-assessable.
Such opinion shall contain such other assumptions and limitations as shall be in
the opinion of Sullivan & Worcester LLP appropriate to render the opinions
expressed therein.
In this paragraph 7.3, references to the Prospectus/Proxy Statement
include and relate to only the text of such Prospectus/Proxy Statement and not
to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE SELLING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Selling Fund in accordance with the provisions of the Trust's Declaration of
Trust and By-Laws and certified copies of the resolutions evidencing such
approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund or the Selling Fund
may waive the conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, nor instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act and no action, suit or
other proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein.
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of state Blue Sky securities authorities,
including any necessary "no-action" positions of and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Selling Fund,
provided that either party hereto may for itself waive any of such conditions.
8.4 No stop orders suspending the effectiveness of the Registration
Statement shall have been issued and, to the best knowledge of the parties
hereto, no investigation or proceeding for that purpose shall have been
instituted or be pending, threatened or contemplated under the 1933 Act.
8.5 The Selling Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the shareholders of the Selling Fund all of the Selling Fund's net investment
company taxable or tax-exempt income for all taxable periods ending on or prior
to the Closing Date (computed without regard to any deduction for dividends
paid) and all of its net capital gains realized in all taxable periods ending on
or prior to the Closing Date (after reduction for any capital loss
carryforward).
8.6 The parties shall have received a favorable opinion of Sullivan &
Worcester LLP addressed to the Acquiring Fund and the Selling Fund substantially
to the effect that for federal income tax purposes:
(a) The transfer of all of the Selling Fund assets in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund followed by the distribution of the
Acquiring Fund Shares to the Selling Fund Shareholders in dissolution and
liquidation of the Selling Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code and the Acquiring Fund and the
Selling Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code.
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the identified
liabilities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund
upon the transfer of the Selling Fund assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Selling Fund
Shareholders in exchange for their shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund.
(e) The aggregate tax basis for the Acquiring Fund Shares
received by each Selling Fund Shareholder pursuant to the Reorganization will be
the same as the aggregate tax basis of the Selling Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Acquiring Fund Shares to be received by each Selling Fund Shareholder will
include the period during which the Selling Fund shares exchanged therefor were
held by such shareholder (provided the Selling Fund shares were held as capital
assets on the date of the Reorganization).
(f) The tax basis of the Selling Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the Selling
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Selling Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Selling Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Selling Fund may waive the conditions set forth in this paragraph
8.6.
8.7 The Acquiring Fund shall have received from KPMG LLP a letter
addressed to the Acquiring Fund, in form and substance satisfactory to the
Acquiring Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Selling Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the Capitalization Table
appearing in the Registration Statement and Prospectus/Proxy Statement has been
obtained from and is consistent with the accounting records of the Selling Fund;
(c) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the pro forma financial
statements that are included in the Registration Statement and Prospectus/Proxy
Statement agree to the underlying accounting records of the Acquiring Fund and
the Selling Fund or with written estimates provided by each Fund's management,
and were found to be mathematically correct; and
(d) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the data utilized in the
calculations of the pro forma expense ratios appearing in the Registration
Statement and Prospectus/Proxy Statement agree with underlying accounting
records of the Selling Fund or with written estimates by the Selling Fund's
management and were found to be mathematically correct.
In addition, unless waived by the Acquiring Fund, the Acquiring Fund
shall have received from KPMG LLP a letter addressed to the Acquiring Fund dated
on the Closing Date, in form and substance satisfactory to the Acquiring Fund,
to the effect that on the basis of limited procedures agreed upon by the
Acquiring Fund (but not an examination in accordance with generally accepted
auditing standards), the net asset value per share of the Selling Fund as of the
Valuation Date was computed and the valuation of the portfolio was consistent
with the valuation practices of the Acquiring Fund.
8.8 The Selling Fund shall have received from KPMG LLP a letter
addressed to the Selling Fund, in form and substance satisfactory to the Selling
Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) they had performed limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards) which consisted of a reading of any
unaudited pro forma financial statements included in the Registration Statement
and Prospectus\Proxy Statement, and making inquiries of appropriate officials of
the Trust responsible for financial and accounting matters whether such
unaudited pro forma financial statements comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act and the
published rules and regulations thereunder;
(c) on the basis of limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards), the Capitalization Table appearing
in the Registration Statement and Prospectus/Proxy Statement has been obtained
from and is consistent with the accounting records of the Acquiring Fund; and
(d) on the basis of limited procedures agreed upon by the
Selling Fund (but not an examination in accordance with generally accepted
auditing standards), the data utilized in the calculations of the pro forma
expense ratios appearing in the Registration Statement and Prospectus/Proxy
Statement agree with written estimates by each Fund's management and were found
to be mathematically correct.
ARTICLE IX
EXPENSES
9.1 Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Selling Fund and the
Acquiring Fund, whether incurred before or after the date of this Agreement,
will be borne by First Union National Bank. Such expenses include, without
limitation, (a) expenses incurred in connection with the entering into and the
carrying out of the provisions of this Agreement; (b) expenses associated with
the preparation and filing of the Registration Statement under the 1933 Act
covering the Acquiring Fund Shares to be issued pursuant to the provisions of
this Agreement; (c) registration or qualification fees and expenses of preparing
and filing such forms as are necessary under applicable state securities laws to
qualify the Acquiring Fund Shares to be issued in connection herewith in each
state in which the Selling Fund Shareholders are resident as of the date of the
mailing of the Prospectus/Proxy Statement to such shareholders; (d) postage; (e)
printing; (f) accounting fees; (g) legal fees; and (h) solicitation costs of the
transaction. Notwithstanding the foregoing, the Acquiring Fund shall pay its own
federal and state registration fees.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties, and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall not survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or
the Selling Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
(a) of a breach by the other of any representation, warranty,
or agreement contained herein to be performed at or prior to the Closing Date,
if not cured within 30 days; or
(b) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Selling Fund, the Trust, its Trustees or officers, to the
other party, but each shall bear the expenses incurred by it incidental to the
preparation and carrying out of this Agreement as provided in paragraph 9.1.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Selling Fund and the Acquiring Fund; provided, however, that no such
amendment may have the effect of changing the provisions for determining the
number of the Acquiring Fund Shares to be issued to the Selling Fund
Shareholders under this Agreement to the detriment of such Shareholders without
their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflicts
of laws provisions thereof.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of the Acquiring Fund
and the Selling Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Trust personally,
but shall bind only the trust property of the Acquiring Fund and of the Selling
Fund, as provided in the Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust on
behalf of the Acquiring Fund and the Selling Fund and signed by authorized
officers of the Trust, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officers shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Acquiring Fund
and of the Selling Fund as provided in the Declaration of Trust of the Trust.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all
as of the date first written above.
EVERGREEN SELECT EQUITY TRUST
ON BEHALF OF EVERGREEN SELECT
SPECIAL EQUITY FUND
By:
Name:
Title:
EVERGREEN SELECT EQUITY TRUST
ON BEHALF OF EVERGREEN SELECT
SOCIAL PRINCIPLES FUND
By:
Name:
Title:
<PAGE>
EXHIBIT B
EVERGREEN
Select Special Equity Fund
Fund at a Glance as of June 30, 1999
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/1/
Portfolio Inception Date 3/15/94 Class I Class IS
Class Inception Date 3/15/94 3/15/94
Average Annual Returns
1 year 42.02% 41.55%
3 years 24.15% 23.77%
5 years 26.12% 25.86%
Since Inception 21.02% 20.78%
12-month income dividends per share 0 0
12-month capital gain distributions per share $ 1.18 $ 1.18
LONG TERM GROWTH
[LINE GRAPH APPEARS HERE]
Evergreen Select
Date Consumer Price Index - US Russell 2000 Special Equity IS
---- ------------------------- ------------ -----------------
3/31/94 1,000,000 1,000,000 1,000,000
6/30/94 1,005,435 961,055 928,000
6/30/95 1,036,005 1,153,907 1,136,121
6/30/96 1,064,151 1,429,538 1,545,689
6/30/97 1,088,995 1,662,932 1,819,441
6/30/98 1,107,337 1,937,388 2,070,250
6/30/99 1,129,076 1,966,347 2,930,786
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Special Equity Fund Class IS, the Russell 2000 and the Consumer Price Index
(CPI).
The Russell 2000 is an unmanaged index, which does not include transaction costs
associated with buying and selling securities nor any management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in the index.
/1/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
Historical performance shown for the Class I prior to 7/27/98 is based on the
performance of (1) the Class Y shares of the Fund's predecessor fund, CoreFund
Special Equity Fund from 2/21/95 to 7/26/98 and (2) the Class A Shares of the
Fund's predecessor fund, CoreFund Special Equity Fund from 3/15/94 to 2/20/95.
Historical performance shown for Class IS prior to 7/27/98 is based on the
performance of the Class A shares of the Fund's predecessor fund, Corefund
Special Equity Fund, CoreFund Special Equity Fund, and reflects the same 0.25%
12b-I applicable to Class IS.
<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 OF JOSEPH E. STOCKE APPEARS HERE]
Joseph E. Stocke CFA
Performance
Evergreen Select Special Equity Fund Class IS produced a total return of 41.55%
for the twelve months ended June 30, 1999, outpacing its benchmark, the Russell
2000 Index, which generated a total return of 1.50%. The Fund achieved
particularly notable performance in the fourth quarter of 1998 and the first
quarter of 1999. In the fourth quarter of 1998, the Fund returned 28.15% versus
16.50% for the Russell 2000 Index. The Fund went on to return 22.20% in the
first quarter of 1999, a period in which the Russell 2000 Index fell by 5.50%.
Portfolio
Characteristics
---------------
Total Net Assets $121,008,952
Number of Holdings 114
P/E Ratio 25.2x
Beta 1.23
Market Environment
After being buffeted by challenging market conditions for much of the past
twelve months, small-to-mid capitalization stock investors closed the first half
of 1999 enjoying broad-based market leadership. The Fund's fiscal year began
with historically high stock valuations and increasing global financial
instability, which, among other factors, drove the stock market to its worst
quarterly decline in nearly a decade. August 1998, in particular, represented
the largest single monthly decline since the October 1987 crash. Small-to-mid
capitalization stock prices slid the hardest, as investors perceived greater
safety in larger companies.
The market began to rebound in the fourth quarter of 1998. Worldwide interest
rate cuts restored investors' confidence that global economies and financial
markets would regain stability. Many investors anticipated weak international
recoveries, however, that would slow U.S. economic growth in the coming year.
<PAGE>
EVERGREEN
Select Special Equity Fund
Portfolio Manager Commentary
In the first quarter of 1999, global economies proved heartier than expected,
and the U.S. economy showed ongoing strength. Investors pushed stock prices
higher as greater optimism for corporate earnings, as well as seasonal cash
inflows, offset concerns about high valuations and disappointment in some high
profile earnings reports. Large cap stocks claimed undisputed leadership in the
market's ascent during that time. The NASDAQ Composite climbed 12.3% and the Dow
Jones Industrial Average rose 7.0% in the first three months of 1999. In
contrast, the Russell 2000 Index and the Standard & Poor's Midcap 400 fell by
5.50% and 6.40%, respectively.
Leadership shifted in this year's second quarter to include stocks of all market
valuations. Ongoing improvement in global economies boosted prices of
long-overlooked cyclical stocks, as the risk of an international slowdown began
to pass. Domestically, investors focused on a resilient housing market, strong
consumer confidence, low unemployment and a resurgence in the Initial Public
Offering (IPO) market; and welcomed accelerating corporate profit growth. Signs
of recovery in the Japanese economy also supported a broadening in the market's
leadership. On the flipside of the economy's strength, however, investors were
mindful that robust growth could rekindle inflation and prompt the Federal
Reserve Board to raise interest rates. In June 1999, the Federal Reserve Board
raised interest rates by 0.25% and investors have kept a watchful eye for
indications of further moves.
Top 5 Industries
----------------
(as a percentage of net assets)
Information Services & Technology 23.5%
Retailing & Wholesale 13.6%
Telecommunication Services & Equipment 9.8%
Healthcare Products & Services 9.8%
Food & Beverage Products 4.4%
Portfolio Activity
The Fund's "bottom-up" strategy, building the Portfolio "one stock at a time",
has been the key to its success. The Fund significantly outperformed its
benchmark, the Russell 2000 Index in several industries, over the past twelve
months. Technology, communications, consumer cyclicals, basic materials and
consumer staples holdings all contributed substantially to the Fund's strong
relative performance.
Individual stocks were the story behind the Fund's strong total return this
fiscal year. These included Ticketmaster Online Citysearch, a consumer cyclicals
company, whose price rose 300% by the end of December 1998. The Fund's
technology stocks led performance in the first quarter of 1999. Comprising 18.9%
of net assets on March 31, 1999, these holdings outperformed the Russell 2000 by
135%. Abovenet Communications, F5 Networks, Miningco.Com and America Online all
contributed to the Fund's competitive performance over the past twelve months.
<PAGE>
EVERGREEN
Select Special Equity Fund
Portfolio Manager Commentary
Top 10 Holdings*
---------------
(as a percentage of net assets)
MIPS Technologies, Inc. 5.2%
Pacific Sunwear of California 4.1%
Gildan Activewear, Inc. 2.8%
Abovenet Communications, Inc. 2.8%
Williams Sonoma, Inc. 2.6%
Abercrombie & Fitch Co. 2.4%
NEXTLINK Communications, Inc., Cl. A 2.2%
Earthlink Network, Inc. 2.2%
Real Networks, Inc. 2.1%
Chirex, Inc. 1.9%
*Portfolio composition subject to change
Outlook
We believe equity investors could face some challenges over the next six months,
but we remain optimistic about growth opportunities. The possibility of higher
inflation and rising interest rates present the greatest concerns to investors.
Further, investors are mindful of historically high valuations, lackluster
European economies and the impending Year 2000 issue.
In our opinion, however, pockets of opportunity exist in every market
environment. By employing both quantitative and qualitative analysis, we believe
the Fund's investment team can seek out companies demonstrating strong growth
potential. We look for the Fund's careful investment process to continue to
reveal companies able to thrive under a wide variety of market conditions.
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.
<PAGE>
EVERGREEN SELECT EQUITY TRUST
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of Assets of
EVERGREEN SELECT SOCIAL PRINCIPLES FUND
a Series of
EVERGREEN SELECT EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898
By and In Exchange For Shares of
EVERGREEN SELECT SPECIAL EQUITY FUND
a Series of
EVERGREEN SELECT EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets and liabilities of Evergreen Select Social
Principles Fund ("Select Social Principles Fund"), a series of Evergreen Select
Equity Trust, to Evergreen Select Special Equity Fund ("Select Special Equity
Fund"), also a series of Evergreen Select Equity Trust, in exchange for
Institutional shares and Institutional Service shares (to be issued to holders
of Institutional shares and Institutional Service shares, respectively, of
Select Social Principles Fund,) of beneficial interest, $0.001 par value per
share, of Select Special Equity Fund, consists of this cover page and the
following described documents, each of which is attached hereto and incorporated
by reference herein:
(1) The Statement of Additional Information of Select Social Principles Fund
and Select Special Equity Fund dated November 1, 1999;
(2) Annual Report of Select Social Principles Fund and Select Special Equity
Fund for the year ended June 30, 1999;
(3) Semi-Annual Report of Select Social Principles Fund for the six-month
period ended December 31, 1999;
(4) Semi-Annual Report of Select Special Equity Fund for the six-month period
ended December 31, 1999;
(5) Pro Forma Financial Statements as of December 31, 1999.
This Statement of Additional Information, which is not a prospectus,
supplements, and should be read in conjunction with, the Prospectus/Proxy
Statement of Select Social Principles Fund and Select Special Equity Fund dated
May 26, 2000. A copy of the Prospectus/Proxy Statement may be obtained without
charge by calling or writing to Evergreen Equity Trust at the telephone numbers
or addresses set forth above.
The date of this Statement of Additional Information is May 26, 2000.
<PAGE>
EVERGREEN SELECT EQUITY TRUST
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
EVERGREEN SELECT EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1999
Evergreen Select Balanced Fund ("Balanced Fund")
Evergreen Select Core Equity Fund ("Core Equity Fund")
Evergreen Select Diversified Value Fund ("Diversified Value Fund")
Evergreen Select Equity Index Fund ("Equity Index Fund")
Evergreen Select Large Cap Blend Fund ("Large Cap Fund")
Evergreen Select Secular Growth Fund ("Secular Growth 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")
Evergreen Strategic Value Fund ("Strategic Value Fund")
(Each a "Fund"; together, the "Funds")
Each Fund is a series of Evergreen Equity
Trust (the "Trust").
This statement of additional information ("SAI") pertains to all
classes of shares of the Funds. It is not a prospectus but should be read in
conjunction with the prospectus dated November 1, 1999 for the Fund in which you
are interested. The Funds are offered through two separate prospectuses: one
offering both Institutional and Institutional Service shares of each Fund, and
one offering Class A, Class B and Class C shares of the Equity Index Fund and
the Special Equity Fund. The information in Part 1 of this SAI is specific
information about the Funds in the prospectus. The information in Part 2 of this
SAI contains more general information that may or may not apply to the Fund or
Class of shares in which you are interested. You may obtain a copy of either
these prospectuses without charge by calling (800) 343-2898.
Certain information may be incorporated by reference to the Funds'
Annual Report dated June 30, 1999. You may obtain a copy of the Annual Report
without charge by calling (800) 343-2898.
<PAGE>
TABLE OF CONTENTS
PART 1
TRUST HISTORY................................................................1-1
INVESTMENT POLICIES..........................................................1-1
OTHER SECURITIES AND PRACTICES...............................................1-3
PRINCIPAL HOLDERS OF FUND SHARES.............................................1-3
EXPENSES....................................................................1-10
PERFORMANCE.................................................................1-15
SERVICE PROVIDERS...........................................................1-17
FINANCIAL STATEMENTS.........................................................1-8
PART 2
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES................2-1
PURCHASE AND REDEMPTION OF SHARES ..........................................2-14
PRICING OF SHARES...........................................................2-19
SALES CHARGE WAIVERS AND REDUCTIONS.........................................2-16
PERFORMANCE CALCULATIONS....................................................2-20
PRINCIPAL UNDERWRITER.......................................................2-21
DISTRIBUTION EXPENSES UNDER RULE 12b-1......................................2-22
TAX INFORMATION.............................................................2-25
BROKERAGE...................................................................2-28
ORGANIZATION................................................................2-29
INVESTMENT ADVISORY AGREEMENT...............................................2-30
MANAGEMENT OF THE TRUST.....................................................2-32
CORPORATE AND MUNICIPAL BOND RATINGS........................................2-35
ADDITIONAL INFORMATION......................................................2-46
<PAGE>
1-14
1-1
PART 1
TRUST HISTORY
The Evergreen Select Equity Trust is an open-end management investment
company, which was organized as a Delaware business trust on September 18, 1997.
Each Fund is a diversified series of Evergreen Select Equity Trust. A copy of
the Declaration of Trust is on file as an exhibit to the Trust's Registration
Statement, of which this SAI is a part. The foregoing is qualified in its
entirety by reference to the Declaration of Trust.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT RESTRICTIONS
Each Fund has adopted the fundamental investment restrictions set forth
below which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined in the Investment Company Act of 1940 (the "1940
Act"). Where necessary, an explanation beneath a fundamental policy describes
the Fund's practices with respect to that policy, as allowed by current law. If
the law governing a policy changes, the Fund's practices may change accordingly
without a shareholder vote. Unless otherwise stated, all references to the
assets of the Fund are in terms of current market value.
1. Diversification
Each Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
Further Explanation of Diversification Policy:
To remain classified as a diversified investment company under the 1940
Act, each Fund must conform with the following: With respect to 75% of its total
assets, a diversified investment company may not invest more than 5% of its
total assets, determined at market or other fair value at the time of purchase,
in the securities of any one issuer, or invest in more than 10% of the
outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to investments in securities issued or
guaranteed by the United States (U.S.) government or its agencies or
instrumentalities.
2. Concentration
Each Fund may not concentrate its investments in the securities of
issuers primarily engaged in any particular industry (other than securities that
are issued or guaranteed by the U.S. government or its agencies or
instrumentalities).
Further Explanation of Concentration Policy:
Each Fund may not invest more than 25% of its total assets, taken at
market value, in the securities of issuers primarily engaged in any particular
industry (other than securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities).
3. Issuing Senior Securities
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
4. Borrowing
Each Fund may not borrow money, except to the extent permitted by
applicable law.
Further Explanation of Borrowing Policy:
Each Fund may borrow from banks and enter into reverse repurchase
agreements in an amount up to 33 1/3% of its total assets, taken at market
value. Each Fund may also borrow up to an additional 5% of its total assets from
banks or others. A Fund may borrow only as a temporary measure for extraordinary
or emergency purposes such as the redemption of Fund shares. A Fund may purchase
additional securities so long as borrowings do not exceed 5% of its total
assets. Each Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities. Each Fund may purchase
securities on margin and engage in short sales to the extent permitted by
applicable law.
5. Underwriting
Each Fund may not underwrite securities of other issuers, except
insofar as a Fund may be deemed to be an underwriter in connection with the
disposition of its portfolio securities.
6. Real Estate
Each Fund may not purchase or sell real estate, except that, to the
extent permitted by applicable law, a Fund may invest in (a) securities that are
directly or indirectly secured by real estate, or (b) securities issued by
issuers that invest in real estate.
7. Commodities
Each Fund may not purchase or sell commodities or contracts on
commodities, except to the extent that a Fund may engage in financial futures
contracts and related options and currency contracts and related options and may
otherwise do so in accordance with applicable law and without registering as a
commodity pool operator under the Commodity Exchange Act.
8. Lending
Each Fund may not make loans to other persons, except that a Fund may
lend its portfolio securities in accordance with applicable law. The acquisition
of investment securities or other investment instruments shall not be deemed to
be the making of a loan.
Further Explanation of Lending Policy:
To generate income and offset expenses, a Fund may lend portfolio
securities to broker-dealers and other financial institutions in an amount up to
33 1/3% of its total assets, taken at market value. While securities are on
loan, the borrower will pay the Fund any income accruing on the security. The
Fund may invest any collateral it receives in additional portfolio securities,
such as U.S. Treasury notes, certificates of deposit, other high-grade,
short-term obligations or interest bearing cash equivalents. Gains or losses in
the market value of a security lent will affect the Fund and its shareholders.
When a Fund lends its securities, it will require the borrower to give
the Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The Fund has the right to call
a loan and obtain the securities lent any time on notice of not more than five
business days. The Fund may pay reasonable fees in connection with such loans.
OTHER SECURITIES AND PRACTICES
Listed below are securities and investment practices the Funds may use
in addition to those discussed in the prospectus. See Additional Information on
Securities and Investment Practices in Part 2 of this SAI for further
information on these particular investment practices. The information below
applies to all Funds unless otherwise noted.
<TABLE>
<S> <C>
When-Issued, Delayed Delivery and Forward Commitment Master Demand Notes
Transactions
Repurchase Agreements Obligations of Foreign Branches of U.S. Banks
Reverse Repurchase Agreements Obligations of U.S. Branches of Foreign Banks
Options
Futures Transactions
Future Contracts
Foreign Currency (Special Equity Fund Only)
Corporate Bond Ratings (Balanced Fund Only)
Convertible Securities
Illiquid and Restricted Securities
Investment in Other Investment Companies
</TABLE>
PRINCIPAL HOLDERS OF FUND SHARES
As of September 30, 1999 the officers and Trustees of the Trust owned
as a group less than 1% of the outstanding shares of any class of each Fund.
Set forth below is information with respect to each person who, to each
Fund's knowledge, owned beneficially or of record more than 5% of the
outstanding shares of any class of each Fund as of September 30, 1999.
--------------------------------------------------------------------------
Balanced Fund
Institutional Class
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 53.26%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 46.73%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
--------------------------------------------------------------------------
Balanced Fund
Institutional Service Class
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
First Clearing Corporation 81.07%
Walter Haemmerle IRA
2 Ocean Point
Port Royal Plantation
Hilton Head Isle, SC 29928
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
First Union National Bank 12.59%
Trust Accounts
Attn: Ginny Batten, CMG 1151-2
401 S. Tryon Street, 3rd Floor
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
First Union National Bank 6.33%
Trust Accounts
Attn: Ginny Batten
301 S. Tryon Street, 11th Floor, CMG 1151
Charlotte, NC 28202-1915
----------------------------------------------------------- --------------
--------------------------------------------------------------------------
Core Equity Fund
Institutional Class
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 99.38%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1151
--------------------------------------------------------------------------
Core Equity Fund
Institutional Service Class
----------------------------------------------------------- --------------
None
--------------------------------------------------------------------------
Diversified Value Fund
Institutional Class
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 87.18%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 12.81%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
--------------------------------------------------------------------------
Diversified Value Fund
Institutional Service Class
----------------------------------------------------------- --------------
Bankers Trust Company 95.72%
FBO Triangle Industries
Master Trust
100 Plaza One
Jersey City, NJ 07311-3999
----------------------------------------------------------- --------------
--------------------------------------------------------------------------
Equity Index Fund
Institutional Class
------------------------------------------------------------ -------------
First Union National Bank BK/EB/INT 81.71%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
------------------------------------------------------------ -------------
------------------------------------------------------------ -------------
First Union National Bank BK/EB/INT 11.42%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
------------------------------------------------------------ -------------
--------------------------------------------------------------------------
Equity Index Fund
Institutional Service Class
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 57.10%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
--------------------------------------------------------------------------
Equity Index Fund
Class A Shares
----------------------------------------------------------- --------------
Independent Trust Corporation 9.81%
Custodian Funds 865
15255 S. 94th Ave., Suite 300
Orlando Park, IL 60462-3896
----------------------------------------------------------- --------------
Donaldson Lufkin Jenrette 5.55%
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
--------------------------------------------------------------------------
Equity Index Fund
Class B Shares
----------------------------------------------------------- --------------
None
--------------------------------------------------------------------------
Equity Index Fund
Class C Shares
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
MLPF&S For Sole Benefit 7.78%
Of Its Customers
Attn: Fund Administration
4800 Deer Lake Drive, E. 2nd Floor
Jacksonville, FL 32246-6484
--------------------------------------------------------------------------
Large Cap Blend Fund
Institutional Class
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 94.80%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 5.19%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
<PAGE>
--------------------------------------------------------------------------
Large Cap Blend Fund
Institutional Service Class
----------------------------------------------------------- --------------
Thomas F. Hackett 33.77%
C/O Warren S. Beebe Jr., CPA
P.O. Box 849
Oakhurst, NJ 07755-0849
----------------------------------------------------------- --------------
First Clearing Corporation 21.97%
Essex County Comm. American Legion
29 Newell Drive
Bloomfield, NJ 07003
----------------------------------------------------------- --------------
First Clearing Corporation 20.55%
First Union Brokerage
Sipes Orchard Home
201 S. College Street, 5th Floor
Charlotte, NC 28288-1167
----------------------------------------------------------- --------------
First National Bank of Shelby 8.35%
T/U/A Robert Gibson Jr.
P.O. Box 168
Shelby, NC 28151-0168
----------------------------------------------------------- --------------
Raymond James & Associates Inc. 7.94%
Richard L. Granger IRA
1817 Jason Drive
Florence, SC 29505-3220
----------------------------------------------------------- --------------
First Clearing Corporation 7.40%
Roberto J. Xacur Enjure
201 S. College Street
Charlotte, NC 28288
--------------------------------------------------------------------------
Secular Growth Fund
Institutional Class
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 94.90%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 5.10%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
--------------------------------------------------------------------------
Secular Growth Fund
Institutional Service Class
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
Evergreen Distributor, Inc. 0.00%
Attn: Fund Administration
3435 Stelzer Road
Columbus, OH 43219-6004
----------------------------------------------------------- --------------
--------------------------------------------------------------------------
Small Cap Growth Fund
Institutional Class
----------------------------------------------------------- --------------
First Union National Bank 69.26%
Re-Invest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
Worcester County 18.91%
Retirement System
Attn: Michael J. Donahue
Chairman & Treasurer
2 Main Street, Room 3 Courthouse
Worcester, MA 0168-1116
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
First Union National Bank 7.57%
Cash Account
Attn: Trust Operation Fund Group
401 S. Tryon Street, 3rd Floor
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
--------------------------------------------------------------------------
Small Company Value Fund
Institutional Class
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 77.06%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 17.22%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
MITRA & CO 5.70%
P.O. Box 2977
Milwaukee, WI 53201-2977
----------------------------------------------------------- --------------
--------------------------------------------------------------------------
Small Company Value Fund
Institutional Service Class
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
Morgan Trust Company 95.32%
Attn: John Kelly
50 North Front Street, 4th Floor
Memphis, TN 38103-2126
<PAGE>
--------------------------------------------------------------------------
Social Principles Fund
Institutional Class
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 94.08%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 5.10%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
<PAGE>
--------------------------------------------------------------------------
Social Principles Fund
Institutional Service Class
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
First Clearing Corporation 72.68%
John J. Scinto Trust
80 Grandview Avenue
Port Chester, NY 10573
----------------------------------------------------------- --------------
First Clearing Corporation 21.67%
201 S. College Street
Charlotte, NC 28288-1167
----------------------------------------------------------- --------------
First Clearing Corporation 5.63%
Maggie Dews
201 S. College Street
Charlotte, NC 28288-1167
--------------------------------------------------------------------------
Special Equity Fund
Class A
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
MLPF&S For The Sole Benefit of Its Customers 18.20%
Attn: Fund Administration
4800 Deer Lake Drive, E. 2nd Floor
Jacksonville, FL 32246-6484
----------------------------------------------------------- --------------
--------------------------------------------------------------------------
Special Equity Fund
Class B
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
MLPF&S For the Sole Benefit 17.88%
Of Its Customers
Attn: Fund Administration
4800 Deer Lake Drive, E. 2nd Floor
Jacksonville, FL 32246-6484
----------------------------------------------------------- --------------
--------------------------------------------------------------------------
Special Equity Fund
Class C
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
MLPF&S For the Sole Benefit 13.18%
Of Its Customers
Attn: Fund Administration
4800 Deer Lake Drive, E. 2nd Floor
Jacksonville, FL 32246-6484
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
Rhona B. Miller 8.62%
5742 Bancroft Drive
New Orleans, LA 70122-1314
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
First Clearing Corporation 5.75%
Charles E. Brooks
2780 N. Riverside Drive, #104
Tampa, FL 33602-1035
----------------------------------------------------------- --------------
--------------------------------------------------------------------------
Special Equity Fund
Institutional Class
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 56.68%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 34.81%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
--------------------------------------------------------------------------
Special Equity Fund
Institutional Service Class
--------------------------------------------------------------------------
Charles Schwab & Co. Inc. 13.52%
Special Custody Account
Exclusive Benefit of Customers
Reinvest Account
Attn: Mutual Fund
101 Montgomery Street
San Francisco, CA 94104-4122
----------------------------------------------------------- --------------
--------------------------------------------------------------------------
First Union National Bank BK/EB/INT 11.46%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
--------------------------------------------------------------------------
Strategic Growth Fund
Institutional Class
------------------------------------------------------------ -------------
First Union National Bank BK/EB/INT 71.07%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
------------------------------------------------------------ -------------
------------------------------------------------------------ -------------
First Union National Bank BK/EB/INT 27.91%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
------------------------------------------------------------ -------------
--------------------------------------------------------------------------
Strategic Growth Fund
Institutional Service Class
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 8.02%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------------- --------------
Wilmington Trust (FLA) Inv. Agt. 7.26%
FBO Anne L. Hassold Trust
P.O. Box 8882
Wilmington, DE 19899-8882
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 6.79%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
--------------------------------------------------------------------------
Strategic Value Fund
Institutional Class
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 62.12%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
-----------------------------------------------------------
----------------------------------------------------------- --------------
First Union National Bank BK/EB/INT 37.39%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG 1151
Charlotte, NC 28202-1911
-----------------------------------------------------------
--------------------------------------------------------------------------
Strategic Value Fund
Institutional Service Class
--------------------------------------------------------------------------
----------------------------------------------------------- --------------
Citibank NA 8.19%
FBO Michael Besson
C/O Valley Financial Systems, Inc.
760 Constitution Drive, Suite 100
Exton, PA 19341-1149
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
Jefnat & Company 7.37%
Oramella Tomassich Trust
1 Court Square, 3rd Floor
Montgomery, AL 36104-3598
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
Carole Link Rodman 6.25%
101 Ramblewood Road
Forest, VA 24551-1339
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
Harley & Company 5.75%
FBO Eleanor Frechtling
483 Maine Street
Harleysville, PA 19438-2311
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
Donaldson Lufkin Jenrette 5.36%
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 0703-2052
----------------------------------------------------------- --------------
----------------------------------------------------------- --------------
SG Cowen Securities 5.34%
Financial Square
New York, NY 10005-3597
----------------------------------------------------------- --------------
EXPENSES
Advisory Fees
Each Fund has its own investment advisor, (For more information, see
Investment Advisory Agreements in Part 2 of this SAI.)
First Capital Group ("FCG"), a division of First Union National Bank
("FUNB"), is the Advisor to each of the Funds except Small Cap Fund, Small
Company Fund and Special Equity Fund. FUNB is located at 201 South College
Street, Charlotte, North Carolina 28288-0630.
Evergreen Asset Management Corp. ("EAMC") is the Advisor to Small
Company Fund. EAMC is located at 2500 Westchester Avenue, Purchase, New York
10577. Lieber & Co., another First Union subsidiary, Corporation is the Fund's
sub-advisor. Lieber & Company is reimbursed by EAMC for the direct and indirect
costs of providing subadvisory services to the Fund.
Evergreen Investment Management Company ("EIMC"), formerly known as
Keystone Investment Management Company, is the Advisor to Small Cap Fund. EIMC
is located at 200 Berkeley Street, Boston, Massachusetts 02116-5034.
Meridian Investment Company ("Meridian") is the Advisor to Special
Equity Fund. Meridian is located at 55 Valley Stream Parkway, Malvern,
Pennsylvania 19355.
Advisory Fees Paid
Below are the advisory fees paid by each Fund for the fiscal period
ended June 30, 1999 and for fiscal periods ended in 1998.
Fiscal Period/Fund Advisory Fee Waiver
Year Ended June 30, 1999
Balanced Fund $4,136,760 $689,460
Core Equity Fund $12,923,968 $1,848,228
Diversified Value Fund $3,983,024 $663,837
Equity Index Fund $1,802,977 $1,159,599
Large Cap Fund $3,318,923 $474,132
Secular Growth Fund* $36,383 $36,383
Small Cap Fund $500,432 $0.00
Small Company Fund $789,167 $84,029
Social Principles Fund $1,203,962 $150,495
Special Equity Fund $1,181,647 $551,194
Strategic Growth Fund $3,224,101 $478,980
Strategic Value Fund $2,384,266 $340,610
Year Ended June 30, 1998
Balanced Fund $1,954,563 $325,761
Core Equity Fund $8,171,550 $1,350,561
Diversified Value Fund $2,181,562 $363,594
Equity Index Fund $1,139,000 $686,000
Large Cap Fund $2,031,616 $346,847
Small Cap Fund $166,954 $0.00
Small Company Fund** $208,402 $58,160
Social Principles Fund $782,703 $129,970
Special Equity Fund $1,208,000 $518,000
Strategic Growth Fund $1,235,649 $210,851
Strategic Value Fund $930,128 $132,876
*For the four months ended June 30, 1999. The Fund commenced operations on
2/26/1999.
**Period from December 23, 1997 (commencement of operations) to June 30, 1998.
12b-1 Fees
Below are the 12b-1 service fees paid by the Institutional Service
shares of each Fund for the fiscal period ended June 30, 1999. The Institutional
shares do not pay 12b-1 fees. For more information, see "Distribution Expenses
Under Rule 12b-1" in Part 2 of this SAI.
Institutional Service Shares
Fund/Period
Service Fees
Year Ended June 30, 1999
Balanced Fund $ 5,257
Core Equity Fund $ 60,519
Diversified Value Fund $ 2,914
Equity Index Fund $ 68,867
Large Cap Fund $ 881
Secular Growth Fund $ 1
Small Cap Fund $ 0
Small Company Fund $ 126
Social Principles Fund $ 279
Special Equity Fund $ 7,423
Strategic Growth Fund $ 25,109
Strategic Value Fund $ 3,890
Trustee Compensation
Listed below is the Trustee compensation paid by the Trust individually
and by the Trust and the eight other trusts in the Evergreen Fund complex for
the fiscal period ended June 30, 1999. The Trustees do not receive pension or
retirement benefits from the Funds. For more information, see Management of the
Trust in Part 2 of this SAI.
Total Compensation from
Trust and Fund Complex Paid
Aggregate Compensation from to Trustees**
Trustee Trust
$7,627 $75,000
Laurence B. Ashkin
$7,657 $75,000
Charles A. Austin, III
$7,509 $74,250
K. Dun Gifford
$9,845 $98,000
James S. Howell*
$7,509 $74,250
Leroy Keith Jr.
$7,627 $75,000
Gerald M. McDonnell
$8,799 $86,500
Thomas L. McVerry
$7,509 $74,250
William Walt Pettit
$7,509 $74,250
David M. Richardson
$7,768 $78,000
Russell A. Salton, III
$8,888 $90,502
Michael S. Scofield*
$7,509 $74,250
Richard J. Shima
* As of January 1, 2000 James S. Howell will become Chairman of the Board and
Michael S. Scofield will become Trustee of Emeritis
** Certain Trustees have elected to defer all or part of their
total compensation for the fiscal period ended September 30,
1998. The amounts listed below will be payable in later years
to the respective Trustees:
Austin $11,325
McVerry $86,500
Howell $78,400
Salton $78,000
Petit $74,250
McDonnell $75,000
Scofield $30,900
Brokerage Commission Paid
The table below shows for each Fund the total amounts paid in brokerage
commissions during the fiscal period specified.
Total Brokerage Commission
Fiscal Period Ended June 30, 1999
Balanced Fund $ 419,607
Core Equity Fund $ 3,384,398
Diversified Value Fund $ 1,245,022
Large Cap Fund $ 522,864
Secular Growth Fund $ 11,833
Small Cap Fund $ 174,134
Small Company Fund $ 209,962
Social Principles Fund $ 165,377
Strategic Growth Fund $ 955,109
Strategic Value Fund $ 519,440
Fiscal Period Ended June 30, 1998
Balanced Fund $ 281,280
Core Equity Fund $ 1,063,426
Diversified Value Fund $ 1,011,341
Large Cap Fund $ 415,687
Small Cap Fund $ 61,462
Small Company Fund $ 123,196
Social Principles Fund $ 88,390
Strategic Growth Fund $ 464,814
Strategic Value Fund $ 145,302
The table below shows the brokerage commissions paid by the predecessor
funds of Evergreen Select Special Equity Fund and Evergreen Select Equity Index
Fund for the fiscal years ended June 30, 1999, 1998 and 1997.
Total Brokerage Commission
Fiscal Period Ended June 30, 1999
Special Equity Fund $ 200,235
Equity Index Fund $ 155,575
Fiscal Period Ended June 30, 1998
Special Equity Fund $116,052
Equity Index Fund $102,434
Fiscal Period Ended June 30, 1997
Special Equity Fund $138,761
Equity Index Fund $89,787
PERFORMANCE
Total Return
Below are the annual total returns for each class of shares of the
Funds as of June 30, 1999. The returns for Select Secular Growth Fund are
cumulative. For more information, see "Total Return" under Performance
Calculations in Part 2 of this SAI.
<TABLE>
Ten Years or Since Class
Fund/Class One Year Five Years Inception Inception Date
<S> <C> <C> <C> <C>
1-Balanced Fund
Institutional 5.70% 14.57% 12.35% 01/22/98
Institutional Service 5.43% 14.55% 12.33% 04/09/98
2-Core Equity Fund
Institutional 9.82% 22.24% 14.88% 11/24/97
Institutional Service 9.53% 21.97% 14.61% 02/04/98
3-Diversified Value Fund
Institutional 9.08% 19.51% 16.55% 01/22/98
Institutional Service 8.77% 19.14% 16.33% 03/31/98
4-Equity Index Fund
Institutional 22.03% 27.08% 17.81% 02/14/85
Institutional Service 21.70% 26.99% 17.77% 10/09/96
Class A 16.00% 25.81% 17.22% 11/04/98
Class B 16.35% 26.76% 17.74% 11/03/98
Class C 20.82% 27.04% 17.79% 04/30/99
5-Large Cap Fund
Institutional 7.12% 23.60% 19.78% 11/24/97
Institutional Service 6.83% 23.30% 19.49% 03/12/98
7-Secular Growth Fund
Institutional 27.50% N/A 31.85% 2/26/99
Institutional Service 27.18% N/A 31.52% 2/26/99
8-Small Cap Fund
Institutional 4.22% N/A 10.96% 12/28/95
Institutional Service N/A N/A N/A N/A
9-Small Company Fund
Institutional -10.73% N/A -6.41% 12/23/97
Institutional Service -11.68% N/A -7.06% 12/31/98
Institutional 0.90% 19.15% 13.81% 11/24/97
Institutional Service 0.64% 18.87% 13.54% 03/12/98
11-Special Equity Fund
Institutional 42.02% 26.12% 21.02% 03/15/94
Institutional Service 41.55% 25.86% 20.78% 03/15/94
9-Strategic Growth Fund
Institutional 19.22% N/A 28.77% 11/24/97
Institutional Service 18.88% N/A 28.42% 02/27/98
10-Strategic Value Fund
Institutional 8.85% 22.14% 14.87% 11/24/97
Institutional Service 8.60% 21.86% 14.59% 03/11/98
</TABLE>
1-Historical performance shown for Institutional shares prior to its inception
is based on the performance of the Class Y Shares of Evergreen Balanced Fund II.
On 1/22/1998, substantially all of the assets of the Class Y shares of Evergreen
Balanced Fund II were transferred through a redemption in-kind transaction to
the Fund's Institutional shares. Historical performance shown for Institutional
Service shares reflects that of Class Y Shares of Evergreen Balanced Fund II,
through 1/22/1998, the inception of Institutional Shares. Performance from
1/23/1998 through the inception of Institutional Service Shares reflects that of
Institutional Shares. Performance prior to inception of Institutional Service
Shares does not include this class' 0.25% 12b-1 fees. Institutional Shares do
not pay a 12b-1 fee. If fees were reflected, returns would have been lower.
2-Historical performance shown for Institutional Service shares from 11/24/1997
to its inception is based on the performance of Institutional shares and has not
been adjusted to reflect the effect of the 0.25% 12b-1 fee applicable to
Institutional Service shares. Institutional shares pays no 12b-1 fee. If these
fees had been reflected, returns would have been lower. Prior to 11/24/1997, the
returns for Institutional and Institutional Service shares are based on the
Fund's predecessor common trust fund's (CTFs) performance, adjusted for
estimated mutual fund expenses. The CTFs were not registered under the 1940 Act
and were not subject to certain investment restrictions. If the CTFs had been
registered, their performance might have been adversely affected. Performance
for the CTFs has been adjusted to include the effect of estimated mutual fund
class gross expense ratios at the time the CTF was converted to a mutual fund.
If fee waivers and expense reimbursements had been calculated into the mutual
fund class expense ratio the total returns would be as follows: Institutional
shares - 5 year =22.32%, 10 year = 14.98% and since 12/31/1981 = 15.78%;
Institutional Service shares - 5 year = 22.05%, 10 year = 14.70% and since
12/31/1981 = 15.50%.
3-Historical performance shown for Institutional shares prior to its inception
is based on the performance of the Class Y Shares of Evergreen Value Fund. On
1/22/1998, substantially all of the assets of the Class Y shares of Evergreen
Value Fund were transferred through a redemption in-kind transaction to the
Fund's Institutional shares. Historical performance shown reflects that of Class
Y Shares of Evergreen Value Fund, through 1/22/1998, the inception of
Institutional Shares. Performance from 1/23/1998 through the inception of
Institutional Service Shares reflects that of Institutional Shares. Performance
prior to inception of Institutional Service Shares does not include this class'
0.25% 12b-1 fees. Institutional Shares do not pay a 12b-1 fee. If fees were
reflected, returns would have been lower.
4-Historical performance shown for Classes A, B, and C prior to their inception
is based on the performance of (1) the Fund's Institutional Shares from
7/27/1998 to the inception of Classes A, B, and C (2) the Class Y Shares of the
Fund's predecessor, CoreFund Equity Index Fund from 6/1/1991 through 7/27/1998
and (3) the Class Y Shares of the CoreFund Equity Index Fund's predecessor,
Viking Index Fund from 2/14/1985 through 5/31/1991. These historical returns for
Classes A, B, and C have not been adjusted to reflect the effect of each Class'
12b-1 fees. These fees for Class A are 0.25%, for Class B are 1.00%, and for
Class C are 1.00%. Neither Class Y nor Institutional shares pay a 12b-1 fee. If
these fees had been reflected, returns would have been lower. Historical
performance shown for Institutional Service Shares prior to its inception is
based on the performance of (1) the Class A Shares of the Fund's predecessor
CoreFund Equity Index Fund from 10/9/1996 to 7/27/1997 (2) the Class Y Shares of
the Fund's predecessor CoreFund Equity Index Fund from 6/1/1991 to 10/8/1996 and
(3) the Class Y Shares of the Fund's predecessor Viking Index Fund from
2/14/1985 through 5/31/1991. Performance of Class Y for CoreFund Equity Index
and Class Y for Viking Index Fund has not been adjusted to reflect the effect of
the 0.25% 12b-1 fee applicable to Institutional Service shares. Class Y pays no
12b-1 fee. If these fees had been reflected, returns would have been lower.
Historical performance shown for Institutional Shares prior to its inception is
based on the performance of the Class Y Shares of the Fund's predecessors,
CoreFund Equity Index Fund from 6/1/1991 through 7/27/1998 and Viking Index Fund
from 2/14/1985 through 5/31/1991.
5-Historical performance shown for Institutional Service Shares from 11/24/1997
to its inception is based on the performance of Institutional Shares and has not
been adjusted to reflect the effect of the 0.25% 12b-1 fee applicable to
Institutional Service Shares. Institutional Shares pays no 12b-1 fee. If these
fees had been reflected, returns would have been lower. Prior to 11/24/1997, the
returns for Institutional Shares and Institutional Service Shares are based on
the Fund's predecessor common trust fund's (CTFs) performance, adjusted for
estimated mutual fund expenses. The CTFs were not registered under the 1940 Act
and were not subject to certain investment restrictions. If the CTFs had been
registered, their performance might have been adversely affected. Performance
for the CTFs have 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: Institutional
Shares - 5 year = 23.68% and since 12/31/1993 = 19.87%; Institutional Service
Shares - 5 year = 23.38% and since 12/31/1993 = 19.58%.
6-Historical performance shown for Institutional Service Shares prior to its
inception is based on the performance of Institutional Shares and has not been
adjusted to reflect the effect of the 0.25% 12b-1 fee applicable to
Institutional Service Shares. Institutional Shares pays no 12b-1 fee. If these
fees had been reflected, returns would have been lower.
7-Historical performance shown for Institutional Service Shares from 11/24/1997
to its inception is based on the performance of Institutional Shares and has not
been adjusted to reflect the effect of the 0.25% 12b-1 fee applicable to
Institutional Service Shares. Institutional Shares pays no 12b-1 fee. If these
fees had been reflected, returns would have been lower. Prior to 11/24/1997, the
returns for Institutional Shares and Institutional Service Shares are based on
the Fund's predecessor common trust fund's (CTFs) performance, adjusted for
estimated mutual fund expenses. The CTFs were not registered under the 1940 Act
and were not subject to certain investment restrictions. If the CTFs had been
registered, their performance might have been adversely affected. Performance
for the CTFs have 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: Institutional
Shares - 5 year =19.24%, 10 year = 13.90% and since 05/31/1988 = 13.99%;
Institutional Service Shares - 5 year = 18.95%, 10 year =13.64 % and since
5/31/1988 = 13.72%.
8-Historical performance shown for Classes A, B and C prior to their inception
is based on 1) Institutional Service Shares from 7/27/1998 to their inception,
2) the performance of the Class A Shares of the Fund's predecessor fund,
CoreFund Special Equity Fund from 2/2/1995 through 7/26/1998 and 3) the original
class of shares of the Fund's predecessor fund from 3/15/1994 to 2/20/1995. The
performance has not been adjusted to reflect the differences in the 12b-1 fees
applicable to each class. These fees are for Class A 0.25%, Class B 1.00%, Class
C 1.00% and Institutional Service Shares 0.25%. If these fees had been reflected
returns for Classes B and C would have been lower. 9-Historical performance
shown for Institutional Service Shares from 11/24/1997 to its inception is based
on the performance of Institutional Shares and has not been adjusted to reflect
the effect of the 0.25% 12b-1 fee applicable to Institutional Service Shares.
Institutional Shares pays no 12b-1 fee. If these fees had been reflected,
returns would have been lower. Prior to 11/24/1997, the returns for
Institutional Shares and Institutional Service Shares are based on the Fund's
predecessor common trust fund's (CTFs) performance, adjusted for estimated
mutual fund expenses. The CTFs were not registered under the 1940 Act and were
not subject to certain investment restrictions. If the CTFs had been registered,
their performance might have been adversely affected. Performance for the CTF
has been adjusted to include the effect of estimated mutual fund class gross
expense ratios at the time the 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: Institutional Shares
- - - since 12/31/1994 = 28.85%; Institutional Service Shares - since 12/31/1994
= 28.51%.
10-Historical performance shown for Institutional Service Shares from 11/24/1997
to its inception is based on the performance of Institutional Shares and has not
been adjusted to reflect the effect of the 0.25% 12b-1 fee applicable to
Institutional Service Shares. Institutional Shares I pays no 12b-1 fee. If these
fees had been reflected, returns would have been lower. Prior to 11/24/1997, the
returns for Institutional Shares and Institutional Service Shares are based on
the Fund's predecessor common trust fund's (CTFs) performance, adjusted for
estimated mutual fund expenses. The CTFs were not registered under the 1940 Act
and were not subject to certain investment restrictions. If the CTFs had been
registered, their performance might have been adversely affected. Performance
for the CTFs have 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: Institutional
Shares - 5 year =22.23%, 10 year =14.96 % and since 12/31/1981 = 17.51%;
Institutional Service shares - 5 year = 21.94%, 10 year = 14.69% and since
12/31/1981 = 17.23%.
Current Yield
Below are the current yields for each class of shares of the Balanced
Fund and Equity Index Fund as of June 30, 1999. For more information, see
"30-day Yield under Performance Calculation in Part 2 of this SAI.
<TABLE>
30-Day Yield
Fund Institutional Institutional Service
<S> <C> <C>
Balanced Fund 3.17% 2.86%
Equity Index Fund 0.95% 0.72%
</TABLE>
SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS") serves as administrator to
each of the Funds (except Small Cap Fund), subject to the supervision and
control of the Trust's Board of Trustees. EIS provides the Funds with
facilities, equipment and personnel and is entitled to receive a fee from the
Fund based on the total assets of all mutual funds for which EIS serves as
administrator and a First Union Corporation subsidiary serves as advisor. The
fee paid to EIS is calculated in accordance with the following schedule:
Assets Fee
first $7 billion 0.05%
next $3 billion 0.035%
next $5 billion 0.030%
next $10 billion 0.020%
next $5 billion 0.015%
over $30 billion 0.010%
Transfer Agent
Evergreen Service Company ("ESC"), a subsidiary of First Union
Corporation, is the Funds' transfer agent. ESC issues and redeems shares, pays
dividends and performs other duties in connection with the maintenance of
shareholder accounts. The transfer agent's address is P.O. Box 2121, Boston,
Massachusetts 02106-2121. The Fund pays ESC annual fees as follows:
Annual Fee Per Annual Fee Per
Fund Type Open Account Closed Account
Monthly Dividend Funds $25.50 $9.00
Quarterly Dividend Funds $24.50 $9.00
Semiannual Dividend Funds $23.50 $9.00
Annual Dividend Funds $23.50 $9.00
Money Market Funds $25.50 $9.00
*For shareholder accounts only. The Fund pays ESC cost plus
15% for broker accounts ** Closed account are maintained on
the system in order to facilitate historical and tax
information.
Distributor
Evergreen Distributor, Inc. (the "Distributor") markets the Funds through
broker-dealers and other financial representatives. Its address is 125 W. 55th
Street, New York, NY 10019.
Independent Auditors
KPMG LLP, 99 High Street, Boston, Massachusetts 02110, audits the
financial statements of each Fund.
Custodian
State Street Bank and Trust Company keeps custody of each Fund's
securities and cash and performs other related duties. The custodian's address
is 225 Franklin Street, Boston, Massachusetts 02110.
Legal Counsel
Sullivan & Worcester LLP provides legal advice to the Funds. Its
address is 1025 Connecticut Avenue, N.W., Washington, D.C. 20036.
FINANCIAL STATEMENTS
The audited financial statements and the reports thereon are hereby
incorporated by reference to the Funds' Annual Report, a copy of which may be
obtained without charge from ESC, P.O. Box 2121, Boston, Massachusetts
02106-2121.
<PAGE>
EVERGREEN FUNDS
Statement of Additional Information ("SAI")
PART 2
ADDITIONAL INFORMATION ON SECURITIES
AND INVESTMENT PRACTICES
The prospectus describes the Fund's investment objective and the
securities in which it primarily invests. The following describes other
securities the Fund may purchase and investment strategies it may use. Some of
the information below will not apply to the Fund in which you are interested.
See the list under Other Securities and Practices in Part 1 of this SAI to
determine which of the sections below are applicable.
Defensive Investments
The Fund may invest up to 100% of its assets in high quality money
market instruments, such as notes, certificates of deposit, commercial paper,
banker's acceptances, bank deposits or U.S. government securities if, in the
opinion of the investment advisor, market conditions warrant a temporary
defensive investment strategy. Evergreen Equity Income Fund may also invest in
debt securities and high grade preferred stocks for defensive purposes when its
investment advisor determines a temporary defensive strategy is warranted.
U.S. Government Securities
The Fund may invest in securities issued or guaranteed by U.S.
Government agencies or instrumentalities.
These securities are backed by (1) the discretionary authority of the
U.S. Government to purchase certain obligations of agencies or instrumentalities
or (2) the credit of the agency or instrumentality issuing the obligations.
Some government agencies and instrumentalities may not receive
financial support from the U.S. Government. Examples of such agencies are:
(i) Farm Credit System, including the National Bank for
Cooperatives, Farm Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association; and
(vi) Student Loan Marketing Association.
Securities Issued by the Government National Mortgage Association ("GNMA").
The Fund may invest in securities issued by the GNMA, a corporation wholly-owned
by the U.S. Government. GNMA securities or "certificates" represent ownership in
a pool of underlying mortgages. The timely payment of principal and interest due
on these securities is guaranteed.
Unlike conventional bonds, the principal on GNMA certificates is not
paid at maturity but over the life of the security in scheduled monthly
payments. While mortgages pooled in a GNMA certificate may have maturities of up
to 30 years, the certificate itself will have a shorter average maturity and
less principal volatility than a comparable 30-year bond.
The market value and interest yield of GNMA certificates can vary due
not only to market fluctuations, but also to early prepayments of mortgages
within the pool. Since prepayment rates vary widely, it is impossible to
accurately predict the average maturity of a GNMA pool. In addition to the
guaranteed principal payments, GNMA certificates may also make unscheduled
principal payments resulting from prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available
from other types of U.S. Government securities, they may be less effective as a
means of locking in attractive long-term rates because of the prepayment
feature. For instance, when interest rates decline, prepayments are likely to
increase as the holders of the underlying mortgages seek refinancing. As a
result, the value of a GNMA certificate is not likely to rise as much as the
value of a comparable debt security would in response to same decline. In
addition, these prepayments can cause the price of a GNMA certificate originally
purchased at a premium to decline in price compared to its par value, which may
result in a loss.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
The Fund may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis.
Settlement of such transactions normally occurs within a month or more after the
purchase or sale commitment is made.
The Fund may purchase securities under such conditions only with the
intention of actually acquiring them, but may enter into a separate agreement to
sell the securities before the settlement date. Since the value of securities
purchased may fluctuate prior to settlement, the Fund may be required to pay
more at settlement than the security is worth. In addition, the purchaser is not
entitled to any of the interest earned prior to settlement.
Upon making a commitment to purchase a security on a when-issued,
delayed delivery or forward commitment basis the Fund will hold liquid assets
worth at least the equivalent of the amount due. The liquid assets will be
monitored on a daily basis and adjusted as necessary to maintain the necessary
value.
Purchases made under such conditions may involve the risk that yields
secured at the time of commitment may be lower than otherwise available by the
time settlement takes place, causing an unrealized loss to the Fund. In
addition, when the Fund engages in such purchases, it relies on the other party
to consummate the sale. If the other party fails to perform its obligations, the
Fund may miss the opportunity to obtain a security at a favorable price or
yield.
<PAGE>
Repurchase Agreements
The Fund may enter into repurchase agreements with entities that are
registered as U.S. Government securities dealers, including member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. government securities or other financial institutions believed by the
investment advisor to be creditworthy. In a repurchase agreement the Fund
obtains a security and simultaneously commits to return the security to the
seller at a set price (including principal and interest) within a period of time
usually not exceeding seven days. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security.
The Fund's custodian or a third party will take possession of the
securities subject to repurchase agreements, and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund's investment advisor believes
that under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or disposition
of such securities. The Fund will only enter into repurchase agreements with
banks and other recognized financial institutions, such as broker-dealers, which
are deemed by the investment advisor to be creditworthy pursuant to guidelines
established by the Board of Trustees.
Reverse Repurchase Agreements
As described herein, the Fund may also enter into reverse repurchase
agreements. These transactions are similar to borrowing cash. In a reverse
repurchase agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
Options
An option is a right to buy or sell a security for a specified price
within a limited time period. The option buyer pays the option seller (known as
the "writer") for the right to buy, which is a "call" option, or the right to
sell, which is a "put" option. Unless the option is terminated, the option
seller must then buy or sell the security at the agreed-upon price when asked to
do so by the option buyer.
The Fund may buy or sell put and call options on securities it holds or
intends to acquire, and may purchase put and call options for the purpose of
offsetting previously written put and call options of the same series. The Fund
may also buy and sell options on financial futures contracts. The Fund will use
options as a hedge against decreases or increases in the value of securities it
holds or intends to acquire.
The Fund may write only covered options. With regard to a call option,
this means that the Fund will own, for the life of the option, the securities
subject to the call option. The Fund will cover put options by holding, in a
segregated account, liquid assets having a value equal to or greater than the
price of securities subject to the put option. If the Fund is unable to effect a
closing purchase transaction with respect to the covered options it has sold, it
will not be able to sell the underlying securities or dispose of assets held in
a segregated account until the options expire or are exercised, resulting in a
potential loss of value to the Fund.
Futures Transactions
The Fund may enter into financial futures contracts and write options
on such contracts. The Fund intends to enter into such contracts and related
options for hedging purposes. The Fund will enter into futures on securities or
index-based futures contracts in order to hedge against changes in interest or
exchange rates or securities prices. A futures contract on securities is an
agreement to buy or sell securities at a specified price during a designated
month. A futures contract on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index. The Fund does not make payment or
deliver securities upon entering into a futures contract. Instead, it puts down
a margin deposit, which is adjusted to reflect changes in the value of the
contract and which continues until the contract is terminated.
The Fund may sell or purchase futures contracts. When a futures
contract is sold by the Fund, the value of the contract will tend to rise when
the value of the underlying securities declines and to fall when the value of
such securities increases. Thus, the Fund sells futures contracts in order to
offset a possible decline in the value of its securities. If a futures contract
is purchased by the Fund, the value of the contract will tend to rise when the
value of the underlying securities increases and to fall when the value of such
securities declines. The Fund intends to purchase futures contracts in order to
establish what is believed by the investment advisor to be a favorable price or
rate of return for securities the Fund intends to purchase.
The Fund also intends to purchase put and call options on futures
contracts for hedging purposes. A put option purchased by the Fund would give it
the right to assume a position as the seller of a futures contract. A call
option purchased by the Fund would give it the right to assume a position as the
purchaser of a futures contract. The purchase of an option on a futures contract
requires the Fund to pay a premium. In exchange for the premium, the Fund
becomes entitled to exercise the benefits, if any, provided by the futures
contract, but is not required to take any action under the contract. If the
option cannot be exercised profitably before it expires, the Fund's loss will be
limited to the amount of the premium and any transaction costs.
The Fund may enter into closing purchase and sale transactions in order
to terminate a futures contract and may sell put and call options for the
purpose of closing out its options positions. The Fund's ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that the Fund will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If the
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the contract and to complete
the contract according to its terms, in which case it would continue to bear
market risk on the transaction.
Although futures and options transactions are intended to enable the
Fund to manage market, interest rate or exchange rate risk, unanticipated
changes in interest rates or market prices could result in poorer performance
than if it had not entered into these transactions. Even if the investment
advisor correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of the Fund's futures position did not
correspond to changes in the value of its investments. This lack of correlation
between the Fund's futures and securities positions may be caused by differences
between the futures and securities markets or by differences between the
securities underlying the Fund's futures position and the securities held by or
to be purchased for the Fund. The Fund's investment advisor will attempt to
minimize these risks through careful selection and monitoring of the Fund's
futures and options positions.
The Fund does not intend to use futures transactions for speculation or
leverage. The Fund has the ability to write options on futures, but currently
intends to write such options only to close out options purchased by the Fund.
The Fund will not change these policies without supplementing the information in
the prospectus and SAI.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the aggregate,
the value of the open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the unrealized gain or loss on
those open positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is exceeded at
any time, the Fund will take prompt action to close out a sufficient number of
open contracts to bring its open futures and options positions within this
limitation.
"Margin" in Futures Transactions. Unlike the purchase or sale of a security, the
Fund does not pay or receive money upon the purchase or sale of a futures
contract. Rather the Fund is required to deposit an amount of "initial margin"
in cash or U.S. Treasury bills with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is different
from that of margin in securities transactions in that futures contract initial
margin does not involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or good
faith deposit on the contract which is returned to the Fund upon termination of
the futures contract, assuming all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market". Variation
margin does not represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value the Fund
will mark-to-market its open futures positions. The Fund is also required to
deposit and maintain margin when it writes call options on futures contracts.
<PAGE>
Foreign Securities
The Fund may invest in foreign securities or U.S. securities traded in
foreign markets. In addition to securities issued by foreign companies,
permissible investments may also consist of obligations of foreign branches of
U.S. banks and of foreign banks, including European certificates of deposit,
European time deposits, Canadian time deposits and Yankee certificates of
deposit. The Fund may also invest in Canadian commercial paper and Europaper.
These instruments may subject the Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. issuers. Such
risks include the possibility of adverse political and economic developments;
imposition of withholding taxes on interest or other income; seizure,
nationalization, or expropriation of foreign deposits; establishment of exchange
controls or taxation at the source; greater fluctuations in value due to changes
in exchange rates, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. Such investments may also entail higher custodial fees and sales
commissions than domestic investments. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those respecting domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks.
Foreign Currency Transactions
As one way of managing exchange rate risk, the Fund may enter into
forward currency exchange contracts (agreements to purchase or sell currencies
at a specified price and date). The exchange rate for the transaction (the
amount of currency the Fund will deliver and receive when the contract is
completed) is fixed when the Fund enters into the contract. The Fund usually
will enter into these contracts to stabilize the U.S. dollar value of a security
it has agreed to buy or sell. The Fund intends to use these contracts to hedge
the U.S. dollar value of a security it already owns, particularly if the Fund
expects a decrease in the value of the currency in which the foreign security is
denominated. Although the Fund will attempt to benefit from using forward
contracts, the success of its hedging strategy will depend on the investment
advisor's ability to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar. The value of the Fund's investments
denominated in foreign currencies will depend on the relative strengths of those
currencies and the U.S. dollar, and the Fund may be affected favorably or
unfavorably by changes in the exchange rates or exchange control regulations
between foreign currencies and the U.S. dollar. Changes in foreign currency
exchange rates also may affect the value of dividends and interest earned, gains
and losses realized on the sale of securities and net investment income and
gains, if any, to be distributed to shareholders by the Fund. The Fund may also
purchase and sell options related to foreign currencies in connection with
hedging strategies.
High Yield, High Risk Bonds
The Fund may invest a portion of its assets in lower rated bonds. Bonds
rated below BBB by Standard & Poor's Ratings Services ("S&P") or Fitch IBCA,
Inc. ("Fitch") or below Baa by Moody's Investors Service, Inc. ("Moody's"),
commonly known as "junk bonds," offer high yields, but also high risk. While
investment in junk bonds provides opportunities to maximize return over time,
they are considered predominantly speculative with respect to the ability of the
issuer to meet principal and interest payments.
Investors should be aware of the following risks:
(1) The lower ratings of junk bonds reflect a greater possibility that
adverse changes in the financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates may impair the
ability of the issuer to make payments of interest and principal, especially if
the issuer is highly leveraged. Such issuer's ability to meet its debt
obligations may also be adversely affected by the issuer's inability to meet
specific forecasts or the unavailability of additional financing. Also, an
economic downturn or an increase in interest rates may increase the potential
for default by the issuers of these securities.
(2) The value of junk bonds may be more susceptible to real or
perceived adverse economic or political events than is the case for higher
quality bonds.
(3) The value of junk bonds, like those of other fixed income
securities, fluctuates in response to changes in interest rates, generally
rising when interest rates decline and falling when interest rates rise. For
example, if interest rates increase after a fixed income security is purchased,
the security, if sold prior to maturity, may return less than its cost. The
prices of junk bonds, however, are generally less sensitive to interest rate
changes than the prices of higher-rated bonds, but are more sensitive to news
about an issuer or the economy which is, or investors perceive as, negative.
(4) The secondary market for junk bonds may be less liquid at certain
times than the secondary market for higher quality bonds, which may adversely
effect (a) the bond's market price, (b) the Fund's ability to sell the bond and
the Fund's ability to obtain accurate market quotations for purposes of valuing
its assets.
For bond ratings descriptions, see "Corporate and Municipal Bond
Ratings" below.
Illiquid and Restricted Securities
The Fund may not invest more than 15% of its net assets in securities
that are illiquid. A security is illiquid when the Fund cannot dispose of it in
the ordinary course of business within seven days at approximately the value at
which the Fund has the investment on its books.
The Fund may invest in "restricted" securities, i.e., securities
subject to restrictions on resale under federal securities laws. Rule 144A under
the Securities Act of 1933 ("Rule 144A") allows certain restricted securities to
trade freely among qualified institutional investors. Since Rule 144A securities
may have limited markets, the Board of Trustees will determine whether such
securities should be considered illiquid for the purpose of determining the
Fund's compliance with the limit on illiquid securities indicated above. In
determining the liquidity of Rule 144A securities, the Trustees will consider:
(1) the frequency of trades and quotes for the security; (2) the number of
dealers willing to purchase or sell the security and the number of other
potential buyers; (3) dealer undertakings to make a market in the security; and
(4) the nature of the security and the nature of the marketplace trades.
Investment in Other Investment Companies
The Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, the Fund may not (1) own more
than 3% of the outstanding voting stocks of another investment company, (2)
invest more than 5% of its assets in any single investment company, and (3)
invest more than 10% of its assets in investment companies. However, the Fund
may invest all of its investable assets in securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund. Investing in other investment
companies may expose a Fund to duplicate expenses and lower its value.
Short Sales
A short sale is the sale of a security the Fund has borrowed. The Fund
expects to profit from a short sale by selling the borrowed security for more
than the cost of buying it to repay the lender. After a short sale is completed,
the value of the security sold short may rise. If that happens, the cost of
buying it to repay the lender may exceed the amount originally received for the
sale by the Fund.
The Fund may engage in short sales, but it may not make short sales of
securities or maintain a short position unless, at all times when a short
position is open, it owns an equal amount of such securities or of securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities of the same issue as, and equal in amount to, the
securities sold short. The Fund may effect a short sale in connection with an
underwriting in which the Fund is a participant.
Municipal Bonds
The Fund may invest in municipal bonds of any state, territory or
possession of the United States ("U.S."), including the District of Columbia.
The Fund may also invest in municipal bonds of any political subdivision, agency
or instrumentality (e.g., counties, cities, towns, villages, districts,
authorities) of the U.S. or its possessions. Municipal bonds are debt
instruments issued by or for a state or local government to support its general
financial needs or to pay for special projects such as airports, bridges,
highways, public transit, schools, hospitals, housing and water and sewer works.
Municipal bonds may also may be issued to refinance public debt.
Municipal bonds are mainly divided between "general obligation" and
"revenue" bonds. General obligation bonds are backed by the full faith and
credit of governmental issuers with the power to tax. They are repaid from the
issuer's general revenues. Payment, however, may be dependent upon legislative
approval and may be subject to limitations on the issuer's taxing power.
Enforcement of payments due under general obligation bonds varies according to
the law applicable to the issuer. In contrast, revenue bonds are supported only
by the revenues generated by the project or facility.
The Fund may also invest in industrial development bonds. Such bonds
are usually revenue bonds issued to pay for facilities with a public purpose
operated by private corporations. The credit quality of industrial development
bonds is usually directly related to the credit standing of the owner or user of
the facilities. To qualify as a municipal bond, the interest paid on an
industrial development bond must qualify as fully exempt from federal income
tax. However, the interest paid on an industrial development bond may be subject
to the federal alternative minimum tax.
The yields on municipal bonds depend on such factors as market
conditions, the financial condition of the issuer and the issue's size, maturity
date and rating. Municipal bonds are rated by S&P, Moody's and Fitch. Such
ratings, however, are opinions, not absolute standards of quality. Municipal
bonds with the same maturity, interest rates and rating may have different
yields, while municipal bonds with the same maturity and interest rate, but
different ratings, may have the same yield. Once purchased by the Fund, a
municipal bond may cease to be rated or receive a new rating below the minimum
required for purchase by the Fund. Neither event would require the Fund to sell
the bond, but the Fund's investment advisor would consider such events in
determining whether the Fund should continue to hold it.
The ability of the Fund to achieve its investment objective depends
upon the continuing ability of issuers of municipal bonds to pay interest and
principal when due. Municipal bonds are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors. Such
laws extend the time for payment of principal and/or interest, and may otherwise
restrict the Fund's ability to enforce its rights in the event of default. Since
there is generally less information available on the financial condition of
municipal bond issuers compared to other domestic issuers of securities, the
Fund's investment advisor may lack sufficient knowledge of an issue's
weaknesses. Other influences, such as litigation, may also materially affect the
ability of an issuer to pay principal and interest when due. In addition, the
market for municipal bonds is often thin and can be temporarily affected by
large purchases and sales, including those by the Fund.
From time to time, Congress has considered restricting or eliminating
the federal income tax exemption for interest on municipal bonds. Such actions
could materially affect the availability of municipal bonds and the value of
those already owned by the Fund. If such legislation were passed, the Trust's
Board of Trustees may recommend changes in the Fund's investment objectives and
policies or dissolution of the Fund.
Virgin Islands, Guam and Puerto Rico
The Fund may invest in obligations of the governments of the Virgin
Islands, Guam and Puerto Rico to the extent such obligations are exempt from the
income or intangibles taxes, as applicable, of the state for which the Fund is
named. The Fund does not presently intend to invest more than (a) 10% of its net
assets in the obligations of each of the Virgin Islands and Guam or (b) 25% of
its net assets in the obligations of Puerto Rico. Accordingly, the Fund may be
adversely affected by local political and economic conditions and developments
within the Virgin Islands, Guam and Puerto Rico affecting the issuers of such
obligations.
Master Demand Notes
The Fund may invest in master demand notes. These are unsecured
obligations that permit the investment of fluctuating amounts by the Fund at
varying rates of interest pursuant to direct arrangements between the Fund, as
lender, and the issuer, as borrower. Master demand notes may permit daily
fluctuations in the interest rate and daily changes in the amounts borrowed. The
Fund has the right to increase the amount under the note at any time up to the
full amount provided by the note agreement, or to decrease the amount. The
borrower may repay up to the full amount of the note without penalty. Master
demand notes permit the Fund to demand payment of principal and accrued interest
at any time (on not more than seven days' notice). Notes acquired by the Fund
may have maturities of more than one year, provided that (1) the Fund is
entitled to payment of principal and accrued interest upon not more than seven
days' notice, and (2) the rate of interest on such notes is adjusted
automatically at periodic intervals, which normally will not exceed 31 days, but
may extend up to one year. The notes are deemed to have a maturity equal to the
longer of the period remaining to the next interest rate adjustment or the
demand notice period. Because these types of notes are direct lending
arrangements between the lender and borrower, such instruments are not normally
traded and there is no secondary market for these notes, although they are
redeemable and thus repayable by the borrower at face value plus accrued
interest at any time. Accordingly, the Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. In
connection with master demand note arrangements, the Fund`s investment advisor
considers, under standards established by the Board of Trustees, earning power,
cash flow and other liquidity ratios of the borrower and will monitor the
ability of the borrower to pay principal and interest on demand. These notes are
not typically rated by credit rating agencies. Unless rated, the Fund may invest
in them only if at the time of an investment the issuer meets the criteria
established for high quality commercial paper, i.e., rated A-1 by S&P, Prime-1
by Moody's or F-1 by Fitch.
Brady Bonds
The Fund may also invest in Brady Bonds. Brady Bonds are created
through the exchange of existing commercial bank loans to foreign entities for
new obligations in connection with debt restructurings under a plan introduced
by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan").
Brady Bonds have been issued only recently, and, accordingly, do not have a long
payment history. They may be collateralized or uncollateralized and issued in
various currencies (although most are U.S. dollar-denominated) and they are
actively traded in the over-the-counter secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be
fixed-rate par bonds or floating rate discount bonds, are generally
collateralized in full as to principal due at maturity by U.S. Treasury zero
coupon obligations that have the same maturity as the Brady Bonds. Interest
payments on these Brady Bonds generally are collateralized by cash or securities
in an amount that, in the case of fixed rate bonds, is equal to at least one
year of rolling interest payments based on the applicable interest rate at that
time and is adjusted at regular intervals thereafter. Certain Brady Bonds are
entitled to "value recovery payments" in certain circumstances, which in effect
constitute supplemental interest payments, but generally are not collateralized.
Brady Bonds are often viewed as having up to four valuation components: (1)
collateralized repayment of principal at final maturity, (2) collateralized
interest payments, (3) uncollateralized interest payments, and (4) any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In the event of a default with respect
to collateralized Brady Bonds as a result of which the payment obligations of
the issuer are accelerated, the U.S. Treasury zero coupon obligations held as
collateral for the payment of principal will not be distributed to investors,
nor will such obligations be sold and the proceeds distributed. The collateral
will be held by the collateral agent to the scheduled maturity of the defaulted
Brady Bonds, which will continue to be outstanding, at which time the face
amount of the collateral will equal the principal payments that would have then
been due on the Brady Bonds in the normal course. In addition, in light of the
residual risk of Brady Bonds and, among other factors, the history of defaults
with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, investments in Brady Bonds are to be viewed as
speculative.
Obligations of Foreign Branches of United States Banks
The Fund may invest in obligations of foreign branches of U.S. banks.
These may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by
government regulation. Payment of interest and principal upon these obligations
may also be affected by governmental action in the country of domicile of the
branch (generally referred to as sovereign risk). In addition, evidences of
ownership of such securities may be held outside the U.S. and the Fund may be
subject to the risks associated with the holding of such property overseas.
Examples of governmental actions would be the imposition of currency controls,
interest limitations, withholding taxes, seizure of assets or the declaration of
a moratorium. Various provisions of federal law governing domestic branches do
not apply to foreign branches of domestic banks.
Obligations of United States Branches of Foreign Banks
The Fund may invest in obligations of U.S. branches of foreign banks.
These may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by federal
and state regulation as well as by governmental action in the country in which
the foreign bank has its head office. In addition, there may be less publicly
available information about a U.S. branch of a foreign bank than about a
domestic bank.
Payment-in-kind Securities
The Fund may invest in payment-in-kind ("PIK") securities. PIKs pay
interest in either cash or additional securities, at the issuer's option, for a
specified period. The issuer's option to pay in additional securities typically
ranges from one to six years, compared to an average maturity for all PIK
securities of eleven years. Call protection and sinking fund features are
comparable to those offered on traditional debt issues.
PIKs, like zero coupon bonds, are designed to give an issuer
flexibility in managing cash flow. Several PIKs are senior debt. In other cases,
where PIKs are subordinated, most senior lenders view them as equity
equivalents.
An advantage of PIKs for the issuer -- as with zero coupon securities
- -- is that interest payments are automatically compounded (reinvested) at the
stated coupon rate, which is not the case with cash-paying securities. However,
PIKs are gaining popularity over zeros since interest payments in additional
securities can be monetized and are more tangible than accretion of a discount.
As a group, PIK bonds trade flat (i.e., without accrued interest).
Their price is expected to reflect an amount representing accredit interest
since the last payment. PIKs generally trade at higher yields than comparable
cash-paying securities of the same issuer. Their premium yield is the result of
the lesser desirability of non-cash interest, the more limited audience for
non-cash paying securities, and the fact that many PIKs have been issued to
equity investors who do not normally own or hold such securities.
Calculating the true yield on a PIK security requires a discounted cash
flow analysis if the security (ex interest) is trading at a premium or a
discount because the realizable value of additional payments is equal to the
current market value of the underlying security, not par.
Regardless of whether PIK securities are senior or deeply subordinated,
issuers are highly motivated to retire them because they are usually their most
costly form of capital.
Zero Coupon "Stripped" Bonds
The Fund may invest in zero coupon "stripped" bonds. These represent
ownership in serially maturing interest payments or principal payments on
specific underlying notes and bonds, including coupons relating to such notes
and bonds. The interest and principal payments are direct obligations of the
issuer. Interest zero coupon bonds of any series mature periodically from the
date of issue of such series through the maturity date of the securities related
to such series. Principal zero coupon bonds mature on the date specified
therein, which is the final maturity date of the related securities. Each zero
coupon bond entitles the holder to receive a single payment at maturity. There
are no periodic interest payments on a zero coupon bond. Zero coupon bonds are
offered at discounts from their face amounts.
In general, owners of zero coupon bonds have substantially all the
rights and privileges of owners of the underlying coupon obligations or
principal obligations. Owners of zero coupon bonds have the right upon default
on the underlying coupon obligations or principal obligations to proceed
directly and individually against the issuer and are not required to act in
concert with other holders of zero coupon bonds.
For federal income tax purposes, a purchaser of principal zero coupon
bonds or interest zero coupon bonds (either initially or in the secondary
market) is treated as if the buyer had purchased a corporate obligation issued
on the purchase date with an original issue discount equal to the excess of the
amount payable at maturity over the purchase price. The purchaser is required to
take into income each year as ordinary income an allocable portion of such
discounts determined on a "constant yield" method. Any such income increases the
holder's tax basis for the zero coupon bond, and any gain or loss on a sale of
the zero coupon bonds relative to the holder's basis, as so adjusted, is a
capital gain or loss. If the holder owns both principal zero coupon bonds and
interest zero coupon bonds representing interest in the same underlying issue of
securities, a special basis allocation rule (requiring the aggregate basis to be
allocated among the items sold and retained based on their relative fair market
value at the time of sale) may apply to determine the gain or loss on a sale of
any such zero coupon bonds.
Mortgage-Backed or Asset-Backed Securities
The Fund may invest in mortgage-backed securities and asset-backed
securities. Two principal types of mortgage-backed securities are collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs"). CMOs are securities collateralized by mortgages, mortgage
pass-throughs, mortgage pay-through bonds (bonds representing an interest in a
pool of mortgages where the cash flow generated from the mortgage collateral
pool is dedicated to bond repayment), and mortgage-backed bonds (general
obligations of the issuers payable out of the issuers' general funds and
additionally secured by a first lien on a pool of single family detached
properties). Many CMOs are issued with a number of classes or series which have
different maturities and are retired in sequence.
Investors purchasing CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligation is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-throughs to be prepaid prior to their
stated maturity. Although some of the mortgages underlying CMOs may be supported
by various types of insurance, and some CMOs may be backed by GNMA certificates
or other mortgage pass-throughs issued or guaranteed by U.S. government agencies
or instrumentalities, the CMOs themselves are not generally guaranteed.
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.
In addition to mortgage-backed securities, the Fund may invest in
securities secured by other assets including company receivables, truck and auto
loans, leases, and credit card receivables. These issues may be traded
over-the-counter and typically have a short-intermediate maturity structure
depending on the pay down characteristics of the underlying financial assets
which are passed through to the security holder.
Credit card receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. Most issuers of
asset-backed securities backed by automobile receivables permit the servicers of
such receivables to retain possession of the underlying obligations. If the
servicers were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
rated asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of asset-backed securities backed by
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
In general, issues of asset-backed securities are structured to include
additional collateral and/or additional credit support to protect against the
risk that a portion of the collateral supporting the asset-backed securities may
default and/or may suffer from these defects. In evaluating the strength of
particular issues of asset-backed securities, the investment advisor considers
the financial strength of the guarantor or other provider of credit support, the
type and extent of credit enhancement provided as well as the documentation and
structure of the issue itself and the credit support.
Variable or Floating Rate Instruments
The Fund may invest in variable or floating rate instruments which may
involve a demand feature and may include variable amount master demand notes
which may or may not be backed by bank letters of credit. Variable or floating
rate instruments bear interest at a rate which varies with changes in market
rates. The holder of an instrument with a demand feature may tender the
instrument back to the issuer at par prior to maturity. A variable amount master
demand note is issued pursuant to a written agreement between the issuer and the
holder, its amount may be increased by the holder or decreased by the holder or
issuer, it is payable on demand, and the rate -of interest varies based upon an
agreed formula. The quality of the underlying credit must, in the opinion of the
investment advisor, be equivalent to the long-term bond or commercial paper
ratings applicable to permitted investments for the Fund. The investment advisor
will monitor, on an ongoing basis, the earning power, cash flow, and liquidity
ratios of the issuers of such instruments and will similarly monitor the ability
of an issuer of a demand instrument to pay principal and interest on demand.
Limited Partnerships
The Fund may invest in limited and master limited partnerships. A
limited partnership is a partnership consisting of one or more general partners,
jointly and severally responsible as ordinary partners, and by whom the business
is conducted, and one or more limited partners who contribute cash as capital to
the partnership and who generally are not liable for the debts of the
partnership beyond the amounts contributed. Limited partners are not involved in
the day-to-day management of the partnership. They receive income, capital gains
and other tax benefits associated with the partnership project in accordance
with terms established in the partnership agreement. Typical limited
partnerships are in real estate, oil and gas and equipment leasing, but they
also finance movies, research and development, and other projects.
For an organization classified as a partnership under the Internal
Revenue Code of 1986, as amended (the "Code"), each item of income, gain, loss,
deduction, and credit is not taxed at the partnership level but flows through to
the holder of the partnership unit. This allows the partnership to avoid double
taxation and to pass through income to the holder of the partnership unit at
lower individual rates.
A master limited partnership is a publicly traded limited partnership.
The partnership units are registered with the Securities and Exchange Commission
("SEC") and are freely exchanged on a securities exchange or in the
over-the-counter market.
PURCHASE AND REDEMPTION OF SHARES
You may buy shares of the Fund through EDI, broker-dealers that have
entered into special agreements with EDI or certain other financial
institutions. With certain exceptions, the Fund may offer up to four different
classes of shares that differ primarily with respect to sales charges and
distribution fees. Depending upon the class of shares, you will pay an initial
sales charge when you buy the Fund's shares, a contingent deferred sales charge
(a "CDSC") when you redeem the Fund's shares or no sales charges at all. Each
Fund offers different classes of shares. Refer to the prospectus to determine
which classes of shares are offered by each Fund.
Class A Shares
With certain exceptions, when you purchase Class A shares you will pay
a maximum sales charge of 4.75%. The prospectus contains a complete table of
applicable sales charges and a discussion of sales charge reductions or waivers
that may apply to purchases. If you purchase Class A shares in the amount of $1
million or more, without an initial sales charge, the Fund will charge a CDSC of
1.00% if you redeem during the month of your purchase or the 12-month period
following the month of your purchase (see "Contingent Deferred Sales Charge"
below).
No front-end sales charges are imposed on Class A shares purchased by
(a) institutional investors, which may include bank trust departments and
registered investment advisors; (b) investment advisors, consultants or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge such clients a management, consulting, advisory or
other fee; (c) clients of investment advisors or financial planners who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisors or financial planners on the books of the
broker-dealer through whom shares are purchased; (d) institutional clients of
broker-dealers, including retirement and deferred compensation plans and the
trusts used to fund these plans, which place trades through an omnibus account
maintained with the Fund by the broker-dealer; (e) shareholders of record on
October 12, 1990 in any series of Evergreen Investment Trust in existence on
that date, and the members of their immediate families; (f) current and retired
employees of First Union National Bank ("FUNB") and its affiliates, EDI and any
broker-dealer with whom EDI has entered into an agreement to sell shares of the
Fund, and members of the immediate families of such employees; and (g) upon the
initial purchase of an Evergreen fund by investors reinvesting the proceeds from
a redemption within the preceding 30 days of shares of other mutual funds,
provided such shares were initially purchased with a front-end sales charge or
subject to a CDSC.
Class B Shares
The Fund offers Class B shares at net asset value without an initial
sales charge. With certain exceptions, however, the Fund will charge a CDSC on
shares you redeem within 72 months after the month of your purchase, in
accordance with the following schedule:
REDEMPTION TIME CDSC RATE
Month of purchase and the first 12-month
period following the month of purchase. ...................................5.00%
Second 12-month period following the month of purchase.....................4.00%
Third 12-month period following the month of purchase......................3.00%
Fourth 12-month period following the month of purchase.....................3.00%
Fifth 12-month period following the month of purchase......................2.00%
Sixth 12-month period following the month of purchase......................1.00%
Thereafter.................................................................0.00%
Class B shares that have been outstanding for seven years after the
month of purchase will automatically convert to Class A shares without
imposition of a front-end sales charge or exchange fee. Conversion of Class B
shares represented by stock certificates will require the return of the stock
certificate to ESC.
Class C Shares
Class C shares are available only through broker-dealers who have
entered into special distribution agreements with EDI. The Fund offers Class C
shares at net asset value without an initial sales charge. With certain
exceptions, however, the Fund will charge a CDSC of 1.00% on shares you redeem
within 12-months after the month of your purchase. See "Contingent Deferred
Sales Charge" below.
Class Y Shares
No CDSC is imposed on the redemption of Class Y shares. Class Y shares
are not offered to the general public and are available only to (1) persons who
at or prior to December 31, 1994 owned shares in a mutual fund advised by (2)
certain institutional investors and (3) investment advisory clients of an
investment advisor of an Evergreen Fund or the advisor's affiliates. Class Y
shares are offered at net asset value without a front-end or back-end sales
charge and do not bear any Rule 12b-1 distribution expenses.
INSTITUTIONAL SHARES, INSTITUTIONAL SERVICE SHARES
Each institutional class of shares is sold without a front-end sales
charge or contingent deferred sales charge. Institutional Service shares pay an
ongoing service fee. The minimum initial investment in any institutional class
of shares is $1 million, which may be waived in certain circumstances. There is
no minimum amount required for subsequent purchases.
<PAGE>
Contingent Deferred Sales Charge
The Fund charges a CDSC as reimbursement for certain expenses, such as
commissions or shareholder servicing fees, that it has incurred in connection
with the sale of its shares (see "Distribution Expenses Under Rule 12b-1,"
below). Institutional, Institutional Service and Charitable shares do not charge
a CDSC. If imposed, the Fund deducts the CDSC from the redemption proceeds you
would otherwise receive. The CDSC is a percentage of the lesser of (1) the net
asset value of the shares at the time of redemption or (2) the shareholder's
original net cost for such shares. Upon request for redemption, to keep the CDSC
a shareholder must pay as low as possible, the Fund will first seek to redeem
shares not subject to the CDSC and/or shares held the longest, in that order.
The CDSC on any redemption is, to the extent permitted by the National
Association of Securities Dealers, Inc., paid to EDI or its predecessor.
SALES CHARGE WAIVERS AND REDUCTIONS
The following information is not applicable to Institutional,
Institutional Service and Charitable shares.
If you making a large purchase, there are several ways you can combine
multiple purchases of Class A shares in Evergreen Funds and take advantage of
lower sales charges. These are described below.
Combined Purchases
You can reduce your sales charge by combining purchases of Class A
shares of multiple Evergreen Funds. For example, if you invested $75,000 in each
of two different Evergreen Funds, you would pay a sales charge based on a
$150,000 purchase (i.e., 3.75% of the offering price, rather than 4.75%).
Rights of Accumulation
You can reduce your sales charge by adding the value of Class A shares
of Evergreen Funds you already own to the amount of your next Class A
investment. For example, if you hold Class A shares valued at $99,999 and
purchase an additional $5,000, the sales charge for the $5,000 purchase would be
at the next lower sales charge of 3.75%, rather than 4.75%.
Your account, and therefore your rights of accumulation, can be linked
to immediate family members which includes father and mother, brothers and
sisters, and sons and daughters. The same rule applies with respect to
individual retirement plans. Please note, however, that retirement plans
involving employees stand alone and do not pass on rights of accumulation.
Letter of Intent
You can, by completing the "Letter of Intent" section of the
application, purchase Class A shares over a 13-month period and receive the same
sales charge as if you had invested all the money at once. All purchases of
Class A shares of an Evergreen Fund during the period will qualify as Letter of
Intent purchases.
<PAGE>
Waiver of Initial Sales Charges
The Fund may sell its shares at net asset value without an initial
sales charge to:
1. purchasers of shares in the amount of $1 million or more;
2. a corporate or certain other qualified retirement plan or a
non-qualified deferred compensation plan or a Title 1
tax-sheltered annuity or TSA plan sponsored by an organization
having 100 or more eligible employees (a "Qualifying Plan") or
a TSA plan sponsored by a public educational entity having
5,000 or more eligible employees (an "Educational TSA Plan");
3. institutional investors, which may include bank trust
departments and registered investment advisors;
4. investment advisors, consultants or financial planners who
place trades for their own accounts or the accounts of their
clients and who charge such clients a management, consulting,
advisory or other fee;
5. clients of investment advisors or financial planners who place
trades for their own accounts if the accounts are linked to a
master account of such investment advisors or financial
planners on the books of the broker-dealer through whom shares
are purchased;
6. institutional clients of broker-dealers, including retirement
and deferred compensation plans and the trusts used to fund
these plans, which place trades through an omnibus account
maintained with the Fund by the broker-dealer;
7. employees of FUNB, its affiliates, EDI, any broker-dealer with
whom EDI, has entered into an agreement to sell shares of the
Fund, and members of the immediate families of such employees;
8. certain Directors, Trustees, officers and employees of the
Evergreen Funds, EDI or their affiliates and to the immediate
families of such persons; or
9. a bank or trust company in a single account in the name of
such bank or in or any of the Evergreen Funds trust company as
Trustee if the initial investment made pursuant to this waiver
is at least $500,000 and any commission paid at the time of
such purchase is not more than 1% of the amount invested.
With respect to items 8 and 9 above, the Fund will only sell shares to
these parties upon the purchasers written assurance that the purchase is for
their personal investment purposes only. Such purchasers may not resell the
securities except through redemption by the Fund. The Fund will not charge any
CDSC on redemptions by such purchasers.
<PAGE>
Waiver of CDSCS
The Fund does not impose a CDSC when the shares you are redeeming
represent:
1. an increase in the share value above the net cost of such
shares;
2. certain shares for which the Fund did not pay a commission on
issuance, including shares acquired through reinvestment of
dividend income and capital gains distributions;
3. shares that are in the accounts of a shareholder who has died
or become disabled;
4. a lump-sum distribution from a 401(k) plan or other benefit
plan qualified under the Employee Retirement Income Security
Act of 1974 ("ERISA");
5. an automatic withdrawal from the ERISA plan of a shareholder
who is a least 59 years old;
6. shares in an account that we have closed because the account
has an aggregate net asset value of less than $1,000;
7. an automatic withdrawal under an Systematic Income Plan of up
to 1.0% per month of your initial account balance;
8. a withdrawal consisting of loan proceeds to a retirement plan
participant;
9. a financial hardship withdrawal made by a retirement plan
participant;
10. a withdrawal consisting of returns of excess contributions or
excess deferral amounts made to a retirement plan; or
11. a redemption by an individual participant in a Qualifying Plan
that purchased Class C shares (this waiver is not available in
the event a Qualifying Plan, as a whole, redeems substantially
all of its assets).
Exchanges
Investors may exchange shares of the Fund for shares of the same class
of any other Evergreen fund which offers the same class of shares. Shares of any
class of the Evergreen Select Funds may be exchanged for the same class of
shares of any other Evergreen Select Fund. See "By Exchange" under "How to Buy
Shares" in the prospectus. Before you make an exchange, you should read the
prospectus of the Evergreen Fund into which you want to exchange. The Trust's
Board of Trustees reserves the right to discontinue, alter or limit the exchange
privilege at any time.
Automatic Reinvestment
As described in the prospectus, a shareholder may elect to receive
dividends and capital gains distributions in cash instead of shares. However,
ESC will automatically reinvest all dividends and distributions in additional
shares when it learns that the postal or other delivery service is unable to
deliver checks or transaction confirmations to the shareholder's address of
record. When a check is returned, the Fund will hold the check amount in a
no-interest account in the shareholder's name until the shareholder updates his
or her address or automatic reinvestment begins. Uncashed or returned redemption
checks will also be handled in the manner described above.
PRICING OF SHARES
Calculation of Net Asset Value
The Fund calculates its net asset value ("NAV") once daily on Monday
through Friday, as described in the prospectus. The Fund will not compute its
NAV on the days the New York Stock Exchange is closed: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
The NAV of the Fund is calculated by dividing the value of the Fund's
net assets attributable to that class by all of the shares issued for that
class.
Valuation of Portfolio Securities
Current values for the Fund's portfolio securities are determined as
follows:
(1) Securities that are traded on an established securities exchange or
the over-the-counter National Market System ("NMS") are valued on the
basis of the last sales price on the exchange where primarily traded or
on the NMS prior to the time of the valuation, provided that a sale has
occurred.
(2) Securities traded on an established securities exchange or in the
over-the-counter market for which there has been no sale and other
securities traded in the over-the-counter market are valued at the mean
of the bid and asked prices at the time of valuation.
(3) Short-term investments maturing in more than 60 days, for which
market quotations are readily available, are valued at current market
value.
(4) Short-term investments maturing in sixty days or less are valued at
amortized cost, which approximates market.
(5) Securities, including restricted securities, for which market
quotations are not readily available; listed securities or those on NMS
if, in the investment advisor's opinion, the last sales price does not
reflect an accurate current market value; and other assets are valued
at prices deemed in good faith to be fair under procedures established
by the Board of Trustees.
(6) Municipal bonds are valued by an independent pricing service at
fair value using a variety of factors which may include yield,
liquidity, interest rate risk, credit quality, coupon, maturity and
type of issue.
<PAGE>
PERFORMANCE CALCULATIONS
Total Return
Total return quotations for a class of shares of the Fund as they may
appear from time to time in advertisements are calculated by finding the average
annual compounded rates of return over one, five and ten year periods, or the
time periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. To the initial
investment all dividends and distributions are added, and all recurring fees
charged to all shareholder accounts are deducted. The ending redeemable value
assumes a complete redemption at the end of the relevant periods.
The following is the formula used to calculate average annual total
return:
[OBJECT OMITTED]
P = initial payment of $1,000 T = average total return N = number of
years
ERV = ending redeemable value of the initial $1,000
Yield
Described below are yield calculations the Fund may use. Yield
quotations are expressed in annualized terms and may be quoted on a compounded
basis. Yields based on these calculations do not represent the Fund's yield for
any future period.
30-Day Yield
If the Fund invests primarily in bonds, it may quote its 30-day yield
in advertisements or in reports or other communications to shareholders. It is
calculated by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:
[OBJECT OMITTED] [OBJECT OMITTED]
Where:
a = Dividends and interest earned during the period b = Expenses
accrued for the period (net of reimbursements) c = The average daily
number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the period
7-Day Current and Effective Yield
If the Fund invests primarily in money market instruments, it may quote
its 7-day current yield or effective yield in advertisements or in reports or
other communications to shareholders.
The current yield is calculated by determining the net change,
excluding capital changes and income other than investment income, in the value
of a hypothetical, pre-existing account having a balance of one share at the
beginning of the 7-day base period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7).
The effective yield is based on a compounding of the current yield,
according to the following formula:
[OBJECT OMITTED]
Tax Equivalent Yield
If the Fund invests primarily in municipal bonds, it may quote in
advertisements or in reports or other communications to shareholders a tax
equivalent yield, which is what an investor would generally need to earn from a
fully taxable investment in order to realize, after income taxes, a benefit
equal to the tax free yield provided by the Fund. Tax equivalent yield is
calculated using the following formula:
[OBJECT OMITTED]
The quotient is then added to that portion, if any, of the
Fund's yield that is not tax exempt. Depending on the Fund's objective, the
income tax rate used in the formula above may be federal or a combination of
federal and state.
PRINCIPAL UNDERWRITER
EDI is the principal underwriter for the Trust and with respect to each
class of shares of the Fund. The Trust has entered into a Principal Underwriting
Agreement ("Underwriting Agreement") with EDI with respect to each class of the
Fund. EDI is a subsidiary of The BISYS Group, Inc.
EDI, as agent, has agreed to use its best efforts to find purchasers
for the shares. EDI may retain and employ representatives to promote
distribution of the shares and may obtain orders from broker-dealers, and
others, acting as principals, for sales of shares to them. The Underwriting
Agreement provides that EDI will bear the expense of preparing, printing, and
distributing advertising and sales literature and prospectuses used by it.
All subscriptions and sales of shares by EDI are at the public offering
price of the shares, which is determined in accordance with the provisions of
the Trust's Declaration of Trust, By-Laws, current prospectuses and SAI. All
orders are subject to acceptance by the Fund and the Fund reserves the right, in
its sole discretion, to reject any order received. Under the Underwriting
Agreement, the Fund is not liable to anyone for failure to accept any order.
EDI has agreed that it will, in all respects, duly conform with all
state and federal laws applicable to the sale of the shares. EDI has also agreed
that it will indemnify and hold harmless the Trust and each person who has been,
is, or may be a Trustee or officer of the Trust against expenses reasonably
incurred by any of them in connection with any claim, action, suit, or
proceeding to which any of them may be a party that arises out of or is alleged
to arise out of any misrepresentation or omission to state a material fact on
the part of EDI or any other person for whose acts EDI is responsible or is
alleged to be responsible, unless such misrepresentation or omission was made in
reliance upon written information furnished by the Trust.
The Underwriting Agreement provides that it will remain in effect as
long as its terms and continuance are approved annually (I) by a vote of a
majority of the Trust's Trustees who are not interested persons of the Fund, as
defined in the 1940 Act (the "Independent Trustees"), and (ii) by vote of a
majority of the Trust's Trustees, in each case, cast in person at a meeting
called for that purpose.
The Underwriting Agreement may be terminated, without penalty, on 60
days' written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its "assignment," as that term is defined in the
1940 Act.
From time to time, if, in EDI's judgment, it could benefit the sales of
shares, EDI may provide to selected broker-dealers promotional materials and
selling aids, including, but not limited to, personal computers, related
software, and data files.
DISTRIBUTION EXPENSES UNDER RULE 12b-1
The Fund bears some of the costs of selling its Class A, Class B, Class
C and Institutional Service shares, as applicable, including certain
advertising, marketing and shareholder service expenses, pursuant to Rule 12b-1
of the 1940 Act. These 12b-1 fees are indirectly paid by the shareholder, as
shown by the Fund's expense table in the prospectus.
Under the Distribution Plans (each a "Plan," together, the "Plans")
that the Fund has adopted for its Class A, Class B, Class C and Institutional
Service shares, as applicable, the Fund may incur expenses for 12b-1 fees up to
a maximum annual percentage of the average daily net assets attributable to a
class, as follows:
Class A 0.75%*
Class B 1.00%
Class C 1.00%
Institutional Service 0.75%*
* Currently limited to 0.25% or less to be used exclusively as
a shareholder service fee. See the expense table in the
prospectus of the Fund in which you are interested.
Of the amounts above, each class may pay under its Plan a maximum
service fee of 0.25% to compensate organizations, which may include the Fund's
investment advisor or its affiliates, for personal services provided to
shareholders and the maintenance of shareholder accounts. The Fund may not,
during any fiscal period, pay distribution or service fees greater than the
amounts above.
Amounts paid under the Plans are used to compensate EDI pursuant to
Distribution Agreements (each an "Agreement," together, the "Agreements") that
the Fund has entered into with respect to its Class A, Class B, Class C and
Institutional Service shares, as applicable. The compensation is based on a
maximum annual percentage of the average daily net assets attributable to a
class, as follows:
Class A 0.25%*
Class B 1.00%
Class C 1.00%
Institutional Service 0.25%*
*May be lower. See the expense table in the prospectus of the Fund in
which you are interested.
The Agreements provide that EDI will use the distribution fees received
from the Fund for the following purposes:
(1) to compensate broker-dealers or other persons for distributing
Fund shares;
(2) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's
shareholders; and
(3) to otherwise promote the sale of Fund shares.
The Agreements also provide that EDI may use distribution fees to make
interest and principal payments in respect of amounts that have been financed to
pay broker-dealers or other persons for distributing Fund shares. EDI may assign
its rights to receive compensation under the Plans to secure such financings.
FUNB or its affiliates may finance payments made by EDI to compensate
broker-dealers or other persons for distributing shares of the Fund.
In the event the Fund acquires the assets of another mutual fund,
compensation paid to EDI under the Agreements may be paid by the Fund's
Distributor to the acquired fund's distributor or its predecessor.
Since EDI's compensation under the Agreements is not directly tied to
the expenses incurred by EDI, the compensation received by it under the
Agreements during any fiscal year may be more or less than its actual expenses
and may result in a profit to EDI. Distribution expenses incurred by EDI in one
fiscal year that exceed the compensation paid to EDI for that year may be paid
from distribution fees received from the Fund in subsequent fiscal years.
Distribution fees are accrued daily and paid at least monthly on Class
B and Class C shares and are charged as class expenses, as accrued. The
distribution fees attributable to the Class B and Class C shares are designed to
permit an investor to purchase such shares through broker-dealers without the
assessment of a front-end sales charge, while at the same time permitting EDI to
compensate broker-dealers in connection with the sale of such shares.
Under the Plans, the Treasurer of the Trust reports the amounts
expended under the Plans and the purposes for which such expenditures were made
to the Trustees of the Trust for their review on a quarterly basis. Also, each
Plan provides that the selection and nomination of the Independent Trustees are
committed to the discretion of such Independent Trustees then in office.
The investment advisor may from time to time from its own funds or such
other resources as may be permitted by rules of the SEC make payments for
distribution services to EDI; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.
Each Plan and the Agreement will continue in effect for successive
12-month periods provided, however, that such continuance is specifically
approved at least annually by the Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities of that class and, in
either case, by a majority of the Independent Trustees of the Trust.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B, Class C and
Institutional Service shares. The Plans are designed to (i) stimulate brokers to
provide distribution and administrative support services to the Fund and holders
of Class A, Class B, Class C and Institutional Service shares and (ii) stimulate
administrators to render administrative support services to the Fund and holders
of Class A, Class B, Class C and Institutional Service shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding Class
A, Class B, Class C and Institutional Service shares; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as the Fund reasonably requests for its Class A, Class B,
Class C and Institutional Service shares.
In the event that the Plan or Distribution Agreement is terminated or
not continued with respect to one or more classes of the Fund, (i) no
distribution fees (other than current amounts accrued but not yet paid) would be
owed by the Fund to EDI with respect to that class or classes, and (ii) the Fund
would not be obligated to pay EDI for any amounts expended under the
Distribution Agreement not previously recovered by the EDI from distribution
services fees in respect of shares of such class or classes through deferred
sales charges.
All material amendments to any Plan or Agreement must be approved by a
vote of the Trustees of the Trust or the holders of the Fund's outstanding
voting securities, voting separately by class, and in either case, by a majority
of the Independent Trustees, cast in person at a meeting called for the purpose
of voting on such approval; and any Plan or Distribution Agreement may not be
amended in order to increase materially the costs that a particular class of
shares of the Fund may bear pursuant to the Plan or Distribution Agreement
without the approval of a majority of the holders of the outstanding voting
shares of the class affected. Any Plan or Distribution Agreement may be
terminated (i) by the Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting separately by
class or by a majority vote of the Independent Trustees, or (ii) by EDI. To
terminate any Distribution Agreement, any party must give the other parties 60
days' written notice; to terminate a Plan only, the Fund need give no notice to
EDI. Any Distribution Agreement will terminate automatically in the event of its
assignment. For more information about 12b-1 fees, see "Expenses" in the
prospectus and "12b-1 Fees" under "Expenses" in Part 1 of this SAI.
TAX INFORMATION
Requirements for Qualifications as a Regulated Investment Company
The Fund intends to qualify for and elect the tax treatment applicable
to regulated investment companies ("RIC") under Subchapter M of the Code, as
amended. (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a RIC, the Fund must, among other things, (i) derive at least 90% of
its gross income from dividends, interest, payments with respect to proceeds
from securities loans, gains from the sale or other disposition of securities or
foreign currencies and other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in such
securities; and (ii) diversify its holdings so that, at the end of each quarter
of its taxable year, (a) at least 50% of the market value of the Fund's total
assets is represented by cash, U.S. government securities and other securities
limited in respect of any one issuer, to an amount not greater than 5% of the
Fund's total assets and 10% of the outstanding voting securities of such issuer,
and (b) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. government securities and
securities of other regulated investment companies). By so qualifying, the Fund
is not subject to federal income tax if it timely distributes its investment
company taxable income and any net realized capital gains. A 4% nondeductible
excise tax will be imposed on the Fund to the extent it does not meet certain
distribution requirements by the end of each calendar year. The Fund anticipates
meeting such distribution requirements.
Taxes on Distributions
Unless the Fund is a municipal bond fund, distributions will be taxable
to shareholders whether made in shares or in cash. Shareholders electing to
receive distributions in the form of additional shares will have a cost basis
for federal income tax purposes in each share so received equal to the net asset
value of a share of the Fund on the reinvestment date.
To calculate ordinary income for federal income tax purposes,
shareholders must generally include dividends paid by the Fund from its
investment company taxable income (net taxable investment income plus net
realized short-term capital gains, if any). The Fund will include dividends it
receives from domestic corporations when the Fund calculates its gross
investment income. Unless the Fund is a municipal bond fund or U.S. Treasury or
U.S. Government money market fund, it anticipates that all or a portion of the
ordinary dividends which it pays will qualify for the 70% dividends-received
deduction for corporations. The Fund will inform shareholders of the amounts
that so qualify. If the Fund is a municipal bond fund or U.S. Treasury or U.S.
Government money market fund, none of its income will consist of corporate
dividends; therefore, none of its distributions will qualify for the 70%
dividends-received deduction for corporations.
From time to time, the Fund will distribute the excess of its net
long-term capital gains over its short-term capital loss to shareholders (i.e.,
capital gain dividends). For federal tax purposes, shareholders must include
such capital gain dividends when calculating their net long-term capital gains.
Capital gain dividends are taxable as net long-term capital gains to a
shareholder, no matter how long the shareholder has held the shares.
Distributions by the Fund reduce its NAV. A distribution that reduces
the Fund's NAV below a shareholder's cost basis is taxable as described above,
although from an investment standpoint, it is a return of capital. In
particular, if a shareholder buys Fund shares just before the Fund makes a
distribution, when the Fund makes the distribution the shareholder will receive
what is in effect a return of capital. Nevertheless, the shareholder may incur
taxes on the distribution. Therefore, shareholders should carefully consider the
tax consequences of buying Fund shares just before a distribution.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her federal income tax return. Each shareholder
should consult a tax advisor to determine the state and local tax implications
of Fund distributions.
If more than 50% of the value of the Fund's total assets at the end of
a fiscal year is represented by securities of foreign corporations and the Fund
elects to make foreign tax credits available to its shareholders, a shareholder
will be required to include in his gross income both cash dividends and the
amount the Fund advises him is his pro rata portion of income taxes withheld by
foreign governments from interest and dividends paid on the Fund's investments.
The shareholder may be entitled, however, to take the amount of such foreign
taxes withheld as a credit against his U.S. income tax, or to treat the foreign
tax withheld as an itemized deduction from his gross income, if that should be
to his advantage. In substance, this policy enables the shareholder to benefit
from the same foreign tax credit or deduction that he would have received if he
had been the individual owner of foreign securities and had paid foreign income
tax on the income therefrom. As in the case of individuals receiving income
directly from foreign sources, the credit or deduction is subject to a number of
limitations.
Special Tax Information for Municipal Bond Fund Shareholders
The Fund expects that substantially all of its dividends will be
"exempt interest dividends," which should be treated as excludable from federal
gross income. In order to pay exempt interest dividends, at least 50% of the
value of the Fund's assets must consist of federally tax-exempt obligations at
the close of each quarter. An exempt interest dividend is any dividend or part
thereof (other than a capital gain dividend) paid by the Fund with respect to
its net federally excludable municipal obligation interest and designated as an
exempt interest dividend in a written notice mailed to each shareholder not
later than 60 days after the close of its taxable year. The percentage of the
total dividends paid by the Fund with respect to any taxable year that qualifies
as exempt interest dividends will be the same for all shareholders of the Fund
receiving dividends with respect to such year. If a shareholder receives an
exempt interest dividend with respect to any share and such share has been held
for six months or less, any loss on the sale or exchange of such share will be
disallowed to the extent of the exempt interest dividend amount.
Any shareholder of the Fund who may be a "substantial user" (as defined
by the Code, as amended.) of a facility financed with an issue of tax-exempt
obligations or a "related person" to such a user should consult his tax advisor
concerning his qualification to receive exempt interest dividends should the
Fund hold obligations financing such facility.
Under regulations to be promulgated, to the extent attributable to
interest paid on certain private activity bonds, the Fund's exempt interest
dividends, while otherwise tax-exempt, will be treated as a tax preference item
for alternative minimum tax purposes. Corporate shareholders should also be
aware that the receipt of exempt interest dividends could subject them to
alternative minimum tax under the provisions of Section 56(g) of the Code
(relating to "adjusted current earnings").
Interest on indebtedness incurred or continued by shareholders to
purchase or carry shares of the Fund will not be deductible for federal income
tax purposes to the extent of the portion of the interest expense relating to
exempt interest dividends. Such portion is determined by multiplying the total
amount of interest paid or accrued on the indebtedness by a fraction, the
numerator of which is the exempt interest dividends received by a shareholder in
his taxable year and the denominator of which is the sum of the exempt interest
dividends and the taxable distributions out of the Fund's investment income and
long-term capital gains received by the shareholder.
Taxes on The Sale or Exchange of Fund Shares
Upon a sale or exchange of Fund shares, a shareholder will realize a
taxable gain or loss depending on his or her basis in the shares. A shareholder
must treat such gains or losses as a capital gain or loss if the shareholder
held the shares as capital assets. Capital gain on assets held for more than 12
months is generally subject to a maximum federal income tax rate of 20% for an
individual. Generally, the Code will not allow a shareholder to realize a loss
on shares he or she has sold or exchanged and replaced within a 61-day period
beginning 30 days before and ending 30 days after he or she sold or exchanged
the shares. The Code will not allow a shareholder to realize a loss on the sale
of Fund shares held by the shareholder for six months or less to the extent the
shareholder received exempt interest dividends on such shares. Moreover, the
Code will treat a shareholder's loss on shares held for six months or less as a
long-term capital loss to the extent the shareholder received distributions of
net capital gains on such shares.
Shareholders who fail to furnish their taxpayer identification numbers
to the Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisors about the applicability of the backup withholding provisions.
Other Tax Considerations
The foregoing discussion relates solely to U.S. federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
domestic corporations, partnerships, trusts and estates). It does not reflect
the special tax consequences to certain taxpayers (e.g., banks, insurance
companies, tax exempt organizations and foreign persons). Shareholders are
encouraged to consult their own tax advisors regarding specific questions
relating to federal, state and local tax consequences of investing in shares of
the Fund.
Each shareholder who is not a U.S. person should consult his or her tax advisor
regarding the U.S. and foreign tax consequences of ownership of shares of the
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 30% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
<PAGE>
BROKERAGE
Brokerage Commissions
If the Fund invests in equity securities, it expects to buy and sell
them through brokerage transactions for which commissions are payable. Purchases
from underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark-up
or reflect a dealer's mark-down. Where transactions are made in the
over-the-counter market, the Fund will deal with primary market makers unless
more favorable prices are otherwise obtainable.
If the Fund invests in fixed income securities, it expects to buy and
sell them directly from the issuer or an underwriter or market maker for the
securities. Generally, the Fund will not pay brokerage commissions for such
purchases. When the Fund buys a security from an underwriter, the purchase price
will usually include an underwriting commission or concession. The purchase
price for securities bought from dealers serving as market makers will similarly
include the dealer's mark up or reflect a dealer's mark down. When the Fund
executes transactions in the over-the-counter market, it will deal with primary
market makers unless more favorable prices are otherwise obtainable.
Selection of Brokers
When buying and selling portfolio securities, the advisor seeks brokers
who can provide the most benefit to the Fund. When selecting a broker, the
investment advisor will primarily look for the best price at the lowest
commission, but in the context of the broker's:
1. ability to provide the best net financial result to the Fund;
2. efficiency in handling trades;
3. ability to trade large blocks of securities;
4. readiness to handle difficult trades;
5. financial strength and stability; and
6. provision of "research services," defined as (a) reports and
analyses concerning issuers, industries, securities and
economic factors and (b) other information useful in making
investment decisions.
The Fund may pay higher brokerage commissions to a broker providing it
with research services, as defined in item 6, above. Pursuant to Section 28(e)
of the Securities Exchange Act of 1934, this practice is permitted if the
commission is reasonable in relation to the brokerage and research services
provided. Research services provided by a broker to the investment advisor do
not replace, but supplement, the services the investment advisor is required to
deliver to the Fund. It is impracticable for the investment advisor to allocate
the cost, value and specific application of such research services among its
clients because research services intended for one client may indirectly benefit
another.
When selecting a broker for portfolio trades, the investment advisor
may also consider the amount of Fund shares a broker has sold, subject to the
other requirements described above.
If the Fund is advised by EAMC, Lieber & Company, an affiliate of EAMC
and a member of the New York and American Stock Exchanges, will to the extent
practicable effect substantially all of the portfolio transactions effected on
those exchanges for the Fund.
Simultaneous Transactions
The investment advisor makes investment decisions for the Fund
independently of decisions made for its other clients. When a security is
suitable for the investment objective of more than one client, it may be prudent
for the investment advisor to engage in a simultaneous transaction, that is, buy
or sell the same security for more than one client. The investment advisor
strives for an equitable result in such transactions by using an allocation
formula. The high volume involved in some simultaneous transactions can result
in greater value to the Fund, but the ideal price or trading volume may not
always be achieved for the Fund.
ORGANIZATION
Description of Shares
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and classes of shares. Each share of
the Fund represents an equal proportionate interest with each other share of
that series and/or class. Upon liquidation, shares are entitled to a pro rata
share of the Trust based on the relative net assets of each series and/or class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.
Voting Rights
Under the terms of the Declaration of Trust, the Trust is not required
to hold annual meetings. At meetings called for the initial election of Trustees
or to consider other matters, each share is entitled to one vote for each dollar
of "NAV"applicable to such share. Shares generally vote together as one class on
all matters. Classes of shares of the Fund have equal voting rights. No
amendment may be made to the Declaration of Trust that adversely affects any
class of shares without the approval of a majority of the votes applicable to
the shares of that class. Shares have non-cumulative voting rights, which means
that the holders of more than 50% of the votes applicable to shares voting for
the election of Trustees can elect 100% of the Trustees to be elected at a
meeting and, in such event, the holders of the remaining shares voting will not
be able to elect any Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law (for such reasons as electing or removing Trustees, changing fundamental
policies, and approving advisory agreements or 12b-1 plans), unless and until
such time as less than a majority of the Trustees holding office have been
elected by shareholders, at which time, the Trustees then in office will call a
shareholders' meeting for the election of Trustees.
Limitation of Trustees' Liability
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
Banking Laws
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered, open-end investment companies such as the Trust. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment advisor, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer, FUNB and
its affiliates are subject to, and in compliance with, the aforementioned laws
and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in FUNB and its affiliates being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of
the Fund by its customers. If FUNB and its affiliates were prevented from
continuing to provide for services called for under the investment advisory
agreement, it is expected that the Trustees would identify, and call upon the
Fund's shareholders to approve a new investment advisor. If this were to occur,
it is not anticipated that the shareholders of the Fund would suffer any adverse
financial consequences.
INVESTMENT ADVISORY AGREEMENT
On behalf of the Fund, the Trust has entered into an investment
advisory agreement with the Fund's investment advisor (the "Advisory
Agreement"). Under the Advisory Agreement, and subject to the supervision of the
Trust's Board of Trustees, the investment advisor furnishes to the Fund (unless
the Fund is Evergreen Masters Fund ) investment advisory, management and
administrative services, office facilities, and equipment in connection with its
services for managing the investment and reinvestment of the Fund's assets. The
investment advisor pays for all of the expenses incurred in connection with the
provision of its services.
If the Fund is Evergreen Masters Fund, the Advisory Agreement is
similar to the above except that the investment advisor selects sub-advisors
(hereinafter referred to as "Managers") for the Fund and monitors each Manager's
investment program and results. The investment advisor has primary
responsibility under the multi-manager strategy to oversee the Managers,
including making recommendations to the Trust regarding the hiring, termination
and replacement of Managers.
The Fund pays for all charges and expenses, other than those
specifically referred to as being borne by the investment advisor, including,
but not limited to, (1) custodian charges and expenses; (2) bookkeeping and
auditors' charges and expenses; (3) transfer agent charges and expenses; (4)
fees and expenses of Independent Trustees; (5) brokerage commissions, brokers'
fees and expenses; (6) issue and transfer taxes; (7) applicable costs and
expenses under the Distribution Plan (as described above) (8) taxes and trust
fees payable to governmental agencies; (9) the cost of share certificates; (10)
fees and expenses of the registration and qualification of the Fund and its
shares with the SEC or under state or other securities laws; (11) expenses of
preparing, printing and mailing prospectuses, SAIs, notices, reports and proxy
materials to shareholders of the Fund; (12) expenses of shareholders' and
Trustees' meetings; (13) charges and expenses of legal counsel for the Fund and
for the Independent Trustees on matters relating to the Fund; (14) charges and
expenses of filing annual and other reports with the SEC and other authorities;
and (15) all extraordinary charges and expenses of the Fund. For information on
advisory fees paid by the Fund, see "Expenses" in Part 1 of this SAI.
The Advisory Agreement continues in effect for two years from its
effective date and, thereafter, from year to year only if approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of the
Fund's outstanding shares. In either case, the terms of the Advisory Agreement
and continuance thereof must be approved by the vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreement may be terminated, without
penalty, on 60 days' written notice by the Trust's Board of Trustees or by a
vote of a majority of outstanding shares. The Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
Managers (Evergreen Masters Fund only)
Evergreen Masters Fund's investment program is based upon the
investment advisor's multi-manager concept. The investment advisor allocates the
Fund's portfolio assets on an equal basis among a number of investment
management organizations - currently four in number - each of which employs a
different investment style, and periodically rebalances the Fund's portfolio
among the Managers so as to maintain an approximate equal allocation of the
portfolio among them throughout all market cycles. Each Manager provides these
services under a Portfolio Management Agreement. Each Manager has discretion,
subject to oversight by the Trustees and the investment advisor, to purchase and
sell portfolio assets consistent with the Fund's investment objectives, policies
and restrictions and specific investment strategies developed by the investment
advisor. The Fund's current Managers are EAMC, MFS Institutional Advisors, Inc.,
OppenheimerFunds, Inc. and Putnam Investment Management, Inc.
The Trust and FUNB have received an order from the SEC that permits the
investment advisor to employ a "manager of managers" strategy in connection with
its management of the Fund. The exemptive order permits the investment advisor,
subject to certain conditions, and without shareholder approval, to: (a) select
new Managers who are unaffiliated with the investment advisor with the approval
of the Trust's Board of Trustees; (b) change the material terms of the Portfolio
Management Agreements with the Managers; and (c) continue the employment of a
Manager after an event which would otherwise cause the automatic termination of
a Portfolio Management Agreement. Shareholders would be notified of any Manager
changes. Shareholders have the right to terminate arrangements with a Manager by
vote of a majority of the outstanding shares of the Fund. The order also permits
the Fund to disclose the Managers' fees only in the aggregate.
Transactions Among Advisory Affiliates
The Trust has adopted procedures pursuant to Rule 17a-7 of the 1940 Act
("Rule 17a-7 Procedures"). The Rule 17a-7 Procedures permit the Fund to buy or
sell securities from another investment company for which a subsidiary of First
Union Corporation is an investment advisor. The Rule 17a-7 Procedures also allow
the Fund to buy or sell securities from other advisory clients for whom a
subsidiary of First Union Corporation is an investment advisor. The Fund may
engage in such transaction if it is equitable to each participant and consistent
with each participant's investment objective.
MANAGEMENT OF THE TRUST
The Trust is supervised by a Board of Trustees that is responsible for
representing the interest of the shareholders. The Trustees meet periodically
throughout the year to oversee the Fund's activities, reviewing, among other
things, the Fund's performance and its contractual arrangements with various
service providers. Each Trustee is paid a fee for his or her services.
See "Expenses-Trustee Compensation" in Part 1 of this SAI.
The Trust has an Executive Committee which consists of the Chairman of
the Board, James Howell, the Vice Chairman of the Board, Michael Scofield, and
Russell Salton, each of whom is an Independent Trustee. The Executive Committee
recommends Trustees to fill vacancies, prepares the agenda for Board Meetings
and acts on routine matters between scheduled Board meetings.
Set forth below are the Trustees and officers of the Trust and their
principal occupations and affiliations over the last five years. Unless
otherwise indicated, the address for each Trustee and officer is 200 Berkeley
Street, Boston, Massachusetts 02116. Each Trustee is also a Trustee of each of
the other Trusts in the Evergreen Fund complex.
<TABLE>
Name Position with Trust Principal Occupations for Last Five Years
<S> <C> <C>
Laurence B. Ashkin Trustee Real estate developer and construction consultant; and
(DOB: 2/2/28) President of Centrum Equities (real estate development) and
Centrum Properties, Inc. (real estate development)
Charles A. Austin III Trustee Investment Counselor to Appleton Partners, Inc. (investment
(DOB: 10/23/34) advice); former
Director, Executive Vice President and Treasurer, State
Street Research & Management Company (investment advice);
Director, The Andover Companies (Insurance); and Trustee,
Arthritis Foundation of New England
K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the Finance Committee,
(DOB: 10/12/38) Cambridge College; Chairman Emeritus and Director, American
Institute of Food and Wine; Chairman and President, Oldways
Preservation and Exchange Trust (education); former Chairman
of the Board, Director, and Executive Vice President, The
London Harness Company (leather goods); former Managing Partner,
Roscommon
Capital Corp.; former Chief Executive Officer, Gifford Gifts
of Fine Foods; former Chairman, Gifford, Drescher & Associates
(environmental consulting)
James S. Howell* Chairman of the Board Former Chairman of the Distribution Committee Foundation for the
(DOB: 8/13/24) of Trustees Carolinas; and former Vice President of Lance Inc. (food
manufacturing).
Leroy Keith, Jr. Trustee Chairman of the Board and Chief Executive Officer, Carson
(DOB: 2/14/39) Products Company (manufacturing); Director of Phoenix Total Return
Fund and Equifax, Inc. (worldwide information management); Trustee
of Phoenix Series Fund, Phoenix Multi-Portfolio Fund, and The
Phoenix Big Edge Series Fund; and former President, Morehouse
College.
Gerald M. McDonnell Trustee Sales Representative with Nucor-Yamoto, Inc. (steel
(DOB: 7/14/39) producer).
Thomas L. McVerry Trustee Former Vice President and Director of Rexham Corporation
(DOB: 8/2/39) (manufacturing); and former Director of Carolina
Cooperative Federal Credit Union.
William Walt Pettit Trustee Partner in the law firm of William Walt Pettit, P.A.
(DOB: 8/26/55)
David M. Richardson Trustee Vice Chair and former Executive Vice President, DHR
(DOB: 9/14/41) International, Inc. (executive recruitment); former Senior
Vice President, Boyden International Inc. (executive
recruitment); and Director, Commerce and Industry
Association of New Jersey, 411 International, Inc., and J&M
Cumming Paper Co.
Russell A. Salton, III MD Trustee Medical Director, U.S. Health Care/Aetna Health Services;
(DOB: 6/2/47) former Managed Health Care Consultant; and former
President, Primary Physician Care.
Michael S. Scofield* Vice Chairman of the Attorney, Law Offices of Michael S. Scofield.
(DOB: 2/20/43) Board of Trustees
Richard J. Shima Trustee Former Chairman, Environmental Warranty, Inc. (insurance
(DOB: 8/11/39) agency); Executive Consultant, Drake Beam Morin, Inc.
(executive outplacement); Director of Connecticut Natural Gas
Corporation, Hartford Hospital, Old State House Association,
Middlesex Mutual Assurance Company (property casuualty), and
Enhance Financial
Services, Inc. (financial quantity insurance); Chairman, Board of
Trustees, Hartford Graduate
Center; Trustee, Greater Hartford YMCA; former Director, Vice
Chairman and Chief Investment Officer, The Travelers Corporation;
former Trustee, Kingswood-Oxford School; and former Managing
Director and Consultant, Russell Miller, Inc. (investment banking
specializing in the insurance industry)
<PAGE>
Anthony J. Fischer** President and Treasurer Vice President/Client Services, BISYS Fund Services.
(DOB:2/10/59)
Nimish S. Bhatt*** Vice President and Vice President, Tax, BISYS Fund Services; former Assistant
(DOB: 6/6/63) Assistant Treasurer Vice President, Evergreen Asset Management Corp./First Union Bank;
former Senior Tax
Consulting/Acting Manager, Investment Companies Group,
PricewaterhouseCoopers LLP, New York.
Bryan Haft*** Vice President Team Leader, Fund Administration, BISYS Fund Services.
(DOB: 1/23/65)
Senior Vice President and Assistant General Counsel, First
Michael H. Koonce Secretary Union Corporation; former Senior Vice President and General
(DOB: 4/20/60) Counsel, Colonial Management Associates, Inc.
*As of January 1, 2000, Michael S. Scofield will become Chairman of the Board and James S. Howell will become Trustee of Emeritis
**Address: BISYS Fund Services, 90 Park Avenue, New York, New York 10016
***Address: BISYS, 3435 Stelzer Road, Columbus, Ohio 43219-8001
</TABLE>
<PAGE>
CORPORATE AND MUNICIPAL BOND RATINGS
The Fund relies on ratings provided by independent rating services to
help determine the credit quality of bonds and other obligations the Fund
intends to purchase or already owns. A rating is an opinion of an issuer's
ability to pay interest and/or principal when due. Ratings reflect an issuer's
overall financial strength and whether it can meet its financial commitments
under various economic conditions.
If a security held by the Fund loses its rating or has its rating
reduced after the Fund has purchased it, the Fund is not required to sell or
otherwise dispose of the security, but may consider doing so.
The principal rating services, commonly used by the Fund and investors
generally, are S&P and Moody's. The Fund may also rely on ratings provided by
Fitch. Rating systems are similar among the different services. As an example,
the chart below compares basic ratings for long-term bonds. The "Credit Quality"
terms in the chart are for quick reference only. Following the chart are the
specific definitions each service provides for its ratings.
<TABLE>
<CAPTION>
COMPARISON OF LONG-TERM BOND RATINGS
MOODY'S S&P FITCH Credit Quality
<S> <C> <C> <C>
Aaa AAA AAA Excellent Quality (lowest risk)
Aa AA AA Almost Excellent Quality (very low risk)
A A A Good Quality (low risk)
Baa BBB BBB Satisfactory Quality (some risk)
Ba BB BB Questionable Quality (definite risk)
B B B Low Quality (high risk)
Caa/Ca/C CCC/CC/C CCC/CC/C In or Near Default
D DDD/DD/D In Default
</TABLE>
CORPORATE BONDS
LONG-TERM RATINGS
Moody's Corporate Long-Term Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
<PAGE>
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations, (i.e.
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. The modifier 1 indicates that the company ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range raking and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S&P Corporate Long-Term Bond Ratings
AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC, CC, and
C are regarded as having significant speculative characteristics. BB indicates
the least degree of speculation and C the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions, which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet it financial
commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred--and not where a default is only
expected. S&P changes ratings to D either:
! On the day an interest and/or principal payment is due and is not paid.
An exception is made if there is a grace period and S&P believes that a
payment will be made, in which case the rating can be maintained; or
! Upon voluntary bankruptcy filing or similar action. An exception is
made if S&P expects that debt service payments will continue to be made
on a specific issue. In the absence of a payment default or bankruptcy
filing, a technical default (i.e., covenant violation) is not
sufficient for assigning a D rating.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
<PAGE>
Fitch Corporate Long-Term Bond Ratings
Investment Grade
AAA Highest credit quality. AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA Very high credit quality. AA ratings denote a very low expectation of credit
risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A High credit quality. A ratings denote a lower expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade
BB Speculative. BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met.
Securities rated in this category are not investment grade.
B Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitment is solely reliant upon sustained, favorable
business or economic developments. A CC rating indicates that default of some
kind appears probable. C ratings signal imminent default.
DDD, DD, D Default. Securities are not meeting current obligations and
are extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. For U.S. corporates, for
example, DD indicates expected recovery of 50%-90% of such outstandings, and D
the lowest recovery potential, i.e. below 50%.
+ or - may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the AAA rating category or to
categories below CCC.
<PAGE>
CORPORATE SHORT-TERM RATINGS
Moody's Corporate Short-Term Issuer Ratings
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics.
- - -- Leading market positions in well-established industries.
- - -- High rates of return on funds employed.
- - -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- - -- Broad margins in earnings coverage of fixed financial changes and high
internal cash generation.
- - -- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime rating
categories.
S&P Corporate Short-Term Obligation Ratings
A-1 A short-term obligation rated A-1 is rated in the highest category by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category certain obligations are designated with a plus sign
(+). This indicates that the obligor's capacity to meet its financial commitment
on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred--and not where a default is only
expected. S&P changes ratings to D either:
! On the day an interest and/or principal payment is due and is not paid.
An exception is made if there is a grace period and S&P believes that a
payment will be made, in which case the rating can be maintained; or
! Upon voluntary bankruptcy filing or similar action, An exception is
made if S&P expects that debt service payments will continue to be made
on a specific issue. In the absence of a payment default or bankruptcy
filing, a technical default (i.e., covenant violation) is not
sufficient for assigning a D rating.
Fitch Corporate Short-Term Obligation Ratings
F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial commitments
is adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D Default. Denotes actual or imminent payment default.
<PAGE>
MUNICIPAL BONDS
LONG-TERM RATINGS
Moody's Municipal Long-Term Bond Ratings
Aaa Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the Aaa securities.
A Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds rated Baa are considered as medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well-assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa Bonds rated Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest.
Ca Bonds rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C Bonds rated C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a mid-
range raking and the modifier 3 indicates that the company ranks in the lower
end of its generic rating category.
S&P Municipal Long-Term Bond Ratings
AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC,
CC, and C are regarded as having significant speculative characteristics. BB
indicates the least degree of speculation and C the highest. While such
obligations will likely have some quality and protective characteristics, these
may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions, which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet it financial
commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
Fitch Municipal Long-Term Bond Ratings
Investment Grade
AAA Highest credit quality. AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA Very high credit quality. AA ratings denote a very low expectation of credit
risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A High credit quality. A ratings denote a lower expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade
BB Speculative. BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met.
Securities rated in this category are not investment grade.
B Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A CC rating indicates that default of some
kind appears probable. C ratings signal imminent default.
DDD, DD, D Default. Securities are not meeting current obligations and are
extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. DD designates lower recovery
potential and D the lowest.
+ or - may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the AAA rating category or to
categories below CCC.
<PAGE>
SHORT-TERM MUNICIPAL RATINGS
Moody's Municipal Short-Term Issuer Ratings
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidence by many of the following characteristics.
- - -- Leading market positions in well-established industries.
- - -- High rates of return on funds employed.
- - -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- - -- Broad margins in earnings coverage of fixed financial changes and high
internal cash generation.
- - -- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Moody's Municipal Short-Term Loan Ratings
MIG 1 This designation denotes best quality. There is strong protection by
established cash flows, superior liquidity support, or demonstrated broad-based
access to the market for refinancing.
MIG 2 This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3 This designation denotes favorable quality. Liquidity and cash-flow
protection may be narrow and market access for refinancing is likely to be less
well established.
SG This designation denotes speculative quality. Debt instruments in this
category may lack margins of protection.
S&P Commercial Paper Ratings
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.
A-3 Issues carrying this designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B Issues rated B are regarded as having only speculative capacity for timely
payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes such payments
will be made during such grace period.
S&P Municipal Short-Term Obligation Ratings
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3 Speculative capacity to pay principal and interest.
Fitch Municipal Short-Term Obligation Ratings
F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial commitments
is adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D Default. Denotes actual or imminent payment default.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectus or required by law, the
Fund reserves the right to change the terms of the offer stated in its
prospectus without shareholder approval, including the right to impose or change
fees for services provided.
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in the Fund's
prospectus, SAI or in supplemental sales literature issued by the Fund or EDI,
and no person is entitled to rely on any information or representation not
contained therein.
The Fund's prospectus and SAI omit certain information contained in the
Trust's registration statement, which you may obtain for a fee from the SEC in
Washington, D.C.
<PAGE>
June 30, 1999
Evergreen Select
Equity Growth Funds
Annual Report
[LOGO OF EVERGREEN FUNDS APPEARS HERE]
<PAGE>
-------------------------------------------------------------------------------
Table of Contents
-------------------------------------------------------------------------------
Letter to Shareholders ................................1
Evergreen Select Balanced Fund
Fund at a Glance ...................................2
Portfolio Manager Commentary........................3
Evergreen Select Core Equity Fund
Fund at a Glance ...................................5
Portfolio Manager Commentary........................6
Evergreen Select Diversified Value Fund
Fund at a Glance ...................................8
Portfolio Manager Commentary........................9
Evergreen Select Large Cap Blend Fund
Fund at a Glance ..................................11
Portfolio Manager Commentary.......................12
Evergreen Select Small Cap Growth Fund
Fund at a Glance ..................................14
Portfolio Manager Commentary.......................15
Evergreen Select Small Company Value Fund
Fund at a Glance ..................................18
Portfolio Manager Commentary.......................19
Evergreen Select Social Principles Fund
Fund at a Glance ..................................23
Portfolio Manager Commentary.......................24
Evergreen Select Special Equity Fund
Fund at a Glance ..................................26
Portfolio Manager Commentary.......................27
Evergreen Select Strategic Growth Fund
Fund at a Glance ..................................30
Portfolio Manager Commentary.......................31
Evergreen Select Strategic Value Fund
Fund at a Glance ..................................33
Portfolio Manager Commentary.......................34
Financial Highlights
Evergreen Select Balanced Fund.....................37
Evergreen Select Core Equity Fund..................38
Evergreen Select Diversified Value Fund............39
Evergreen Select Large Cap Blend Fund..............40
Evergreen Select Small Cap Growth Fund.............41
Evergreen Select Small Company Value Fund..........42
Evergreen Select Social Principles Fund............43
Evergreen Select Special Equity Fund...............44
Evergreen Select Strategic Growth Fund.............46
Evergreen Select Strategic Value Fund..............47
Schedule of Investments
Evergreen Select Balanced Fund.....................48
Evergreen Select Core Equity Fund..................51
Evergreen Select Diversified Value Fund............54
Evergreen Select Large Cap Blend Fund..............56
Evergreen Select Small Cap Growth Fund.............58
Evergreen Select Small Company Value Fund..........60
Evergreen Select Social Principles Fund............62
Evergreen Select Special Equity Fund...............64
Evergreen Select Strategic Growth Fund.............66
Evergreen Select Strategic Value Fund..............68
Statements of Assets and Liabilities..................70
Statements of Operations .............................72
Statements of Changes in Net Assets...................74
Combined Notes to Financial Statements ...............79
Independent Auditors' Report..........................92
Other Information.....................................93
-------------------------------------------------------------------------------
Evergreen Funds
-------------------------------------------------------------------------------
Evergreen Funds is one of the nation's fastest growing investment companies with
over $70 billion in assets under management.
With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This 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 . Are not bank guaranteed
Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
August 1999
[PHOTO OF WILLIAM M. ENNIS APPEARS HERE]
[PHOTO OF DAVID C. FRANCIS, CFA APPEARS HERE]
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Select Equity Funds annual report, which
covers the twelve-month period ended June 30, 1999.
Continued Strength in the Domestic Economy
After stock markets around the world, including the United States, declined
dramatically last summer and into the early fall, the Federal Reserve's actions
to lower interest rates in late 1998 helped restore investor confidence. The
U.S. stock market rallied strongly during the final quarter of 1998 and into the
first half of 1999.
Throughout the period, the strong performance of large capitalization growth
stocks continued. Investors who focused on this small group of stocks,
particularly technology stocks, fared well. After long periods of lagging
performance in many areas of the market, participation broadened during the
second quarter of 1999 to include both value stocks and small company stocks.
Currently, the stock market is responding positively to the combination of low
inflation, low interest rates and low unemployment. The economy appears strong
and investor confidence seems high. We remain cautiously optimistic about the
stock market.
Year 2000 Preparation/1/
At Evergreen, we continue to prepare ourselves to provide uninterrupted service
and communication with all our shareholders throughout the end of 1999 and right
through the date change into the year 2000 and beyond. As of the end of August,
when this report was finalized, we have completed the testing of internal
systems. In March, we successfully participated in industry-wide testing with
the Securities Industry Association. We are confident that our efforts will
enable our shareholders to receive the same Evergreen products and services we
deliver today.
As always, we encourage all shareholders to diversify their mutual fund
portfolios and we suggest you consult with your financial advisor for an
allocation strategy that helps you meet your investment goals and objectives.
Evergreen Funds offers a wide range of funds that includes multiple investment
styles to help you find one that is appropriate in your portfolio.
Thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
/s/ David C. Francis
David C. Francis, CFA
Managing Director
Chief Investment Officer
First Capital Group - FUNB
/1/ The information above constitutes Year 2000 readiness disclosure.
1
<PAGE>
EVERGREEN
Select Balanced Fund
Fund at a Glance as of June 30, 1999
PORTFOLIO PROFILE
Philosophy
Evergreen Select Balanced Fund uses a systematic and disciplined investment
approach which provides exposure to both the equity and fixed income markets.
The basis of this approach is founded in the belief that stocks offer the
greatest long-term growth opportunities while bonds provide income and less risk
to principal.
Process
The Fund employs a blended approach to equity investing, utilizing companies
with both value and growth-oriented characteristics. Within the fixed income
component, portfolio performance is enhanced while seeking to control risk by
managing duration, sector allocation and security selection.
Benchmarks
Standard & Poors 500 Index (S&P 500) Lehman Brothers Government/Corporate Bond
Index (LBGBI).
PERFORMANCE AND RETURNS/1/
Portfolio Inception Date: 4/01/91 Class I Class IS
Class Inception Date 01/22/98 04/09/98
Average Annual Returns
1 year 5.70% 5.43%
3 years 14.23% 14.19%
5 years 14.57% 14.55%
Since Inception 12.35% 12.33%
12-month income dividends per share $0.42 $0.39
12-month capital gain distributions per share $0.14 $0.14
LONG TERM GROWTH
[LINE GRAPH APPEARS HERE]
Select Balanced,
Date Class I CPI S&P 500 LBGBI
---- --------------- -------- -------- ---------
3/31/91 1,000,000 1,000,000 1,000,000 1,000,000
6/30/91 1,007,024 1,007,407 997,713 1,015,100
6/30/92 1,149,999 1,038,519 1,131,538 1,158,900
6/30/93 1,298,090 1,069,622 1,285,744 1,311,300
6/30/94 1,322,763 1,096,296 1,303,834 1,292,100
6/30/95 1,530,289 1,129,630 1,643,758 1,457,000
6/30/96 1,752,429 1,160,319 2,071,132 1,524,900
6/30/97 2,078,503 1,187,407 2,789,795 1,643,000
6/30/98 2,470,904 1,207,407 3,631,237 1,827,400
6/30/99 2,611,572 1,231,111 4,458,061 1,878,100
Comparison of change in value of a $1,000,000 investment in Evergreen select
Balanced Fund, Class I, the S&P 500, the Consumer Price Index (CPI) and the
LBGBI.
The S&P 500 and LBGBI are unmanaged indices, which do not include transaction
costs associated with buying and selling securities nor any management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in the index.
/1/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
Historical performance shown for Class I prior to its inception is based on the
performance of the Class Y Shares of Evergreen Balanced Fund II. Historical
performance shown for Class IS reflects that of Class Y Shares of Evergreen
Balanced Fund II, through 1/22/1998, the inception of Class I Shares.
Performance from 1/23/1998 through the inception of Class IS Shares reflects
that of Class I Shares. Performance prior to inception of Class IS Shares does
not include this class' 0.25% 12b-1 fees. Class I Shares do not pay a 12b-1 fee.
If these fees were reflected, returns would have been lower.
2
<PAGE>
EVERGREEN
Select Balanced Fund
Portfolio Manager Commentary
Portfolio Management Team
Mr. Rich has been an equity portfolio manager with Meridian Investment Company,
and has maintained sector analytical responsibilities since he joined Meridian
in 1990. Prior to joining Meridian in 1990, Mr. Rich served as a portfolio
manager with First Fidelity Bank. Lester Rich has over 17 years of investment
experience.
Mr. Williams joined FUNB as a Vice-President and senior portfolio manager in
1993 and became a Senior Vice President in September 1997. Mr. Williams has been
a professional in banking and investment management since 1969.
[PHOTO OF LESTER RICH APPEARS HERE] [PHOTO OF ROLLIN C. WILLIAMS APPEARS HERE]
Performance and Portfolio Structure
For the twelve months ended June 30, 1999 Evergreen Select Balanced Fund, Class
I posted a 5.7% total return. This performance compared to the 2.7% total return
for the Lehman Brothers Government/Corporate Index and the S&P 500 Index's
22.8% return, for the same period.
During the fiscal year, the composition of the Fund remained relatively stable.
The portfolio's equity exposure increased from 54% to just over 55%, while the
weighting of fixed income securities fell from 46% to roughly 44%. Our cash
position fluctuated around 1% during the period.
Portfolio
Characteristics
---------------
Total Net Assets $659,137,807
Number of Issues 93
P/E Ratio 36.1x
Beta 1.08
Market Environment
The U.S. economy provided a favorable backdrop for both equity and fixed income
investors during much of the fiscal year. Strong economic growth was tempered by
benign inflation, propelling the stock market to new highs and pushing the bond
market into positive territory during the first six months.
The fiscal year was broken into two markedly different periods regarding
interest rate activity: the first three months, during which rates declined
sharply, and the final nine months in which rates increased steadily. The yield
on the bellwether 30-year Treasury Bond started the period at 5.63% and fell as
low as 4.70% before soaring to 5.96% by June 30. Although the stock market
shrugged off higher interest rates, the U.S. bond market suffered negative
returns during the final six months in light of rising rates.
Top 5 Industries--Equity
------------------------
(as a percentage of net assets)
Information Services & Technology 8.4%
Healthcare Products & Services 5.5%
Communication Systems & Services 5.5%
Finance & Insurance 5.0%
Banks 4.7%
3
<PAGE>
EVERGREEN
Select Balanced Fund
Portfolio Manager Commentary
Portfolio Activity
Within the fixed income portion of the Fund, we generally maintained duration in
excess of the benchmark during the first half of the fiscal period, a strategy
that was beneficial in the opening months as interest rates fell. In early May,
we reversed course and shortened duration in response to increasing inflationary
pressure and a potential rate hike by the Federal Reserve Board. The portfolio's
shortened duration proved beneficial when interest rates soared during the final
six weeks of the quarter.
Technology currently represents the portfolio's largest sector weighting.
Although some of our technology holdings, America Online and Compaq Computer
Corp., specifically, struggled during the past few months, other stocks
purchased in this sector during the fiscal year added to the fund's performance.
Industry stalwarts Cisco Systems, Microsoft and Intel posted total twelve-month
returns of 110%, 66% and 61%, respectively.
Financial companies represent another strong sector weighting. Within this area,
we are emphasizing fundamentally strong banks such as BankAmerica, Fleet
Financial, BankBoston and Bank One. In fact, the Fund benefited from a merger
between two of these holdings, Fleet Financial and BankBoston. The market's
realization of the potential of this combined banking franchise coupled with the
lower valuation levels helped boost both of these issues to higher levels.
Top 10 Equity Holdings*
-----------------------
(as a percentage of net assets)
Dayton Hudson Corp. 2.5%
Microsoft Corp. 2.3%
Cisco Systems, Inc. 2.3%
MCI WorldCom, Inc. 2.2%
Tyco International Ltd. 2.0%
General Electric Co. 2.0%
GTE Corp. 1.7%
Waste Management, Inc. 1.6%
BankAmerica Corp. 1.5%
Citigroup, Inc. 1.5%
*Portfolio composition subject to change
Top 5 Bond Holdings
-------------------
(as a percentage of net assets)
Coupon Maturity
------- --------
U.S. Treasury Notes 7.75% 2/15/2001 7.4%
U.S. Treasury Bonds 9.13% 5/15/2018 3.5%
U.S. Treasury Bonds 8.88% 8/15/2017 3.1%
U.S. Treasury Bonds 7.88% 2/15/2021 3.0%
U.S. Treasury Notes 5.88% 7/31/1999 2.7%
Outlook
The significant broadening of the stock market in the last three months has
given many investors reason to cheer. Long overlooked cyclical stocks have
become favorites as worldwide economies strengthen and the risk of a slowdown,
induced by struggling Asian and Latin American economies, passes. Accelerating
corporate profit growth is good news for both equity and bond markets that have
been fretting over unimpressive earnings growth. Looking ahead, the specter of
higher inflation brought on by the surprisingly high April CPI (up 0.7%), as
well as rising interest rates, present the greatest challenges to the market
outlook.
4
<PAGE>
EVERGREEN
Select Core Equity Fund
Fund at a Glance as of June 30, 1999
PORTFOLIO PROFILE
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
Standard & Poors 500 Index (S&P 500)
/1/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
Historical performance shown for Class IS from 11/24/97 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee.
If these fees had been reflected, returns would have been lower. Prior to
11/24/97, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTFs) performance, adjusted for estimated mutual fund
expenses. The CTFs were not registered under the 1940 Act and were not subject
to certain investment restrictions. If the CTFs had been registered, their
performance might have been adversely affected. Performance for the CTF has been
adjusted to include the effect of estimated mutual fund class gross expense
ratios at the time the CTF was converted to a mutual fund. If fee waivers and
expense reimbursements had been calculated into the mutual fund class expense
ratio the total returns would be as follows: Class I--3 year = 21.34%, 5 year
= 22.32%, 10 year = 14.98% and since 12/31/81 = 15.78%; Class IS--3 year
= 21.07%, 5 year = 22.05%, 10 year = 14.70% and since 12/31/81 = 15.50%.
PERFORMANCE AND RETURNS/1/
Portfolio Inception Date 12/31/81 Class I Class IS
Class Inception Date 11/24/97 02/04/98
Average Annual Returns -------- --------
1 year 9.82% 9.53%
3 years 21.28% 21.02%
5 years 22.24% 21.97%
10 years 14.88% 14.61%
Since Inception 15.68% 15.40%
12-month income dividends per share $ 0.69 $ 0.46
12-month capital gain distributions per share $ 7.83 $ 7.83
LONG TERM GROWTH
[LINE GRAPH APPEARS HERE]
Consumer Price S&P 500 Select Core
Date Index - US Composite Equity Class I
---- -------------- --------- --------------
6/30/89 1,000,000 1,000,000 1,000,000
6/30/90 1,046,728 1,164,872 1,188,555
6/30/91 1,095,890 1,251,018 1,239,834
6/30/92 1,129,734 1,418,818 1,381,085
6/30/93 1,163,570 1,612,176 1,535,730
6/30/94 1,192,587 1,634,859 1,466,474
6/30/95 1,228,848 2,061,084 1,793,707
6/30/96 1,262,232 2,596,963 2,243,661
6/30/97 1,291,700 3,498,084 2,931,866
6/30/98 1,313,457 4,553,155 3,644,544
6/30/99 1,339,243 5,589,898 4,002,550
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Core Equity, Class I, the S&P 500 and the Consumer Price Index (CPI).
The S&P 500 is an unmanaged index, which does not include transaction costs
associated with buying and selling securities nor any management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in the index.
5
<PAGE>
EVERGREEN
Select Core Equity Fund
Portfolio Manager Commentary
Portfolio Management Team
The Fund is managed by Mark C. Sipe, CFA and Hanspeter Giger, CFA who have over
33 years of combined investment experience. Their disciplined approach assures
consistency of results and superior service.
[PHOTO OF MARK C. SIPE APPEARS HERE] [PHOTO OF HANSPETER GIGER APPEARS HERE]
Mark C. Sipe Hanspeter Giger
Performance
Within this turbulent market environment, for the fiscal year, the Evergreen
Select Core Equity Fund, Class I total return of 9.8% lagged the S&P 500's
performance of 22.8%. Late in 1998, the Fund began a significant repositioning
designed to address and correct the major factor contributing to its performance
lag relative to the S&P 500 in prior periods, the relative weighting among
stocks held in the Fund.
Like many other diversified funds, the average performance of stocks held in the
Evergreen Select Core Equity Fund has often matched or exceeded the performance
of the average stock in the S&P 500. However, the Fund's holdings among the
largest capitalization stocks had not been in proportion to their size in the
S&P 500, i.e., weighted according to their market capitalization. This weighting
factor alone--not stock selection, per se--accounted for over half of the Fund's
performance deficit relative to the index during the first three months of the
period, with the bulk of that occurring prior to the completion of the
repositioning at the end of February. In fact, the Fund began tracking the S&P
500 more closely in March, and outperformed the benchmark during the three
months ending June 30, with a total return of 7.4% versus 7.0% for the S&P. This
was the period in the market, as noted above, in which the breadth of
performance across market capitalizations improved as well.
Portfolio
Characteristics
---------------
Total Net Assets $1,943,722,912
Number of Issues 131
P/E Ratio 26.3x
Beta 1.00
Market Environment
Two distinctly different market environments characterized the second half of
the Evergreen Select Core Equity Fund's June fiscal year. The initial three
months of the period saw an exaggerated extension of the narrow market that
dominated in prior quarters. As an example, the S&P 500 was up roughly 5% during
that time frame, while the median stock return among the 500 stocks in the index
was down roughly 2%. In fact, the total increase in the S&P 500's market
capitalization was accounted for by just 15 stocks; an index of the remaining
485 stocks would have been flat during the period.
Throughout much of the latter half of the period, however, the stock market
vacillated amidst speculation surrounding the Federal Reserve Board's likely
response to signs of potentially higher inflation. Investors related the
continuation of domestic economic strength, combined with indications of at
least a bottoming in Asia's fortunes, as increasing the likelihood of a more
aggressive stance by the Fed. The anticipation of the eventual interest rate
increase at quarter end produced a
6
<PAGE>
EVERGREEN
Select Core Equity Fund
Portfolio Manager Commentary
notable rotation among market leadership. The narrowly concentrated market of
January through March was challenged by the recovery among smaller stocks as
well as value-oriented industries, such as metals, chemicals, energy, and
utilities. Further illustrating this shift, the average stock price performance
of the bottom 150 stocks in the S&P 500 in terms of market capitalization (up
19.6%) more than doubled the average performance of the largest 150 stocks (up
8.8%) from the beginning of April until the end of June.
Top 5 Industries
----------------
(as a percentage of net assets)
Information Services & Technology 18.6%
Healthcare Products & Services 13.9%
Finance & Insurance 8.8%
Retailing & Wholesale 7.2%
Food and Beverage Products 7.0%
Portfolio Activity
Beyond the structural changes in the portfolio, the most notable shifts in the
Fund's investments related to selected sector weightings. In this vein, sector
over-weights were reaffirmed in technology and health care, due to the long-term
secular growth opportunities that those areas continue to offer. On the other
hand, reductions were made in energy and basic materials sector exposures.
Sector performance during the fiscal year was far and away led by technology and
telecommunications. Technology stocks in the Fund such as Applied Materials,
Altera, and Adaptec joined strong performances by Nokia Corp. and market
stalwarts such as Oracle Corp., International Business Machines, Cisco Systems,
Microsoft, Dell, and Intel. In the telecom sector, the standout performer was
MCI Worldcom. Lagging sectors during the period included consumer staples, basic
materials, and electric utilities. Of the poor-performing market segments, basic
materials began to see signs of life late in the period as earnings expectations
bottomed coincidentally with the perceived stabilization of Asian economies. As
a result, basic materials stocks, following a dismal performance in 1998, are
among the top performers so far in 1999.
Top 10 Holdings*
----------------
(as a percentage of net assets)
General Electric Co. 5.8%
Microsoft Corp. 5.1%
International Business Machines Corp. 3.7%
Coca Cola Co. 2.6%
Cisco Systems, Inc. 2.2%
Intel Corp. 2.2%
Bristol-Myers Squibb Co. 2.2%
BankAmerica Corp. 2.0%
MCI WorldCom, Inc. 1.9%
Philip Morris Companies, Inc. 1.6%
*Portfolio composition subject to change
---------------------------------------
Outlook
In all, the period closed with the S&P 500 as well as the NASDAQ Index, standing
at record highs. From an outlook standpoint, although the complexion of the
market has changed in the last several months, the generally positive backdrop
of domestic economic growth, low inflation, and low interest rates remains in
place. Going forward, the Fund will continue to invest in what we believe are
quality companies that meet the requirements of our investment research process.
More specifically, we will continue to pursue investments in stocks offering the
most attractive combination of good long-term earnings growth prospects and
price, focusing on predominantly large cap as well as selective mid cap
securities.
7
<PAGE>
EVERGREEN
Select Diversified Value Fund
Fund at a Glance as of June 30, 1999
Portfolio Profile
Philosophy
Evergreen Select Diversified Value Fund is a 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
Standard & Poors 500 Index (S&P 500)
Performance and Returns/1/
Portfolio Inception Date 01/03/91 Class I Class IS
Class Inception Date 01/22/98 03/31/98
Average Annual Returns
1 year 9.08% 8.77%
3 years 19.12% 18.50%
5 years 19.51% 19.14%
Since Inception 16.55% 16.33%
12-month income dividends per share $0.20 $0.14
12-month capital gain distributions per share $0.65 $0.65
Long Term Growth
[LINE GRAPH APPEARS HERE]
Select Diversified
Date Value,Class I CPI S&P 500
--- ------------------ ---- ---------
12/31/90 1,000,000 1,000,000 1,000,000
6/30/91 1,164,762 1,016,500 1,142,600
6/30/92 1,292,453 1,047,800 1,295,900
6/30/93 1,448,141 1,079,200 1,472,500
6/30/94 1,504,393 1,106,100 1,493,200
6/30/95 1,832,207 1,139,800 1,882,500
6/30/96 2,170,015 1,170,700 2,372,000
6/30/97 2,769,937 1,198,100 3,195,100
6/30/98 3,363,904 1,218,200 4,158,700
6/30/99 3,667,912 1,242,200 5,105,700
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Diversified Value Fund, Class I, the S&P 500 and the Consumer Price Index (CPI).
The S&P 500 is an unmanaged index, which does not include transaction costs
associated with buying and selling securities nor any management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in the index.
/1/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
Historical performance shown for Class I prior to its inception is based on the
performance of the Class Y Shares of Evergreen Value Fund. Historical
performance shown for Class IS reflects that of Class Y Shares of Evergreen
Value Fund, through 1/22/1998, the inception of Class I Shares. Performance from
1/23/1998 through the inception of Class IS Shares reflects that of Class I
Shares. Performance prior to inception of Class IS Shares does not include this
class' 0.25% 12b-1 fees. Class I Shares do not pay a 12b-1 fee. If these fees
were reflected, returns would have been lower.
8
<PAGE>
EVERGREEN
Select Diversified Value Fund
Portfolio Manager Commentary
Portfolio Management Team
John E. Gray, CFA, and Eric M. Teal, who have a combined 52 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] [PHOTO OF ERIC TEAL APPEARS HERE]
Jack Gray Eric Teal
Performance
For the twelve-month period ended June 30, 1999 Evergreen Select Diversified
Value Fund, Class I posted a net return of 9.0% versus 22.8% for the S&P 500.
The majority of the Fund's underperformance occurred during the third quarter
market correction, when the Fund declined 16.3% versus the 10.3% decline for the
S&P 500.
Portfolio
Characteristics
---------------
Total Net Assets $607,738,783
Number of Issues 98
P/E Ratio 25.1x
Beta 1.07
Market Environment
It was nearly impossible for large-cap active investment strategies to
outperform the S&P 500 during the past twelve months. In 1998, only 28% of the
stocks in the S&P 500 outperformed the average, and the first quarter of 1999
was more of the same. This reflects the narrow leadership in the equity markets.
High-P/E growth stocks have led the market, and if managers underweighted the
"nifty-fifty"--the very largest, mega-cap stocks--then performance suffered.
Portfolio Activity
Among our best performers during the year were several in the technology sector:
Sun Microsystems up over 150%, IBM up 127%, Cisco Systems up 109%, and Tellabs
up 88%. Tyco International, a conglomerate and one of the Fund's largest
holdings, gained over 51%. Poor performance came in the oil service and
healthcare sectors. Oil drillers, R&B Falcon and Diamond Offshore declined 60%
and 30%, respectively, in line with plummeting crude oil prices in 1998. Medical
providers and HMO stocks also continued to be out of favor with investors.
Consequently, Lincare, Healthsouth, and Tenet Healthcare all declined
approximately 40%.
9
<PAGE>
EVERGREEN
Select Diversified Value Fund
Portfolio Manager Commentary
Top 10 Holdings*
----------------
(as a percentage of net assets)
Tyco International Ltd. 3.7%
Microsoft Corp. 3.3%
Motorola, Inc. 3.1%
Nokia Corp. 2.4%
PNC Bank Corp. 2.4%
Reliant Energy, Inc. 2.3%
General Electric Co. 2.2%
Time Warner, Inc. 2.1%
Wal-Mart Stores, Inc. 1.9%
American International Group, Inc. 1.9%
*Portfolio composition subject to change
---------------------------------------
Although the Fund's absolute performance was below the overall market, relative
results have significantly improved in 1999. During the first six months of 1999
the Fund has returned 9.2% versus 12.4% for the S&P 500, and during the past
three months the Fund is up 6.0% versus 7.0% for the S&P 500.
This improvement has kept the Fund within striking distance of the benchmark for
1999. We believe several market indicators should work to our advantage in the
near future. Most importantly, there has been an overall broadening out of the
market, suggesting that market leadership may not be confined to a select group
of high multiple growth stocks. This should favor active management strategies
and portfolios that are properly diversified with winning stocks.
Top 5 Industries
----------------
(as a percentage of net assets)
Finance & Insurance 11.8%
Information Services & Technology 11.0%
Healthcare Products & Services 9.3%
Oil/Energy 6.9%
Retailing & Wholesale 6.8%
Outlook
During the fiscal year the majority of stocks underperformed the broad market
averages and, as a result, the majority of active managers underperformed their
benchmarks. The recent overall broadening out of the market may work in favor of
active management and the Evergreen Select Diversified Value Fund. The emphasis
remains on stock selection and risk monitoring rather than on sector or style
decisions. Our outlook remains positive.
10
<PAGE>
EVERGREEN
Select Large Cap Blend Fund
Fund at a Glance as of June 30, 1999
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
counter-cyclical, 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
Standard & Poors 500 Index (S&P 500)
/1/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
Historical performance shown for Class IS from 11/24/97 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee.
If these fees had been reflected, returns would have been lower. Prior to
11/24/97, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTFs) performance, adjusted for estimated mutual fund
expenses. The CTFs were not registered under the 1940 Act and were not subject
to certain investment restrictions. If the CTFs had been registered, their
performance might have been adversely affected. Performance for the CTF has been
adjusted to include the effect of estimated mutual fund class gross expense
ratios at the time the CTF was converted to a mutual fund. If fee waivers and
expense reimbursements had been calculated into the mutual fund class expense
ratio the total returns would be as follows:
Class I--3 year = 22.50%, 5 year = 23.68% and since 12/31/93 = 19.87%; Class
IS--3 year = 22.21%, 5 year = 23.38% and since 12/31/93 = 19.58%.
PERFORMANCE AND RETURNS/1/
Portfolio Inception Date 12/31/93 Class I Class IS
Class Inception Date 11/24/97 03/12/98
Average Annual Returns
1 year 7.12% 6.83%
3 years 22.44% 22.15%
5 years 23.60% 23.30%
Since Inception 19.78% 19.49%
12-month income dividends per share $0.40 $0.30
12-month capital gain distribution per share $5.20 $5.20
LONG TERM GROWTH
[LINE GRAPH APPEARS HERE]
Select Large
Cap Blend,
Date CPI S&P 500 Class I
---- ---------- --------- -------------
12/31/93 1,000,000 1,000,000 1,000,000
6/30/94 1,015,096 966,128 934,984
6/30/95 1,045,961 1,218,008 1,228,085
6/30/96 1,074,376 1,534,688 1,469,331
6/30/97 1,099,459 2,067,210 1,976,896
6/30/98 1,117,977 2,690,709 2,517,631
6/30/99 1,139,926 3,303,378 2,697,141
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Large Cap Blend Fund, Class I, the S&P 500 and the Consumer Price Index (CPI).
The S&P 500 is an unmanaged index, which does not include transaction costs
associated with buying and selling securities nor any management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in the index.
11
<PAGE>
EVERGREEN
Select Large Cap Blend Fund
Portfolio Manager Commentary
Portfolio Management
Mr. Rich has been an equity portfolio manager with Meridian Investment Company,
and has maintained sector analytical responsibilities since he joined Meridian
in 1990. Prior to joining Meridian in 1990, Mr. Rich served as a portfolio
manager with First Fidelity Bank. Lester Rich has over 17 years of investment
experience.
[PHOTO OF LESTER RICH APPEARS HERE]
Lester Rich
Performance
Evergreen Select Large Cap Blend Fund, Class I posted a 7.1% total return for
the fiscal year ended June 30, 1999. This performance trailed the exceptional
performance by the broad stock market, as measured by the S&P 500, which
returned 22.8% for the same period.
Portfolio
Characteristics
---------------
Total Net Assets $438,756,964
Number of Issues 56
P/E Ratios 35.7x
Beta 1.06
Market Environment
The U.S. economy provided a strong backdrop for the stock market's persistent
climb during the past year. Equity investors shrugged off rising interest rates,
as strong economic growth and benign inflation paved the way for another
excellent period for stocks.
Though headlines proclaimed new record highs throughout the year, not all
investors participated in the extraordinary returns. The very largest
growth-oriented companies (technology companies, in particular) led the way,
while smaller companies and value-oriented stocks lagged. Within this market
environment, active equity managers struggled to beat the returns of the S&P
500.
Top 5 Industries
----------------
(as a percentage of net assets)
Information Services & Technology 14.8%
Healthcare Products & Services 10.0%
Communication Systems & Services 10.0%
Finance & Insurance 9.5%
Banks 8.3%
12
<PAGE>
EVERGREEN
Select Large Cap Blend Fund
Portfolio Manager Commentary
Portfolio Manager Commentary
Portfolio Activity
Technology currently represents the portfolio's largest sector weighting.
Although our technology holdings--America Online and Compaq,
specifically--struggled during the past few months, other stocks purchased in
this sector during the fiscal period added to the fund's performance. Industry
stalwarts (and current Fund holdings) Cisco Systems, Microsoft and Intel posted
total twelve-month returns of 110%, 66% and 61%, respectively.
Financial companies represent another strong sector weighting. Within this area,
we are emphasizing fundamentally strong banks such as BankAmerica, Fleet
Financial, BankBoston and Bank One. In fact, the Fund benefited from a merger
between two of these holdings, Fleet Financial and BankBoston. The market's
realization of the potential of this combined banking franchise coupled with the
lower valuation levels helped boost both of these issues to higher levels.
A modestly underweighted utility position benefited performance, as companies
within this sector continue to battle higher interest rates, increasing
competition and uncertainty regarding deregulation. Unfortunately, the Fund's
only two holdings posted negative returns. Similarly, several of our consumer
staples companies lagged the market's strong returns. Share prices of current
holdings Coca-Cola, Gillette and Proctor & Gamble all declined during the
period.
Top 10 Holdings*
---------------
(as a percentage of net assets)
Dayton Hudson Corp. 4.6%
Microsoft Corp. 4.2%
Cisco Systems, Inc. 4.2%
MCI WorldCom, Inc. 4.1%
General Electric Co. 3.8%
Tyco International Ltd. 3.5%
Citigroup, Inc. 3.1%
GTE Corp. 3.1%
Waste Management, Inc. 2.8%
BankAmerica Corp. 2.7%
*Portfolio composition subject to change
Outlook
The significant broadening of the market in the last three months has given many
investors reason to cheer. Long overlooked cyclical stocks have become favorites
as worldwide economies strengthen and the risk of a slowdown, induced by
struggling Asian and Latin American economies, passes. Accelerating corporate
profit growth is good news for a market that has fretted over unimpressive
earnings growth. Looking ahead, the specter of higher inflation brought on by
the surprisingly high April CPI (up 0.7%), as well as rising interest rates,
present the greatest challenges to the market outlook.
13
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Fund at a Glance as of June 30, 1999
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 with a competitive advantage, stocks of which
are growth-oriented, and reasonably valued.
Benchmark
Russell 2000 Growth Index
Russell 2000 Index
PERFORMANCE AND RETURNS/1/
Performance Inception Date Class I
Class Inception Date 12/28/95
Average Annual Returns
1 year 4.22%
3 years 7.83%
Since Inception 10.96%
12-month income dividends per share 0
12-month capital gain distributions per share $ 0.02
LONG TERM GROWTH
[LINE GRAPH APPEARS HERE]
Select Small Cap
Date Class I Russell 2000 CPI Russell 2000 Growth
---- ---------------- ------------ --- -------------------
12/31/95 1,000,000 1,000,000 1,000,000 1,000,000
6/30/96 1,148,000 1,103,600 1,021,174 1,119,200
6/30/97 1,231,868 1,283,800 1,045,015 1,170,800
6/30/98 1,381,010 1,495,700 1,062,616 1,325,300
6/30/99 1,439,293 1,518,000 1,083,477 1,435,300
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Small Cap Growth Fund, Class I, the Russell 2000 Growth, the Russell 2000 and
the Consumer Price Index (CPI).
The Russell 2000 Growth and Russell 2000 are unmanaged indices, which do not
include transaction costs associated with buying and selling securities nor any
management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in the index.
/1/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
14
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Portfolio Manager Commentary
Portfolio Management
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 Company, where he manages the Fund and separately managed other,
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 cap 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]
Tom Holman
Performance
Evergreen Select Small Company Growth Fund had relatively strong performance,
especially during the final three months of the fiscal year as market leadership
changed and investors sought out the attractive values in small company growth
stocks. For the 12 months ended June 30, 1999, Evergreen Select Small Cap Growth
Fund, Class I had a total return of 4.22%, including a 15.68% return during the
final three months of the period. The benchmark, the Russell 2000 Growth Index,
had a return of 8.30% over the 12 months, and 14.75% over the final three
months.
Portfolio
Characteristics
---------------
Total Net Assets $70,113,537
Number of Issues 62
P/E Ratios 24.0x
Beta 1.24
Market Environment
The full 12-month period consisted of three periods of sharply different
conditions. The "Downdraft", from July 20 through October 8, 1998, was a time of
global economic concern and political uncertainty. This created a very difficult
environment for small company investing as the average small cap stock lost 38%
of its value. The "Rebound" began as small caps bottomed on October 8, and
lasted through January 20, 1999. During this time, the average small cap stock
gained more than 50%. This dramatic rise was driven by the U.S. Federal Reserve
Board lowering short-term interest rates three successive times. It is difficult
to sustain that type of momentum, however, and the market let off a little steam
in early 1999.
The final period, the "Broadening", began toward the end of February 1999, and
brought a significant change as the overall market finally broadened beyond the
few large cap growth stocks that had led performance over the previous two
years. Cyclical stocks and small company stocks began to perform well. For the
first time in more than two years, small company growth stocks outperformed
large company stocks. The primary factor was the clear sign of the improving
economy in Asia. That affected domestic small companies in two ways. First, as
the Asian economies picked up, they began to increase their imports of goods
from the United States, particularly benefiting the technology sector. Second,
Asian companies enjoyed better demand in their own
15
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Portfolio Manager Commentary
domestic economies, and so cut back on their exports to the United States, where
they had been dumping goods at very low prices and creating a difficult
competitive environment for U.S. companies. As a result, a number of sectors in
which the Fund had invested did remarkably well, including technology and
industrial manufacturing.
Any discussion of the 12-month period must take note of the enormous gains
generated by internet stocks. Seven of the top 10 contributors to the Russell
2000 Growth Index over the period were internet-related stocks. The average gain
of these seven stocks was 320%. Even more startling is the fact that those seven
stocks combined generated a 5.92% return for the entire index. To phrase this
another way, those seven stocks account for more than 70% of the index's return.
This massive concentration of stellar performance in a small group of stocks is
the primary reason for the Fund's underperformance over 12 months. We chose to
remain style-consistent, keeping the market cap of the fund below $1 billion by
selling securities as their market cap exceeded $2 billion. While this decision
seemed prudent at the time, it caused us to sell securities too early and had a
negative impact on the Fund's performance. We are considering changes so this
type of scenario will not inhibit performance in the future.
Top 5 Industries
----------------
(as a percentage of net assets)
Information Services & Technology 27.1%
Electrical Equipment & Services 9.8%
Telecommunication Services & Equipment 9.7%
Education 8.2%
Consumer Products & Services 6.8%
Portfolio Activity
During the first six months of the period, we had moved away from companies that
had significant exposure to Asia. That worked very well; however, with the
strength in the Asian markets in 1999, we migrated back to those areas where we
found exceptional value. As prospects brightened, we invested in companies such
as Lattice, a semi-conductor manufacturer, and Kemet, which makes capacitors for
circuit boards. In general, we increased our technology weighting substantially.
As of June 30, 1999, 24.8% of net assets were invested in hardware and 10.7% in
software and technology services. Those areas together had comprised about 24%
of net assets back on December 31, 1998.
We found some outstanding opportunities in technology; Fibre Channel is a new
data-storage standard that allows greater quantities of data to be stored faster
and further away, enhancing network speed and reliability. Qlogic makes fibre
channel adapter cards that hook various devices to the network. During the
second quarter of 1999 alone, Qlogic's stock prices rose from $30 to $135.
PMC-Sierra, which makes semi-conductor sets that manage telecommunications
traffic, was a stock that rose from $32 when we purchased it in September 1998
to $77 by March, when we sold it as it surpassed the $2 billion market
capitalization line. Applied Microcircuits, which is in a very similar industry
to PMC-Sierra, also did very well, rising from $40 per share in December, when
we purchased it, to $80 by the end of the fiscal year.
We also increased our weighting in cyclical and industrial manufacturing
companies, which at the end of the fiscal year accounted for about 10% of Fund
net assets, compared to a 5.5% weighting in the Russell 2000 Growth Index. Roper
Industries, a manufacturer of industrial controls and fluid handling products,
was a very strong performer, with its stock price rising 31.9% during the final
three months of the period.
16
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Portfolio Manager Commentary
One of the key events in which we have tried to take advantage is the federal
TEA 21 highway construction and repair program, which is expected to increase
federal spending substantially over the next six years. This already has had a
dramatic impact on construction-related companies as contractors upgrade their
existing equipment. Portfolio companies that have helped performance included
Astec Industries, an asphalt paving equipment company ; Manitowac, a crane
manufacturer; and CMI Corp, which makes concrete paving equipment.
The Fund also has been overweighted in telecommunications, with a 10% weighting
versus 4.3% for the index. Viatel, a company deploying a fiber optic network
across Europe, posted a 97% return during the final quarter, helped by both
deregulation and industry consolidation. ITC Deltacom, which provides local and
long-distance services in the Southeastern United States, and Transaction
Network Services, which operates a nationwide credit card processing network,
were two other strong contributors.
Finance and healthcare were two areas in which the Fund has been underweighted
substantially. We have de-emphasized finance, at 2.3% of net assets versus 12%
for the index, principally because we found more attractive opportunities
elsewhere. Healthcare, which was just 1.8% of net assets at the end of the
fiscal year versus 14% for the index, is beset by uncertainties over funding and
payment issues.
Top 10 Holdings*
---------------
(as a percentage of net assets)
Strayer Education, Inc. 2.9%
Kronos, Inc. 2.9%
Scotts Co., Cl. A 2.9%
Applied Micro Circuits Corp. 2.7%
Galileo Technology Ltd. 2.5%
Transaction Network Services, Inc. 2.4%
Citadel Communications Corp. 2.3%
Investors Financial Services Corp. 2.3%
Maximus, Inc. 2.2%
Electronics for Imaging, Inc. 2.2%
*Portfolio composition subject to change
Outlook
We are somewhat cautious about the immediate outlook because the rapid, dramatic
increases in a few select industries within technology have taken away some of
the valuation advantages enjoyed by small cap growth companies, especially as
interest rates have climbed. However, over the longer term we still think that
smaller companies in general offer very attractive valuations relative to larger
companies and good investment opportunities in an environment of global economic
expansion. Our focus remains to invest in market leaders and to carefully manage
the risk profile of the Fund, taking profits where significant gains have been
obtained and looking for companies which we believe have above-average growth
prospects, reasonable valuations and strong managements.
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.
17
<PAGE>
EVERGREEN
Select Small Company Value Fund
Fund at a Glance as of June 30, 1999
PORTFOLIO PROFILE
Philosophy
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 they believe 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 Value Index
PERFORMANCE AND RETURNS/1/
Portfolio Inception Date 12/23/97 Class I Class IS
Class Inception Date 12/23/97 12/31/98
Average Annual Returns
1 year -10.73% -11.68%
3 years N/A N/A
5 years N/A N/A
Since Inception -6.41% -7.06%
12-month income dividends per share $0.03 0
12-month capital gain distributions per share $0.03 0
LONG TERM GROWTH
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Consumer Price Index - US Russell 2000 Value Evergreen Select Sm Comp Value Class I
--- ------------------------- ------------------ --------------------------------------
<S> <C> <C> <C>
31-Dec-97 $1,000,000 $1,000,000 $1,000,000
31-Mar-98 1,005,580 1,083,500 1,062,315
30-Jun-98 1,010,539 1,044,373 989,018
30-Sep-98 1,014,259 857,663 779,165
31-Dec-98 1,016,119 935,505 867,937
31-Mar-99 1,022,939 844,839 771,960
30-Jun-99 1,030,378 984,678 882,942
</TABLE>
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Small Company Value Fund, Class I, the Russell 2000 Value and the Consumer Price
Index (CPI).
The Russell 2000 Value Index is an unmanaged index and does not include
transaction costs associated with buying and selling securities, nor any
management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in the index.
/1/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
Historical performance shown for Class IS prior to its inception is based on the
performance of Class I and has not been adjusted to reflect the effect of the
0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee. If these fees
had been reflected, returns would have been lower.
18
<PAGE>
EVERGREEN
Select Small Company Value Fund
Portfolio Manager Commentary
Portfolio Management Team
During the fiscal year ended June 30, 1999, Evergreen Select Small Company Value
Fund was managed by a team headed by Nola Maddox Falcone. The team also included
Constance Unger and Peter J. Kovalski, CFA. Nola M. Falcone retired as President
and Co-Chief Executive Officer of Lieber & Co. and Evergreen Asset Management
Corp. in July 1999, following a successful 30-year career in investment
management. The Fund's management team now comprises Ms. Unger, as team leader,
and Mr. Kovalski. Ms. Unger, who joined Evergreen Asset Management Corp. as an
analyst in 1998, is an investment veteran with more than 12 years' experience in
value investing. She also has served at Segall Bryant & Hamill Investment
Counselors, Society Asset Management and Bankers Trust Co. Mr. Kovalski, CFA,
joined Evergreen Asset Management Corp. 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 FALCONE APPEARS HERE]
Nola Maddox Falcone, CFA
[PHOTO OF PETER J. KOVALSKI APPEARS HERE]
Peter J. Kovalski, CFA
[PHOTO OF CONSTANCE UNGER APPEARS HERE]
Constance Unger, CFA
Performance
During a fiscal year in which small company value investing was not in favor
until very late in the period, Evergreen Select Small Company Value Fund
performed consistently with its style of investing. For the 12 months ended June
30, 1999, the Class I had a total return of -10.73%, including a 14.38% gain
during the final three months of the period. During the 12 months, the Russell
2000 Value Index had a return of -5.72%, and gained 15.55% during the final
quarter.
Portfolio Structure
The Fund's management team has assembled a diversified stock portfolio of 128
different companies. During the period since the Fund's inception, the team has
found a number of attractive opportunities among small cap companies. This has
resulted in a portfolio of stocks of companies that, in the aggregate, have
lower valuations, as measured by traditional price measures such as
price-to-earnings and price-to-book ratios, than the overall stock market, yet
higher earnings growth rates. Opportunities were particularly evident among
consumer-sensitive companies whose businesses rely principally on the U.S. Many
of the best-performing companies have found ways to take advantage of the
growing needs of the large, baby-boomer generation that is approaching late
middle age. Those companies that have products or services appealing to this
market have benefited from an environment of low unemployment and strong
consumer demand.
19
<PAGE>
EVERGREEN
Select Small Company Value Fund
Portfolio Manager Commentary
Portfolio
Characteristics
---------------
Total Net Assets $108,181,122
Number of Holdings 128
P/E Ratio 13.1x
Beta N/A
Market Environment
During most of the 12-month period, small company investing and value investing
continued to be out of favor as investors persisted in their preference for the
large-company growth companies that had been the market's performance leaders
for more than two years. It was only during the final three months that the
market broadened and other types of stocks began to outperform the large-company
growth stocks. Throughout the 12 months, strong domestic companies, including
small cap companies, continued to report healthy earnings in an economy of
consistently strong consumer demand, despite shifting investor sentiment and
market volatility.
The fiscal year began in the summer of 1998 in an environment of investor
anxiety. With a backdrop of international currency and financial crises
reverberating around the globe, investors avoided small cap stocks and shifted
assets to sectors with perceived liquidity. In response to market turmoil, the
U.S. Federal Reserve Board intervened in the fall of 1998 with three successive
reductions in short-term interest rates. These actions resulted in a rebound in
equity markets, including in the small cap sector, during the final quarter of
1998.
Top 5 Industries
----------------
(as a percentage of net assets)
Banks 12.8%
Building, Construction & Furnishings 9.3%
Heathcare Products & Services 9.2%
Finance & Insurance 8.5%
Consumer Products & Services 8.4%
The shift of investment assets out of the popular large-company growth stocks
and into the undervalued, low-P/E small cap sector began in April 1999,
resulting in very strong outperformance by small company stocks in the final
quarter of the fiscal year. The Russell 2000 Value Index, for example, returned
15.55% during the quarter, while the S&P 500 Index returned 7.06%.
Takeover activity was one of the primary catalysts for the small cap sector's
outperformance, especially by senior management teams and private investors who
recognized the depressed small company values. Many larger companies also found
it easy to purchase small companies at attractive values, which resulted in an
automatic accretion of earnings. This trend was aided by the continuation of
pooling of interest accounting rules, which allow two companies to merge their
books without taking a hit to earnings from goodwill charges. These rules are
expected to continue unchanged until January 1, 2001.
Within the Russell 2000 Value Index, internet companies, which value investors
tend to avoid because of their unprecedented high stock valuations, were the
performance leaders. However, outside of the internet and selected other
technology stocks, the fiscal year ended with the small capitalization sector
continuing to be undervalued by virtually all historical standards for
evaluating the investment potential of company stocks.
20
<PAGE>
EVERGREEN
Select Small Company Value Fund
Portfolio Manager Commentary
Portfolio Activity
Throughout the extended period in which the small company value sector
underperformed the broader market, our research analysts and portfolio managers
continued to search for value-timing opportunities among small company stocks
that were out-of-favor despite their strong fundamental characteristics. We
found many small cap companies with healthy earnings and continued growth
prospects, but with stock prices that had dropped precipitously we believed it
was important to stay the course in our investment discipline. In addition, we
believed merger-and-acquisition activity was likely to pick up, especially
because of the depressed stock price levels in the small cap sector. We also
believed that institutional investors eventually would shift their attention and
part of their portfolios to the small sector.
During the summer-autumn 1998 crisis, we found many value-timing opportunities
that we added to the portfolio. These included several financial services
companies: Waddell and Reed Financial Inc., a mutual fund company, that was
purchased on August 31, 1998 and had a return to the Fund of 63.3% by the end of
the fiscal year; Pacific Century Financial Corp., a Hawaii-based bank that was
purchased on August 26, 1998 and had a 38.1% return to the Fund for the fiscal
year; Radian Group, a mortgage insurer purchased on September 4, 1998 and which
had a 25.4% return to the Fund. Other value-timing purchases included Jabil
Circuits, a contract manufacturer for the technology industry, purchased on
September 14, 1998 and sold one month later for a 43.9% gain; VISX, a
manufacturer of laser systems for corrective eye surgery, which was purchased in
October 1998 and sold in April 1999 at a 456.1% gain; and Prime Hospitality, a
company which operates extended stay hotels. It was purchased on November 30,
1998 and posted a 38.0% gain to the Fund by June 30, 1999.
One of the underlying strategies for the Fund is to target merger or takeover
candidates in consolidating industries. During the fiscal year, nineteen
portfolio companies were involved in either announced or completed acquisitions.
Eight of those companies were in the financial services sector.
Fund managers and analysts also seek out small companies with new product niches
that can benefit from emerging lifestyle or demographic trends. Among these
holdings was Koala Corporation, which manufactures baby changing stations and
high chairs. Purchased on December 30, 1998, the stock had a 54.7% return to the
Fund by June 30.
In the final quarter of the fiscal year, the Fund also increased its exposure to
the technology and telecommunications industries. Acquisitions that contributed
to performance included: Kent Electronics, which manufactures electronic
components for computing and networks; CapRock Communications, which owns and
operates a long-distance fiber optics network based in the Southwest United
States; Lightbridge Inc., which provides fraud prevention software for the
telecommunications industry; and Benchmark Electronics, a contract manufacturer
to the technology industry.
The Fund was overweighted in the energy sector during three of the fiscal year's
quarters. While this overweighting hurt performance for the full fiscal year, it
helped significantly in the final quarter as energy stocks finally began to
perform well. Among the energy-related performance leaders in the final quarter
were Barrett Resources, Southwestern Energy, Providence Energy, Cabot Oil and
Gas and Berry Petroleum.
21
<PAGE>
EVERGREEN
Select Small Company Value Fund
Portfolio Manager Commentary
Top 10 Holdings*
---------------
(as a percentage of net assets)
Alpharma, Inc. 2.3%
Sonic Automotive, Inc. 1.9%
Fair Issac & Co., Inc. 1.8%
Republic Bancshares, Inc. 1.8%
MDU Resources Group, Inc. 1.7%
Stewart Enterprises, Inc. 1.6%
Mid-State Bancshares 1.6%
Genlyte Group, Inc. 1.6%
Raymond James Financial, Inc. 1.5%
American Bankers Insurance Group, Inc. 1.5%
*Portfolio composition subject to change
Outlook
As investors turn to sectors that have been overlooked, we believe several
factors bode well for small cap value investing. The small cap stock sector
remains significantly undervalued when compared to large-caps, while investors,
including institutions, have broadened their interest to small cap stocks. In
addition, value investing shows clear signs that it is returning to favor after
being overlooked for more than two years. In addition, we have discovered during
our visits to small cap technology and industrial companies that those firms
with exposure to Asia are experiencing a clear pick-up in demand. Meanwhile,
consumer-oriented companies, which were performance leaders during the past
year, continue to experience strong domestic demand.
We believe many high quality, small cap companies with good products have the
potential to enjoy excellent earnings growth. At the same time, current stock
valuations encourage continued merger-and-acquisition activity and stock buyback
programs.
We continue to see attractive companies selling at reasonable prices in the
small cap market, and we intend to continue to pursue a discipline that we
believe, over the long term, will lead to significant investment opportunities.
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.
22
<PAGE>
EVERGREEN
Select Social Principles Fund
Fund at a Glance as of June 30, 1999
PORTFOLIO PROFILE
Philosophy
Evergreen Select Social Principles Fund invests in the stocks of mid-sized U.S.
companies, with 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
Standard & Poors 400 MidCap Index
(S&P 400 MidCap)
PERFORMANCE AND RETURNS/1/
Portfolio Inception Date: 5/31/88 Class I Class IS
Class Inception Date 11/24/97 3/12/98
Average Annual Returns
1 year 0.90% 0.64%
3 years 12.66% 12.40%
5 years 19.15% 18.87%
10 years 13.81% 13.54%
Since Inception 13.89% 13.62%
12-month income dividends per share $ 0.14 $ 0.08
12-month capital gain distributions per share $ 2.10 $ 2.10
LONG TERM GROWTH
[LINE GRAPH APPEARS HERE]
Select Social
Principles
Date Consumer Price Index - US S & P 400 Midcap Class I
--- ------------------------- ---------------- -------------------------
6/30/89 1,000,000 1,000,000 1,000,000
6/30/90 1,046,728 1,154,349 1,063,517
6/30/91 1,095,890 1,302,588 1,137,717
6/30/92 1,129,734 1,544,277 1,279,616
6/30/93 1,163,570 1,894,673 1,600,619
6/30/94 1,192,587 1,893,285 1,517,265
6/30/95 1,228,848 2,314,536 2,117,849
6/30/96 1,262,232 2,813,314 2,548,218
6/30/97 1,291,700 3,469,526 2,996,303
6/30/98 1,313,457 4,402,847 3,610,445
6/30/99 1,339,243 5,150,640 3,643,810
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Social Principles Fund, Class I, the S&P 400 MidCap and the Consumer Price Index
(CPI).
The S&P 400 MidCap is an unmanaged index, which does not include transaction
costs associated with buying and selling securities nor any management fees. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in the index.
/1/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
Historical performance shown for Class IS from 11/24/97 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee.
If these fees had been reflected, returns would have been lower. Prior to
11/24/97, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTFs) performance, adjusted for estimated mutual fund
expenses. The CTFs were not registered under the 1940 Act and were not subject
to certain investment restrictions. If the CTFs had been registered, their
performance might have been adversely affected. Performance for the CTF has been
adjusted to include the effect of estimated mutual fund class gross expense
ratios at the time the CTF was converted to a mutual fund. If fee waivers and
expense reimbursements had been calculated into the mutual fund class expense
ratio the total returns would be as follows: Class I--3 year = 12.72%, 5 year =
19.24%, 10 year = 13.90% and since 05/31/88 = 13.99%; Class IS--3 year = 12.46%,
5 year = 18.95%, 10 year =13.64 % and since 5/31/88 = 13.72%.
23
<PAGE>
EVERGREEN
Select Social Principles Fund
Portfolio Manager Commentary
Portfolio Management
Evergreen Select Social Principles Fund is managed by A. Jay Zelko who has over
22 years of investment experience.
[PHOTO OF A. JAY ZELKO APPEARS HERE]
A. Jay Zelko
Performance
For the twelve months ended June 30, 1999, Evergreen Select Social Principles
Fund, Class I posted a 0.90% total return. This performance trailed the 17.2%
total return of the Fund's benchmark, the S&P 400 Midcap Index. Underperformance
can be partially attributed to the Fund's healthcare and finance exposure.
Portfolio
Characteristics
---------------
Total Net Assets $134,536,025
Number of Issues 58
P/E Ratio 30.9x
Beta 1.03
Market Environment
The U.S. economy provided a positive backdrop for the U.S. stock market during
the past year. Economic growth remained strong and inflation stayed low. Even
rising interest rates during the past nine months weren't enough to derail the
market's upward ascent.
Although the headlines proclaimed new highs throughout the fiscal year, not all
investors participated in these extraordinary returns. The largest stocks
enjoyed the greatest returns, while small cap stocks (as measured by the Russell
2000 Index) lagged significantly, up a mere 1.5%.
Top 5 Industries
----------------
(as a percentage of net assets)
Information Services & Technology 14.1%
Retailing & Wholesale 13.1%
Healthcare Products & Services 9.0%
Finance & Insurance 8.8%
Utilities-Electric 5.7%
24
<PAGE>
EVERGREEN
Select Social Principles Fund
Portfolio Manager Commentary
Portfolio Activity
Strong stock selection within the technology sector positively impacted
performance. For instance, current holdings Adaptec, PMC-Sierra, Veritas
Software and Teradyne all returned over 125% for the twelve months. In addition,
we bolstered our technology exposure and took advantage of corporate America's
increasing reliance on the internet by purchasing PSINet, a global internet
access provider to the business market.
We have also emphasized retailing companies within the portfolio. Retailers are
enjoying solid earnings growth, as they continue to reap the benefits of the
healthy U.S. economy and strong consumer spending. Family Dollar Stores,
Abercrombie & Fitch, and Best Buy are three such holdings capitalizing upon this
strong backdrop, evidenced by their total annual returns of 31%, 118% and 274%,
respectively.
Top 10 Holdings*
---------------
(as a percentage of net assets)
Best Buy Co., Inc. 4.8%
Abercrombie & Fitch 4.2%
Veritas Software Corp. 3.1%
Allied Waste Industries, Inc. 2.9%
Sanmina Corp. 2.8%
Qwest Communications Intl., Inc. 2.6%
Adaptec, Inc. 2.6%
Compuware Corp. 2.6%
Healthsouth Corp. 2.6%
PMC-Sierra, Inc. 2.5%
*Portfolio composition subject to change
While many of the portfolio's technology and retail companies posted outstanding
gains, the Fund's performance lagged the benchmark, in part, due to the
portfolio's healthcare and finance holdings. In healthcare, concerns over
medicare reform caused investors to move away from service providers such as
HEALTHSOUTH, Lincare and Pediatrix. Many finance companies were penalized by
rising interest rates. Consequently, holdings Reliastar Financial and Conseco
both posted negative returns during the fiscal period.
Outlook
Looking ahead, we continue to hold an optimistic outlook for mid cap equities.
Although mid cap stocks have underperformed their large cap brethren for the
past few years, there are signs that a market rotation may be taking place.
During the past three months, for instance, indices of mid cap stocks (the S&P
400 Midcap Index, +14.2%) and small cap stocks (the Russell 2000 Index, +15.6%)
doubled the performance of the large cap S&P 500 which was up 7.0%.
We believe this valuation disparity between large and smaller stocks, as well as
mid caps' own strong fundamentals, will attract investors to mid cap equities.
We enthusiastically look forward to the next few years.
25
<PAGE>
EVERGREEN
Select Special Equity Fund
Fund at a Glance as of June 30, 1999
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/1/
Portfolio Inception Date 3/15/94 Class I Class IS
Class Inception Date 3/15/94 3/15/94
Average Annual Returns
1 year 42.02% 41.55%
3 years 24.15% 23.77%
5 years 26.12% 25.86%
Since Inception 21.02% 20.78%
12-month income dividends per share 0 0
12-month capital gain distributions per share $ 1.18 $ 1.18
LONG TERM GROWTH
[LINE GRAPH APPEARS HERE]
Evergreen Select
Date Consumer Price Index - US Russell 2000 Special Equity IS
---- ------------------------- ------------ -----------------
3/31/94 1,000,000 1,000,000 1,000,000
6/30/94 1,005,435 961,055 928,000
6/30/95 1,036,005 1,153,907 1,136,121
6/30/96 1,064,151 1,429,538 1,545,689
6/30/97 1,088,995 1,662,932 1,819,441
6/30/98 1,107,337 1,937,388 2,070,250
6/30/99 1,129,076 1,966,347 2,930,786
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Special Equity Fund Class IS, the Russell 2000 and the Consumer Price Index
(CPI).
The Russell 2000 is an unmanaged index, which does not include transaction costs
associated with buying and selling securities nor any management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in the index.
/1/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
Historical performance shown for the Class I prior to 7/27/98 is based on the
performance of (1) the Class Y shares of the Fund's predecessor fund, CoreFund
Special Equity Fund from 2/21/95 to 7/26/98 and (2) the Class A Shares of the
Fund's predecessor fund, CoreFund Special Equity Fund from 3/15/94 to 2/20/95.
Historical performance shown for Class IS prior to 7/27/98 is based on the
performance of the Class A shares of the Fund's predecessor fund, Corefund
Special Equity Fund, CoreFund Special Equity Fund, and reflects the same 0.25%
12b-I applicable to Class IS.
26
<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 OF JOSEPH E. STOCKE APPEARS HERE]
Joseph E. Stocke CFA
Performance
Evergreen Select Special Equity Fund Class IS produced a total return of 41.55%
for the twelve months ended June 30, 1999, outpacing its benchmark, the Russell
2000 Index, which generated a total return of 1.50%. The Fund achieved
particularly notable performance in the fourth quarter of 1998 and the first
quarter of 1999. In the fourth quarter of 1998, the Fund returned 28.15% versus
16.50% for the Russell 2000 Index. The Fund went on to return 22.20% in the
first quarter of 1999, a period in which the Russell 2000 Index fell by 5.50%.
Portfolio
Characteristics
---------------
Total Net Assets $121,008,952
Number of Holdings 114
P/E Ratio 25.2x
Beta 1.23
Market Environment
After being buffeted by challenging market conditions for much of the past
twelve months, small-to-mid capitalization stock investors closed the first half
of 1999 enjoying broad-based market leadership. The Fund's fiscal year began
with historically high stock valuations and increasing global financial
instability, which, among other factors, drove the stock market to its worst
quarterly decline in nearly a decade. August 1998, in particular, represented
the largest single monthly decline since the October 1987 crash. Small-to-mid
capitalization stock prices slid the hardest, as investors perceived greater
safety in larger companies.
The market began to rebound in the fourth quarter of 1998. Worldwide interest
rate cuts restored investors' confidence that global economies and financial
markets would regain stability. Many investors anticipated weak international
recoveries, however, that would slow U.S. economic growth in the coming year.
27
<PAGE>
EVERGREEN
Select Special Equity Fund
Portfolio Manager Commentary
In the first quarter of 1999, global economies proved heartier than expected,
and the U.S. economy showed ongoing strength. Investors pushed stock prices
higher as greater optimism for corporate earnings, as well as seasonal cash
inflows, offset concerns about high valuations and disappointment in some high
profile earnings reports. Large cap stocks claimed undisputed leadership in the
market's ascent during that time. The NASDAQ Composite climbed 12.3% and the Dow
Jones Industrial Average rose 7.0% in the first three months of 1999. In
contrast, the Russell 2000 Index and the Standard & Poor's Midcap 400 fell by
5.50% and 6.40%, respectively.
Leadership shifted in this year's second quarter to include stocks of all market
valuations. Ongoing improvement in global economies boosted prices of
long-overlooked cyclical stocks, as the risk of an international slowdown began
to pass. Domestically, investors focused on a resilient housing market, strong
consumer confidence, low unemployment and a resurgence in the Initial Public
Offering (IPO) market; and welcomed accelerating corporate profit growth. Signs
of recovery in the Japanese economy also supported a broadening in the market's
leadership. On the flipside of the economy's strength, however, investors were
mindful that robust growth could rekindle inflation and prompt the Federal
Reserve Board to raise interest rates. In June 1999, the Federal Reserve Board
raised interest rates by 0.25% and investors have kept a watchful eye for
indications of further moves.
Top 5 Industries
----------------
(as a percentage of net assets)
Information Services & Technology 23.5%
Retailing & Wholesale 13.6%
Telecommunication Services & Equipment 9.8%
Healthcare Products & Services 9.8%
Food & Beverage Products 4.4%
Portfolio Activity
The Fund's "bottom-up" strategy, building the Portfolio "one stock at a time",
has been the key to its success. The Fund significantly outperformed its
benchmark, the Russell 2000 Index in several industries, over the past twelve
months. Technology, communications, consumer cyclicals, basic materials and
consumer staples holdings all contributed substantially to the Fund's strong
relative performance.
Individual stocks were the story behind the Fund's strong total return this
fiscal year. These included Ticketmaster Online Citysearch, a consumer cyclicals
company, whose price rose 300% by the end of December 1998. The Fund's
technology stocks led performance in the first quarter of 1999. Comprising 18.9%
of net assets on March 31, 1999, these holdings outperformed the Russell 2000 by
135%. Abovenet Communications, F5 Networks, Miningco.Com and America Online all
contributed to the Fund's competitive performance over the past twelve months.
28
<PAGE>
EVERGREEN
Select Special Equity Fund
Portfolio Manager Commentary
Top 10 Holdings*
---------------
(as a percentage of net assets)
MIPS Technologies, Inc. 5.2%
Pacific Sunwear of California 4.1%
Gildan Activewear, Inc. 2.8%
Abovenet Communications, Inc. 2.8%
Williams Sonoma, Inc. 2.6%
Abercrombie & Fitch Co. 2.4%
NEXTLINK Communications, Inc., Cl. A 2.2%
Earthlink Network, Inc. 2.2%
Real Networks, Inc. 2.1%
Chirex, Inc. 1.9%
*Portfolio composition subject to change
Outlook
We believe equity investors could face some challenges over the next six months,
but we remain optimistic about growth opportunities. The possibility of higher
inflation and rising interest rates present the greatest concerns to investors.
Further, investors are mindful of historically high valuations, lackluster
European economies and the impending Year 2000 issue.
In our opinion, however, pockets of opportunity exist in every market
environment. By employing both quantitative and qualitative analysis, we believe
the Fund's investment team can seek out companies demonstrating strong growth
potential. We look for the Fund's careful investment process to continue to
reveal companies able to thrive under a wide variety of market conditions.
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.
29
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Fund at a Glance as of June 30, 1999
PORTFOLIO PROFILE
Philosophy
Evergreen Select Strategic Growth Fund is a growth-style equity product that
emphasizes large and mid-sized U.S. companies. We believe that superior
long-term returns can be achieved through a disciplined approach of investing in
stocks with excellent historical and future earnings growth.
Process
The Fund is managed by two investment professionals who utilize a unique blend
of quantitative and qualitative fundamental analysis. This bottom-up stock
selection process is research-intensive and identifies companies which exhibit
strong current fundamentals, histories of superior earnings/dividend growth and
rising earnings expectations.
Benchmark
Russell 1000 Growth Index
PERFORMANCE AND RETURNS/1/
Portfolio Inception Date 12/31/94 Class I Class IS
Class Inception Date 11/24/97 02/27/98
Average Annual Returns
1 year 19.22% 18.88%
3 years 27.21% 26.86%
Since Inception 28.77% 28.42%
12-month income dividends per share $ 0.09 $ 0.04
12-month capital gain distributions per share $ 3.26 $ 3.26
LONG TERM GROWTH
[LINE GRAPH APPEARS HERE]
Select Strategic
Date Consumer Price Index - US Russell 1000 Growth Growth Class I
--- ------------------------ ------------------ -----------------------
12/31/94 1,000,000 1,000,000 1,000,000
6/30/95 1,018,704 1,202,924 1,209,022
6/30/96 1,046,379 1,537,472 1,513,807
6/30/97 1,070,808 2,019,276 1,999,367
6/30/98 1,088,844 2,653,042 2,614,802
6/30/99 1,110,220 3,376,522 3,116,891
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Strategic Growth Fund, Class I, the Russell 1000 Growth and the Consumer Price
Index (CPI).
The Russell 1000 Growth is an unmanaged index, which does not include
transaction costs associated with buying and selling securities nor any
management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in the index.
/1/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
Historical performance shown for Class IS from 11/24/97 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee.
If these fees had been reflected, returns would have been lower. Prior to
11/24/97, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTFs) performance, adjusted for estimated mutual fund
expenses. The CTFs were not registered under the 1940 Act and were not subject
to certain investment restrictions. If the CTFs had been registered, their
performance might have been adversely affected. Performance for the CTF has been
adjusted to include the effect of estimated mutual fund class gross expense
ratios at the time the CTF was converted to a mutual fund. If fee waivers and
expense reimbursements had been calculated into the mutual fund class expense
ratio the total returns would be as follows: Class I--3 year = 27.27% and since
12/31/94 = 28.85%; Class IS--3 year = 26.92% and since 12/31/94 = 28.51%.
30
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Portfolio Manager Commentary
Portfolio Management Team
David Chow 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 promotes consistency of results and superior service.
[PHOTO OF DAVID M. CHOW APPEARS HERE] [PHOTO OF W. SHANNON REID APPEARS HERE]
David M. Chow W. Shannon Reid
Performance
Evergreen Select Strategic Growth Fund, Class I posted a 19.2% total return for
the fiscal year ended June 30, 1999 versus a 27.3% return for its benchmark, the
Russell 1000 Growth Index. Performance significantly trailed the benchmark after
the first half of the fiscal year, as the stock market exhibited a very narrow
advance in which the top 20 largest stocks within the Russell 1000 Growth Index
accounted for 73% of the index's gain.
Portfolio
Characteristics
---------------
Total Net Assets $493,769,324
Number of Issues 64
P/E Ratio 42.5x
Beta 1.12
Market Environment
The list of financial and economic crises were multiple during the first fiscal
quarter ending September 30, 1998. Much of Asia was sliding into recession,
Russia was experiencing debt default and financial meltdown, and Brazil was
witnessing interest rates rise above 40% in an effort to protect its currency.
Amid these disasters, the Federal Reserve Board apparently felt that risks to
the monetary system were so great that they coordinated a takeover of the hedge
fund Long Term Capital by its creditors.
The U.S. equity market buckled under this pressure, as most major indices
produced negative double-digit returns during the period. During the December
quarter, however, the market rebounded. Resilient domestic economic growth,
global markets' stability, and support by the Federal Reserve Board (in the form
of 3 interest rate cuts) renewed investor confidence and fueled the S&P 500
Index's impressive 21.3% quarterly return, the strongest quarterly advance in
twenty years.
The upward trend has continued over the past six months. Investors have shrugged
off rising interest rates, choosing instead to focus on the strong economy and
benign inflation.
31
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Portfolio Manager Commentary
Top 5 Industries
----------------
(as a percentage of net assets)
Information Services & Technology 19.9%
Healthcare Products & Services 17.0%
Retailing & Wholesale 13.5%
Communication Systems & Services 9.3%
Electrical Equipment & Services 7.9%
Portfolio Activity
Technology represents the Fund's largest sector representation at 20%. Prominent
holdings include well-known names such as Microsoft and Cisco, as well as
lesser-known companies such as Siebel Systems and Broadvision. Despite recent
significant price appreciation, our stance regarding this sector remains
positive and we continue to look for attractive entry points. Our focus revolves
around companies which provide solutions for the following three themes:
. continued growth in demand for communications network bandwidth
. increasing demand for data management and storage capacity
. enablers of business to business e-commerce.
Healthcare is the Fund's second largest sector weighting at 17%. Pharmaceutical
stocks have fallen out of favor over the past several months due to a rotation
into more economically sensitive names, slowing earnings growth rates and
political risk (a Medicare drug benefit is likely to be a campaign issue in the
year 2000). We believe the worst is over for this group. Two of our favorites
are Warner Lambert and Bristol-Meyers. Medical device stocks will trade upon
their specific product cycles. Our largest holdings here include VISX Corp. and
Guidant. Hospital management companies face a difficult operating environment
due to rising costs and falling reimbursement rates; thus we continue to avoid
this area.
Retailers account for 13% of the fund. We continue to like the prospects for
companies who exhibit an ability to gain market share against the backdrop of an
increasingly competitive retail environment. Major holdings include Wal-Mart,
Home Depot and Best Buy.
Top 10 Holdings*
---------------
(as a percentage of net assets)
General Electric Co. 5.8%
Microsoft Corp. 5.4%
Cisco Systems, Inc. 3.8%
Lucent Technologies, Inc. 3.6%
Bristol-Myers Squibb Co. 3.2%
EMC Corp. 3.1%
Wal-Mart Stores, Inc. 3.1%
Warner-Lambert Co. 2.7%
Home Depot, Inc. 2.3%
Johnson & Johnson 2.1%
*Portfolio composition subject to change
Outlook
The Fund outperformed its benchmark in each year from 1995 through 1997.
Relative performance slipped in 1998 when our bottom-up, diversified approach
did not keep up with the market's narrow advance. Going forward, we will
continue to adhere to our investment discipline of owning a diversified
portfolio of companies, which we believe will produce superior and sustainable
earnings growth. We are confident that as the stock market broadens and rewards
strong fundamentals and earnings growth, our style will once again outperform.
32
<PAGE>
EVERGREEN
Select Strategic Value Fund
Fund at a Glance as of June 30, 1999
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/1/
Portfolio Inception Date 12/31/81 Class I Class IS
Class Inception Date 11/24/97 03/11/98
Average Annual Returns
1 year 8.85% 8.60%
3 years 22.28% 22.01%
5 years 22.14% 21.86%
10 years 14.87% 14.59%
Since Inception 17.41% 17.12%
12-month income dividends per share $ 2.93 $ 2.41
12-month capital gain distributions per share $ 4.89 $ 4.89
LONG TERM GROWTH
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Consumer Price Index - US Russell 1000 Value Select Strategic Value Class I
--- ------------------------- ------------------ ------------------------------
<S> <C> <C> <C>
6/30/89 1,000,000 1,000,000 1,000,000
6/30/90 1,046,728 1,067,015 1,060,827
6/30/91 1,095,890 1,123,988 1,039,276
6/30/92 1,129,734 1,303,207 1,156,546
6/30/93 1,163,570 1,589,238 1,417,841
6/30/94 1,192,587 1,615,032 1,471,162
6/30/95 1,228,848 1,944,912 1,883,533
6/30/96 1,262,232 2,423,915 2,187,321
6/30/97 1,291,700 3,228,269 2,959,338
6/30/98 1,313,457 4,159,571 3,674,144
6/30/99 1,339,243 4,840,350 3,999,293
</TABLE>
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 (CPI).
The Russell 1000 Value is an unmanaged index, which does not include transaction
costs associated with buying and selling securities nor any management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in the index.
/1/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
Historical performance shown for Class IS from 11/24/97 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee.
If these fees had been reflected, returns would have been lower. Prior to
11/24/97, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTFs) performance, adjusted for estimated mutual fund
expenses. The CTFs were not registered under the 1940 Act and were not subject
to certain investment restrictions. If the CTFs had been registered, their
performance might have been adversely affected. Performance for the CTF has been
adjusted to include the effect of estimated mutual fund class gross expense
ratios at the time the CTF was converted to a mutual fund. If fee waivers and
expense reimbursements had been calculated into the mutual fund class expense
ratio the total returns would be as follows: Class I--3 year =22.34%, 5 year
=22.23%, 10 year = 14.96 % and since 12/31/81 = 17.51%; Class IS--3 year =
22.07%, 5 year = 21.94%, 10 year = 14.69% and since 12/31/81 = 17.23%.
33
<PAGE>
EVERGREEN
Select Strategic Value Fund
Portfolio Manager Commentary
Portfolio Management Team
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] [PHOTO OF JACK GRAY APPEARS HERE]
Elizabeth Smith Jack Gray
[PHOTO OF TIM O'GRADY APPEARS HERE]
Tim O'Grady
Performance
Evergreen Select Strategic Value Fund, Class I posted an 8.9% total return for
the fiscal year ended June 30, 1999. This performance lagged the 16.4% return
for the Russell 1000 Value Index. The fund underperformed the benchmark during a
period in which growth stocks outpaced their value counterparts considerably.
Lagging performance can also be contributed to a poor showing by the portfolio's
utility holdings.
Portfolio
Characteristics
---------------
Total Net Assets $532,805,514
Number of Issues 49
P/E Ratio 19.1x
Beta 1.00
Market Environment
Although the U.S. economy provided a positive backdrop for the stock market with
solid growth and low inflation, value stocks nevertheless experienced a
turbulent fiscal year. During the first three months of the fiscal period, for
example, value stocks, as measured by the Russell 1000 Value Index, declined
nearly 12%, and for the entire year lagged the S&P 500 Index by 6.4%.
For the first nine months of the period, large cap growth stocks were investors'
overwhelming asset class of choice. Technology stocks thrived in this
environment, while more value-oriented sectors such as financials and utilities
trailed far behind. As value managers, it was difficult to witness growth stocks
continue to soar to new highs despite the prospect for a slower earnings growth
and soaring valuation levels.
34
<PAGE>
EVERGREEN
Select Strategic Value Fund
Portfolio Manager Commentary
Portfolio Activity
Technology represented one of the portfolio's greatest areas of strength, and
stocks purchased in this sector during the fiscal period added to the fund's
performance. Underlying this exposure is an emphasis on industry leaders such as
Intel and IBM, while stock-picking remains sensitive to valuation levels. During
the fiscal year, these two technology stalwarts, and current holdings, posted
total returns of 61% and 126%, respectively. The portfolio's overweighting in
technology versus the benchmark reflects our view that technology is the single
most significant trend driving the U.S. economy.
Strong stock selection among our telecommunications holdings also had a positive
impact on total return. Nokia, a telecom company that supplies mobile phones as
well as multi-media network terminals, was one of the top performers, up over
150% during the twelve months. Motorola and Century Telephone also posted strong
returns of 81% and 31%, respectively.
Top 5 Industries
----------------
(as a percentage of net assets)
Banks 13.5%
Finance & Insurance 11.7%
Oil/Energy 9.3%
Utilities-Telephone 9.0%
Information Services & Technology 5.2%
We began a major restructuring of our utility holdings during the second half of
the fiscal year. Pinnacle West was eliminated from the portfolio due to
regulatory uncertainty and initial positions were taken in ALLTEL and GTE. In
the case of ALLTEL, its rural cellular and telephone assets enjoy a strong
competitive position. The company's forecasted earnings per share growth rate is
superior to that of its peers, while its current valuation, we feel, does not
reflect this growth. GTE is the largest United States based local telephone
company and second largest provider of cellular service.
Within basic industry we added Mead and Hercules, the effect of which moved our
sector policy to a slight overweight from a neutral stance from earlier in the
period. Mead Corporation, a leading company in the paper and forest products
industry, trades at a significant discount (15-20%) to its peers, where
historically the shares have traded at parity or at a slight premium to the
group.
35
<PAGE>
EVERGREEN
Select Strategic Value Fund
Portfolio Manager Commentary
Top 10 Holdings*
---------------
(as a percentage of net assets)
Mobil Corp. 4.0%
Chase Manhattan Corp. 3.7%
Citigroup, Inc. 3.7%
GTE Corp. 3.6%
International Business Machines Corp. 3.4%
Mellon Bank Corp. 3.2%
AT&T Corp. 3.1%
Williams Companies, Inc. 3.1%
Alcoa, Inc. 3.0%
Koninklijke (Royal) Philips Electronics NV 2.9%
*Portfolio composition subject to change
Outlook
As we enter the final six months of 1999, from a valuation perspective, value
stocks remain inexpensive relative to growth. The relative price earnings
multiple (defined as the Russell 1000 Growth Index divided by the Russell 1000
Value Index price earnings multiple) for growth stocks still commands a 60%
premium over value stocks, compared to an eighteen year average of 40%. Our
sense is "old generals", i.e., growth stock leadership never dies it just fades
away. In other words, we do not expect a pendulum swing to value from the growth
leadership to develop overnight. It is reasonable to presume the movement
towards value, i.e., the foot soldiers, will be a slow process, aided and
abetted by further evidence of stronger than anticipated economic growth and the
wide relative valuation gap between styles.
36
<PAGE>
EVERGREEN
Select Balanced Fund
Financial Highlights
(For a share outstanding throughout each period)
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
CLASS I
Net asset value
beginning of period $ 13.39 $ 12.58
-------- --------
Income from investment
operations
Net investment income 0.46 0.16
Net realized and
unrealized gain on
securities 0.27 0.81
-------- --------
Total from investment
operations 0.73 0.97
-------- --------
Distributions to
shareholders from
Net realized gains on
securities (0.14) 0
-------- --------
Net investment income (0.42) (0.16)
Total distributions (0.56) (0.16)
-------- --------
Net asset value end of
period $ 13.56 $ 13.39
-------- --------
Total return 5.70% 7.76%
Ratios/supplemental data
Net assets end of period
(thousands) $658,733 $723,850
Ratios to average net
assets
Expenses++ 0.69% 0.70%+
Net investment income 3.47% 2.80%+
Portfolio turnover rate 60% 37%
Year Ended Period Ended
June 30, 1999 June 30, 1998 (b)
CLASS IS
Net asset value
beginning of period $ 13.42 $ 13.34
-------- --------
Net realized and
unrealized gain on
securities 0.35 0.09
-------- --------
Total from investment
operations 0.70 0.16
-------- --------
Income from investment
operations
Net investment income 0.35 0.07
Net realized gains on
securities (0.14) 0
-------- --------
Total distributions (0.53) (0.08)
-------- --------
Net asset value end of
period $ 13.59 $ 13.42
-------- --------
Distributions to
shareholders from
Net investment income (0.39) (0.08)
Total return 5.43% 1.23%
Ratios/supplemental data
Net assets end of period
(thousands) $ 405 $ 215
Ratios to average net
assets
Expenses++ 0.93% 0.95%+
Net investment income 3.35% 2.58%+
Portfolio turnover rate 60% 37%
(a) For the period from January 22, 1998 (commencement of Class operations) to
June 30, 1998.
(b) For the period from April 9, 1998 (commencement of Class operations) to
June 30, 1998.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and
excludes fee credits.
See Combined Notes to Financial Statements.
37
<PAGE>
EVERGREEN
Select Core Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
CLASS I
Net asset value beginning of period $ 92.59 $ 82.97
---------- ----------
Income from investment operations
Net investment income 0.72 0.51
Net realized and unrealized gains or losses
on securities 7.51 9.62
---------- ----------
Total from investment operations 8.23 10.13
---------- ----------
Distributions to shareholders from
Net investment income (0.69) (0.51)
Net realized gains (7.83) 0
---------- ----------
Total distributions to shareholders (8.52) (0.51)
---------- ----------
Net asset value, end of period $ 92.30 $ 92.59
---------- ----------
Total return 9.82% 12.23%
Ratios/supplemental data
Net assets, end of period (thousands) $1,913,483 $1,952,436
Ratios to average net assets
Expenses++ 0.67% 0.70%+
Net investment income 0.83% 0.96%+
Portfolio turnover rate 55% 22%
Year Ended Period Ended
June 30, 1999 June 30, 1998 (b)
CLASS IS
Net asset value beginning of period $ 87.33 $ 80.21
---------- ----------
Income from investment operations
Net investment income 0.48 0.27
Net realized and unrealized gains or losses
on securities 7.02 7.16
---------- ----------
Total from investment operations 7.50 7.43
---------- ----------
Distributions to shareholders from
Net investment income (0.46) (0.31)
Net realized gains (7.83) 0
---------- ----------
Total distributions to shareholders (8.29) (0.31)
---------- ----------
Net asset value, end of period $ 86.54 $ 87.33
---------- ----------
Total return 9.53% 9.27%
Ratios/supplemental data
Net assets, end of period (thousands) $ 30,240 $ 18,244
Ratios to average net assets
Expenses++ 0.92% 0.95%+
Net investment income 0.56% 0.60%+
Portfolio turnover rate 55% 22%
(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.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and
excludes fee credits.
See Combined Notes to Financial Statements.
38
<PAGE>
EVERGREEN
Select Diversified Value Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 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 0.22 0.14
Net realized and unrealized gains or losses
on securities and futures contracts 2.06 2.41
-------- --------
Total from investment operations 2.28 2.55
-------- --------
Distributions to shareholders from
Net investment income (0.20) (0.14)
Net realized gains (0.65) 0
-------- --------
Total distributions to shareholders (0.85) (0.14)
-------- --------
Net asset value, end of period $ 27.65 $ 26.22
-------- --------
Total return 9.08% 10.72%
Ratios/supplemental data
Net assets, end of period (thousands) $606,355 $797,352
Ratios to average net assets
Expenses++ 0.62% 0.68%+
Net investment income 0.88% 1.24%+
Portfolio turnover rate 76% 56%
<CAPTION>
Year Ended Period Ended
June 30, 1999 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 0.12 0.06
Net realized and unrealized gains or losses
on securities and futures contracts 2.07 (0.64)
-------- --------
Total from investment operations 2.19 (0.58)
-------- --------
Distributions to shareholders from
Net investment income (0.14) (0.05)
Net realized gains (0.65) 0
-------- --------
Total distributions to shareholders (0.79) (0.05)
-------- --------
Net asset value, end of period $ 27.33 $ 25.93
-------- --------
Total return 8.77% (2.19%)
Ratios/supplemental data
Net assets, end of period (thousands) $ 1,384 $ 210
Ratios to average net assets
Expenses++ 0.88% 0.93%+
Net investment income 0.62% 0.80%+
Portfolio turnover rate 76% 56%
</TABLE>
(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.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and ex-
cludes fee credits.
See Combined Notes to Financial Statements.
39
<PAGE>
EVERGREEN
Select Large Cap Blend Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 (d) June 30, 1998 (a)
<S> <C> <C>
CLASS I (c)
Net asset value, beginning of period $ 50.74 $ 45.05
-------- --------
Income from investment operations
Net investment income 0.40 0.23
Net realized and unrealized gains or
losses on securities 2.81 5.70
-------- --------
Total from investment operations 3.21 5.93
-------- --------
Distributions to shareholders from
Net investment income (0.40) (0.24)
Net realized gains (5.20) 0
-------- --------
Total distributions (5.60) (0.24)
-------- --------
Net asset value, end of period $ 48.35 $ 50.74
-------- --------
Total return 7.12% 13.18%
Ratios/supplemental data
Net assets end of period (thousands) $438,375 $497,534
Ratios to average net assets
Expenses++ 0.68% 0.71%+
Net investment income 0.79% 0.80%+
Portfolio turnover rate 46% 42%
<CAPTION>
Year Ended Period Ended
June 30, 1999 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 0.28 0.08
Net realized and unrealized gains or
losses on securities 2.81 1.00
-------- --------
Total from investment operations 3.09 1.08
-------- --------
Distributions to shareholders from
Net investment income (0.30) (0.09)
Net realized gains (5.20) 0
-------- --------
Total distributions (5.50) (0.09)
-------- --------
Net asset value, end of period $ 48.33 $ 50.74
-------- --------
Total return 6.83% 2.17%
Ratios/supplemental data
Net assets end of period (thousands) $ 382 $ 301
Ratios to average net assets
Expenses++ 0.93% 0.96%+
Net investment income 0.53% 0.57%+
Portfolio turnover rate 46% 42%
</TABLE>
(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.
(c) On April 30, 1999, Class IC shares of the Fund were converted to Class I
shares. Shareholders of Class IC shares became owners of that number of
Class I shares having a net asset value equal to the net asset value of
their shares immediately prior to the close of business on April 30, 1999.
Class IC is the accounting survivor, its basis of accounting for assets and
liabilities and its operating results for the periods prior to April 30,
1999 have been carried forward in these financial statements.
(d) The Fund redesignated $0.02 per share for Class I and IS of distributions
from net investment income declared after January 1, 1999, as capital gains
distributions after January 1, 1999.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and ex-
cludes fee credits.
See Combined Notes to Financial Statements.
40
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period Ended
Year Ended Period Ended February 28, February 28, Period Ended
June 30, 1999 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 loss (0.08) (0.03) (0.06) (0.04) (0.03)
Net realized and
unrealized gain or loss
on securities 0.63 (0.08) 2.48 (0.16) 1.68
------- ------- ------- ------ ------
Total from investment
operations 0.55 (0.11) 2.42 (0.20) 1.65
------- ------- ------- ------ ------
Distributions to
shareholders from
Net realized gains (0.02) 0 (0.47) (0.17) 0
------- ------- ------- ------ ------
Total distributions (0.02) 0 (0.47) (0.17) 0
------- ------- ------- ------ ------
Net asset value end of
period $ 13.65 $ 13.12 $ 13.23 $11.28 $11.65
------- ------- ------- ------ ------
Total return 4.22% (0.83%) 21.67% (1.75%) 16.50%
Ratios/supplemental data
Net assets end of period
(thousands) $70,114 $69,283 $47,524 $2,888 $2,446
Ratios to average net
assets
Expenses++ 1.02% 1.01%+ 0.92% 1.00%+ 1.00%+
Net investment loss (0.68%) (0.62%)+ (0.48%) (0.57%)+ (0.45%)+
Portfolio turnover rate 165% 54% 166% 123% 57%
</TABLE>
(a) For the period from December 28, 1995 (commencement of Class operations) to
June 30, 1996
(b) For the period form July 1, 1996 to February 28, 1997. The Fund changed its
fiscal year end from June 30 to February 28, effective February 28, 1997.
(c) For the period from March 1, 1998 to June 30, 1998. The Fund changed its
fiscal year end from February 28 to June 30, effective June 30, 1998.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and ex-
cludes fee credits.
# Net investment loss based on average shares outstanding during the period.
See Combined Notes to Financial Statements.
41
<PAGE>
EVERGREEN
Select Small Company Value Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 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 0.03 0.04
Net realized and unrealized gains or losses
on securities (1.12) 0.09
-------- -------
Total from investment operations (1.09) 0.13
-------- -------
Distributions to shareholders from
Net investment income (0.03) (0.04)
Net realized gains (0.03) 0
-------- -------
Total distributions to shareholders (0.06) (0.04)
-------- -------
Net asset value, end of period $ 8.94 $ 10.09
-------- -------
Total return (10.73%) 1.28%
Ratios/supplemental data
Net assets, end of period (thousands) $108,180 $77,647
Ratios to average net assets
Expenses++ 0.97% 1.01%+
Net investment income 0.29% 0.68%+
Portfolio turnover rate 48% 23%
</TABLE>
<TABLE>
<CAPTION>
Period Ended
June 30, 1999 # (b)
<S> <C>
CLASS IS
Net asset value beginning of period $8.56
-----
Income from investment operations
Net investment income 0
Net realized and unrealized gains or losses on securities 0.08
-----
Total from investment operations 0.08
-----
Net asset value, end of period $8.64
-----
Total return 0.99%
Ratios/supplemental data
Net assets, end of period (thousands) $ 1
Ratios to average net assets
Expenses++ 1.24%+
Net investment income 0.00%+
Portfolio turnover rate 48%
</TABLE>
(a) For the period from December 23,1997 (commencement of Class operations) to
June 30, 1998.
(b) For the period from December 31,1998 (commencement of Class operations) to
June 30, 1999.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and ex-
cludes fee credits.
# Net investment income or loss based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
42
<PAGE>
EVERGREEN
Select Social Principles Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
<S> <C> <C>
CLASS I (c)
Net asset value beginning of period $ 38.95 $ 36.65
-------- --------
Income from investment operations
Net investment income 0.11 0.03
Net realized and unrealized gain on securities 0.09 2.31
-------- --------
Total from investment operations 0.20 2.34
-------- --------
Distributions to shareholders from
Net investment income (0.14) (0.04)
Net realized gains on securities (2.10) 0
-------- --------
Total distributions (2.24) (0.04)
-------- --------
Net asset value end of period $ 36.91 $ 38.95
-------- --------
Total return 0.90% 6.38%
Ratios/supplemental data
Net assets end of period (thousands) $134,476 $177,187
Ratios to average net assets
Expenses++ 0.84% 0.86%+
Net investment income 0.33% 0.12%+
Portfolio turnover rate 36% 24%
<CAPTION>
Year Ended Period Ended
June 30, 1999 June 30, 1998 (b)
<S> <C> <C>
CLASS IS
Net asset value beginning of period $ 38.94 $ 38.44
-------- --------
Income from investment operations
Net investment loss (0.04) (0.01)
Net realized and unrealized gain on securities 0.14 0.52
-------- --------
Total from investment operations 0.10 0.51
-------- --------
Distributions to shareholders from
Net investment income (0.08) (0.01)
Net realized gains on securities (2.10) 0
-------- --------
Total distributions (2.18) (0.01)
-------- --------
Net asset value end of period $ 36.86 $ 38.94
-------- --------
Total return 0.64% 1.32%
Ratios/supplemental data
Net assets end of period (thousands) $ 60 $ 205
Ratios to average net assets:
Expenses++ 1.09% 1.11%+
Net investment income or loss 0.06% (0.12%)+
Portfolio turnover rate 36% 24%
</TABLE>
(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.
(c) On April 30, 1999, Class IC shares of the Fund were converted to Class I
shares. Shareholders of Class IC shares became owners of that number of
Class I shares having a net asset value equal to the net asset value of
their shares immediately prior to the close of business on April 30, 1999.
Class IC is the accounting survivor, its basis of accounting for assets and
liabilities and its operating results for the periods prior to April 30,
1999 have been carried forward in these financial statements.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and ex-
cludes fee credits.
See Combined Notes to Financial Statements.
43
<PAGE>
EVERGREEN
Select Special Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period Ended
Year Ended June 30, Period Ended October 31, 1995 (b) October 31, 1994 (a)
---------------------------- June 30, ------------------- -------------------
1999 (f) 1998 1997 1996 (c) (d) (e) Retail Class Original Class
<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 or
loss (0.02) (0.05) 0.02 0.07 0.12 0.06
Net realized and
unrealized gains or
losses on
securities 4.15 1.52 1.81 2.13 2.12 (0.63)
-------- ------- ------- ------- ------- -------
Total from investment
operations 4.13 1.47 1.83 2.20 2.24 (0.57)
-------- ------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income 0 0 (0.03) (0.07) (0.12) (0.06)
Net realized gains (1.18) (1.49) (2.39) (1.69) (0.07) 0
-------- ------- ------- ------- ------- -------
Total distributions to
shareholders (1.18) (1.49) (2.42) (1.76) (0.19) (0.06)
-------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 14.20 $ 11.25 $ 11.27 $ 11.86 $ 11.42 $ 9.37
-------- ------- ------- ------- ------- -------
Total return 42.02% 14.23% 17.94% 22.27% 24.44% (5.72%)
Ratios/supplemental data
Net assets, end of
period (thousands) $116,966 $73,981 $71,980 $63,680 $57,396 $10,069
Ratios to average net
assets
Expenses++ 1.06% 1.10% 0.84% 0.34%+ 0.32% 0.15%+
Net investment income or
loss (0.36%) (0.48%) 0.19% 0.94%+ 1.14% 1.06%+
Portfolio turnover rate 99% 62% 74% 72% 129% 39%
</TABLE>
(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.
(c) For the period from November 1, 1995 to June 30, 1996. The Fund changed its
fiscal year end from October 31 to June 30, effective June 30, 1996.
(d) On April 15, 1996, the Conestoga Special Equity Fund was acquired by the
CoreFund Special Equity Fund ("CoreFund").
(e) On April 15, 1996, the Institutional Class shares of the CoreFund were ex-
changed for Class Y shares and the Retail Class shares of the Core Fund
were exchanged for Class A shares of the CoreFund.
(f) On July 24, 1998, the assets and certain liabilities of CoreFund were ac-
quired by Evergreen Select Special Equity Fund ("Special Equity Fund").
Shareholders of CoreFund, Class Y became owners of that number of shares of
Special Equity Fund, Class I 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 sur-
vivor, 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.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and ex-
cludes fee credits.
See Combined Notes to Financial Statements.
44
<PAGE>
EVERGREEN
Select Special Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period Ended
Year Ended June 30, Period Ended October 31, 1995 (b) October 31, 1994 (a)
------------------------- June 30, ------------------- -------------------
1999 (f) 1998 1997 1996 (c) (d) (e) Retail Class Original Class
<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 or
loss (0.06) (0.10) 0 0.08 0.12 0.06
Net realized and
unrealized gains or
losses on securities 4.11 1.52 1.81 2.11 2.12 (0.63)
------ ------ ------ ------ ------ -------
Total from investment
operations 4.05 1.42 1.81 2.19 2.24 (0.57)
------ ------ ------ ------ ------ -------
Distributions to
shareholders from
Net investment income 0 0 (0.02) (0.07) (0.12) (0.06)
Net realized gains (1.18) (1.49) (2.39) (1.69) (0.07) 0
------ ------ ------ ------ ------ -------
Total distributions to
shareholders (1.18) (1.49) (2.41) (1.76) (0.19) (0.06)
------ ------ ------ ------ ------ -------
Net asset value, end of
period $14.05 $11.18 $11.25 $11.85 $11.42 $ 9.37
------ ------ ------ ------ ------ -------
Total return 41.55% 13.78% 17.73% 22.14% 24.44% (5.72%)
Ratios/supplemental data
Net assets, end of
period (thousands) $4,043 $2,981 $2,347 $1,144 $ 734 $10,069
Ratios to average net
assets
Expenses++ 1.31% 1.35% 1.14% 0.37%+ 0.27% 0.15%+
Net investment income or
loss (0.61%) (0.73%) (0.12%) 0.91%+ 1.29% 1.06%+
Portfolio turnover rate 99% 62% 74% 72% 129% 39%
</TABLE>
(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
income, 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
February 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 Financial
cial Highlights' ratio of expenses, net investment income, total return, and
the per share investment activities and distributions reflect this location.
(c) For the period from November 1, 1995 to June 30, 1996. The Fund changed its
fiscal year end from October 31 to June 30, effective June 30, 1996.
(d) On April 15, 1996, the Conestoga Special Equity Fund was acquired by the
CoreFund Special Equity Fund ("CoreFund").
(e) On April 15, 1996, the Institutional Class shares of the CoreFund were
exchanged for Class Y shares and the Retail Class shares of the Core Fund
were exchanged for Class A shares of the CoreFund.
(f) On July 24, 1998, the assets and certain liabilities of 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.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and
excludes fee credits.
See Combined Notes to Financial Statements.
45
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Financial Highlights
(For a share outstanding throughout each period)
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
CLASS I
Net asset value, beginning of period $ 38.41 $ 32.45
-------- --------
Income from investment operations
Net investment income 0.08 0.04
Net realized and unrealized gains or losses
on securities 6.80 5.96
-------- --------
Total from investment operations 6.88 6.00
-------- --------
Distributions to shareholders from
Net investment income (0.09) (0.04)
Net realized gains (3.26) 0
-------- --------
Total distributions (3.35) (0.04)
-------- --------
Net asset value, end of period $ 41.94 $ 38.41
-------- --------
Total return 19.22% 18.53%
Ratios/supplemental data
Net assets end of period (thousands) $481,119 $321,532
Ratios to average net assets
Expenses++ 0.72% 0.72%+
Net investment income 0.24% 0.19%+
Portfolio turnover rate 155% 80%
Year Ended Period Ended
June 30, 1999 June 30, 1998 (b)
CLASS IS
Net asset value, beginning of period $ 38.36 $ 36.10
-------- --------
Income from investment operations
Net investment income or loss 0.04 (0.08)
Net realized and unrealized gains or losses
on securities 6.73 2.34
-------- --------
Total from investment operations 6.77 2.26
-------- --------
Distributions to shareholders from
Net investment income (0.04) 0
Net realized gains (3.26) 0
-------- --------
Total distributions (3.30) 0
-------- --------
Net asset value, end of period $ 41.83 $ 38.36
-------- --------
Total return 18.88% 6.29%
Ratios/supplemental data
Net assets end of period (thousands) $ 12,650 $ 2,373
Ratios to average net assets
Expenses++ 0.97% 0.97%+
Net investment loss (0.03%) (0.27%)+
Portfolio turnover rate 155% 80%
(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.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and
excludes fee credits.
See Combined Notes to Financial Statements.
46
<PAGE>
EVERGREEN
Select Strategic Value Fund
Financial Highlights
(For a share outstanding throughout each period)
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
CLASS I
Net asset value, beginning of period $ 226.02 $ 203.35
-------- --------
Income from investment operations
Net investment income 3.31 1.60
Net realized and unrealized gains or losses
on securities 15.66 22.67
-------- --------
Total from investment operations 18.97 24.27
-------- --------
Distributions to shareholders from
Net investment income (2.93) (1.60)
Net realized gains (4.89) 0
-------- --------
Total distributions to shareholders (7.82) (1.60)
-------- --------
Net asset value, end of period $ 237.17 $ 226.02
-------- --------
Total return 8.85% 11.95%
Ratios/supplemental data
Net assets, end of period (thousands) $530,995 $287,194
Ratios to average net assets
Expenses++ 0.71% 0.75%+
Net investment income 1.61% 1.26%+
Portfolio turnover rate 41% 12%
Year Ended Period Ended
June 30, 1999 June 30, 1998 (b)
CLASS IS
Net asset value, beginning of period $ 226.04 $ 223.08
-------- --------
Income from investment operations
Net investment income 2.87 0.61
Net realized and unrealized gains or losses
on securities 15.62 3.13
-------- --------
Total from investment operations 18.49 3.74
-------- --------
Distributions to shareholders from
Net investment income (2.41) (0.78)
Net realized gains (4.89) 0
-------- --------
Total distributions to shareholders (7.30) (0.78)
-------- --------
Net asset value, end of period $ 237.23 $ 226.04
-------- --------
Total return 8.60% 1.68%
Ratios/supplemental data
Net assets, end of period (thousands) $ 1,810 $ 1,327
Ratios to average net assets
Expenses++ 0.96% 1.00%+
Net investment income 1.34% 0.93%+
Portfolio turnover rate 41% 12%
(a) For the period from November 24, 1997 (commencement of Class operations) to
June 30, 1998.
(b) For the period from March 11, 1998 (commencement of Class operations) to
June 30, 1998.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and
excludes fee credits.
See Combined Notes to Financial Statements.
47
<PAGE>
EVERGREEN
Select Balanced Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 55.3%
Automotive Equipment & Manufacturing - 1.4%
78,900 Ford Motor Co....................................... $ 4,452,919
81,000 Goodyear Tire & Rubber Co........................... 4,763,812
------------
9,216,731
------------
Banks - 4.7%
136,900 Bank One Corp....................................... 8,154,106
136,000 BankAmerica Corp.................................... 9,970,500
83,200 BankBoston Corp..................................... 4,253,600
108,800 Fleet Financial Group, Inc.......................... 4,828,000
95,600 Mellon Bank Corp.................................... 3,477,450
------------
30,683,656
------------
Chemical & Agricultural
Products - 0.6%
105,200 Monsanto Co......................................... 4,148,825
------------
Communication Systems & Services - 5.5%
234,000 *Cisco Systems, Inc................................. 15,049,125
95,100 Lucent Technologies, Inc............................ 6,413,306
172,000 *MCI WorldCom, Inc.................................. 14,802,750
------------
36,265,181
------------
Consumer Products &
Services - 1.6%
31,800 Gillette Co......................................... 1,303,800
106,700 Procter & Gamble Co................................. 9,522,975
------------
10,826,775
------------
Diversified Companies - 2.5%
41,700 Textron, Inc........................................ 3,432,431
136,800 Tyco International Ltd.............................. 12,961,800
------------
16,394,231
------------
Electrical Equipment &
Services - 2.0%
114,500 General Electric Co................................. 12,938,500
------------
Environmental Services - 1.6%
197,900 Waste Management, Inc............................... 10,637,125
------------
Finance & Insurance - 5.0%
204,700 Allstate Corp....................................... 7,343,612
32,000 American International Group, Inc................... 3,746,000
208,050 Citigroup, Inc...................................... 9,882,375
128,200 Federal National Mortgage Assoc..................... 8,765,675
39,700 Merrill Lynch & Co., Inc............................ 3,173,519
------------
32,911,181
------------
Food & Beverage Products - 3.8%
68,100 Anheuser Busch Companies, Inc....................... 4,830,844
83,900 Coca Cola Co........................................ 5,243,750
65,800 *Kroger Co.......................................... 1,838,288
90,000 Nabisco Holdings Corp. Cl. A........................ 3,892,500
95,100 Philip Morris Companies, Inc........................ 3,821,831
104,800 *Safeway, Inc....................................... 5,187,600
------------
24,814,813
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products & Services - 5.5%
106,300 Bristol-Myers Squibb Co.......................... $ 7,487,506
46,487 Johnson & Johnson................................ 4,555,726
24,700 McKesson HBOC, Inc............................... 793,488
35,300 Merck & Co., Inc................................. 2,612,200
83,900 Pfizer, Inc...................................... 9,208,025
45,000 Pharmacia & Upjohn, Inc.......................... 2,556,562
134,000 Warner-Lambert Co................................ 9,296,250
------------
36,509,757
------------
Information Services & Technology - 8.4%
59,500 *America Online, Inc............................. 6,574,750
321,900 Compaq Computer Corp............................. 7,625,006
174,600 *Compuware Corp.................................. 5,554,463
109,800 *EMC Corp........................................ 6,039,000
97,000 Intel Corp....................................... 5,771,500
67,900 International Business Machines Corp............. 8,776,075
167,400 *Microsoft Corp.................................. 15,097,387
------------
55,438,181
------------
Metal Products & Services - 0.8%
85,500 Alcoa, Inc....................................... 5,290,313
------------
Oil/Energy - 2.7%
90,800 Mobil Corp....................................... 8,989,200
140,400 Texaco, Inc...................................... 8,775,000
------------
17,764,200
------------
Paper & Packaging - 0.2%
23,100 International Paper Co........................... 1,166,550
------------
Printing, Publishing, Broadcasting &
Entertainment - 2.4%
143,500 News Corp, Ltd................................... 5,067,344
43,700 Omnicom Group, Inc............................... 3,496,000
96,900 Time Warner, Inc................................. 7,122,150
------------
15,685,494
------------
Retailing & Wholesale - 2.6%
250,700 Dayton Hudson Corp............................... 16,295,500
19,500 Lowe's Companies, Inc............................ 1,105,406
------------
17,400,906
------------
Telecommunication Services & Equipment - 0.2%
42,200 Centurytel, Inc.................................. 1,677,450
------------
Transportation - 0.7%
142,200 Burlington Northern Santa Fe Corp................ 4,408,200
------------
Utilities - Electric - 1.4%
186,600 Cinergy Corp..................................... 5,971,200
60,205 Duke Power Co.................................... 3,273,647
------------
9,244,847
------------
Utilities - Telephone - 1.7%
147,600 GTE Corp......................................... 11,180,700
------------
Total Common Stocks
(cost $300,580,380)............................. 364,603,616
------------
</TABLE>
See Combined Notes to Financial Statements.
48
<PAGE>
EVERGREEN
Select Balanced Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - 13.5%
Aerospace & Defense - 0.9%
$ 5,371,000 Jet Equipment Trust 144A
9.41%, 6/15/2010................................ 5,961,633
------------
Banks - 2.2%
$ 2,302,000 Boatmen's Bancshares, Inc.
6.75%, 3/15/2003................................ $ 2,312,762
3,836,000 First Chicago Corp.
9.875%, 8/15/2000............................... 3,989,681
7,673,000 NationsBank Corp.
7.625%, 4/15/2005............................... 8,015,024
------------
14,317,467
------------
Chemical & Agricultural
Products - 0.6%
3,836,000 Dow Chemical Co. 8.625%, 4/1/2006................ 4,177,178
------------
Communication Systems & Services - 1.3%
9,000,000 Comcast Cable Communications I 6.20%,
11/15/2008...................................... 8,395,497
------------
Consumer Products &
Services - 0.5%
3,299,000 Stanley Works
7.375%, 12/15/2002.............................. 3,356,963
------------
Finance & Insurance - 4.1%
4,220,000 Dean Witter, Discover & Co.
6.75%, 10/15/2013............................... 4,128,257
4,200,000 General Electric Capital Corp.
8.75%, 3/14/2003................................ 4,528,885
2,110,000 International Bank For Reconstruction &
Development Co. COLTS
7.95%, 5/15/2016................................ 2,364,086
5,000,000 Liberty Financial Cos. Incorporated 7.625%,
11/15/2028...................................... 4,923,970
7,673,000 Loews Corp.
6.75%, 12/15/2006............................... 7,503,043
3,836,000 Merrill Lynch & Co., Inc. 7.00%, 4/27/2008....... 3,810,311
------------
27,258,552
------------
Food & Beverage Products - 0.6%
3,836,000 General Mills, Inc.
9.00%, 12/20/2002............................... 4,122,960
------------
Healthcare Products & Services - 0.6%
3,836,000 Baxter International
7.25%, 2/15/2008................................ 3,895,143
------------
Industrial Specialty Products & Services - 0.2%
1,074,000 Waste Management, Inc.
8.75%, 5/1/2018................................. 1,181,225
------------
Oil/Energy - 1.3%
3,069,000 Atlantic Richfield Co.
9.00%, 4/1/2021................................. 3,682,668
5,000,000 Calenergy Incorporated
7.52%, 9/15/2008................................ 5,004,365
------------
8,687,033
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Paper & Packaging - 0.8%
$ 5,000,000 Donohue Forest Products Inc
7.625%, 5/15/2007................................. $ 5,060,685
------------
Utilities - Electric - 0.4%
2,762,000 Union Electric Co.
8.00%, 12/15/2022................................. 2,761,829
------------
Total Corporate Bonds
(cost $94,170,987)................................ 89,176,165
------------
YANKEE OBLIGATIONS - 0.6%
3,836,000 Province of Ontario, Canada
7.75%, 6/4/2002
(cost, $4,112,729)................................ 3,973,636
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 30.1%
Mortgage Pass-Through Certificates - 0.8%
Government National Mortgage Association
1,027,828 8.50%, 5/15/2021.................................. 1,077,568
479,165 8.50%, 7/15/2021.................................. 502,353
1,350,940 8.50%, 6/15/2022.................................. 1,416,316
753,200 9.00%, 9/15/2021.................................. 800,342
837,656 9.00%, 10/15/2021................................. 890,085
563,028 9.50%, 2/15/2021.................................. 607,257
------------
5,293,921
------------
Treasury Notes & Bonds - 29.3%
U.S. Treasury Bonds
15,346,000 7.625%, 2/15/2007................................. 15,916,687
16,800,000 7.875%, 2/15/2021................................. 19,902,758
4,000,000 8.75%, 5/15/2017.................................. 5,035,000
16,113,000 8.875%, 8/15/2017................................. 20,528,977
17,428,000 9.125%, 5/15/2018................................. 22,781,673
U.S. Treasury Notes
17,800,000 5.875%, 7/31/1999................................. 17,816,696
14,650,000 6.00%, 8/15/1999.................................. 14,677,469
14,500,000 6.625%, 4/30/2002................................. 14,867,038
12,579,000 7.75%, 11/30/1999................................. 12,720,514
47,173,000 7.75%, 2/15/2001.................................. 48,809,337
------------
193,056,149
------------
Total U.S. Government & Agency Obligations (cost
$204,274,857)..................................... 198,350,070
------------
SHORT-TERM INVESTMENTS - 0.9%
Repurchase Agreement - 0.9%
5,783,790 Dresdner Bank AG Repo 4.75%, purchased 6/30/1999,
maturing 7/1/1999, maturity value $5,784,553
(cost $5,783,790) (a)............................. 5,783,790
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $608,922,743)........................ 100.4% 661,887,277
Other Assets and Liabilities - net.......... (0.4) (2,749,470)
----- ------------
Net Assets.................................. 100.0% $659,137,807
===== ============
</TABLE>
See Combined Notes to Financial Statements.
49
<PAGE>
EVERGREEN
Select Balanced Fund
Schedule of Investments(continued)
June 30, 1999
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at
June 30, 1999.
* Non-income producing security
144A Securities that may be resold to "qualified institutional buyers" under
rule 144A of the securities act of 1933. These securities have been
determined to be liquid under guidelines established by the Fund's Board of
Trustees.
Summary of Abbreviations:
COLTS Continuously Offered Longer-term Securities
See Combined Notes to Financial Statements.
50
<PAGE>
EVERGREEN
Select Core Equity Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 97.2%
Automotive Equipment & Manufacturing - 1.3%
235,000 Arvin Industries, Inc. ............................. $ 8,900,625
280,000 Ford Motor Co. ..................................... 15,802,500
------------
24,703,125
------------
Banks - 5.5%
300,000 Bank One Corp. ..................................... 17,868,750
525,000 BankAmerica Corp. .................................. 38,489,063
225,000 BankBoston Corp. ................................... 11,503,125
240,000 Chase Manhattan Corp. .............................. 20,790,000
205,000 Fleet Financial Group, Inc. ........................ 9,096,875
250,000 US Bancorp.......................................... 8,500,000
------------
106,247,813
------------
Building, Construction & Furnishings - 0.1%
80,000 Masco Corp. ........................................ 2,310,000
------------
Business Equipment &
Services - 0.5%
850,000 *Office Max, Inc. .................................. 10,200,000
------------
Capital Goods - 0.3%
135,000 Deere & Co. ........................................ 5,349,375
------------
Chemical & Agricultural Products - 1.4%
300,000 *Cytec Industries, Inc. ............................ 9,562,500
260,000 Du Pont (E. I.) De Nemours & Co. ................... 17,761,250
------------
27,323,750
------------
Communication Systems & Services - 5.2%
680,000 *Cisco Systems, Inc. ............................... 43,732,500
425,000 *MCI WorldCom, Inc. ................................ 36,576,563
300,000 *Tellabs, Inc. ..................................... 20,268,750
------------
100,577,813
------------
Consumer Products &
Services - 2.6%
175,000 *Cendant Corp. ..................................... 3,587,500
60,000 Colgate-Palmolive Co. .............................. 5,925,000
210,000 Gillette Co. ....................................... 8,610,000
250,000 Liz Claiborne, Inc. ................................ 9,125,000
175,000 Procter & Gamble Co. ............................... 15,618,750
100,000 *R.J. Reynolds Tobacco Holdings, Inc. .............. 3,150,000
50,000 Whirlpool Corp. .................................... 3,700,000
------------
49,716,250
------------
Diversified Companies - 1.4%
245,000 Allied Signal, Inc. ................................ 15,435,000
120,000 Tyco International Ltd. ............................ 11,370,000
------------
26,805,000
------------
Electrical Equipment &
Services - 5.8%
1,000,000 General Electric Co. ............................... 113,000,000
------------
Environmental Services - 1.1%
360,000 *Allied Waste Industries, Inc. ..................... 7,110,000
250,000 Waste Management, Inc. ............................. 13,437,500
------------
20,547,500
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Finance & Insurance - 8.8%
30,000 Aetna, Inc. ........................................ $ 2,683,125
150,000 Allmerica Financial Corp. .......................... 9,121,875
425,000 Allstate Corp. ..................................... 15,246,875
150,000 American International Group, Inc. ................. 17,559,375
450,000 Citigroup, Inc. .................................... 21,375,000
150,000 Federal Home Loan Mortgage Corp. ................... 8,700,000
260,000 Franklin Resources, Inc. ........................... 10,562,500
175,000 Hartford Financial Services Group, Inc. ............ 10,204,687
125,000 Loews Corp. ........................................ 9,890,625
80,000 Merrill Lynch & Co., Inc. .......................... 6,395,000
230,000 MGIC Investment Corp. .............................. 11,183,750
200,000 Morgan Stanley, Dean Witter & Co. .................. 20,500,000
200,000 PMI Group, Inc. .................................... 12,562,500
60,000 Providian Financial Corp. .......................... 5,610,000
179,990 Radian Group, Inc. ................................. 8,785,762
------------
170,381,074
------------
Food & Beverage Products - 7.0%
220,000 Bestfoods........................................... 10,890,000
800,000 Coca Cola Co. ...................................... 50,000,000
125,000 Fortune Brands, Inc. ............................... 5,171,875
100,000 *Kroger Co. ........................................ 2,793,750
300,000 Nabisco Group Holding Corp. ........................ 5,868,750
750,000 Philip Morris Companies, Inc. ...................... 30,140,625
70,000 Ralston Purina Co. ................................. 2,130,625
235,000 *Safeway, Inc. ..................................... 11,632,500
435,000 Sara Lee Corp. ..................................... 9,869,063
200,000 *United States Foodservice.......................... 8,525,000
------------
137,022,188
------------
Healthcare Products &
Services - 13.9%
450,000 Abbott Laboratories................................. 20,475,000
250,000 *Amgen, Inc. ....................................... 15,218,750
260,000 *Boston Scientific Corp. ........................... 11,423,750
600,000 Bristol-Myers Squibb Co. ........................... 42,262,500
270,000 *Covance, Inc. ..................................... 6,463,125
100,000 *Guidant Corp. ..................................... 5,143,750
305,000 *Health Management Associates, Inc. Cl. A .......... 3,431,250
200,000 *HEALTHSOUTH Corp. ................................. 2,987,500
200,000 Johnson & Johnson................................... 19,600,000
205,000 *Lincare Holdings, Inc. ............................ 5,125,000
125,000 Medtronic, Inc. .................................... 9,734,375
300,000 Merck & Co., Inc. .................................. 22,200,000
250,000 Mylan Laboratories, Inc. ........................... 6,625,000
175,000 Pfizer, Inc. ....................................... 19,206,250
215,000 *Quintiles Transnational Corp. ..................... 9,030,000
400,000 Schering-Plough Corp. .............................. 21,200,000
70,000 SmithKline Beecham Plc, ADR......................... 4,624,375
475,000 *Tenet Healthcare Corp. ............................ 8,817,187
200,000 Teva Pharmaceutical Industries Ltd., ADR............ 9,800,000
375,000 Warner-Lambert Co. ................................. 26,015,625
------------
269,383,437
------------
Industrial Specialty Products
& Services - 0.3%
200,000 Trinity Industries, Inc. ........................... 6,700,000
------------
</TABLE>
See Combined Notes to Financial Statements.
51
<PAGE>
EVERGREEN
Select Core Equity Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Information Services & Technology - 18.6%
350,000 *Adaptec, Inc. ..................................... $ 12,359,375
140,000 *Altera Corp. ...................................... 5,153,750
200,000 *Applied Materials, Inc. ........................... 14,775,000
675,000 Compaq Computer Corp. .............................. 15,989,062
300,000 Computer Associates
International, Inc. ............................... 16,500,000
230,000 *Compuware Corp. ................................... 7,316,875
150,000 *Comverse Technology, Inc. ......................... 11,325,000
380,000 *Dell Computer Corp. ............................... 14,060,000
190,000 *EMC Corp. ......................................... 10,450,000
720,000 Intel Corp. ........................................ 42,840,000
560,000 International Business Machines Corp. .............. 72,380,000
1,100,000 *Microsoft Corp. ................................... 99,206,250
200,000 *Network Associates, Inc. .......................... 2,937,500
525,000 *Oracle Systems Corp. .............................. 19,490,625
500,000 *Quantum Corp. ..................................... 12,062,500
100,000 *Synopsys, Inc. .................................... 5,518,750
------------
362,364,687
------------
Metal Products & Services - 0.4%
130,000 Alcoa, Inc. ........................................ 8,043,750
------------
Oil/Energy - 5.0%
65,000 Elf Aquitaine, ADR.................................. 4,781,563
110,000 Enron Corp. ........................................ 8,992,500
330,000 Exxon Corp. ........................................ 25,451,250
450,000 MCN Energy Group, Inc. ............................. 9,337,500
130,000 Mobil Corp. ........................................ 12,870,000
725,000 *Newpark Resources, Inc. ........................... 6,434,375
185,000 Texaco, Inc. ....................................... 11,562,500
365,000 Tosco Corp. ........................................ 9,467,187
390,000 Ultramar Diamond Shamrock Corp. .................... 8,506,875
------------
97,403,750
------------
Oil Field Services - 0.8%
160,000 Diamond Offshore Drilling, Inc. .................... 4,540,000
160,000 Schlumberger Ltd. .................................. 10,190,000
------------
14,730,000
------------
Paper & Packaging - 1.7%
200,000 Bowater, Inc. ...................................... 9,450,000
260,000 Kimberly-Clark Corp. ............................... 14,820,000
150,000 *Sealed Air Corp. .................................. 9,731,250
------------
34,001,250
------------
Printing, Publishing,
Broadcasting &
Entertainment - 0.6%
165,000 Time Warner, Inc. .................................. 12,127,500
------------
Real Estate - 0.8%
350,000 FelCor Lodging Trust, Inc. REIT..................... 7,262,500
340,000 Simon Property Group Inc. REIT...................... 8,627,500
------------
15,890,000
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Retailing & Wholesale - 7.2%
150,000 *Best Buy Co., Inc. ............................. $ 10,125,000
250,000 Dayton Hudson Corp. ............................. 16,250,000
370,000 Family Dollar Stores, Inc. ...................... 8,880,000
235,000 *Federated Department Stores, Inc. .............. 12,440,312
440,000 Home Depot, Inc. ................................ 28,352,500
200,000 Lowe's Companies, Inc. .......................... 11,337,500
500,000 *Reebok International Ltd........................ 9,312,500
140,000 Sears, Roebuck & Co. ............................ 6,238,750
385,000 *Toys R Us, Inc. ................................ 7,964,688
600,000 Wal-Mart Stores, Inc. ........................... 28,950,000
--------------
139,851,250
--------------
Telecommunication Services
& Equipment - 0.6%
187,500 Centurytel, Inc. ................................ 7,453,125
40,000 Nokia Corp., ADR................................. 3,662,500
--------------
11,115,625
--------------
Textile & Apparel - 0.1%
138,200 *Fruit Of The Loom Ltd. Cl. A.................... 1,347,450
--------------
Transportation - 0.9%
300,000 Burlington Northern Santa Fe Corp. .............. 9,300,000
140,000 Kansas City Southern Industries, Inc. ........... 8,933,750
--------------
18,233,750
--------------
Utilities - Electric - 1.5%
300,000 Cinergy Corp. ................................... 9,600,000
200,000 CMS Energy Corp. ................................ 8,375,000
40,000 FPL Group, Inc. ................................. 2,185,000
200,000 GPU, Inc. ....................................... 8,437,500
--------------
28,597,500
--------------
Utilities - Telephone - 3.8%
190,000 Ameritech Corp. ................................. 13,965,000
360,000 AT&T Corp. ...................................... 20,092,500
390,000 GTE Corp. ....................................... 29,542,500
200,000 Sprint Corp. .................................... 10,562,500
--------------
74,162,500
--------------
Total Common Stocks
(cost $1,308,724,910)........................... $1,888,136,337
--------------
<CAPTION>
Principal
Amounrt
<C> <S> <C>
SHORT-TERM INVESTMENTS - 2.7%
Repurchase Agreement - 1.8%
$34,586,097 Dresdner Bank AG 4.75%, purchased 6/30/1999,
maturing 7/1/1999, maturity value $34,590,660
(cost $34,586,097) (a).......................... $ 34,586,097
--------------
</TABLE>
See Combined Notes to Financial Statements.
52
<PAGE>
EVERGREEN
Select Core Equity Fund
Schedule of Investments(continued)
June 30, 1999
Shares Value
SHORT-TERM INVESTMENTS - continued
Money Market Shares - 0.9%
18,292,686 Valiant General Fund................................ $ 18,292,686
------------
Total Short-Term Investments
(cost $52,878,783)................................. 52,878,783
------------
Total Investments -
(cost $1,361,603,693)..................... 99.9% 1,941,015,120
Other Assets and
Liabilities - net......................... 0.1 2,707,792
----- --------------
Net Assets................................. 100.0% $1,943,722,912
===== ==============
(a) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices plus accrued interest at
June 30, 1999.
* Non-income producing security
Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
53
<PAGE>
EVERGREEN
Select Diversified Value Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 99.4%
Aerospace & Defense - 1.1%
100,000 Raytheon Co. Cl. A.................................. $ 6,887,500
------------
Automotive Equipment & Manufacturing - 2.3%
185,000 Ford Motor Co....................................... 10,440,938
65,000 * Lear Corp. ....................................... 3,233,750
------------
13,674,688
------------
Banks - 6.8%
185,000 Bank One Corp. ..................................... 11,019,062
90,000 BankAmerica Corp. .................................. 6,598,125
35,000 Chase Manhattan Corp. .............................. 3,031,875
250,000 PNC Bank Corp....................................... 14,406,250
160,000 SouthTrust Corp. ................................... 6,140,000
------------
41,195,312
------------
Building, Construction & Furnishings - 0.8%
170,000 Masco Corp.......................................... 4,908,750
------------
Business Equipment &
Services - 0.3%
160,000 * Office Max, Inc................................... 1,920,000
------------
Capital Goods - 0.3%
50,000 Deere & Co. ........................................ 1,981,250
------------
Chemical & Agricultural
Products - 1.9%
100,000 * Cytec Industries, Inc............................. 3,187,500
30,000 Hercules, Inc. ..................................... 1,179,375
200,000 IMC Global, Inc..................................... 3,525,000
75,000 Praxair, Inc. ...................................... 3,670,313
------------
11,562,188
------------
Communication Systems &
Services - 4.5%
90,000 * Cisco Systems, Inc................................ 5,788,125
148,000 Lucent Technologies, Inc............................ 9,980,750
75,000 * MCI WorldCom, Inc................................. 6,454,687
80,000 * Tellabs, Inc...................................... 5,405,000
------------
27,628,562
------------
Consumer Products &
Services - 3.2%
100,000 Gillette Co. ....................................... 4,100,000
70,000 Procter & Gamble Co................................. 6,247,500
31,666 * R.J. Reynolds Tobacco Holdings, Inc. ............. 997,479
110,000 Whirlpool Corp. .................................... 8,140,000
------------
19,484,979
------------
Diversified Companies - 4.1%
25,000 Textron, Inc. ...................................... 2,057,812
240,000 Tyco International Ltd. ............................ 22,740,000
------------
24,797,812
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Electrical Equipment &
Services - 5.4%
120,000 General Electric Co. ............................... $13,560,000
200,000 Motorola, Inc....................................... 18,950,000
------------
32,510,000
------------
Finance & Insurance - 11.8%
145,000 Allstate Corp....................................... 5,201,875
55,000 American Express Co. ............................... 7,156,875
96,600 American International
Group, Inc......................................... 11,308,237
150,000 Citigroup, Inc...................................... 7,125,000
125,000 Conseco, Inc........................................ 3,804,688
70,000 Federal National Mortgage Assoc. ................... 4,786,250
90,000 Lehman Brothers Holdings, Inc. ..................... 5,602,500
90,000 Merrill Lynch & Co., Inc. .......................... 7,194,375
65,000 MGIC Investment Corp. .............................. 3,160,625
100,000 Morgan Stanley, Dean Witter & Co. .................. 10,250,000
80,000 Nationwide Financial Services, Inc.
Cl. A.............................................. 3,620,000
70,000 Price (T.) Rowe & Associates, Inc. ................. 2,686,250
------------
71,896,675
------------
Food & Beverage Products - 5.1%
130,000 Bestfoods........................................... 6,435,000
60,000 Coca Cola Co. ...................................... 3,750,000
190,000 Fortune Brands, Inc................................. 7,861,250
95,000 Nabisco Group Holding Corp.......................... 1,858,437
200,000 Philip Morris Companies, Inc........................ 8,037,500
57,000 * Tricon Global Restaurants, Inc. .................. 3,085,125
------------
31,027,312
------------
Healthcare Products &
Services - 9.3%
100,000 * Amgen, Inc. ...................................... 6,087,500
144,000 * Boston Scientific Corp. .......................... 6,327,000
85,000 Bristol-Myers Squibb Co............................. 5,987,187
150,000 * Health Management Associates, Inc. Cl. A ......... 1,687,500
30,000 Johnson & Johnson................................... 2,940,000
170,000 * Lincare Holdings, Inc............................. 4,250,000
80,000 Pfizer, Inc......................................... 8,780,000
150,000 Pharmacia & Upjohn, Inc. ........................... 8,521,875
65,000 SmithKline Beecham Plc, ADR......................... 4,294,063
100,000 Teva Pharmaceutical Industries
Ltd., ADR.......................................... 4,900,000
100,000 Varian Med Systems, Inc............................. 2,525,000
------------
56,300,125
------------
Information Services & Technology - 11.0%
113,000 * Adaptec, Inc. .................................... 3,990,312
30,000 * America Online, Inc............................... 3,315,000
100,000 * Apple Computer.................................... 4,631,250
85,000 * Applied Materials, Inc. .......................... 6,279,375
85,000 Compaq Computer Corp. .............................. 2,013,438
60,000 * Comverse Technology, Inc. ........................ 4,530,000
70,000 * EMC Corp. ........................................ 3,850,000
80,000 Intel Corp. ........................................ 4,760,000
</TABLE>
See Combined Notes to Financial Statements.
54
<PAGE>
EVERGREEN
Select Diversified Value Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Information Services & Technology - continued
70,000 International Business Machines Corp............... $ 9,047,500
220,000 * Microsoft Corp................................... 19,841,250
178,000 * Quantum Corp..................................... 4,294,250
------------
66,552,375
------------
Metal Products & Services - 1.8%
81,910 Alcoa, Inc. ....................................... 5,068,181
225,000 USX United States Steel Group...................... 6,075,000
------------
11,143,181
------------
Natural Gas - 0.9%
160,000 El Paso Energy Corp................................ 5,630,000
------------
Oil / Energy - 6.9%
60,000 Anadarko Petroleum Corp............................ 2,208,750
90,000 Apache Corp. ...................................... 3,510,000
60,000 Atlantic Richfield Co.............................. 5,013,750
100,000 Elf Aquitaine, ADR................................. 7,356,250
100,000 Mobil Corp......................................... 9,900,000
513,000 Reliant Energy, Inc. .............................. 14,171,625
------------
42,160,375
------------
Oil Field Services - 1.0%
71,500 Diamond Offshore Drilling, Inc..................... 2,028,813
135,000 Tidewater, Inc. ................................... 4,117,500
------------
6,146,313
------------
Paper & Packaging - 1.7%
150,000 Bowater, Inc. ..................................... 7,087,500
55,000 Kimberly-Clark Corp. .............................. 3,135,000
------------
10,222,500
------------
Printing, Publishing, Broadcasting &
Entertainment - 3.2%
85,000 Omnicom Group, Inc................................. 6,800,000
175,000 Time Warner, Inc. ................................. 12,862,500
------------
19,662,500
------------
Real Estate - 0.6%
150,000 Simon Property Group Inc. REIT..................... 3,806,250
------------
Retailing & Wholesale - 6.8%
100,000 * Abercrombie & Fitch Co. ......................... 4,800,000
80,000 Circuit City Stores, Inc........................... 7,440,000
69,000 Dayton Hudson Corp. ............................... 4,485,000
150,000 Lowe's Companies, Inc.............................. 8,503,125
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Retailing & Wholesale - continued
45,000 Sears, Roebuck & Co................................. $ 2,005,313
115,000 * Toys R Us, Inc.................................... 2,379,062
242,000 Wal-Mart Stores, Inc. .............................. 11,676,500
------------
41,289,000
------------
Telecommunication Services & Equipment - 3.2%
120,000 Centurytel, Inc..................................... 4,770,000
160,000 Nokia Corp., ADR.................................... 14,650,000
------------
19,420,000
------------
Textile & Apparel - 0.3%
45,000 V. F. Corp.......................................... 1,923,750
------------
Transportation - 1.3%
125,000 * Continental Airlines, Inc......................... 4,703,125
50,000 Delta Air Lines, Inc................................ 2,881,250
------------
7,584,375
------------
Utilities - Telephone - 3.8%
100,000 Ameritech Corp...................................... 7,350,000
145,000 AT&T Corp........................................... 8,092,813
100,000 GTE Corp. .......................................... 7,575,000
------------
23,017,813
------------
Total Common Stocks
(cost $517,317,544)................................ 604,333,585
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<C> <S> <C>
SHORT-TERM INVESTMENTS - 1.6%
Repurchase Agreement - 1.5%
9,001,068 Dresdner Bank AG 4.75%, purchased 6/30/1999,
maturing 7/1/1999, maturity value $9,002,256 (cost
$9,001,068) (a)................................... 9,001,068
------------
U.S. Government Agency Obligations - 0.1%
United States Treasury Bills
85,000 4.23%, 7/22/1999 (b)............................... 84,790
466,000 4.485%, 8/19/1999 (b).............................. 463,156
------------
547,946
------------
Total Short-Term Investments
(cost $9,549,014)................................. 9,549,014
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $526,866,558)................................ 101.0% 613,882,599
Other Assets and Liabilities - net.................. (1.0) (6,143,816)
----- ------------
Net Assets.......................................... 100.0% $607,738,783
----- ------------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at June 30,
1999.
(b) At June 30, 1999, all or a portion of the principal amount of this security
was pledged to cover initial margin requirements for open future contracts.
* Non-income producing security
Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust
Futures Contracts - Long Positions
<TABLE>
<CAPTION>
Number of Initial Contract Value at Unrealized
Expiration Contracts Amount June 30, 1999 Gain
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
September 1999 25 S&P 500 Index $8,249,862 $8,635,625 $385,763
</TABLE>
See Combined Notes to Financial Statements.
55
<PAGE>
EVERGREEN
Select Large Cap Blend Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 99.8%
Automotive Equipment & Manufacturing - 2.5%
94,000 Ford Motor Co....................................... $ 5,305,125
94,000 Goodyear Tire & Rubber Co........................... 5,528,375
------------
10,833,500
------------
Banks - 8.3%
163,000 Bank One Corp....................................... 9,708,687
164,000 BankAmerica Corp.................................... 12,023,250
97,000 BankBoston Corp..................................... 4,959,125
125,000 Fleet Financial Group, Inc.......................... 5,546,875
117,300 Mellon Bank Corp.................................... 4,266,788
------------
36,504,725
------------
Chemical & Agricultural
Products - 1.1%
127,000 Monsanto Co......................................... 5,008,563
------------
Communication Systems & Services - 10.0%
284,000 *Cisco Systems, Inc................................. 18,264,750
110,000 Lucent Technologies, Inc............................ 7,418,125
209,000 *MCI WorldCom, Inc.................................. 17,987,062
------------
43,669,937
------------
Consumer Products &
Services - 2.9%
38,000 Gillette Co......................................... 1,558,000
126,000 Procter & Gamble Co................................. 11,245,500
------------
12,803,500
------------
Diversified Companies - 4.4%
49,000 Textron, Inc........................................ 4,033,313
161,000 Tyco International Ltd.............................. 15,254,750
------------
19,288,063
------------
Electrical Equipment &
Services - 3.8%
149,000 General Electric Co................................. 16,837,000
------------
Environmental Services - 2.8%
226,000 Waste Management, Inc............................... 12,147,500
------------
Finance & Insurance - 9.5%
241,000 Allstate Corp....................................... 8,645,875
39,000 American International Group, Inc................... 4,565,437
290,000 Citigroup, Inc...................................... 13,775,000
156,000 Federal National Mortgage Assoc..................... 10,666,500
47,800 Merrill Lynch & Co., Inc............................ 3,821,013
------------
41,473,825
------------
Food & Beverage Products - 6.7%
81,000 Anheuser Busch Companies, Inc....................... 5,745,937
100,200 Coca Cola Co........................................ 6,262,500
82,200 *Kroger Co.......................................... 2,296,463
108,900 Nabisco Holdings Corp. Cl. A........................ 4,709,925
109,000 Philip Morris Companies, Inc........................ 4,380,437
120,000 *Safeway, Inc....................................... 5,940,000
------------
29,335,262
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products &
Services - 10.0%
129,400 Bristol-Myers Squibb Co............................. $ 9,114,612
58,055 Johnson & Johnson................................... 5,689,390
30,500 McKesson HBOC, Inc.................................. $979,813
41,800 Merck & Co., Inc.................................... 3,093,200
96,000 Pfizer, Inc......................................... 10,536,000
53,500 Pharmacia & Upjohn, Inc............................. 3,039,469
162,000 Warner-Lambert Co................................... 11,238,750
------------
43,691,234
------------
Information Services &
Technology - 14.8%
70,000 * America Online, Inc............................... 7,735,000
379,000 Compaq Computer Corp................................ 8,977,562
195,000 * Compuware Corp.................................... 6,203,438
128,000 *EMC Corp........................................... 7,040,000
111,000 Intel Corp.......................................... 6,604,500
78,500 International Business Machines Corp................ 10,146,125
203,000 *Microsoft Corp..................................... 18,308,062
------------
65,014,687
------------
Metal Products & Services - 1.4%
103,000 Alcoa, Inc.......................................... 6,373,125
------------
Oil/Energy - 4.9%
110,022 Mobil Corp.......................................... 10,892,178
170,000 Texaco, Inc......................................... 10,625,000
------------
21,517,178
------------
Paper & Packaging - 0.3%
28,300 International Paper Co.............................. 1,429,150
------------
Printing, Publishing, Broadcasting &
Entertainment - 4.6%
172,000 News Corp Ltd....................................... 6,073,750
47,800 Omnicom Group, Inc.................................. 3,824,000
137,800 Time Warner, Inc.................................... 10,128,300
------------
20,026,050
------------
Retailing & Wholesale - 4.8%
308,000 Dayton Hudson Corp.................................. 20,020,000
22,300 Lowe's Companies, Inc............................... 1,264,131
------------
21,284,131
------------
Telecommunication Services
& Equipment - 0.3%
34,400 Centurytel, Inc..................................... 1,367,400
------------
Transportation - 1.1%
163,000 Burlington Northern Santa Fe Corp................... 5,053,000
------------
Utilities - Electric - 2.5%
212,941 Cinergy Corp........................................ 6,814,112
73,413 Duke Power Co....................................... 3,991,832
------------
10,805,944
------------
Utilities - Telephone - 3.1%
179,000 GTE Corp............................................ 13,559,250
------------
Total Common Stocks
(cost $324,538,256)................................ 438,023,024
------------
</TABLE>
See Combined Notes to Financial Statements.
56
<PAGE>
EVERGREEN
Select Large Cap Blend Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 2.3%
Repurchase Agreement - 2.3%
$10,138,645 Dresdner Bank AG 4.75%, purchased 6/30/1999,
maturing 7/1/1999, maturity value $10,139,983
(cost $10,138,645)(a)............................ $ 10,138,645
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $334,676,901)........................ 102.1% 448,161,669
Other Assets and
Liabilities - net.......................... (2.1) (9,404,705)
----- ------------
Net Assets.................................. 100.0% $438,756,964
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices plus accrued inter-
est at June 30, 1999.
* Non-income producing security
See Combined Notes to Financial Statements.
57
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 99.1%
Banks - 2.3%
40,200 Investors Financial Services Corp. (b).............. $ 1,608,000
------------
Building, Construction & Furnishings - 4.3%
90,800 Dal Tile International Inc. ........................ 1,032,850
25,000 Elcor Chemical Corp. ............................... 1,092,187
46,400 *Wackenhut Corrections Corp......................... 919,300
------------
3,044,337
------------
Business Equipment &
Services - 2.1%
7,900 *Abacus Direct Corp. (b)............................ 722,850
28,000 *Metzler Group, Inc. (b)............................ 773,500
------------
1,496,350
------------
Capital Goods - 1.5%
25,500 Manitowoc Co., Inc.................................. 1,061,438
------------
Chemical & Agricultural
Products - 1.5%
42,600 Arch Chemicals, Inc................................. 1,035,713
------------
Communication Systems & Services - 1.3%
38,500 Kemet Corp. ........................................ 883,094
------------
Consumer Products & Services - 6.8%
39,600 *Action Performance Companies, Inc. (b)............. 1,306,800
46,100 *Chattem, Inc....................................... 1,466,556
42,500 *Scotts Co. Cl. A................................... 2,024,063
------------
4,797,419
------------
Education - 8.2%
56,246 *Bright Horizons Family Solutions, Inc.............. 1,061,643
66,400 *CBT Group Public Ltd. (b).......................... 1,095,600
57,600 *ITT Educational Services, Inc...................... 1,501,200
67,100 Strayer Education, Inc. (b)......................... 2,059,131
------------
5,717,574
------------
Electrical Equipment &
Services - 9.8%
40,700 Cmp Group, Inc...................................... 1,065,831
37,400 *Cognex Corp........................................ 1,180,438
16,000 *Lattice Semiconductor Corp. (b).................... 996,000
40,700 Littelfuse, Inc. (b)................................ 783,475
40,200 *Pri Automation, Inc. (b)........................... 1,457,250
10,400 *QLogic Corp........................................ 1,372,800
------------
6,855,794
------------
Healthcare Products &
Services - 1.8%
15,300 *Pediatrix Medical Group, Inc. (b).................. 325,125
36,250 *Renal Care Group, Inc.............................. 937,969
------------
1,263,094
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Industrial Specialty Products & Services - 1.6%
35,800 Roper Industries, Inc.............................. $ 1,145,600
------------
Information Services & Technology - 27.1%
23,100 *Applied Micro Circuits Corp....................... 1,899,975
60,700 Computer Network Technology (b).................... 1,312,637
82,700 Deltek Systems, Inc. .............................. 816,663
30,200 *Electronics for Imaging, Inc...................... 1,551,525
14,000 *Forrester Research, Inc. (b)...................... 350,000
38,500 *Galileo Technology Ltd. .......................... 1,744,531
38,100 Genesis Microchip, Inc. (b) ....................... 900,112
28,600 Henry Jack & Associates, Inc. ..................... 1,122,550
27,400 *IDX Systems Corp. (b)............................. 618,213
45,000 *Kronos, Inc. ..................................... 2,047,500
54,300 *Maximus, Inc...................................... 1,561,125
22,000 *Progress Software Corp. .......................... 621,500
17,100 *Qrs Corp. ........................................ 1,333,800
33,300 *Sandisk Corp. (b)................................. 1,498,500
9,400 *Verio, Inc. (b)................................... 653,300
60,850 *Wind River Systems, Inc. (b)...................... 977,403
------------
19,009,334
------------
Leisure & Tourism - 1.8%
41,600 *Steiner Leisure Ltd............................... 1,261,000
------------
Machinery - Diversified - 3.8%
31,400 *Astec Industries, Inc............................. 1,279,550
55,400 Cmi Corp. ......................................... 505,525
29,700 *Terex Corp........................................ 903,994
------------
2,689,069
------------
Manufacturing - Distributing - 1.7%
50,000 *National RV Holdings, Inc. (b).................... 1,212,500
------------
Oil Field Services - 3.0%
66,300 *Core Laboratories NV (b).......................... 924,056
89,100 *Global Industries Ltd............................. 1,141,594
------------
2,065,650
------------
Printing, Publishing, Broadcasting &
Entertainment - 5.2%
41,200 *Big Flower Holdings, Inc. (b)..................... 1,313,250
45,400 Citadel Communications Corp........................ 1,642,912
16,700 *Entercom Communications Corp...................... 713,925
------------
3,670,087
------------
Retailing & Wholesale - 2.3%
22,200 *Ann Taylor Stores Corp. (b)....................... 999,000
33,000 Regis Corporation.................................. 633,187
------------
1,632,187
------------
Telecommunication Services & Equipment - 9.7%
4,900 Copper Mountain Networks, Inc...................... 378,525
40,200 E.Spire Communications, Inc. (b)................... 424,612
38,500 *Intermedia Communications, Inc. (b)............... 1,155,000
</TABLE>
See Combined Notes to Financial Statements.
58
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Telecommunication Services & Equipment - continued
42,900 *ITC DeltaCom, Inc. (b)............................. $ 1,201,200
32,000 Pacific Gateway Exchange, Inc. (b).................. 932,000
56,700 *Transaction Network Services, Inc.................. 1,658,475
18,200 *Viatel, Inc........................................ 1,021,475
------------
6,771,287
------------
Textile & Apparel - 1.6%
48,400 *Tarrant Apparel Group (b).......................... 1,101,100
------------
Transportation - 1.7%
27,300 *Eagle USA Airfreight, Inc.......................... 1,158,544
------------
Total Common Stocks
(cost $59,694,557)................................. 69,479,171
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 26.7%
Repurchase Agreement - 0.9%
$607,000 Evergreen Joint Repurchase Agreement 5.00%,
purchased 6/30/1999, maturing 7/1/1999, maturity
value $607,084
(cost $607,000) (a).............................. $ 607,000
------------
</TABLE>
<TABLE>
<CAPTION>
Shares
<C> <S> <C>
Mutual Fund Shares - 25.8%
18,071,447 Navigator Prime Portfolio (c)....................... $ 18,071,447
------------
Total Short-Term Investments
(cost $18,678,447)................................. 18,678,447
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $78,373,004) ........................ 100.0% 88,157,618
Other Assets and
Liabilities - net ......................... 0.0 (18,044,081)
----- ------------
Net Assets ................................. 100.0% $ 70,113,537
===== ============
</TABLE>
(a) The repurchase agreements are fully collateralized by the U.S. government
and/or agency obligations based on market prices plus accrued interest at
June 30, 1999.
(b) All or a portion of this security is on loan.
(c) Represents investment of cash collateral received for securities on loan.
* Non-income producing security
Summary of Abbreviations:
NV Naamloze (Dutch for "corporation")
See Combined Notes to Financial Statements.
59
<PAGE>
EVERGREEN
Select Small Company Value Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 98.3%
Automotive Equipment & Manufacturing - 2.5%
40,000 Arvin Industries, Inc. ............................. $ 1,515,000
60,000 Wabash National Corp. .............................. 1,162,500
------------
2,677,500
------------
Banks - 12.8%
10,000 ABC Bancorp......................................... 132,500
9,500 Bank of Commerce.................................... 193,563
25,000 Britton & Koontz Capital Corp. ..................... 523,437
27,500 BSB Bancorp, Inc. .................................. 742,500
105,000 * Civic Bancorp..................................... 1,483,125
56,910 Commercial Bankshares, Inc. ........................ 1,230,679
75,000 Cowlitz Bancorp..................................... 496,875
20,000 First State Bancorp................................. 387,500
38,500 Grand Premier Financial, Inc. ...................... 476,438
30,000 Granite State Bankshares, Inc. ..................... 693,750
14,000 Hancock Holding Co. ................................ 628,250
50,000 Independent Bankshares, Inc. ....................... 550,000
50,000 Mid-State Bancshares................................ 1,687,500
10,000 Pacific Century Financial Corp. .................... 215,625
75,000 Pointe Financial Corp. ............................. 801,562
92,500 * Republic Bancshares, Inc. ........................ 1,896,250
30,100 Seacoast Banking Corp. of Florida
Cl. A.............................................. 918,050
35,365 * United Security Bancorp........................... 459,745
7,000 Western Bancorp..................................... 304,500
------------
13,821,849
------------
Building, Construction & Furnishings - 9.3%
6,700 * Beazer Homes USA, Inc. ........................... 155,356
47,000 * CompX International, Inc. Cl. A................... 840,125
20,000 Crossmann Communities, Inc. ........................ 581,250
20,000 D.R. Horton, Inc. .................................. 332,500
60,000 * Gehl Co. ......................................... 1,215,000
75,000 * Genlyte Group, Inc. .............................. 1,682,813
17,000 * Knoll, Inc. ...................................... 452,625
25,000 * Koala Corp. ...................................... 668,750
40,000 La-Z-Boy Chair Co. ................................. 920,000
22,500 * Monaco Coach Corp. ............................... 952,031
27,800 * SLI, Inc. ........................................ 750,600
40,100 * Stanley Furniture Co., Inc. ...................... 902,250
30,000 * Toll Brothers, Inc................................ 643,125
------------
10,096,425
------------
Business Equipment & Services - 2.6%
25,000 * Consolidated Graphics, Inc........................ 1,250,000
35,000 International Telecomm Systems, Inc. ............... 560,000
50,000 * RCM Technologies, Inc............................. 662,500
9,000 * Zebra Technologies Corp. Cl. A.................... 345,937
------------
2,818,437
------------
Communication Systems & Services - 0.9%
40,000 * Orbital Sciences Corp. ........................... 945,000
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Consumer Products & Services - 8.4%
40,000 CPI Corp. ........................................ $1,320,000
45,000 Lancaster Colony Corp............................. 1,552,500
35,000 Matthews International Corp. Cl. A................ 1,036,875
55,000 * Maxwell Shoe, Inc. Cl. A........................ 498,438
20,000 Polaris Industries, Inc........................... 870,000
66,000 * Rock Of Ages Corp. Cl. A........................ 676,500
30,000 St. John Knits, Inc............................... 877,500
116,900 Stewart Enterprises, Inc. Cl. A................... 1,702,356
70,000 York Group, Inc. ................................. 525,000
------------
9,059,169
------------
Electrical Equipment & Services - 1.9%
30,000 * Benchmark Electronics, Inc. .................... 1,078,125
50,000 * Kent Electronics Corp. ......................... 990,625
------------
2,068,750
------------
Electronic Equipment & Services -2.1%
22,000 Boston Acoustics, Inc. ........................... 393,250
5,000 * Electro Scientific Industries, Inc. ............ 208,906
22,800 * Hadco Corp. .................................... 906,300
85,000 * Vicon Industries, Inc. ......................... 765,000
------------
2,273,456
------------
Finance & Insurance - 8.5%
30,000 American Bankers Insurance Group, Inc. ........... 1,633,125
17,000 * Farm Family Holdings, Inc. ..................... 581,187
32,000 Frontier Insurance Group, Inc. ................... 492,000
10,000 LandAmerica Financial Group, Inc.................. 287,500
29,500 Meadowbrook Insurance Group, Inc. ................ 401,938
85,500 Morgan Keegan, Inc................................ 1,619,156
20,000 Radian Group, Inc................................. 976,250
70,000 Raymond James Financial, Inc...................... 1,675,625
60,000 State Auto Financial Corp. ....................... 810,000
27,700 Waddell & Reed Financial, Inc.
Cl. A............................................ 760,019
------------
9,236,800
------------
Food & Beverage Products - 3.7%
25,000 International Multifoods Corp. ................... 564,062
48,800 Michael Foods, Inc. .............................. 1,146,800
30,000 * Performance Food Group Co. ..................... 815,625
80,000 Smucker (J. M.) Co. .............................. 1,520,000
------------
4,046,487
------------
Healthcare Products & Services - 9.2%
70,000 * Acuson Corp. ................................... 1,203,125
40,000 * ADAC Laboratories............................... 290,000
70,000 Alpharma, Inc. ................................... 2,489,375
25,000 * ArthroCare Corp. ............................... 512,500
121,000 * Carematrix Corp. ............................... 1,504,937
125,000 * Encore Medical Corp. ........................... 367,188
80,000 * Exactech, Inc. ................................. 920,000
30,000 Jones Pharma, Inc. ............................... 1,181,250
63,500 * Maxxim Medical, Inc. ........................... 1,480,344
------------
9,948,719
------------
</TABLE>
See Combined Notes to Financial Statements.
60
<PAGE>
EVERGREEN
Select Small Company Value Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Industrial Specialty Products & Services - 0.9%
25,000 Graco, Inc. ....................................... $ 734,375
4,500 Hach Co. Cl. A..................................... 79,313
60,000 * Mathsoft, Inc. .................................. 172,500
------------
986,188
------------
Information Services & Technology - 4.4%
70,000 * Axent Technologies, Inc.......................... 778,750
10,000 * Engineering Animation, Inc....................... 211,875
20,000 * Etec Systems, Inc................................ 665,000
55,300 Fair Issac & Co., Inc.............................. 1,938,956
33,200 * Micros Systems, Inc.............................. 1,128,800
------------
4,723,381
------------
Machinery - Diversified - 1.5%
41,250 Hardinge, Inc. .................................... 724,453
30,600 * Terex Corp. ..................................... 931,388
------------
1,655,841
------------
Manufacturing - Distributing - 0.4%
20,000 CLARCOR, Inc. ..................................... 383,750
------------
Oil/Energy - 2.0%
20,000 * Barrett Resources Corp. ......................... 767,500
30,000 Berry Petroleum Co. Cl. A.......................... 418,125
32,000 Cabot Oil & Gas Corp. Cl. A........................ 596,000
10,000 Pennzoil-Quaker State Co. ......................... 150,000
20,000 Southwestern Energy Co. ........................... 211,250
------------
2,142,875
------------
Printing, Publishing, Broadcasting &
Entertainment - 0.8%
43,900 Banta Corp. ....................................... 921,900
------------
Real Estate - 1.8%
15,000 Eastgroup Properties, Inc. REIT.................... 300,938
125,000 Mission West Properties, Inc. REIT................. 1,031,250
50,000 * Prime Hospitality Corp. ......................... 600,000
------------
1,932,188
------------
Retailing & Wholesale - 7.9%
65,000 * Duckwall-ALCO Stores, Inc. ...................... 682,500
34,200 Ethan Allen Interiors, Inc. ....................... 1,291,050
50,000 * Finish Line, Inc. Cl. A.......................... 562,500
17,300 * Footstar, Inc. .................................. 643,344
90,000 Freds, Inc. ....................................... 1,406,250
63,500 * Lithia Motors, Inc. ............................. 1,301,750
30,000 Seaway Food Town, Inc. ............................ 588,750
152,700 * Sonic Automotive, Inc. .......................... 2,099,625
------------
8,575,769
------------
Telecommunication Services & Equipment - 3.5%
30,000 * CapRock Communications Corp. .................... 1,215,000
4,000 Hickory Tech Corp. ................................ 44,500
55,000 * ITC DeltaCom, Inc. .............................. 1,540,000
75,000 * Lightbridge, Inc. ............................... 942,187
------------
3,741,687
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Thrift Institutions - 5.4%
15,000 First Liberty Financial Corp. ..................... $ 470,625
36,000 Highland Bancorp, Inc. ............................ 679,500
75,400 Horizon Financial Corp. ........................... 1,032,038
14,200 Mech Financial, Inc. .............................. 532,500
45,000 MetroWest Bank..................................... 315,000
25,000 Monterey Bay Bancorp, Inc. ........................ 368,750
42,500 Quaker City Bancorp, Inc. ......................... 701,250
48,371 St. Paul Bancorp, Inc. ............................ 1,233,460
29,000 Teche Holding Co. ................................. 496,625
------------
5,829,748
------------
Transportation - 1.9%
25,700 * Heartland Express, Inc........................... 420,837
90,000 * Motivepower Industries, Inc...................... 1,620,000
------------
2,040,837
------------
Utilities - Electric - 2.1%
10,000 Central Hudson Gas & Electric Corp. ............... 420,000
80,000 MDU Resources Group, Inc. ......................... 1,825,000
------------
2,245,000
------------
Utilities - Gas - 3.8%
10,000 Eastern Enterprises................................ 397,500
25,000 Indiana Energy, Inc................................ 532,813
20,000 NUI Corp........................................... 500,000
10,000 Providence Energy Corp. ........................... 266,875
40,000 South Jersey Industries, Inc....................... 1,132,500
65,000 UGI Corp........................................... 1,312,187
------------
4,141,875
------------
Total Common Stocks
(cost $106,312,714)............................... 106,313,631
------------
<CAPTION>
Principal
Amount
<C> <S> <C>
SHORT-TERM INVESTMENTS - 0.7%
Repurchase Agreement - 0.7%
$ 829,000 State Street Bank & Trust Co. 4.80%, purchased
6/30/1999,
maturing 7/1/1999, maturity value $829,111 (cost
$829,000) (a)..................................... 829,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $107,141,714)................................ 99.0% 107,142,631
Other Assets and
Liabilities - net................................... 1.0 1,038,491
----- ------------
Net Assets........................................... 100.0% $108,181,122
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at June 30,
1999.
* Non-income producing security
Summary of Abbreviations:
REITReal Estate Investment Trust
See Combined Notes to Financial Statements.
61
<PAGE>
EVERGREEN
Select Social Principles Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 98.0%
Advertising & Related Services - 2.2%
135,500 *Ha Lo Industries, Inc............................ $ 1,338,063
35,400 Young & Rubicam, Inc.............................. 1,608,487
------------
2,946,550
------------
Aerospace & Defense - 1.1%
81,900 *BE Aerospace, Inc................................ 1,530,506
------------
Banks - 4.7%
35,600 BankBoston Corp................................... 1,820,050
37,950 Mellon Bank Corp.................................. 1,380,431
64,600 SouthTrust Corp................................... 2,479,025
15,700 Summit Bancorp.................................... 656,456
------------
6,335,962
------------
Building, Construction & Furnishings - 3.2%
87,150 *NCI Building Systems, Inc........................ 1,862,831
37,300 Southdown, Inc.................................... 2,396,525
------------
4,259,356
------------
Business Equipment & Services - 1.3%
35,600 *Consolidated Graphics, Inc....................... 1,780,000
------------
Communication Systems & Services - 3.7%
39,000 *Metromedia Fiber Network, Inc.................... 1,401,563
19,100 *NorthPoint Communications Group, Inc............. 697,150
42,550 *Tellabs, Inc..................................... 2,874,784
------------
4,973,497
------------
Diversified Companies - 1.0%
34,600 ITT Industries, Inc............................... 1,319,125
------------
Education - 1.1%
57,300 *Apollo Group, Inc................................ 1,522,031
------------
Electronic Equipment & Services - 2.8%
48,900 *Sanmina Corp..................................... 3,710,288
------------
Environmental Services - 2.9%
196,475 *Allied Waste Industries, Inc..................... 3,880,381
------------
Finance & Insurance - 8.8%
34,500 AFLAC, Inc........................................ 1,651,688
45,700 Annuity & Life Re Ltd............................. 1,025,394
100,000 Conseco, Inc...................................... 3,043,750
34,200 Countrywide Credit Industries, Inc................ 1,462,050
71,100 Partnerre Ltd..................................... 2,657,362
46,100 ReliaStar Financial Corp.......................... 2,016,875
------------
11,857,119
------------
Food & Beverage Products - 5.5%
50,700 Dean Foods Co..................................... 2,107,219
48,100 *Keebler Foods Co................................. 1,461,037
27,000 McCormick & Co., Inc.............................. 852,188
25,700 *Tricon Global Restaurants, Inc................... 1,391,013
37,500 *United States Foodservice........................ 1,598,437
------------
7,409,894
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products & Services - 9.0%
86,100 *Elan Corp Plc, ADR................................ $ 2,389,275
231,100 *HEALTHSOUTH Corp.................................. 3,452,056
89,400 Mylan Laboratories, Inc............................ 2,369,100
64,000 *Pediatrix Medical Group, Inc...................... 1,360,000
59,900 *Quintiles Transnational Corp...................... 2,515,800
------------
12,086,231
------------
Industrial Specialty Products & Services - 2.9%
33,720 Magna International, Inc. Cl. A.................... 1,913,610
63,350 Roper Industries, Inc.............................. 2,027,200
------------
3,940,810
------------
Information Services & Technology - 14.1%
99,500 *Adaptec, Inc...................................... 3,513,594
110,250 *Compuware Corp.................................... 3,507,328
56,850 *PMC-Sierra, Inc................................... 3,350,597
29,100 Psinet, Inc........................................ 1,273,125
18,650 *Uniphase Corp..................................... 3,095,900
44,000 *Veritas Software Corp............................. 4,177,250
------------
18,917,794
------------
Manufacturing - Distributing - 1.8%
34,100 *Teradyne, Inc..................................... 2,446,675
------------
Oil/Energy - 4.6%
275,600 *Newpark Resources, Inc............................ 2,445,950
56,900 Sonat, Inc......................................... 1,884,813
84,500 Ultramar Diamond Shamrock Corp..................... 1,843,156
------------
6,173,919
------------
Paper & Packaging - 1.2%
94,150 Rock Tennessee Co. Cl. A........................... 1,571,128
------------
Printing, Publishing, Broadcasting &
Entertainment - 0.9%
14,500 Omnicom Group, Inc................................. 1,160,000
------------
Real Estate - 1.0%
62,300 FelCor Lodging Trust, Inc. REIT.................... 1,292,725
------------
Retailing & Wholesale - 13.1%
117,000 *Abercrombie & Fitch Co............................ 5,616,000
94,700 *Best Buy Co., Inc................................. 6,392,250
124,500 Family Dollar Stores, Inc.......................... 2,988,000
72,000 *Starbucks Corp.................................... 2,704,500
------------
17,700,750
------------
Telecommunication Services & Equipment - 3.6%
33,894 Centurytel, Inc.................................... 1,347,286
106,650 *Qwest Communications International, Inc........... 3,526,116
------------
4,873,402
------------
Transportation - 1.8%
116,000 Comair Holdings, Inc............................... 2,414,250
------------
</TABLE>
See Combined Notes to Financial Statements.
62
<PAGE>
EVERGREEN
Select Social Principles Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Electric - 5.7%
84,550 Cinergy Corp....................................... $ 2,705,600
60,500 Sierra Pacific Resources........................... 2,200,688
113,400 UtiliCorp United, Inc.............................. 2,757,037
------------
7,663,325
------------
Total Common Stocks (cost $100,352,517)............ 131,765,718
------------
<CAPTION>
Principal
Amount
<C> <S> <C>
SHORT-TERM INVESTMENTS - 0.5%
Repurchase Agreement - 0.5%
$ 716,516 Dresdner Bank AG 4.75%, purchased 06/30/1999,
maturing 07/01/1999, maturity value $716,611
(cost $716,516) (a)............................... 716,516
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - continued
Money Market Shares - 0.0%
110 Valiant General Fund ............................... $ 110
------------
Total Short-Term Investments
(cost $716,626).................................... 716,626
------------
Total Investments -
(cost $101,069,143)......................... 98.5% 132,482,344
Other Assets and Liabilities - net........... 1.5 2,053,681
----- ------------
Net Assets................................... 100.0% $134,536,025
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices plus accrued interest at
June 30, 1999.
* Non-income producing security
Summary of Abbreviations:
REIT Real Estate Investment Trust
ADR American Depository Receipt
See Combined Notes to Financial Statements.
63
<PAGE>
EVERGREEN
Select Special Equity Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 95.3%
Advertising & Related
Services - 0.6%
4,800 * Flycast Communications Corp. ..................... $ 91,800
13,700 Young & Rubicam, Inc................................ 622,494
------------
714,294
------------
Building, Construction & Furnishings - 3.8%
50,800 * Comfort Systems USA, Inc. ........................ 914,400
56,100 * Group Maintenance America Corp. .................. 725,794
39,200 * Shaw Group, Inc................................... 622,300
57,200 Standard Pacific Corp............................... 740,025
47,280 * Winsloew Furniture, Inc........................... 1,589,790
------------
4,592,309
------------
Business Equipment &
Services - 1.1%
36,300 * Metamor Worldwide, Inc. .......................... 873,469
52,100 * Vision Twenty One, Inc............................ 433,081
------------
1,306,550
------------
Communication Systems & Services - 3.0%
29,900 * Mac Gray Corp. ................................... 261,625
50,300 * Metromedia Fiber Network, Inc..................... 1,807,656
31,600 * Pinnacle Holdings, Inc. .......................... 774,200
123,000 * VDI Media......................................... 799,500
------------
3,642,981
------------
Consumer Products &
Services - 0.2%
121,500 * Acme United Corp.................................. 258,188
------------
Diversified Companies - 1.4%
23,900 GATX Corp........................................... 909,694
22,300 National Service Industries, Inc.................... 802,800
------------
1,712,494
------------
Electrical Equipment &
Services - 0.6%
72,900 * Magnetek, Inc..................................... 770,006
------------
Electronic Equipment &
Services - 0.2%
32,100 * Vicon Industries, Inc............................. 288,900
------------
Environmental Services - 1.7%
78,600 * Casella Waste Systems, Inc........................ 2,043,600
------------
Finance & Insurance - 4.0%
12,460 * Affiliated Managers Group, Inc.................... 376,136
28,800 Bay View Capital Corp............................... 590,400
149,400 * Delta Financial Corp. ............................ 952,425
41,300 Everest Reinsurance Holdings, Inc. ................. 1,347,412
9,700 * NextCard, Inc..................................... 329,194
89,800 * WFS Financial, Inc................................ 1,245,975
------------
4,841,542
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Food & Beverage Products - 4.4%
111,700 Chiquita Brands International, Inc. ................ $ 1,005,300
26,200 Dean Foods Co....................................... 1,088,938
40,400 Earthgrains Co...................................... 1,042,825
115,300 * Fresh Del Monte Produce........................... 1,628,612
10,400 * Omega Protein Corp. .............................. 54,600
96,200 Scheid Vineyards, Inc. Cl. A........................ 481,000
------------
5,301,275
------------
Healthcare Products &
Services - 9.8%
104,000 * Brookdale Living Communities, Inc................. 1,540,500
52,100 * Cellegy Pharmaceuticals, Inc. .................... 240,963
71,300 * Chirex, Inc....................................... 2,290,512
51,900 * Collagenex Pharmaceuticals, Inc................... 519,000
80,500 * Computer Motion, Inc. ............................ 820,094
65,500 * Dura Pharmaceuticals, Inc......................... 781,906
45,400 * Guilford Pharmaceuticals, Inc..................... 578,850
30,600 * Isis Pharmaceuticals, Inc......................... 311,738
50,400 * MedPartners, Inc.................................. 381,150
117,700 * Pharmaceutical Resources, Inc. ................... 1,022,519
84,100 * Progenics Pharmaceuticals, Inc.................... 1,166,887
52,400 * Roberts Pharmaceutical Corp....................... 1,270,700
58,400 * Scios, Inc........................................ 189,800
90,800 * Titan Pharmaceuticals, Inc........................ 448,325
28,300 * Urologix, Inc..................................... 69,866
44,750 * Valentis, Inc. ................................... 170,609
------------
11,803,419
------------
Industrial Specialty Products & Services - 0.3%
25,398 * Building One Services Corp........................ 352,397
------------
Information Services & Technology - 23.5%
83,700 * Abovenet Communications, Inc...................... 3,379,387
800 * Ask Jeeves, Inc................................... 11,200
33,500 * Beyond Common Corp. .............................. 961,031
107,400 * Ciber, Inc........................................ 2,054,025
52,400 * Concentric Network Corp. ......................... 2,082,900
43,400 * Earthlink Network, Inc. .......................... 2,666,388
36,900 * F5 Networks, Inc.................................. 1,512,900
27,700 * GoTo.com, Inc. ................................... 775,600
39,300 * Juno Online Services, Inc. ....................... 903,900
283,000 * Maxtor Corp....................................... 1,423,844
69,500 * Mecon, Inc........................................ 521,250
94,700 * Mikohn Gaming Corp................................ 349,206
131,000 * MIPS Technologies, Inc............................ 6,279,812
73,300 * nFront, Inc. ..................................... 1,113,244
36,100 * Real Networks, Inc................................ 2,486,388
36,900 * THQ, Inc.......................................... 1,060,875
27,500 * Ticketmaster Online Citysearch.................... 831,875
800 * US SEARCH.com, Inc. .............................. 6,400
------------
28,420,225
------------
Manufacturing - Distributing - 0.8%
21,000 Pentair, Inc........................................ 960,750
------------
</TABLE>
See Combined Notes to Financial Statements.
64
<PAGE>
EVERGREEN
Select Special Equity Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Metal Products & Services - 1.9%
95,100 Ispat International N V............................ $ 1,052,044
95,400 * Metals USA, Inc. ................................ 1,216,350
------------
2,268,394
------------
Oil / Energy - 2.1%
62,900 * Midamerica Energy Holdings Co. .................. 2,177,912
47,700 * Newpark Resources, Inc. ......................... 423,338
------------
2,601,250
------------
Oil Field Services - 2.2%
10,200 * Callon Petroleum Co. ............................ 105,188
56,000 * Horizon Offshore, Inc. .......................... 434,000
72,800 * IRI International Corp. ......................... 336,700
41,500 * Lone Star Technologies, Inc. .................... 736,625
64,156 * Meridian Resource Corp. ......................... 248,604
21,722 * Nabors Industries, Inc. ......................... 530,831
10,700 Tidewater, Inc. ................................... 326,350
------------
2,718,298
------------
Printing, Publishing, Broadcasting &
Entertainment - 0.8%
80,200 * Big City Radio, Inc. ............................ 290,725
23,000 * SBS Broadcasting SA.............................. 741,750
------------
1,032,475
------------
Real Estate - 2.5%
60,100 * AMB Property Corp. REIT.......................... 1,412,350
29,400 Franchise Finance Corp. America REIT............... 646,800
46,900 Imperial Credit Commercial Mortgage Investment
Corp. REIT........................................ 507,106
35,200 * Prime Hospitality Corp. ......................... 422,400
------------
2,988,656
------------
Retailing & Wholesale - 13.6%
61,400 * Abercrombie & Fitch Co. ......................... 2,947,200
51,900 * Bon Ton Stores, Inc. ............................ 334,106
10,400 * CDnow, Inc. ..................................... 183,300
149,400 * Electronics Boutique Holdings Corp. ............. 2,128,950
37,000 * General Nutrition Companies, Inc. ............... 862,563
204,400 * Pacific Sunwear Of California.................... 4,982,250
67,200 * Paul Harris Stores, Inc. ........................ 457,800
57,700 * Select Comfort Corp. ............................ 515,694
24,600 * Tweeter Home Entertainment Group, Inc. .......... 965,550
88,500 * Williams Sonoma, Inc. ........................... 3,080,906
------------
16,458,319
------------
Telecommunication Services & Equipment - 9.8%
96,200 * Amnex, Inc. ..................................... 4,810
31,400 * AT & T Canada, Inc .............................. 2,011,562
78,400 * Clearnet Communications, Inc. ................... 1,092,700
55,800 * Globalstar LP Ltd. .............................. 1,293,863
44,600 * Hybrid Networks, Inc. ........................... 111,500
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Telecommunication Services & Equipment - continued
56,000 * Hyperion Telecommunications, Inc. Cl. A .......... $ 1,053,500
16,600 * Intermedia Communications, Inc. .................. 498,000
50,400 * MGC Communications, Inc. ......................... 1,310,400
36,400 * NEXTLINK Communications, Inc. Cl. A............... 2,707,250
18,600 * Time Warner Telecom, Inc. ........................ 539,400
56,100 * US LEC Corp. Cl. A................................ 1,262,250
------------
11,885,235
------------
Textile & Apparel - 3.5%
204,300 * Gildan Activewear, Inc. .......................... 3,447,562
41,000 * Novel Denim Holdings Ltd. ........................ 331,844
41,500 * Skechers U.S.A., Inc. ............................ 435,750
------------
4,215,156
------------
Transportation - 2.7%
33,200 * Amtran, Inc....................................... 817,550
118,700 * Arkansas Best Corp. .............................. 1,179,581
57,900 * Genesee & Wyoming, Inc............................ 597,094
60,500 * Midway Airlines Corp.............................. 620,125
------------
3,214,350
------------
Utilities - Telephone - 0.8%
9,900 * McLeod USA, Inc. Cl. A............................ 544,500
57,500 * Star Telecommunications, Inc. .................... 449,219
------------
993,719
------------
Total Common Stocks
(cost $94,918,298)................................. $115,384,782
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 5.3%
Repurchase Agreement - 5.3%
$6,393,856 Dresdner Bank AG 4.75%, purchased 6/30/1999,
maturing 7/1/1999, maturity value $6,394,700 (cost
$6,393,856) (a)................................... 6,393,856
------------
Total Investments -
(cost $101,312,154)....................... 100.6% 121,778,638
Other Assets and
Liabilities - net......................... (0.6) (769,686)
----- ------------
Net Assets................................. 100.0% $121,008,952
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at June 30,
1999.
* Non-income producing security
Summary of Abbreviations:
REIT Real Estate Investment Trust
NV Naamloze (Dutch for "corporation")
See Combined Notes to Financial Statements.
65
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 95.8%
Aerospace & Defense - 1.0%
72,300 United Technologies Corp............................ $ 5,183,006
------------
Banks - 2.3%
62,375 Chase Manhattan Corp................................ 5,403,234
65,475 U.S. Trust Corp..................................... 6,056,438
------------
11,459,672
------------
Building, Construction &
Furnishings - 0.6%
48,500 Dycom Industries, Inc............................... 2,716,000
------------
Communication Systems &
Services - 9.3%
290,550 *Cisco Systems, Inc................................. 18,685,997
266,500 Lucent Technologies, Inc............................ 17,972,093
107,950 *MCI WorldCom, Inc.................................. 9,290,447
------------
45,948,537
------------
Consumer Products &
Services - 5.6%
91,350 Avon Products, Inc.................................. 5,069,925
51,950 Clorox Co........................................... 5,548,909
18,670 Colgate-Palmolive Co................................ 1,843,663
70,000 Maytag Corp......................................... 4,878,125
114,600 Procter & Gamble Co................................. 10,228,050
------------
27,568,672
------------
Diversified Companies - 1.0%
51,400 Tyco International Ltd.............................. 4,870,150
------------
Electrical Equipment &
Services - 7.9%
252,575 General Electric Co................................. 28,540,975
25,375 *QLogic Corp........................................ 3,349,500
107,950 *Vitesse Semiconductor Corp......................... 7,279,878
------------
39,170,353
------------
Electronic Equipment &
Services - 0.9%
88,475 *SDL, Inc........................................... 4,517,755
------------
Finance & Insurance - 5.5%
45,780 American Express Co................................. 5,957,122
93,850 Federal Home Loan Mortgage
Corp............................................... 5,443,300
54,125 Federal National Mortgage Assoc..................... 3,700,797
78,475 Marsh & McLennan Co., Inc........................... 5,924,863
56,500 Schwab (Charles) & Co., Inc......................... 6,207,937
------------
27,234,019
------------
Food & Beverage Products - 2.4%
80,100 Quaker Oats Co...................................... 5,316,638
130,875 *Safeway, Inc....................................... 6,478,312
------------
11,794,950
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products &
Services - 17.0%
111,710 Abbott Laboratories................................ $ 5,082,805
225,475 Bristol-Myers Squibb Co............................ 15,881,895
89,425 *Guidant Corp...................................... 4,599,798
108,200 Johnson & Johnson.................................. 10,603,600
133,350 *MedQuist, Inc..................................... 5,834,063
121,550 Merck & Co., Inc................................... 8,994,700
128,800 Schering-Plough Corp............................... 6,826,400
59,150 *VISX, Inc......................................... 4,683,941
192,825 Warner-Lambert Co.................................. 13,377,234
94,300 *Wellpoint Health Networks, Inc.
Cl. A............................................. 8,003,713
------------
83,888,149
------------
Information Services
& Technology - 19.9%
85,650 *America Online, Inc............................... 9,464,325
48,800 *Broadvision, Inc.................................. 3,599,000
97,675 CDW Computer Centers, Inc.......................... 4,297,700
75,200 *Citrix Systems, Inc............................... 4,248,800
279,250 *EMC Corp.......................................... 15,358,750
115,400 Intel Corp......................................... 6,866,300
81,650 *Lexmark International Group, Inc.................. 5,394,003
297,970 *Microsoft Corp.................................... 26,873,169
63,325 Siebel Systems, Inc................................ 4,203,197
134,650 *Sun Microsystems, Inc............................. 9,274,019
25,000 *Uniphase Corp..................................... 4,150,000
25,750 *Veritas Software Corp............................. 2,444,640
11,875 Yahoo, Inc......................................... 2,045,469
------------
98,219,372
------------
Oil/Energy - 1.2%
70,500 Enron Corp......................................... 5,763,375
------------
Paper & Packaging - 2.5%
80,175 Avery Dennison Corp................................ 4,840,566
133,485 Kimberly-Clark Corp................................ 7,608,645
------------
12,449,211
------------
Printing, Publishing, Broadcasting
& Entertainment - 1.5%
23,335 Gannett Co., Inc................................... 1,665,536
74,200 Omnicom Group, Inc................................. 5,936,000
------------
7,601,536
------------
Retailing & Wholesale - 13.5%
118,475 *Best Buy Co., Inc................................. 7,997,062
65,800 *Costco Companies, Inc............................. 5,268,113
220,200 Family Dollar Stores, Inc.......................... 5,284,800
135,113 Gap, Inc........................................... 6,806,292
178,025 Home Depot, Inc.................................... 11,471,486
99,800 Lowe's Companies, Inc.............................. 5,657,413
151,700 TJX Co., Inc....................................... 5,053,506
315,450 Wal-Mart Stores, Inc............................... 15,220,462
128,540 Walgreen Co........................................ 3,775,863
------------
66,534,997
------------
</TABLE>
See Combined Notes to Financial Statements.
66
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Telecommunication Services & Equipment - 1.6%
53,575 *Qualcomm, Inc...................................... 7,688,013
------------
Utilities - Telephone - 2.1%
95,175 SBC Communications, Inc............................. 5,520,150
93,850 Sprint Corp......................................... 4,956,453
------------
10,476,603
------------
Total Common Stocks
(cost $351,447,363)................................ 473,084,370
------------
</TABLE>
<TABLE>
<CAPTION>
Principle
Amount
<C> <S> <C>
SHORT-TERM INVESTMENTS - 5.7%
Repurchase Agreement - 5.6%
27,671,784 Dresdner Bank AG 4.75%, purchased 6/30/1999,
maturing 7/1/1999, maturity value $27,675,435
(cost $27,671,784)(a)............................ $ 27,671,784
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
<CAPTION>
Money Market Shares - 0.1%
<C> <S> <C>
188,020 Valiant General Fund................................ $ 188,020
------------
Total Short-Term Investments
(cost $27,859,804)................................. 27,859,804
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $379,307,168)........................ 101.5% 500,944,174
Other Assets and Liabilities - net.......... (1.5) (7,174,850)
----- ------------
Net Assets.................................. 100.0% $493,769,324
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices plus accrued inter-
est at June 30, 1999.
* Non-Income Producing Security.
See Combined Notes to Financial Statements.
67
<PAGE>
EVERGREEN
Select Strategic Value Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 93.6%
Aerospace & Defense - 2.2%
167,700 Raytheon Co. Cl. A................................ $ 11,550,338
------------
Automotive Equipment & Manufacturing - 1.6%
169,000 *Lear Corp........................................ 8,407,750
------------
Banks - 13.5%
228,100 Chase Manhattan Corp. ............................ 19,759,162
200,000 First American Corp............................... 8,312,500
163,600 Fleet Financial Group, Inc. ...................... 7,259,750
475,000 Mellon Bank Corp.................................. 17,278,125
207,000 SouthTrust Corp. ................................. 7,943,625
266,800 Summit Bancorp.................................... 11,155,575
------------
71,708,737
------------
Capital Goods - 1.2%
132,800 Case Corp......................................... 6,391,000
------------
Chemical & Agricultural
Products - 2.1%
280,000 Hercules, Inc. ................................... 11,007,500
------------
Consumer Products &
Services - 3.6%
177,000 Black & Decker Corp. ............................. 11,173,125
113,000 Maytag Corp. ..................................... 7,874,688
------------
19,047,813
------------
Electrical Equipment &
Services - 2.7%
152,000 Motorola, Inc. ................................... 14,402,000
------------
Electronic Equipment &
Services - 2.9%
155,204 Koninklijke (Royal) Philips Electronics NV ADR.... 15,656,204
------------
Finance & Insurance - 11.7%
118,400 Allstate Corp. ................................... 4,247,600
413,000 Citigroup, Inc. .................................. 19,617,500
275,000 Countrywide Credit Industries, Inc. .............. 11,756,250
103,600 Loews Corp........................................ 8,197,350
175,000 Merrill Lynch & Co., Inc.......................... 13,989,062
103,600 Nationwide Financial Services, Inc. Cl. A......... 4,687,900
------------
62,495,662
------------
Food & Beverage Products - 3.0%
83,000 Fortune Brands, Inc. ............................. 3,434,125
315,100 Philip Morris Companies, Inc. .................... 12,663,081
------------
16,097,206
------------
Healthcare Products & Services - 3.8%
165,200 Bristol-Myers Squibb Co. ......................... 11,636,275
459,700 * Tenet Healthcare Corp........................... 8,533,181
------------
20,169,456
------------
Information Services & Technology - 5.2%
163,400 Intel Corp. ...................................... 9,722,300
141,200 International Business Machines Corp. ............ 18,250,100
------------
27,972,400
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Metal Products & Services - 4.2%
260,000 Alcoa, Inc. ........................................ $ 16,087,500
241,900 USX United States Steel Group....................... 6,531,300
------------
22,618,800
------------
Natural Gas - 0.9%
142,100 El Paso Energy Corp. ............................... 5,000,144
------------
Oil/Energy - 9.3%
100,500 Cabot Corp.......................................... 2,430,844
214,000 Mobil Corp.......................................... 21,186,000
213,600 Texaco, Inc......................................... 13,350,000
315,000 Tosco Corp.......................................... 8,170,312
197,700 Ultramar Diamond Shamrock Corp. .................... 4,312,331
------------
49,449,487
------------
Paper & Packaging - 1.3%
171,314 Mead Corp........................................... 7,152,360
------------
Real Estate - 0.6%
142,100 FelCor Lodging Trust, Inc. REIT..................... 2,948,575
------------
Retailing & Wholesale - 1.3%
154,900 Sears, Roebuck & Co................................. 6,902,731
------------
Telecommunication Services
& Equipment - 4.2%
367,500 Centurytel, Inc..................................... 14,608,125
87,800 Nokia Corp. ADR..................................... 8,039,188
------------
22,647,313
------------
Textile & Apparel - 1.2%
148,000 V. F. Corp.......................................... 6,327,000
------------
Transportation - 0.9%
157,200 Burlington Northern Santa Fe Corp................... 4,873,200
------------
Utilities - Electric - 2.2%
253,400 Scana Corp. ........................................ 5,923,225
231,850 UtiliCorp United, Inc............................... 5,636,853
------------
11,560,078
------------
Utilities - Gas - 5.0%
263,000 NICOR, Inc.......................................... 10,010,438
385,000 Williams Companies, Inc............................. 16,386,562
------------
26,397,000
------------
Utilities - Telephone - 9.0%
170,000 ALLTEL Corp......................................... 12,155,000
300,000 AT&T Corp........................................... 16,743,750
252,000 GTE Corp. .......................................... 19,089,000
------------
47,987,750
------------
Total Common Stocks
(cost $415,517,982)................................ 498,770,504
------------
PREFERRED STOCKS - 1.4%
Printing, Publishing, Broadcasting &
Entertainment - 1.4%
235,800 News Corp. Ltd...................................... 7,442,437
------------
Total Preferred Stocks
(cost $5,734,588).................................. 7,442,437
------------
</TABLE>
See Combined Notes to Financial Statements.
68
<PAGE>
EVERGREEN
Select Strategic Value Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 4.6%
Repurchase Agreement - 4.0%
$20,965,166 Dresdner Bank AG 4.75%, purchased 6/30/1999,
maturing 7/1/1999, maturity value $20,967,932
(cost $20,965,166)(a)............................ $ 20,965,166
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
<CAPTION>
Money Market Shares - 0.6%
<C> <S> <C>
3,238,537 Valiant General Fund................................ $ 3,238,537
------------
Total Short-Term Investments
(cost $24,203,703)................................. 24,203,703
Total Investments - (cost $445,456,273)..... 99.6% 530,416,644
Other Assets and Liabilities - net........... 0.4 2,388,870
----- ------------
Net Assets................................... 100.0% $532,805,514
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at June 30,
1999.
* Non-Income Producing Security
Summary of Abbreviations:
ADR American Depository Receipt
NV Naamloze (Dutch for "corporation")
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
69
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Assets and Liabilities
June 30, 1999
<TABLE>
<CAPTION>
Diversified Large Cap Small Cap
Balanced Core Equity Value Blend Growth
Fund Fund Fund Fund Fund
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Identified cost of
securities............. $608,922,743 $1,361,603,693 $526,866,558 $334,676,901 $78,373,004
Net unrealized gains on
securities............. 52,964,534 579,411,427 87,016,041 113,484,768 9,784,614
---------------------------------------------------------------------------------------------
Market value of
securities............. 661,887,277 1,941,015,120 613,882,599 448,161,669 88,157,618
Cash.................... 0 0 0 0 14,416
Receivable for
securities sold........ 4,857,863 3,505,724 3,067,451 4,580,756 0
Receivable for Fund
shares sold............ 419,135 372,289 195,290 0 45,019
Dividends and interest
receivable............. 5,789,563 1,884,530 767,996 406,477 84
Receivable for daily
variation margin on
open futures
contracts.............. 0 0 156,250 0 0
Deferred organization
expenses............... 0 0 0 0 5,932
Prepaid expenses and
other assets........... 9,807 4,233 22,617 22,148 21,849
---------------------------------------------------------------------------------------------
Total assets.......... 672,963,645 1,946,781,896 618,092,203 453,171,050 88,244,918
---------------------------------------------------------------------------------------------
Liabilities
Payable for securities
purchased.............. 8,428,422 0 4,344,450 10,874,003 0
Payable for Fund shares
redeemed............... 5,057,054 1,876,530 5,667,525 3,267,818 3,698
Payable for securities
on loan................ 0 0 0 0 18,071,447
Advisory fee payable.... 269,003 925,761 244,810 219,233 46,107
Distribution Plan
expenses payable....... 42 6,028 826 59 0
Due to other related
parties................ 13,437 40,739 3,408 9,966 516
Accrued expenses and
other liabilities...... 57,880 209,926 92,401 43,007 9,613
---------------------------------------------------------------------------------------------
Total liabilities..... 13,825,838 3,058,984 10,353,420 14,414,086 18,131,381
---------------------------------------------------------------------------------------------
Net assets.............. $659,137,807 $1,943,722,912 $607,738,783 $438,756,964 $70,113,537
---------------------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital......... $604,276,094 $1,174,619,818 $502,485,819 $291,584,904 $64,747,945
Undistributed
(overdistributed) net
investment income or
loss................... 1,619,270 56,683 414,562 (8,169) 0
Accumulated net
realized gains or
losses on securities
and futures
contracts.............. 277,909 189,634,984 17,436,598 33,695,461 $(4,419,022)
Net unrealized gains on
securities and futures
contracts.............. 52,964,534 579,411,427 87,401,804 113,484,768 $ 9,784,614
---------------------------------------------------------------------------------------------
Total net assets........ $659,137,807 $1,943,722,912 $607,738,783 $438,756,964 $70,113,537
---------------------------------------------------------------------------------------------
Net assets consists of
Class I................. $658,732,768 $1,913,483,237 $606,354,638 $438,375,045 $70,113,537
Class IS................ 405,039 30,239,675 1,384,145 381,919 0
---------------------------------------------------------------------------------------------
Total net assets........ $659,137,807 $1,943,722,912 $607,738,783 $438,756,964 $70,113,537
---------------------------------------------------------------------------------------------
Shares outstanding
Class I................. 48,588,180 20,730,802 21,927,085 9,066,653 5,135,726
Class IS................ 29,809 349,426 50,643 7,902 0
---------------------------------------------------------------------------------------------
Net asset value per
share
Class I................. $ 13.56 $ 92.30 $ 27.65 $ 48.35 $ 13.65
---------------------------------------------------------------------------------------------
Class IS................ $ 13.59 $ 86.54 $ 27.33 $ 48.33 $ 0
---------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
70
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Assets and Liabilities
June 30, 1999
<TABLE>
<CAPTION>
Small Company Social Special Strategic Strategic
Value Principles Equity Growth Value
Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Identified cost of
securities............. $107,141,714 $101,069,143 $101,312,154 $379,307,168 $445,456,273
Net unrealized gains on
securities............. 917 31,413,201 20,466,484 121,637,006 84,960,371
-----------------------------------------------------------------------------------------------
Market value of
securities............. 107,142,631 132,482,344 121,778,638 500,944,174 530,416,644
Cash.................... 435 0 0 0 0
Receivable for
securities sold........ 2,219,938 2,476,006 870,502 10,688,751 0
Receivable for Fund
shares sold............ 0 200 280,877 650,916 4,973,900
Dividends and interest
receivable............. 87,308 50,454 14,914 200,187 832,276
Receivable for daily
variation margin on
open futures
contracts.............. 0 0 0 0 0
Deferred organization
expenses............... 0 0 0 0 0
Prepaid expenses and
other assets........... 3,279 6,322 30,898 12,017 23,024
-----------------------------------------------------------------------------------------------
Total assets.......... 109,453,591 135,015,326 122,975,829 512,496,045 536,245,844
-----------------------------------------------------------------------------------------------
Liabilities
Payable for securities
purchased.............. 1,031,250 0 1,597,588 14,937,132 2,896,795
Payable for Fund shares
redeemed............... 152,000 371,586 255,923 3,461,329 170,643
Payable for securities
on loan................ 0 0 0 0 0
Advisory fee payable.... 69,282 78,527 52,069 228,777 238,759
Distribution Plan
expenses payable....... 0 6 516 1,500 413
Due to other related
parties................ 3,166 3,188 0 12,472 16,587
Accrued expenses and
other liabilities...... 16,771 25,994 60,781 85,511 117,133
-----------------------------------------------------------------------------------------------
Total liabilities..... 1,272,469 479,301 1,966,877 18,726,721 3,440,330
-----------------------------------------------------------------------------------------------
Net assets.............. $108,181,122 $134,536,025 $121,008,952 $493,769,324 $532,805,514
-----------------------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital......... $116,705,297 $ 85,750,061 $ 86,594,949 $302,022,022 $437,988,176
Undistributed
(overdistributed) net
investment income or
loss................... (460) (1,986) (322) (7,208) 938,131
Accumulated net
realized gains or
losses on securities
and futures
contracts.............. (8,524,632) 17,374,749 13,947,841 70,117,504 8,918,836
Net unrealized gains on
securities and futures
contracts.............. 917 31,413,201 20,466,484 121,637,006 84,960,371
-----------------------------------------------------------------------------------------------
Total net assets........ $108,181,122 $134,536,025 $121,008,952 $493,769,324 $532,805,514
-----------------------------------------------------------------------------------------------
Net assets consists of
Class I................. $108,180,076 $134,476,499 $116,965,568 $481,118,988 $530,995,228
Class IS................ 1,046 59,526 4,043,384 12,650,336 1,810,286
-----------------------------------------------------------------------------------------------
Total net assets........ $108,181,122 $134,536,025 $121,008,952 $493,769,324 $532,805,514
-----------------------------------------------------------------------------------------------
Shares outstanding
Class I................. 12,098,501 3,643,469 8,237,347 11,471,839 2,238,855
Class IS................ 121 1,615 287,691 302,454 7,631
-----------------------------------------------------------------------------------------------
Net asset value per
share
Class I................. $ 8.94 $ 36.91 $ 14.20 $ 41.94 $ 237.17
-----------------------------------------------------------------------------------------------
Class IS................ $ 8.64 $ 36.86 $ 14.05 $ 41.83 $ 237.23
-----------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
71
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Operations
Year Ended June 30, 1999
<TABLE>
<CAPTION>
Diversified Large Cap Small Cap
Balanced Core Equity Value Blend Growth
Fund Fund Fund Fund Fund
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income
Dividends (net of
foreign withholding
taxes of $3,693,
$81,445, $40,950,
$4,238, $0,
respectively).......... $ 5,095,377 $ 24,008,076 $ 9,357,060 $ 6,263,285 $ 100,589
Securities lending
income................. 0 0 0 0 23,242
Interest................ 23,575,630 3,610,651 542,734 745,135 87,967
-------------------------------------------------------------------------------------------
Total investment
income................. 28,671,007 27,618,727 9,899,794 7,008,420 211,798
-------------------------------------------------------------------------------------------
Expenses
Advisory fee............ 4,136,760 12,923,968 3,983,024 3,318,923 500,432
Distribution Plan
expenses............... 5,257 60,519 2,914 881 --
Administrative services
fees................... 178,848 480,743 173,365 123,530 8,400
Transfer agent fee...... 737,548 12,936 295,122 556 648
Trustees' fees and
expenses............... 13,700 38,000 11,879 7,262 980
Printing and postage
expenses............... 36,855 70,158 12,091 12,870 2,315
Custodian fee........... 200,683 540,553 185,701 132,201 21,344
Registration and filing
fees................... 74,996 100,777 69,733 96,499 74,110
Professional fees....... 39,452 23,743 29,615 29,242 12,936
Organization expenses... 0 0 0 0 3,989
Other................... 18,025 36,142 16,061 12,387 14,012
-------------------------------------------------------------------------------------------
Total expenses......... 5,442,124 14,287,539 4,779,505 3,734,351 639,166
Less: Fee credits....... (27,674) (76,453) (30,047) (18,838) (3,866)
Fee waivers .......... (689,460) (1,848,228) (663,837) (474,132) 0
-------------------------------------------------------------------------------------------
Net expenses........... 4,724,990 12,362,858 4,085,621 3,241,381 635,300
-------------------------------------------------------------------------------------------
Net investment income or
loss................... 23,946,017 15,255,869 5,814,173 3,767,039 (423,502)
-------------------------------------------------------------------------------------------
Net realized and change
in unrealized gains or
losses on securities
and futures contracts
Net realized gains or
losses on:
Securities............. 928,390 178,262,279 17,043,520 35,527,151 (2,938,420)
Futures contracts...... 0 12,624,975 328,675 0 0
-------------------------------------------------------------------------------------------
Net realized gains or
losses on securities
and futures contracts.. 928,390 190,887,254 17,372,195 35,527,151 (2,938,420)
-------------------------------------------------------------------------------------------
Net change in unrealized
gains or losses on
securities and futures
contracts.............. 12,500,436 (31,676,691) 23,916,181 (7,056,882) 6,375,643
-------------------------------------------------------------------------------------------
Net realized and change
in unrealized gains or
losses on securities
and futures contracts.. 13,428,826 159,210,563 41,288,376 28,470,269 3,437,223
-------------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............. $37,374,843 $174,466,432 $47,102,549 $32,237,308 $3,013,721
-------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
72
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Operations
Year Ended June 30, 1999
<TABLE>
<CAPTION>
Small Company Social Special Strategic Strategic
Value Principles Equity Growth Value
Fund Fund Fund Fund Fund
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income
Dividends (net of
foreign withholding
taxes of $0, $4,425,
$4,102, $0, $32,939,
respectively).......... $ 944,862 $ 1,521,760 $ 294,364 $ 3,246,479 $ 7,216,969
Securities lending
income................. 0 0 0 0 0
Interest................ 158,565 237,570 249,570 1,125,933 684,942
---------------------------------------------------------------------------------------------
Total investment
income................. 1,103,427 1,759,330 543,934 4,372,412 7,901,911
---------------------------------------------------------------------------------------------
Expenses
Advisory fee............ 789,167 1,203,962 1,181,647 3,224,101 2,384,266
Distribution Plan
expenses............... 126 279 7,423 25,109 3,890
Administrative services
fees................... 22,722 39,281 20,362 118,218 88,316
Transfer agent fee...... 331 1,379 59,803 138,356 596
Trustees' fees and
expenses............... 2,539 2,791 1,426 10,000 6,013
Printing and postage
expenses............... 3,167 5,523 3,528 24,147 11,127
Custodian fee........... 31,304 42,625 28,893 143,014 98,842
Registration and filing
fees................... 60,230 86,717 71,535 102,018 145,869
Professional fees....... 15,148 16,980 14,427 24,736 17,780
Organization expenses... 0 0 0 0 0
Other................... 14,252 13,430 4,253 7,799 20,929
---------------------------------------------------------------------------------------------
Total expenses......... 938,986 1,412,967 1,393,297 3,817,498 2,777,628
Less: Fee credits....... (5,396) (6,031) (4,516) (27,923) (13,690)
Fee waivers........... (84,029) (150,495) (551,194) (478,980) (340,610)
---------------------------------------------------------------------------------------------
Net expenses........... 849,561 1,256,441 837,587 3,310,595 2,423,328
---------------------------------------------------------------------------------------------
Net investment income or
loss................... 253,866 502,889 (293,653) 1,061,817 5,478,583
---------------------------------------------------------------------------------------------
Net realized and change
in unrealized gains or
losses on securities
and futures contracts
Net realized gains or
losses on:
Securities............. (8,481,510) 20,463,898 17,426,693 100,654,235 9,159,666
Futures contracts...... 0 0 0 0 0
---------------------------------------------------------------------------------------------
Net realized gains or
losses on securities
and futures contracts.. (8,481,510) 20,463,898 17,426,693 100,654,235 9,159,666
---------------------------------------------------------------------------------------------
Net change in unrealized
gains or losses on
securities and futures
contracts.............. 2,615,130 (22,240,460) 14,600,653 51,252,431 24,194,498
---------------------------------------------------------------------------------------------
Net realized and change
in unrealized gains or
losses on securities
and futures contracts.. (5,866,380) (1,776,562) 32,027,346 151,906,666 33,354,164
---------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations........ $(5,612,514) $(1,273,673) $31,733,693 $152,968,483 $38,832,747
---------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
73
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Changes in Net Assets
Year Ended June 30, 1999
<TABLE>
<CAPTION>
Diversified Large Cap Small Cap
Balanced Core Equity Value Blend Growth
Fund Fund Fund Fund Fund
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income or
loss................... $ 23,946,017 $ 15,255,869 $ 5,814,173 $ 3,767,039 $ (423,502)
Net realized gains or
losses on securities
and futures contracts.. 928,390 190,887,254 17,372,195 35,527,151 (2,938,420)
Net change in unrealized
gains or losses on
securities and futures
contracts.............. 12,500,436 (31,676,691) 23,916,181 (7,056,882) 6,375,643
-------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ 37,374,843 174,466,432 47,102,549 32,237,308 3,013,721
-------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income
(b)
Class I................ (22,214,234) (14,533,736) (5,432,863) (415,801) 0
Class IS............... (71,558) (136,355) (6,977) (2,046) 0
Class IC (a)........... 0 0 0 (3,330,655) 0
-------------------------------------------------------------------------------------------------
Total distributions
from net investment
income................ (22,285,792) (14,670,091) (5,439,840) (3,748,502) 0
-------------------------------------------------------------------------------------------------
Net realized gains (b)
Class I................ (7,372,020) (160,679,308) (17,317,740) (1,886,318) (100,814)
Class IS............... (32,664) (2,314,062) (34,597) (32,097) 0
Class IC (a)........... 0 0 0 (50,651,105) 0
-------------------------------------------------------------------------------------------------
Total distributions
from net realized
gains................. (7,404,684) (162,993,370) (17,352,337) (52,569,520) (100,814)
-------------------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (29,690,476) (177,663,461) (22,792,177) (56,318,022) (100,814)
-------------------------------------------------------------------------------------------------
Capital shares
transactions
Proceeds from shares
sold................... 107,820,701 194,557,250 67,508,083 46,937,384 3,242,108
Payment for shares
redeemed............... (200,572,408) (345,341,133) (303,364,284) (147,493,668) (5,425,723)
Net asset value of
shares issued in
reinvestment of
distributions.......... 20,140,059 127,043,887 21,722,516 51,527,385 100,757
Net asset value of
shares issued in
acquisition of
CoreStates Equity
Growth Fund............ 0 0 0 0 0
-------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
shares transactions... (72,611,648) (23,739,996) (214,133,685) (49,028,899) (2,082,858)
-------------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... (64,927,281) (26,937,025) (189,823,313) (73,109,613) 830,049
Net assets
Beginning of year....... 724,065,088 1,970,659,937 797,562,096 511,866,577 69,283,488
-------------------------------------------------------------------------------------------------
End of year............. $659,137,807 $1,943,722,912 $607,738,783 $438,756,964 $70,113,537
-------------------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income or
loss................... $ 1,619,270 $ 56,683 $ 414,562 $ (8,169) $ 0
-------------------------------------------------------------------------------------------------
</TABLE>
(a) On April 30, 1999, the Class IC shares of the Large Cap Blend Fund and So-
cial Principles Fund were converted to Class I shares. Shareholders of
Class IC shares became owners of that number of Class I shares having a net
asset value equal to the net asset value of their shares immediately prior
to the close of business on April 30, 1999. Class IC is the accounting sur-
vivor, its operating results for the periods prior to April 30, 1999 have
been carried forward in these financial statements.
(b) The Large Cap Blend Fund redesignated $240,950 ($0.02 per share for Classes
I, IS and IC) distributions from net investment income declared after Janu-
ary 1, 1999, as capital gains distributions after January 1, 1999.
See Combined Notes to Financial Statements.
74
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Changes in Net Assets
Year Ended June 30, 1999
<TABLE>
<CAPTION>
Small Company Social Special Strategic Strategic
Value Principles Equity Growth Value
Fund Fund Fund Fund Fund
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income or
loss................... $ 253,866 $ 502,889 $ (293,653) $ 1,061,817 $ 5,478,583
Net realized gains or
losses on securities... (8,481,510) 20,463,898 17,426,693 100,654,235 9,159,666
Net change in unrealized
gains or losses on
securities............. 2,615,130 (22,240,460) 14,600,653 51,252,431 24,194,498
-------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ (5,612,514) (1,273,673) 31,733,693 152,968,483 38,832,747
-------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income
Class I................ (313,271) (78,008) 0 (1,186,581) (4,545,875)
Class IS............... (102) (238) 0 (10,641) (17,533)
Class IC (a)........... 0 (537,557) 0 0 0
-------------------------------------------------------------------------------------------------
Total distributions
from net investment
income................ (313,373) (615,803) 0 (1,197,222) (4,563,408)
-------------------------------------------------------------------------------------------------
Net realized gains
Class I................ (363,011) (157,473) (7,643,649) (42,795,680) (7,731,471)
Class IS............... 0 (6,403) (298,735) (947,111) (36,621)
Class IC (a)........... 0 (8,960,041) 0 0 0
-------------------------------------------------------------------------------------------------
Total distributions
from net realized
gains................. (363,011) (9,123,917) (7,942,384) (43,742,791) (7,768,092)
-------------------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (676,384) (9,739,720) (7,942,384) (44,940,013) (12,331,500)
-------------------------------------------------------------------------------------------------
Capital shares
transactions
Proceeds from shares
sold................... 49,048,796 14,856,248 44,330,181 98,098,328 281,162,284
Payment for shares
redeemed............... (12,850,016) (58,178,607) (32,256,122) (282,527,098) (72,083,435)
Net asset value of
shares issued in
reinvestment of
distributions.......... 624,439 9,074,037 7,935,176 40,521,982 8,705,025
Net asset value of
shares issued in
acquisition of
CoreStates Equity
Growth Fund............ 0 0 0 205,742,310 0
-------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
shares transactions... 36,823,219 (34,248,322) 20,009,235 61,835,522 217,783,874
-------------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... 30,534,321 (45,261,715) 43,800,544 169,863,992 244,285,121
Net assets
Beginning of year....... 77,646,801 179,797,740 77,208,408 323,905,332 288,520,393
-------------------------------------------------------------------------------------------------
End of year............. $108,181,122 $134,536,025 $121,008,952 $493,769,324 $532,805,514
-------------------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income or
loss................... $ (460) $ (1,986) $ (322) $ (7,208) $ 938,131
-------------------------------------------------------------------------------------------------
</TABLE>
(a) On April 30, 1999, the Class IC shares of the Large Cap Blend Fund and So-
cial Principles Fund were converted to Class I shares. Shareholders of
Class IC shares became owners of that number of Class I shares having a net
asset value equal to the net asset value of their shares immediately prior
to the close of business on April 30, 1999. Class IC is the accounting sur-
vivor, its operating results for the periods prior to April 30, 1999 have
been carried forward in these financial statements.
See Combined Notes to Financial Statements.
75
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Changes in Net Assets
Period Ended June 30, 1998
<TABLE>
<CAPTION>
Diversified Large Cap Small Cap
Balanced Core Equity Value Blend Growth
Fund** Fund* Fund** Fund* Fund***
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income... $ 9,106,347 $ 11,215,922 $ 4,518,633 $ 2,329,360 $ (130,149)
Net realized gain on
securities and future
contracts.............. 6,632,946 161,218,815 17,369,461 51,925,395 407,197
Net change in
unrealized gains or
losses on securities
and future contracts... 40,464,098 53,230,680 63,485,623 5,211,744 (1,425,687)
--------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting from
operations............ 56,203,391 225,665,417 85,373,717 59,466,499 (1,148,639)
--------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income
Class I................ (9,096,812) (11,166,520) (4,502,185) (29,968) 0
Class IS............... (1,320) (29,555) (1,220) (475) 0
Class IC............... 0 0 0 (2,357,277) 0
--------------------------------------------------------------------------------------------------
Total distributions
from net investment
income................ (9,098,132) (11,196,075) (4,503,405) (2,387,720) 0
--------------------------------------------------------------------------------------------------
Net realized gains
Class I................ 0 0 0 0 0
Class IS............... 0 0 0 0 0
Class IC............... 0 0 0 0 0
--------------------------------------------------------------------------------------------------
Total distributions
from net realized
gains................. 0 0 0 0 0
--------------------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (9,098,132) (11,196,075) (4,503,405) (2,387,720) 0
--------------------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 794,145,003 1,978,861,338 844,178,135 502,787,135 24,034,367
Payment of shares
redeemed............... (121,943,214) (222,735,836) (130,961,973) (48,017,312) (1,126,600)
Net asset value of
shares issued in
reinvestment of
distributions.......... 4,758,040 65,093 3,475,622 17,975 0
--------------------------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions.......... 676,959,829 1,756,190,595 716,691,784 454,787,798 22,907,767
--------------------------------------------------------------------------------------------------
Total increase in net
assets............... 724,065,088 1,970,659,937 797,562,096 511,866,577 21,759,128
Net assets
Beginning of period..... 0 0 0 0 47,524,360
--------------------------------------------------------------------------------------------------
End of period........... $ 724,065,088 $1,970,659,937 $ 797,562,096 $511,866,577 $69,283,488
--------------------------------------------------------------------------------------------------
Undistributed net
investment income or
loss................... $ 76,045 $ 15,911 $ 84,835 $ 48,469 $ (334)
--------------------------------------------------------------------------------------------------
</TABLE>
* For the period from November 24, 1997 (commencement of operations) to June
30, 1998.
** For the period from January 22, 1998 (commencement of operations) to June
30, 1998.
*** For the period from March 1, 1998 to 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.
76
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Changes in Net Assets
Period Ended June 30, 1998
<TABLE>
<CAPTION>
Small Social Special Strategic Strategic
Company Value Principles Equity Growth Value
Fund** Fund* Fund Fund* Fund*
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income
(loss)................. $ 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 gains or
losses on securities
and written options.... (2,614,213) 4,046,653 (654,231) 17,033,702 12,371,066
----------------------------------------------------------------------------------------------
Net increase
(decrease) 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:
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
----------------------------------------------------------------------------------------------
Total distributions
from net investment
income................ (152,163) (162,565) 0 (325,046) (1,678,724)
----------------------------------------------------------------------------------------------
Net realized gains
Class I................ 0 0 (9,099,479) 0 0
Class IS............... 0 0 (364,614) 0 0
Class IC............... 0 0 0 0 0
----------------------------------------------------------------------------------------------
Total distributions
from net realized
gains................. 0 0 (9,464,093) 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)
Net assets value of
shares issued in
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..... 0 0 74,326,814 0 0
----------------------------------------------------------------------------------------------
End of period........... $77,646,801 $179,797,740 $77,208,408 $323,905,332 $288,520,393
----------------------------------------------------------------------------------------------
Undistributed net
investment income or
loss................... $ 69,313 $ 60,566 $ (4,076) $ 85,171 $ 75,764
----------------------------------------------------------------------------------------------
</TABLE>
* For the period from November 24, 1997 (commencement of operations) to June
30, 1998.
** For the period from December 23, 1997 (commencement of operations) to June
30, 1998.
See Combined Notes to Financial Statements.
77
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Changes in Net Assets
Year Ended February 28, 1998
<TABLE>
<CAPTION>
Small Cap
Growth Fund
-----------
1998
-------------------------------------------------------------------------------
<S> <C>
Operations
Net investment loss.............................................. $ (134,192)
Net realized loss on securities.................................. (415,947)
Net change in unrealized gains or losses on securities........... 4,981,029
-------------------------------------------------------------------------------
Net increase in net assets resulting from operations............ 4,430,890
-------------------------------------------------------------------------------
Distributions to shareholders from:
Net realized gain on investments................................. (1,657,057)
-------------------------------------------------------------------------------
Total distributions to shareholders............................. (1,657,057)
-------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold........................................ 42,857,020
Payment for shares redeemed...................................... 1,640,345
Net assets value of shares issued in reinvestment of
distributions................................................... (2,634,970)
-------------------------------------------------------------------------------
Net increase in net assets resulting from capital share
transactions.................................................. 41,862,395
-------------------------------------------------------------------------------
Total increase in net assets.................................. 44,636,228
Net assets
Beginning of year................................................. 2,888,132
-------------------------------------------------------------------------------
End of year, including accumulated net investment income of $320
................................................................. $47,524,360
-------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
78
<PAGE>
Combined Notes to Financial Statements
1. ORGANIZATION
The Evergreen Select Equity Growth Funds consist of Evergreen Select Balanced
Fund ("Balanced Fund"), Evergreen Select Core Equity Fund ("Core Equity Fund")
(formerly Evergreen Select Common Stock Fund), Evergreen Select Diversified
Value Fund ("Diversified Value Fund"), Evergreen Select Large Cap Blend Fund
("Large Cap Blend Fund"), Evergreen Select Small Cap Growth Fund ("Small Cap
Growth Fund"), Evergreen Select Small Company Value Fund ("Small Company Value
Fund"), Evergreen Select Social Principles Fund ("Social Principles Fund"), Ev-
ergreen Select Special Equity Fund ("Special Equity Fund") (formerly CoreFunds
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 company. 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 Institu-
tional Service Class of shares ("Class IS"). Each Class of shares is sold with-
out a front-end sales charge or contingent deferred sales charge. Class IS
shares pay an ongoing service fee. Until April 30, 1999 Large Cap Blend Fund
and Social Principles Fund offered an Institutional Charitable Class of shares
("Class IC"), which were available only to those investors that qualified as a
non-profit organization under the Internal Revenue Code.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
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.
Corporate bonds, U.S. government obligations, mortgage and other asset-backed
securities and other fixed-income securities are valued at prices provided by
an independent pricing service. In determining a price for normal institution-
al-size transactions, the pricing service uses methods based on market transac-
tions for comparable securities and analysis of various relationships between
similar securities, which are generally recognized by institutional traders.
Short-term investments with remaining maturities of 60 days or less at the time
of purchase are carried at amortized cost, which approximates market value.
Securities for which valuations are not readily available from an independent
pricing service (including restricted securities) are valued at fair value as
determined in good faith according to procedures established by the Board of
Trustees.
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 securi-
ties pledged falls below the carrying value of the repurchase agreement, in-
cluding accrued interest. Each Fund will only enter into repurchase agreements
with banks and other financial institutions which are deemed by the investment
adviser to be creditworthy pursuant to guidelines established by the Board of
Trustees.
79
<PAGE>
Combined Notes to Financial Statements(continued)
Pursuant to an exemptive order issued by the Securities and Exchange Commission
certain Funds managed by Evergreen Investment Management Company ("EIMC") 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.
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.) dol-
lars. 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 or loss resulting from changes in foreign
currency exchange rates is a component of net unrealized gain or loss on secu-
rities and foreign currency related transactions. Net realized foreign currency
gains or losses resulting from changes in exchange rates include foreign cur-
rency 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. Securities Lending
In order to generate income and to offset expenses, the Funds may lend portfo-
lio securities to brokers, dealers, and other financial organizations. The
Funds' investment advisor will monitor the creditworthiness of such borrowers.
Loans of securities may not exceed 33 1/3% of a Fund's total assets and will be
collateralized by cash, letters of credit or U.S. Government securities that
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities, including accrued interest. The Fund
monitors the adequacy of the collateral daily and will require the borrower to
provide additional collateral in the event the value of the collateral falls
below 100% of the market value of the securities on loan. While such securities
are on loan, the borrower will pay a Fund any income accruing thereon, and the
Fund may invest any cash collateral received in portfolio securities, thereby
increasing its return. A Fund will have the right to call any such loan and ob-
tain the securities loaned at any time on five days' notice. Any gain or loss
in the market price of the loaned securities, which occurs during the term of
the loan, would affect a Fund and its investors. A Fund may pay fees in connec-
tion with such loans.
F. 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-
80
<PAGE>
Combined Notes to Financial Statements(continued)
dividend date or in the case of some foreign securities, on the date thereafter
when the Fund is made aware of the dividend. Income and capital gains realized
from some foreign securities may be subject to foreign withholding taxes, which
are accrued as applicable.
G. Federal Taxes
The Funds qualify as regulated investment companies under the Internal Revenue
Code of 1986, as amended (the "Code"). As such, the Funds will not incur any
federal income tax liability since they are expected to distribute all of their
net investment company taxable income and net capital gains, if any, to their
shareholders. The Funds also intend to avoid any excise tax liability by making
the required distributions under the Code. Accordingly, no provision for fed-
eral taxes is required. To the extent that realized capital gains can be offset
by capital loss carryforwards, it is each Fund's policy not to distribute such
gains.
H. Distributions
Distributions from net investment income for the Funds, except Small Cap Growth
Fund, are declared and paid monthly. Small Cap Growth Fund declares and pays
distributions from net investment income, if any, annually. 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 accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles. The difference between financial statements amounts avail-
able for distribution and distributions made in accordance with income tax reg-
ulations are primarily due to differing treatment for certain distributions re-
ceived from real estate investment trusts, certain repurchases of securities
sold at a loss and the in-kind transaction described in Note 5.
The Large Cap Blend Fund redesignated $240,950 ($0.02 per share for Class I, IS
and IC) of distributions from net investment income declared after January 1,
1999, as capital gains distributions after January 1, 1999.
Certain distributions paid during previous years have been reclassified to
conform with current year presentation.
I. 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.
J. Organization Expenses
Organization expenses for Small Cap Growth Fund are amortized to operations
over a five-year period on a straight-line basis. In the event any of the ini-
tial shares of the Fund are redeemed by any holder during the five-year amorti-
zation period, redemption proceeds will be reduced by any unamortized organiza-
tion expenses in the same proportion as the number of initial shares being re-
deemed bears to the number of initial shares outstanding at the time of the re-
demption.
81
<PAGE>
Combined Notes to Financial Statements(continued)
3. CONVERSION INFORMATION
On November 24, 1997, the Core Equity Fund, Strategic Growth Fund, and Strate-
gic Value Fund commenced operations of their respective Class I shares as a re-
sult 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 chart summarizes pertinent data related to each Fund on
the date of conversion:
<TABLE>
<CAPTION>
Core Large Cap Social Strategic Strategic
Equity Fund Blend Fund Principles Fund Growth Fund Value Fund
------------- ---------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Shares issued........... 22,828,425 10,264,770 4,293,581 5,750,026 831,617
Net assets.............. $1,894,078,143 $462,393,873 $157,379,236 $186,600,811 $169,109,520
Net asset value per
share.................. $ 82.97 $ 45.05 $ 36.65 $ 32.45 $ 203.35
Unrealized appreciation
of securities.......... $ 557,857,438 $115,329,906 $ 49,607,008 $ 53,350,873 $ 48,394,807
</TABLE>
The above amounts are reflected in proceeds from shares sold in the statements
of changes in net assets for the period ended June 30, 1998.
4. CLASS IC CONVERSION
On April 30, 1999, the Large Cap Blend Fund and Social Principles Fund con-
verted their respective Class IC shares to Class I shares. Shareholders of
Class IC shares became owners of that number of Class I shares having a net as-
set value equal to the net asset value of their shares immediately prior to the
close of business April 30, 1999. Since Class IC shares contributed the major-
ity of the net assets and the shareholders to the newly combined Class I, the
Class IC and its operating results for prior periods are carried forward as the
accounting survivor. The following chart summarizes pertinent data related to
each Fund's Class IC shares on the date of conversion:
<TABLE>
<CAPTION>
Large Cap Social
Blend Fund Principles Fund
----------- --------------
<S> <C> <C>
Class I shares issued.............. 9,604,208 3,712,810
Net assets of Class IC............. $452,516,632 $126,994,084
Net asset value of Class I per
share............................. $ 47.12 $ 34.20
</TABLE>
5. IN-KIND TRANSACTION
On January 21, 1998, the Evergreen Balanced Fund II and Evergreen Value Fund,
Class Y, executed a redemption in-kind transaction of $737,248,788 and
$793,367,277, respectively. This transaction resulted in the liquidation of
substantially all of the net assets of the Evergreen Balanced Fund II and Ever-
green Value Fund Class Y shares, which were transferred to Class I shares of
Balanced Fund and Diversified Value Fund, respectively. On January 22, 1998,
Balanced Fund and Diversified Value Fund commenced operations of their Class I
shares through in-kind purchases of 58,643,231 and 33,532,392 shares, respec-
tively, amounting to $737,248,788 and $793,367,277, respectively. These amounts
are reflected in proceeds from shares sold in the statements of changes in net
assets for the period ended June 30, 1998. In exchange for these shares, in-
vestment securities, excluding cash and cash equivalents, with a cost and mar-
ket value of $708,705,595 and $774,879,156 were contributed to the Balanced
Fund and Diversified Value Fund, respectively. Additionally, Balanced Fund and
Diversified Value Fund received cash and cash equivalents of $28,543,193 and
$23,488,121, respectively, to complete the transaction.
82
<PAGE>
Combined Notes to Financial Statements(continued)
6. 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. Shareholders of CoreFund Class B shares re-
ceived 22,353 shares of Class IS as a result of the merger. 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 ma-
jority 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 survivor. The above amounts are reflected in proceeds from
shares issued in both the Statements of Changes in Net Assets and Capital
Shares Transactions.
Effective the close of business on July 24, 1998, Strategic Growth Fund ac-
quired the net assets of CoreFund Equity Growth Fund, an open-end management
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 net 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. The above amounts are reflected in
proceeds from shares issued in both the Statements of Changes in Net Assets and
Capital Shares Transactions.
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, a common trust fund managed by FUNB. The net assets were ac-
quired 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 pri-
marily of portfolio securities with unrealized appreciation of $25,897,713. The
aggregate net assets of Equity Growth Fund and Strategic Growth Fund immedi-
ately prior to the acquisition were $81,699,736 and $186,600,811, respectively.
The aggregate net assets and shares outstanding of Strategic Growth Fund imme-
diately after the acquisition were $268,300,547 and 8,267,568, respectively.
The foregoing amounts are reflected in proceeds from shares sold in the State-
ments of Changes in Net Assets for the period ended June 30, 1998.
7. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class I and/or Class IS. Transactions in shares of the Funds were
as follows:
Select Balanced Fund
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
-------------------------- -------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold............. 7,848,229 $ 102,258,212 62,963,666 $ 793,932,091
Shares redeemed......... (14,836,155) (195,030,850) (9,271,066) (121,943,214)
Shares issued in
reinvestment of
distributions.......... 1,521,793 20,036,612 361,713 4,756,721
------------------------------------------------------------------------------
Net increase
(decrease)............. (5,466,133) (72,736,026) 54,054,313 676,745,598
------------------------------------------------------------------------------
Class IS
Shares sold............. 422,203 5,562,489 15,938 212,912
Shares redeemed......... (416,181) (5,541,558) 0 0
Shares issued in
reinvestment of
distributions.......... 7,749 103,447 100 1,319
------------------------------------------------------------------------------
Net increase............ 13,771 124,378 16,038 214,231
------------------------------------------------------------------------------
Net increase
(decrease)............. (5,452,362) $ (72,611,648) 54,070,351 $ 676,959,829
</TABLE>
-------------------------------------------------------------------------------
(a) For Class I and Class IS the capital share activity is for the period from
January 22, 1998 and April 9, 1998, respectively, (commencement of each
Classes operations) to June 30, 1998.
83
<PAGE>
Combined Notes to Financial Statements(continued)
Select Core Equity Fund
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
------------------------- --------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold............. 1,894,587 $ 162,933,860 23,538,750 $1,957,108,914
Shares redeemed......... (3,733,442) (323,280,104) (2,451,922) (219,096,830)
Shares issued in
reinvestment of
distributions.......... 1,482,376 125,141,384 453 40,719
------------------------------------------------------------------------------
Net increase
(decrease)............. (356,479) (35,204,860) 21,087,281 1,738,052,803
------------------------------------------------------------------------------
Class IS
Shares sold............. 388,096 31,623,390 250,305 21,752,424
Shares redeemed......... (271,386) (22,061,029) (41,914) (3,639,006)
Shares issued in
reinvestment of
distributions.......... 24,042 1,902,503 283 24,374
------------------------------------------------------------------------------
Net increase............ 140,752 11,464,864 208,674 18,137,792
------------------------------------------------------------------------------
Net increase
(decrease)............. (215,727) $ (23,739,996) 21,295,955 $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 Class operations) to June 30,
1998.
Select Diversified Value Fund
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
-------------------------- -------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold............. 2,710,532 $ 66,392,052 35,285,849 $ 843,364,554
Shares redeemed......... (12,054,441) (303,229,194) (5,013,312) (130,385,842)
Shares issued in
reinvestment of
distributions.......... 864,540 21,680,943 133,917 3,474,402
------------------------------------------------------------------------------
Net increase
(decrease)............. (8,479,369) (215,156,199) 30,406,454 716,453,114
------------------------------------------------------------------------------
Class IS
Shares sold............. 46,088 1,116,031 30,796 813,581
Shares redeemed......... (5,221) (135,090) (22,745) (576,131)
Shares issued in
reinvestment of
distributions.......... 1,677 41,573 48 1,220
------------------------------------------------------------------------------
Net increase............ 42,544 1,022,514 8,099 238,670
------------------------------------------------------------------------------
Net increase
(decrease)............. (8,436,825) $(214,133,685) 30,414,553 $ 716,691,784
</TABLE>
-------------------------------------------------------------------------------
(a) For Class I and Class IS, for the period from January 22, 1998 and March
31, 1998, respectively (commencement of Class operations) to June 30, 1998.
Select Large Cap Blend Fund
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
------------------------- ------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold.............. 281,613 $ 13,021,813 281,458 $ 13,881,808
Shares redeemed.......... (1,136,453) (53,049,940) (5,242) (257,909)
Shares issued in
reinvestment of
distributions........... 40,730 1,853,814 339 16,702
Shares issued from
conversion of Class IC
(b)..................... 9,604,208 452,516,632 0 0
------------------------------------------------------------------------------
Net increase............. 8,790,098 414,342,319 276,555 13,640,601
------------------------------------------------------------------------------
Class IS
Shares sold.............. 7,147 328,082 5,918 297,642
Shares redeemed.......... (5,917) (269,541) (1) (44)
Shares issued in
reinvestment of
distributions........... 745 33,874 10 475
------------------------------------------------------------------------------
Net increase............. 1,975 92,415 5,927 298,073
------------------------------------------------------------------------------
Class IC
Shares sold.............. 745,024 33,587,489 10,802,599 488,607,729
Shares redeemed.......... (2,036,907) (94,174,187) (997,016) (47,759,403)
Shares issued in
reinvestment of
distributions........... 1,090,492 49,639,697 16 798
Shares redeemed in
conversion to Class I
(b)..................... (9,604,208) (452,516,632) 0 0
------------------------------------------------------------------------------
Net increase (decrease).. (9,805,599) (463,463,633) 9,805,599 440,849,124
------------------------------------------------------------------------------
Net increase (decrease).. (1,013,526) $ (49,028,899) 10,088,081 $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 Class opera-
tions) to June 30, 1998.
(b) On April 30, 1999, Class IC shares of the Fund were converted to Class I
shares.
84
<PAGE>
Combined Notes to Financial Statements(continued)
Select Small Cap Growth Fund
<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended
June 30, 1999 June 30, 1998 (a) February 28, 1998
--------------------- ---------------------- ----------------------
Shares Amount Shares Amount Shares Amount
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class I
Shares sold............. 284,105 $ 3,242,108 1,770,376 $22,034,367 3,414,877 $42,857,020
Shares redeemed......... (437,071) (5,425,723) (82,127) (1,126,600) (209,509) (2,634,970)
Shares issued in
reinvestment of
distributions.......... 8,734 100,757 0 0 130,289 1,640,345
----------------------------------------------------------------------------------------------
Net increase
(decrease)............. (144,232) $(2,082,858) 1,688,249 $20,907,767 3,335,657 $41,862,395
</TABLE>
-------------------------------------------------------------------------------
(a) For the four month period ended June 30, 1998. The fund changed its fiscal
year end from the last business day in February to June 30, effective June
30, 1998.
Select Small Company Value Fund
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
------------------------ ----------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold................. 5,762,869 $ 48,213,008 8,353,679 $86,504,946
Shares redeemed............. (1,437,069) (12,034,887) (669,991) (6,702,683)
Shares issued in
reinvestment of
distributions.............. 74,799 624,337 14,214 149,844
-----------------------------------------------------------------------------
Net increase................ 4,400,599 36,802,458 7,697,902 $79,952,107
-----------------------------------------------------------------------------
Class IS (b)
Shares sold................. 101,479 835,788
Shares redeemed............. (101,371) (815,129)
Shares issued in
reinvestment of
distributions.............. 13 102
-----------------------------------------------------------------------------
Net increase................ 121 20,761
-----------------------------------------------------------------------------
Net increase................ 4,400,720 $ 36,823,219
</TABLE>
-------------------------------------------------------------------------------
(a) For the period from December 23, 1997 (commencement of Class operations) to
June 30, 1998.
(b) For the period from December 31, 1998 (commencement of Class operations) to
June 30, 1999.
Select Social Principles Fund
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
------------------------- -----------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold............... 90,138 $ 3,145,258 61,760 $ 2,208,624
Shares redeemed........... (225,918) (8,155,311) (59) (2,272)
Shares issued in
reinvestment of
distributions............ 4,705 162,875 33 1,243
Shares issued from
conversion of Class IC
(b)...................... 3,712,810 126,994,084 0 0
-----------------------------------------------------------------------------
Net increase.............. 3,581,735 122,146,906 61,734 2,207,595
-----------------------------------------------------------------------------
Class IS
Shares sold............... 4,670 159,277 5,274 207,403
Shares redeemed........... (8,520) (297,123) (1) (36)
Shares issued in
reinvestment of
distributions............ 191 6,618 1 42
-----------------------------------------------------------------------------
Net increase (decrease)... (3,659) (131,228) 5,274 207,409
-----------------------------------------------------------------------------
Class IC
Shares sold............... 337,062 11,551,713 4,876,095 179,363,747
Shares redeemed........... (1,429,917) (49,726,173) (327,340) (12,068,700)
Shares issued in
reinvestment of
distributions............ 256,850 8,904,544 60 2,256
Shares redeemed in
conversion to Class I
(b)...................... (3,712,810) (126,994,084) 0 0
-----------------------------------------------------------------------------
Net increase (decrease)... (4,548,815) (156,264,000) 4,548,815 167,297,303
-----------------------------------------------------------------------------
Net increase (decrease)... (970,739) $ (34,248,322) 4,615,823 $169,712,307
</TABLE>
-------------------------------------------------------------------------------
(a) For Class I, Class IS, Class IC, for the period from November 24, 1997,
March 12, 1998, and November 24, 1997, respectively, (commencement of Class
operations) to June 30, 1998.
(b) On April 30, 1999, Class IC shares of the Fund were converted to Class I
shares.
85
<PAGE>
Combined Notes to Financial Statements(continued)
Select Special Equity Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998 (a)
------------------------ ------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold............... 3,681,321 $ 43,045,845 1,100,970 $ 12,968,366
Shares redeemed........... (2,831,875) (30,671,560) (1,727,770) (20,152,176)
Shares issued in
reinvestment of
distributions............ 812,275 7,643,511 816,325 8,424,468
-----------------------------------------------------------------------------
Net increase.............. 1,661,721 20,017,796 189,525 1,240,658
-----------------------------------------------------------------------------
Class IS
Shares sold............... 114,558 1,284,336 92,537 1,100,809
Shares redeemed........... (146,994) (1,584,562) (47,881) (551,920)
Shares issued in
reinvestment of
distributions............ 31,295 291,665 35,511 364,590
-----------------------------------------------------------------------------
Net increase (decrease)... (1,141) (8,561) 80,167 913,479
-----------------------------------------------------------------------------
Net increase.............. 1,660,580 $ 20,009,235 269,692 $ 2,154,137
</TABLE>
-------------------------------------------------------------------------------
(a) 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.
Select Strategic Growth Fund
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
------------------------ ------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold............... 4,260,240 $ 93,242,573 9,834,675 $324,746,855
Shares redeemed........... (7,535,767) (278,683,495) (1,464,385) (53,203,209)
Shares issued in
reinvestment of
distributions............ 1,078,559 39,578,816 982 34,947
Shares issued in
acquisition of CoreFund
Equity Growth Fund....... 5,297,535 198,759,540 -- --
-----------------------------------------------------------------------------
Net increase (decrease)... 3,100,567 52,897,434 8,371,272 271,578,593
-----------------------------------------------------------------------------
Class IS
Shares sold............... 130,363 4,855,755 447,254 16,811,393
Shares redeemed........... (101,906) (3,843,603) (385,382) (14,145,118)
Shares issued in
reinvestment of
distributions............ 25,744 943,166 -- --
Shares issued in
acquisition of CoreFund
Equity Growth Fund....... 186,381 6,982,770 -- --
-----------------------------------------------------------------------------
Net increase.............. 240,582 8,938,088 61,872 2,666,275
-----------------------------------------------------------------------------
Net increase.............. 3,341,149 $ 61,835,522 8,433,144 $274,244,868
</TABLE>
-------------------------------------------------------------------------------
(a) For Class I and Class IS, for the period from November 24, 1997 and Febru-
ary 27,1998, respectively, (commencement of Class operations) to June 30,
1998.
Select Strategic Value Fund
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 June 30, 1998 (a)
----------------------- -----------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold................. 1,250,078 $278,450,304 1,344,196 $283,217,426
Shares redeemed............. (322,534) (69,617,033) (74,798) (16,435,232)
Shares issued in
reinvestment of
distributions.............. 40,648 8,661,803 1,265 284,542
-----------------------------------------------------------------------------
Net increase................ 968,192 217,495,074 1,270,663 267,066,736
-----------------------------------------------------------------------------
Class IS
Shares sold................. 12,671 2,711,091 6,502 1,463,439
Shares redeemed............. (11,118) (2,466,402) (641) (145,389)
Shares issued in
reinvestment of
distributions.............. 208 44,111 9 2,141
-----------------------------------------------------------------------------
Net increase................ 1,761 288,800 5,870 1,320,191
-----------------------------------------------------------------------------
Net increase................ 969,953 $217,783,874 1,276,533 $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 Class operations) to June 30,
1998.
86
<PAGE>
Combined Notes to Financial Statements(continued)
8. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term investments and securities acquired as a result of conversions, in-
kind transactions and acquisitions) were as follows for the year ended June 30,
1999:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
--------------------------------
<S> <C> <C>
Core Equity Fund................... $967,825,286 $1,146,988,165
Diversified Value Fund............. 494,893,123 720,249,809
Large Cap Blend Fund............... 209,577,370 304,210,789
Small Cap Growth Fund.............. 102,714,420 104,869,540
Small Company Value Fund........... 88,807,726 41,235,068
Social Principles Fund............. 52,951,629 88,939,584
Special Equity Fund................ 82,262,402 74,842,128
Strategic Growth Fund.............. 688,217,425 682,569,471
Strategic Value Fund............... 340,664,736 133,944,607
</TABLE>
Balanced Fund's cost of purchases of US government and non-US government secu-
rities was $212,982,807 and $193,337,453, respectively, and the Fund's proceeds
from sale of US government and non-US government securities was $241,974,953
and $244,318,838, respectively, for the year ended June 30, 1999.
The Small Cap Growth Fund loaned securities during the year ended June 30, 1999
to certain brokers who paid the Fund a negotiated lenders' fee. During the year
ended June 30, 1999, the Fund earned $23,242 in income from securities lending.
These fees are included in interest income. As of June 30, 1999 the value of
the Fund's securities on loan and the value of collateral amounted to
$18,066,600 and $18,071,447, respectively.
On June 30, 1999, the composition of unrealized appreciation and depreciation
of investment securities based on the aggregate cost of investments for federal
income tax purposes was as follows:
<TABLE>
<CAPTION>
Gross Gross Net
Unrealized Unrealized Unrealized
Tax Cost Appreciation Depreciation Appreciation
-----------------------------------------------------
<S> <C> <C> <C> <C>
Balanced Fund........... $ 609,174,309 $ 75,997,154 $(23,284,186) $ 52,712,968
Core Equity Fund........ 1,362,601,518 605,378,972 (26,965,370) 578,413,602
Diversified Value Fund.. 527,183,807 104,294,007 (17,595,215) 86,698,792
Large Cap Blend Fund.... 334,948,580 121,221,117 (8,008,028) 113,213,089
Small Cap Growth Fund... 78,552,312 13,588,795 (3,983,489) 9,605,306
Small Company Value
Fund................... 107,141,835 11,582,296 (11,581,500) 796
Social Principles Fund.. 101,278,096 39,184,577 (7,980,329) 31,204,248
Special Equity Fund..... 102,164,580 31,909,652 (12,295,594) 19,614,058
Strategic Growth Fund... 379,596,925 122,887,277 (1,540,028) 121,347,249
Strategic Value Fund.... 445,888,166 95,130,970 (10,602,492) 84,528,478
</TABLE>
On July 24, 1998, Strategic Growth Fund acquired securities, excluding cash
equivalents, with an aggregate cost $139,199,312 from the Fund's acquisition of
CoreFund Equity Growth Fund.
As of June 30, 1999, Small Cap Growth Fund had a capital loss carryover for
federal income tax purposes of $1,348,498 expiring in 2006 and $2,891,216 ex-
piring in 2007 and Small Company Value Fund had a capital loss carryover for
federal income tax purposes of $3,027,415 expiring in 2007. In addition to the
capital loss carryovers, capital losses incurred by the Funds after October 31,
1998, within the Funds' fiscal year, are deemed to arise on the first business
day of the Funds' following fiscal year. For the year ended June 30, 1999 the
Small Company Value Fund incurred and elected to defer $5,497,097 of such post-
October losses.
9. 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.
87
<PAGE>
Combined Notes to Financial Statements(continued)
10. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED
TRANSACTIONS
The investment adviser to each Fund, other than Small Cap Growth Fund, Small
Company Value Fund and Special Equity Fund, is FUNB. Each Fund, other than
Small Cap Growth Fund, Small Company Value Fund and Special Equity Fund, pays
FUNB a fee for its services as set forth below. The annual advisory fees are
calculated daily and paid monthly and are based on a percentage of average
daily net assets.
<TABLE>
<CAPTION>
Annual
Advisory Fee
------------
<S> <C>
Balanced Fund.............................................. 0.60%
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>
Evergreen Investment Management Company ("EIMC"), a wholly owned subsidiary of
FUNB, is the investment adviser to Small Cap Growth 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 wholly owned subsidiary of FUNB,
is the investment adviser to Small Company Value Fund. Small Company Value Fund
pays EAMC an annual fee of 0.90% of average daily net assets. Leiber & Company,
an affiliate of First Union, is the investment sub-adviser to Small Company
Value Fund. Leiber & Company provides these services at no additional cost to
the Fund.
Leiber & Company also provides brokerage services to Small Company Value Fund
with respect to substantially all security transactions effected on either the
New York or American Stock Exchanges. For the year ended June 30, 1998, Small
Company Fund incurred $152,290, in brokerage commissions with Leiber & Company.
Meridian Investment Company ("Meridian"), an indirect subsidiary of FUNB,
serves as the investment advisor to Special Equity Fund. In return for its
services, Meridian is paid an annual fee equal to 1.50% of average daily net
assets of Special Equity Fund. Currently, Meridian agreed to limit its advisory
fee to 0.74% of average daily net assets.
Each investment adviser, 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 year ended June 30,
1999, the investment advisers voluntarily reduced their fees as follows:
<TABLE>
<CAPTION>
% of Average
Total Fee Waivers Daily Net Assets
---------------------------
<S> <C> <C>
Balanced Fund......................... $ 689,460 .10%
Core Equity Fund...................... 1,848,228 .10
Diversified Value Fund................ 663,837 .10
Large Cap Blend Fund.................. 474,132 .10
Small Company Value Fund.............. 84,029 .10
Social Principles Fund................ 150,495 .10
Special Equity Fund................... 551,194 .70
Strategic Growth Fund................. 478,980 .10
Strategic Value Fund.................. 340,610 .10
</TABLE>
Evergreen Investment Services ("EIS"), a subsidiary of First Union, is the ad-
ministrator and BISYS serves as sub-administrator to the Funds. As administra-
tor, EIS provides the Funds with facilities, equipment and personnel. As sub-
administrator to the Funds, BISYS provides the officers of the Funds. The ad-
ministrator and sub-administrator for each Fund are entitled to an annual fee
based on the average daily net assets of the
88
<PAGE>
Combined Notes to Financial Statements(continued)
funds administered by EIS for which First Union or its investment advisory sub-
sidiaries are also the investment advisors. The administration fee is calcu-
lated by applying percentage rates, which start at 0.05% and decline to 0.01%
per annum as net assets increase, to the average daily net asset value of the
Fund. The sub-administration fee is calculated by applying percentage rates,
which start at 0.01% and decline to .004% per annum as net assets increase, to
the average daily net asset value of the Fund. For the year ended June 30,
1999, the following amounts were paid for administration and sub-administration
services:
<TABLE>
<CAPTION>
Administration Sub-administration
------------- -----------------
<S> <C> <C>
Balanced Fund.......................... $170,206 $ 8,642
Core Equity Fund....................... 381,935 98,808
Diversified Value Fund................. 165,277 8,088
Large Cap Blend Fund................... 98,170 25,360
Small Company Value Fund............... 18,083 4,639
Social Principles Fund................. 31,213 8,068
Special Equity Fund.................... 16,536 3,826
Strategic Growth Fund.................. 93,810 24,408
Strategic Value Fund................... 70,246 18,070
</TABLE>
For the year ended June 30, 1999, Small Cap Growth Fund reimbursed EIMC for
certain administrative and accounting expenses amounting to $8,400.
For the Small Cap Growth Fund, the sub-administration fee is paid by the in-
vestment advisor and is not a Fund expense.
Evergreen Service Company ("ESC"), an indirectly, wholly owned subsidiary of
FUNB, serves as the transfer and dividend disbursing agent for the Funds.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
11. EXPENSE OFFSET ARRANGEMENT
The Funds have entered into an expense offset arrangement with ESC and their
custodian whereby credits realized as a result of uninvested cash balances were
used to reduce a portion of each Fund's related expenses. The assets deposited
with ESC and the custodian under this expense offset arrangement could have
been invested in income-producing assets. The amount of fee credits received by
each Fund and the impact on each Fund's expense ratio represented as a percent-
age of its average daily net assets were as follows:
<TABLE>
<CAPTION>
Total Fee % of Average
Credits Received Daily Net Assets
--------------- ---------------
<S> <C> <C>
Balanced Fund.......................... $27,674 .00%
Core Equity Fund....................... 76,453 .00
Diversified Value Fund................. 30,047 .01
Large Cap Blend Fund................... 18,838 .00
Small Cap Growth Fund.................. 3,866 .01
Small Company Value Fund............... 5,396 .01
Social Principles Fund................. 6,031 .00
Special Equity Fund.................... 4,516 .01
Strategic Growth Fund.................. 27,923 .01
Strategic Value Fund................... 13,690 .00
</TABLE>
12. 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.
89
<PAGE>
Combined Notes to Financial Statements(continued)
13. FINANCING AGREEMENTS
Certain Evergreen Funds, 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 November 20, 1998. Under this agreement, the Banks
provide an unsecured credit facility in the aggregate amount of $400 million
($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. Dur-
ing the year ended June 30, 1999, the Fund had no borrowings under these agree-
ments.
14. DISTRIBUTIONS TO SHAREHOLDERS
On July 1, 1999 the following Funds declared net investment income dividends,
payable on July 2, 1999 to shareholders of record on June 30, 1999:
Class I Class IS
----------------
Balanced Fund.......................................... $0.035 $0.032
Core Equity Fund....................................... 0.028 0.009
Diversified Value Fund................................. 0.020 0.014
Strategic Value Fund................................... 0.445 0.395
On July 8, 1999 the following Funds declared capital gains dividends, payable
on July 9, 1999 to shareholders of record on July 7, 1999:
Class I Class IS
----------------
Core Equity Fund....................................... $9.063 $9.063
Strategic Growth Fund ................................. 5.951 5.951
Strategic Value Fund................................... 4.190 4.190
These distributions are not reflected in the accompanying financial statements.
90
<PAGE>
Combined Notes to Financial Statements(continued)
15. SUBSEQUENT EVENTS
Effective on the close of business on July 9, 1999, Balanced Fund, Core Equity
Fund, Strategic Growth Fund and Strategic Value Fund ("Acquiring Evergreen
Funds") acquired substantially all of the net assets and identified liabilities
of certain common trust funds managed by FUNB. The net assets, consisting pri-
marily of portfolio securities, were acquired either through a taxable or tax-
free exchange for Class I shares of the Acquiring Evergreen Funds.
The following summarizes pertinent data related to the Funds on the date of the
acquisition:
<TABLE>
<CAPTION>
Evergreen Unrealized
Acquiring Total Total Net Fund Appreciation
Evergreen Shares Assets NAV/share of
Fund Common Trust Fund Issued Acquired Class I Securities
-----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
Balanced Fund CoreStates Balanced Fund 422,321 $ 5,780,695 $13.68 $ 0
CoreStates Balanced Trust 6,059,738 82,945,060 20,569,515
--------- ------------ ------------
Total 6,482,059 88,725,755 20,569,515
========= ============ ============
Core Equity Fund CoreStates Growth and
Income Equity Trust 6,974,611 595,233,256 85.34 134,355,837
Signet Investors Equity A 592,625 50,576,342 36,302,394
Signet Investors Equity B 123,773 10,563,173 7,475,528
Signet Capital Growth 67,230 5,737,565 3,701,178
--------- ------------ ------------
Total 7,758,239 662,110,336 181,834,937
========= ============ ============
Strategic Growth Fund CoreStates Union County
Equity Trust 70,063 2,592,329 37.00 1,356,557
--------- ------------ ------------
Strategic Value Fund CoreStates Value Equity Fund 341,237 80,405,690 235.63 0
CoreStates Value Equity Trust 309,990 73,043,358 11,453,813
--------- ------------ ------------
Total 651,227 $153,449,048 $ 11,453,813
========= ============ ============
</TABLE>
Effective the close of business on July 30, 1999, Core Equity Fund acquired the
net assets and liabilities of Evergreen Select Equity Income Fund, an open-end
management investment company registered under the 1940 Act, in an exchange of
shares. The net assets were exchanged through a tax-free exchange for 14,454
Class IS shares and 1,629,831 Class I shares of Core Equity Fund. The acquired
net assets consisted primarily of portfolio securities with unrealized appreci-
ation of $15,463,739. Aggregate net assets of Core Equity Fund and Evergreen
Select Equity Income Fund immediately before the acquisition were
$2,449,655,426 and $132,358,403, respectively. The aggregate net assets of Core
Equity Fund after the acquisition were $2,582,013,829.
91
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders
Evergreen Select Equity Trust
We have audited the accompanying statements of assets and liabilities, includ-
ing the schedules of investments of the Evergreen Select Balanced Fund, Ever-
green Select Core Equity Fund (formerly Evergreen Select Common Stock Fund),
Evergreen Select Diversified Value Fund, Evergreen Select Large Cap Blend Fund,
Evergreen Select Small Cap Growth Fund, Evergreen Select Small Company Value
Fund, Evergreen Select Social Principles Fund, Evergreen Select Special Equity
Fund (formerly CoreFund Special Equity Fund), Evergreen Select Strategic Growth
Fund and Evergreen Select Strategic Value Fund, portfolios of the Evergreen Se-
lect Equity Trust, as of June 30, 1999, and the related statements of opera-
tions for the year then ended, the statements of changes in net assets for each
of the years or periods in the two year period then ended, and for the year
ended February 28, 1998 for Evergreen Select Small Cap Growth Fund, and finan-
cial highlights for each of the years or periods as described on pages 37 to
47. These financial statements and financial highlights are the responsibility
of the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. For Ever-
green Select Special Equity Fund, the statement of changes in net assets for
the year ended June 30, 1998 and financial highlights for each of the years or
periods ended prior to the year ended June 30, 1999 were audited by other audi-
tors whose reports dated August 25, 1998 and December 8, 1995, expressed un-
qualified opinions on those financial statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform our audits to obtain
reasonable assurance about whether the financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999 by correspondence with the custodian and brokers. An audit also in-
cludes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presenta-
tion. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
portfolios of the Evergreen Select Equity Trust as of June 30, 1999, the re-
sults of their operations, changes in their net assets and financial highlights
for each of the years or periods described above in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
Boston, Massachusetts
August 6, 1999
92
<PAGE>
Other Information
Year 2000 - Unaudited
Like other investment companies, the Funds could be adversely af-fected 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 advisers are taking steps
to address this po-tential year 2000 problem with respect to the computer
systems that they use and to obtain satisfactory assurances that comparable
steps are being taken by the Funds' other major service providers. At this
time, however, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the Funds from this problem.
FEDERAL TAX STATUS OF DIVIDENDS (Unaudited)
Pursuant to section 852 of the Internal Revenue Code, the Funds have
designated the following amounts as long-term capital gain distribu-
tions for the fiscal year ended June 30, 1999:
<TABLE>
<CAPTION>
Distributions Per share
-----------------------
<S> <C> <C>
Core Equity Fund................................. $162,933,370 $7.825
Large Cap Blend Fund............................. 45,364,119 4.487
Small Company Value Fund......................... 300 --
Social Principles Fund........................... 9,215,913 2.121
Special Equity Fund.............................. 1,747,325 0.256
Strategic Growth Fund............................ 36,903,232 2.750
Strategic Value Fund............................. 6,286,864 3.953
</TABLE>
For corporate shareholders, the following percentages of ordinary in-
come dividends paid during the fiscal year ended June 30, 1999 quali-
fied for the dividends received deduction:
<TABLE>
<S> <C>
Balanced Fund.................................................... 17.24%
Core Equity Fund................................................. 100.00
Diversified Value Fund........................................... 41.19
Large Cap Blend Fund............................................. 54.65
Small Company Value Fund......................................... 57.57
Social Principles Fund........................................... 100.00
Special Equity Fund.............................................. 0.74
Strategic Growth Fund............................................ 23.79
Strategic Value Fund............................................. 90.38
</TABLE>
93
<PAGE>
Evergreen Select Funds
Money Market
Money Market Fund
Treasury Money Market Fund
100% Treasury Money Market Fund
Municipal Money Market Fund
Municipal Fixed Income
Intermediate Tax Exempt Bond Fund
Taxable Fixed Income
International Bond Fund
Total Return Bond Fund
Income Plus Fund
Core Bond Fund
Fixed Income Fund
Adjustable Rate Fund
Limited Duration Fund
Growth and Income/Balanced
Equity Income Fund
Balanced Fund
Growth
Special Equity Fund
Small Cap Growth Fund
Small CompanyValue Fund
Strategic Growth Fund
Core Equity Fund
Equity Index Fund
Large Cap Blend Fund
Strategic Value Fund
Diversified Value Fund
Social Principles
Secular Growth Fund
53736 542780 08/99
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 19
HUDSON, MA
[LOGO OF EVERGREEN FUNDS APPEARS HERE]
200 Berkeley Street
Boston, MA 02116
<PAGE>
December 31, 1999
E v e r g r e e n S e l e c t
Equity Funds
Semiannual Report
[LOGO OF EVERGREEN FUNDS] [DALBAR MUTUAL FUND SERVICE AWARD]
<PAGE>
Table of Contents
Letter to Shareholders ..................................... 1
Evergreen Select Balanced Fund
Fund at a Glance ........................................... 2
Portfolio Manager Commentary ............................... 3
Evergreen Select Core Equity Fund
Fund at a Glance ........................................... 6
Portfolio Manager Commentary ............................... 7
Evergreen Select Diversified Value Fund
Fund at a Glance ........................................... 9
Portfolio Manager Commentary ............................... 10
Evergreen Select Large Cap Blend Fund
Fund at a Glance ........................................... 12
Portfolio Manager Commentary ............................... 13
Evergreen Select Secular Growth Fund
Fund at a Glance ........................................... 15
Portfolio Manager Commentary ............................... 16
Evergreen Select Small Cap Growth Fund
Fund at a Glance ........................................... 18
Portfolio Manager Commentary ............................... 19
Evergreen Select Small Company
Value Fund
Fund at a Glance ........................................... 22
Portfolio Manager Commentary ............................... 23
Evergreen Select Social Principles Fund
Fund at a Glance ........................................... 26
Portfolio Manager Commentary ............................... 27
Evergreen Select Strategic Growth Fund
Fund at a Glance ........................................... 29
Portfolio Manager Commentary ............................... 30
Evergreen Select Strategic Value Fund
Fund at a Glance ........................................... 32
Portfolio Manager Commentary ............................... 33
Financial Highlights
Evergreen Select Balanced Fund ............................. 35
Evergreen Select Core Equity Fund .......................... 36
Evergreen Select Diversified Value Fund .................... 37
Evergreen Select Large Cap Blend Fund ...................... 38
Evergreen Select Secular Growth Fund ....................... 39
Evergreen Select Small Cap Growth Fund . ................... 40
Evergreen Select Small Company Value Fund .................. 41
Evergreen Select Social Principles Fund .................... 42
Evergreen Select Strategic Growth Fund ..................... 43
Evergreen Select Strategic Value Fund ...................... 44
Schedule of Investments
Evergreen Select Balanced Fund ............................. 45
Evergreen Select Core Equity Fund .......................... 48
Evergreen Select Diversified Value Fund .................... 51
Evergreen Select Large Cap Blend Fund ...................... 54
Evergreen Select Secular Growth Fund ....................... 56
Evergreen Select Small Cap Growth Fund . ................... 58
Evergreen Select Small Company Value Fund .................. 60
Evergreen Select Social Principles Fund .................... 62
Evergreen Select Strategic Growth Fund ..................... 64
Evergreen Select Strategic Value Fund ...................... 66
Statements of Assets and Liabilities ....................... 68
Statements of Operations ................................... 70
Statements of Changes in Net Assets ........................ 72
Combined Notes to Financial
Statements ................................................. 76
Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies with
approximately $80 billion in asssets under management.
With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to 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: NOT FDIC INSURED May lose value . not bank guaranteed
Evergreen Distributor,Inc.
Evergreen Funds(SM) is a service mark of Evergreen Investment Services,Inc.
<PAGE>
Letter to Shareholders
----------------------
February 2000
[PHOTO]
William M. Ennis
[PHOTO]
Dennis Ferro
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Select Equity Funds semiannual report
for the period ended December 31, 1999.
Continued Strength in the Domestic Economy
Although the U.S. economy is in the ninth year of economic expansion, many
believe that valuation levels in some sectors of the stock market are just not
sustainable. The second half of 1999 was marked by the S&P 500 falling in the
first three months before rebounding nearly 15% in the last three months. While
equity investors have experienced a turbulent investment environment over the
last six months, concerns about rising interest rates, inflation and Y2K fears
in the opening months were stifled resulting in eventually every major market
index being driven higher during the fourth quarter of 1999.
The Federal Reserve Bank's "tightening bias" leads many to anticipate further
interest rate increases in order to stem even the slightest inflationary
pressure. Additional interest hikes would likely have a negative effect on stock
prices, which could restrain consumer spending; however, many investors are
waiting for just such a scenario to take place, so they can take advantage of
lower stock prices as a buying opportunity.
We believe that the economy is still fundamentally strong, and that inflation
will stay contained, producing only moderate upward pressure on interest rates.
We remain cautiously optimistic about the prospects for continued growth in the
markets.
Website Enhancements
Please visit our enhanced website, evergreen-funds.com, for more information
about Evergreen Funds. The site offers an array of helpful information including
1999 tax information, an investment education center, interactive calculators to
assist your investment planning and general information about Evergreen Funds.
We believe that sound investing is about taking steps to meet your long-term
financial needs and goals. We remind you to take advantage of your financial
advisor's expertise to develop and refine a financial plan that will enable you
to meet your objectives. Evergreen Funds offers a broad mix of stock, bond and
money market funds that should make it simple for you to choose the most
appropriate for your portfolio.
We would like to thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
/s/ Dennis H. Ferro
Dennis Ferro
Chief Investment Officer
First Union National Bank
Capital Management Group
1
<PAGE>
EVERGREEN
Select Balanced Fund
Fund at a Glance as of December 31, 1999
-------------------------------------------------------------------------------
PORTFOLIO PROFILE
-------------------------------------------------------------------------------
Philosophy
Evergreen Select Balanced Fund uses a systematic and disciplined investment
approach which provides exposure to both the equity and fixed income markets.
The basis of this approach is founded in the belief that stocks offer the
greatest long-term growth opportunities while bonds provide income and less risk
to principal.
Process
The Fund employs a blended approach to equity investing, utilizing companies
with both value- and growth-oriented characteristics. Within the fixed income
component, portfolio performance is enhanced while seeking to control risk by
managing duration, sector allocation and security selection.
Benchmarks
Standard & Poor's 500 Index (S&P 500)
Lehman Brothers Government/Corporate
Bond Index (LBGCBI)
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
-------------------------------------------------------------------------------
Portfolio Inception Date: 4/01/1991 Class I Class IS
Class Inception Date 1/22/1998 4/9/1998
Average Annual Returns
6 months 11.60% 11.48%
1 year 13.93% 13.69%
3 years 15.40% 15.33%
5 years 16.84% 16.79%
Since Portfolio Inception 13.02% 12.99%
6-month income dividends per share $0.25 $0.23
6-month capital gain distributions per share $0.53 $0.53
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Consumer Price
Select Balanced Index - US S & P 500 Lehman Brothers
3/31/91 1,000,000 1,000,000 1,000,000 1,000,000
12/31/91 1,143,581 1,021,481 1,139,198 1,130,782
12/31/92 1,237,351 1,051,111 1,225,975 1,216,511
12/31/93 1,369,502 1,080,000 1,349,546 1,350,712
12/31/94 1,339,851 1,108,889 1,367,374 1,303,321
12/31/95 1,698,966 1,137,037 1,881,278 1,554,111
12/31/96 1,897,974 1,174,815 2,313,128 1,599,216
12/31/97 2,300,631 1,194,815 3,084,864 1,755,270
12/31/98 2,560,978 1,214,074 3,966,332 1,921,815
12/31/99 2,918,285 1,247,407 4,801,394 1,880,249
Comparison of the change in value of a $1,000,000 investment in Evergreen Select
Balanced Fund Class I1, the S&P 500, the LBGCBI and the Consumer Price Index
(CPI).
The S&P 500 and the LBGCBI are unmanaged indices which do not include
transaction costs associated with buying and selling securities nor any
management fees. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Index returns do not reflect expenses, which have been
deducted from the Fund's return.
Historical performance shown for Class I prior to its inception is based on the
performance of the Class Y Shares of Evergreen Balanced Fund II. Historical
performance shown for Class IS reflects that of Class Y Shares of Evergreen
Balanced Fund II, through 1/22/1998, the inception of Class I Shares.
Performance from 1/23/1998 through the inception of Class IS Shares reflects
that of Class I Shares. Performance prior to inception of Class IS Shares does
not include this class' 0.25% 12b-1 fees. Class I Shares do not pay a 12b-1 fee.
If fees were reflected, returns would have been lower.
U.S. Government guarantee applies only to the underlying securities of the
Fund's portfolio and not the Fund's shares.
Investment objective is non-fundamental and may be changed without the vote of
the Fund's shareholders.
2
<PAGE>
EVERGREEN
Select Balanced Fund
Portfolio Manager Commentary
Portfolio Management Team
[PHOTO] [PHOTO]
W. Shannon Reid, David M. Chow,
CFA CFA
[PHOTO]
Rollin C. Williams,
CFA
Performance
For the six-month period ended December 31, 1999, the Fund's, Class I Shares,
posted an 11.60% return. This compared favorably to returns of 0.13% and 7.69%,
respectively, for the Fund's benchmarks, the Lehman Brothers
Government/Corporate Bond Index and the S&P 500, for the same period. The Fund's
solid performance in the fourth quarter and throughout the year can be
attributed to a heavy weighting and strong stock selection within the
portfolio's technology component.
Portfolio
Characteristics
------------------
(as of 12/31/1999)
Total Net Assets $646,198,503
Number of Holdings 117
P/E Ratio 46.0x
Beta 1.25
Environment
The past six months represented a markedly different period for equity and fixed
income investors. Despite tame inflation news throughout the six months, bond
prices fell as interest rates trended higher. Rising interest rates were
prompted by the market's expectation of tighter monetary policy in response to
stronger-than-expected GDP growth. From a sector standpoint, Treasury
securities struggled during the period and underperformed the "spread" sectors,
as investors flocked to the generous yields of corporates and mortgages.
The stock market, conversely, witnessed a roller coaster ride during the past
six months, rebounding from a difficult third quarter and culminating with an
amazing performance during the final three months. In fact, equity investors
along the entire capitalization spectrum enjoyed this spectacular rebound and
strong returns in the final half of the period. The S&P 500 posted a strong
total return and growth stocks again won the value-versus-growth battle, as the
large cap Russell 1000 Growth Index outperformed its value counterpart.
3
<PAGE>
EVERGREEN
Select Balanced Fund
Portfolio Manager Commentary
Strategy
1999 marked the worst year for bonds since 1994, and the Fund's exposure to this
segment of the financial markets penalized total return. Within the portfolio's
fixed income component, returns were negatively effected by a "barbelled"
portfolio that was maintained during the fourth quarter (a "barbelled" portfolio
structure is distinguished by securities primarily on both ends of the yield
curve rather than in the middle.) This strategy--which paid off handsomely in
1997 and 1998--had a negative impact on performance during the last six months
of 1999.
Conversely, the Fund's equity exposure had a very favorable impact on
performance. The equity management team continues to employ a combination of
quantitative and qualitative investment analysis that seeks to identify
companies that they believe will exhibit superior and sustainable earnings
growth. This methodology has resulted in a portfolio currently skewed towards
technology and consumer cyclicals, and underweighted in traditional growth-
oriented sectors such as consumer staples and health care.
As of December 31, 1999, technology represented the Fund's largest sector.
Within the sector, we continue to emphasize three trends: (1) technological
advances in communications networks, (2) the growth in demand for enterprise
information storage solutions and (3) business-to-business electronic commerce.
Consumer cyclicals represented the Fund's second largest sector weighting at 21%
versus 18% for the benchmark. Healthy consumer spending patterns, innovative
business models, and strong management teams were the factors shared by our top
performers which included Yahoo (up 151% for the period), America Online (up
38%), Home Depot (up 60%) and Wal-Mart (up 43%). We have always included Yahoo
and America Online in the media subsector of consumer cyclicals as opposed to
technology, a definition we believe was validated by the recently announced
AOL/Time Warner merger.
Top 5 Industries--Equity
-------------------------------------------
(as a percentage of 12/31/1999 net assets)
Information Services & Technology 19.3%
Healthcare Products & Services 6.9%
Communication Systems & Services 6.2%
Retailing & Wholesale 5.5%
Telecommunication Services & Equipment 2.9%
Top 5 Industries--Bonds
-------------------------------------------
(as a percentage of 12/31/1999 net assets)
Treasury Bonds & Notes 27.7%
Finance & Insurance 4.3%
Banks 2.4%
Communication Systems & Services 1.4%
Oil/Energy 1.3%
Top 10 Equity Holdings
-------------------------------------------
(as a percentage of 12/31/1999 net assets)
Cisco Systems, Inc. 3.3%
Microsoft Corp. 3.2%
Yahoo!, Inc. 2.3%
General Electric Co. 1.9%
Lucent Technologies, Inc. 1.5%
Home Depot, Inc. 1.4%
Johnson & Johnson 1.4%
America Online, Inc. 1.4%
EMC Corp. 1.3%
Procter & Gamble Co. 1.3%
4
<PAGE>
EVERGREEN
Select Balanced Fund
Portfolio Manager Commentary
Top 5 Bond Holdings
------------------------------------------
(as a percentage of 12/31/1999 net assets)
Coupon Maturity
U.S. Treasury Notes 7.75% 2/15/2001 4.5%
U.S. Treasury Notes 6.88% 5/15/2006 2.5%
U.S. Treasury Notes 7.25% 5/15/2004 2.3%
U.S. Treasury Notes 5.50% 3/31/2000 2.3%
U.S. Treasury Bonds 7.88% 2/15/2021 2.0%
Outlook
Looking ahead, the policy statement issued by the Federal Reserve Board at the
conclusion of its December Federal Open Market Committee meeting and the current
forward momentum of the economy suggest interest rates are heading higher. In
anticipation of higher rates, within our fixed income holdings we expect to
maintain a shorter duration stance in early 2000.
From an equity perspective, though the past six months have been an
extraordinary market environment, we urge investors not to expect returns of
this magnitude to continue indefinitely. For the near term, we believe stock
valuations in certain areas are overextended; nevertheless, we remain positive.
Growth stock investing is ultimately about identifying companies that will
produce superior and sustainable earnings growth. Given the extraordinary
events taking place in the fields of technology, economics and global politics,
we believe these opportunities are more abundant than ever.
5
<PAGE>
EVERGREEN
Select Core Equity Fund
Fund at a Glance as of December 31, 1999
-------------------------------------------------------------------------------
PORTFOLIO PROFILE
-------------------------------------------------------------------------------
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
Standard & Poor's 500 Index (S&P 500)
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
-------------------------------------------------------------------------------
Portfolio Inception Date: 12/31/1981 Class I Class IS
Class Inception Date 11/24/1997 2/4/1998
Average Annual Returns
6 months 8.02% 7.89%
1 year 17.64% 17.34%
3 years 19.18% 18.90%
5 years 23.83% 23.52%
10 years 14.37% 14.09%
Since Portfolio Inception 15.80% 15.51%
6-month income dividends per share $ 0.20 $ 0.10
6-month capital gain distributions per share $ 9.10 $ 9.10
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Select Core Equity Consumer Price Index - US S&P 500 Composite
12/31/89 1,000,000 1,000,000 1,000,000
12/31/90 976,256 1,061,063 968,948
12/31/91 1,250,825 1,093,577 1,264,172
12/31/92 1,322,176 1,125,297 1,360,469
12/31/93 1,419,470 1,156,225 1,497,597
12/31/94 1,316,091 1,187,153 1,517,380
12/31/95 1,795,355 1,217,288 2,087,661
12/31/96 2,263,388 1,257,732 2,566,887
12/31/97 2,883,973 1,279,144 3,423,285
12/31/98 3,257,596 1,299,762 4,401,453
12/31/99 3,831,966 1,335,448 5,328,124
Comparison of the change in value of a $1,000,000 investment in Evergreen Select
Core Equity Fund, Class I1, the S&P 500 and the Consumer Price Index (CPI).
The S&P 500 is an unmanaged index which does not include transaction costs
associated with buying and selling securities nor any management fees. The CPI
is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Index returns do not reflect expenses, which have been
deducted from the Fund's return.
Historical performance shown for Class IS from 11/24/1997 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee.
If these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTF) performance, adjusted for estimated mutual fund
expenses. The CTF was not registered under the 1940 Act and was not subject to
certain investment restrictions. If the CTF had been registered, its performance
might have been adversely affected.
Investment objective is non-fundamental and may be changed without the vote of
the Fund's shareholders.
6
<PAGE>
EVERGREEN
Select Core Equity Fund
Portfolio Manager Commentary
Portfolio Management Team
The Fund is managed by Mark C. Sipe, CFA and Hanspeter Giger, CFA who have over
33 years of combined investment experience.
[PHOTO] [PHOTO]
Mark C. Sipe Hanspeter Giger
Performance
The Fund's Class I Shares, performed well for the six-month period ended
December 31, 1999, returning 8.02% versus the S&P 500's 7.69% return for the
same period. This favorable performance did not come easily in a market still
led by the very largest capitalization stocks, and further, dominated by one
sector--technology. The results were equally gratifying in that they followed a
restructuring of the Fund aimed at better representing the largest stocks in the
market in proportion to their weightings in the S&P 500 index.
Portfolio
Characteristics
------------------
(as of 12/31/1999)
Total Net Assets $2,718,664,136
Number of Holdings 126
P/E Ratio 29.0x
Beta 0.93
Environment
The stock market continued to provide plenty of excitement in the second half of
calendar 1999. The first three months of the period actually saw the S&P 500
close down over 6%, with all market sectors, except technology down on a price
basis. However, the final three months more than made up for that poor interim
showing. As evidence of the ongoing relative strength of size (i.e.
capitalization) in the market, when taken as a group, the largest 50 stocks in
the S&P 500 index outperformed the 50 smallest by an amazing 51 percentage
points.
The largest of the large capitalization stocks continue to provide the bulk of
the market's returns, but an added narrowness took hold in the form of
spectacular performance by the technology sector, especially in the fourth
quarter of the year. Emblematic of that performance was the return of the
technology-heavy NASDAQ 100 Index, which was up almost 54% in the quarter, and
up over 60% for the six months. Within the S&P 500 specifically, technology was
far and away the strongest sector, up over 36% during the quarter, and up over
40% for the full period. That compares with the performance of the next
strongest sector, consumer cyclicals, which appreciated over 20% in the quarter,
but only about 8% for the second half of 1999.
7
<PAGE>
EVERGREEN
Select Core Equity Fund
Portfolio Manager Commentary
The returns of the remaining S&P sectors were uniformly below the performance of
the index during the final three months of 1999, and almost uniformly so during
the full period.
Strategy
Contributions to the Fund's performance during the reporting period came
primarily from overweighted positions in capital goods and health care. In the
case of capital goods, the bulk of the returns were generated by a single
holding, General Electric, which was up over 38% for the six months. Within
health care, a sector which performed reasonably poorly in the market during the
time frame analyzed, nevertheless contributed to Fund performance through
superior stock selection. A number of the Fund's holdings, namely Amgen,
Lincare Holdings, Teva Pharmaceuticals, Tenet Healthcare, and Warner Lambert
were up well in excess of the S&P's returns. As would be expected, an
overweighted position in the Fund's technology holdings was the proper stance
during the period. Technology holdings that contributed most positively
included Oracle, Nokia, Comverse Technology, Applied Materials, Network
Associates, and Cisco, all of which were up in excess of 65%. Offsetting the
full benefit of the Fund's sector weighting, however, was poor performance by
the Fund's fifth largest position, International Business Machines.
Top 5 Industries
------------------------------------------
(as a percentage of 12/31/1999 net assets)
Information Services & Technology 23.1%
Healthcare Products & Services 10.3%
Communication Systems & Services 8.8%
Finance & Insurance 7.5%
Retailing & Wholesale 7.2%
Top 10 Holdings
----------------------------------------
(as a percentage 12/31/1999 net assets)
General Electric Co. 6.8%
Microsoft Corp. 6.6%
Cisco Systems, Inc. 4.8%
Intel Corp. 2.9%
International Business Machines Corp. 2.8%
MCI WorldCom, Inc. 2.3%
Coca Cola Co. 2.2%
Wal-Mart Stores, Inc. 2.1%
Exxon Mobil Corp. 2.1%
Bristol-Myers Squibb Co. 1.8%
Outlook
The outlook for the stock market going forward will continue to be shaped by
expectations surrounding the direction of interest rates, corporate earnings,
and trends in domestic and international economies. At present, inflation and
economic growth worldwide continue to provide a positive backdrop for stocks.
However, an upward move in interest rates, which has not been met by a slowing
of index gains, may warrant some caution in the near term. Within the Fund,
investments will continue to be selected focusing on a combination of strong
fundamental outlooks and attractive relative valuations.
8
<PAGE>
EVERGREEN
Select Diversified Value Fund
Fund at a Glance as of December 31, 1999
-------------------------------------------------------------------------------
PORTFOLIO PROFILE
-------------------------------------------------------------------------------
Philosophy
Evergreen Select Diversified Value Fund is a 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
Standard & Poor's 500 Index (S&P 500)
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
-------------------------------------------------------------------------------
Portfolio Inception Date: 1/03/1991 Class I Class IS
Class Inception Date 1/22/1998 3/31/1998
Average Annual Returns
6 months 7.27% 7.11%
1 year 17.13% 16.79%
3 years 17.06% 16.39%
5 years 20.38% 19.97%
Since Portfolio Inception 16.46% 16.23%
6-month income dividends per share $0.09 $0.06
6-month capital gain distributions per share $1.08 $1.08
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Evergreen Consumer Price
Select Diversified Index - US S&P 500
1/3/91 1,000,000 1,000,000 1,000,000
12/31/91 1,283,236 1,030,600 1,304,700
12/31/92 1,389,775 1,060,500 1,404,100
12/31/93 1,524,936 1,089,700 1,545,600
12/31/94 1,556,105 1,118,800 1,566,000
12/31/95 2,057,218 1,147,200 2,154,600
12/31/96 2,452,576 1,185,400 2,649,100
12/31/97 3,090,385 1,205,500 3,533,000
12/31/98 3,359,805 1,225,000 4,542,500
12/31/99 3,934,708 1,258,600 5,498,900
Comparison of the change in value of a $1,000,000 investment in Evergreen Select
Diversified Value Fund Class I1, the S&P 500 and the Consumer Price Index (CPI).
The S&P 500 is an unmanaged index which does not include transaction costs
associated with buying and selling securities nor any management fees. The CPI
is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Index returns do not reflect expenses, which have been
deducted from the Fund's return.
Historical performance shown for Class I prior to its inception is based on the
performance of the Class Y Shares of Evergreen Value Fund. Historical
performance shown for Class IS reflects that of Class Y Shares of Evergreen
Value Fund, through 1/22/1998, the inception of Class I Shares. Performance
from 1/23/1998 through the inception of Class IS Shares reflects that of Class I
Shares. Performance prior to inception of Class IS Shares does not include this
class' 0.25% 12b-1 fees. Class I Shares do not pay a 12b-1 fee. If fees were
reflected, returns would have been lower.
Investment objective is non-fundamental and may be changed without the vote of
the Fund's shareholders.
9
<PAGE>
EVERGREEN
Select Diversified Value Fund
Portfolio Manager Commentary
Portfolio Management
Eric M. Teal is manager of the Evergreen Select Diversified Value Fund. He
employs rigorous fundamental analysis combined with a disciplined quantitative
approach to seek superior results and adherence to risk/reward objectives.
[PHOTO]
Eric M. Teal
Performance
For the six-month period ended December 31, 1999, the Fund's Class I Shares
7.27% return narrowly trailed that of its benchmark, the S&P 500 Index, which
returned 7.69% for the same period.
Portfolio
Characteristics
--------------------
(as of 12/31/1999)
Total Net Assets $544,552,587
Number of Holdings 100
P/E Ratio 29.0x
Beta 1.19
Environment
The first half of the Fund's fiscal year was broken into two distinctly
different periods, as the market fell sharply during the first three months,
then rebounded dramatically in the final quarter of 1999. Negative returns in
the opening months were primarily a result of well-publicized Y2K risks, higher
crude oil prices and rising interest rates that all combined to concern
investors.
In the second half of the period, the equity markets continued their familiar
trend from the past few years, amazing investors by climbing ever higher.
Against this backdrop, nearly every major market index posted solid gains, and
investors shrugged off their earlier fears. The negative factors that threatened
the market's continued growth were offset by what the expert's have dubbed
"Economic Nirvana"--strong economic growth, benign inflation and low
unemployment. These ideal conditions along with strong earnings reports and
enthusiasm for equities prompted investors to shrug off any negative
information, and stock prices soared.
Top 5 Industries
--------------------------------------------
(as a percentage of 12/31/1999 net assets)
Information Services & Technology 15.5%
Healthcare Products & Services 9.1%
Finance & Insurance 8.7%
Retailing & Wholesale 8.2%
Electrical Equipment & Services 7.5%
10
<PAGE>
EVERGREEN
Select Diversified Value Fund
Portfolio Manager Commentary
Strategy
During the six months, Fund results steadily increased in a volatile and narrow
market. Our multi-cap core strategy continues to emphasize all sectors with no
more than 75% of our stocks concentrated in large capitalization companies.
Identifying companies with a reasonable valuation and exhibiting some degree of
earnings acceleration is our primary objective.
Performance during the six-month period slightly trailed the narrow, technology-
laden S&P 500 Index. Positive stock selection contributed to the improving
results. Many of our top holdings have been in the wireless handset industry,
including Motorola, which gained over 60%, and Nokia, up over 100%.
Semiconductor related stocks continued to outperform due to pricing
improvements; Applied Materials rose over 65%. Biotechnology stocks also showed
strong gains during the period with Amgen up almost 100%. Our underperformers
were traditional defensive value stocks which included Philip Morris.
Top 10 Holdings
--------------------------------------------
(as a percentage of 12/31/1999 net assets)
Motorola, Inc. 3.8%
Microsoft Corp. 3.4%
General Electric Co. 3.2%
Wal-Mart Stores, Inc. 3.1%
American International Group, Inc. 2.4%
Lucent Technologies, Inc. 2.0%
Ford Motor Co. 1.8%
Lowe's Companies, Inc. 1.8%
Cisco Systems, Inc. 1.8%
Pfizer, Inc. 1.6%
The Fund remains committed to closely monitoring risk and continuing to focus on
stock selection rather than sector risks. Recent additions--especially in the
technology sector--have focused on earnings growth and valuation rather than
simply momentum.
Outlook
1999 was a tremendous year for the equity markets and technology stocks in
particular, with the technology-heavy NASDAQ gaining over 85%. The economy
continued to be very robust and earnings growth continued to accelerate upward.
We expect the Fed to make some aggressive moves to slow growth during early
2000. We believe that a higher interest rate environment sharpens our focus on
identifying companies with sustainable and quality driven earnings. At this
point our favorite sectors are still technology, along with basic materials and
consumer cyclicals. We also have not given up on utilities, which currently
enjoy historically high yields. Additionally, the financial sector is beginning
to look attractive, but we do not want to be too premature in overweighting the
group.
11
<PAGE>
EVERGREEN
Select Large Cap Blend Fund
Fund at a Glance as of December 31, 1999
-------------------------------------------------------------------------------
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
counter-cyclical, 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
Russell 1000 Growth Index
(Russell 1000 Growth)
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
-------------------------------------------------------------------------------
Portfolio Inception Date: 12/31/1993 Class I Class IS
Class Inception Date 11/24/1997 3/12/1998
Average Annual Returns
6 months 3.53% 3.41%
1 year 9.74% 9.45%
3 years 16.98% 16.71%
5 years 24.20% 23.90%
Since Portfolio Inception 18.74% 18.45%
6-month income dividends per share $0.13 $0.08
6-month capital gain distributions per share $6.51 $6.51
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Consumer Price Russell 1000
Select Large Cap Index - US Growth
12/31/93 1,000,000 1,000,000 1,000,000
12/31/94 948,384 1,026,749 1,026,561
12/31/95 1,324,983 1,052,812 1,408,288
12/31/96 1,750,686 1,087,791 1,733,917
12/31/97 2,283,227 1,106,310 2,262,535
12/31/98 2,553,381 1,124,143 3,138,235
12/31/99 2,802,807 1,155,007 4,178,330
Comparison of the change in value of a $1,000,000 investment in Evergreen Select
Large Cap Blend Fund Class I1, the Russell 1000 Growth and the Consumer Price
Index (CPI).
The Russell 1000 Growth is an unmanaged index which does not include transaction
costs associated with buying and selling securities nor any management fees. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may
vary based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Index returns do not reflect expenses, which have been
deducted from the Fund's return.
Historical performance shown for Class IS from 11/24/1997 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1
fee. If these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTF) performance, adjusted for estimated mutual fund
expenses. The CTF was not registered under the 1940 Act and was not subject to
certain investment restrictions. If the CTF had been registered, its
performance might have been adversely affected.
Investment objective is non-fundamental and may be changed without the vote of
the Fund's shareholders.
12
<PAGE>
EVERGREEN
Select Large Cap Blend Fund
Portfolio Manager Commentary
Portfolio Management Team
The Evergreen Select Large Cap Blend Fund is managed by Timothy M. Stevenson and
Eric M. Teal. The team-oriented approach incorporates multiple perspectives to
attempt to identify the most attractive opportunities in the market and ensures
adherence to the style-specific objectives.
[PHOTO] [PHOTO]
Timothy M. Eric M. Teal
Stevenson, CFA
Performance
For the six-month period ended December 31, 1999, the Fund's Class I Shares
returned 3.53% trailing that of its benchmark, the Russell 1000 Growth Index,
which returned 20.56% for the same period. The Fund lagged its benchmark
primarily due to under-exposure to semiconductors and electronics equipment
makers within the technology sector as well as poor returns among its capital
goods and consumer cyclical holdings.
Portfolio
Characteristics
------------------
(as of 12/31/1999)
Total Net Assets $344,647,844
Number of Holdings 63
P/E Ratio 27.4x
Beta 1.09
Environment
The first half of the Fund's fiscal year was broken into two distinctly
different periods, as the market fell sharply during the first three months,
then rebounded dramatically in the final quarter of 1999. Negative returns in
the opening months were primarily a result of well-publicized Y2K risks, higher
crude oil prices and rising interest rates that all combined to concern
investors.
In the second half of the fiscal period, the equity markets continued their
familiar trend from the past few years, amazing investors by climbing ever
higher. Against this backdrop, nearly every major market index posted solid
gains, and investors shrugged off earlier fears. The negative factors that
threatened the market's continued growth were offset by what the expert's have
dubbed "Economic Nirvana"--strong economic growth, benign inflation and low
unemployment. These ideal conditions along with strong earnings reports and
enthusiasm for equities--the overwhelming asset class of choice--prompted
investors to shrug off any negative information, and stock prices soared.
Top 5 Industries
------------------------------------------
(as a percentage of 12/31/1999 net assets)
Information Services & Technology 21.2%
Communication Systems & Services 10.7%
Healthcare Products & Services 10.4%
Finance & Insurance 8.9%
Banks 5.9%
13
<PAGE>
EVERGREEN
Select Large Cap Blend Fund
Portfolio Manager Commentary
Strategy
During the six months, Fund results rose but trailed the S&P 500 Index due to
specific stock selection. Relative performance was lost due to significant
earnings disappointments from Waste Management and Bank One. A large position
in Bank of America also subtracted from total return as rising interest rates
penalized most financial services companies. Within the portfolio's financial
weighting, we reduced exposure to insurance companies. Lastly, speculation
surrounding accounting issues at Tyco resulted in a pull back on one of Wall
Street's favorite stocks.
Offsetting some negative factors were strong fourth-quarter performances by the
portfolio's technology and communication services holdings. Underlying a
modestly overweighted technology position, Microsoft, EMC Corp. and Cisco
Systems--three of the Fund's top four holdings--jumped 28.9%, 53.1% and 56.2%,
respectively, during the final three months. The portfolio's weighting of
communication services stocks was increased in the latter part of the period due
to positive underlying fundamentals that this sector currently enjoys. MCI
Worldcom, GTE Corp and Motorola represent three holdings within this high-growth
sector.
Our strongest performers during the six months were our significant picks in
technology with Cisco and EMC Corp rising over 60% and 80%, respectively.
Alcoa, our top holding in the basic metal products and services sector rose over
31%.
Top 10 Holdings
------------------------------------------
(as a percentage of 12/31/1999 net assets)
Microsoft Corp. 5.4%
General Electric Co. 5.1%
EMC Corp. 4.6%
Cisco Systems, Inc. 4.5%
MCI WorldCom, Inc. 3.9%
Exxon Mobil Corp. 3.5%
Dayton Hudson Corp. 3.1%
Citigroup, Inc. 3.1%
GTE Corp. 2.9%
Warner-Lambert Co. 2.6%
Outlook
1999 was a tremendous year for the equity markets and technology stocks in
particular, with the technology-heavy NASDAQ gaining over 85%. The economy has
continued to be very robust and earnings growth has continued to accelerate
upward. We expect the Federal Reserve to make some aggressive moves to slow
growth during early 2000. We believe that a higher interest rate environment
increases our focus on identifying those companies with sustainable and quality
driven earnings. At this point our favorite sectors are still technology, along
with basic materials and consumer cyclicals. We also have not given up on
utilities, which enjoy historically high yields. Additionally, the financial
sector is beginning to look attractive, but we do not want to be too premature
in overweighting the group.
14
<PAGE>
EVERGREEN
Select Secular Growth Fund
Fund at a Glance as of December 31, 1999
-------------------------------------------------------------------------------
PORTFOLIO PROFILE
-------------------------------------------------------------------------------
Philosophy
Evergreen Select Secular Growth Fund seeks to identify companies that are
positioned to capitalize upon favorable secular trends within the U.S. economy.
We accomplish this by using highly focused fundamental research along with
quantitative tools to select high quality, large cap growth companies that
exhibit consistent and accelerating earnings growth.
Process
Stephen Dalton and his team of dedicated analysts utilize a disciplined
investment process in order to construct a portfolio of large cap, high quality,
growth-oriented companies:
. Ideas generated by the Secular Growth Team analysts
. Daily meetings to discuss buy/sell candidates, establish priorities
and discuss the market
. Analyst recommendations are made to the team; team leaders make final
decisions
. Quantitative tools are used to verify or challenge recommendations
Benchmark
Standard & Poor's 500 Index (S&P 500)
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
-------------------------------------------------------------------------------
Portfolio Inception Date: 12/31/1994 Class I Class IS
Class Inception Date 2/26/1999 2/26/1999
Average Annual Returns
6 months 50.01% 49.77%
1 year 66.30% 65.84%
3 years 45.04% 44.67%
5 years 39.16% 38.80%
Since Portfolio Inception 39.19% 38.84%
6-month capital gain distributions per share $3.27 $3.27
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Select Secular Growth Consumer Price Index - US S & P 500
12/31/94 1,000,000 1,000,000 1,000,000
6/30/95 1,197,451 1,018,704 1,202,128
12/31/95 1,366,569 1,025,384 1,375,833
6/30/96 1,611,157 1,046,760 1,514,679
12/31/96 1,709,825 1,059,452 1,691,658
6/30/97 1,947,789 1,070,808 2,040,258
12/31/97 2,215,359 1,077,488 2,256,050
6/30/98 2,725,200 1,088,844 2,655,629
12/31/98 3,137,643 1,094,856 2,900,693
6/30/99 3,479,044 1,110,220 3,260,309
12/31/99 5,219,120 1,124,916 3,511,398
Comparison of change in value of a $1,000,000 investment in Evergreen Select
Secular Growth Fund, Class I1, S&P 500 and the Consumer Price Index (CPI).
The S&P 500 is an unmanaged index which does not include transaction costs
associated with buying and selling securities nor any management fees. The CPI
is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may
vary based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Index returns do not reflect expenses, which have been
deducted from the Fund's return.
Historical performance shown for Classes I and IS prior to 7/12/1999 is based on
the Fund's predecessor common trust fund's (CTF) performance, adjusted for
estimated mutual fund expenses. The CTF was not registered under the Investment
Company Act of 1940 and was not subject to certain investment restrictions. If
the CTF had been registered, its performance might have been adversely affected.
Investment objective is non-fundamental and may be changed without the vote of
the Fund's shareholders.
15
<PAGE>
EVERGREEN
Select Secular Growth Fund
Portfolio Manager Commentary
Portfolio Management
Stephen M. Dalton, CFA
Stephen Dalton is the portfolio manager of the Evergreen Select Secular Growth
Fund and has 15 years of investment management and research experience, managing
growth and balanced portfolios. In addition, he has covered the health care,
technology, retail, media and entertainment industries. Prior to joining First
Capital, Steve was a Senior Portfolio Manager at CoreStates Investment Advisory,
which was acquired by First Union in 1998. Mr. Dalton is supported by a team of
three dedicated analysts with a combined 59 years of investment experience.
Performance
For the six-month period ended December 31, 1999, the Fund's Class I Shares
posted a 50.01% return. The Fund's performance significantly outpaced its
benchmark, the S&P 500, which returned 7.69% for the same period.
Portfolio
Characteristics
--------------------
(as of 12/31/1999)
Total Net Assets $945,307,303
Number of Holdings 57
P/E Ratio 67.5x
Beta 1.29
Environment
The first half of the Fund's six-month period ended 12/31/1999 was broken into
two distinctly different periods: the first three months in which the stock
market posted negative returns, and the amazing year-end ascent. The one
constant through this roller-coaster ride was the strong relative performance by
growth stocks.
Underlying this growth-dominated marketplace, was the extraordinary relative
performance of the technology sector. In the final three months alone, the
technology sector soared nearly 37%. Coupled with rising interest rates that
penalized value-oriented equity strategies, the technology-deficient value
indices trailed their growth counterparts throughout the period.
Top 5 Industries
--------------------------------------------
(as a percentage of 12/31/1999 net assets)
Information Services & Technology 30.5%
Retailing & Wholesale 16.0%
Communication Systems & Services 14.2%
Finance & Insurance 9.4%
Healthcare Products & Services 6.8%
16
<PAGE>
EVERGREEN
Select Secular Growth Fund
Portfolio Manager Commentary
Strategy
The Fund emphasizes large capitalization U.S. companies that have generated
consistent above-average historical and prospective profitability, as well as
issues which we believe will post accelerating earnings growth. The investment
process is based on an intensive top-down strategy that identifies secular
themes within the U.S. economy, and seeks to exploit them by identifying
companies with specific growth characteristics.
Within the technology sector (currently our largest sector weighting, though
roughly benchmark weighted) particular emphasis was placed on issues providing
internet infrastructure, both hardware and software support, security, high
speed access and bandwidth. As technological innovation spurs productivity and
continues to drive the U.S. economy, we feel these particular areas are poised
to exploit this powerful secular trend. In fact, strong returns by companies in
these areas had an extremely positive effect on total return, allowing the Fund
to outpace its benchmark and peer group average significantly during the past
six months.
Exceptional performance can also be attributed to a strong fourth quarter
rebound in the Fund's overweighted position in communication services--another
area the Fund enjoys very favorable underlying secular fundamentals. This
sector weighting was bolstered in September, with two of the portfolio's
holdings in this group--Global Crossing and Metromedia Fiber Networks--soaring
92% and 95%, respectively, in the final three months alone.
Exceptional six-month returns by newly added tech holdings in telecom equipment
(JDS Uniphase, up 289%, and Broadcom, up 88%), and internet infrastructure
software (Broadvision up 592%, Veritas, 352%, Verisign, 342%, and Sun
Microsystems, 125%), played a critical role in the Fund's superior performance.
New positions purchased during the quarter also contributed to strong
performance. These include Exodus, the premier web hosting service company, up
101% from our mid-October entry to quarter-end and Nokia, up 92% since early
October inclusion in the Fund. Our technology holdings represented the largest
sector weighting--46% of the portfolio compared to 43% of the benchmark--and
rose a dramatic 99% in the fourth quarter alone.
Though we remain extremely "bullish" on the technology sector over the long
term, we strategically took profits from some of our outstanding technology
performers in late December, and increased exposure to retail and financial
stocks due to both secular and seasonal factors in the first half of 2000.
Top 10 Holdings
--------------------------------------------
(as a percentage of 12/31/1999 net assets)
Home Depot, Inc. 3.2%
American Express Co. 3.1%
Wal-Mart Stores, Inc. 3.1%
Costco Wholesale Corp. 3.1%
Dayton Hudson Corp. 2.9%
VeriSign, Inc. 2.8%
EMC Corp. 2.7%
Cisco Systems, Inc. 2.5%
Veritas Software Corp. 2.5%
JDS Uniphase Corp. 2.4%
Outlook
Looking ahead, we anticipate continued quiescent inflation. Nevertheless, as we
anticipate persistent strong performance from the internet infrastructure and
business-to-business e-commerce arenas in technology, we remain bullish on the
Fund's positioning. Areas in which we remain especially bullish are telecom
equipment and services, internet infrastructure software, web hosting services,
and pervasive computing (wireless internet access). We also maintain a
favorable outlook for the financial sector, an area exploiting both the
demographic influence of higher levels of public investing and the globalization
of corporate financial services.
17
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Fund at a Glance as of December 31, 1999
-------------------------------------------------------------------------------
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 with a competitive advantage, growth-oriented,
and reasonably valued.
Benchmark
Russell 2000 Growth Index
(Russell 2000 Growth)
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
-------------------------------------------------------------------------------
Portfolio Inception Date: 12/28/1995 Class I
Class Inception Date 12/28/1995
Average Annual Returns
6 months 46.15%
1 year 58.84%
3 years 20.43%
Since Portfolio Inception 20.42%
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Select Small Cap CPI Russell 2000
12/31/95 1,000,000 1,000,000 1,000,000
6/30/96 1,148,043 1,020,847 1,119,229
12/31/96 1,204,639 1,033,225 1,112,624
6/30/97 1,231,918 1,044,300 1,170,760
12/31/97 1,296,860 1,050,814 1,256,739
6/30/98 1,381,194 1,061,889 1,325,311
12/31/98 1,324,461 1,067,752 1,272,237
6/30/99 1,439,564 1,082,736 1,435,321
12/31/99 2,103,624 1,097,068 1,820,534
Comparison of the change in value of a $1,000,000 investment in Evergreen Select
Small Cap Growth Fund Class I1, the Russell 2000 Growth and the Consumer Price
Index (CPI).
The Russell 2000 Growth is an unmanaged index which does not include transaction
costs associated with buying and selling securities nor any management fees. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
Smaller capitalization stock investing may offer the potential for greater long
term results; however, it is also generally associated with greater volatility
due to the higher risk of failure.
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Index returns do not reflect expenses,
which have been deducted from the Fund's return.
Investment objective is non-fundamental and may be changed without the vote of
the Fund's shareholders.
18
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Portfolio Manager Commentary
Portfolio Management
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 Company, 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]
Thomas L. Holman
Performance
Evergreen Select Small Cap Growth Fund performed exceptionally well during the
six-month period ended December 31, 1999. The Fund's Class I shares had a total
return of 46.15% during the six months, compared to a 26.83% return for the
benchmark Russell 2000 Growth Index.
The Fund's heavy emphasis on the technology sector, and good stock selection
within the sector, drove performance. Software companies, especially those
involved in commerce on the internet, and hardware companies, including
manufacturers of semi-conductors and components, all contributed to the Fund's
excellent returns.
Portfolio
Characteristics
--------------------
(as of 12/31/1999)
Total Net Assets $111,493,601
Number of Holdings 70
P/E Ratio 36.4x
Beta 1.31
Environment
The most significant development during the six months was the growing
realization that technology and its business implications were expanding faster
than anyone had anticipated. The internet propelled this growing awareness that
technology was both creating new enterprises and changing traditional business
operations. "Brick-and-mortar" retailers, for example, began evolving into
"click-and-mortar" operations in which their traditional stores became
supplemented by catalogue operations and websites. In the business-to-business
environment, large enterprises such as General Electric and General Motors
implemented new web-based systems, tying their production departments to their
supplying companies, creating potentially enormous efficiencies in ordering and
receiving supplies from vendors.
Investors' enthusiasm for technology spilled into the initial public offering
market. Shares of new technology companies, especially those involved in
e-commerce, rose rapidly.
The Fund was very well positioned to take advantage of these trends. Over the
six-month period, the Fund's average weighting in technology totaled more than
half its net assets. Software company stocks, for
19
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Portfolio Manager Commentary
example, averaged 16% of net assets during the period, while hardware averaged
23.6% and telecommunications averaged 12.6% of Fund net assets. All three
industries were over-weighted when compared to investment benchmarks. In
addition, stock selection within each of these industries was very good, as
portfolio holdings outperformed sector benchmarks. The Fund also successfully
invested in a number of initial public stock offerings, supporting overall
performance.
Top 5 Industries
--------------------------------------------
(as a percentage of 12/31/1999 net assets)
Information Services & Technology 31.1%
Business Equipment & Services 9.2%
Electronic Equipment & Services 8.1%
Electrical Equipment & Services 7.9%
Printing, Publishing, Broadcasting &
Entertainment 7.3%
Strategy
Investments in the software industry were the largest contributors to
performance, followed by hardware and telecommunications selections.
Electronic commerce was a major link among many of the better performing stocks
in the portfolio, including two initial public offerings, or IPOs: Commerce One
and Art Technology Group.
Commerce One, 20% of which is owned by General Motors, has developed a software
system that manages an electronic marketplace linking major manufacturers, such
as GM, with all suppliers, creating significant efficiencies in ordering and
supplying parts for the production process. The stock rose 855% after the
Fund's acquisition at the IPO. Art Technology Group is in a similar business,
producing software that runs electronic commerce sites for other businesses.
The Fund invested in the stock at its IPO in mid-July. The investment had
appreciated 609% by the end of the period on December 31, 1999.
Other "e-commerce" investments that did particularly well included QRS Corp.,
which operates a data base for universal product codes for web-based commerce,
allowing businesses to easily identify and keep track of products
electronically. Its stock rose by 102% during the six-month period. Another
successful investment was in Netegrity, which provides security systems for e-
commerce operations and is linked to the General Electric system. Its stock
rose by 129% after the Fund's investment on September 16, 1999 through the end
of 1999.
Clarify, a company that produces software enabling corporations to keep track of
all their relationships with customers and suppliers, was a leading performer.
The Fund invested in Clarify in mid-August and enjoyed a 259% gain after Clarify
received an acquisition offer from Nortel. Another software investment that
performed particularly well was Progress Software. The stock of this company,
which produces database management software, rose 101% during the six-month
period.
The long-term potential of hand-held digital devices for computing and
telecommunications drove the performance of many hardware-related investments.
Among the successful investments were: Kopin, which makes semi-conductors for
digital handsets; Three Five Systems, which manufactures display systems for
handsets; and Sandisk, which produces very small semi-conductors that provide
memory systems for digital phones.
Telecommunications tends to be dominated by large companies in which the Fund
cannot invest. However, we did find opportunities in some smaller
telecommunications companies, including Primus Telecom, which operates an
international fibre-optic based network, and Rural Cellular, which provides
cellular phone service in areas not serviced by the large, national networks.
20
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Portfolio Manager Commentary
Top 10 Holdings
--------------------------------------------
(as a percentage of 12/31/1999 net assets)
Kronos, Inc. 3.6%
Documentum, Inc. 2.6%
Universal Electronics, Inc. 2.3%
Startek, Inc. 2.2%
Three Five Systems, Inc. 2.2%
QRS Corp. 2.2%
Entercom Communications Corp. 2.2%
Sandisk Corp. 2.1%
Molecular Devices Corp. 2.1%
Natural Microsystems Corp. 2.1%
Strategy
We adjusted our long-term strategy of investing in small-company growth stocks
to gain greater flexibility. We now can maintain investments in fast-growing
companies, even if they grow to be larger than the limits of traditional small-
cap benchmarks. We believe this flexibility will allow us to keep winning stocks
for longer periods of time. While we have made this change, we still intend to
keep our focus on small-cap stocks and keep the average market capitalization of
holdings within the small-cap universe. As before, new investments will continue
to be confined to small-cap stocks. This greater flexibility allowed us to main
an investment in one of the Fund's best performing companies during the period,
Applied Micro Circuits. It grew to be more than $6 billion in market
capitalization. Under our older restrictions, we would have lost the opportunity
to benefit from its growth after it reached $2 billion in market capitalization.
Outlook
Even after the strong performance of the past six months, we remain optimistic
about the opportunities, particularly in technology. While we see some
companies whose stock prices have grown too high for their business
fundamentals, we also see significant investment opportunities created by the
internet, fibre-optics in networks, and hand-held, wireless communications
devices.
In addition, we believe there are excellent values in some non-technology
stocks, including cyclical manufacturing and industrial companies whose stocks
have been bypassed in the market's enthusiasm for technology. These include
aluminum suppliers, paper and commodity processors and suppliers. Many of these
companies are well positioned to benefit from the broad expansion of the global
economy.
We will continue to exercise our long-term discipline to invest in small, high-
growth companies with reasonable stock valuations. Additionally, we will
continue to take profits where stock prices have grown more rapidly than
justified by a company's future growth opportunities.
21
<PAGE>
EVERGREEN
Select Small Company Value Fund
Fund at a Glance as of December 31, 1999
-------------------------------------------------------------------------------
PORTFOLIO PROFILE
-------------------------------------------------------------------------------
Philosophy
Evergreen Select Small Company Value Fund seeks capital appreciation by
investing in little-known and relatively small companies. 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 Value Index
(Russell 2000 Value)
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
-------------------------------------------------------------------------------
Portfolio Inception Date: 12/23/1997 Class I Class IS
Class Inception Date 12/23/1997 12/31/1998
Average Annual Returns
6 months -4.93% -5.06%
1 year -3.29% -4.01%
3 years n/a n/a
5 years n/a n/a
Since Portfolio Inception -7.21% -7.70%
6-month income dividends per share $0.02 $0.01
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Evergreen Select Consumer Price Russell 2000
Sm Comp Value I Index - US Value
12/31/97 1,000,000 1,000,000 1,000,000
6/30/98 985,352 1,010,539 1,044,373
12/31/98 865,689 1,016,119 935,505
6/30/99 880,655 1,030,378 984,678
12/31/99 837,249 1,044,017 921,555
Comparison of the change in value of a $1,000,000 investment in Evergreen Select
Small Company Value Fund Class I1, the Russell 2000 Value and the Consumer Price
Index (CPI).
The Russell 2000 Value is an unmanaged index which does not include transaction
costs associated with buying and selling securities nor any management fees. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Index returns do not reflect expenses, which have been
deducted from the Fund's return.
Historical performance shown for Class IS prior to its inception is based on the
performance of Class I and has not been adjusted to reflect the effect of the
0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee. If these
fees had been reflected returns would have been lower.
Smaller capitalization stock investing may offer the potential for greater long
term results; however, it is also generally associated with greater volatility
due to the higher risk of failure.
Investment objective is non-fundamental and may be changed without the vote of
the Fund's shareholders.
22
<PAGE>
EVERGREEN
Select Small Company Value Fund
Portfolio Manager Commentary
Portfolio Management
Evergreen Select Small Company Value Fund is managed by Jordan Alexander, CFA.
Mr. Alexander joined Evergreen Asset Management Corp. in 1998, and is now a Vice
President of the firm. Earlier in his career, he was a health care associate
analyst at PaineWebber Incorporated and a senior financial analyst and auditor
at Arthur Andersen LLP.
[PHOTO]
Jordan Alexander, CFA
Performance
Evergreen Select Small Company Value Fund outperformed its benchmark during a
very difficult period for small cap value investing. For the six-month period
ended December 31, 1999, the Fund's Class I shares generated a total return of
4.93%, compared with the Russell 2000 Value Index, a common benchmark of small
company value investing, which had a total return of -6.41%. The performance of
the Fund during the period was helped by strong gains in several issues in the
technology/communications and health care sectors.
Portfolio
Characteristics
--------------------
(as of 12/31/1999)
Total Net Assets $85,115,454
Number of Holdings 83
P/E Ratio 20.9x
Beta N/A
Environment
The final six months of 1999 offered a very difficult environment for small cap
value investing. During this period, market leadership tended to be narrowly
focused on a relatively small group of large cap growth and technology
companies. While the Russell 2000 did well, performance tended to be limited to
issues in the technology sector, especially companies focused on the internet,
and initial public stock offerings. The Fund invests in attractively valued
small cap companies with a history of stable earnings growth, and issues with
these characteristics tended to be ignored by the market.
Top 5 Industries
--------------------------------------------
(as a percentage of 12/31/1999 net assets)
Banks 13.1%
Retailing & Wholesale 13.0%
Building, Construction & Furnishings 12.2%
Consumer Products & Services 12.0%
Healthcare Products & Services 10.1%
23
<PAGE>
EVERGREEN
Select Small Company Value Fund
Portfolio Manager Commentary
Strategy
The present management team assumed responsibility for the Fund in September and
began to restructure the portfolio. As part of the restructuring, we reduced
the Fund's weighting in the financial services sector and removed issues that we
believe had deteriorating business fundamentals and lacked catalysts for better
stock performance. In addition, we began to add attractively valued investments
in the technology and health care sectors. As we pursued this restructuring, we
pared down the number of portfolio holdings by a third, reducing the number of
companies from 128 on June 30 to 83 on December 31, 1999. In general, we did
not change industry allocations significantly, although we did reduce Fund
holdings in the financial sector, which we believe continue to be vulnerable in
a rising interest rate environment.
The restructuring helped the performance of the Fund during the final two months
of the fiscal period. Contributors to the improved performance included a
number of issues in the technology, health care and telecommunications sectors.
For example, approximately half of the 20 best performers in the Fund during the
period were either new names or additions to existing holdings. These issues
included Arthrocare and new names in the technology/communications sector, such
as CSG Systems and SBS Technologies. Arthrocare, which appreciated 326.3% during
the period, is developing several new products for the arthroscopy market. We
initiated our position in Arthrocare early last year when the stock was trading
at a forward price-earnings multiple of approximately 16x. The stock has
performed very well, as investors began to focus on the company's opportunities
in the spinal surgery and cosmetic surgery markets. CSG Systems, which
appreciated 63.2% during the period, provides customer care and billing systems
for the communications market. The company maintains its internally developed
software and is benefiting from the trend toward billing/customer service
outsourcing in the cable TV industry. CSG should see strong earnings growth
over the next several years as subscriber revenues increase from new services
offered by cable operators. SBS Technologies, which gained 44.6%, designs
custom embedded computer products that are used in the aerospace, computer and
telecommunications industries. The company's performance has been helped by
several design wins in the rapidly growing telecommunications market.
Other new holdings that helped the Fund's performance included Whole Foods
Market, which appreciated 41.6%, and Guess? Inc., which rose 32.1%. While many
of the portfolio additions had a positive impact on performance, the Fund was
hurt by a heavy weighting in financials, consumer cyclicals and consumer
staples. Many of the issues in these sectors were affected by investors'
concerns over rising interest rates.
Top 10 Holdings
--------------------------------------------
(as a percentage of 12/31/1999 net assets)
Whole Foods Market, Inc. 3.0%
Michael Foods, Inc. 2.6%
Alpharma, Inc., Cl. A 2.5%
Interim Services, Inc. 2.1%
SBS Technologies, Inc. 2.0%
Micros Systems, Inc. 2.0%
Ross Stores, Inc. 2.0%
Civic Bancorp. 1.9%
Genlyte Group, Inc. 1.9%
Furniture Brands International, Inc. 1.8%
24
<PAGE>
EVERGREEN
Select Small Company Value Fund
Portfolio Manager Commentary
Outlook
We are very positive about the potential for strong small-cap stock performance
as valuations of small-caps relative to larger companies are at some of the most
attractive levels in many years. In the past, the small-cap sector posted
dramatic gains following similar periods of underperformance. For example,
small-caps more than doubled in 1975-76 and were up over 65% in 1990-91 after
declining about 20% in the preceding year. The acceleration of stock buybacks
and merger and acquisition activity in the small-cap sector could provide a
catalyst for the small-cap sector this year. Favorable small-cap performance
has generally coincided with periods of strong cyclical growth, lower relative
cost of capital, and a more profitable business environment. While the cost of
capital for small-cap companies relative to larger companies suggests
uncertainty, the overall economic outlook for earnings growth and profitability
supports a favorable trend.
25
<PAGE>
EVERGREEN
Select Social Principles Fund
Fund at a Glance as of December 31, 1999
-------------------------------------------------------------------------------
PORTFOLIO PROFILE
-------------------------------------------------------------------------------
Philosophy
Evergreen Select Social Principles Fund invests in the stocks of mid-sized U.S.
companies, 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
Standard & Poor's MidCap 400 Index
(S&P MidCap 400)
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
-------------------------------------------------------------------------------
Portfolio Inception Date: 5/31/1988 Class I Class IS
Class Inception Date 11/24/1997 3/12/1998
Average Annual Returns
6 months 5.53% 5.38%
1 year 6.95% 6.68%
3 years 12.71% 12.39%
5 years 18.14% 17.83%
10 years 13.84% 13.56%
Since Portfolio Inception 13.88% 13.60%
6-month income dividends per share $0.06 $0.04
6-month capital gain distributions per share $8.48 $8.48
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Select Social Priniciples Consumer Price Index - US S & P 400 Midcap
12/31/89 1,000,000 1,000,000 1,000,000
12/31/90 923,575 1,061,063 948,811
12/31/91 1,328,376 1,093,577 1,424,143
12/31/92 1,460,974 1,125,297 1,593,830
12/31/93 1,601,794 1,156,225 1,815,798
12/31/94 1,588,316 1,187,153 1,751,021
12/31/95 2,187,987 1,217,288 2,290,121
12/31/96 2,552,891 1,257,732 2,729,431
12/31/97 3,151,017 1,279,144 3,604,695
12/31/98 3,418,618 1,299,762 4,293,463
12/31/99 3,656,298 1,335,448 4,923,001
Comparison of the change in value of a $1,000,000 investment in Evergreen Select
Social Principles Fund Class I1, S&P MidCap 400 and the Consumer Price Index
(CPI).
The S&P MidCap 400 is an unmanaged index which does not include transaction
costs associated with buying and selling securities nor any management fees. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Index returns do not reflect expenses, which have been
deducted from the Fund's return.
Historical performance shown for Class IS from 11/24/1997 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1
fee. If these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTF) performance, adjusted for estimated mutual fund
expenses. The CTF were not registered under the 1940 Act and were not subject to
certain investment restrictions. If the CTF had been registered, their
performance might have been adversely affected.
Investment objective is non-fundamental and may be changed without the vote of
the Fund's shareholders.
26
<PAGE>
EVERGREEN
Select Social Principles Fund
Portfolio Manager Commentary
Portfolio Management Team
[PHOTO] [PHOTO]
Jay Zelko Timothy M. Stevenson, CFA
[PHOTO]
Eric. M. Teal
Performance
For the six-month period ended December 31, 1999, the Evergreen Select Social
Principles Fund, Class I Shares', 5.53% return narrowly trailed that of its
benchmark, the S&P Midcap 400 Index, which returned 7.35% for the same period.
The Fund lagged its benchmark during the first three months due primarily to
poor performance among its capital goods holdings. Strong relative returns in
the final three months can be attributed to solid gains within the portfolio's
technology exposure.
Portfolio
Characteristics
-------------------
(as of 12/31/1999)
Total Net Assets $106,662,925
Number of Holdings 68
P/E Ratio 23.0x
Beta 1.26
Environment
The first half of the Fund's fiscal year was divided into two distinctly
different periods, as the market fell during the first three months, then
rebounded sharply in the final quarter of 1999. Negative returns in the opening
months were primarily a result of well-publicized Y2K risks, higher crude oil
prices and rising interest rates that all combined to concern investors.
The market's second half comeback was a due to ideal economic conditions--strong
economic growth, benign inflation and low unemployment--along with strong
earnings reports, prompting investors to shrug off negative information and
drive stock prices higher.
Top 5 Industries
--------------------------------------------
(as a percentage of 12/31/1999 net assets)
Information Services & Technology 28.0%
Retailing & Wholesale 8.3%
Healthcare Products & Services 7.1%
Finance & Insurance 6.5%
Food & Beverage Products 6.4%
27
<PAGE>
EVERGREEN
Select Social Principles Fund
Portfolio Manager Commentary
Strategy
The Fund lost ground during the volatile third quarter of 1999, but exceeded its
benchmark during the fourth quarter. Technology and communication services
represented two of the market's hottest-performing areas during the fourth
quarter, and the portfolio's overweighted position in both aided the Fund's
performance. Strong gains from computer hardware maker EMC Corp., up over 85%,
improved results. Other technology stocks in the fiberoptic and software
industries contributed to strong absolute performance: Veritas Software rose
over 230%, JDS Uniphase gained over 225%, and semiconductor company, PMC-Sierra,
jumped 120%.
Within a number of the portfolio's sector weightings, we remain strategically
positioned to capitalize on specific subsectors that enjoy strong fundamentals.
Underlying our technology exposure is an emphasis on semi-conducters and
software manufacturers. Within our financial services weighting, we decreased
exposure to insurance companies and we reduced the portfolio's weighting of
medical services stocks within an already underweighted healthcare position.
Due to strong seasonal factors and positive underlying fundamentals in the
retail sector, the portfolio remains very committed to this area. Current
holdings include Best Buy, Circuit City and Abercrombie & Fitch. Conversely, we
remain underweighted in the utility sector.
Top 10 Holdings
------------------------------------------
(as a percentage of 12/31/1999 net assets)
PMC-Sierra, Inc. 6.5%
Veritas Software Corp. 6.0%
Qwest Communications International, Inc. 3.6%
Teradyne, Inc. 3.6%
Best Buy Co., Inc. 3.3%
Compuware Corp. 3.3%
Sanmina Corp. 2.9%
Siebel Systems, Inc. 2.3%
Tellabs, Inc. 2.2%
United States Food Services 2.1%
Outlook
We continue to hold an optimistic outlook for mid-cap equities. Though mid-cap
stocks have underperformed their large-cap brethren for the past few years,
there are signs that a market rotation may be taking place. Our forecast proved
a few months premature, but the rotation definitely transpired during the final
three months of 1999 as mid-cap stocks outpaced their larger counterparts.
We believe this valuation disparity between large-cap and smaller-cap stocks as
well as mid-caps' own strong fundamentals, will attract investors to mid-cap
equities. We anticipate mid-caps' solid performance to continue and
enthusiastically look forward to the next few years.
28
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Fund at a Glance as of December 31, 1999
-------------------------------------------------------------------------------
PORTFOLIO PROFILE
-------------------------------------------------------------------------------
Philosophy
Evergreen Select Strategic Growth Fund is a growth-style equity product that
emphasizes large and mid-sized U.S. companies. We believe that superior long-
term returns can be achieved through a disciplined approach of investing in
stocks with excellent historical and future earnings growth.
Process
The Fund is managed by two investment professionals who utilize a unique blend
of quantitative and qualitative fundamental analysis. This bottom-up stock
selection process is research-intensive and identifies companies which exhibit
strong current fundamentals, histories of superior earnings/dividend growth and
rising earnings expectations.
Benchmark
Russell 1000 Growth Index
(Russell 1000 Growth)
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
-------------------------------------------------------------------------------
Portfolio Inception Date: 12/31/1994 Class I Class IS
Class Inception Date 11/24/1997 2/27/1998
Average Annual Returns
6 months 41.30% 41.13%
1 year 58.29% 57.88%
3 years 37.04% 36.67%
Since Portfolio Inception 34.59% 34.24%
6-month income dividends per share $0.02 $0.00
6-month capital gain distributions per share $8.05 $8.05
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Class I CPI Russell 1000 Growth
12/31/94 1,000,000 1,000,000 1,000,000
6/30/95 1,209,641 1,018,704 1,202,924
12/31/95 1,382,642 1,025,384 1,371,851
6/30/96 1,516,114 1,046,760 1,537,472
12/31/96 1,715,660 1,059,452 1,689,055
6/30/97 2,004,134 1,070,808 2,019,276
12/31/97 2,242,768 1,077,488 2,203,996
6/30/98 2,621,608 1,088,844 2,653,042
12/31/98 2,789,394 1,094,856 3,057,038
6/30/99 3,124,954 1,110,220 3,376,522
12/31/99 4,416,398 1,124,916 4,070,222
Comparison of the change in value of a $1,000,000 investment in Evergreen Select
Strategic Growth Fund Class I1, the Russell 1000 Growth and the Consumer Price
Index (CPI).
The Russell 1000 Growth is an unmanaged index which does not include transaction
costs associated with buying and selling securities nor any management fees. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may
vary based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Index returns do not reflect expenses, which have been
deducted from the Fund's return.
Historical performance shown for Class IS from 11/24/1997 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1
fee. If these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTF) performance, adjusted for estimated mutual fund
expenses. The CTF was not registered under the 1940 Act and was not subject to
certain investment restrictions. If the CTF had been registered, its
performance might have been adversely affected.
Investment objective is non-fundamental and may be changed without the vote of
the Fund's shareholders.
29
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Portfolio Manager Commentary
Portfolio Management Team
David M. Chow, CFA and W. Shannon Reid, CFA 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.
[PHOTO] [PHOTO]
David M. Chow, CFAW. Shannon Reid, CFA
Performance
The Evergreen Select Strategic Growth Fund, Class I Shares, advanced 41.30% for
the six-month period ended December 31, 1999. This performance significantly
outpaced our benchmark, the Russell 1000 Growth Index, which returned 20.56% for
the same period.
Portfolio
Characteristics
---------------
(as of 12/31/1999)
Total Net Assets $731,040,556
Number of Holdings 62
P/E Ratio 45.5x
Beta 1.25
Environment
A strong domestic economy, an improving global economic outlook and the absence
of signs of inflation drove stock market indices to record valuation levels
during this reporting period. The macro-economic environment notwithstanding,
the Fund's management team continues to employ a combination of quantitative and
qualitative investment analysis that seeks to identify companies that will
exhibit superior and sustainable earnings growth. This methodology has resulted
in a portfolio currently skewed towards technology and consumer cyclicals and
underweighted in traditional growth oriented sectors such as consumer staples
and health care.
Strategy
Technology stocks were the undisputed winners for the reporting period and the
year. As of December 31, 1999, this group represented the Fund's largest
sector. Within the sector we continue to emphasize three trends: (1)
technological advances in communications networks, (2) the growth in demand for
enterprise information storage solutions and (3) business-to-business electronic
commerce.
30
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Portfolio Manager Commentary
Cisco Systems and JDS Uniphase, two of the Fund's larger holdings, are prime
beneficiaries of this first trend. Cisco is the dominant player in data
communications infrastructure equipment controlling more than three-quarters of
the market for key internet backbone products such as routers and switches. JDS
Uniphase is the leading component provider for advanced fiber optics networks
utilizing a relatively new technology called dense-wavelength divisional
multiplexing. On the enterprise information storage front, EMC Corporation is
the undisputed leader. This market will continue to experience explosive
growth, as the global economy increasingly becomes information based. Business-
to-business electronic commerce companies became the darlings of Wall Street in
the latter half of 1999. Issues held by the Fund in this area include
Broadvision and Siebel Systems. While we are optimistic regarding the growth
opportunities for these companies we have recently trimmed positions given the
recent rapid price appreciation of the stocks.
Top 5 Industries
------------------------------------------
(as a percentage of 12/31/1999 net assets)
Information Services & Technology 33.8%
Healthcare Products & Services 12.2%
Communication Systems & Services 10.8%
Retailing & Wholesale 9.6%
Telecommunication Services & Equipment 5.1%
Consumer cyclicals represented the Fund's second largest sector weighting at 21%
versus 18% for the benchmark. Healthy consumer spending patterns, innovative
business models, and strong management teams were the factors shared by our top
performers. These included Yahoo (up 151% for the period), America Online (up
38%), Home Depot (up 60%) and Wal-Mart (up 43%). We have always included Yahoo
and America Online in the media subsector of consumer cyclicals as opposed to
technology, a definition we believe was validated by the recently announced
AOL/Time Warner merger.
Our exposure to health care at 12% is below that of the benchmark's 13%. The
underweighting is attributable to our concerns toward decelerating earnings
growth for many of these companies as well as rhetoric regarding increased
regulation as we cycle through the presidential campaign.
Likewise, we are underweighted in consumer staples. We find this group
generally unattractive given their relatively low top line growth and premium
valuations.
Top 10 Holdings
------------------------------------------
(as a percentage of 12/31/1999 net assets)
Cisco Systems, Inc. 5.8%
Microsoft Corp. 5.6%
Yahoo!, Inc. 4.1%
General Electric Co. 3.3%
Lucent Technologies, Inc. 2.6%
Johnson & Johnson 2.5%
Home Depot, Inc. 2.5%
America Online, Inc. 2.4%
Procter & Gamble Co. 2.4%
EMC Corp. 2.3%
Outlook
The past six months has been an extraordinary market environment. We urge
investors not to expect returns of this magnitude to continue indefinitely. For
the near term, stock valuations in certain areas are overextended. Nevertheless,
we remain positive. Growth stock investing is ultimately about identifying
companies that will produce superior and sustainable earnings growth. Given the
extraordinary events taking place in the fields of technology, economics and
global politics, we believe these opportunities are more abundant than ever.
31
<PAGE>
EVERGREEN
Select Strategic Value Fund
Fund at a Glance as of December 31, 1999
-------------------------------------------------------------------------------
PORTFOLIO PROFILE
-------------------------------------------------------------------------------
Philosophy
Evergreen Select Strategic Value Fund is a value-style equity fund 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 screening 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 identify 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
(Russell 1000 Value)
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
-------------------------------------------------------------------------------
Portfolio Inception Date: 12/31/1981 Class I Class IS
Class Inception Date 11/24/1997 3/11/1998
Average Annual Returns
6 months -1.87% -2.00%
1 year 9.06% 8.80%
3 years 15.31% 15.05%
5 years 20.79% 20.51%
10 years 14.19% 13.91%
Since Portfolio Inception 16.86% 16.58%
6-month income dividends per share $1.63 $1.37
6-month capital gain distributions per share $4.19 $4.19
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Class I CPI Russell 1000 Value
6/30/89 1,000,000 1,000,000 1,000,000
6/30/90 871,191 1,061,063 919,165
6/30/91 1,063,238 1,093,577 1,145,329
6/30/92 1,272,913 1,125,297 1,303,510
6/30/93 1,440,274 1,156,225 1,539,748
6/30/94 1,466,163 1,187,153 1,509,126
6/30/95 1,954,466 1,217,288 2,087,871
6/30/96 2,458,529 1,257,732 2,539,685
6/30/97 3,251,555 1,279,144 3,433,545
6/30/98 3,456,038 1,299,762 3,970,216
6/30/99 3,768,732 1,335,448 4,262,214
Comparison of the change in value of a $1,000,000 investment in Evergreen Select
Strategic Value Fund Class I1, Russell 1000 Value and the Consumer Price Index
(CPI).
The Russell 1000 Value is an unmanaged index which does not include transaction
costs associated with buying and selling securities nor any management fees. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Index returns do not reflect expenses, which have been
deducted from the Fund's return.
Historical performance shown for Class IS from 11/24/1997 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1
fee. If these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTF) performance, adjusted for estimated mutual fund
expenses. The CTF was not registered under the 1940 Act and was not subject to
certain investment restrictions. If the CTF had been registered, its
performance might have been adversely affected.
Investment objective is non-fundamental and may be changed without the vote of
the Fund's shareholders.
32
<PAGE>
EVERGREEN
Select Strategic Value Fund
Portfolio Manager Commentary
Portfolio Management
[PHOTO]
Timothy O'Grady
Performance
For the six-month period ended December 31, 1999, the -1.87% return of the
Evergreen Select Strategic Value Fund, Class I Shares, outpaced that of its
benchmark, the Russell 1000 Value Index, which returned -4.89% for the same
period. Strong relative performance during the period can be primarily
attributed to a strategic overweighting and stock selection within the
technology sector.
Portfolio
Characteristics
---------------
(as of 12/31/1999)
Total Net Assets $763,143,554
Number of Holdings 45
P/E Ratio 16.3x
Beta 0.92
Environment
U.S. equity investors experienced a roller-coaster ride over the past six
months, as the S&P 500 Index fell in the first three months before rebounding
nearly 15% in the latter half of the period. Equity investors were concerned by
rising interest rates, inflationary and Y2K fears in the opening months, but
then simply shrugged off these negative events and drove every major equity
index higher during the fourth quarter of 1999.
Underlying the entire six-month period was the market's insatiable appetite for
technology stocks. This ultra-growth segment of the market proved to be the
best performer in 1999, and its dramatic rise was the primary reason growth
stocks have again outperformed their value-oriented (and technology-deficient)
counterparts. In the fourth quarter alone, the Russell 1000 Growth Index
outpaced the Russell 1000 Value Index by nearly 20%.
Top 5 Industries
------------------------------------------
(as a percentage of 12/31/1999 net assets)
Banks 12.3%
Oil/Energy 11.8%
Finance & Insurance 9.4%
Utilities-Telephone 8.9%
Telecommunication Services & Equipment 8.2%
33
<PAGE>
EVERGREEN
Select Strategic Value Fund
Portfolio Manager Commentary
Strategy
Despite a difficult period for value investors, the Evergreen Select Strategic
Value Fund posted strong relative returns. Throughout the period we maintained
a technology weighting of roughly 1.5x that of our benchmark--the maximum
weighting permitted. However, we sold some of the portfolio's technology
holdings to lock-in extraordinary gains and reduce our overall exposure to this
group.
Financial services stocks represent another strong sector weighting, and within
this area we modified our bank focus early in the six-month period.
Specifically, we elected to eliminate First American, Summit Bancorporation and
Fleet Financial as portfolio holdings. Due to acquisition activity as well as
other declining fundamentals, we downgraded our outlook for these companies and
removed them from the portfolio. Offsetting these transactions were purchases
of Wells Fargo and Bank of America, two companies enjoying the fundamental
competitive advantages and differentiation theme we find attractive. In the
case of both companies, they possess scale, breadth and intermediation of
products and services and a superior technology platform.
Within the consumer discretionary sector we moved to sell our positions in V.F.
Corporation and Sears, while initiating a position in Lowe's. Strong performers
during the six months include Nokia (up 108.7%), Alcoa (up 35.0%), Century
Telephone (up 19.4%), and Alltell (up 16.6%).
Top 10 Holdings
------------------------------------------
(as a percentage of 12/31/1999 net assets)
Alcoa, Inc. 4.3%
Exxon Mobil Corp. 3.7%
Chase Manhattan Corp. 3.5%
Black & Decker Corp. 3.4%
AT&T Corp. 3.3%
GTE Corp. 3.2%
Mead Corp. 3.2%
Centurytel, Inc. 3.1%
Citigroup, Inc. 3.1%
Disney (Walt) Co. 3.0%
Outlook
Despite the current euphoria over growth stocks, the fundamental reasons for
owning value stocks discussed in our earlier reports have not altered. In fact,
evidence continues to accumulate supporting our stance and outlook. The
domestic economy continues on a sustainable growth path and many foreign
economies are recovering from depressed levels. Corporate earnings momentum
continues positive, both on an absolute basis and relative to expectations.
34
<PAGE>
EVERGREEN
Select Balanced Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 # ----------------------
(Unaudited) 1999 1998 (a)
<S> <C> <C> <C>
CLASS I SHARES
Net asset value, beginning of
period $ 13.56 $ 13.39 $ 12.58
-------- --------- ---------
Income from investment operations
Net investment income 0.21 0.46 0.16
Net realized and unrealized gains 1.32 0.27 0.81
-------- --------- ---------
Total from investment operations 1.53 0.73 0.97
-------- --------- ---------
Distributions to shareholders from
Net investment income (0.25) (0.42) (0.16)
Net realized gains (0.53) (0.14) 0
-------- --------- ---------
Total distributions to shareholders (0.78) (0.56) (0.16)
-------- --------- ---------
Net asset value, end of period $ 14.31 $ 13.56 $ 13.39
-------- --------- ---------
Total return 11.60% 5.70% 7.76%
Ratios and supplemental data
Net assets, end of period
(thousands) $645,161 $ 658,733 $ 723,850
Ratios to average net assets
Expenses++ 0.66%+ 0.69% 0.70%+
Net investment income 3.06%+ 3.47% 2.80%+
Portfolio turnover rate 88% 60% 37%
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 # ----------------------
(Unaudited) 1999 1998 (b)
<S> <C> <C> <C>
CLASS IS SHARES
Net asset value, beginning of
period $ 13.59 $ 13.42 $ 13.34
-------- --------- ---------
Income from investment operations
Net investment income 0.18 0.35 0.07
Net realized and unrealized gains 1.34 0.35 0.09
-------- --------- ---------
Total from investment operations 1.52 0.70 0.16
-------- --------- ---------
Distributions to shareholders from
Net investment income (0.23) (0.39) (0.08)
Net realized gains (0.53) (0.14) 0
-------- --------- ---------
Total distributions to shareholders (0.76) (0.53) (0.08)
-------- --------- ---------
Net asset value, end of period $ 14.35 $ 13.59 $ 13.42
-------- --------- ---------
Total return 11.48% 5.43% 1.23%
Ratios and supplemental data
Net assets, end of period
(thousands) $ 1,038 $ 405 $ 215
Ratios to average net assets
Expenses++ 0.91%+ 0.93% 0.95%+
Net investment income 2.73%+ 3.35% 2.58%+
Portfolio turnover rate 88% 60% 37%
</TABLE>
(a) For the period from January 22, 1998 (commencement of class operations) to
June 30, 1998.
(b) For the period from April 9, 1998 (commencement of class operations) to
June 30, 1998.
+ Annualized.
++ The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
35
<PAGE>
EVERGREEN
Select Core Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ----------------------
(Unaudited) 1999 1998 (a)
<S> <C> <C> <C>
CLASS I SHARES
Net asset value, beginning of
period $ 92.30 $ 92.59 $ 82.97
---------- ---------- ----------
Income from investment operations
Net investment income 0.22 0.72 0.51
Net realized and unrealized gains 6.61 7.51 9.62
---------- ---------- ----------
Total from investment operations 6.83 8.23 10.13
---------- ---------- ----------
Distributions to shareholders from
Net investment income (0.20) (0.69) (0.51)
Net realized gains (9.10) (7.83) 0
---------- ---------- ----------
Total distributions to shareholders (9.30) (8.52) (0.51)
---------- ---------- ----------
Net asset value, end of period $ 89.83 $ 92.30 $ 92.59
---------- ---------- ----------
Total return 8.02% 9.82% 12.23%
Ratios and supplemental data
Net assets, end of period
(thousands) $2,671,204 $1,913,483 $1,952,436
Ratios to average net assets
Expenses++ 0.69%+ 0.67% 0.70%+
Net investment income 0.53%+ 0.83% 0.96%+
Portfolio turnover rate 5% 55% 22%
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ----------------------
(Unaudited) 1999 1998 (b)
<S> <C> <C> <C>
CLASS IS SHARES
Net asset value, beginning of
period $ 86.54 $ 87.33 $ 80.21
---------- ---------- ----------
Income from investment operations
Net investment income 0.12 0.48 0.27
Net realized and unrealized gains 6.15 7.02 7.16
---------- ---------- ----------
Total from investment operations 6.27 7.50 7.43
---------- ---------- ----------
Distributions to shareholders from
Net investment income (0.10) (0.46) (0.31)
Net realized gains (9.10) (7.83) 0
---------- ---------- ----------
Total distributions to shareholders (9.20) (8.29) (0.31)
---------- ---------- ----------
Net asset value, end of period $ 83.61 $ 86.54 $ 87.33
---------- ---------- ----------
Total return 7.89% 9.53% 9.27%
Ratios and supplemental data
Net assets, end of period
(thousands) $47,460 $30,240 $18,244
Ratios to average net assets
Expenses++ 0.94%+ 0.92% 0.95%+
Net investment income 0.27%+ 0.56% 0.60%+
Portfolio turnover rate 5% 55% 22%
</TABLE>
(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.
+ Annualized.
++ The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
See Combined Notes to Financial Statements.
36
<PAGE>
EVERGREEN
Select Diversified Value Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ----------------------
(Unaudited) 1999 1998 (a)
<S> <C> <C> <C>
CLASS I SHARES
Net asset value, beginning of period $ 27.65 $ 26.22 $ 23.81
-------- --------- ---------
Income from investment operations
Net investment income 0.07 0.22 0.14
Net realized and unrealized gains 1.89 2.06 2.41
-------- --------- ---------
Total from investment operations 1.96 2.28 2.55
-------- --------- ---------
Distributions to shareholders from
Net investment income (0.09) (0.20) (0.14)
Net realized gains (1.08) (0.65) 0
-------- --------- ---------
Total distributions to shareholders (1.17) (0.85) (0.14)
-------- --------- ---------
Net asset value, end of period $ 28.44 $ 27.65 $ 26.22
-------- --------- ---------
Total return 7.27% 9.08% 10.72%
Ratios and supplemental data
Net assets, end of period (thousands) $543,140 $ 606,355 $ 797,352
Ratios to average net assets
Expenses++ 0.62%+ 0.62% 0.68%+
Net investment income 0.53%+ 0.88% 1.24%+
Portfolio turnover rate 23% 76% 56%
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ----------------------
(Unaudited) 1999 1998 (b)
<S> <C> <C> <C>
CLASS IS SHARES
Net asset value, beginning of period $ 27.33 $ 25.93 $ 26.56
-------- --------- ---------
Income from investment operations
Net investment income 0.04 0.12 0.06
Net realized and unrealized gains or
losses 1.86 2.07 (0.64)
-------- --------- ---------
Total from investment operations 1.90 2.19 (0.58)
-------- --------- ---------
Distributions to shareholders from
Net investment income (0.06) (0.14) (0.05)
Net realized gains (1.08) (0.65) 0
-------- --------- ---------
Total distributions to shareholders (1.14) (0.79) (0.05)
-------- --------- ---------
Net asset value, end of period $ 28.09 $ 27.33 $ 25.93
-------- --------- ---------
Total return 7.11% 8.77% (2.19%)
Ratios and supplemental data
Net assets, end of period (thousands) $ 1,413 $ 1,384 $ 210
Ratios to average net assets
Expenses++ 0.87%+ 0.88% 0.93%+
Net investment income 0.28%+ 0.62% 0.80%+
Portfolio turnover rate 23% 76% 56%
</TABLE>
(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.
+ Annualized.
++ The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
See Combined Notes to Financial Statements.
37
<PAGE>
EVERGREEN
Select Large Cap Blend Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 --------------------
(Unaudited) 1999 (d) 1998 (a)
<S> <C> <C> <C>
CLASS I SHARES (c)
Net asset value, beginning of period $ 48.35 $ 50.74 $ 45.05
-------- --------- ---------
Income from investment operations
Net investment income 0.13 0.40 0.23
Net realized and unrealized gains 1.46 2.81 5.70
-------- --------- ---------
Total from investment operations 1.59 3.21 5.93
-------- --------- ---------
Distributions to shareholders from
Net investment income (0.13) (0.40) (0.24)
Net realized gains (6.51) (5.20) 0
-------- --------- ---------
Total distributions to shareholders (6.64) (5.60) (0.24)
-------- --------- ---------
Net asset value, end of period $ 43.30 $ 48.35 $ 50.74
-------- --------- ---------
Total return 3.53% 7.12% 13.18%
Ratios and supplemental data
Net assets, end of period (thousands) $344,219 $ 438,375 $ 497,534
Ratios to average net assets
Expenses++ 0.70%+ 0.68% 0.71%+
Net investment income 0.54%+ 0.79% 0.80%+
Portfolio turnover rate 11% 46% 42%
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 --------------------
(Unaudited) 1999 (d) 1998 (b)
<S> <C> <C> <C>
CLASS IS SHARES
Net asset value, beginning of period $ 48.33 $ 50.74 $ 49.75
-------- --------- ---------
Income from investment operations
Net investment income 0.08 0.28 0.08
Net realized and unrealized gains 1.45 2.81 1.00
-------- --------- ---------
Total from investment operations 1.53 3.09 1.08
-------- --------- ---------
Distributions to shareholders from
Net investment income (0.08) (0.30) (0.09)
Net realized gains (6.51) (5.20) 0
-------- --------- ---------
Total distributions to shareholders (6.59) (5.50) (0.09)
-------- --------- ---------
Net asset value, end of period $ 43.27 $ 48.33 $ 50.74
-------- --------- ---------
Total return 3.41% 6.83% 2.17%
Ratios and supplemental data
Net assets, end of period (thousands) $ 429 $ 382 $ 301
Ratios to average net assets
Expenses++ 0.95%+ 0.93% 0.96%+
Net investment income 0.30%+ 0.53% 0.57%+
Portfolio turnover rate 11% 46% 42%
</TABLE>
(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.
(c) On April 30, 1999, Class IC shares of the Fund were converted to Class I
shares. Shareholders of Class IC shares became owners of that number of
Class I shares having a net asset value equal to the net asset value of
their shares immediately prior to the close of business on April 30, 1999.
Class IC is the accounting survivor, its basis of accounting for assets and
liabilities and its operating results for the periods prior to April 30,
1999 have been carried forward in these financial statements.
(d) The Fund redesignated $0.02 per share for Class I and IS of distributions
from net investment income declared after January 1, 1999, as capital gains
distributions after January 1, 1999.
+ Annualized.
++ The ratio of expenses to average net assets includes fee waivers and
excludes expense reductions.
See Combined Notes to Financial Statements.
38
<PAGE>
EVERGREEN
Select Secular Growth Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1999 Period Ended
(Unaudited) June 30, 1999 (a)
<S> <C> <C>
CLASS I SHARES
Net asset value, beginning of period $ 99.99 $100.00
-------- -------
Income from investment operations
Net investment income or loss (0.13) 0.15
Net realized and unrealized gains or
losses 49.27 (0.01)
-------- -------
Total from investment operations 49.14 0.14
-------- -------
Distributions to shareholders from
Net investment income 0 (0.15)
Net realized and unrealized gains on
securities (3.27) 0
-------- -------
Total distributions to shareholders (3.27) (0.15)
-------- -------
Net asset value, end of period $ 145.86 $ 99.99
-------- -------
Total return 50.01% 0.14%
Ratios and supplemental data
Net assets, end of period (thousands) $945,226 $40,128
Ratios to average net assets
Expenses++ 0.70%+ 0.71%+
Net investment income or loss (0.18%)+ 0.18%+
Portfolio turnover rate 48% 65%
<CAPTION>
Six Months Ended
December 31, 1999 Period Ended
(Unaudited) June 30, 1999 (a)
<S> <C> <C>
CLASS IS SHARES
Net asset value, beginning of period $ 99.95 $100.00
-------- -------
Income from investment operations
Net investment income or loss (0.26) 0.21
Net realized and unrealized gains or
losses 49.15 (0.15)
-------- -------
Total from investment operations 48.89 0.06
-------- -------
Distributions to shareholders from
Net investment income 0 (0.11)
Net realized and unrealized gains on
securities (3.27) 0
-------- -------
Total distributions to shareholders (3.27) (0.11)
-------- -------
Net asset value, end of period $ 145.57 $ 99.95
-------- -------
Total return 49.77% 0.06%
Ratios and supplemental data
Net assets, end of period (thousands) $ 81 $ 1
Ratios to average net assets
Expenses++ 0.95%+ 0.96%+
Net investment income or loss (0.50%)+ 0.63%+
Portfolio turnover rate 48% 65%
</TABLE>
(a) For the period from February 26, 1999 (commencement of class operations) to
June 30, 1999.
+ Annualized.
++ Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
See Combined Notes to Financial Statements.
39
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended June 30, Year Ended February 28,
----------------------- ----------------------------
Six Months Ended
December 31, 1999 Period Ended
(Unaudited) 1999 1998 (c) 1998 # 1997 (b) # June 30, 1996 (a)
<S> <C> <C> <C> <C> <C> <C>
CLASS I SHARES
Net asset value, beginning of
period $ 13.65 $ 13.12 $ 13.23 $ 11.28 $ 11.65 $10.00
-------- --------- --------- ------------ ----------- ------
Income from investment operations
Net investment loss (0.04) (0.08) (0.03) (0.06) (0.04) (0.03)
Net realized and unrealized gains
or losses 6.34 0.63 (0.08) 2.48 (0.16) 1.68
-------- --------- --------- ------------ ----------- ------
Total from investment operations 6.30 0.55 (0.11) 2.42 (0.20) 1.65
-------- --------- --------- ------------ ----------- ------
Distributions to shareholders from
Net realized gains 0 (0.02) 0 (0.47) (0.17) 0
-------- --------- --------- ------------ ----------- ------
Total distributions to shareholders 0 (0.02) 0 (0.47) (0.17) 0
-------- --------- --------- ------------ ----------- ------
Net asset value, end of period $ 19.95 $ 13.65 $ 13.12 $ 13.23 $ 11.28 $11.65
-------- --------- --------- ------------ ----------- ------
Total return 46.15% 4.22% (0.83%) 21.67% (1.75%) 16.50%
Ratios and supplemental data
Net assets, end of period
(thousands) $111,494 $ 70,114 $ 69,283 $ 47,524 $ 2,888 $2,446
Ratios to average net assets
Expenses++ 0.98%+ 1.02% 1.01%+ 0.92% 1.00%+ 1.00%+
Net investment loss (0.56%)+ (0.68%) (0.62%)+ (0.48%) (0.57%)+ (0.45%)+
Portfolio turnover rate 129% 165% 54% 166% 123% 57%
</TABLE>
(a) For the period from December 28, 1995 (commencement of class operations) to
June 30, 1996
(b) For the period from July 1, 1996 to February 28, 1997. The Fund changed its
fiscal year end from June 30 to February 28, effective February 28, 1997.
(c) For the period from March 1, 1998 to June 30, 1998. The Fund changed its
fiscal year end from February 28 to June 30, effective June 30, 1998.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and
excludes expense reductions.
# Net investment loss is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
40
<PAGE>
EVERGREEN
Select Small Company Value Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------
Six Months Ended
December 31, 1999 #
(Unaudited) 1999 1998 (a)
<S> <C> <C> <C>
CLASS I SHARES
Net asset value, beginning of
period $ 8.94 $ 10.09 $ 10.00
------- ---------- ---------
Income from investment operations
Net investment income 0.02 0.03 0.04
Net realized and unrealized gains
or losses (0.46) (1.12) 0.09
------- ---------- ---------
Total from investment operations (0.44) (1.09) 0.13
------- ---------- ---------
Distributions to shareholders
from
Net investment income (0.02) (0.03) (0.04)
------- ---------- ---------
Net realized gains 0 (0.03) 0
------- ---------- ---------
Total distributions to
shareholders (0.02) (0.06) (0.04)
------- ---------- ---------
Net asset value, end of period $ 8.48 $ 8.94 $ 10.09
------- ---------- ---------
Total return (4.93%) (10.73%) 1.28%
Ratios and supplemental data
Net assets, end of period
(thousands) $85,114 $ 108,180 $ 77,647
Ratios to average net assets
Expenses ++ 0.94%+ 0.97% 1.01%+
Net investment income 0.41%+ 0.29% 0.68%+
Portfolio turnover rate 46% 48% 23%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1999 # Period Ended
(Unaudited) June 30, 1999 (b) #
<S> <C> <C>
CLASS IS SHARES
Net asset value, beginning of
period $8.64 $8.56
----- -----
Income from investment operations
Net investment income 0.01 0
Net realized and unrealized gains
or losses (0.44) 0.08
----- -----
Total from investment operations (0.43) 0.08
----- -----
Distributions to shareholders from
Net investment income (0.01) 0
----- -----
Total distributions to
shareholders (0.01) 0
----- -----
Net asset value, end of period $8.20 $8.64
----- -----
Total return (5.06%) 0.99%
Ratios and supplemental data
Net assets, end of period
(thousands) $ 1 $ 1
Ratios to average net assets
Expenses ++ 1.19%+ 1.24%+
Net investment income 0.17%+ 0.00%+
Portfolio turnover rate 46% 48%
</TABLE>
(a) For the period from December 23,1997 (commencement of class operations) to
June 30, 1998.
(b) For the period from December 31,1998 (commencement of class operations) to
June 30, 1999.
+ Annualized
++ The ratio of expenses to average net assets includes fee waivers and
excludes expense reductions.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
41
<PAGE>
EVERGREEN
Select Social Principles Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 # ----------------------
(Unaudited) 1999 1998 (a)
<S> <C> <C> <C>
CLASS I SHARES (c)
Net asset value, beginning of
period $ 36.91 $ 38.95 $ 36.65
-------- --------- ---------
Income from investment operations
Net investment income 0.06 0.11 0.03
Net realized and unrealized gains 1.36 0.09 2.31
-------- --------- ---------
Total from investment operations 1.42 0.20 2.34
-------- --------- ---------
Distributions to shareholders
from
Net investment income (0.06) (0.14) (0.04)
Net realized gains (8.48) (2.10) 0
-------- --------- ---------
Total distributions to
shareholders (8.54) (2.24) (0.04)
-------- --------- ---------
Net asset value, end of period $ 29.79 $ 36.91 $ 38.95
-------- --------- ---------
Total return 5.53% 0.90% 6.38%
Ratios and supplemental data
Net assets, end of period
(thousands) $106,611 $ 134,476 $ 177,187
Ratios to average net assets
Expenses++ 0.82%+ 0.84% 0.86%+
Net investment income 0.37%+ 0.33% 0.12%+
Portfolio turnover rate 20% 36% 24%
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 # ----------------------
(Unaudited) 1999 1998 (b)
<S> <C> <C> <C>
CLASS IS SHARES
Net asset value, beginning of
period $ 36.86 $ 38.94 $ 38.44
-------- --------- ---------
Income from investment operations
Net investment income or loss 0.03 (0.04) (0.01)
Net realized and unrealized gains 1.34 0.14 0.52
-------- --------- ---------
Total from investment operations 1.37 0.10 0.51
-------- --------- ---------
Distributions to shareholders
from
Net investment income (0.04) (0.08) (0.01)
Net realized gains (8.48) (2.10) 0
-------- --------- ---------
Total distributions to
shareholders (8.52) (2.18) (0.01)
-------- --------- ---------
Net asset value, end of period $ 29.71 $ 36.86 $ 38.94
-------- --------- ---------
Total return 5.38% 0.64% 1.32%
Ratios and supplemental data
Net assets, end of period
(thousands) $ 52 $ 60 $ 205
Ratios to average net assets
Expenses++ 1.07%+ 1.09% 1.11%+
Net investment income or loss 0.17%+ 0.06% (0.12%)+
Portfolio turnover rate 20% 36% 24%
</TABLE>
(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.
(c) On April 30, 1999, Class IC shares of the Fund were converted to Class I
shares. Shareholders of Class IC shares became owners of that number of
Class I shares having a net asset value equal to the net asset value of
their shares immediately prior to the close of business on April 30, 1999.
Class IC is the accounting survivor, its basis of accounting for assets and
liabilities and its operating results for the periods prior to April 30,
1999 have been carried forward in these financial statements.
+ Annualized.
++ The ratio of expenses to average net assets includes fee waivers and
excludes expense reductions.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
42
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ----------------------
(Unaudited) 1999 # 1998 (a)
<S> <C> <C> <C>
CLASS I SHARES
Net asset value, beginning of
period $ 41.94 $ 38.41 $ 32.45
-------- --------- ---------
Income from investment operations
Net investment income 0.01 0.09 0.04
Net realized and unrealized gains 14.85 6.79 5.96
-------- --------- ---------
Total from investment operations 14.86 6.88 6.00
-------- --------- ---------
Distributions to shareholders from
Net investment income (0.02) (0.09) (0.04)
Net realized gains (8.05) (3.26) 0
-------- --------- ---------
Total distributions to shareholders (8.07) (3.35) (0.04)
-------- --------- ---------
Net asset value, end of period $ 48.73 $ 41.94 $ 38.41
-------- --------- ---------
Total return 41.30% 19.22% 18.53%
Ratios and supplemental data
Net assets, end of period
(thousands) $713,032 $ 481,119 $ 321,532
Ratios to average net assets
Expenses++ 0.71%+ 0.72% 0.72%+
Net investment income 0.06%+ 0.24% 0.19%+
Portfolio turnover rate 70% 155% 80%
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ----------------------
(Unaudited) 1999 # 1998 (b)
<S> <C> <C> <C>
CLASS IS SHARES
Net asset value, beginning of
period $ 41.83 $ 38.36 $ 36.10
-------- --------- ---------
Income from investment operations
Net investment loss (0.03) (0.01) (0.08)
Net realized and unrealized gains 14.77 6.78 2.34
-------- --------- ---------
Total from investment operations 14.74 6.77 2.26
-------- --------- ---------
Distributions to shareholders from
Net investment income 0 (0.04) 0
Net realized gains (8.05) (3.26) 0
-------- --------- ---------
Total distributions to shareholders (8.05) (3.30) 0
-------- --------- ---------
Net asset value, end of period $ 48.52 $ 41.83 $ 38.36
-------- --------- ---------
Total return 41.13% 18.88% 6.29%
Ratios and supplemental data
Net assets, end of period
(thousands) $ 18,009 $ 12,650 $ 2,373
Ratios to average net assets
Expenses++ 0.96%+ 0.97% 0.97%+
Net investment loss (0.19%)+ (0.03%) (0.27%)+
Portfolio turnover rate 70% 155% 80%
</TABLE>
(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.
+ Annualized.
++ The ratio of expenses to average net assets includes fee waivers and
excludes expense reductions.
# Net investment income or loss is based on average shares outstanding during
the period.
See Combined Notes to Financial Statements.
43
<PAGE>
EVERGREEN
Select Strategic Value Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ----------------------
(Unaudited) 1999 1998 (a)
<S> <C> <C> <C>
CLASS I SHARES
Net asset value, beginning of period $ 237.17 $ 226.02 $ 203.35
-------- --------- ---------
Income from investment operations
Net investment income 1.23 3.31 1.60
Net realized and unrealized gains or
losses (5.60) 15.66 22.67
-------- --------- ---------
Total from investment operations (4.37) 18.97 24.27
-------- --------- ---------
Distributions to shareholders from
Net investment income (1.63) (2.93) (1.60)
Net realized gains (4.19) (4.89) 0
-------- --------- ---------
Total distributions to shareholders (5.82) (7.82) (1.60)
-------- --------- ---------
Net asset value, end of period $ 226.98 $ 237.17 $ 226.02
-------- --------- ---------
Total return (1.87%) 8.85% 11.95%
Ratios and supplemental data
Net assets, end of period (thousands) $760,161 $ 530,995 $ 287,194
Ratios to average net assets
Expenses++ 0.73%+ 0.71% 0.75%+
Net investment income 1.14%+ 1.61% 1.26%+
Portfolio turnover rate 21% 41% 12%
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ----------------------
(Unaudited) 1999 1998 (b)
<S> <C> <C> <C>
CLASS IS SHARES
Net asset value, beginning of period $ 237.23 $ 226.04 $ 223.08
-------- --------- ---------
Income from investment operations
Net investment income 0.89 2.87 0.61
Net realized and unrealized gains or
losses (5.54) 15.62 3.13
-------- --------- ---------
Total from investment operations (4.65) 18.49 3.74
-------- --------- ---------
Distributions to shareholders from
Net investment income (1.37) (2.41) (0.78)
Net realized gains (4.19) (4.89) 0
-------- --------- ---------
Total distributions to shareholders (5.56) (7.30) (0.78)
-------- --------- ---------
Net asset value, end of period $ 227.02 $ 237.23 $ 226.04
-------- --------- ---------
Total return (2.00%) 8.60% 1.68%
Ratios and supplemental data
Net assets, end of period (thousands) $ 2,983 $ 1,810 $ 1,327
Ratios to average net assets
Expenses++ 0.99%+ 0.96% 1.00%+
Net investment income 0.89%+ 1.34% 0.93%+
Portfolio turnover rate 21% 41% 12%
</TABLE>
(a) For the period from November 24, 1997 (commencement of class operations) to
June 30, 1998.
(b) For the period from March 11, 1998 (commencement of class operations) to
June 30, 1998.
+ Annualized.
++ The ratio of expenses to average net assets includes fee waivers and
excludes expense redutions.
See Combined Notes to Financial Statements.
44
<PAGE>
EVERGREEN
Select Balanced Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 55.3%
Banks - 0.4%
33,260 U.S. Trust Corp. ................................... $ 2,667,036
------------
Business Equipment & Services - 0.8%
27,950 * i2 Technologies, Inc. ............................ 5,450,250
------------
Chemical & Agricultural Products - 0.6%
70,180 * Waters Corp. ..................................... 3,719,540
------------
Communication Systems & Services - 6.2%
200,240 * Cisco Systems, Inc. .............................. 21,450,710
131,320 Lucent Technologies, Inc. .......................... 9,824,377
84,525 * Powerwave Technologies, Inc. ..................... 4,934,147
57,910 * RF Micro Devices, Inc. ........................... 3,963,216
------------
40,172,450
------------
Consumer Products & Services - 1.3%
78,875 Procter & Gamble Co. ............................... 8,641,742
------------
Electrical Equipment & Services - 2.8%
79,840 General Electric Co. ............................... 12,355,240
34,325 * QLogic Corp. ..................................... 5,487,709
------------
17,842,949
------------
Electronic Equipment & Services - 1.6%
24,425 * SDL, Inc. ........................................ 5,324,650
49,285 Texas Instruments, Inc. ............................ 4,774,484
------------
10,099,134
------------
Finance & Insurance - 1.8%
59,660 AFLAC, Inc. ........................................ 2,815,206
56,715 Citigroup, Inc. .................................... 3,151,227
28,000 Federal National Mortgage Assoc. ................... 1,748,250
134,990 MBNA Corp. ......................................... 3,678,478
------------
11,393,161
------------
Food & Beverage Products - 1.8%
104,400 Anheuser Busch Companies, Inc. ..................... 7,399,350
66,075 Quaker Oats Co. .................................... 4,336,172
------------
11,735,522
------------
Healthcare Products & Services - 6.9%
133,545 Bristol-Myers Squibb Co. ........................... 8,571,920
98,575 Johnson & Johnson................................... 9,179,797
124,030 * MedQuist, Inc. ................................... 3,201,524
182,245 Medtronic, Inc. .................................... 6,640,552
121,425 Merck & Co., Inc. .................................. 8,143,064
65,935 Schering-Plough Corp. .............................. 2,781,633
76,730 Warner-Lambert Co. ................................. 6,287,064
------------
44,805,554
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Information Services & Technology - 19.3%
118,990 * America Online, Inc. ............................ $ 8,976,308
29,005 * Applied Micro Circuits Corp. .................... 3,690,886
21,075 * Broadvision, Inc. ............................... 3,584,067
22,950 * Business Objects SA.............................. 3,066,694
49,615 * CDW Computer Centers, Inc. ...................... 3,900,979
79,545 * EMC Corp. ....................................... 8,690,291
30,810 Emulex Corp. ...................................... 3,466,125
43,750 * Harmonic Lightwaves, Inc. ....................... 4,153,516
42,750 * JDS Uniphase Corp. .............................. 6,896,109
58,605 * Legato Systems, Inc. ............................ 4,032,757
76,500 * Mercury Interactive Corp. ....................... 8,257,219
177,660 * Microsoft Corp. ................................. 20,741,805
27,810 * Network Appliance, Inc. ......................... 2,309,968
35,835 * PMC-Sierra, Inc. ................................ 5,744,799
62,100 * Siebel Systems, Inc. ............................ 5,216,400
106,190 * Sun Microsystems, Inc. .......................... 8,223,088
75,380 * Synopsys, Inc. .................................. 5,031,615
81,730 * Vitesse Semiconductor Corp. ..................... 4,285,717
34,100 * Yahoo!, Inc. .................................... 14,754,644
------------
125,022,987
------------
Oil/Energy - 0.3%
43,475 Enron Corp. ....................................... 1,929,203
------------
Paper & Packaging - 1.4%
90,530 Georgia-Pacific Corp. ............................. 4,594,398
67,805 Kimberly-Clark Corp. .............................. 4,424,276
------------
9,018,674
------------
Printing, Publishing, Broadcasting &
Entertainment - 1.3%
60,345 Knight-Ridder, Inc. ............................... 3,590,527
14,500 New York Times Co., Cl. A.......................... 712,313
38,140 Omnicom Group, Inc. ............................... 3,814,000
------------
8,116,840
------------
Retailing & Wholesale - 5.5%
47,190 * Best Buy Co., Inc. .............................. 2,368,348
51,495 Circuit City Stores, Inc. ......................... 2,320,494
183,920 Family Dollar Stores, Inc. ........................ 3,000,195
136,485 Home Depot, Inc. .................................. 9,357,753
68,030 Lowe's Companies, Inc. ............................ 4,064,793
44,125 Tandy Corp. ....................................... 2,170,398
47,340 Tiffany & Co. ..................................... 4,225,095
120,225 Wal-Mart Stores, Inc. ............................. 8,310,553
------------
35,817,629
------------
Telecommunication Services & Equipment - 2.9%
42,925 * E-Tek Dynamics, Inc. ............................ 5,778,778
57,755 Nortel Networks Corp. ............................. 5,833,255
39,580 * Qualcomm, Inc. .................................. 6,971,028
------------
18,583,061
------------
</TABLE>
45
<PAGE>
EVERGREEN
Select Balanced Fund
Schedule of Investments(continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Telephone - 0.4%
48,345 SBC Communications, Inc. ........................... $ 2,356,819
------------
Total Common Stocks (cost $259,329,379)............. 357,372,551
------------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - 15.3%
Aerospace & Defense - 0.9%
$ 5,371,000 Jet Equipment Trust, 144A, 9.41%, 6/15/2010......... 5,692,057
------------
Banks - 2.4%
2,302,000 Boatmen's Bancshares, Inc., 6.75%, 3/15/2003........ 2,266,784
3,836,000 First Chicago Corp., 9.875%, 8/15/2000.............. 3,916,030
7,673,000 NationsBank Corp., 7.625%, 4/15/2005................ 7,791,011
500,000 Norwest Corp.
Medium Term Note,
6.20%, 12/1/2005................................... 472,762
500,000 Republic New York Corp., 8.25%, 11/1/2001........... 507,577
500,000 United States Bancorp, 6.75%, 10/15/2005............ 485,023
------------
15,439,187
------------
Chemical & Agricultural Products - 0.9%
3,836,000 Dow Chemical Co., 8.625%, 4/1/2006.................. 4,049,692
Du Pont (E.I.) De Nemours & Co.:
1,000,000 8.50%, 2/15/2003.................................... 1,031,005
500,000 9.15%, 4/15/2000.................................... 504,171
------------
5,584,868
------------
Communication Systems & Services - 1.4%
925,000 Ameritech Capital Funding Corp., 6.55%, 1/15/2028... 804,820
9,000,000 Comcast Cable Communications I, 6.20%, 11/15/2008... 8,171,640
------------
8,976,460
------------
Consumer Products & Services - 0.5%
3,299,000 Stanley Works, 7.375%, 12/15/2002................... 3,303,883
------------
Finance & Insurance - 4.0%
500,000 Chrysler Financial Corp., 6.95%, 3/25/2002.......... 500,934
4,220,000 Dean Witter, Discover & Co., 6.75%, 10/15/2013...... 3,851,885
Ford Motor Credit Co.:
500,000 6.25%, 11/8/2000.................................... 498,415
500,000 7.50%, 1/15/2003.................................... 504,481
4,200,000 General Electric Capital Corp., 8.75%, 3/14/2003.... 4,418,404
5,000,000 Liberty Financial Cos, Inc., 7.625%, 11/15/2028.... 4,576,925
7,673,000 Loews Corp.,
6.75%, 12/15/2006................................. 7,262,264
4,336,000 Merrill Lynch, Pierce, Fenner & Smith, Inc.,
7.00%, 4/27/2008.................................. 4,179,653
------------
25,792,961
------------
Food & Beverage Products - 1.3%
3,750,000 Albertsons, Inc.,
7.45%, 8/1/2029................................... 3,572,644
750,000 Coca Cola Co.,
6.00%, 7/15/2003.................................. 722,942
3,836,000 General Mills, Inc., 9.00%, 12/20/2002............. 4,039,876
------------
8,335,462
------------
Healthcare Products & Services - 0.6%
3,836,000 Baxter International, 7.25%, 2/15/2008............. 3,758,171
------------
Industrial Specialty Products & Services - 0.1%
1,074,000 Waste Management, Inc., 8.75%, 5/1/2018............ 962,883
------------
Oil/Energy - 1.3%
3,069,000 Atlantic Richfield Co., 9.00%, 4/1/2021............ 3,493,983
5,000,000 Calenergy, Inc.,
7.52%, 9/15/2008.................................. 4,874,810
------------
8,368,793
------------
Paper & Packaging - 0.8%
5,000,000 Donohue Forest Products, Inc., 7.625%, 5/15/2007... 4,852,160
------------
Retailing & Wholesale - 0.2%
Wal Mart Stores, Inc.:
1,000,000 8.625%, 4/1/2001................................... 1,022,966
500,000 9.10%, 7/15/2000................................... 507,539
------------
1,530,505
------------
Total Corporate Bonds (cost $107,074,665).......... 92,597,390
------------
SUPRA NATIONAL - 0.3%
Finance & Insurance - 0.3%
2,110,000 International Bank for Reconstruction & Development
Co., COLTS
7.95%, 5/15/2016
(cost $2,513,130)................................. 2,223,372
------------
YANKEE OBLIGATIONS - 0.6%
3,836,000 Province of Ontario, Canada, 7.75%, 6/4/2002
(cost $4,112,729)................................. 3,901,979
------------
</TABLE>
46
<PAGE>
EVERGREEN
Select Balanced Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 28.4%
Mortgage Pass-Through Certificates - 0.7%
Government National Mortgage Assoc.:
$ 1,002,245 8.50%, 5/15/2021.................................... $ 1,036,321
410,824 8.50%, 7/15/2021.................................... 423,192
1,082,266 8.50%, 6/15/2022.................................... 1,114,847
630,344 9.00%, 9/15/2021.................................... 660,614
711,529 9.00%, 10/15/2021................................... 745,697
436,379 9.50%, 2/15/2021.................................... 465,189
------------
4,445,860
------------
Treasury Notes & Bonds - 27.7%
U.S. Treasury Bonds:
10,420,000 7.625%, 2/15/2007................................... 10,612,124
11,300,000 7.875%, 2/15/2021................................... 12,631,287
10,500,000 8.125%, 8/15/2021................................... 12,052,036
4,500,000 8.75%, 5/15/2017.................................... 5,373,284
6,513,000 8.875%, 8/15/2017................................... 7,872,589
5,828,000 9.125%, 5/15/2018................................... 7,223,077
7,000,000 11.75%, 11/15/2014.................................. 9,467,500
U.S. Treasury Notes:
15,100,000 5.50%, 3/31/2000.................................... 15,104,726
10,000,000 5.75%, 8/15/2003.................................... 9,793,750
5,800,000 6.25%, 2/15/2003.................................... 5,783,690
7,300,000 6.625%, 3/31/2002................................... 7,352,472
4,350,000 6.625%, 4/30/2002................................... 4,382,625
15,600,000 6.875%, 5/15/2006................................... 15,877,883
14,700,000 7.25%, 5/15/2004.................................... 15,154,789
11,000,000 7.50%, 2/15/2005.................................... 11,477,818
28,373,000 7.75%, 2/15/2001.................................... 28,869,528
------------
179,029,178
------------
Total U.S. Government & Agency Obligations
(cost $189,764,118)................................ 183,475,038
------------
SHORT-TERM INVESTMENTS - 0.9%
Repurchase Agreement - 0.9%
$ 6,045,300 Cowen Securities Corp., 2.55%, dated 12/31/1999,
maturing 1/3/2000, maturity value $6,046,585
(cost $6,045,300) (a).............................. $ 6,045,300
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $562,213,462)......................... 99.9% 645,615,630
Other Assets and Liabilities - net........... 0.1 582,873
----- ------------
Net Assets................................... 100.0% $646,198,503
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by the U.S. government
and/or agency obligations based on market prices plus accrued interest at
December 31, 1999.
* Non-income producing security.
144A Security that may be sold to qualified institutional buyers under Rule
144A or security offered pursuant to Section 4(2) of the Securities Act
1933, as amended. This security has been determined to be liquid under
guidelines established by the Board of Trustees.
Summary of Abbreviations:
COLTS Continuously Offered Longer Term Securities
See Combined Notes to Financial Statements.
47
<PAGE>
EVERGREEN
Select Core Equity Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 97.4%
Aerospace & Defense - 1.1%
400,000 Honeywell International, Inc. .................... $ 23,075,000
160,000 Rockwell International Corp. ..................... 7,660,000
--------------
30,735,000
--------------
Automotive Equipment & Manufacturing - 1.6%
285,000 Arvin Industries, Inc. ........................... 8,086,875
505,000 Ford Motor Co. ................................... 26,985,938
600,000 * Tower Automotive, Inc. ......................... 9,262,500
--------------
44,335,313
--------------
Banks - 3.6%
670,000 BankAmerica Corp. ................................ 33,625,625
395,000 Chase Manhattan Corp. ............................ 30,686,562
650,710 FleetBoston Financial Corp. ...................... 22,652,842
510,000 U.S. Bancorp...................................... 12,144,375
--------------
99,109,404
--------------
Building, Construction & Furnishings - 0.3%
150,000 Deere & Co. ...................................... 6,506,250
80,000 Masco Corp. ...................................... 2,030,000
--------------
8,536,250
--------------
Chemical & Agricultural
Products - 1.2%
460,000 * Cytec Industries, Inc. ......................... 10,637,500
335,000 Du Pont (E. I.) De Nemours & Co. ................. 22,068,125
--------------
32,705,625
--------------
Communication Systems & Services - 8.8%
1,225,010 * Cisco Systems, Inc. ............................ 131,229,196
500,000 Lucent Technologies, Inc. ........................ 37,406,250
1,110,000 * MCI WorldCom, Inc. ............................. 58,899,375
200,000 * Tellabs, Inc. .................................. 12,837,500
--------------
240,372,321
--------------
Consumer Products &
Services - 2.2%
165,000 * Cendant Corp. .................................. 4,382,813
170,000 Colgate-Palmolive Co. ............................ 11,050,000
220,000 Liz Claiborne, Inc. .............................. 8,277,500
235,000 Procter & Gamble Co. ............................. 25,747,187
160,000 Whirlpool Corp. .................................. 10,410,000
--------------
59,867,500
--------------
Electrical Equipment &
Services - 6.8%
1,200,000 General Electric Co. ............................. 185,700,000
--------------
Finance & Insurance - 7.5%
170,000 Allmerica Financial Corp. ........................ 9,456,250
450,000 Allstate Corp. ................................... 10,800,000
288,750 American International Group, Inc. ............... 31,221,094
600,000 Citigroup, Inc. .................................. 33,337,500
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Finance & Insurance - continued
215,000 Federal Home Loan Mortgage Corp. ................. $ 10,118,437
300,000 Franklin Resources, Inc. ......................... 9,618,750
300,000 Hartford Financial Services Group, Inc. .......... 14,212,500
150,000 Loews Corp. ...................................... 9,103,125
105,000 Merrill Lynch & Co., Inc. ........................ 8,767,500
170,000 MGIC Investment Corp. ............................ 10,231,875
190,000 Morgan Stanley, Dean Witter & Co. ................ 27,122,500
200,000 PMI Group, Inc. .................................. 9,762,500
205,000 Radian Group, Inc. ............................... 9,788,750
190,000 XL Capital, Ltd., Cl. A........................... 9,856,250
--------------
203,397,031
--------------
Food & Beverage
Products - 3.8%
190,000 Bestfoods......................................... 9,986,875
1,000,000 Coca Cola Co. .................................... 58,250,000
240,000 * Kroger Co. ..................................... 4,530,000
580,000 Nabisco Group Holding Corp. ...................... 6,162,500
590,000 Sara Lee Corp. ................................... 13,016,875
630,000 * United States Food Service...................... 10,552,500
--------------
102,498,750
--------------
Healthcare Products &
Services - 10.3%
550,000 Abbott Laboratories............................... 19,971,875
640,000 * Amgen, Inc. .................................... 38,440,000
270,000 * Boston Scientific Corp. ........................ 5,906,250
780,000 Bristol-Myers Squibb Co. ......................... 50,066,250
145,000 * Guidant Corp. .................................. 6,815,000
239,000 Johnson & Johnson................................. 22,256,875
380,000 * Lincare Holdings, Inc. ......................... 13,181,250
370,000 Medtronic, Inc. .................................. 13,481,875
270,000 Mylan Laboratories, Inc. ......................... 6,800,625
610,000 Pfizer, Inc. ..................................... 19,786,875
550,000 Schering-Plough Corp. ............................ 23,203,125
170,000 SmithKline Beecham, PLC, ADR...................... 10,954,375
525,000 * Tenet Healthcare Corp. ......................... 12,337,500
140,000 Teva Pharmaceutical Industries, Ltd., ADR......... 10,036,250
330,000 Warner-Lambert Co. ............................... 27,039,375
--------------
280,277,500
--------------
Industrial Specialty Products & Services - 0.8%
175,000 Illinois Tool Works, Inc. ........................ 11,823,438
360,000 Trinity Industries, Inc. ......................... 10,237,500
--------------
22,060,938
--------------
Information Services & Technology - 23.1%
90,000 * Adaptec, Inc. .................................. 4,488,750
190,000 * Altera Corp. ................................... 9,416,875
400,000 * America Online, Inc. ........................... 30,175,000
220,000 * Applied Materials, Inc. ........................ 27,871,250
</TABLE>
48
<PAGE>
EVERGREEN
Select Core Equity Fund
Schedule of Investments(continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Information Services & Technology - continued
1,040,000 Compaq Computer Corp. ............................ $ 28,145,000
340,000 Computer Associates International, Inc. .......... 23,778,750
340,000 * Compuware Corp. ................................ 12,665,000
80,000 * Comverse Technology, Inc. ...................... 11,580,000
730,000 * Dell Computer Corp. ............................ 37,230,000
206,000 * EMC Corp. ...................................... 22,505,500
945,000 Intel Corp. ...................................... 77,785,312
714,000 International Business Machines Corp. ............ 77,112,000
100,000 * Legato Systems, Inc. ........................... 6,881,250
1,540,000 * Microsoft Corp. ................................ 179,795,000
390,000 * Network Associates, Inc. ....................... 10,408,125
410,000 * Oracle Systems Corp. ........................... 45,945,625
160,000 * Synopsys, Inc. ................................. 10,680,000
75,000 * Veritas Software Corp. ......................... 10,734,375
--------------
627,197,812
--------------
Iron & Steel - 0.4%
600,000 AK Steel Holding Corp. ........................... 11,325,000
--------------
Metal Products &
Services - 0.9%
175,000 Alcoa, Inc. ...................................... 14,525,000
295,000 USX United States Steel Group..................... 9,735,000
--------------
24,260,000
--------------
Oil/Energy - 5.7%
150,400 Anadarko Petroleum Corp. ......................... 5,132,400
139,200 Chevron Corp. .................................... 12,058,200
465,000 Enron Corp. ...................................... 20,634,375
622,824 Exxon Mobil Corp. ................................ 50,176,258
385,000 MCN Energy Group, Inc. ........................... 9,143,750
725,000 * Newpark Resources, Inc. ........................ 4,440,625
290,000 Texaco, Inc. ..................................... 15,750,625
470,000 Tosco Corp. ...................................... 12,778,125
195,000 Total SA, ADR..................................... 13,503,750
475,000 Ultramar Diamond Shamrock Corp. .................. 10,776,563
--------------
154,394,671
--------------
Oil Field Services - 1.2%
180,000 Diamond Offshore Drilling, Inc. .................. 5,501,250
300,000 Halliburton Co. .................................. 12,075,000
165,000 Schlumberger, Ltd. ............................... 9,281,250
171,944 Transocean Sedco Forex, Inc. ..................... 5,792,364
--------------
32,649,864
--------------
Paper & Packaging - 1.7%
240,000 Bowater, Inc. .................................... 13,035,000
340,000 Kimberly-Clark Corp. ............................. 22,185,000
210,000 * Sealed Air Corp. ............................... 10,880,625
--------------
46,100,625
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Printing, Publishing, Broadcasting &
Entertainment - 0.6%
215,000 Time Warner, Inc. ............................... $ 15,574,063
--------------
Real Estate - 0.8%
600,000 FelCor Lodging Trust, Inc., REIT................. 10,500,000
440,000 Simon Property Group, Inc., REIT................. 10,092,500
--------------
20,592,500
--------------
Retailing & Wholesale - 7.3%
200,000 * Best Buy Co., Inc. ............................ 10,037,500
315,000 Dayton Hudson Corp. ............................. 23,132,812
600,000 Family Dollar Stores, Inc. ...................... 9,787,500
235,000 * Federated Department Stores, Inc. ............. 11,882,188
645,000 Home Depot, Inc. ................................ 44,222,812
260,000 Lowe's Companies, Inc. .......................... 15,535,000
400,000 * Reebok International, Ltd. .................... 3,275,000
300,000 * Safeway, Inc. ................................. 10,668,750
140,000 Sears, Roebuck & Co. ............................ 4,261,250
500,000 * Toys "R" Us, Inc. ............................. 7,156,250
825,000 Wal-Mart Stores, Inc. ........................... 57,028,125
--------------
196,987,187
--------------
Telecommunication Services & Equipment - 1.7%
405,200 Bell Atlantic Corp. ............................. 24,945,125
225,000 Centurytel, Inc. ................................ 10,659,375
50,000 Nokia Corp., ADR................................. 9,500,000
--------------
45,104,500
--------------
Transportation - 1.0%
237,000 Burlington Northern Santa Fe Corp. .............. 5,747,250
350,000 * Canadian National Railway Co. ................. 9,209,375
225,000 CNF Transportation, Inc. ........................ 7,762,500
70,000 Kansas City Southern Industries, Inc. ........... 5,223,750
--------------
27,942,875
--------------
Utilities - Electric - 0.6%
290,000 CMS Energy Corp. ................................ 9,044,375
280,000 GPU, Inc. ....................................... 8,382,500
--------------
17,426,875
--------------
Utilities - Telephone - 4.4%
535,000 AT&T Corp. ...................................... 27,151,250
394,000 GTE Corp. ....................................... 27,801,625
600,000 SBC Communications, Inc. ........................ 29,250,000
200,000 Sprint Corp. .................................... 13,462,500
300,000 U.S. West, Inc. ................................. 21,600,000
--------------
119,265,375
--------------
Total Common Stocks (cost $1,750,744,273)........ 2,648,416,979
--------------
</TABLE>
49
<PAGE>
EVERGREEN
Select Core Equity Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 2.6%
Money Market Shares - 0.3%
8,637,098 Valiant General Fund.............................. $ 8,637,098
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
Repurchase Agreement - 2.3%
$61,331,651 Cowen Securities Corp., 2.55%, dated 12/31/1999,
maturing 1/3/2000, maturity value $61,344,684
(a)............................................. $ 61,331,651
--------------
Total Short-Term Investments (cost $69,968,749).. 69,968,749
--------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -(cost $1,820,713,022)... 100.0% 2,718,385,728
Other Assets and Liabilities - net......... 0.0 278,408
----- --------------
Net Assets................................. 100.0% $2,718,664,136
===== ==============
</TABLE>
(a) The repurchase agreement is fully collateralized by the U.S.
government and/or agency obligations based on market prices plus
accrued interest at December 31,1999.
* Non-income producing security.
Summary of Abbreviations:
ADR American Depository Receipt
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
50
<PAGE>
EVERGREEN
Select Diversified Value Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 91.7%
Automotive Equipment & Manufacturing - 2.1%
185,000 Ford Motor Co. ...................................... $ 9,885,938
45,500 * Lear Corp. ........................................ 1,456,000
------------
11,341,938
------------
Banks - 3.6%
35,000 BankAmerica Corp. ................................... 1,756,563
24,496 Chase Manhattan Corp. ............................... 1,903,033
100,000 Firstar Corp. ....................................... 2,112,500
98,000 PNC Bank Corp. ...................................... 4,361,000
160,000 SouthTrust Corp. .................................... 6,050,000
91,000 Wells Fargo Co. ..................................... 3,679,812
------------
19,862,908
------------
Building, Construction &
Furnishings - 0.6%
50,000 Deere & Co. ......................................... 2,168,750
55,000 Masco Corp. ......................................... 1,395,625
------------
3,564,375
------------
Chemical & Agricultural
Products - 1.2%
120,753 IMC Global, Inc. .................................... 1,977,330
42,271 Praxair, Inc. ....................................... 2,126,760
45,500 Waters Corp. ........................................ 2,411,500
------------
6,515,590
------------
Communication Systems &
Services - 5.5%
90,000 * Cisco Systems, Inc. ............................... 9,641,250
148,000 Lucent Technologies, Inc. ........................... 11,072,250
133,839 * MCI WorldCom, Inc. ................................ 7,101,832
34,293 * Tellabs, Inc. ..................................... 2,201,182
------------
30,016,514
------------
Consumer Products &
Services - 2.6%
93,000 Gillette Co. ........................................ 3,830,543
60,000 Maytag Corp. ........................................ 2,880,000
40,000 Procter & Gamble Co. ................................ 4,382,500
47,000 Whirlpool Corp. ..................................... 3,057,938
------------
14,150,981
------------
Diversified Companies - 1.2%
22,000 Minnesota Mining & Manufacturing Co. ................ 2,153,250
42,500 Textron, Inc. ....................................... 3,259,219
30,000 Tyco International, Ltd. ............................ 1,166,250
------------
6,578,719
------------
Electrical Equipment &
Services - 7.5%
114,000 General Electric Co. ................................ 17,641,500
140,000 Motorola, Inc. ...................................... 20,615,000
30,000 * Solectron Corp. ................................... 2,853,750
------------
41,110,250
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Electronic Equipment &
Services - 1.2%
33,000 * KLA-Tencor Corp. .................................. $ 3,675,375
31,000 Texas Instruments, Inc. ............................. 3,003,125
------------
6,678,500
------------
Finance & Insurance - 8.7%
28,000 American Express Co. ................................ 4,655,000
120,750 American International Group, Inc. .................. 13,056,094
150,000 Citigroup, Inc. ..................................... 8,334,375
53,746 Federal National Mortgage Assoc. .................... 3,355,766
77,000 Lehman Brothers Holdings, Inc. ...................... 6,520,937
58,000 MGIC Investment Corp. ............................... 3,490,875
29,500 Morgan Stanley, Dean Witter & Co. ................... 4,211,125
39,708 Nationwide Financial Services, Inc., Cl. A........... 1,109,342
30,000 Providian Financial Corp. ........................... 2,731,875
------------
47,465,389
------------
Food & Beverage Products - 2.5%
60,000 Coca Cola Co. ....................................... 3,495,000
64,000 Fortune Brands, Inc. ................................ 2,116,000
116,212 Philip Morris Companies, Inc. ....................... 2,694,666
34,700 Quaker Oats Co. ..................................... 2,277,187
73,000 * Tricon Global Restaurants, Inc. ................... 2,819,625
------------
13,402,478
------------
Healthcare Products &
Services - 9.4%
126,000 * Amgen, Inc. ....................................... 7,567,875
59,491 Bristol-Myers Squibb Co. ............................ 3,818,579
84,000 * Health Management Associates, Inc., Cl. A ......... 1,123,500
30,000 Johnson & Johnson.................................... 2,793,750
69,992 Lilly (Eli) & Co. ................................... 4,654,468
40,000 Merck & Co., Inc. ................................... 2,682,500
44,804 Monsanto Co. ........................................ 1,596,143
25,000 PE Corp-PE Biosystems Group.......................... 3,007,812
270,000 Pfizer, Inc. ........................................ 8,758,125
106,876 Pharmacia & Upjohn, Inc. ............................ 4,809,420
63,000 SmithKline Beecham, PLC, ADR......................... 4,059,562
88,000 Teva Pharmaceutical Industries, Ltd., ADR............ 6,308,500
------------
51,180,234
------------
Industrial Specialty Products & Services - 1.8%
60,000 Corning, Inc. ....................................... 7,736,250
48,000 Dover Corp. ......................................... 2,178,000
------------
9,914,250
------------
Information Services & Technology - 15.5%
25,000 * Altera Corp. ...................................... 1,239,063
100,000 * America Online, Inc. .............................. 7,543,750
23,000 * Apple Computer..................................... 2,364,687
</TABLE>
51
<PAGE>
EVERGREEN
Select Diversified Value Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Information Services & Technology - continued
65,000 * Applied Materials, Inc. .......................... $ 8,234,687
85,000 Compaq Computer Corp. .............................. 2,300,313
182,767 * Compuware Corp. .................................. 6,808,071
64,321 * EMC Corp. ........................................ 7,027,069
80,000 Intel Corp. ........................................ 6,585,000
36,100 International Business Machines Corp. .............. 3,898,800
40,000 * Legato Systems, Inc. ............................. 2,752,500
25,000 * Lexmark International Group, Inc., Cl. A.......... 2,262,500
39,700 * LSI Logic......................................... 2,679,750
40,000 * Micron Technology, Inc. .......................... 3,110,000
160,000 * Microsoft Corp. .................................. 18,680,000
90,000 * Unisys Corp. ..................................... 2,874,375
13,500 * Yahoo!, Inc. ..................................... 5,841,281
------------
84,201,846
------------
Metals & Mining - 0.3%
60,000 Newmont Mining Corp. ............................... 1,470,000
------------
Metal Products & Services - 1.1%
74,910 Alcoa, Inc. ........................................ 6,217,530
------------
Oil/Energy - 5.9%
135,000 Anadarko Petroleum Corp. ........................... 4,606,875
65,000 Atlantic Richfield Co. ............................. 5,622,500
160,000 El Paso Energy Corp. ............................... 6,210,000
93,634 Exxon Mobil Corp. .................................. 7,543,389
75,600 Total SA, ADR....................................... 5,235,300
61,600 Ultramar Diamond Shamrock Corp. .................... 1,397,550
60,455 USX Marathon Group.................................. 1,492,483
------------
32,108,097
------------
Oil Field Services - 0.9%
135,000 Tidewater, Inc. .................................... 4,860,000
------------
Paper & Packaging - 0.7%
55,000 Kimberly-Clark Corp. ............................... 3,588,750
------------
Printing, Publishing, Broadcasting & Entertainment -
2.0%
21,000 * AMFM, Inc. ....................................... 1,643,250
26,000 * CBS Corp. ........................................ 1,662,375
102,000 Time Warner, Inc. .................................. 7,388,625
------------
10,694,250
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Retailing & Wholesale - 8.2%
111,000 * Abercrombie & Fitch Co., Cl. A..................... $ 2,962,312
25,906 * Best Buy Co., Inc. ................................ 1,300,157
120,000 Circuit City Stores, Inc. ........................... 5,407,500
65,284 Dayton Hudson Corp. ................................. 4,794,294
165,000 Lowe's Companies, Inc. .............................. 9,858,750
45,000 Sears, Roebuck & Co. ................................ 1,369,688
25,000 Tandy Corp. ......................................... 1,229,688
70,000 * Toys "R" Us, Inc. ................................. 1,001,875
242,000 Wal-Mart Stores, Inc. ............................... 16,728,250
------------
44,652,514
------------
Telecommunication Services & Equipment - 3.1%
25,000 * ADC Telecommunications, Inc. ...................... 1,814,062
120,000 Centurytel, Inc. .................................... 5,685,000
40,000 Nokia Corp., ADR..................................... 7,600,000
44,919 * Qwest Communications International, Inc. .......... 1,931,517
------------
17,030,579
------------
Transportation - 0.8%
40,600 Canadian National Railway Co. ....................... 1,068,288
20,000 Delta Air Lines, Inc. ............................... 996,250
30,000 Kansas City Southern Industries, Inc. ............... 2,238,750
------------
4,303,288
------------
Utilities - Electric - 0.4%
100,800 Reliant Energy, Inc. ................................ 2,305,800
------------
Utilities - Gas - 0.3%
52,511 The Williams Companies, Inc. ........................ 1,604,867
------------
Utilities - Telephone - 4.5%
49,000 ALLTEL Corp. ........................................ 4,051,688
145,000 AT&T Corp. .......................................... 7,358,750
78,676 GTE Corp. ........................................... 5,551,575
25,000 * Nextel Communications, Inc., Cl. A................. 2,578,125
104,000 SBC Communications, Inc. ............................ 5,070,000
------------
24,610,138
------------
Total Common Stocks (cost $397,915,733).............. 499,429,785
------------
</TABLE>
52
<PAGE>
EVERGREEN
Select Diversified Value Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 1.6%
Repurchase Agreement - 1.5%
$7,875,445 Cowen Securities Corp., 2.55%, dated 12/31/1999,
maturing 1/3/2000, maturity value $7,877,119 (a)... $ 7,875,445
------------
U.S. Government Agency Obligations - 0.1%
U.S. Treasury Bills (b):
85,000 4.885%, 1/13/2000................................... 84,861
85,000 4.92%, 1/13/2000.................................... 84,861
450,000 5.08%, 2/17/2000.................................... 447,033
------------
616,755
------------
Total Short-Term Investments (cost $8,492,200)...... 8,492,200
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -(cost $406,407,933)........ 93.3% 507,921,985
Other Assets and Liabilities - net............ 6.7 36,630,602
----- ------------
Net Assets.................................... 100.0% $544,552,587
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by the U.S. govern-
ment and/or agency obligations based on market prices plus accrued
interest at December 31, 1999.
(b) At December 31, 1999, all or a portion of the principal amount of
this security was pledged to cover initial margin requirements for
open future contracts.
* Non-income producing security
Summary of Abbreviations:
ADR American Depository Receipts
FUTURES CONTRACTS - LONG POSITIONS
<TABLE>
<CAPTION>
Initial Contract Value at Unrealized
Expiration Contracts Amount December 31, 1999 Gain
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 2000 25 S&P 500 Index $8,935,000 $9,276,075 $341,075
</TABLE>
See Combined Notes to Financial Statements.
53
<PAGE>
EVERGREEN
Select Large Cap Blend Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 99.9%
Automotive Equipment & Manufacturing - 1.7%
72,080 Ford Motor Co........................................... $ 3,851,775
74,830 Goodyear Tire & Rubber Co............................... 2,109,271
------------
5,961,046
------------
Banks - 5.9%
71,780 Bank One Corp........................................... 2,301,446
128,010 BankAmerica Corp. ...................................... 6,424,502
187,185 FleetBoston Financial Corp.............................. 6,516,378
94,630 Mellon Financial Corp................................... 3,223,334
19,170 Providian Financial Corp................................ 1,745,668
------------
20,211,328
------------
Communication Systems & Services - 10.7%
144,724 * Cisco Systems, Inc.................................... 15,503,559
79,130 Lucent Technologies, Inc................................ 5,919,913
252,620 * MCI WorldCom, Inc..................................... 13,404,622
31,110 * Tellabs, Inc.......................................... 1,996,873
------------
36,824,967
------------
Consumer Products & Services - 3.3%
64,990 Gillette Co............................................. 2,676,776
80,560 Procter & Gamble Co..................................... 8,826,355
------------
11,503,131
------------
Diversified Companies - 1.4%
39,780 Textron, Inc. .......................................... 3,050,629
46,640 Tyco International, Ltd................................. 1,813,130
------------
4,863,759
------------
Electrical Equipment & Services - 5.4%
113,170 General Electric Co..................................... 17,513,057
11,150 * Solectron Corp........................................ 1,060,644
------------
18,573,701
------------
Electronic Equipment & Services - 1.3%
47,280 Texas Instruments, Inc. ................................ 4,580,250
------------
Finance & Insurance - 8.9%
128,406 Allstate Corp........................................... 3,081,744
52,555 American International Group, Inc....................... 5,682,509
193,410 Citigroup, Inc.......................................... 10,746,343
125,050 Federal National Mortgage Assoc......................... 7,807,810
38,400 Merrill Lynch & Co., Inc................................ 3,206,400
------------
30,524,806
------------
Food & Beverage Products - 4.4%
62,820 Anheuser Busch Companies, Inc........................... 4,452,367
80,500 Coca Cola Co............................................ 4,689,125
66,560 * Kroger Co............................................. 1,256,320
87,340 Nabisco Holdings Corp., Cl. A........................... 2,762,128
83,060 Philip Morris Companies, Inc. .......................... 1,925,954
------------
15,085,894
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products & Services - 10.4%
101,320 Bristol-Myers Squibb Co................................ $ 6,503,478
46,570 Johnson & Johnson...................................... 4,336,831
49,870 Lilly (Eli) & Co. ..................................... 3,316,355
25,500 McKesson HBOC, Inc..................................... 575,344
33,870 Merck & Co., Inc....................................... 2,271,407
97,480 Monsanto Co............................................ 3,472,725
137,050 Pfizer, Inc............................................ 4,445,559
42,830 Pharmacia & Upjohn, Inc................................ 1,927,350
110,280 Warner-Lambert Co. .................................... 9,036,067
------------
35,885,116
------------
Information Services & Technology - 21.2%
15,135 * Altera Corp.......................................... 750,128
110,680 * America Online, Inc. ................................ 8,349,423
296,970 Compaq Computer Corp................................... 8,036,751
156,512 * Compuware Corp....................................... 5,830,072
144,100 * EMC Corp............................................. 15,742,925
89,182 Intel Corp. ........................................... 7,340,793
43,840 International Business Machines Corp................... 4,734,720
158,780 * Microsoft Corp....................................... 18,537,565
8,607 * Yahoo!, Inc.......................................... 3,724,141
------------
73,046,518
------------
Metal Products & Services - 2.0%
82,810 Alcoa, Inc. ........................................... 6,873,230
------------
Oil/Energy - 5.6%
150,139 Exxon Mobil Corp....................................... 12,095,573
133,130 Texaco, Inc............................................ 7,230,623
------------
19,326,196
------------
Paper & Packaging - 0.3%
21,560 International Paper Co................................. 1,216,793
------------
Printing, Publishing, Broadcasting & Entertainment -
4.9%
126,140 News Corp, Ltd......................................... 4,824,855
38,890 Omnicom Group, Inc..................................... 3,889,000
112,050 Time Warner, Inc. ..................................... 8,116,622
------------
16,830,477
------------
Retailing & Wholesale - 5.8%
146,840 Dayton Hudson Corp..................................... 10,783,563
45,400 Lowe's Companies, Inc.................................. 2,712,650
96,100 * Safeway, Inc. ....................................... 3,417,556
42,650 Wal-Mart Stores, Inc. ................................. 2,948,181
------------
19,861,950
------------
Telecommunication Services & Equipment - 1.5%
20,349 Motorola, Inc.......................................... 2,996,390
47,365 * Qwest Communications International, Inc.............. 2,036,695
------------
5,033,085
------------
</TABLE>
54
<PAGE>
EVERGREEN
Select Large Cap Blend Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Transportation - 0.4%
57,490 Burlington Northern Santa Fe Corp....................... $ 1,394,133
------------
Utilities - Electric - 1.2%
85,923 Duke Power Co........................................... 4,306,890
------------
Utilities - Telephone - 3.6%
139,920 GTE Corp. .............................................. 9,873,105
25,404 * Nextel Communications, Inc., Cl. A.................... 2,619,787
------------
12,492,892
------------
Total Common Stocks
(cost $247,368,748).................................... 344,396,162
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 1.8%
Repurchase Agreement - 1.8%
$6,157,652 Cowen Securities Corp.,
2.55%, 12/31/1999, maturing 1/3/2000, maturity
value $6,158,961
(cost $6,157,652) (a)............................. $ 6,157,652
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $253,526,400)......................... 101.7% 350,553,814
Other Assets and
Liabilities - net........................... (1.7) (5,905,970)
----- ------------
Net Assets................................... 100.0% $344,647,844
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by the U.S. government
and/or agency obligations based on market prices plus accrued interest at
December 31, 1999.
* Non-income producing security.
See Combined Notes to Financial Statements.
55
<PAGE>
EVERGREEN
Select Secular Growth Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 96.2%
Banks - 1.7%
298,400 Northern Trust Corp................................. $ 15,815,200
------------
Communication Systems & Services - 14.2%
242,100 * Exodus Communications, Inc........................ 21,501,506
370,944 * Global Crossing, Ltd.............................. 18,547,200
235,100 Level 3 Communications, Inc......................... 19,248,813
202,300 Lucent Technologies, Inc............................ 15,134,569
124,950 * MCI WorldCom, Inc................................. 6,630,159
450,600 * Metromedia Fiber Network, Inc., Cl. A............. 21,600,637
218,329 * RF Micro Devices, Inc............................. 14,941,891
589,400 Williams Communications Group....................... 17,055,763
------------
134,660,538
------------
Electrical Equipment & Services - 4.5%
76,900 * Broadcom Corp..................................... 20,945,637
141,281 General Electric Co................................. 21,863,235
------------
42,808,872
------------
Finance & Insurance - 9.4%
176,000 American Express Co................................. 29,260,000
155,142 American International Group, Inc................... 16,774,729
214,195 Federal Home Loan Mortgage Corp..................... 10,080,552
141,000 Morgan Stanley, Dean Witter & Co. .................. 20,127,750
328,100 Schwab (Charles) & Co., Inc......................... 12,590,837
------------
88,833,868
------------
Finance - 0.9%
90,468 Goldman Sachs Group, Inc............................ 8,520,955
------------
Healthcare Products & Services - 6.8%
337,200 * Amgen, Inc........................................ 20,253,075
244,000 Johnson & Johnson................................... 22,722,500
247,924 Medtronic, Inc...................................... 9,033,731
286,563 Schering-Plough Corp................................ 12,089,376
------------
64,098,682
------------
Information Services & Technology - 30.5%
242,000 * America Online, Inc. ............................. 18,255,875
123,400 * Broadvision, Inc.................................. 20,985,712
61,200 Brocade Communications Systems, Inc. ............... 10,832,400
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Information Services &
Technology - continued
239,400 * Compuware Corp.................................... $ 8,917,650
55,000 DoubleClick, Inc.................................... 13,918,437
230,900 * EMC Corp.......................................... 25,225,825
203,400 Inktomi Corp. ...................................... 18,051,750
142,800 * JDS Uniphase Corp. ............................... 23,035,425
181,000 * Legato Systems, Inc. ............................. 12,455,063
376,500 Lifeminders.com, Inc................................ 21,742,875
43,000 * Microsoft Corp.................................... 5,020,250
249,800 MP3.com, Inc. ...................................... 7,915,538
521,811 National Information Consortium, Inc................ 16,697,952
125,939 * Pfsweb, Inc. ..................................... 4,722,713
272,200 * Sun Microsystems, Inc. ........................... 21,078,487
138,300 VeriSign, Inc....................................... 26,406,656
163,000 * Veritas Software Corp. ........................... 23,329,375
22,000 * Yahoo!, Inc....................................... 9,519,125
------------
288,111,108
------------
Printing, Publishing, Broadcasting & Entertainment - 6.3%
308,100 * CBS Corp. ........................................ 19,699,144
336,600 Comcast Corp., Cl. A................................ 17,019,337
280,500 * Cox Communications, Inc., Cl. A................... 14,445,750
227,400 * Infinity Broadcasting Corp........................ 8,229,038
------------
59,393,269
------------
Retailing & Wholesale - 16.0%
305,588 * Best Buy Co., Inc. ............................... 15,336,698
317,900 * Costco Wholesale Corp............................. 29,008,375
377,800 Dayton Hudson Corp. ................................ 27,744,687
172,791 Gap, Inc............................................ 7,948,386
437,550 Home Depot, Inc..................................... 29,999,522
242,000 Tandy Corp.......................................... 11,903,375
420,600 Wal-Mart Stores, Inc. .............................. 29,073,975
------------
151,015,018
------------
Telecommunication Services & Equipment - 5.9%
220,900 * Cisco Systems, Inc................................ 23,663,913
130,738 * E-Tek Dynamics, Inc............................... 17,600,603
77,300 Nokia Corp., ADR.................................... 14,687,000
------------
55,951,516
------------
Total Common Stocks (cost $644,112,309)............. 909,209,026
------------
</TABLE>
56
<PAGE>
EVERGREEN
Select Secular Growth Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
LIMITED PARTNERSHIP - 0.2%
1,000,000 Brentwood Associates IV, LP......................... $ 981
1,000,000 Brentwood Associates V, LP.......................... 254,164
1,000,000 Brentwood Associates VI, LP......................... 1,148,192
500,000 Franklin Capital Associates, LP .................... 31,309
------------
Total Limited Partnership (cost $1,464,297)......... 1,434,646
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 2.8%
Repurchase Agreement - 2.8%
$26,653,080 Cowen Securities Corp., 2.55%, dated 12/31/1999,
maturing 1/3/2000, maturity value $26,658,744
(cost $26,653,080) (a)........................... $ 26,653,080
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $672,229,686)......................... 99.2% 937,296,752
Other Assets and Liabilities - net........... 0.8 8,010,551
----- ------------
Net Assets................................... 100.0% $945,307,303
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by the U.S. government
and/or agency obligations based on market prices plus accrued interest at
December 31, 1999.
* Non-income producing security.
Summary of Abbreviations:
ADR American Depository Receipt
See Combined Notes to Financial Statements.
57
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 98.5%
Building, Construction & Furnishings - 0.4%
34,100 United States Aggregates, Inc........................ $ 409,200
------------
Business Equipment &
Services - 9.2%
21,700 * Great Plains Software, Inc......................... 1,622,075
68,900 * Startek, Inc....................................... 2,497,625
63,200 * Teletech Holdings, Inc. ........................... 2,130,037
30,100 * TSI International Software, Ltd. (a)............... 1,704,413
92,600 * West Teleservices Corp............................. 2,262,912
------------
10,217,062
------------
Chemical & Agricultural
Products - 2.5%
37,700 Geon Co. ............................................ 1,225,250
51,000 Georgia Gulf Corp.................................... 1,552,313
------------
2,777,563
------------
Communication Systems &
Services - 1.4%
62,600 * Complete Busines Solutions, Inc. (a)............... 1,572,825
------------
Consumer Products &
Services - 2.3%
56,200 * Jakks Pacific, Inc................................. 1,050,238
141,700 * The Topps Company, Inc............................. 1,470,137
------------
2,520,375
------------
Education - 3.7%
59,700 * CBT Group Public, Ltd.............................. 1,999,950
67,300 * Devry, Inc......................................... 1,253,462
55,200 * ITT Educational Services, Inc...................... 852,150
------------
4,105,562
------------
Electrical Equipment &
Services - 7.9%
41,400 CMP Group, Inc....................................... 1,141,088
29,900 * Lattice Semiconductor Corp. (a).................... 1,409,038
47,900 Methode Electronics, Inc............................. 1,538,787
48,900 * Natural Microsystems Corp. (a)..................... 2,289,131
59,600 * Three-Five Systems, Inc. (a)....................... 2,443,600
------------
8,821,644
------------
Electronic Equipment &
Services - 8.1%
38,215 * Act Manufacturing, Inc............................. 1,433,063
45,200 * Kopin Corp. ....................................... 1,898,400
72,000 * LTX Corp........................................... 1,611,000
55,400 * Universal Electronics, Inc......................... 2,548,400
32,900 * Veeco Instruments, Inc. (a)........................ 1,540,131
------------
9,030,994
------------
Healthcare Products &
Services - 5.5%
94,100 * LifePoint Hospitals, Inc. (a)...................... 1,111,556
39,000 * Lynx Therapeutics, Inc. (a)........................ 1,262,625
44,300 * Molecular Devices Corp. (a)........................ 2,303,600
154,900 * PSS World Medical, Inc............................. 1,461,869
------------
6,139,650
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Industrial Specialty Products & Services - 2.1%
99,200 * Labor Ready, Inc. (a)............................. $ 1,202,800
29,000 Roper Industries, Inc............................... 1,096,563
------------
2,299,363
------------
Information Services &
Technology - 31.1%
26,500 * Advanced Digital Information...................... 1,288,563
50,100 * Advantage Learning Systems, Inc. (a).............. 560,494
11,200 * Applied Micro Circuits Corp. (a).................. 1,425,200
16,300 * Art Technology Group, Inc......................... 2,088,437
2,500 * C-bridge Internet Solutions, Inc. (a)............. 121,563
11,600 * Clarify, Inc...................................... 1,461,600
23,350 * Diamond Technology Partners, Inc. (a)............. 2,006,641
47,900 * Documentum, Inc. (a).............................. 2,868,012
25,200 * Engage Technologies, Inc. (a)..................... 1,512,000
66,400 * Kronos, Inc. (a).................................. 3,984,000
142,200 * Maxtor Corp. (a).................................. 1,030,950
21,300 * Metasolv Software, Inc. .......................... 1,741,275
25,000 * Netegrity, Inc. (a)............................... 1,423,437
4,200 * Pfsweb, Inc. (a).................................. 157,500
22,400 * Progress Software Corp............................ 1,271,200
12,988 * PSINet, Inc. (a).................................. 802,009
23,050 * QRS Corp.......................................... 2,420,250
38,300 * Remedy Corp....................................... 1,814,462
24,200 * Sandisk Corp. .................................... 2,329,250
36,000 * Spyglass, Inc. (a)................................ 1,365,188
43,600 * Unify Corp........................................ 1,193,550
24,600 * Xircom, Inc....................................... 1,845,000
------------
34,710,581
------------
Machinery - Diversified - 0.3%
55,400 Cmi Corp............................................ 391,263
------------
Manufacturing - Distributing - 1.3%
50,300 Oshkosh Truck Corp.................................. 1,474,419
------------
Oil Field Services - 1.6%
35,300 * Core Laboratories, NV (a)......................... 708,206
70,000 * Pride International, Inc.......................... 1,023,750
------------
1,731,956
------------
Printing, Publishing, Broadcasting & Entertainment -
7.3%
31,500 * Citadel Communications Corp....................... 2,043,563
36,400 * Entercom Communications Corp. (a)................. 2,402,400
78,200 * Media 100, Inc. (a)............................... 2,067,412
40,000 * Spanish Broadcasting System, Inc., Cl. A (a)...... 1,610,000
------------
8,123,375
------------
Retailing & Wholesale - 1.6%
39,400 * Whole Foods Market, Inc. (a)...................... 1,827,175
------------
</TABLE>
58
<PAGE>
EVERGREEN
Select Small Cap Growth Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Telecommunication Services & Equipment - 7.0%
74,000 * Davox Corp. (a).................................... $ 1,452,250
58,700 * ITC DeltaCom, Inc. (a)............................. 1,621,587
32,300 * Microcell Telecommunications....................... 1,061,863
47,000 * Tollgrade Communications, Inc...................... 1,621,500
38,700 * Viatel, Inc........................................ 2,075,287
------------
7,832,487
------------
Transportation - 1.6%
41,650 * Eagle USA Airfreight, Inc. (a)..................... 1,796,156
------------
Utilities - Telephone - 3.6%
49,200 * Primus Telecomm Group, Inc......................... 1,881,900
23,700 * Rural Celluar Corp., Cl. A......................... 2,144,850
------------
4,026,750
------------
Total Common Stocks
(cost $72,624,234).................................. 109,808,400
------------
SHORT-TERM INVESTMENTS - 25.0%
Money Market Shares - 23.5%
26,219,817 Navigator Prime Portfolio (b)........................ 26,219,817
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - continued
Repurchase Agreements - 1.5%
$ 1,563,000 Evergreen Joint Repurchase Agreement, 3.10%, dated
12/31/99, maturing 1/3/2000, maturity value
$1,563,404 (c).................................... $ 1,563,000
148,000 State Street Bank & Trust Co., 3.25%, dated
12/31/1999 maturing 1/3/2000, maturity
value $148,040 (c)................................ 148,000
------------
1,711,000
------------
Total Short-Term Investments
(cost $27,930,817)................................ 27,930,817
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $100,555,051)......................... 123.5% 137,739,217
Other Assets and Liabilities - net........... (23.5) (26,245,616)
----- ------------
Net Assets................................... 100.0% $111,493,601
===== ============
</TABLE>
(a) All or a portion of this security is on loan.
(b) Represents investment in cash collateral received for securities on loan.
(c) The repurchase agreement is fully collateralized by the U.S. government
and/or agency obligations based on market prices plus accrued interest at
December 31, 1999.
* Non-income producing security.
Summary of Abbreviations:
NV Naamloze Vennootschap (Dutch corporation)
See Combined Notes to Financial Statements.
59
<PAGE>
EVERGREEN
Select Small Company Value Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 100.4%
Automotive Equipment &
Manufacturing - 1.3%
40,000 Arvin Industries, Inc. .............................. $ 1,135,000
-----------
Banks - 13.1%
25,000 Britton & Koontz Capital Corp. ...................... 468,750
47,996 Charter One Financial, Inc. ......................... 917,924
105,000 * Civic Bancorp ..................................... 1,627,500
63,600 * Columbia Banking Systems, Inc. .................... 834,750
57,971 Commercial Bankshares, Inc. ......................... 1,239,119
40,000 First Oak Brook Bancshares, Inc., Cl. A.............. 740,000
30,000 First State Bancorp.................................. 412,500
28,500 Grand Premier Financial, Inc. ....................... 422,156
40,000 Granite State Bankshares, Inc. ...................... 795,000
60,000 Independent Bankshares, Inc. ........................ 832,500
46,100 Mid-State Bancshares................................. 1,469,437
15,900 * Pointe Financial Corp. ............................ 135,150
35,365 * United Security Bancorp ........................... 442,063
47,587 Washington Trust Bancorp, Inc. ...................... 844,669
-----------
11,181,518
-----------
Building, Construction &
Furnishings - 12.2%
60,000 American Woodmark Corp. ............................. 1,455,000
148,000 Craftmade International, Inc. ....................... 1,073,000
20,000 * Crossmann Communities, Inc. ....................... 310,000
20,000 D.R. Horton, Inc. ................................... 276,250
71,500 * Furniture Brands International, Inc. .............. 1,573,000
75,000 * Genlyte Group, Inc. ............................... 1,603,125
64,400 * Koala Corp. ....................................... 901,600
58,750 * Monaco Coach Corp. ................................ 1,501,797
60,900 * Stanley Furniture Co., Inc. ....................... 1,119,037
30,000 * Toll Brothers, Inc. ............................... 558,750
-----------
10,371,559
-----------
Business Equipment &
Services - 3.8%
73,000 * Interim Services, Inc. ............................ 1,806,750
50,000 * RCM Technologies, Inc. ............................ 862,500
9,000 * Zebra Technologies Corp., Cl. A.................... 526,500
-----------
3,195,750
-----------
Consumer Products &
Services - 12.0%
60,000 * Chattem, Inc. ..................................... 1,140,000
40,000 CPI Corp. ........................................... 902,500
35,000 * CSG System International, Inc. .................... 1,395,625
50,000 * Fossil, Inc. ...................................... 1,156,250
59,700 * Guess?, Inc. ...................................... 1,298,475
61,000 Industrie Natuzzi SpA, ADR........................... 808,250
45,000 Lancaster Colony Corp. .............................. 1,490,625
100,000 * Maxwell Shoe, Inc. Cl. A........................... 800,000
19,000 Polaris Industries, Inc. ............................ 688,750
116,900 Stewart Enterprises, Inc., Cl. A..................... 555,275
-----------
10,235,750
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Electrical Equipment &
Services - 1.7%
40,000 Applied Power, Inc., Cl. A.......................... $ 1,470,000
-----------
Electronic Equipment &
Services - 2.8%
22,800 * Hadco Corp. ...................................... 1,162,800
195,000 * Vicon Industries, Inc. ........................... 1,170,000
-----------
2,332,800
-----------
Finance & Insurance - 3.3%
45,500 Morgan Keegan, Inc. ................................ 764,969
70,000 Raymond James Financial, Inc. ...................... 1,308,125
27,700 Waddell & Reed Financial, Inc., Cl. A............... 751,362
-----------
2,824,456
-----------
Food & Beverage Products - 5.6%
55,000 International Multifoods Corp. ..................... 728,750
90,600 Michael Foods, Inc. ................................ 2,231,025
280,000 * Monterey Pasta Co. ............................... 1,102,500
30,000 * Performance Food Group Co. ....................... 731,250
-----------
4,793,525
-----------
Healthcare Products &
Services - 10.1%
70,000 Alpharma, Inc., Cl. A............................... 2,152,500
90,000 * AmeriSource Health Corp., Cl. A................... 1,366,875
21,000 * ArthroCare Corp. ................................. 1,281,000
29,000 Beckman Coulter, Inc. .............................. 1,475,375
77,500 * Exactech, Inc. ................................... 915,469
31,750 * Jones Pharma, Inc. ............................... 1,379,140
-----------
8,570,359
-----------
Industrial Specialty Products &
Services - 1.3%
28,600 Donaldson, Inc. .................................... 688,188
14,000 * Meade Instruments Corp. .......................... 399,000
-----------
1,087,188
-----------
Information Services &
Technology - 4.0%
23,200 * Micros Systems, Inc. ............................. 1,716,800
47,100 * SBS Technologies, Inc. ........................... 1,719,150
-----------
3,435,950
-----------
Manufacturing - Distributing - 1.7%
65,000 LSI Industries, Inc. ............................... 1,405,625
-----------
Oil/Energy - 2.1%
20,000 * Barrett Resources Corp. .......................... 588,750
45,000 Berry Petroleum Co., Cl. A.......................... 680,625
32,000 Cabot Oil & Gas Corp., Cl. A........................ 514,000
-----------
1,783,375
-----------
Printing, Publishing, Broadcasting
& Entertainment - 2.6%
97,800 Bowne & Co., Inc. .................................. 1,320,300
77,000 * Obie Media Corp. ................................. 895,125
-----------
2,215,425
-----------
</TABLE>
60
<PAGE>
EVERGREEN
Select Small Company Value Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Real Estate - 0.8%
89,600 Mission West Properties, Inc., REIT.................. $ 694,400
-----------
Retailing & Wholesale - 13.1%
40,000 * Ames Department Stores, Inc. ...................... 1,152,500
60,000 * Consolidated Stores Corp. ......................... 975,000
78,900 Freds, Inc. Cl. A.................................... 1,257,469
45,000 * Papa John's International, Inc. ................... 1,172,813
125,000 Pier 1 Imports, Inc. ................................ 796,875
95,000 Ross Stores, Inc. ................................... 1,704,062
152,700 * Sonic Automotive, Inc. ............................ 1,488,825
55,000 * Whole Foods Market, Inc. .......................... 2,550,625
-----------
11,098,169
-----------
Telecommunication Services & Equipment - 1.7%
97,400 Hickory Tech Corp.................................... 1,461,000
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Thrift Institutions - 3.5%
36,000 Highland Bancorp, Inc................................ $ 684,000
75,400 Horizon Financial Corp............................... 716,300
14,200 Mech Financial, Inc.................................. 490,787
45,000 MetroWest Bank....................................... 267,188
25,000 * Monterey Bay Bancorp, Inc.......................... 253,125
32,500 * Quaker City Bancorp, Inc........................... 528,125
-----------
2,939,525
-----------
Utilities - Electric - 1.4%
61,100 MDU Resources Group, Inc............................. 1,222,000
-----------
Utilities - Gas - 2.3%
25,000 Eastern Enterprises.................................. 1,435,938
20,000 NUI Corp............................................. 527,500
-----------
1,963,438
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $82,776,879).......................... 100.4% 85,416,812
Other Assets and Liabilities - net........... (0.4) (301,358)
----- -----------
Net Assets................................... 100.0% $85,115,454
===== ===========
</TABLE>
* Non-income producing security
Summary of Abbreviations:
ADR American Depository Receipt
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
61
<PAGE>
EVERGREEN
Select Social Principles Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 98.4%
Advertising & Related Services - 2.7%
117,800 * Ha Lo Industries, Inc. ........................... $ 883,500
28,800 Young & Rubicam, Inc. .............................. 2,037,600
------------
2,921,100
------------
Aerospace & Defense - 0.5%
68,900 * BE Aerospace, Inc. ............................... 581,344
------------
Banks - 4.5%
36,716 FleetBoston Financial Corp. ........................ 1,278,176
30,600 Mellon Financial Corp. ............................. 1,042,312
54,500 SouthTrust Corp. ................................... 2,060,781
13,500 Summit Bancorp...................................... 413,438
------------
4,794,707
------------
Building, Construction & Furnishings - 2.2%
48,394 * NCI Building Systems, Inc. ....................... 895,289
27,500 Southdown, Inc. .................................... 1,419,688
------------
2,314,977
------------
Business Equipment & Services - 0.4%
30,000 * Consolidated Graphics, Inc. ...................... 448,125
------------
Communication Systems & Services - 3.9%
30,400 * Metromedia Fiber Network, Inc.,
Cl. A.............................................. 1,457,300
16,600 * NorthPoint Communications
Group, Inc. ....................................... 398,400
35,900 * Tellabs, Inc. .................................... 2,304,331
------------
4,160,031
------------
Consumer Products & Services - 1.0%
16,700 Harley-Davidson, Inc. .............................. 1,069,844
------------
Diversified Companies - 0.9%
28,800 ITT Industries, Inc. ............................... 963,000
------------
Education - 0.9%
48,300 * Apollo Group, Inc. ............................... 969,019
------------
Electrical Equipment & Services - 2.0%
18,200 Linear Technology Corp. ............................ 1,302,438
9,600 * SCI Systems, Inc. ................................ 789,000
------------
2,091,438
------------
Electronic Equipment & Services - 3.6%
57,600 * Teradyne, Inc. ................................... 3,801,600
------------
Finance & Insurance - 6.5%
16,510 AFLAC, Inc. ........................................ 779,066
39,700 Annuity & Life Re, Ltd. ............................ 1,037,162
52,300 Conseco, Inc. ...................................... 934,862
29,800 Countrywide Credit Industries, Inc. ................ 752,450
31,600 E Trade Group, Inc. ................................ 825,550
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Finance & Insurance - continued
32,710 Partnerre, Ltd. ................................... $ 1,061,031
38,800 ReliaStar Financial Corp. ......................... 1,520,475
------------
6,910,596
------------
Food & Beverage Products - 6.4%
28,700 Dean Foods Co. .................................... 1,140,825
53,900 * Keebler Foods Co. ............................... 1,515,937
23,500 McCormick & Co., Inc. ............................. 699,125
31,000 * Tricon Global Restaurants, Inc. ................. 1,197,375
133,400 * United States Food Service....................... 2,234,450
------------
6,787,712
------------
Healthcare Products & Services - 7.1%
19,700 * Biogen, Inc. .................................... 1,664,650
40,100 * Elan Corp., PLC, ADR............................. 1,182,950
198,500 * HEALTHSOUTH Corp. ............................... 1,066,938
7,100 MedImmune, Inc. ................................... 1,177,712
43,202 Mylan Laboratories, Inc. .......................... 1,088,150
55,700 * Pediatrix Medical Group, Inc. ................... 389,900
14,400 * Wellpoint Health Networks, Inc., Cl. A........... 949,500
------------
7,519,800
------------
Industrial Specialty Products & Services - 1.1%
28,400 Magna International, Inc., Cl. A................... 1,203,450
------------
Information Services & Technology - 28.0%
28,300 * Altera Corp. .................................... 1,402,619
12,600 * Citrix Systems, Inc. ............................ 1,549,800
19,350 CNET, Inc. ........................................ 1,098,113
93,100 * Compuware Corp. ................................. 3,467,975
12,420 * JDS Uniphase Corp. .............................. 2,003,501
43,000 * PMC-Sierra, Inc. ................................ 6,893,437
25,300 * PSINet, Inc. .................................... 1,562,275
31,100 * Sanmina Corp. ................................... 3,106,113
29,000 * Siebel Systems, Inc. ............................ 2,436,000
44,475 * Veritas Software Corp. .......................... 6,365,484
------------
29,885,317
------------
Oil/Energy - 4.6%
47,900 El Paso Energy Corp. .............................. 1,859,119
232,400 * Newpark Resources, Inc. ......................... 1,423,450
71,300 Ultramar Diamond Shamrock Corp. ................... 1,617,619
------------
4,900,188
------------
Paper & Packaging - 1.1%
79,400 Rock Tennessee Co., Cl. A.......................... 1,171,150
------------
Pharmaceuticals - 0.9%
23,600 Chiron Corp. ...................................... 1,000,050
------------
Printing, Publishing, Broadcasting &
Entertainment - 1.2%
12,600 Omnicom Group, Inc. ............................... 1,260,000
------------
</TABLE>
62
<PAGE>
EVERGREEN
Select Social Principles Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Real Estate - 0.9%
54,100 FelCor Lodging Trust, Inc., REIT.................... $ 946,749
------------
Retailing & Wholesale - 8.3%
17,160 * Abercrombie & Fitch Co., Cl. A.................... 457,958
71,026 * Best Buy Co., Inc. ............................... 3,564,617
4,150 Circuit City Stores, Inc. .......................... 187,009
105,000 Family Dollar Stores, Inc. ......................... 1,712,812
125,100 * Saks, Inc. ....................................... 1,946,869
42,200 * Starbucks Corp. .................................. 1,023,350
------------
8,892,615
------------
Telecommunication Services & Equipment - 5.2%
24,220 Crown Castle International Corp. ................... 778,067
89,900 * Qwest Communications International, Inc. ......... 3,865,700
6,400 Voicestream Wireless Corp. ......................... 910,800
------------
5,554,567
------------
Utilities - Electric - 4.5%
71,300 Cinergy Corp. ...................................... 1,720,113
73,428 Sierra Pacific Resources New........................ 1,271,222
95,600 UtiliCorp United, Inc. ............................. 1,858,225
------------
4,849,560
------------
Total Common Stocks
(cost $82,877,279)................................. 104,996,939
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 4.6%
Repurchase Agreement - 4.6%
$4,863,609 Cowen Securities Corp., 2.55%, dated 12/31/1999,
maturing 1/3/2000, maturity value $4,864,643
(cost $4,863,609) (a)............................. $ 4,863,609
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments - (cost $87,740,888)....... 103.0% 109,860,548
Other Assets and Liabilities - net........... (3.0) (3,197,623)
----- ------------
Net Assets................................... 100.0% $106,662,925
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by the U.S. government
and/or agency obligations based on market prices plus accrued interest at
December 31, 1999.
* Non-income producing security.
Summary of Abbreviations:
ADR American Depository Receipt
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
63
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 96.9%
Banks - 0.7%
65,475 U.S. Trust Corp. ................................... $ 5,250,277
------------
Business Equipment &
Services - 1.5%
56,775 i2 Technologies, Inc. .............................. 11,071,125
------------
Chemical & Agricultural
Products - 1.1%
153,550 Waters Corp. ....................................... 8,138,150
------------
Communication Systems & Services - 10.8%
394,200 * Cisco Systems, Inc. .............................. 42,228,675
258,525 Lucent Technologies, Inc. .......................... 19,340,901
166,400 * Powerwave Technologies, Inc. ..................... 9,713,600
114,000 RF Micro Devices, Inc. ............................. 7,801,875
------------
79,085,051
------------
Consumer Products &
Services - 2.4%
160,175 Procter & Gamble Co. ............................... 17,549,173
------------
Electrical Equipment
& Services - 4.8%
157,175 General Electric Co. ............................... 24,322,831
67,575 * QLogic Corp. ..................................... 10,803,553
------------
35,126,384
------------
Electronic Equipment &
Services - 2.8%
49,575 SDL, Inc. .......................................... 10,807,350
97,025 Texas Instruments, Inc. ............................ 9,399,297
------------
20,206,647
------------
Finance & Insurance - 3.1%
117,450 AFLAC, Inc. ........................................ 5,542,172
111,650 Citigroup, Inc. .................................... 6,203,553
55,125 Federal National Mortgage Assoc. ................... 3,441,867
265,759 MBNA Corp. ......................................... 7,241,933
------------
22,429,525
------------
Food & Beverage Products - 3.2%
205,525 Anheuser Busch Companies, Inc. ..................... 14,566,585
134,175 Quaker Oats Co. .................................... 8,805,234
------------
23,371,819
------------
Healthcare Products &
Services - 12.2%
262,900 Bristol-Myers Squibb Co. ........................... 16,874,894
200,175 Johnson & Johnson................................... 18,641,297
244,175 * MedQuist, Inc. ................................... 6,302,767
358,775 Medtronic, Inc. .................................... 13,072,864
246,575 Merck & Co., Inc. .................................. 16,535,936
129,800 Schering-Plough Corp. .............................. 5,475,938
151,050 Warner-Lambert Co. ................................. 12,376,659
------------
89,280,355
------------
Information Services &
Technology - 33.8%
234,250 * America Online, Inc. ............................. 17,671,234
57,100 * Applied Micro Circuits Corp. ..................... 7,265,975
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Information Services &
Technology - continued
40,780 * Broadvision, Inc. ............................... $ 6,935,149
45,180 Business Objects SA................................ 6,037,178
97,675 CDW Computer Centers, Inc. ........................ 7,679,697
156,600 * EMC Corp. ....................................... 17,108,550
60,650 Emulex Corp. ...................................... 6,823,125
86,125 Harmonic Lightwaves, Inc. ......................... 8,176,492
86,800 * JDS Uniphase Corp. .............................. 14,001,925
115,375 * Legato Systems, Inc. ............................ 7,939,242
150,600 * Mercury Interactive Corp. ....................... 16,255,388
349,750 * Microsoft Corp. ................................. 40,833,312
54,750 * Network Appliance, Inc. ......................... 4,547,672
70,550 * PMC-Sierra, Inc. ................................ 11,310,047
119,805 Siebel Systems, Inc. .............................. 10,063,620
209,050 * Sun Microsystems, Inc. .......................... 16,188,309
148,400 * Synopsys, Inc. .................................. 9,905,700
160,900 * Vitesse Semiconductor Corp. ..................... 8,437,194
69,250 * Yahoo!, Inc. .................................... 29,963,609
------------
247,143,418
------------
Oil/Energy - 0.5%
84,900 Enron Corp. ....................................... 3,767,437
------------
Paper & Packaging - 2.4%
178,225 Georgia-Pacific Corp. ............................. 9,044,919
133,485 Kimberly-Clark Corp. .............................. 8,709,896
------------
17,754,815
------------
Printing, Publishing, Broadcasting &
Entertainment - 2.2%
118,801 Knight-Ridder, Inc. ............................... 7,068,659
28,542 New York Times Co., Cl. A ......................... 1,402,126
74,200 Omnicom Group, Inc. ............................... 7,420,000
------------
15,890,785
------------
Retailing & Wholesale - 9.7%
92,900 * Best Buy Co., Inc. .............................. 4,662,419
101,375 Circuit City Stores, Inc. ......................... 4,568,211
362,075 Family Dollar Stores, Inc. ........................ 5,906,348
268,688 Home Depot, Inc. .................................. 18,421,887
133,925 Lowe's Companies, Inc. ............................ 8,002,019
86,862 Tandy Corp. ....................................... 4,272,525
93,200 Tiffany & Co. ..................................... 8,318,100
236,675 Wal-Mart Stores, Inc. ............................. 16,360,159
------------
70,511,668
------------
Telecommunication Services & Equipment - 5.1%
87,175 E-Tek Dynamics, Inc. .............................. 11,735,934
113,700 Nortel Networks Corp. ............................. 11,483,700
77,900 * Qualcomm, Inc. .................................. 13,720,138
------------
36,939,772
------------
Utilities - Telephone - 0.6%
95,175 SBC Communications, Inc. .......................... 4,639,781
------------
Total Common Stocks
(cost $445,804,262)............................... 708,156,182
------------
</TABLE>
64
<PAGE>
EVERGREEN
Select Strategic Growth Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 2.5%
Money Market Shares - 0.0%
192,812 Valiant General Fund................................ $ 192,812
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
Repurchase Agreement - 2.5%
$18,491,401 Cowen Securities Corp., 2.55%, dated
12/31/1999, maturing 1/3/2000,
maturity value $18,495,330 (a)..................... $ 18,491,401
------------
Total Short-Term Investments
(cost $18,684,213)................................. 18,684,213
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $464,488,475)......................... 99.4% 726,840,395
Other Assets and Liabilities - net........... 0.6 4,200,161
----- ------------
Net Assets................................... 100.0% $731,040,556
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by the U.S. government
and/or agency obligations based on market prices plus accrued interest at
December 31, 1999.
* Non-income producing security.
See Combined Notes to Financial Statements.
65
<PAGE>
EVERGREEN
Select Strategic Value Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 94.6%
Automotive Equipment & Manufacturing - 1.0%
230,100 * Lear Corp. ....................................... $ 7,363,200
------------
Banks - 12.3%
245,700 BankAmerica Corp. .................................. 12,331,069
341,400 Chase Manhattan Corp. .............................. 26,522,512
662,600 Mellon Financial Corp. ............................. 22,569,813
278,500 SouthTrust Corp. ................................... 10,530,781
539,100 Wells Fargo Co. .................................... 21,799,856
------------
93,754,031
------------
Chemical & Agricultural
Products - 2.3%
634,600 Hercules, Inc. ..................................... 17,689,475
------------
Consumer Products &
Services - 5.4%
499,900 Black & Decker Corp. ............................... 26,119,775
309,000 Maytag Corp. ....................................... 14,832,000
------------
40,951,775
------------
Electronic Equipment &
Services - 4.2%
165,184 Koninklijke (Royal) Philips Electronics, NV, ADR.... 22,299,840
152,015 * Teradyne, Inc. ................................... 10,032,990
------------
32,332,830
------------
Finance & Insurance - 9.5%
174,000 Allstate Corp. ..................................... 4,176,000
424,700 Citigroup, Inc. .................................... 23,597,394
371,900 Countrywide Credit Industries, Inc. ................ 9,390,475
138,700 Loews Corp. ........................................ 8,417,356
269,400 Merrill Lynch & Co., Inc. .......................... 22,494,900
144,100 Nationwide Financial Services, Inc.,
Cl. A.............................................. 4,025,794
------------
72,101,919
------------
Food & Beverage Products - 3.3%
391,700 McDonald's Corp. ................................... 15,790,407
411,500 Philip Morris Companies, Inc. ...................... 9,541,656
------------
25,332,063
------------
Healthcare Products &
Services - 4.5%
315,900 Bristol-Myers Squibb Co. ........................... 20,276,831
613,900 * Tenet Healthcare Corp. ........................... 14,426,650
------------
34,703,481
------------
Information Services &
Technology - 3.4%
92,400 Intel Corp. ........................................ 7,605,675
170,300 International Business Machines Corp. .............. 18,392,400
------------
25,998,075
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Metal Products & Services - 5.8%
396,800 Alcoa, Inc. ....................................... $ 32,934,400
334,200 USX United States Steel Group...................... 11,028,600
------------
43,963,000
------------
Oil/Energy - 12.8%
295,000 Burlington Resources, Inc. ........................ 9,753,437
190,100 El Paso Energy Corp. .............................. 7,378,256
349,822 Exxon Mobil Corp. ................................. 28,182,535
307,500 Texaco, Inc. ...................................... 16,701,094
716,500 Tosco Corp. ....................................... 19,479,844
297,600 Ultramar Diamond Shamrock Corp. ................... 6,751,800
380,000 USX Marathon Group................................. 9,381,250
------------
97,628,216
------------
Paper & Packaging - 3.2%
554,400 Mead Corp. ........................................ 24,081,750
------------
Printing, Publishing, Broadcasting &
Entertainment - 3.0%
786,100 Disney (Walt) Co. ................................. 22,993,425
------------
Real Estate - 0.5%
201,200 FelCor Lodging Trust, Inc., REIT................... 3,521,000
------------
Retailing & Wholesale - 2.6%
333,500 Lowe's Companies, Inc. ............................ 19,926,625
------------
Telecommunication Services & Equipment - 8.2%
504,800 Centurytel, Inc. .................................. 23,914,900
154,600 Motorola, Inc. .................................... 22,764,850
85,200 Nokia Corp., ADR................................... 16,188,000
------------
62,867,750
------------
Utilities - Gas - 3.7%
359,500 NICOR, Inc. ....................................... 11,683,750
543,700 The Williams Companies, Inc. ...................... 16,616,831
------------
28,300,581
------------
Utilities - Telephone - 8.9%
229,500 ALLTEL Corp. ...................................... 18,976,780
491,000 AT&T Corp. ........................................ 24,918,250
344,700 GTE Corp. ......................................... 24,322,894
------------
68,217,924
------------
Total Common Stocks
(cost $650,563,156)............................... 721,727,120
------------
PREFERRED STOCKS - 1.4%
Printing, Publishing, Broadcasting &
Entertainment - 1.4%
314,700 News Corp., Ltd.
(cost $7,860,011) ................................ 10,522,782
------------
</TABLE>
66
<PAGE>
EVERGREEN
Select Strategic Value Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 3.8%
Money Market Shares - 0.4%
3,321,071 Valiant General Fund ............................... $ 3,321,071
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
Repurchase Agreement - 3.4%
$26,216,748 Cowen Securities Corp., 2.55%,
dated 12/31/1999, maturing
1/3/2000, maturity value
$26,222,319 (a).................................... $ 26,216,748
------------
Total Short-Term Investments
(cost $29,537,819)................................. 29,537,819
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $687,960,986)......................... 99.8% 761,787,721
Other Assets and Liabilities - net........... 0.2 1,355,833
----- ------------
Net Assets................................... 100.0% $763,143,554
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by the U.S. government
and/or agency obligations based on market prices plus accrued interest at
December 31, 1999.
* Non-income producing security.
Summary of Abbreviations:
ADR American Depository Receipt
NV Naamloze Vennootschap (Dutch corporation)
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
67
<PAGE>
EVERGREEN
Select Equity Funds
Statements of Assets and Liabilities
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Diversified Large Cap Secular
Balanced Core Equity Value Blend Growth
Fund Fund Fund Fund Fund
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Identified cost of
securities............ $562,213,462 $1,820,713,022 $406,407,933 $253,526,400 $672,229,686
Net unrealized gains on
securities............ 83,402,168 897,672,706 101,514,052 97,027,414 265,067,066
---------------------------------------------------------------------------------------------
Market value of
securities............ 645,615,630 2,718,385,728 507,921,985 350,553,814 937,296,752
Cash................... 2,241 0 0 0 1,696,056
Receivable for
securities sold....... 380,304 0 36,472,959 0 14,824,140
Receivable for Fund
shares sold........... 51,376 853,954 41,747 0 6,434
Dividends and interest
receivable............ 5,344,872 2,271,074 487,207 343,538 127,845
Receivable for daily
variation margin on
open futures
contracts............. 0 0 21,250 0 0
Deferred organization
expenses.............. 0 0 0 0 0
Prepaid expenses and
other assets.......... 2,603 14,899 25,825 26,137 28,083
---------------------------------------------------------------------------------------------
Total assets........... 651,397,026 2,721,525,655 544,970,973 350,923,489 953,979,310
---------------------------------------------------------------------------------------------
Liabilities
Distributions payable.. 667,475 0 20,197 100,428 0
Payable for securities
purchased............. 0 0 0 0 7,784,880
Payable for Fund shares
redeemed.............. 4,081,399 893,511 68,575 5,915,042 161,671
Payable for securities
on loan............... 0 0 0 0 0
Due to custodian bank.. 0 0 0 0 0
Advisory fee payable... 277,030 1,594,631 225,810 189,414 446,808
Distribution Plan
expenses payable...... 8 746 9 134 1
Due to other related
parties............... 11,701 50,067 10,108 6,791 16,926
Accrued expenses and
other liabilities..... 160,910 322,564 93,687 63,836 261,721
---------------------------------------------------------------------------------------------
Total liabilities...... 5,198,523 2,861,519 418,386 6,275,645 8,672,007
---------------------------------------------------------------------------------------------
Net assets.............. $646,198,503 $2,718,664,136 $544,552,587 $344,647,844 $945,307,303
---------------------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital........ $539,076,474 $1,758,585,466 $426,101,911 $236,564,477 $602,775,902
Undistributed
(overdistributed) net
investment income or
loss.................. (67,625) 807,508 42,516 5,027 (642,815)
Accumulated net
realized gains or
losses on securities
and futures
contracts............. 23,787,486 61,598,456 16,553,033 11,050,926 78,107,150
Net unrealized gains on
securities and futures
contracts............. 83,402,168 897,672,706 101,855,127 97,027,414 265,067,066
---------------------------------------------------------------------------------------------
Total net assets........ $646,198,503 $2,718,664,136 $544,552,587 $344,647,844 $945,307,303
---------------------------------------------------------------------------------------------
Net assets consists of
Class I................ $645,160,940 $2,671,204,314 $543,139,434 $344,218,930 $945,226,365
Class IS............... 1,037,563 47,459,822 1,413,153 428,914 80,938
---------------------------------------------------------------------------------------------
Total net assets....... $646,198,503 $2,718,664,136 $544,552,587 $344,647,844 $945,307,303
---------------------------------------------------------------------------------------------
Shares outstanding
Class I................ 45,079,474 29,734,719 19,096,865 7,948,714 6,480,308
Class IS............... 72,288 567,600 50,300 9,913 556
---------------------------------------------------------------------------------------------
Net asset value per
share
Class I................ $ 14.31 $ 89.83 $ 28.44 $ 43.30 $ 145.86
---------------------------------------------------------------------------------------------
Class IS............... $ 14.35 $ 83.61 $ 28.09 $ 43.27 $ 145.57
---------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
68
<PAGE>
EVERGREEN
Select Equity Funds
Statements of Assets and Liabilities
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Small Cap Small Company Social Strategic Strategic
Growth Value Principles Growth Value
Fund Fund Fund Fund Fund
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Identified cost of
securities............ $100,555,051 $82,776,879 $ 87,740,888 $464,488,475 $687,960,986
Net unrealized gains on
securities............ 37,184,166 2,639,933 22,119,660 262,351,920 73,826,735
--------------------------------------------------------------------------------------------
Market value of
securities............ 137,739,217 85,416,812 109,860,548 726,840,395 761,787,721
Cash................... 330 0 0 3,625 0
Receivable for
securities sold....... 11,011 562,179 0 666,585 0
Receivable for Fund
shares sold........... 34,025 0 0 4,507,824 4,267,001
Dividends and interest
receivable............ 5,251 101,467 88,571 252,973 1,057,689
Receivable for daily
variation margin on
open futures
contracts............. 0 0 0 0 0
Deferred organization
expenses.............. 3,921 0 0 0 0
Prepaid expenses and
other assets.......... 11,689 27,299 11,393 21,813 32,144
--------------------------------------------------------------------------------------------
Total assets......... 137,805,444 86,107,757 109,960,512 732,293,215 767,144,555
--------------------------------------------------------------------------------------------
Liabilities
Distributions payable.. 0 17,751 0 0 437,200
Payable for securities
purchased............. 0 383,958 0 0 2,781,525
Payable for Fund shares
redeemed.............. 0 271,000 3,216,471 779,024 125,831
Payable for securities
on loan............... 26,219,817 0 0 0 0
Due to custodian bank.. 0 235,455 0 0 0
Advisory fee payable... 68,826 59,972 70,006 400,036 471,360
Distribution Plan
expenses payable...... 0 0 0 122 20
Due to other related
parties............... 0 1,936 1,952 14,511 20,117
Accrued expenses and
other liabilities..... 23,200 22,231 9,158 58,966 164,948
--------------------------------------------------------------------------------------------
Total liabilities.... 26,311,843 992,303 3,297,587 1,252,659 4,001,001
--------------------------------------------------------------------------------------------
Net assets.............. $111,493,601 $85,115,454 $106,662,925 $731,040,556 $763,143,554
--------------------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital........ $ 71,224,547 $99,878,337 $ 78,022,790 $425,177,634 $680,029,743
Undistributed
(overdistributed) net
investment income or
loss.................. (220,306) (8,535) 9,227 (89,568) 42,890
Accumulated net
realized gains or
losses on securities
and futures
contracts............. 3,305,194 (17,394,281) 6,511,248 43,600,570 9,244,186
Net unrealized gains on
securities and futures
contracts............. 37,184,166 2,639,933 22,119,660 262,351,920 73,826,735
--------------------------------------------------------------------------------------------
Total net assets..... $111,493,601 $85,115,454 $106,662,925 $731,040,556 $763,143,554
--------------------------------------------------------------------------------------------
Net assets consists of
Class I................ $111,493,601 $85,114,462 $106,611,192 $713,031,377 $760,160,961
Class IS............... 0 992 51,733 18,009,179 2,982,593
--------------------------------------------------------------------------------------------
Total net assets....... $111,493,601 $85,115,454 $106,662,925 $731,040,556 $763,143,554
--------------------------------------------------------------------------------------------
Shares outstanding
Class I................ 5,588,479 10,037,070 3,578,768 14,631,487 3,348,948
Class IS............... 0 121 1,741 371,132 13,138
--------------------------------------------------------------------------------------------
Net asset value per
share
Class I................ $ 19.95 $ 8.48 $ 29.79 $ 48.73 $ 226.98
--------------------------------------------------------------------------------------------
Class IS............... -- $ 8.20 $ 29.71 $ 48.52 $ 227.02
--------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
69
<PAGE>
EVERGREEN
Select Equity Funds
Statements of Operations
Six Months Ended December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Diversified Large Cap Secular
Balanced Core Equity Value Blend Growth
Fund Fund Fund Fund Fund
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income
Dividends (net of
foreign withholding
taxes of $1,249,
$38,187, $8,170, $885,
$0, $0, $0, $2,171,
$639, $4,332,
respectively)......... $ 1,628,644 $ 13,538,474 $ 3,079,679 $ 2,245,336 $ 896,085
Securities lending
income................ 0 0 0 0 196,594
Interest............... 10,970,314 1,904,338 117,322 149,086 799,783
-------------------------------------------------------------------------------------------
Total investment
income................. 12,598,958 15,442,812 3,197,001 2,394,422 1,892,462
-------------------------------------------------------------------------------------------
Expenses
Advisory fee........... 2,035,575 8,865,278 1,675,648 1,360,501 2,544,933
Distribution Plan
expenses.............. 880 44,346 1,652 488 17
Administrative services
fee................... 77,121 287,615 63,478 44,215 82,340
Transfer agent fee..... 190,529 9,811 110,635 182 704
Trustees' fees and
expenses.............. 6,740 26,812 5,684 3,936 5,822
Printing and postage
expenses.............. 17,481 65,301 14,460 10,127 17,928
Custodian fee.......... 105,865 325,846 44,337 42,741 106,490
Registration and filing
fees.................. 46,648 66,266 22,832 16,715 213,468
Professional fees...... 9,740 12,891 8,820 8,237 9,798
Organization expenses.. 0 0 0 0 0
Other.................. 86,094 50,204 46,674 44,445 3,139
-------------------------------------------------------------------------------------------
Total expenses....... 2,576,673 9,754,370 1,994,220 1,531,587 2,984,639
Less: Expense
reductions.......... (13,487) (52,784) (11,480) (8,152) (14,080)
Fee waivers........ (339,262) (924,281) (263,730) (171,420) (425,608)
-------------------------------------------------------------------------------------------
Net expenses........... 2,223,924 8,777,305 1,719,010 1,352,015 2,544,951
-------------------------------------------------------------------------------------------
Net investment income
or loss............... 10,375,034 6,665,507 1,477,991 1,042,407 (652,489)
-------------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and futures contracts
Net realized gains or
losses on:
Securities............. 47,925,140 66,866,599 18,891,871 25,848,525 99,416,584
Futures contracts...... 0 (4,246,425) 466,175 0 0
-------------------------------------------------------------------------------------------
Net realized gains or
losses on securities
and futures
contracts............. 47,925,140 62,620,174 19,358,104 25,848,525 99,416,584
-------------------------------------------------------------------------------------------
Net change in
unrealized gains or
losses on securities
and futures
contracts............. 9,868,119 120,962,603 14,453,323 (16,457,354) 196,431,202
-------------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and futures
contracts............. 57,793,259 183,582,777 33,811,427 9,391,171 295,847,786
-------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ $68,168,293 $190,248,284 $35,289,418 $10,433,578 $295,195,297
-------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
70
<PAGE>
EVERGREEN
Select Equity Fund
Statements of Operations
Six Months Ended December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Small Cap Small Company Social Strategic
Growth Value Principles Strategic Growth Value
Fund Fund Fund Fund Fund
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income
Dividends (net of
foreign withholding
taxes of $1,249,
$38,187, $8,170, $885,
$0, $0, $0, $2,171,
$639, $4,332,
respectively)......... $ 64,224 $ 563,649 $ 568,999 $ 1,341,773 $ 5,707,014
Securities lending
income................ 48,178 0 0 0 0
Interest............... 48,794 107,853 97,450 793,568 728,961
---------------------------------------------------------------------------------------------
Total investment
income................. 161,196 671,502 666,449 2,135,341 6,435,975
---------------------------------------------------------------------------------------------
Expenses
Advisory fee........... 313,675 450,171 450,630 1,967,647 2,405,518
Distribution Plan
expenses.............. 0 5 82 17,559 2,871
Administrative services
fee................... 4,743 11,377 12,816 63,816 78,033
Transfer agent fee..... 998 204 182 36,659 19,930
Trustees' fees and
expenses.............. 726 1,021 971 4,822 6,818
Printing and postage
expenses.............. 1,888 2,626 3,119 12,994 17,928
Custodian fee.......... 9,488 13,222 10,459 36,588 89,773
Registration and filing
fees.................. 31,840 13,463 4,721 13,724 91,361
Professional fees...... 7,655 8,789 7,794 9,175 9,798
Organization expenses.. 2,011 0 0 0 0
Other.................. 11,956 8,688 3,252 3,636 3,117
---------------------------------------------------------------------------------------------
Total expenses....... 384,980 509,566 494,026 2,166,620 2,725,147
Less: Expense
reductions.......... (3,478) (3,970) (1,966) (12,865) (14,164)
Fee waivers........ 0 (37,167) (31,950) (168,384) (196,718)
---------------------------------------------------------------------------------------------
Net expenses......... 381,502 468,429 460,110 1,985,371 2,514,265
---------------------------------------------------------------------------------------------
Net investment income
or loss............... (220,306) 203,073 206,339 149,970 3,921,710
---------------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and futures contracts
Net realized gains or
losses on:
Securities........... 7,724,216 (8,869,649) 13,379,755 73,538,856 9,684,294
Futures contracts.... 0 0 0 0 0
---------------------------------------------------------------------------------------------
Net realized gains or
losses on securities
and futures
contracts............. 7,724,216 (8,869,649) 13,379,755 73,538,856 9,684,294
---------------------------------------------------------------------------------------------
Net change in
unrealized gains or
losses on securities
and futures
contracts............. 27,399,552 2,639,016 (9,293,541) 139,358,357 (22,587,449)
---------------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and futures
contracts............. 35,123,768 (6,230,633) 4,086,214 212,897,213 (12,903,155)
---------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ $34,903,462 $(6,027,560) $4,292,553 $213,047,183 $(8,981,445)
---------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
71
<PAGE>
EVERGREEN
Select Equity Funds
Statements of Changes in Net Assets
Six Months Ended December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Diversified Large Cap Secular
Balanced Core Equity Value Blend Growth
Fund Fund Fund Fund Fund
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income
or loss............... $ 10,375,034 $ 6,665,507 $ 1,477,991 $ 1,042,407 $ (652,489)
Net realized gains or
losses on securities
and futures
contracts............. 47,925,140 62,620,174 19,358,104 25,848,525 99,416,584
Net change in
unrealized gains or
losses on securities
and futures
contracts............. 9,868,119 120,962,603 14,453,323 (16,457,354) 196,431,202
----------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ 68,168,293 190,248,284 35,289,418 10,433,578 295,195,297
----------------------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class I................ (12,050,262) (5,868,238) (1,847,289) (1,028,536) (1,204)
Class IS............... (11,667) (46,444) (2,748) (675) 0
Net realized gains
Class I................ (24,379,441) (187,467,729) (20,189,344) (48,438,597) (21,267,232)
Class IS............... (36,122) (3,188,973) (52,325) (54,463) (852)
----------------------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (36,477,492) (196,571,384) (22,091,706) (49,522,271) (21,269,288)
----------------------------------------------------------------------------------------------------
Capital shares
transactions
Proceeds from shares
sold.................. 40,891,177 134,132,114 17,963,149 3,355,140 45,503,515
Payment for shares
redeemed.............. (205,272,716) (336,210,264) (113,950,665) (106,922,322) (185,887,007)
Net asset value of
shares issued in
reinvestment of
distributions......... 31,025,679 188,873,735 19,603,608 48,546,755 21,268,857
Net asset value of
shares issued in
acquisition of common
trust funds........... 88,725,755 662,110,336 0 0 750,366,912
Net asset value of
shares issued in
acquisition of other
investment companies.. 0 132,358,403 0 0 0
----------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
shares transactions... (44,630,105) 781,264,324 (76,383,908) (55,020,427) 631,252,277
----------------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... (12,939,304) 774,941,224 (63,186,196) (94,109,120) 905,178,286
Net assets
Beginning of period.... 659,137,807 1,943,722,912 607,738,783 438,756,964 40,129,017
----------------------------------------------------------------------------------------------------
End of period.......... $ 646,198,503 $2,718,664,136 $ 544,552,587 $ 344,647,844 $ 945,307,303
----------------------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income or
loss................... $ (67,625) $ 807,508 $ 42,516 $ 5,027 $ (642,815)
----------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
72
<PAGE>
EVERGREEN
Select Equity Funds
Statements of Changes in Net Assets
Six Months Ended December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Small Cap Small Company Social Strategic Strategic
Growth Value Principles Growth Value
Fund Fund Fund Fund Fund
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income
or loss............... $ (220,306) $ 203,073 $ 206,339 $ 149,970 $ 3,921,710
Net realized gains or
losses on securities
and futures
contracts............. 7,724,216 (8,869,649) 13,379,755 73,538,856 9,684,294
Net change in
unrealized gains or
losses on securities
and futures
contracts............. 27,399,552 2,639,016 (9,293,541) 139,358,357 (22,587,449)
------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ 34,903,462 (6,027,560) 4,292,553 213,047,183 (8,981,445)
------------------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class I................ 0 (211,134) (195,048) (230,950) (4,801,884)
Class IS............... 0 (14) (78) (1,380) (15,067)
Net realized gains
Class I................ 0 0 (24,231,940) (97,463,054) (9,327,347)
Class IS............... 0 0 (11,316) (2,592,736) (31,597)
------------------------------------------------------------------------------------------------
Total distributions to
shareholders.......... 0 (211,148) (24,438,382) (100,288,120) (14,175,895)
------------------------------------------------------------------------------------------------
Capital shares
transactions
Proceeds from shares
sold.................. 14,763,891 14,916,520 1,477,125 134,798,995 149,769,345
Payment for shares
redeemed.............. (8,287,289) (31,914,652) (33,457,584) (112,639,967) (61,089,469)
Net asset value of
shares issued in
reinvestment of
distributions......... 0 171,172 24,253,188 99,760,812 11,366,456
Net asset value of
shares issued in
acquisition of common
trust funds........... 0 0 0 2,592,329 153,449,048
Net asset value of
shares issued in
acquisition of other
investment companies.. 0 0 0 0 0
------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
shares transactions... 6,476,602 (16,826,960) (7,727,271) 124,512,169 253,495,380
------------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... 41,380,064 (23,065,668) (27,873,100) 237,271,232 230,338,040
Net assets
Beginning of period.... 70,113,537 108,181,122 134,536,025 493,769,324 532,805,514
------------------------------------------------------------------------------------------------
End of period.......... $111,493,601 $ 85,115,454 $106,662,925 $ 731,040,556 $763,143,554
------------------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income or
loss................... $ (220,306) $ (8,535) $ 9,227 $ (89,568) $ 42,890
------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
73
<PAGE>
EVERGREEN
Select Equity Fund
Statements of Changes in Net Assets
Year Ended June 30, 1999
<TABLE>
<CAPTION>
Diversified Large Cap Secular
Balanced Core Equity Value Blend Growth
Fund Fund Fund Fund Fund (a)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income
or loss................ $ 23,946,017 $ 15,255,869 $ 5,814,173 $ 3,767,039 9,089
Net realized gains or
losses on securities
and futures
contracts.............. 928,390 190,887,254 17,372,195 35,527,151 (41,350)
Net change in
unrealized gains or
losses on securities
and futures
contracts.............. 12,500,436 (31,676,691) 23,916,181 (7,056,882) 648,999
--------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............. 37,374,843 174,466,432 47,102,549 32,237,308 616,738
--------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income
(b)
Class I............... (22,214,234) (14,533,736) (5,432,863) (415,801) (7,798)
Class IS.............. (71,558) (136,355) (6,977) (2,046) (1)
Class IC (c).......... 0 0 0 (3,330,655) 0
Net realized gains (b)
Class I............... (7,372,020) (160,679,308) (17,317,740) (1,886,318) 0
Class IS.............. (32,664) (2,314,062) (34,597) (32,097) 0
Class IC (c).......... 0 0 0 (50,651,105) 0
--------------------------------------------------------------------------------------------------
Total distributions
to shareholders...... (29,690,476) (177,663,461) (22,792,177) (56,318,022) (7,799)
--------------------------------------------------------------------------------------------------
Capital shares
transactions
Proceeds from shares
sold................... 107,820,701 194,557,250 67,508,083 46,937,384 39,940,669
Payment for shares
redeemed............... (200,572,408) (345,341,133) (303,364,284) (147,493,668) (425,994)
Net asset value of
shares issued in
reinvestment of
distributions.......... 20,140,059 127,043,887 21,722,516 51,527,385 5,403
Net asset value of
shares issued in
acquisition of other
investment companies... 0 0 0 0 0
--------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
shares transactions.. (72,611,648) (23,739,996) (214,133,685) (49,028,899) 39,520,078
--------------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets................ (64,927,281) (26,937,025) (189,823,313) (73,109,613) 40,129,017
Net assets
Beginning of period..... 724,065,088 1,970,659,937 797,562,096 511,866,577 0
--------------------------------------------------------------------------------------------------
End of period........... $ 659,137,807 $1,943,722,912 $ 607,738,783 $ 438,756,964 $40,129,017
--------------------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income or
loss.................... $ 1,619,270 $ 56,683 $ 414,562 $ (8,169) $ 10,878
--------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period from February 26, 1999 (commencement of Class operations) to
June 30, 1999.
(b) The Large Cap Blend Fund redesignated $240,950 (or $0.02 per share for
Classes I, IS and IC) distributions from net investment income declared af-
ter January 1, 1999, as capital gains distributions after January 1, 1999.
(c) On April 30, 1999, the IC shares of the Large Cap Blend Fund and Social
Principles Fund were converted to Class I shares. Shareholders of Class IC
shares became owners of that number of Class I shares having a net asset
value equal to the net asset value of their shares immediately prior to the
close of business on April 30, 1999. Class IC is the accounting survivor,
its operating results for the periods prior to April 30, 1999 have been
carried forward in these financial statements.
See Combined Notes to Financial Statements.
74
<PAGE>
EVERGREEN
Select Equity Funds
Statements of Changes in Net Assets
Year Ended June 30, 1999
<TABLE>
<CAPTION>
Small Cap Small Company Social Strategic Strategic
Growth Value Principles Growth Value
Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income
or loss............... $ (423,502) $ 253,866 $ 502,889 $ 1,061,817 $ 5,478,583
Net realized gains or
losses on securities
and futures
contracts............. (2,938,420) (8,481,510) 20,463,898 100,654,235 9,159,666
Net change in
unrealized gains or
losses on securities
and futures
contracts............. 6,375,643 2,615,130 (22,240,460) 51,252,431 24,194,498
-----------------------------------------------------------------------------------------------
Net increase
(decrease)
in net assets
resulting from
operations.......... 3,013,721 (5,612,514) (1,273,673) 152,968,483 38,832,747
-----------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income
Class I.............. 0 (313,373) (78,008) (1,186,581) (4,545,875)
Class IS............. 0 0 (238) (10,641) (17,533)
Class IC (b)......... 0 0 (537,557) 0 0
Net realized gains
Class I.............. (100,814) (363,011) (157,473) (42,795,680) (7,731,471)
Class IS............. 0 0 (6,403) (947,111) (36,621)
Class IC (b)......... 0 0 (8,960,041) 0 0
-----------------------------------------------------------------------------------------------
Total distributions
to shareholders...... (100,814) (676,384) (9,739,720) (44,940,013) (12,331,500)
-----------------------------------------------------------------------------------------------
Capital shares
transactions
Proceeds from shares
sold.................. 3,242,108 49,048,796 14,856,248 98,098,328 281,161,395
Payment for shares
redeemed.............. (5,425,723) (12,850,016) (58,178,607) (282,527,098) (72,083,435)
Net asset value of
shares issued in
reinvestment of
distributions......... 100,757 624,439 9,074,037 40,521,982 8,705,914
Net asset value of
shares issued in
acquisition of other
investment companies.. 0 0 0 205,742,310 0
-----------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
shares transactions... (2,082,858) 36,823,219 (34,248,322) 61,835,522 217,783,874
-----------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............. 830,049 30,534,321 (45,261,715) 169,863,992 244,285,121
Net assets
Beginning of period.... 69,283,488 77,646,801 179,797,740 323,905,332 288,520,393
-----------------------------------------------------------------------------------------------
End of period.......... $70,113,537 $108,181,122 $134,536,025 $ 493,769,324 $532,805,514
================================================================================================
Undistributed
(overdistributed) net
investment income or
loss................... $ 0 $ (460) $ (1,986) $ (7,208) $ 938,131
===============================================================================================
</TABLE>
(a) For the period from February 26, 1999 (commencement of Class operations) to
June 30, 1999.
(b) On April 30, 1999, the IC shares of the Large Cap Blend Fund and Social
Principles Fund were converted to Class I shares. Shareholders of Class IC
shares became owners of that number of Class I shares having a net asset
value equal to the net asset value of their shares immediately prior to the
close of business on April 30, 1999. Class IC is the accounting survivor,
its operating results for the periods prior to April 30, 1999 have been
carried forward in these financial statements.
See Combined Notes to Financial Statements.
75
<PAGE>
Combined Notes to Financial Statements (Unaudited)
1. ORGANIZATION
The Evergreen Select Equity Funds consist of Evergreen Select Balanced Fund
("Balanced Fund"), Evergreen Select Core Equity Fund ("Core Equity Fund"), Ev-
ergreen Select Diversified Value Fund ("Diversified Value Fund"), Evergreen Se-
lect Large Cap Blend Fund ("Large Cap Blend Fund"), Evergreen Select Secular
Growth Fund ("Secular Growth Fund"), Evergreen Select Small Cap Growth Fund
("Small Cap Growth Fund"), Evergreen Select Small Company Value Fund ("Small
Company Value Fund"), Evergreen Select Social Principles Fund ("Social Princi-
ples Fund"), Evergreen Select Strategic Growth Fund ("Strategic Growth Fund")
and Evergreen Select Strategic Value Fund ("Strategic Value Fund"), (collec-
tively, the "Funds"). Each Fund is a diversified series of Evergreen Select Eq-
uity Trust, a Delaware business trust organized on September 18, 1997. The
Trust is an open-end management investment company registered under the Invest-
ment Company Act of 1940, as amended (the "1940 Act").
The Funds offer Institutional shares ("Class I ") and Institutional Service
shares ("Class IS"). 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.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
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
and other securities traded in the over-the-counter market for which there has
been no sale are valued at the mean between the last reported bid and asked
price.
Corporate bonds, U.S. government obligations, mortgage and other asset-backed
securities and other fixed-income securities are valued at prices provided by
an independent pricing service. In determining a price for normal institution-
al-size transactions, the pricing service uses methods based on market transac-
tions for comparable securities and analysis of various relationships between
similar securities, which are generally recognized by institutional traders.
Securities for which valuations are not readily available from an independent
pricing service (including restricted securities) are valued at fair value as
determined in good faith according to procedures established by the Board of
Trustees.
Mutual fund shares held as short-term investments are valued at net asset val-
ue.
Short-term investments with remaining maturities of 60 days or less at the time
of purchase 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. Col-
lateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the Fund
and the counterparty. Each Fund monitors the adequacy of the 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 adviser to be creditworthy pursuant to guidelines
established by the Board of Trustees.
76
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Pursuant to an exemptive order issued by the Securities and Exchange Commis-
sion, the Small Cap Growth Fund along with certain other Funds, managed by Ev-
ergreen Investment Management Company ("EIMC"), an indirect wholly owned sub-
sidiary of First Union National Bank ("FUNB"), 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.
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 ("variation mar-
gin") 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 Statements of
Assets and Liabilities.
D. Foreign Currency
The books and records of the Funds are maintained in United States (U.S.) dol-
lars. Foreign currency amounts are translated into U.S. 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 or loss resulting from changes in foreign cur-
rency exchange rates is a component of net unrealized gain or loss on securi-
ties and foreign currency related transactions. Net realized foreign currency
gains or losses resulting from changes in exchange rates include foreign cur-
rency 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 Funds and
the amounts that are actually received 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. Securities Lending
In order to generate income and to offset expenses, the Funds may lend portfo-
lio securities to brokers, dealers, and other financial organizations. The
Funds' investment advisers will monitor the creditworthiness of such borrowers.
Loans of securities may not exceed 33 1/3% of a Fund's total assets and will be
collateralized by cash, letters of credit or U.S. Government securities that
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities, including accrued interest. The Fund
monitors the adequacy of the collateral daily and will require the borrower to
provide additional collateral in the event the value of the collateral falls
below 100% of the market value of the securities on loan. While such securities
are on loan, the borrower will pay a Fund any income accruing thereon, and the
Fund may invest any cash collateral received in portfolio securities, thereby
increasing its return. A Fund will have the right to call any such loan and ob-
tain the securities loaned at any time on five days' notice. Any gain or loss
in the market price of the loaned securities, which occurs during the term of
the loan, would affect a Fund and its investors. A Fund may pay fees in connec-
tion with such loans.
F. 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 an 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
77
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
in the case of some foreign securities, on the date thereafter when the Fund is
made aware of the dividend. Income and capital gains realized on some foreign
securities may be subject to foreign taxes, which are accrued as applicable.
G. Federal Taxes
The Funds intend to continue to qualify as regulated investment companies under
the Internal Revenue Code of 1986, as amended ("Code"). Thus, the Funds will
not incur any federal income tax liability since they are expected to distrib-
ute 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.
H. Distributions
Distributions from net investment income, if any, for the Funds, except for
Small Cap Growth Fund, are declared and paid monthly. Small Cap Growth Fund de-
clares and pays distributions from net investment income, if any, annually.
Distributions from net realized capital gains, if any, are paid at least annu-
ally. Distributions to shareholders are recorded at the close of business on
the ex-dividend date.
Income and capital gains distributions to shareholders are determined in accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles.
I. 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.
J. Organization Expenses
Organization expenses for Small Cap Growth Fund are amortized to operations
over a five-year period on a straight-line basis. In the event any of the ini-
tial shares of the Fund are redeemed by any holder during the five-year amorti-
zation period, redemption proceeds will be reduced by any unamortized organiza-
tion expenses in the same proportion as the number of initial shares being re-
deemed bears to the number of initial shares outstanding at the time of the re-
demption.
3. INVESTMENT ADVISORY AGREEMENTS AND OTHER AFFILIATED TRANSACTIONS
The investment adviser to each Fund, other than Small Cap Growth Fund and Small
Company Value Fund is First Capital Group ("FCG"), a division of FUNB. Each
Fund, other than Small Cap Growth Fund and Small Company Value Fund, pays FCG a
fee for its services as set forth below. The annual advisory fees are calcu-
lated daily and paid monthly and are based on a percentage of the average daily
net assets of each Fund.
<TABLE>
<CAPTION>
Annual
Advisory fee
------------
<S> <C>
Balanced Fund....................................... 0.60%
Core Equity Fund.................................... 0.70
Diversified Value Fund.............................. 0.60
Large Cap Blend Fund................................ 0.70
Secular Growth Fund................................. 0.70
Social Principles Fund.............................. 0.80
Strategic Growth Fund............................... 0.70
Strategic Value Fund................................ 0.70
</TABLE>
EIMC is the investment adviser to Small Cap Growth Fund. In return for its
services, EIMC is paid an annual advisory fee equal to 0.80% of the Fund's
first $100 million of average daily net assets, 0.75% of the Fund's next $150
million, and 0.65% thereafter.
Evergreen Asset Management Corp. ("EAMC"), a wholly-owned subsidiary of FUNB,
is the investment adviser to Small Company Value Fund. Small Company Value Fund
pays EAMC an annual fee of 0.90% of its average daily net assets. Leiber & Com-
pany, an affiliate of First Union Corporation ("First Union"), is the invest-
ment
78
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
sub-adviser to Small Company Value Fund. Leiber & Company provides these serv-
ices at no additional cost to the Fund.
Leiber & Company also provides brokerage services to Small Company Value 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,
1999, Small Company Fund incurred $91,862, in brokerage commissions with Leiber
& Company.
Each investment adviser, other than EIMC, has voluntarily agreed to waive a
portion of the investment advisory fee for each Fund and/or to reimburse a por-
tion of each Fund's annual operating expenses. For the six months ended Decem-
ber 31, 1999, the investment advisers voluntarily reduced their fees as fol-
lows:
<TABLE>
<CAPTION>
Total % of Average
Fee Daily Net Assets
Waivers (annualized)
------- ---------------
<S> <C> <C>
Balanced Fund......................... $339,262 0.10%
Core Equity Fund...................... 924,281 0.07
Diversified Value Fund................ 263,730 0.09
Large Cap Blend Fund.................. 171,420 0.09
Secular Growth Fund................... 425,608 0.12
Small Company Value Fund.............. 37,167 0.07
Social Principles Fund................ 31,950 0.06
Strategic Growth Fund................. 168,384 0.06
Strategic Value Fund.................. 196,718 0.06
</TABLE>
Evergreen Investment Services ("EIS"), an indirect wholly-owned subsidiary of
First Union, is the administrator and The BISYS Group, Inc. ("BISYS") serves as
sub-administrator to the Funds. As administrator, EIS provides the Funds with
facilities, equipment and personnel. As sub-administrator to the Funds, BISYS
provides the officers of the Funds. Officers of the Funds and affiliated Trust-
ees receive no compensation directly from the Funds.
The administrator and sub-administrator for each Fund, except Small Cap Growth
Fund, are entitled to an annual fee based on the average daily net assets of
the Funds administered by EIS for which First Union or its investment advisory
subsidiaries are also the investment advisors. The administration fee is calcu-
lated by applying percentage rates, which start at 0.05% and decline to 0.01%
per annum as net assets increase, to the average daily net assets of each Fund.
The sub-administration fee is calculated by applying percentage rates, which
start at 0.01% and decline to 0.004% per annum as net assets increase, to the
average daily net assets of each Fund.
For the six months ended December 31, 1999, the following amounts were paid for
administration and sub-administration services:
<TABLE>
<CAPTION>
Administration Sub-administration
------------- -----------------
<S> <C> <C>
Balanced Fund................. $ 60,439 $16,682
Core Equity Fund.............. 225,369 62,246
Diversified Value Fund........ 49,773 13,705
Large Cap Blend Fund.......... 34,654 9,561
Secular Growth Fund........... 64,495 17,845
Small Company Value Fund...... 8,917 2,460
Social Principles Fund........ 10,045 2,771
Strategic Growth Fund......... 50,003 13,813
Strategic Value Fund.......... 61,144 16,889
</TABLE>
For the Small Cap Growth Fund, the sub-administration fee is paid by the in-
vestment advisor and is not a Fund expense. For the six months ended December
31, 1999, Small Cap Growth Fund reimbursed EIMC for certain administrative and
accounting expenses amounting to $4,743.
Evergreen Service Company ("ESC"), an indirect, wholly-owned subsidiary of
FUNB, serves as the transfer and dividend disbursing agent for the Funds.
79
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly-owned subsidiary of 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. Distribu-
tion Plans permit each 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-deal-
ers who sell shares of the Fund, are paid by the Fund through "Distribution
Plan expenses". Class IS currently pays a service fee equal to 0.25% of the av-
erage daily net asset of the class. Distribution Plan expenses are calculated
daily and paid at least quarterly.
Each of the Distribution Plans may be terminated at any time by vote of the In-
dependent Trustees or by vote of a majority of the outstanding voting shares of
the respective class.
5. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class I and/or Class IS. Transactions in shares of the Funds were
as follows:
Balanced Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
-------------------------- --------------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold............. 2,981,652 $ 40,024,793 7,848,229 $ 102,258,212
Shares redeemed......... (15,227,946) (204,969,515) (14,836,155) (195,030,850)
Shares issued in
reinvestment of
distributions.......... 2,255,529 31,015,930 1,521,793 20,036,612
Shares issued in
acquisition of:
Corestates Balanced
Fund.................. 422,321 5,780,695 0 0
Corestates Balanced
Trust................. 6,059,738 82,945,060 0 0
-------------------------------------------------------------------------------
Net decrease............ (3,508,706) (45,203,037) (5,466,133) (72,736,026)
-------------------------------------------------------------------------------
Class IS Shares
Shares sold............. 64,826 866,384 422,203 5,562,489
Shares redeemed......... (23,063) (303,201) (416,181) (5,541,558)
Shares issued in
reinvestment of
distributions.......... 716 9,749 7,749 103,447
-------------------------------------------------------------------------------
Net increase............ 42,479 572,932 13,771 124,378
-------------------------------------------------------------------------------
Net decrease............ $ (44,630,105) $ (72,611,648)
-------------------------------------------------------------------------------
</TABLE>
Core Equity Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
------------------------- -------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold............. 1,245,614 $ 101,898,840 1,894,587 $ 162,933,860
Shares redeemed......... (3,828,357) (318,348,019) (3,733,442) (323,280,104)
Shares issued in
reinvestment of
distributions.......... 2,198,590 186,527,155 1,482,376 125,141,384
Shares issued in
acquisition of common
trust funds:
Corestates Growth and
Income Equity Trust... 6,974,611 595,233,256 0 0
Signet Capital Growth.. 67,230 5,737,565 0 0
Signet Investors Equity
Class A............... 592,625 50,576,342 0 0
Signet Investors Equity
Class B............... 123,773 10,563,173 0 0
Shares issued in
acquisition of other
investment companies:
Evergreen Select Equity
Income Fund........... 1,629,831 132,135,902 0 0
-----------------------------------------------------------------------------
Net increase
(decrease)............. 9,003,917 764,324,214 (356,479) (35,204,860)
-----------------------------------------------------------------------------
Class IS Shares
Shares sold............. 405,508 32,233,274 388,096 31,623,390
Shares redeemed......... (231,505) (17,862,245) (271,386) (22,061,029)
Shares issued in
reinvestment of
distributions.......... 29,717 2,346,580 24,042 1,902,503
Shares issued in
acquisition of other
investment companies:
Evergreen Select Equity
Income Fund........... 14,454 222,501 0 0
-----------------------------------------------------------------------------
Net increase............ 218,174 16,940,110 140,752 11,464,864
-----------------------------------------------------------------------------
Net increase
(decrease)............. $ 781,264,324 $ (23,739,996)
-----------------------------------------------------------------------------
</TABLE>
80
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Diversified Value Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
------------------------- --------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold............. 667,054 $ 17,962,659 2,710,532 $ 66,392,052
Shares redeemed......... (4,210,637) (113,886,974) (12,054,441) (303,229,194)
Shares issued in
reinvestment of
distributions.......... 713,363 19,548,535 864,540 21,680,943
------------------------------------------------------------------------------
Net decrease............ (2,830,220) (76,375,780) (8,479,369) (215,156,199)
------------------------------------------------------------------------------
Class IS Shares
Shares sold............. 19 490 46,088 1,116,031
Shares redeemed......... (2,397) (63,691) (5,221) (135,090)
Shares issued in
reinvestment of
distributions.......... 2,035 55,073 1,677 41,573
------------------------------------------------------------------------------
Net increase
(decrease)............. (343) (8,128) 42,544 1,022,514
------------------------------------------------------------------------------
Net decrease............ $ (76,383,908) $(214,133,685)
------------------------------------------------------------------------------
Large Cap Blend Fund
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
------------------------- --------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold............. 70,831 $ 3,269,982 281,613 $ 13,021,813
Shares redeemed......... (2,327,772) (106,874,822) (1,136,453) (53,049,940)
Shares issued in
reinvestment of
distributions.......... 1,139,002 48,491,624 40,730 1,853,814
Shares issued from
conversion of Class IC
(a).................... 0 0 9,604,208 452,516,632
------------------------------------------------------------------------------
Net increase
(decrease)............. (1,117,939) (55,113,216) 8,790,098 414,342,319
------------------------------------------------------------------------------
Class IS Shares
Shares sold............. 1,764 85,158 7,147 328,082
Shares redeemed......... (1,048) (47,500) (5,917) (269,541)
Shares issued in
reinvestment of
distributions.......... 1,295 55,131 745 33,874
------------------------------------------------------------------------------
Net increase............ 2,011 92,789 1,975 92,415
------------------------------------------------------------------------------
Class IC Shares
Shares sold............. 0 0 745,024 33,587,489
Shares redeemed......... 0 0 (2,036,907) (94,174,187)
Shares issued in
reinvestment of
distributions.......... 0 0 1,090,492 49,639,697
Shares converted in
conversion to Class I
(a).................... 0 0 (9,604,208) (452,516,632)
------------------------------------------------------------------------------
Net decrease............ 0 0 (9,805,599) (463,463,633)
------------------------------------------------------------------------------
Net decrease............ $ (55,020,427) $ (49,028,899)
------------------------------------------------------------------------------
(a) On April 30, 1999, Class IC shares of the Fund were converted to Class I
shares.
Secular Growth Fund
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999 (b)
------------------------- --------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold............. 422,480 $ 45,437,073 405,610 $ 39,939,701
Shares redeemed......... (1,739,289) (185,887,007) (4,346) (425,994)
Shares issued in
reinvestment of
distributions.......... 158,837 21,268,005 54 5,402
Shares issued in
acquisition of:
Corestate Charitable
Equity Trust.......... 1,069,362 110,877,230 0 0
Corestate Growth and
Income Fund........... 787,473 81,649,376 0 0
Corestate Growth Equity
Fund.................. 4,185,687 433,994,394 0 0
Corestate Growth Equity
Trust................. 1,194,440 123,845,912 0 0
------------------------------------------------------------------------------
Net increase............ 6,078,990 631,184,983 401,318 39,519,109
------------------------------------------------------------------------------
Class IS Shares
Shares sold............. 540 66,442 10 968
Shares issued in
reinvestment of
distributions.......... 6 852 0 1
------------------------------------------------------------------------------
Net increase............ 546 67,294 10 969
------------------------------------------------------------------------------
Net increase............ $ 631,252,277 $ 39,520,078
------------------------------------------------------------------------------
</TABLE>
(b) For the period from February 26, 1999 (commencement of class operations) to
June 30, 1999.
81
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Small Cap Growth Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
------------------------ -------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold.............. 966,368 $ 14,763,891 284,105 $ 3,242,108
Shares redeemed.......... (513,615) (8,287,289) (437,071) (5,425,723)
Shares issued in
reinvestment of
distributions........... 0 0 8,734 100,757
------------------------------------------------------------------------------
Net increase (decrease).. $ 6,476,602 $ (2,082,858)
------------------------------------------------------------------------------
Small Company Value Fund
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999 (a)
------------------------ -------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold.............. 1,763,607 $ 14,896,899 5,762,869 $ 48,213,008
Shares redeemed.......... (3,845,627) (31,896,066) (1,437,069) (12,034,887)
Shares issued in
reinvestment of
distributions........... 20,589 171,171 74,799 624,337
------------------------------------------------------------------------------
Net increase (decrease).. (2,061,431) (16,827,996) 4,400,599 36,802,458
------------------------------------------------------------------------------
Class IS Shares
Shares sold.............. 2,472 19,621 101,492 835,890
Shares redeemed.......... (2,472) (18,586) (101,371) (815,129)
Shares issued in
reinvestment of
distributions........... 0 1 0 0
------------------------------------------------------------------------------
Net increase............. 0 1,036 121 20,761
------------------------------------------------------------------------------
Net increase (decrease).. $(16,826,960) $ 36,823,219
------------------------------------------------------------------------------
(a) For Class IS, for the period from December 31, 1998 (commencement of class
operations) to June 30, 1999.
Social Principles Fund
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
------------------------ -------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold.............. 38,075 $ 1,335,750 90,138 $ 3,145,258
Shares redeemed.......... (975,019) (33,321,195) (225,918) (8,155,311)
Shares issued in
reinvestment of
distributions........... 872,243 24,241,794 4,705 162,875
Shares issued from
conversion of Class IC
(b)..................... 0 0 3,712,810 126,994,084
------------------------------------------------------------------------------
Net increase (decrease) (64,701) (7,743,651) 3,581,735 122,146,906
------------------------------------------------------------------------------
Class IS Shares
Shares sold.............. 3,710 141,375 4,670 159,277
Shares redeemed.......... (3,994) (136,389) (8,520) (297,123)
Shares issued in
reinvestment of
distributions........... 410 11,394 191 6,618
------------------------------------------------------------------------------
Net increase (decrease) 126 16,380 (3,659) (131,228)
------------------------------------------------------------------------------
Class IC Shares
Shares sold.............. 0 0 337,062 11,551,713
Shares redeemed.......... 0 0 (1,429,917) (49,726,173)
Shares issued in
reinvestment of
distributions........... 0 0 256,850 8,904,544
Shares converted in
conversion to Class I
(b)..................... 0 0 (3,712,810) (126,994,084)
------------------------------------------------------------------------------
Net decrease............. 0 0 (4,548,815) (156,264,000)
------------------------------------------------------------------------------
Net decrease............. $ (7,727,271) $ (34,248,322)
------------------------------------------------------------------------------
</TABLE>
(b) On April 30, 1999, Class IC shares of the Fund were converted to Class I
shares.
82
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Strategic Growth Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
------------------------- ------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold.............. 3,286,506 $ 132,246,666 4,260,240 $ 93,242,573
Shares redeemed.......... (2,699,718) (110,488,146) (7,535,767) (27,683,495)
Shares issued in
reinvestment of
distributions........... 2,502,797 97,529,865 1,078,559 39,578,816
Shares issued in
acquisition of:
CoreFund Equity Growth
Fund................... 0 0 5,297,535 198,759,540
Corestate Union County
Equity Trust........... 70,063 2,592,329 0 0
------------------------------------------------------------------------------
Net increase (decrease).. 3,159,648 121,880,714 (2,196,968) 105,137,894
------------------------------------------------------------------------------
Class IS Shares
Shares sold.............. 62,818 2,552,329 130,363 4,855,755
Shares redeemed.......... (51,663) (2,151,821) (101,906) (3,843,603)
Shares issued in
reinvestment of
distributions........... 57,523 2,230,947 25,744 943,166
Shares issued in
acquisition of other
investment companies:
CoreFund Equity Growth
Fund................... 0 0 186,381 6,982,770
------------------------------------------------------------------------------
Net increase............. 68,678 2,631,455 240,582 8,938,088
------------------------------------------------------------------------------
Net increase............. $ 124,512,169 $114,075,982
------------------------------------------------------------------------------
Strategic Value Fund
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
------------------------- ------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold.............. 679,428 $ 147,447,248 1,250,078 $278,450,304
Shares redeemed.......... (269,283) (59,956,731) (322,534) (69,617,033)
Shares issued in
reinvestment of
distributions........... 48,721 11,332,741 40,648 8,661,803
Shares issued in
acquisition of:
Corestate Value Equity
Fund................... 341,237 80,405,690 0 0
Corestate Value Equity
Trust.................. 309,990 73,043,358 0 0
------------------------------------------------------------------------------
Net increase............. 1,110,093 252,272,306 968,192 217,495,074
------------------------------------------------------------------------------
Class IS Shares
Shares sold.............. 10,545 2,322,097 12,671 2,711,091
Shares redeemed.......... (5,184) (1,132,738) (11,118) (2,466,402)
Shares issued in
reinvestment of
distributions........... 146 33,715 208 44,111
------------------------------------------------------------------------------
Net increase............. 5,507 1,223,074 1,761 288,800
------------------------------------------------------------------------------
Net increase............. $ 253,495,380 $217,783,874
------------------------------------------------------------------------------
</TABLE>
6. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term investments and securities acquired as a result of conversions, and
acquisitions) were as follows for the six months ended December 31, 1999:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
-------------------------
<S> <C> <C>
Core Equity Fund...................... $120,541,671 $588,753,126
Diversified Value Fund................ 125,088,361 263,382,043
Large Cap Blend Fund.................. 40,151,264 143,169,297
Secular Growth Fund................... 312,337,035 542,179,490
Small Cap Growth Fund................. 104,735,131 99,529,670
Small Company Value Fund.............. 44,323,600 58,989,786
Social Principles Fund................ 22,206,666 53,019,421
Strategic Growth Fund................. 394,068,724 375,799,641
Strategic Value Fund.................. 217,487,466 137,641,661
</TABLE>
For the Balanced Fund, cost of purchases of U.S. government and non-U.S. gov-
ernment securities was $198,177,676 and $375,838,856, respectively, and the
Fund's proceeds from sale of U.S. government and non-U.S. government securities
was $274,808,328 and $460,776,227, respectively, for the six months ended
December 31, 1999.
83
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
The Secular Growth Fund and Small Cap Growth Fund loaned securities during the
six months ended December 31, 1999 to certain brokers who paid the Funds a ne-
gotiated lenders' fee. During the six months ended December 31, 1999, the Funds
earned $196,594 and $48,178, respectively in income from securities lending. As
of December 31, 1999 the value of the Small Cap Growth Fund's securities on
loan and the value of collateral amounted to $25,999,749 and $26,219,817, re-
spectively.
As of June 30, 1999, Small Cap Growth Fund had a capital loss carryover for
federal income tax purposes of $1,348,498 expiring in 2006 and $2,891,216 ex-
piring in 2007 and Small Company Value Fund had a capital loss carryover for
federal income tax purposes of $3,027,415 expiring in 2007.
In addition to the capital loss carryovers, capital losses incurred by the
Funds after October 31, within the Funds' fiscal year, are deemed to arise on
the first business day of the Funds' following fiscal year. For the year ended
June 30, 1999 the Small Company Value Fund incurred and elected to defer
$5,497,097 of such post-October losses.
7. CONVERSION INFORMATION
On July 9, 1999, Balanced Fund, Core Equity Fund, Secular Growth Fund, Strate-
gic Growth Fund and Strategic Value Fund (collectively "Acquiring Evergreen
Funds") acquired substantially all of the net assets and identified liabilities
of certain common trust funds managed by FUNB into the Acquiring Evergreen
Funds. The net assets, consisting primarily of portfolio securities, were ac-
quired either through a taxable or tax-free exchange for Class I shares of the
Acquiring Evergreen Funds.
The following summarizes pertinent data related to the Funds on the date of the
acquisition:
<TABLE>
<CAPTION>
Evergreen
Acquiring Total Total Net Fund Unrealized
Evergreen Shares Assets NAV/share Appreciation
Fund Common Trust Fund Issued Acquired Class I of Securities
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balanced CoreStates Balanced
Fund Fund 422,321 $ 5,780,695 $ 13.68 $ 0
CoreStates Balanced
Trust 6,059,738 82,945,060 20,569,515
-------- ----------- ------------
Total 6,482,059 88,725,755 20,569,515
========= ============ ============
Core
Equity CoreStates Growth and
Fund Income Equity Trust 6,974,611 595,233,256 $ 85.34 134,355,837
Signet Capital Growth 67,230 5,737,565 3,701,178
Signet Investors
Equity Class A 592,625 50,576,342 36,302,394
Signet Investors
Equity Class B 123,773 10,563,173 7,475,528
-------- ----------- ------------
Total 7,758,239 662,110,336 181,834,937
========= ============ ============
Secular
Growth CoreStates Charitable
Fund Equity Trust 1,069,362 110,877,230 $103.69 31,871,390
CoreStates Growth and
Income Fund 787,473 81,649,376 0
CoreStates Growth
Equity Fund 4,185,687 433,994,394 0
CoreStates Growth
Equity Trust 1,194,440 123,845,912 36,115,475
-------- ----------- ------------
Total 7,236,962 750,366,912 67,986,865
========= ============ ============
Strategic
Growth CoreStates Union
Fund County Equity Trust 70,063 2,592,329 $ 37.00 1,356,557
-------- ----------- ------------
Strategic
Value CoreStates Value
Fund Equity Fund 341,237 80,405,690 $235.63 0
CoreStates Value
Equity Trust 309,990 73,043,358 11,453,813
-------- ----------- ------------
Total 651,227 $153,449,048 $ 11,453,813
========= ============ ============
</TABLE>
The above amounts are reflected in the Statements of Changes in Net Assets for
the six months ended December 31, 1999.
84
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
8. CLASS IC CONVERSION
On April 30, 1999, the Large Cap Blend Fund and Social Principles Fund con-
verted their respective Class IC shares to Class I shares. Shareholders of
Class IC shares became owners of that number of Class I shares having a net as-
set value equal to the net asset value of their shares immediately prior to the
close of business April 30, 1999. Since Class IC shares contributed the major-
ity of the net assets and the shareholders to the newly combined Class I, the
Class IC and its operating results for prior periods are carried forward as the
accounting survivor. The following chart summarizes pertinent data related to
each Fund's Class IC shares on the date of conversion:
<TABLE>
<CAPTION>
Social
Large Cap Principles
Blend Fund Fund
-----------------------------------------------------------------
<S> <C> <C>
Class I shares issued................. 9,604,208 3,712,810
Net assets of Class IC................ $452,516,632 $126,994,084
Net asset value of Class I per share.. $ 47.12 $ 34.20
</TABLE>
9. ACQUISITIONS
Effective the close of business on July 30, 1999, Core Equity Fund acquired the
net assets and liabilities of Evergreen Select Equity Income Fund, an open-end
management investment company registered under the 1940 Act in an exchange of
shares. The net assets were exchanged through a tax-free exchange of 14,454
Class IS shares and 1,629,831 Class I shares of Core Equity Fund. The acquired
net assets consisted primarily of portfolio securities with unrealized appreci-
ation of $15,463,739. Aggregate net assets of Core Equity Fund and Evergreen
Select Equity Income Fund immediately before the acquisition were
$2,449,655,426 and $132,358,403, respectively. The aggregate net assets of Core
Equity Fund after the acquisition were $2,582,013,829. The above amounts are
reflected in both the Statements of Changes in Net Assets and Capital Shares
Transactions for the six months ended December 31, 1999.
Effective the close of business on July 24, 1998, Strategic Growth Fund ac-
quired the net assets of CoreFund Equity Growth Fund, an open-end management
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 net 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. The above amounts are reflected in
proceeds from shares sold in both the Statements of Changes in Net Assets and
Capital Shares Transactions for the year ended June 30, 1999.
10. EXPENSE REDUCTIONS
The Funds have entered into an expense reduction arrangements with ESC and
their custodian whereby credits realized as a result of uninvested cash bal-
ances were used to reduce a portion of each Fund's related expenses. The assets
deposited with ESC and the custodian under these expense reduction arrangements
could have been invested in income-producing assets. The amount of expense re-
ductions received by each Fund and the impact on each Fund's expense ratio rep-
resented as a percentage of its average daily net assets were as follows:
<TABLE>
<CAPTION>
% of Average
Expense Daily Net Assets
Reductions (annualized)
----------------------------------------------------------------
<S> <C> <C>
Balanced Fund....................... $13,487 .00%
Core Equity Fund.................... 52,784 .00
Diversified Value Fund.............. 11,480 .00
Large Cap Blend Fund................ 8,152 .00
Secular Growth Fund................. 14,080 .00
Small Cap Growth Fund............... 3,478 .01
Small Company Fund.................. 3,970 .01
Social Principles Fund.............. 1,966 .00
Strategic Growth Fund............... 12,865 .00
Strategic Value Fund ............... 14,164 .00
</TABLE>
85
<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. At the election of the Trustees, the deferral account will be paid
either in one lump sum or in quarterly installments for up to ten years.
12. FINANCING AGREEMENTS
Certain Evergreen Funds, State Street Bank and Trust Company ("State Street")
and Bank of New York ("BONY") entered into a renewed financing agreement dated
December 22, 1998. Under this agreement, the State Street and BONY provided an
unsecured credit facility in the aggregate amount of $150 million ($125 million
committed and $25 million uncommitted). The credit facility was allocated, un-
der the terms of the financing agreement, between the Banks. The credit facil-
ity was accessed by the Funds for temporary or emergency purposes only and was
subject to each Fund's borrowing restrictions. Borrowings under 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 facili-
ty, which will be allocated to all funds. This agreement was terminated on July
27, 1999.
On July 27, 1999, all of the Evergreen Funds and a group of banks (the "Lend-
ers") entered into a credit agreement. Under this agreement, the Lenders pro-
vided an unsecured revolving credit commitment in the aggregate amount of
$1.050 billion. The credit facility is allocated, under the terms of the fi-
nancing agreement, among the Lenders. The credit facility is accessed by the
Evergreen Funds for temporary of emergency purposes to fund the redemption of
their shares or a general working capital as permitted by each Fund's borrowing
restrictions. Borrowings under this facility bear interest at 0.75% per annum
above the Federal Funds rate (1.50% per annum above the Federal Funds rate dur-
ing the period from and including December 1, 1999 through and including Janu-
ary 31, 2000). A commitment fee of 0.10% per annum is incurred on the average
daily unused portion of the revolving credit agreement. The commitment fee is
allocated to all Evergreen Funds. For its assistance in arranging this financ-
ing agreement, First Union Capital Markets Corp. was paid a one-time arrange-
ment fee of $250,000. State Street serves as paying agent for the Funds and as
paying agent is entitled to a fee of $20,000 per annum, which is allocated to
all the Evergreen Funds.
During the six months ended December 31, 1999 the Funds had no significant bor-
rowing under the financing agreements.
13. CONCENTRATION RISK
The Funds may invest a substantial portion of its assets in an industry or sec-
tor and, therefore, may be more affected by changes in that industry or sector
than would be a comparable mutual fund that is not heavily weighed in any in-
dustry or sector.
86
<PAGE>
Evergreen Select Funds*
Money Market
Money Market Fund
Treasury Money Market Fund
100% Treasury Money Market Fund
Municipal Money Market Fund
U.S. Government Money Market Fund
Municipal Fixed
Income
Intermediate Term Municipal Bond Fund
Taxable Fixed
Income
International Bond Fund
Total Return Bond Fund
Income Plus Fund
Core Bond Fund
Fixed Income Fund
Fixed Income Fund II
Adjustable Rate Fund
Limited Duration Fund
Growth and Income/
Balanced
Balanced Fund
Growth
Special Equity Fund
Small Cap Growth Fund
Small Company Value Fund
Strategic Growth Fund
Core Equity Fund
Equity Index Fund
Large Cap Blend Fund
Strategic Value Fund
Diversified Value Fund
Social Principles Fund
Secular Growth Fund
* Minimum investment in an Evergreen Select Fund is $1,000,000.
57803 542780 2/2000
---------------
PRSRT STD
U.S. POSTAGE
PAID
HUDSON, MA
PERMIT NO. 19
---------------
[LOGO OF EVERGREEN FUNDS]
200 Berkeley Street
Boston, MA 02116
<PAGE>
December 31, 1999
Evergreen Select
Equity Funds
Semiannual Report
Evergreen Select Equity Index Fund
Evergreen Select Special Equity Fund
[LOGO OF EVERGREEN FUNDS] [LOGO OF MUTUAL FUND
SINCE 1932 SERVICE AWARD]
<PAGE>
Table of Contents
Letter to Shareholders ................................................... 1
Evergreen Select Equity Index Fund
Fund at a Glance .................................................... 2
Portfolio Manager Commentary ........................................ 3
Evergreen Select Special Equity Fund
Fund at a Glance .................................................... 5
Portfolio Manager Commentary ........................................ 6
Financial Highlights
Evergreen Select Equity Index Fund .................................. 8
Evergreen Select Special Equity Fund ................................ 11
Schedule of Investments
Evergreen Select Equity Index Fund .................................. 15
Evergreen Select Special Equity Fund ................................ 22
Statements of Assets and
Liabilities .............................................................. 25
Statements of Operations ................................................. 26
Statements of Changes in Net Assets ...................................... 27
Combined Notes to Financial
Statements ............................................................... 29
Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies with
approximately $80 billion in assets under management.
With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This semiannual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
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Mutual Funds: NOT FDIC INSURED May lose value . Not bank guaranteed
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Evergreen Distributor, Inc.
Evergreen Funds(SM) is a service mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
February 2000
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Select Equity Funds semiannual report
for the period ended December 31, 1999.
[PHOTO]
William M. Ennis
[PHOTO]
Dennis Ferro
Continued Strength in the Domestic Economy
Although the U.S. economy is in the ninth year of economic expansion, many
believe that valuation levels in some sectors of the stock market are just not
sustainable. The second half of 1999 was marked by the S&P 500 falling in the
first three months before rebounding nearly 15% in the last three months. While
equity investors have experienced a turbulent investment environment over the
last six months, concerns about rising interest rates, inflation and Y2K fears
in the opening months were stifled resulting in eventually every major market
index being driven higher during the fourth quarter of 1999.
The Federal Reserve Bank's "tightening bias" leads many to anticipate further
interest rate increases in order to stem even the slightest inflationary
pressure. Additional interest hikes would likely have a negative effect on stock
prices, which could restrain consumer spending; however, many investors are
waiting for just such a scenario to take place, so they can take advantage of
lower stock prices as a buying opportunity.
We believe that the economy is still fundamentally strong, and that inflation
will stay contained, producing only moderate upward pressure on interest rates.
We remain cautiously optimistic about the prospects for continued growth in the
markets.
Website Enhancements
Please visit our enhanced website, evergreen-funds.com, for more information
about Evergreen Funds. The site offers an array of helpful information including
1999 tax information, an investment education center, interactive calculators to
assist your investment planning and provide general information about Evergreen
Funds.
We believe that sound investing is about taking steps to meet your long-term
financial needs and goals. We remind you to take advantage of your financial
advisor's expertise to develop and refine a financial plan that will enable you
to meet your objectives. Evergreen Funds offers a broad mix of stock, bond and
money market funds that should make it simple for you to choose the most
appropriate for your portfolio.
We would like to thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
/s/ Dennis Ferro
Dennis Ferro
Chief Investment Officer
First Union National Bank
Capital Management Group
1
<PAGE>
EVERGREEN
Select Equity Index Fund
Fund at a Glance as of December 31, 1999
PORTFOLIO PROFILE
Philosophy
Evergreen Select Equity Index Fund seeks investment results that achieve price
and yield performance similar to the Standard & Poor's 500 Index.
Process
The Fund invests only in stocks represented in the S&P 500 Index. The Fund's
cash position is invested in index futures to minimize tracking errors.
Portfolio turnover is minimal and is the result of index compositional changes.
Benchmark
Standard & Poor's 500 Index (S&P 500)
PERFORMANCE AND RETURNS1
<TABLE>
<CAPTION>
Portfolio Inception
Date: 2/14/1985 Class I Class IS Class A Class B Class C
Class Inception Date 2/14/1985 10/09/1996 11/04/1998 11/03/1998 4/30/1999
<S> <C> <C> <C> <C> <C>
Average Annual Returns*
6 months with sales charge n/a n/a 2.45% 2.12% 5.11%
6 months w/o sales charge 7.68% 7.49% 7.55% 7.12% 7.11%
1 year with sales charge n/a n/a 14.66% 14.48% 17.85%
1 year w/o sales charge 20.69% 20.34% 20.38% 19.48% 19.85%
3 years 26.88% 26.69% 24.71% 25.76% 26.58%
5 years 27.94% 27.81% 26.63% 27.50% 27.77%
10 years 17.40% 17.34% 16.80% 17.26% 17.32%
Since Portfolio Inception 17.31% 17.27% 16.90% 17.22% 17.26%
Maximum Sales Charge n/a n/a 4.75% 5.00% 2.00%
Front End CDSC CDSC
6-month income
dividends per share $ 0.31 $ 0.24 $ 0.24 $ 0.08 $ 0.08
6-month capital gain
distributions per share $ 0.36 $ 0.36 $ 0.36 $ 0.36 $ 0.36
</TABLE>
*Adjusted for maximum applicable sales charge, unless otherwise noted.
LONG TERM GROWTH
[GRAPH]
Ev Select Equity Index CPI S&P 500
12/31/89 10,000 10,000 10,000
12/31/90 9,550 10,611 9,689
31-Dec-91 12,979 10,936 12,642
31-Dec-92 13,858 11,253 13,605
31-Dec-93 15,057 11,562 14,976
31-Dec-94 15,100 11,872 15,174
31-Dec-95 20,631 12,173 20,877
31-Dec-96 25,347 12,577 25,669
31-Dec-97 33,595 12,791 34,233
31-Dec-98 42,811 12,998 44,015
31-Dec-99 51,670 13,354 53,281
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Index returns do not reflect expenses, which have been
deducted from the Fund's return. Historical performance shown for Class I prior
to its inception is based on the performance of the Class Y Shares of the Fund's
predecessors, CoreFund Equity Index Fund from 6/1/1991 through 7/27/1998 and
Viking Index Fund from 2/14/1985 through 5/31/1991. Historical performance
shown for Classes A, B, and C prior to their inception is based on the
performance of (1) the Fund's Class I Shares from 7/27/1998 to the inception of
Classes A, B, and C (2) the Class Y Shares of the Fund's predecessor, CoreFund
Equity Index Fund from 6/1/1991 through 7/27/1998 and (3) the Class Y Shares of
the Fund's predecessor, Viking Index Fund from 2/14/1985 through 5/31/1991.
These historical returns for Classes A, B, and C have not been adjusted to
reflect the effect of each Class' 12b-1 fees. These fees for Class A are 0.25%,
for Class B are 1.00%, and for Class C are 1.00%. Neither Class Y nor Class I
pays a 12b-1 fee. If these fees had been reflected, returns would have been
lower.
Historical performance shown for Class IS prior to its inception is based on the
performance of (1) the Class A Shares of the Fund's predecessor CoreFund Equity
Index Fund from 10/9/1996 to 7/27/1997 (2) the Class Y Shares of the Fund's
predecessor CoreFund Equity Index Fund from 6/1/1991 to 10/8/1996 and (3) the
Class Y Shares of the Fund's predecessor Viking Index Fund from 2/14/1985
through 5/31/1991. Performance of Class Y for CoreFund Equity Index and Class Y
for Viking Index Fund has not been adjusted to reflect the effect of the 0.25%
12b-1 fee applicable to Class IS. The advisor is waiving a portion of its
advisory fee. Had the fee not been waived, returns would have been lower.
Comparison of change in value of a $10,000 investment in Evergreen Select Equity
Index Fund Class I1, S&P 500 and the Consumer Price Index (CPI).
The S&P 500 is an unmanaged index which does not include transaction costs
associated with buying and selling securities nor any mutual fund expenses. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
2
<PAGE>
EVERGREEN
Select Equity Index Fund
Portfolio Manager Commentary
Portfolio Management
[PHOTO]
Eric M. Teal
Eric M. Teal has managed Evergreen Select Equity Index Fund since December 1998.
Mr. Teal, Vice President and a Quantitative Equity Analyst, joined First Union
National Bank (FUNB) in September 1993, and currently heads the Quantitative
Analysis/Portfolio Management Unit within FUNB. He also manages Evergreen
Select Diversified Value Fund and is responsible for risk analysis and
quantitative management for other Evergreen Select Equity Funds.
Performance
For the six-month period ended December 31, 1999, the Evergreen Select Equity
Index Fund, Class I shares, return of 7.68% tracked that of its benchmark, the
S&P 500 Index, which returned 7.69% for the same period. Performance does not
reflect sales charges.
Portfolio
Characteristics
---------------
(as of 12/31/1999)
Total Net Assets $893,507,529
Number of Holdings 500
P/E Ratio 26.6x
Beta 1.00
Environment
U.S. equity investors experienced a roller-coaster ride over the past six
months, as the S&P 500 fell in the first three months before rebounding nearly
15% in the latter half of the period. Equity investors were concerned by rising
interest rates, inflationary and Y2K fears in the opening months, but then
simply shrugged off these negative events and drove every major U.S. equity
index higher during the fourth quarter of 1999.
Underlying the entire six-month period was the market's insatiable appetite for
technology stocks. This ultra-growth segment of the market proved to be the
best performer in 1999, and its dramatic rise is the primary reason growth
stocks have again outperformed their value-oriented (and technology-deficient)
counterparts.
Top 5 Industries
----------------
(as a percentage of 12/31/1999 net assets)
Information Services & Technology 18.7%
Healthcare Products & Services 9.1%
Finance & Insurance 8.0%
Retailing & Wholesale 6.2%
Utilities-Telephone 6.1%
3
<PAGE>
EVERGREEN
Select Equity Index Fund
Portfolio Manager Commentary
Strategy
The Fund seeks investment results that achieve price and yield performance
similar to the S&P 500. The Fund invests primarily in stocks represented in the
S&P 500. In addition, the portfolio manager utilizes quantitative techniques
that balance the risk/reward relationship in portfolio construction.
The Fund has significantly improved performance relative to other index funds
during the past few quarters, and was one of the top funds in its peer group
during 1999. We continue to use sampling techniques to replicate the return of
the S&P 500. Cash flows are invested immediately and index additions and
deletions are completed in the most timely and cost effective way. Improved
trading strategies and close risk-monitoring have contributed to the Fund's
Class I shares rank of 16 out of 107 funds in the competitive Lipper S&P 500
Index fund peer group classification*. Lipper Inc., is an independent monitor of
mutual fund performance.
Top 10 Holdings
---------------
(as a percentage of 12/31/1999 net assets)
Microsoft Corp. 4.7%
General Electric Co. 3.9%
Cisco Systems, Inc. 2.7%
Wal-Mart Stores, Inc. 2.4%
Exxon Mobil Corp. 2.2%
Intel Corp. 2.1%
Lucent Technologies, Inc. 1.8%
International Business Machines Corp. 1.5%
Citigroup, Inc. 1.5%
American International Group, Inc. 1.3%
Outlook
Looking ahead, we expect the stock market to continue to be shaped by
expectations surrounding the direction of interest rates, corporate earnings, as
well as trends in domestic and international economies.
Range-bound interest rates will likely affect corporate earnings which are the
main driver of stock prices in the coming quarters. At present, low inflation
and economic growth worldwide continue to provide a positive backdrop for
stocks. However, an upward move in interest rates, which has not been met by a
slowing of index gains, may warrant some caution in the near term.
*Source: Lipper Analytical Service Inc., an independent mutual fund rating
company. The rankings are based on total return and do not include the effect of
a sales charge. Past performance is no guarantee of future results.
4
<PAGE>
EVERGREEN
Select Special Equity Fund
Fund at a Glance as of December 31, 1999
PORTFOLIO PROFILE
Philosophy
Evergreen Select Special Equity Fund seeks capital growth 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 (Russell 2000)
PERFORMANCE AND RETURNS1
<TABLE>
<CAPTION>
Portfolio Inception
Date: 03/15/1994 Class I Class IS Class A Class B Class C
Class Inception Date 3/15/1994 3/15/1994 8/30/1999 8/30/1999 8/30/1999
<S> <C> <C> <C> <C> <C>
Average Annual Returns*
6 months with sales charge n/a n/a 16.73% 17.38% 20.38%
6 months w/o sales charge 22.75% 22.71% 22.55% 22.38% 22.38%
1 year with sales charge n/a n/a 65.55% 68.51% 71.50%
1 year w/o sales charge 74.31% 73.97% 73.74% 73.51% 73.50%
3 years 30.07% 29.70% 27.55% 29.01% 29.59%
5 years 30.15% 29.88% 28.59% 29.67% 29.81%
Since Portfolio Inception 23.31% 23.08% 22.02% 22.96% 23.03%
Maximum Sales Charge n/a n/a 4.75% 5.00% 2.00%
Front End CDSC CDSC
6-month capital gain
distributions per share $ 2.19 $ 2.19 $ 2.19 $ 2.19 $ 2.19
</TABLE>
*Adjusted for maximum applicable sales charge, unless otherwise noted.
LONG TERM GROWTH
[GRAPH]
Ev Select Spec CPI Russell 2000
Equity
3/31/94 10,000 10,000 10,000
12/31/94 9,731 10,170 10,085
12/31/95 13,084 10,428 12,953
12/31/96 16,519 10,774 15,090
12/31/97 19,738 10,958 18,464
12/31/98 20,854 11,135 17,994
12/31/99 36,349 11,440 21,760
Comparison of change in value of a $10,000 investment in Evergreen Select
Special Equity Fund Class I1, Russell 2000 and the Consumer Price Index (CPI).
The Russell 2000 is an unmanaged index which does not include transaction costs
associated with buying and selling securities nor any mutual fund expenses. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
Small capitalization stock investing may offer the potential for greater long
term results; however, it is also generally associated with greater price
volatility due to the higher risk of failure.
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Index returns do not reflect expenses, which have been
deducted from the Fund's return.
Historical performance shown for Classes A, B and C prior to their inception is
based on 1) Class IS from 7/27/1998 to their inception, 2) the performance of
the Class A Shares of the Fund's predecessor fund, CoreFund Special Equity Fund
from 2/21/1995 through 7/26/1998 and 3) the original class of shares of the
Fund's predecessor fund from 3/15/1994 to 2/20/1995. The performance has not
been adjusted to reflect the differences in the 12b-1 fees applicable to each
class. These fees are for Class A 0.25%, for Class B 1.00%, and for Class C
1.00%. If these fees had been reflected, returns for Classes B and C would have
been lower. Historical performance shown for Class I prior to its inception is
based on the performance of the Class Y Shares of the Fund's predecessor,
CoreFund Special Equity Fund. Historical performance shown for Class IS prior to
its inception is based on the performance of the Class A Shares of the Fund's
predecessor, CoreFund Special Equity Fund, and reflects the same 0.25% 12b-1 fee
applicable to Class IS.
The Fund may purchase stocks in initial public offerings. Stocks purchased in
IPOs have a tendency to fluctuate in value significantly shortly after the IPO
relative to the price at which they were purchased. These fluctuations could
impact the net asset value and return earned on the Fund's shares.
The advisor is waiving a portion of its advisory fee. Had the fee not been
waived, returns would have been lower.
5
<PAGE>
EVERGREEN
Select Special Equity Fund
Portfolio Manager Commentary
Portfolio Management Team
[PHOTO] [PHOTO]
Timothy M. Eric M. Teal
Stevenson, CFA
Mr. Stevenson has over 19 years of investment experience and serves as the Chief
Investment Officer of Meridian Investment Company. In addition to managing the
Evergreen Select Special Equity Fund, he is also responsible for the development
and ongoing management of long/short equity market-neutral strategy. His
previous responsibilities include team leader of First Capital Group's growth-
style equity unit and co-manager of the Evergreen Select Strategic Growth Fund.
Eric M. Teal has managed Evergreen Select Equity Index Fund since December 1998.
Mr. Teal, Vice President and a Quantitative Equity Analyst, joined First Union
National Bank (FUNB) in September 1993, and currently heads the Quantitative
Analysis/Portfolio Management Unit within FUNB. He also manages Evergreen
Select Diversified Value Fund and is responsible for risk analysis and
quantitative management for other Evergreen Select Equity Funds.
Portfolio
Characteristics
---------------
(as of 12/31/1999)
Total Net Assets $186,805,507
Number of Holdings 150
P/E Ratio 24.8x
Beta 1.21
Performance
Evergreen Select Special Equity Fund Class I produced a total return of 22.75%
for the six-month period ended December 31, 1999, easily exceeding the 10.95%
return of its benchmark, the Russell 2000 Index. The Fund's Class I posted a
one-year return of 74.31% compared to a return of 21.26% for the Russell 2000
Index for the same period. The fourth quarter of 1999 was a particularly strong
performance period for the Fund, with its 23.12% total return providing a strong
finish to an excellent year. Exposure to the technology sector and strong IPO
market contributed greatly to the Fund's performance. Class I shares do not
reflect any sales charges.
Environment
Small-cap investors were richly rewarded in the last six months of 1999 if they
were invested in the technology sector. Returns realized in the small-cap
universe were particularly dependent upon an investor's exposure to the fast
growing internet and related technology industries, as traditional value-
oriented stocks lagged significantly. Some of this disparity in performance is
reflected in the returns of the small-cap benchmarks during the last quarter of
1999.
Top 5 Industries
----------------
(as a percentage of 12/31/1999 net assets)
Information Services & Technology 9.4%
Finance & Insurance 9.4%
Retailing & Wholesale 7.0%
Healthcare Products & Services 5.9%
Communication Systems & Services 5.6%
6
<PAGE>
EVERGREEN
Select Special Equity Fund
Portfolio Manager Commentary
Strategy
Our exposure to internet-related companies such as F5 Networks and wireless
communications companies such as Clearnet Communications helped propel the
Fund's return during the last six months of 1999. Another spectacular position
for the Fund has been Metromedia Fiber Network, a provider of bandwidth fiber
optic communications equipment, which rose 96% in the fourth quarter alone.
While the Fund maintained positions in industries outside the technology sector,
the amazing returns generated by our technology positions drove our returns in
the second half of 1999.
As we entered the month of December, we began to see the emergence of profit-
taking by investors in some of our more successful areas of portfolio emphasis
such as the technology sector. As the strong momentum began to wane, we
initiated steps to reduce those positions and neutralize some of our more
aggressive investment bets. Our bottom-up security analysis led us to the
conclusion that our heavy weighting in extremely extended technology companies
should be reduced until a better risk-reward relationship presented itself.
While we remained very optimistic about the prospect of technology companies in
the months ahead, we observed greater relative attractiveness in other areas as
we ended the period.
We increased our weighting in financial companies and banks in response to the
new trends we observed at the end of 1999. Although our previous underweighting
in this sector greatly benefited our results during the year, we felt that the
sector presented an excellent investment opportunity in the near-term. Examples
of new names we added in this sector included Dain Rauscher Corp. (a West-coast
provider of individual and institutional investment services) and Southwest-
based Imperial Bancorp.
Outlook
We believe the prospect for small-cap growth stocks remains bright. New
technologies and the availability of venture capital provide an exciting mix for
entrepreneurial activity. New investment opportunities may abound in this
environment and the rewards for agile investors may be significant. Our very
disciplined approach to stock selection and systematic approach to portfolio
construction should continue to help us participate in these investment
opportunities in the year ahead.
Top 10 Holdings
---------------
(as a percentage of 12/31/1999 net assets)
NEXTLINK Communications, Inc., Cl. A 3.3%
Metromedia Fiber Network, Inc., Cl. A 2.7%
E.W. Blanch Holdings, Inc. 2.4%
Real Networks, Inc. 2.0%
Imperial Bancorp 1.9%
Mark IV Industries, Inc. 1.9%
Toro Co. 1.9%
Dain Rauscher Corp. 1.9%
Applebee's International, Inc. 1.7%
Pacific Sunwear Of California 1.5%
7
<PAGE>
EVERGREEN
Select Equity Index Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ------------------------------------------------
(Unaudited) 1999 (a) 1998 1997 1996 (b) 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS I SHARES
Net asset value,
beginning of period $ 52.06 $ 46.27 $ 37.39 $ 28.47 $ 23.79 $ 20.54
-------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.28 0.54 0.50 0.51 0.51 0.52
Net realized and
unrealized gains 3.67 8.85 10.12 9.16 5.47 4.24
-------- -------- -------- -------- -------- --------
Total from investment
operations 3.95 9.39 10.62 9.67 5.98 4.76
-------- -------- -------- -------- -------- --------
Distributions to
shareholders from
Net investment income (0.31) (0.51) (0.50) (0.51) (0.51) (0.52)
-------- -------- -------- -------- -------- --------
Net realized gains (0.36) (3.09) (1.24) (0.24) (0.79) (0.99)
Total distributions to
shareholders (0.67) (3.60) (1.74) (0.75) (1.30) (1.51)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 55.34 $ 52.06 $ 46.27 $ 37.39 $ 28.47 $ 23.79
-------- -------- -------- -------- -------- --------
Total return 7.68% 22.03% 29.17% 34.44% 25.69% 24.45%
Ratios and supplemental
data
Net assets, end of
period (thousands) $596,017 $570,864 $315,920 $241,413 $166,350 $112,533
Ratios to average net
assets
Expenses++ 0.30%+ 0.30% 0.38% 0.37% 0.35% 0.37%
Net investment income 1.08%+ 1.19% 1.19% 1.63% 1.94% 2.48%
Portfolio turnover rate 9% 21% 12% 11% 13% 27%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ---------------------------
(Unaudited) 1999 (a) 1998 1997 (c)
<S> <C> <C> <C> <C>
CLASS IS SHARES
Net asset value, beginning of
period $ 52.04 $ 46.27 $ 37.37 $29.62
------- ------- ------- ------
Income from investment
operations
Net investment income 0.21 0.45 0.49 0.32
Net realized and unrealized
gains 3.66 8.81 10.12 8.05
------- ------- ------- ------
Total from investment
operations 3.87 9.26 10.61 8.37
------- ------- ------- ------
Distributions to shareholders
from
Net investment income (0.24) (0.40) (0.47) (0.38)
------- ------- ------- ------
Net realized gains (0.36) (3.09) (1.24) (0.24)
Total distributions to
shareholders (0.60) (3.49) (1.71) (0.62)
------- ------- ------- ------
Net asset value, end of period $ 55.31 $ 52.04 $ 46.27 $37.37
------- ------- ------- ------
Total return 7.49% 21.70% 29.17% 28.58%
Ratios and supplemental data
Net assets, end of period
(thousands) $41,275 $38,051 $11,944 $4,507
Ratios to average net assets
Expenses++ 0.55%+ 0.55% 0.38% 0.37%+
Net investment income 0.81%+ 0.95% 1.19% 1.51%+
Portfolio turnover rate 9% 21% 12% 11%
</TABLE>
(a) On July 24, 1998, the assets and liabilities of CoreFund Equity Index Fund
("CoreFund") were acquired by Evergreen Select Equity Index Fund ("Equity
Index Fund"). Shareholders of CoreFund, Class A, Class B and Class Y became
owners of that number of shares of Equity Index Fund, Class IS, Class IS
and Class I, respectively, 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 survi-
vor, 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.
(b) On April 22, 1996, the Class A shares of CoreFund were redesignated as
Class Y shares of CoreFund.
(c) For the period from October 9, 1996 (commencement of class operations) to
June 30, 1997.
+ Annualized.
++ Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
See Combined Notes to Financial Statements.
8
<PAGE>
EVERGREEN
Select Equity Index Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1999 Year Ended
(Unaudited) June 30, 1999 (a)
<S> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $ 52.03 $ 45.23
-------- --------
Income from investment operations
Net investment income 0.20 0.29
Net realized and unrealized gains 3.69 9.87
-------- --------
Total from investment operations 3.89 10.16
-------- --------
Distributions to shareholders from
Net investment income (0.24) (0.27)
Net realized gains (0.36) (3.09)
-------- --------
Total distributions to shareholders (0.60) (3.36)
-------- --------
Net asset value, end of period $ 55.32 $ 52.03
-------- --------
Total return* 7.55% 24.08%
Ratios and supplemental data
Net assets, end of period (thousands) $ 57,809 $ 38,203
Ratios to average net assets
Expenses++ 0.55%+ 0.55%+
Net investment income 0.82%+ 0.96%+
Portfolio turnover rate 9% 21%
<CAPTION>
Six Months Ended
December 31, 1999 Year Ended
(Unaudited) June 30, 1999 (b)
<S> <C> <C>
CLASS B SHARES
Net asset value, beginning of period $ 52.00 $ 45.26
-------- --------
Income from investment operations
Net investment income 0.02 0.08
Net realized and unrealized gains 3.66 9.83
-------- --------
Total from investment operations 3.68 9.91
-------- --------
Distributions to shareholders from
Net investment income (0.08) (0.08)
Net realized gains (0.36) (3.09)
-------- --------
Total distributions to shareholders (0.44) (3.17)
-------- --------
Net asset value, end of period $ 55.24 $ 52.00
-------- --------
Total return* 7.12% 23.44%
Ratios and supplemental data
Net assets, end of period (thousands) $175,930 $107,334
Ratios to average net assets
Expenses++ 1.30%+ 1.31%+
Net investment income 0.07%+ 0.21%+
Portfolio turnover rate 9% 21%
</TABLE>
(a) For the period from November 4, 1998 (commencement of class operations) to
June 30, 1999.
(b) For the period from November 3, 1998 (commencement of class operations) to
June 30, 1999.
+ Annualized.
++ Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
* Excluding applicable sales charges.
See Combined Notes to Financial Statements.
9
<PAGE>
EVERGREEN
Select Equity Index Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1999 Year Ended
(Unaudited) June 30, 1999 (a)
<S> <C> <C>
CLASS C SHARES
Net asset value, beginning of period $ 52.06 $50.95
------- ------
Income from investment operations
Net investment income 0.03 0.02
Net realized and unrealized gains 3.65 1.11
------- ------
Total from investment operations 3.68 1.13
------- ------
Distributions to shareholders from
Net investment income (0.08) (0.02)
Net realized gains (0.36) 0
------- ------
Total distributions to shareholders (0.44) (0.02)
------- ------
Net asset value, end of period $ 55.30 $52.06
------- ------
Total return* 7.11% 2.22%
Ratios and supplemental data
Net assets, end of period (thousands) $22,477 $3,489
Ratios to average net assets
Expenses++ 1.30% 1.31%+
Net investment income 0.08% 0.27%+
Portfolio turnover rate 9% 21%
</TABLE>
(a) For the period from April 30, 1999 (commencement of class operations) to
June 30, 1999.
+ Annualized.
++ Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
* Excluding applicable sales charges.
See Combined Notes to Financial Statements.
10
<PAGE>
EVERGREEN
Select Special Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, Year Ended October 31,
December 31, 1999 # ---------------------------- Period Ended ------------------------
(Unaudited) 1999 (f) 1998 1997 June 30, 1996 (c)(d)(e) 1995 (b) 1994 (a)
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS I SHARES
Net asset value,
beginning of period $ 14.20 $ 11.25 $ 11.27 $ 11.86 $ 11.42 $ 9.37 $ 10.00
-------- -------- ------- ------- ------- ----------- -----------
Income from investment
operations
Net investment income
or loss (0.02) (0.02) (0.05) 0.02 0.07 0.12 0.06
Net realized and
unrealized
gains or losses 2.94 4.15 1.52 1.81 2.13 2.12 (0.63)
-------- -------- ------- ------- ------- ----------- -----------
Total from investment
operations 2.92 4.13 1.47 1.83 2.20 2.24 (0.57)
-------- -------- ------- ------- ------- ----------- -----------
Distributions to
shareholders from
Net investment income 0 0 0 (0.03) (0.07) (0.12) (0.06)
Net realized gains (2.19) (1.18) (1.49) (2.39) (1.69) (0.07) 0
-------- -------- ------- ------- ------- ----------- -----------
Total distributions to
shareholders (2.19) (1.18) (1.49) (2.42) (1.76) (0.19) (0.06)
-------- -------- ------- ------- ------- ----------- -----------
Net asset value, end of
period $ 14.93 $ 14.20 $ 11.25 $ 11.27 $ 11.86 $ 11.42 $ 9.37
-------- -------- ------- ------- ------- ----------- -----------
Total return 22.75% 42.02% 14.23% 17.94% 22.27% 24.44% (5.72%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $144,593 $116,966 $73,981 $71,980 $63,680 $ 57,396 $ 10,069
Ratios to average net
assets
Expenses++ 1.05%+ 1.06% 1.10% 0.84% 0.34%+ 0.32% 0.15%+
Net investment income
or loss (0.31%)+ (0.36%) (0.48%) 0.19% 0.94%+ 1.14% 1.06%+
Portfolio turnover rate 108% 99% 62% 74% 72% 129% 39%
</TABLE>
(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.
(c) For the period from November 1, 1995 to June 30, 1996. The Fund changed its
fiscal year end from October 31 to June 30, effective June 30, 1996.
(d) On April 15, 1996, the Conestoga Special Equity Fund was acquired by the
CoreFund Special Equity Fund ("CoreFund").
(e) On April 15, 1996, the Institutional Class shares of the CoreFund were ex-
changed for Class Y shares and the Retail Class shares of the CoreFund were
exchanged for Class A shares of the CoreFund.
(f) On July 24, 1998, the assets and certain liabilities of CoreFund were ac-
quired by Evergreen Select Special Equity Fund ("Special Equity Fund").
Shareholders of CoreFund Class Y became owners of that number of shares of
Special Equity Fund, Class I, 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 sur-
vivor, 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.
+ Annualized.
++ Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
# Net investment loss is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
11
<PAGE>
EVERGREEN
Select Special Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, Year Ended October 31,
December 31, 1999 # ------------------------ Period Ended ------------------------
(Unaudited) 1999 (f) 1998 1997 June 30, 1996 (c)(d)(e) 1995 (b) 1994 (a)
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS IS SHARES
Net asset value,
beginning of period $14.05 $11.18 $11.25 $11.85 $11.42 $ 9.37 $ 10.00
------ ------ ------ ------ ------ ---------- -----------
Income from investment
operations
Net investment income
or loss (0.04) (0.06) (0.10) 0 0.08 0.12 0.06
Net realized and
unrealized gains or
losses 2.92 4.11 1.52 1.81 2.11 2.12 (0.63)
------ ------ ------ ------ ------ ---------- -----------
Total from investment
operations 2.88 4.05 1.42 1.81 2.19 2.24 (0.57)
------ ------ ------ ------ ------ ---------- -----------
Distributions to
shareholders from
Net investment income 0 0 0 (0.02) (0.07) (0.12) (0.06)
Net realized gains (2.19) (1.18) (1.49) (2.39) (1.69) (0.07) 0
------ ------ ------ ------ ------ ---------- -----------
Total distributions to
shareholders (2.19) (1.18) (1.49) (2.41) (1.76) (0.19) (0.06)
------ ------ ------ ------ ------ ---------- -----------
Net asset value, end of
period $14.74 $14.05 $11.18 $11.25 $11.85 $ 11.42 $ 9.37
------ ------ ------ ------ ------ ---------- -----------
Total return 22.71% 41.55% 13.78% 17.73% 22.14% 24.44% (5.72%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $6,929 $4,043 $2,981 $2,347 $1,144 $ 734 $ 10,069
Ratios to average net
assets
Expenses++ 1.30%+ 1.31% 1.35% 1.14% 0.37%+ 0.27% 0.15%+
Net investment income
or loss (0.56%)+ (0.61%) (0.73%) (0.12%) 0.91%+ 1.29% 1.06%+
Portfolio turnover rate 108% 99% 62% 74% 72% 129% 39%
</TABLE>
(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.
(c) For the period from November 1, 1995 to June 30, 1996. The Fund changed its
fiscal year end from October 31 to June 30, effective June 30, 1996.
(d) On April 15, 1996, the Conestoga Special Equity Fund was acquired by the
CoreFund Special Equity Fund ("CoreFund").
(e) On April 15, 1996, the Institutional Class shares of the CoreFund were ex-
changed for Class Y shares and the Retail Class shares of the CoreFund were
exchanged for Class A shares of the CoreFund.
(f) On July 24, 1998, the assets and certain liabilities of CoreFund were ac-
quired 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.
+ Annualized.
++ Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
# Net investment loss is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
12
<PAGE>
EVERGREEN
Select Special Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period Ended
December 31, 1999 (a) #
(Unaudited)
<S> <C>
CLASS A SHARES
Net asset value, beginning of period $ 13.97
-------
Income from investment operations
Net investment loss (0.03)
Net realized and unrealized gains 2.97
-------
Total from investment operations 2.94
-------
Distributions to shareholders from
Net realized gains (2.19)
-------
Total distributions to shareholders (2.19)
-------
Net asset value, end of period $ 14.72
-------
Total return* 23.25%
Ratios and supplemental data
Net assets, end of period (thousands) $12,341
Ratios to average net assets
Expenses++ 1.32%+
Net investment loss (0.51%)+
Portfolio turnover rate 108%
<CAPTION>
Period Ended
December 31, 1999 (a) #
(Unaudited)
<S> <C>
CLASS B SHARES
Net asset value, beginning of period $ 13.97
-------
Income from investment operations
Net investment loss (0.08)
Net realized and unrealized gains 3.00
-------
Total from investment operations 2.92
-------
Distributions to shareholders from
Net realized gains (2.19)
-------
Total distributions to shareholders (2.19)
-------
Net asset value, end of period $ 14.70
-------
Total return* 23.08%
Ratios and supplemental data
Net assets, end of period (thousands) $14,437
Ratios to average net assets
Expenses++ 2.07%+
Net investment loss (1.24%)+
Portfolio turnover rate 108%
</TABLE>
(a) For the period from August 30, 1999 (commencement of class operations) to
December 31, 1999.
+ Annualized.
++ Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
* Excluding applicable sales charges.
# Net investment loss is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
13
<PAGE>
EVERGREEN
Select Special Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period Ended
December 31, 1999 (a) #
(Unaudited)
<S> <C>
CLASS C SHARES
Net asset value, beginning of period $13.97
------
Income from investment operations
Net investment loss (0.08)
Net realized and unrealized gains 3.00
------
Total from investment operations 2.92
------
Distributions to shareholders from
Net realized gains (2.19)
------
Total distributions to shareholders (2.19)
------
Net asset value, end of period $14.70
------
Total return* 22.38%
Ratios and supplemental data
Net assets, end of period (thousands) $8,506
Ratios to average net assets
Expenses++ 2.07%+
Net investment loss (1.23%)+
Portfolio turnover rate 108%
</TABLE>
(a) For the period from August 30, 1999 (commencement of class operations) to
December 31, 1999.
+ Annualized.
++ Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
* Excluding applicable sales charges.
# Net investment loss is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
14
<PAGE>
EVERGREEN
Select Equity Index Fund
Schedule of Investments
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 95.9%
Advertising & Related Services - 0.1%
19,700 Interpublic Group of Companies, Inc. ............. $ 1,136,444
------------
Aerospace & Defense - 1.2%
65,570 Boeing Co. ....................................... 2,725,253
13,300 General Dynamics Corp. ........................... 701,575
13,400 Goodrich BF Co. .................................. 368,500
53,262 Honeywell International, Inc. .................... 3,072,552
25,800 Lockheed Martin Corp. ............................ 564,375
5,300 Northrop Grumman Corp. ........................... 286,531
23,100 Raytheon Co., Cl. B............................... 613,594
13,300 Rockwell International Corp. ..................... 636,737
1,757 Teledyne Technologies, Inc. ...................... 16,582
32,900 United Technologies Corp. ........................ 2,138,500
------------
11,124,199
------------
Automotive Equipment & Manufacturing - 1.2%
11,200 Cooper Tire & Rubber Co. ......................... 174,300
9,913 Dana Corp. ....................................... 296,770
35,515 Delphi Automotive Systems Corp. .................. 559,361
83,800 Ford Motor Co. ................................... 4,478,062
44,200 General Motors Corp. ............................. 3,212,788
11,900 Genuine Parts Co. ................................ 295,269
11,280 Goodyear Tire & Rubber Co. ....................... 317,955
5,000 Johnson Controls, Inc. ........................... 284,375
5,000 * Navistar International Corp., Inc. ............... 236,875
4,000 Paccar, Inc. ..................................... 177,250
14,700 Pep Boys-Manny Moe & Jack......................... 134,138
8,000 TRW, Inc. ........................................ 415,500
------------
10,582,643
------------
Banks - 4.7%
26,850 AmSouth Bancorp................................... 518,541
53,600 Bank of New York Co., Inc. ....................... 2,144,000
80,099 Bank One Corp. ................................... 2,568,174
118,443 BankAmerica Corp. ................................ 5,944,358
21,800 BB&T Corp. ....................................... 596,775
56,832 Chase Manhattan Corp. ............................ 4,415,136
12,750 Comerica, Inc. ................................... 595,266
22,250 Fifth Third Bancorp............................... 1,632,594
65,660 First Union Corp. **.............................. 2,154,469
70,573 Firstar Corp. .................................... 1,490,855
65,734 FleetBoston Financial Corp. ...................... 2,288,365
13,800 Golden West Financial Corp. ...................... 462,300
16,160 Huntington Bancshares, Inc. ...................... 385,820
30,600 KeyCorp........................................... 677,025
33,600 Mellon Financial Corp. ........................... 1,144,500
41,600 National City Corp. .............................. 985,400
15,200 Northern Trust Corp. ............................. 805,600
8,200 Old Kent Financial Corp........................... 290,075
20,500 PNC Bank Corp. ................................... 912,250
14,400 Regions Financial Corp. .......................... 361,800
7,200 Republic New York Corp. .......................... 518,400
10,500 SouthTrust Corp. ................................. 397,031
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Banks - continued
10,600 State Street Corp. ............................... $ 774,462
12,600 Summit Bancorp.................................... 385,875
21,600 Suntrust Banks, Inc. ............................. 1,486,350
21,300 Synovus Financial Corp. .......................... 423,337
49,238 U.S. Bancorp...................................... 1,172,480
12,100 Union Planters Corp. ............................. 477,194
13,800 Wachovia Corp. ................................... 938,400
115,530 Wells Fargo Co. .................................. 4,671,744
------------
41,618,576
------------
Building, Construction & Furnishings - 0.3%
2,400 Armstrong World Industries, Inc. ................. 80,100
10,100 Centex Corp. ..................................... 249,344
15,500 Deere & Co. ...................................... 672,312
9,000 Fleetwood Enterprises, Inc. ...................... 185,625
5,000 Foster Wheeler Corp. ............................. 44,375
4,400 Kaufman & Broad Home Corp. ....................... 106,425
28,000 Masco Corp. ...................................... 710,500
4,400 Pulte Corp. ...................................... 99,000
10,700 Sherwin Williams Co. ............................. 224,700
7,100 Springs Industries, Inc. ......................... 283,556
------------
2,655,937
------------
Business Equipment &
Services - 0.9%
42,345 Automatic Data Processing, Inc. .................. 2,281,337
11,300 * Computer Sciences Corp. .......................... 1,069,262
6,900 Deluxe Corp. ..................................... 189,319
10,000 Dun & Bradstreet Corp. ........................... 295,000
8,100 Equifax, Inc. .................................... 190,856
28,600 First Data Corp. ................................. 1,410,337
15,800 Ikon Office Solutions, Inc. ...................... 107,638
16,950 Paychex, Inc. .................................... 678,000
18,500 * Seagate Technology................................ 861,406
20,300 * Thermo Electron Corp. ............................ 304,500
45,000 Xerox Corp. ...................................... 1,020,938
------------
8,408,593
------------
Capital Goods - 0.2%
23,100 Caterpillar, Inc. ................................ 1,087,144
11,000 Ingersoll Rand Co. ............................... 605,687
------------
1,692,831
------------
Chemical & Agricultural
Products - 1.2%
14,700 Air Products & Chemicals, Inc. ................... 493,369
15,950 Dow Chemical Co. ................................. 2,131,319
71,499 DuPont (E.I.) De Nemours & Co. ................... 4,709,997
4,000 Eastman Chemical Co. ............................. 190,750
2,300 Engelhard Corp. .................................. 43,413
5,900 * FMC Corp. ........................................ 338,144
12,300 * Grace (W.R.) & Co. ............................... 170,662
4,800 Great Lakes Chemical Corp. ....................... 183,300
7,700 Hercules, Inc. ................................... 214,637
11,400 PPG Industries, Inc. ............................. 713,212
</TABLE>
15
<PAGE>
EVERGREEN
Select Equity Index Fund
Schedule of Investments(continued)
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Chemical & Agricultural
Products - continued
11,300 Praxair, Inc. .................................... $ 568,531
13,075 Rohm & Haas Co. .................................. 531,989
5,000 Sigma-Aldrich Corp. .............................. 150,313
9,200 Union Carbide Corp. .............................. 614,100
------------
11,053,736
------------
Communication Systems & Services - 5.9%
15,400 * Andrew Corp. ..................................... 291,637
227,000 * Cisco Systems, Inc. .............................. 24,317,375
217,490 Lucent Technologies, Inc. ........................ 16,270,971
195,900 * MCI WorldCom, Inc. ............................... 10,394,944
29,100 * Tellabs, Inc. .................................... 1,867,856
------------
53,142,783
------------
Consumer Products &
Services - 3.1%
5,000 Alberto Culver Co., Cl. B......................... 129,062
7,400 American Greetings Corp., Cl. A................... 174,825
17,000 Avon Products, Inc. .............................. 561,000
5,900 Black & Decker Corp. ............................. 308,275
47,374 * Cendant Corp. .................................... 1,258,372
15,800 Clorox Co. ....................................... 795,925
41,384 Colgate-Palmolive Co. ............................ 2,689,960
20,700 Eastman Kodak Co. ................................ 1,371,375
15,400 Fort James Corp. ................................. 421,575
74,400 Gillette Co. ..................................... 3,064,350
6,200 H & R Block, Inc. ................................ 271,250
11,900 Hasbro, Inc. ..................................... 226,844
5,300 International Flavors & Fragrances, Inc. ......... 200,075
2,000 Jostens, Inc. .................................... 48,625
3,300 Liz Claiborne, Inc. .............................. 124,162
25,850 Mattel, Inc. ..................................... 339,281
6,000 Maytag Corp. ..................................... 288,000
18,191 Newell Rubbermaid, Inc. .......................... 527,539
18,600 Nike, Inc., Cl. B................................. 921,862
10,600 * Pactiv Corp. ..................................... 112,625
10,400 Polaroid Corp. ................................... 195,650
91,900 Procter & Gamble Co. ............................. 10,068,794
5,000 Service Corp. International....................... 34,688
6,600 Stanley Works..................................... 198,825
15,300 Tupperware Corp. ................................. 259,144
38,975 Unilever NV....................................... 2,121,702
10,400 UST, Inc. ........................................ 261,950
615 Water Pik Tech, Inc. ............................. 5,881
5,600 Whirlpool Corp. .................................. 364,350
------------
27,345,966
------------
Diversified Companies - 1.0%
5,200 Cooper Industries, Inc. .......................... 210,275
4,400 Fluor Corp. ...................................... 201,850
5,200 ITT Industries, Inc. ............................. 173,875
27,500 Minnesota Mining & Manufacturing Co. ............. 2,691,563
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Diversified Companies - continued
5,900 National Service Industries, Inc. ................ $ 174,050
8,800 * Owens Illinois, Inc. ............................. 220,550
10,000 Textron, Inc. .................................... 766,875
116,236 Tyco International, Ltd. ......................... 4,518,674
------------
8,957,712
------------
Electrical Equipment &
Services - 4.6%
29,100 Emerson Electric Co. ............................. 1,669,613
227,700 General Electric Co. ............................. 35,236,575
10,700 Molex, Inc. ...................................... 606,556
20,300 * Solectron Corp. .................................. 1,931,037
5,700 Tektronix, Inc. .................................. 221,588
4,400 Thomas & Betts Corp. ............................. 140,250
21,600 * Xilinx, Inc. ..................................... 982,125
------------
40,787,744
------------
Electronic Equipment &
Services - 0.8%
6,400 * KLA-Tencor Corp. ................................. 712,800
11,700 * Teradyne, Inc. ................................... 772,200
55,200 Texas Instruments, Inc. .......................... 5,347,500
------------
6,832,500
------------
Energy - 0.1%
21,500 Occidental Petroleum Corp. ....................... 464,938
------------
Environmental Services - 0.1%
18,300 * Allied Waste Industries, Inc. .................... 161,269
4,200 Millipore Corp. .................................. 162,225
40,120 Waste Management, Inc. ........................... 689,562
------------
1,013,056
------------
Finance & Insurance - 8.0%
10,208 Aetna, Inc. ...................................... 569,734
20,600 AFLAC, Inc. ...................................... 972,062
54,500 Allstate Corp. ................................... 1,308,000
30,700 American Express Co. ............................. 5,103,875
16,916 American General Corp. ........................... 1,283,501
109,076 American International Group, Inc. ............... 11,793,842
16,125 Aon Corp. ........................................ 645,000
48,648 Associates First Capital Corp., Cl. A............. 1,334,779
11,835 Bear Stearns Companies, Inc. ..................... 505,946
12,900 Capital One Financial Corp. ...................... 621,619
12,000 Chubb Corp. ...................................... 675,750
13,300 CIGNA Corp. ...................................... 1,071,481
10,400 Cincinnati Financial Corp. ....................... 324,350
234,193 Citigroup, Inc. .................................. 13,012,349
23,307 Conseco, Inc. .................................... 416,613
7,500 Countrywide Credit Industries, Inc. .............. 189,375
47,300 Federal Home Loan Mortgage Corp. ................. 2,226,056
70,000 Federal National Mortgage Assoc. ................. 4,370,625
16,300 Franklin Resources, Inc. ......................... 522,619
15,400 Hartford Financial Services Group, Inc. .......... 729,575
31,359 Household International, Inc. .................... 1,168,123
</TABLE>
16
<PAGE>
EVERGREEN
Select Equity Index Fund
Schedule of Investments (continued)
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Finance & Insurance - continued
11,700 J.P. Morgan & Co., Inc. ............................ $ 1,481,512
7,800 Jefferson Pilot Corp. .............................. 532,350
8,800 Lehman Brothers Holdings, Inc. ..................... 745,250
13,000 Lincoln National Corp. ............................. 520,000
7,000 Loews Corp. ........................................ 424,813
17,900 Marsh & McLennan Co., Inc. ......................... 1,712,806
7,800 MBIA, Inc. ......................................... 411,938
59,230 MBNA Corp. ......................................... 1,614,017
25,200 Merrill Lynch & Co., Inc. .......................... 2,104,200
8,000 MGIC Investment Corp. .............................. 481,500
38,600 Morgan Stanley, Dean Witter & Co. .................. 5,510,150
11,200 Paine Webber Group, Inc. ........................... 434,700
6,100 Potlatch Corp. ..................................... 272,213
7,900 Price (T.) Rowe & Associates, Inc. ................. 291,806
4,700 Progressive Corp. .................................. 343,688
10,800 Providian Financial Corp. .......................... 983,475
13,000 SAFECO Corp. ....................................... 323,375
55,800 Schwab (Charles) & Co., Inc. ....................... 2,141,325
10,100 SLM Holding Corp. .................................. 426,725
15,916 St. Paul Companies, Inc. ........................... 536,170
7,100 Torchmark Corp. .................................... 206,344
15,757 UnumProvident Corp. ................................ 505,209
39,710 Washington Mutual, Inc. ............................ 1,032,460
------------
71,881,300
------------
Food & Beverage Products - 4.5%
31,895 Albertsons, Inc. ................................... 1,028,614
30,200 Anheuser Busch Companies, Inc. ..................... 2,140,425
40,272 Archer Daniels Midland Co. ......................... 490,815
19,000 Bestfoods........................................... 998,687
3,700 Brown Forman Corp., Cl. B........................... 211,825
31,800 Campbell Soup Co. .................................. 1,230,262
171,810 Coca Cola Co. ...................................... 10,007,932
28,800 Coca Cola Enterprises, Inc. ........................ 579,600
31,800 Conagra, Inc. ...................................... 717,488
3,500 Coors Adolph Co., Cl. B............................. 183,750
10,500 Darden Restaurants, Inc. ........................... 190,313
12,000 Fortune Brands, Inc. ............................... 396,750
20,800 General Mills, Inc. ................................ 743,600
6,500 Great Atlantic & Pacific Tea, Inc. ................. 181,188
23,450 H.J. Heinz Co. ..................................... 933,603
12,200 Hershey Foods Corp. ................................ 579,500
26,300 Kellogg Co. ........................................ 810,369
54,500 * Kroger Co. ....................................... 1,028,687
92,500 McDonald's Corp. ................................... 3,728,906
24,000 Nabisco Group Holding Corp. ........................ 255,000
99,800 Pepsico, Inc. ...................................... 3,517,950
163,900 Philip Morris Companies, Inc. ...................... 3,800,431
9,000 Quaker Oats Co. .................................... 590,625
22,700 Ralston Purina Co. ................................. 632,763
66,400 Sara Lee Corp. ..................................... 1,464,950
28,900 Seagram Co., Ltd. .................................. 1,298,694
22,800 SYSCO Corp. ........................................ 902,025
11,000 * Tricon Global Restaurants, Inc. .................. 424,875
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Food & Beverage Products -continued
5,800 Wendy's International, Inc. ........................ $ 119,625
9,500 Winn Dixie Stores, Inc. ............................ 227,406
9,300 Wrigley (W.M.) Junior Co. .......................... 771,319
------------
40,187,977
------------
Forest Products - 0.0%
7,800 Willamette Industries, Inc. ........................ 362,213
------------
Gold Mining - 0.0%
23,300 Homestake Mining Co. ............................... 182,031
19,400 Placer Dome, Inc. .................................. 208,550
------------
390,581
------------
Healthcare Products &
Services - 9.1%
107,600 Abbott Laboratories ................................ 3,907,225
8,600 Allergan, Inc. ..................................... 427,850
6,400 * Alza Corp. ....................................... 221,600
89,200 American Home Products Corp. ....................... 3,517,825
73,000 * Amgen, Inc. ...................................... 4,384,562
3,800 Bausch & Lomb, Inc. ................................ 260,063
19,600 Baxter International, Inc. ......................... 1,231,125
7,200 Biomet, Inc. ....................................... 288,000
27,100 * Boston Scientific Corp. .......................... 592,813
138,300 Bristol-Myers Squibb Co. ........................... 8,877,131
3,700 C.R. Bard, Inc. .................................... 196,100
18,700 Cardinal Health, Inc. .............................. 895,262
37,950 Columbia/HCA Healthcare Corp. ...................... 1,112,409
20,400 * Guidant Corp. .................................... 958,800
29,200 * HEALTHSOUTH Corp. ................................ 156,950
25,700 * Humana, Inc. ..................................... 210,419
21,200 IMS Health, Inc. ................................... 576,375
96,300 Johnson & Johnson................................... 8,967,937
77,700 Lilly (Eli) & Co. .................................. 5,167,050
5,400 Mallinckrodt, Inc. ................................. 171,788
11,700 * Manor Care, Inc. ................................. 187,200
17,829 McKesson HBOC, Inc. ................................ 402,267
86,000 Medtronic, Inc. .................................... 3,133,625
169,900 Merck & Co., Inc. .................................. 11,393,919
46,500 Monsanto Co. ....................................... 1,656,562
7,400 PE Corp-PE Biosystems Group......................... 890,313
268,000 Pfizer, Inc. ....................................... 8,693,250
34,755 Pharmacia & Upjohn, Inc. ........................... 1,563,975
9,100 * Quintiles Transnational Corp. .................... 170,056
100,200 Schering-Plough Corp................................ 4,227,187
5,100 Shared Medical System Corp.......................... 259,781
5,200 * St. Jude Medical, Inc. ........................... 159,575
20,000 * Tenet Healthcare Corp. ........................... 470,000
11,400 United Healthcare Corp. ............................ 605,625
59,300 Warner-Lambert Co. ................................. 4,858,894
7,800 * Watson Pharmaceuticals, Inc. ..................... 279,338
4,000 * Wellpoint Health Networks, Inc., Cl. A............ 263,750
------------
81,336,601
------------
</TABLE>
17
<PAGE>
EVERGREEN
Select Equity Index Fund
Schedule of Investments(continued)
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Industrial Specialty Products & Services - 0.9%
7,300 * Advanced Micro Devices, Inc. ..................... $ 211,244
4,000 Bemis Co., Inc. .................................. 139,500
16,900 Corning, Inc. .................................... 2,179,044
4,000 Crane Co. ........................................ 79,500
2,000 Cummins Engine, Inc. ............................. 96,625
9,000 Danaher Corp. .................................... 434,250
14,300 Dover Corp. ...................................... 648,862
4,400 Eaton Corp. ...................................... 319,550
10,500 Ecolab, Inc. ..................................... 410,812
20,600 Illinois Tool Works, Inc. ........................ 1,391,787
19,300 Leggett & Platt, Inc. ............................ 413,744
5,000 * McDermott International, Inc. .................... 45,313
8,700 Pall Corp. ....................................... 187,594
6,275 Parker Hannifin Corp. ............................ 321,986
4,800 Perkinelmer, Inc. ................................ 200,100
7,700 Snap-on, Inc. .................................... 204,531
10,500 Timken Co. ....................................... 214,594
6,600 Vulcan Materials Co. ............................. 263,587
------------
7,762,623
------------
Information Services & Technology - 18.7%
25,100 * 3Com Corp. ....................................... 1,179,700
6,500 * Adaptec, Inc. .................................... 324,188
8,600 Adobe Systems, Inc. .............................. 578,350
154,800 * America Online, Inc. ............................. 11,677,725
11,200 * Analog Devices, Inc. ............................. 1,041,600
11,700 * Apple Computer.................................... 1,202,906
26,700 * Applied Materials, Inc. .......................... 3,382,556
5,000 Autodesk, Inc. ................................... 168,750
18,100 * BMC Software, Inc. ............................... 1,446,869
11,200 * Cabletron Systems, Inc. .......................... 291,200
9,200 * Ceridian Corp. ................................... 198,375
6,000 * Citrix Systems, Inc. ............................. 738,000
120,985 Compaq Computer Corp. ............................ 3,274,157
37,175 Computer Associates International, Inc. .......... 2,599,927
25,000 * Compuware Corp. .................................. 931,250
4,600 * Comverse Technology, Inc. ........................ 665,850
175,800 * Dell Computer Corp. .............................. 8,965,800
35,600 Electronic Data Systems Corp. .................... 2,382,975
70,210 * EMC Corp. ........................................ 7,670,442
21,600 * Gateway, Inc. .................................... 1,556,550
70,800 Hewlett-Packard Co. .............................. 8,066,775
231,700 Intel Corp. ...................................... 19,071,806
125,500 International Business Machines Corp. ............ 13,554,000
9,200 * Lexmark International Group, Inc., Cl. A.......... 832,600
9,800 * LSI Logic......................................... 661,500
19,200 * Micron Technology, Inc. .......................... 1,492,800
358,500 * Microsoft Corp. .................................. 41,854,875
11,000 * National Semiconductor Corp. ..................... 470,937
9,200 * Network Appliance, Inc. .......................... 764,175
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Information Services & Technology - continued
23,200 * Novell, Inc. ..................................... $ 926,550
95,893 * Oracle Systems Corp. ............................. 10,746,009
16,700 * Parametric Technology Corp. ...................... 451,944
13,700 * Peoplesoft, Inc. ................................. 291,981
29,400 * Silicon Graphics, Inc. ........................... 288,488
107,600 * Sun Microsystems, Inc. ........................... 8,332,275
21,700 * Unisys Corp. ..................................... 693,044
18,300 * Yahoo!, Inc. ..................................... 7,918,181
------------
166,695,110
------------
Iron & Steel - 0.0%
10,000 * Bethlehem Steel Corp. ............................ 83,750
------------
Leisure & Tourism - 0.3%
14,700 Brunswick Corp. .................................. 327,075
41,000 Carnival Corp., Cl. A............................. 1,960,312
21,100 Hilton Hotels Corp. .............................. 203,087
13,000 * Mirage Resorts, Inc. ............................. 199,063
------------
2,689,537
------------
Metals & Mining - 0.1%
27,300 Barrick Gold Corp. ............................... 482,869
9,470 Newmont Mining Corp. ............................. 232,015
------------
714,884
------------
Machinery - Diversified - 0.0%
12,400 Milacron, Inc. ................................... 190,650
------------
Manufacturing - Distributing - 0.0%
3,200 Briggs & Stratton Corp. .......................... 171,600
------------
Metal Products & Services - 0.6%
15,200 Alcan Aluminum, Ltd. ............................. 626,050
26,700 Alcoa, Inc. ...................................... 2,216,100
6,150 Allegheny Technologies, Inc. ..................... 137,991
21,700 Becton Dickinson & Co. ........................... 580,475
8,200 Crown Cork & Seal Co., Inc. ...................... 183,475
9,700 * Freeport McMoran Copper & Gold, Inc., Cl. B....... 204,912
12,600 Inco, Ltd. ....................................... 296,100
4,400 Nucor Corp. ...................................... 241,175
8,400 Phelps Dodge Corp. ............................... 563,850
3,500 Reynolds Metals Co. .............................. 268,187
8,000 USX United States Steel Group..................... 264,000
7,000 Worthington Industries, Inc. ..................... 115,938
------------
5,698,253
------------
Office Equipment & Supplies - 0.1%
18,400 Pitney Bowes, Inc. ............................... 888,950
------------
Oil/Energy - 5.1%
6,000 Amerada Hess Corp. ............................... 340,500
9,700 Anadarko Petroleum Corp. ......................... 331,013
8,500 Apache Corp. ..................................... 313,969
3,900 Ashland, Inc. .................................... 128,456
22,500 Atlantic Richfield Co. ........................... 1,946,250
14,900 Burlington Resources, Inc. ....................... 492,631
</TABLE>
18
<PAGE>
EVERGREEN
Select Equity Index Fund
Schedule of Investments (continued)
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Oil/Energy - continued
46,600 Chevron Corp. ................................... $ 4,036,725
14,000 Coastal Corp. ................................... 496,125
42,062 Conoco, Inc., Cl. B.............................. 1,046,292
6,000 Consolidated Natural Gas Co. .................... 389,625
14,900 El Paso Energy Corp. ............................ 578,306
51,800 Enron Corp. ..................................... 2,298,625
239,928 Exxon Mobil Corp. ............................... 19,329,182
6,292 Kerr-McGee Corp. ................................ 390,104
17,300 Phillips Petroleum Co. .......................... 813,100
148,300 Royal Dutch Petroleum Co. ....................... 8,962,881
12,600 Sunoco, Inc. .................................... 296,100
37,700 Texaco, Inc. .................................... 2,047,581
9,500 Tosco Corp. ..................................... 258,281
14,629 Union Pacific Resource Group, Inc. .............. 186,520
15,000 Unocal Corp. .................................... 503,438
22,300 USX Marathon Group............................... 550,531
------------
45,736,235
------------
Oil Field Services - 0.5%
21,000 Baker Hughes, Inc. .............................. 442,312
30,400 Halliburton Co. ................................. 1,223,600
11,600 * Rowan Companies, Inc. ........................... 251,575
36,600 Schlumberger, Ltd. .............................. 2,058,750
7,085 Transocean Sedco Forex, Inc. .................... 238,676
------------
4,214,913
------------
Paper & Packaging - 0.9%
7,400 Avery Dennison Corp. ............................ 539,275
2,800 Ball Corp. ...................................... 110,250
5,401 Boise Cascade Corp. ............................. 218,741
6,400 Champion International Corp. .................... 396,400
10,800 Georgia-Pacific Corp. ........................... 548,100
28,344 International Paper Co. ......................... 1,599,664
37,804 Kimberly-Clark Corp. ............................ 2,466,711
15,200 Louisiana Pacific Corp. ......................... 216,600
7,400 Mead Corp. ...................................... 321,437
5,361 * Sealed Air Corp. ................................ 277,767
2,800 Temple Inland, Inc. ............................. 184,625
5,000 Westvaco Corp. .................................. 163,125
16,106 Weyerhaeuser Co. ................................ 1,156,612
------------
8,199,307
------------
Printing, Publishing, Broadcasting &
Entertainment - 3.2%
52,432 * CBS Corp. ....................................... 3,352,371
23,000 * Clear Channel Communications, Inc. .............. 2,052,750
53,600 Comcast Corp., Cl. A............................. 2,710,150
140,778 Disney (Walt) Co. ............................... 4,117,756
6,800 Donnelley (R.R.) & Sons Co. ..................... 168,725
6,200 Dow Jones & Co., Inc. ........................... 421,600
18,300 Gannett Co., Inc. ............................... 1,492,594
9,300 * Harrahs Entertainment, Inc. ..................... 245,869
7,100 Knight-Ridder, Inc. ............................. 422,450
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Printing, Publishing, Broadcasting &
Entertainment - continued
14,000 McGraw-Hill Companies, Inc. ..................... $ 862,750
4,700 Meredith Corp. .................................. 195,931
12,200 New York Times Co., Cl. A........................ 599,325
11,800 Omnicom Group, Inc. ............................. 1,180,000
89,300 Time Warner, Inc. ............................... 6,468,669
4,000 Times Mirror Co., Ser. A......................... 268,000
18,900 Tribune Co. ..................................... 1,040,681
50,252 * Viacom, Inc., Cl. B.............................. 3,037,105
------------
28,636,726
------------
Real Estate - 0.1%
15,400 Marriott International, Inc., Cl. A.............. 486,062
------------
Retailing & Wholesale - 6.2%
7,700 * Autozone, Inc. .................................. 248,806
9,100 * Bed Bath & Beyond, Inc. ......................... 316,225
13,000 * Best Buy Co., Inc. .............................. 652,438
14,100 Circuit City Stores, Inc. ....................... 635,381
12,200 * Consolidated Stores Corp. ....................... 198,250
14,400 * Costco Wholesale Corp. .......................... 1,314,000
25,100 CVS Corp. ....................................... 1,002,431
30,300 Dayton Hudson Corp. ............................. 2,225,156
10,100 Dillards, Inc., Cl. A............................ 203,894
15,425 Dollar General Corp. ............................ 350,919
13,400 * Federated Department Stores, Inc. ............... 677,538
61,800 Gap, Inc. ....................................... 2,842,800
3,600 Harcourt General, Inc. .......................... 144,900
159,297 Home Depot, Inc. ................................ 10,921,801
18,300 J.C. Penney Co., Inc. ........................... 364,856
34,750 * Kmart Corp. ..................................... 349,672
10,200 * Kohl's Corp. .................................... 736,312
14,094 Limited, Inc. ................................... 610,446
7,100 Longs Drug Stores Corp. ......................... 183,269
26,600 Lowe's Companies, Inc. .......................... 1,589,350
25,800 May Department Stores Co. ....................... 832,050
1,084 Neiman Marcus Group, Cl. B....................... 29,200
9,500 Nordstrom, Inc. ................................. 248,781
24,100 * Office Depot, Inc. .............................. 263,594
25,900 Rite Aid Corp. .................................. 289,756
3,100 Russell Corp. ................................... 51,925
34,100 * Safeway, Inc. ................................... 1,212,681
25,900 Sears, Roebuck & Co. ............................ 788,331
32,450 * Staples, Inc. ................................... 673,338
9,000 SuperValu, Inc. ................................. 180,000
13,000 Tandy Corp. ..................................... 639,438
19,700 TJX Co., Inc. ................................... 402,619
16,900 * Toys "R" Us, Inc. ............................... 241,881
6,000 W.W. Grainger, Inc. ............................. 286,875
309,390 Wal-Mart Stores, Inc. ........................... 21,386,584
72,800 Walgreen Co. .................................... 2,129,400
------------
55,224,897
------------
</TABLE>
19
<PAGE>
EVERGREEN
Select Equity Index Fund
Schedule of Investments (continued)
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Telecommunication Services & Equipment - 3.6%
9,700 * ADC Telecommunications, Inc. ..................... $ 703,856
9,300 Centurytel, Inc. ................................. 440,588
11,300 * General Instrument Corp. ......................... 960,500
51,885 * Global Crossing, Ltd. ............................ 2,594,250
41,400 * MediaOne Group, Inc. ............................. 3,180,037
42,500 Motorola, Inc. ................................... 6,258,125
92,200 Nortel Networks Corp. ............................ 9,312,200
45,600 * Qualcomm, Inc. ................................... 8,031,300
6,000 Scientific Atlanta, Inc. ......................... 333,750
------------
31,814,606
------------
Textile & Apparel - 0.0%
7,900 V.F. Corp. ....................................... 237,000
------------
Transportation - 0.7%
10,000 * AMR Corp. ........................................ 670,000
30,992 Burlington Northern Santa Fe Corp. ............... 751,556
14,000 CSX Corp. ........................................ 439,250
9,000 Delta Air Lines, Inc. ............................ 448,313
19,000 * FDX Corp. ........................................ 777,812
7,500 Kansas City Southern Industries, Inc. ............ 559,688
25,600 Norfolk Southern Corp. ........................... 524,800
6,200 Ryder Systems, Inc. .............................. 151,513
36,300 Southwest Airlines Co. ........................... 587,606
19,700 Union Pacific Corp. .............................. 859,412
7,200 * US Airways Group, Inc. ........................... 230,850
------------
6,000,800
------------
Utilities - Electric - 1.5%
16,500 * AES Corp. ........................................ 1,233,375
8,600 Ameren Corp. ..................................... 281,650
14,100 American Electric Power Co., Inc. ................ 452,962
9,100 Carolina Power & Light Co. ....................... 276,981
8,500 Cinergy Corp. .................................... 205,063
6,300 CMS Energy Corp. ................................. 196,481
17,600 Consolidated Edison, Inc. ........................ 607,200
9,500 Constellation Energy Group, Inc. ................. 275,500
13,100 Dominion Resources, Inc. ......................... 514,175
10,300 DTE Energy Co. ................................... 323,163
24,286 Duke Power Co. ................................... 1,217,336
21,800 Edison International.............................. 570,887
21,900 Entergy Corp. .................................... 563,925
17,200 Firstenergy Corp. ................................ 390,225
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Electric - continued
6,300 Florida Progress Corp. ........................... $ 266,569
11,000 FPL Group, Inc. .................................. 470,937
11,900 GPU, Inc. ........................................ 356,256
6,800 New Century Energies, Inc. ....................... 206,550
12,600 * Niagara Mohawk Holdings, Inc. .................... 175,613
7,700 Northern State Power Corp. ....................... 150,150
13,300 PECO Energy Co. .................................. 462,175
27,200 PG&E Corp. ....................................... 557,600
5,500 Pinnacle West Capital Corp. ...................... 168,094
11,500 PP&L Resources, Inc. ............................. 263,063
14,900 Public Service Enterprise Group, Inc. ............ 518,706
21,000 Reliant Energy, Inc. ............................. 480,375
16,314 Sempra Energy..................................... 283,456
46,600 Southern Co. ..................................... 1,095,100
18,185 Texas Utilities Co. .............................. 646,704
------------
13,210,271
------------
Utilities - Gas - 0.2%
5,750 Columbia Energy Group............................. 363,688
3,700 Eastern Enterprises............................... 212,519
3,000 NICOR, Inc. ...................................... 97,500
6,600 Oneok, Inc. ...................................... 165,825
4,800 Peoples Energy Corp. ............................. 160,800
28,600 The Williams Companies, Inc. ..................... 874,087
------------
1,874,419
------------
Utilities - Telephone - 6.1%
20,800 ALLTEL Corp. ..................................... 1,719,900
221,527 AT&T Corp. ....................................... 11,242,495
109,124 Bell Atlantic Corp. .............................. 6,717,946
130,700 BellSouth Corp. .................................. 6,118,394
67,000 GTE Corp. ........................................ 4,727,687
24,800 * Nextel Communications, Inc., Cl. A................ 2,557,500
236,981 SBC Communications, Inc. ......................... 11,552,824
62,200 Sprint Corp. ..................................... 4,186,838
32,400 * Sprint Corp. (PCS Group), Ser. 1.................. 3,321,000
35,995 U.S. West, Inc. .................................. 2,591,640
------------
54,736,224
------------
Utilities - 0.1%
12,000 Central & South West Corp. ....................... 240,000
16,000 Unicom Corp. ..................................... 536,000
------------
776,000
------------
Total Common Stocks (cost $569,328,639)........... 857,019,147
------------
</TABLE>
20
<PAGE>
EVERGREEN
Select Equity Index Fund
Schedule of Investments (continued)
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 4.3%
Repurchase Agreement - 4.1%
$36,648,146 Cowen Securities Corp., 2.55%, dated 12/31/1999,
maturing 1/3/2000, maturity
value $36,655,934 (a)............................. $ 36,648,146
------------
U.S. Government Agency Obligations - 0.2%
U.S. Treasury Bills+
10,000 4.885%, 1/13/2000.................................. 9,984
10,000 4.92%, 1/13/2000................................... 9,984
1,180,000 4.955%, 2/3/2000................................... 1,174,640
125,000 4.99%, 2/3/2000.................................... 124,428
25,000 5.04%, 1/27/2000................................... 24,909
100,000 5.09%, 2/17/2000................................... 99,336
465,000 5.10%, 2/17/2000................................... 461,934
70,000 5.12%, 2/17/2000................................... 69,532
------------
1,974,747
------------
Total Short-Term Investments (cost $38,622,893).... 38,622,893
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments - (cost $607,951,532).... 100.2% 895,642,040
Other Assets and Liabilities - net.......... (0.2) (2,134,511)
----- ------------
Net Assets.................................. 100.0% $893,507,529
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by the U.S. govern-
ment and/or agency obligations based on market prices plus accrued
interest at December 31, 1999.
* Non-income producing security.
** At December 31, 1999, the Fund owned 65,660 shares of First Union Corp.
common stock, an affiliated issuer, with a cost of $3,841,204. During the
period ended December 31, 1999, the Fund earned $61,203 in dividend income
from this investment. This investment in First Union Corp. enables the Fund
to maintain a similar weighting as that of the S&P 500 Index.
+ Securities are being held in a segregated account at the Fund's custo-
dian for initial margin deposits on open futures contracts.
Futures Contracts - Long Position
<TABLE>
<CAPTION>
Initial Contract Value at Unrealized
Expiration Contracts Amount December 31, 1999 Gain
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 2000 94 S&P 500 Index $33,667,733 $34,878,701 $1,210,968
</TABLE>
Summary of Abbreviations:
NV Naamloze Vennootschap (Dutch corporation)
See Combined Notes to Financial Statements.
21
<PAGE>
EVERGREEN
Select Special Equity Fund
Schedule of Investments
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 92.7%
Banks - 1.9%
147,901 * Imperial Bancorp.................................. $ 3,568,112
------------
Building, Construction & Furnishings - 0.9%
32,574 * Aaon, Inc......................................... 468,251
46,340 * Shaw Group, Inc................................... 1,172,981
------------
1,641,232
------------
Business Equipment & Services - 1.2%
73,400 * Circle International Group, Inc................... 1,633,150
12,299 * Startek, Inc...................................... 445,839
63,630 * Vision Twenty One, Inc............................ 174,982
------------
2,253,971
------------
Chemical & Agricultural Products - 1.3%
105,103 * Cemfirst, Inc..................................... 2,299,128
24,233 * Hines Horticulture, Inc........................... 204,466
------------
2,503,594
------------
Communication Systems & Services - 5.6%
14,824 * Active Voice Corp................................. 430,823
47,964 Allen Telecom, Inc. .............................. 554,584
26,600 * ANADIGICS, Inc. .................................. 1,255,187
23,962 * Gilat Communications, Ltd. ....................... 576,586
106,027 * Metromedia Fiber Network, Inc., Cl. A............. 5,082,669
23,982 * Performance Technologies, Inc. ................... 416,687
155,147 * VDI Media......................................... 2,133,271
------------
10,449,807
------------
Consumer Products & Services - 4.9%
54,309 Commonwealth Industries, Inc. .................... 706,017
47,517 * Guess?, Inc. ..................................... 1,033,495
25,235 * Mobile Mini, Inc. ................................ 542,552
35,752 * NFO Worldwide, Inc................................ 799,951
34,411 * SCP Pool Corp..................................... 892,535
123,994 * Sola International, Inc........................... 1,720,417
93,683 Toro Co........................................... 3,495,547
------------
9,190,514
------------
Electrical Equipment & Services - 4.8%
51,940 American Superconductor Corp...................... 1,454,320
41,301 Helix Technology Corp............................. 1,850,801
34,880 * Mattson Technology, Inc........................... 597,320
15,452 * Parlex Corp....................................... 406,581
16,555 * Power One, Inc.................................... 758,426
36,391 * Radisys Corp. .................................... 1,855,941
32,060 * Three-Five Systems, Inc. ......................... 1,314,460
42,308 * Windmere Durable Holdings, Inc.................... 719,236
------------
8,957,085
------------
Electronic Equipment & Services - 4.0%
36,450 * Aavid Thermal Technologies, Inc................... 895,303
25,913 * American Xtal Technology, Inc..................... 451,858
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Electronic Equipment & Services - continued
31,445 * Astropower, Inc................................... $ 440,230
18,103 * Bel Fuse, Inc. ................................... 504,621
20,162 * C-COR.net Corp.................................... 1,544,913
19,250 * Elantec Semiconductor, Inc........................ 635,250
43,045 * LTX Corp.......................................... 963,132
12,837 * Universal Electronics, Inc........................ 590,502
37,198 Watkins-Johnson Co. .............................. 1,487,920
------------
7,513,729
------------
Finance & Insurance - 9.4%
29,235 American Capital Strategies, Ltd. ................ 665,096
75,153 Dain Rauscher Corp................................ 3,494,614
38,740 * Data Broadcasting Corp............................ 319,605
112,430 * Delta Financial Corp. ............................ 463,774
74,337 E.W. Blanch Holdings, Inc......................... 4,553,141
20,728 * First Sierra Financial, Inc. ..................... 354,967
34,589 * Insurance Auto Auctions, Inc...................... 544,777
19,801 * National Discount Brokers Group................... 522,251
53,550 * New Century Financial Corp........................ 843,413
26,126 Southwest Securities Group, Inc................... 715,199
256,328 * UICI.............................................. 2,707,465
109,640 * WFS Financial, Inc................................ 2,316,145
------------
17,500,447
------------
Food & Beverage Products - 3.6%
109,670 Applebee's International, Inc..................... 3,235,265
68,852 * CEC Entertainment, Inc............................ 1,953,676
111,570 * Scheid Vineyards, Inc., Cl. A..................... 404,441
61,013 * Triarc Companies, Inc. ........................... 1,121,114
------------
6,714,496
------------
Forest Products - 0.0%
1,589 Deltic Timber Corp................................ 34,759
------------
Gaming - 0.2%
22,700 * Argosy Gaming Corp................................ 353,269
------------
Healthcare Products & Services - 5.9%
102,534 * Apria Healthcare Group, Inc. ..................... 1,839,204
73,534 * Brookdale Living Communities, Inc................. 909,983
69,150 * Caremark Rx, Inc.................................. 350,072
91,420 * Chirex, Inc. ..................................... 1,337,017
87,910 * Computer Motion, Inc. ............................ 967,010
25,600 * Corixa Corp....................................... 435,200
76,630 * Dura Pharmaceuticals, Inc......................... 1,068,031
44,140 * Guilford Pharmaceuticals, Inc..................... 750,380
77,024 Hooper Holmes, Inc................................ 1,983,368
33,206 * I-STAT Corp. ..................................... 481,487
34,058 * Novoste Corp...................................... 561,957
35,556 * ProxyMed, Inc..................................... 346,671
------------
11,030,380
------------
</TABLE>
22
<PAGE>
EVERGREEN
Select Special Equity Fund
Schedule of Investments (continued)
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Industrial Specialty Products & Services - 3.4%
89,526 * Global Industrial Technologies, Inc. ............. $ 1,163,838
22,099 * II-VI, Inc........................................ 444,742
198,216 Mark IV Industries, Inc........................... 3,505,945
61,820 * McDermott International, Inc...................... 560,244
43,237 Steel Technologies, Inc. ......................... 626,937
------------
6,301,706
------------
Information Services & Technology - 9.4%
37,675 * 4Front Technologies, Inc.......................... 503,903
31,601 * Computer Network Technology....................... 724,848
60,850 * Concentric Network Corp. ......................... 1,874,941
9,016 * Ibis Technology Corp.............................. 447,419
154,480 * Maxtor Corp....................................... 1,119,980
47,101 * Metacreations Corp. .............................. 404,774
16,968 * Mikohn Gaming Corp................................ 86,961
8,726 * MIPS Technologies, Inc............................ 453,752
30,316 * MMC Networks, Inc................................. 1,042,112
22,929 * MTI Technology Corp............................... 845,507
15,436 * Netopia, Inc. .................................... 838,368
43,592 * Peerless Systems Corp............................. 337,838
26,965 * Pinnacle Systems, Inc. ........................... 1,097,138
31,540 * Real Networks, Inc................................ 3,794,656
98,958 * S3, Inc........................................... 1,144,202
36,858 * Tecnomatix Technologies, Ltd...................... 1,059,667
22,616 * Telescan, Inc. ................................... 558,333
37,521 * Trimble Navigation, Ltd........................... 811,392
12,122 * ZixIt Corp. ...................................... 480,334
------------
17,626,125
------------
Machinery - Diversified - 1.0%
31,222 * Applied Science & Tech, Inc....................... 1,037,644
38,740 * Gasonics International Corp....................... 765,115
1,590 Thermo Sentron, Inc............................... 23,055
------------
1,825,814
------------
Manufacturing - Distributing - 0.8%
3,892 Lindsay Manufacturing Co. ........................ 71,029
25,210 Pentair, Inc...................................... 970,585
10,214 * Photon Dynamics, Inc. ............................ 395,793
------------
1,437,407
------------
Metal Products & Services - 2.1%
49,600 * Material Sciences Corp. .......................... 505,300
22,669 * Maverick Tube Corp................................ 559,641
93,360 Quanex Corp. ..................................... 2,380,680
44,275 Summit Technology, Inc. .......................... 517,464
------------
3,963,085
------------
Oil/Energy - 3.7%
63,700 * Barrett Resources Corp............................ 1,875,169
78,302 * Newfield Exploration Co. ......................... 2,094,578
26,502 * St. Mary Land & Exploration Co.................... 655,924
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Oil/Energy - continued
41,912 * Stone Energy Corp................................ $ 1,493,115
52,211 Western Gas Resources, Inc. ..................... 688,533
------------
6,807,319
------------
Oil Field Services - 3.5%
16,800 * Cal Dive International, Inc...................... 556,500
73,100 * Hanover Compressor Co............................ 2,759,525
49,110 * Lone Star Technologies, Inc...................... 1,368,941
61,112 * Nabors Industries, Inc. ......................... 1,890,653
------------
6,575,619
------------
Paper & Packaging - 0.6%
70,192 Pope & Talbot, Inc. ............................. 1,123,072
------------
Pharmaceuticals - 2.5%
40,718 * Advance Paradigm, Inc. .......................... 877,982
17,594 * Biocryst Pharmaceuticals, Inc.................... 519,023
24,347 * SuperGen, Inc. .................................. 715,193
44,456 * Transkaryotic Therapies, Inc..................... 1,711,652
70,013 * Triangle Pharmaceuticals, Inc.................... 897,042
------------
4,720,892
------------
Printing, Publishing, Broadcasting &
Entertainment - 0.7%
39,700 * Ascent Entertainment Group, Inc.................. 503,694
16,910 * SBS Broadcasting SA.............................. 823,305
------------
1,326,999
------------
Real Estate - 4.1%
120,125 * Choice Hotels, Inc., REIT........................ 2,057,141
54,400 Imperial Credit Commercial Mortgage Investment
Corp., REIT..................................... 618,800
198,792 Indymac Mortgage Holdings, Inc., REIT............ 2,534,598
124,116 LNR Property Corp................................ 2,466,805
------------
7,677,344
------------
Retailing & Wholesale - 7.0%
33,200 * Children's Place Retail Stores, Inc.............. 545,725
22,450 * Coldwater Creek, Inc............................. 460,225
60,650 * Footstar, Inc.................................... 1,849,825
22,039 * Intertan, Inc.................................... 575,769
95,450 * Jack In The Box, Inc............................. 1,974,622
18,603 * Kenneth Cole Productions, Inc., Cl. A............ 851,087
49,435 * Michaels Stores, Inc............................. 1,408,898
47,204 Movado Group, Inc................................ 1,029,637
88,424 * Pacific Sunwear Of California.................... 2,818,515
74,620 * Sharper Image Corp............................... 946,741
46,943 * Sunglass Hut International, Inc.................. 528,109
------------
12,989,153
------------
Telecommunication Services & Equipment - 5.5%
15,284 * Anaren Microwave, Inc............................ 827,247
10,329 Commnet Cellular, Inc............................ 331,819
18,690 * Intermedia Communications, Inc................... 725,406
74,960 * NEXTLINK Communications, Inc., Cl. A............. 6,226,365
69,150 * US LEC Corp., Cl. A.............................. 2,230,087
------------
10,340,924
------------
</TABLE>
23
<PAGE>
EVERGREEN
Select Special Equity Fund
Schedule of Investments (continued)
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Thrift Institutions - 0.0%
8,342 Warren Bancorp, Inc............................... $ 62,565
------------
Transportation - 4.7%
60,459 * American Freightways Corp......................... 978,680
23,499 * Amtran, Inc....................................... 455,293
149,000 * Arkansas Best Corp. .............................. 1,788,000
39,300 CNF Transportation, Inc........................... 1,355,850
17,969 * Forward Air Corp.................................. 779,405
67,730 * Genesee & Wyoming, Inc............................ 872,024
49,739 * M.S. Carriers, Inc................................ 1,187,519
61,179 Roadway Express, Inc.............................. 1,322,996
------------
8,739,767
------------
Total Common Stocks
(cost $150,830,089).............................. 173,229,186
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 7.2%
Repurchase Agreement - 7.2%
$13,370,717 Cowen Securities Corp.,
2.55%, dated 12/31/1999, maturing 1/3/2000,
maturity value $13,373,558
(cost $13,370,717) (a)...................... $ 13,370,717
------------
Total Investments -
(cost $164,200,806)......................... 99.9% 186,599,903
Other Assets and
Liabilities - net........................... 0.1 205,604
----- ------------
Net Assets................................... 100.0% $186,805,507
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by the U.S. government
and/or agency obligations based on market prices plus accrued interest at
December 31, 1999.
* Non-income producing security.
Summary of Abbreviations:
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
24
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Assets and Liabilities
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Equity Index Special Equity
Fund Fund
- - --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Identified cost of securities.................... $607,951,532 $164,200,806
Net unrealized gains on securities............... 287,690,508 22,399,097
- - --------------------------------------------------------------------------------
Market value of securities....................... 895,642,040 186,599,903
Receivable for securities sold................... 0 1,410,770
Receivable for Fund shares sold.................. 2,176,584 1,357,726
Dividends and interest receivable................ 762,262 38,375
Receivable for daily variation margin on open
futures contracts............................... 79,900 0
Prepaid expenses and other assets................ 68,759 106,536
- - --------------------------------------------------------------------------------
Total assets..................................... 898,729,545 189,513,310
- - --------------------------------------------------------------------------------
Liabilities
Distributions payable............................ 71,646 0
Payable for securities purchased................. 569,888 2,355,035
Payable for Fund shares redeemed................. 4,416,716 167,955
Advisory fee payable............................. 109,238 127,465
Distribution Plan expenses payable............... 19,886 2,153
Due to other related parties..................... 16,362 14,868
Accrued expenses and other liabilities........... 18,280 40,327
- - --------------------------------------------------------------------------------
Total liabilities................................ 5,222,016 2,707,803
- - --------------------------------------------------------------------------------
Net assets........................................ $893,507,529 $186,805,507
================================================================================
Net assets represented by
Paid-in capital.................................. $609,266,645 $144,211,515
Undistributed (overdistributed) net investment
income or loss.................................. (22,986) (277,608)
Accumulated net realized gains or losses on
securities and futures contracts................ (4,637,606) 20,472,503
Net unrealized gains or losses on securities and
futures contracts............................... 288,901,476 22,399,097
- - --------------------------------------------------------------------------------
Total net assets.................................. $893,507,529 $186,805,507
================================================================================
Net assets consists of
Class I.......................................... $596,017,026 $144,593,189
Class IS......................................... 41,275,114 6,928,475
Class A.......................................... 57,809,096 12,340,316
Class B.......................................... 175,929,902 14,437,244
Class C.......................................... 22,476,391 8,506,283
- - --------------------------------------------------------------------------------
Total net assets.................................. $893,507,529 $186,805,507
- - --------------------------------------------------------------------------------
Shares outstanding
Class I.......................................... 10,770,403 9,681,898
Class IS......................................... 746,195 470,141
Class A.......................................... 1,044,975 838,202
Class B.......................................... 3,184,547 982,262
Class C.......................................... 406,416 578,462
- - --------------------------------------------------------------------------------
Net asset value per share
Class I.......................................... $ 55.34 $ 14.93
================================================================================
Class IS......................................... $ 55.31 $ 14.74
================================================================================
Class A.......................................... $ 55.32 $ 14.72
================================================================================
Class A--Offering price (based on sales charge of
4.75%).......................................... $ 58.08 $ 15.46
================================================================================
Class B.......................................... $ 55.24 $ 14.70
================================================================================
Class C.......................................... $ 55.30 $ 14.70
================================================================================
</TABLE>
See Combined Notes to Financial Statements.
25
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Operations
Six Months Ended December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Equity Index Special Equity
Fund Fund
- - ---------------------------------------------------------------------------------
<S> <C> <C>
Investment income
Dividends (net of foreign withholding taxes of
$21,367 and $0, respectively).................... $ 4,712,143 $ 252,596
Interest.......................................... 654,361 308,321
- - ---------------------------------------------------------------------------------
Total investment income............................ 5,366,504 560,917
- - ---------------------------------------------------------------------------------
Expenses
Advisory fee...................................... 1,560,050 997,275
Distribution Plan expenses........................ 850,250 41,956
Administrative services fees...................... 88,603 38,964
Transfer agent fee................................ 379,739 31,844
Trustees' fees and expenses....................... 6,877 1,628
Printing and postage expenses..................... 20,025 3,877
Custodian fee..................................... 99,922 23,619
Registration and filing fees...................... 14,815 10,218
Professional fees................................. 11,972 8,368
Other............................................. 2,364 8,650
- - ---------------------------------------------------------------------------------
Total expenses.................................. 3,034,617 1,166,399
Less: Expense reductions........................ (12,886) (9,536)
Fee waivers................................... (1,001,444) (318,660)
- - ---------------------------------------------------------------------------------
Net expenses.................................... 2,020,287 838,203
- - ---------------------------------------------------------------------------------
Net investment income (loss)...................... 3,346,217 (277,286)
=================================================================================
Net realized and unrealized gains or losses on
securities and futures contracts
Net realized gains or losses on:
Securities........................................ (3,759,754) 30,286,318
Futures contracts................................. 1,947,702 0
- - ---------------------------------------------------------------------------------
Net realized gains or losses on securities and
futures contracts................................ (1,812,052) 30,286,318
- - ---------------------------------------------------------------------------------
Net change in unrealized gains on securities and
futures contracts................................ 60,151,070 1,932,613
- - ---------------------------------------------------------------------------------
Net realized and unrealized gains on securities
and futures contracts............................ 58,339,018 32,218,931
- - ---------------------------------------------------------------------------------
Net increase in net assets resulting from
operations....................................... $61,685,235 $31,941,645
=================================================================================
</TABLE>
See Combined Notes to Financial Statements.
26
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Changes in Net Assets
Six Months Ended December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Equity Index Special Equity
Fund Fund
- - --------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income or loss.................. $ 3,346,217 $ (277,286)
Net realized gains or losses on securities and
futures contracts............................. (1,812,052) 30,286,318
Net change in unrealized gains or losses on
securities and futures contracts.............. 60,151,070 1,932,613
- - --------------------------------------------------------------------------------
Net increase in net assets resulting from
operations................................... 61,685,235 31,941,645
- - --------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class I...................................... (3,254,400) 0
Class IS..................................... (173,362) 0
Class A...................................... (219,005) 0
Class B...................................... (207,957) 0
Class C...................................... (20,838) 0
Net realized gains
Class I...................................... (3,855,784) (856,226)
Class IS..................................... (264,381) (21,494,235)
Class A...................................... (358,623) (503,264)
Class B...................................... (1,092,585) (545,776)
Class C...................................... (131,127) (362,155)
- - --------------------------------------------------------------------------------
Total distributions to shareholders.......... (9,578,062) (23,761,656)
- - --------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold...................... 265,238,776 86,852,769
Payment for shares redeemed.................... (190,853,654) (47,793,845)
Net asset value of shares issued in
reinvestment of distributions................. 9,073,094 18,557,642
- - --------------------------------------------------------------------------------
Net increase in net assets resulting from
capital share transactions.................. 83,458,216 57,616,566
- - --------------------------------------------------------------------------------
Total increase in net assets................ 135,565,389 65,796,555
Net assets
Beginning of period............................ 757,942,140 121,008,952
- - --------------------------------------------------------------------------------
End of period.................................. $893,507,529 $186,805,507
================================================================================
Undistributed (overdistributed) net investment
income or loss.................................. $ (22,986) $ (277,608)
================================================================================
</TABLE>
See Combined Notes to Financial Statements.
27
<PAGE>
EVERGREEN
Select Equity Growth Funds
Statements of Changes in Net Assets
Year Ended June 30, 1999
<TABLE>
<CAPTION>
Equity Index Special Equity
Fund Fund
- - -------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income or loss................. $ 5,015,981 $ (293,653)
Net realized gains on securities and futures
contracts.................................... 19,118,855 17,426,693
Net change in unrealized gains on securities
and futues contracts......................... 69,198,431 14,600,653
- - -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations.................................. 93,333,267 31,733,693
- - -------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class I..................................... (4,162,159) 0
Class IS.................................... (242,056) 0
Class A..................................... (80,573) 0
Class B..................................... (52,475) 0
Class C..................................... (692) 0
Net realized gains
Class I..................................... (17,615,538) (7,643,649)
Class IS.................................... (2,041,449) (298,735)
Class A..................................... (10,507) 0
Class B..................................... (32,427) 0
- - -------------------------------------------------------------------------------
Total distributions to shareholders......... (24,237,876) (7,942,384)
- - -------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold..................... 473,037,440 44,330,181
Payment for shares redeemed................... (136,826,407) (32,256,122)
Net asset value of shares issued in
reinvestment of distributions................ 22,881,422 7,935,176
- - -------------------------------------------------------------------------------
Net increase in net assets resulting from
capital share transactions................. 359,092,455 20,009,235
- - -------------------------------------------------------------------------------
Total increase in net assets............... 428,187,846 43,800,544
Net assets
Beginning of period........................... 329,754,294 77,208,408
- - -------------------------------------------------------------------------------
End of period................................. $ 757,942,140 $121,008,952
- - -------------------------------------------------------------------------------
Undistributed (overdistributed) net investment
income or loss................................. $ 506,359 $ (322)
- - -------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
28
<PAGE>
Combined Notes to Financial Statements (Unaudited)
1. ORGANIZATION
The Evergreen Select Equity Funds consist of Evergreen Select Equity Index Fund
("Equity Index Fund") and Evergreen Select Special Equity Fund ("Special Equity
Fund"), each of which is a diversified series of Evergreen Select Equity Trust
(the "Trust"), a Delaware business trust organized on September 18, 1997. The
Trust is an open-end management investment company registered under the Invest-
ment Company Act of 1940, as amended (the "1940 Act").
The Funds offer Class A, Class B, Class C, Institutional shares ("Class I"),
and Institutional Service shares ("Class IS"). Class A shares are sold with a
maximum front-end sales charge of 4.75%. Class B shares and Class C shares are
sold without a front-end sales charge, but pay a higher ongoing distribution
fee than Class A. Class B shares are sold subject to a contingent deferred
sales charge that is payable upon redemption and decreases depending on how
long the shares have been held. Class B shares will automatically convert to
Class A shares after seven years. Class B shares purchased prior to January 1,
1997, follow the conversion rights at the time the shares were purchased. Class
C shares are sold subject to contingent deferred sales charge payable on the
shares redeemed within one year after the month of purchase. Class I and Class
IS shares are 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 sold only to certain institutional shareholders.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
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
and other securities traded in the over-the-counter market for which there has
been no sale are valued at the mean between the last reported bid and asked
price. Securities for which valuations are not readily available from an inde-
pendent pricing service (including restricted securities) are valued at fair
value as determined in good faith according to procedures established by the
Board of Trustees. Short-term investments with remaining maturities of 60 days
or less at the time of purchase are carried at amortized cost, which approxi-
mates 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. Col-
lateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the Fund
and the counterparty. Each Fund monitors the adequacy of the 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 adviser to be creditworthy pursuant to guidelines
established by the Board of Trustees.
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 ("variation mar-
gin") 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.
29
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
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. 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 there-
after when the Fund is made aware of the dividend. Income and capital gains re-
alized on some foreign securities may be subject to foreign taxes, which are
accrued as applicable.
E. Federal Taxes
The Funds intend to continue to qualify as regulated investment companies under
the Internal Revenue Code of 1986, as amended ("Code"). Thus, the Funds will
not incur any federal income tax liability since they are expected to distrib-
ute all of their net investment company taxable income and net capital gains,
if any, to their shareholders. The Funds also intend to avoid any excise tax
liability by making the required distributions under the Code. Accordingly, no
provision for federal taxes is required. To the extent that realized capital
gains can be offset by capital loss carryforwards, it is each Fund's policy not
to distribute such gains.
F. Distributions
Distributions from net investment income, if any, 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 accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles.
G. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. Currently, class specific expenses are limited
to expenses incurred under the Distribution Plans for each class.
3. INVESTMENT ADVISORY AGREEMENTS AND OTHER AFFILIATED TRANSACTIONS
First Capital Group, a division of First Union National Bank ("FUNB"), serves
as the investment advisor to the Equity Index Fund and is paid an advisory fee
that is computed daily and paid monthly at an annual rate of 0.40% of the
Fund's average daily net assets.
Meridian Investment Company ("Meridian"), an indirect, wholly-owned subsidiary
of First Union Corporation ("First Union"), serves as the investment advisor to
Special Equity Fund. In return for its services, Meridian is paid an annual fee
equal to 1.00% of average daily net assets of the Fund. Prior to November 1,
1999 the Fund paid Meridian a fee at the annual rate of 1.50% of the Fund's av-
erage daily net assets.
Each investment adviser has voluntarily agreed to waive a portion of the in-
vestment advisory fee on their respective Fund. For the six months ended Decem-
ber 31, 1999, the investment advisers voluntarily reduced their fees as fol-
lows:
<TABLE>
<CAPTION>
% of Average
Daily Net Assets
Fee Waivers (annualized)
----------------------------
<S> <C> <C>
Equity Index Fund.................. $1,001,444 0.13%
Special Equity Fund................ 318,660 0.20%
</TABLE>
Evergreen Investment Services ("EIS"), an indirect, wholly-owned subsidiary of
FUNB, is the administrator and The BISYS Group, Inc. ("BISYS") serves as sub-
administrator to the Funds. As administrator, EIS provides the
30
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Funds with facilities, equipment and personnel. As sub-administrator to the
Funds, BISYS provides the officers of the Funds. Officers of the Funds and af-
filiated Trustees receive no compensation directly from the Funds.
The administrator and sub-administrator for each Fund are entitled to an annual
fee based on the average daily net assets of the Funds for which First Union or
its investment advisory subsidiaries are also the investment advisors. The ad-
ministration fee for Equity Index Fund 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 for the Equity Index Fund is calculated by applying percentage rates,
which start at 0.01% and decline to 0.004% per annum as net assets increase, to
the average daily net asset value of the Fund. Effective November 1, 1999 the
Special Equity Fund pays the administrator and sub-administrator a combined fee
at an annual rate of 0.10% of the Fund's average daily net assets. For the six
months ended December 31, 1999, the Funds paid or accrued the following amounts
for administrative and sub-administrative services:
<TABLE>
<CAPTION>
Administration Fee Sub-administration Fee
-----------------------------------------
<S> <C> <C>
Equity Index Fund..... $69,431 $19,172
Special Equity Fund... 36,608 2,356
</TABLE>
Evergreen Service Company ("ESC"), an indirect, wholly-owned subsidiary of
FUNB, serves as the transfer and dividend disbursing agent for the Funds.
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of BISYS, serves
as principal underwriter to the Funds.
Each Fund has adopted Distribution Plans, as allowed by Rule 12b-1 of the 1940
Act, for each class of shares, except Class I. Distribution plans permit each
Fund to reimburse its principal underwriter for costs related to selling shares
of the Fund and for various other services. These costs, which consist primar-
ily of commissions and service fees to broker-dealers who sell shares of the
Fund, are paid by the Fund as Distribution Plan expenses. Under the Distribu-
tion Plans, Class A and Class IS incur distributions fees equal to 0.25% of the
average daily net asset of the class, all of which is used to pay for share-
holder service fees. Class B and Class C incur distribution fees equal to 1.00%
of the average daily net assets of each class. Of this amount, 0.25% of the
distribution fees incurred is used to pay for shareholder service fee, and
0.75% is used to pay for distribution-related costs. Distribution Plan expenses
are calculated daily and paid at least quarterly.
During the six months ended December 31, 1999, amounts paid or accrued to EDI
pursuant to each Fund's Class A, Class B, Class C and Class IS Distribution
Plans were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C Class IS
---------------------------------
<S> <C> <C> <C> <C>
Equity Index Fund........... $57,172 $683,670 $62,046 $47,362
Special Equity Fund......... 4,790 19,254 11,184 6,728
</TABLE>
With respect to Class B and Class C shares, the principal underwriter may pay
distribution fees greater than the allowable annual amounts each Fund is per-
mitted to pay under the Distribution Plans.
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.
5. ACQUISITIONS
Effective on the close of business July 24, 1998, Equity Index Fund and Special
Equity Fund (collectively, "Evergreen Funds") acquired all of the net assets
and certain liabilities of the CoreFund Equity Index Fund ("Core Index Fund")
and CoreFund Special Equity Fund ("Core Special Fund") (collectively,
"CoreFunds"), respectively, each an open-end, management investment company,
registered under 1940 Act, through tax-free exchanges of shares. Shareholders
of Class A, Class B and Class Y shares of the CoreFunds became owners of that
number of full and fractional shares of Class IS, Class IS and Class I shares,
respectively, of Equity Index Fund and Special Equity Fund, having an aggregate
net asset value equal to the aggregate net asset
31
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
value of their CoreFund shares immediately prior to the close of business on
July 24, 1998. As a result of these transactions, shareholders of Core Index
Fund, Class B received 43,220 shares of Equity Index Fund, Class IS and share-
holders of Core Special Fund, Class B received 22,353 shares of Special Equity
Fund, Class IS.
The Evergreen Funds had no operations prior to the acquisition. Since Evergreen
Funds and the CoreFunds were similar funds, and the CoreFunds contributed the
majority of the net assets and shareholders, their basis of accounting for as-
sets and liabilities and their operating results for prior periods are carried
forward as the accounting survivors. CoreFunds Class A and Class Y shares were
the predecessor share classes to the Evergreen Fund Class IS and Class I. The
amounts relating to these transactions are reflected in proceeds from shares
sold in both the Statements of Changes in Net Assets and footnote 6--Capital
Shares Transactions.
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 A, Class B, Class C, Class I and Class IS. Transactions in
shares of the Funds were as follows:
Equity Index Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999*
------------------------- -------------------------
Shares Amount Shares Amount
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold............. 2,714,036 $ 139,230,797 6,042,847 $ 285,769,694
Shares redeemed......... (3,037,812) (154,319,442) (2,377,803) (106,433,062)
Shares issued in
reinvestment of
distributions.......... 128,166 6,735,775 473,952 20,448,200
- - ------------------------------------------------------------------------------
Net increase
(decrease)............. (195,610) (8,352,870) 4,138,996 199,784,832
- - ------------------------------------------------------------------------------
Class IS Shares
Shares sold............. 48,840 2,430,292 485,500 22,872,676
Shares redeemed......... (41,956) (2,150,499) (65,194) (6,348,972)
Shares issued in
reinvestment of
distributions.......... 8,151 428,319 52,714 2,258,939
- - ------------------------------------------------------------------------------
Net increase............ 15,035 708,112 473,020 18,782,643
- - ------------------------------------------------------------------------------
Class A Shares
Shares sold............. 756,181 38,734,531 1,148,902 56,545,137
Shares redeemed......... (456,151) (23,090,765) (416,523) (20,942,814)
Shares issued in
reinvestment of
distributions.......... 10,688 562,030 1,878 90,280
- - ------------------------------------------------------------------------------
Net increase............ 310,718 16,205,796 734,257 35,692,603
- - ------------------------------------------------------------------------------
Class B Shares
Shares sold............. 1,299,527 66,654,427 2,124,978 104,464,062
Shares redeemed......... (202,349) (10,411,337) (62,624) (3,100,383)
Shares issued in
reinvestment of
distributions.......... 23,203 1,224,747 1,812 83,415
- - ------------------------------------------------------------------------------
Net increase............ 1,120,381 57,467,837 2,064,166 101,447,094
- - ------------------------------------------------------------------------------
Class C Shares
Shares sold............. 354,024 18,188,729 67,034 3,385,871
Shares redeemed......... (16,940) (881,611) (23) (1,176)
Shares issued in
reinvestment of
distributions.......... 2,309 122,223 12 588
- - ------------------------------------------------------------------------------
Net increase............ 339,393 17,429,341 67,023 3,385,283
- - ------------------------------------------------------------------------------
Net increase............ $ 83,458,216 $ 359,092,455
- - --------------------------------------------------------------------------------
</TABLE>
* The Class A, Class B and Class C amounts represented are for the periods from
November 4, 1998, November 3, 1998 and April 30, 1998 (commencement of class
operations) respectively, to June 30, 1999.
32
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Special Equity Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
------------------------ ------------------------
Shares Amount Shares Amount
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold............... 3,636,294 $ 50,794,090 3,681,321 $ 43,045,845
Shares redeemed........... (3,410,628) (45,110,609) (2,831,875) (30,671,560)
Shares issued in
reinvestment of
distributions............ 1,218,885 16,635,988 812,275 7,643,511
- - ------------------------------------------------------------------------------
Net increase.............. 1,444,551 22,319,469 1,661,721 20,017,796
- - ------------------------------------------------------------------------------
Class IS Shares
Shares sold............... 233,160 3,217,378 114,558 1,284,336
Shares redeemed........... (105,268) (1,428,345) (146,994) (1,584,562)
Shares issued in
reinvestment of
distributions............ 54,558 730,361 31,295 291,665
- - ------------------------------------------------------------------------------
Net increase (decrease)... 182,450 2,519,394 (1,141) (8,561)
- - ------------------------------------------------------------------------------
Class A Shares*
Shares sold............... 865,326 11,776,769 -- --
Shares redeemed........... (56,329) (805,836) -- --
Shares issued in
reinvestment of
distributions............ 29,205 424,607 -- --
- - ------------------------------------------------------------------------------
Net increase.............. 838,202 11,395,540 -- --
- - ------------------------------------------------------------------------------
Class B Shares*
Shares sold............... 967,171 13,156,370 -- --
Shares redeemed........... (16,784) (225,607) -- --
Shares issued in
reinvestment of
distributions............ 31,875 460,215 -- --
- - ------------------------------------------------------------------------------
Net increase.............. 982,262 13,390,978 -- --
- - ------------------------------------------------------------------------------
Class C Shares*
Shares sold............... 573,243 7,908,162 -- --
Shares redeemed........... (15,997) (223,448) -- --
Shares issued in
reinvestment of
distributions............ 21,216 306,471 -- --
- - ------------------------------------------------------------------------------
Net increase.............. 578,462 7,991,185 -- --
- - ------------------------------------------------------------------------------
Net increase.............. $ 57,616,566 $ 20,009,235
- - --------------------------------------------------------------------------------
</TABLE>
* For the period from August 30, 1999 (commencement of class operations) to De-
cember 31, 1999.
7. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term investments) were as follows for the six months ended December 31,
1999:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
-------------------------------------
<S> <C> <C>
Equity Index Fund......... $138,441,461 $ 67,509,962
Special Equity Fund....... 176,211,455 150,562,804
</TABLE>
8. EXPENSE REDUCTIONS
The Funds have entered into an expense reduction arrangements with ESC and
their custodian whereby credits realized as a result of uninvested cash bal-
ances were used to reduce a portion of each Fund's related expenses. The assets
deposited with ESC and the custodian under these expense reduction arrangements
could have been invested in income-producing assets. The amount of expense re-
ductions received by each Fund and the impact on each Fund's expense ratio rep-
resented as a percentage of its average daily net assets were as follows:
<TABLE>
<CAPTION>
% of Average
Expense Daily Net Assets
Reductions (annualized)
---------------------------
<S> <C> <C>
Equity Index Fund................... $12,886 0.00%
Special Equity Fund................. 9,536 0.00
</TABLE>
9. DEFERRED TRUSTEES' FEES
Each Independent Trustee of the Funds may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Fund's Trustees' fees and
expenses. At the election of the Trustees, the deferral account will be paid
either in one lump sum or in quarterly installments for up to ten years.
33
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
10. FINANCING AGREEMENT
Certain Evergreen Funds, State Street Bank and Trust Company ("State Street")
and Bank of New York ("BONY") entered into a renewed financing agreement dated
December 22, 1998. Under this agreement, the State Street and BONY provided an
unsecured credit facility in the aggregate amount of $150 million ($125 million
committed and $25 million uncommitted). The credit facility was allocated, un-
der the terms of the financing agreement, between the Banks. The credit facil-
ity was accessed by the Funds for temporary or emergency purposes only and was
subject to each Fund's borrowing restrictions. Borrowings under 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 facili-
ty, which will be allocated to all funds. This agreement was terminated on July
27, 1999.
On July 27, 1999, all of the Evergreen Funds and a group of banks (the "Lend-
ers") entered into a credit agreement. Under this agreement, the Lenders pro-
vide an unsecured revolving credit commitment in the aggregate amount of $1.050
billion. The credit facility is allocated, under the terms of the financing
agreement, among the Lenders. The credit facility is accessed by the Funds for
temporary or emergency purposes to fund the redemption of their shares or a
general working capital as permitted by each Fund's borrowing restrictions.
Borrowings under this facility bear interest at 0.75% per annum above the Fed-
eral Funds rate (1.50% per annum above the Federal Funds rate during the period
from and including December 1, 1999 through and including January 31, 2000). A
commitment fee of 0.10% per annum is incurred on the average daily unused por-
tion of the revolving credit commitment. The commitment fee is allocated to all
Funds. For its assistance in arranging this financing agreement, First Union
Capital Markets Corp. was paid a one-time arrangement fee of $250,000. State
Street serves as paying agent for the Funds and as paying agent is entitled to
a fee of $20,000 per annum, which was allocated to all the Funds.
During the six months ended December 31, 1999, the Funds had no borrowings un-
der these agreements.
11. SUBSEQUENT EVENT
Effective February 1, 2000, the maximum deferred sales charge for Class C
shares is changed to 2.00%. Class C shares purchased on or after February 1,
2000 are subject to a 2.00% contingent deferred sales charge if such shares are
redeemed within one year after the month of purchase, and a 1.00% contingent
deferred sales charge if such shares are redeemed within two years after the
month of purchase. Class C shares purchased prior to February 1, 2000 follow
the contingent deferred sales charge schedule at the time the shares were ini-
tially purchased.
34
<PAGE>
Evergreen Select Funds
Money Market
Money Market Fund
Treasury Money Market Fund
100% Treasury Money Market Fund
Municipal Money Market Fund
U.S. Government Money Market Fund
Municipal Fixed
Income
Intermediate Term Municipal Bond Fund
Taxable Fixed
Income
International Bond Fund
Total Return Bond Fund
Income Plus Fund
Core Bond Fund
Fixed Income Fund
Adjustable Rate Fund
Limited Duration Fund
Growth and Income/
Balanced
Equity Income Fund
Balanced Fund
Growth
Special Equity Fund
Small Cap Growth Fund
Small Company Value Fund
Secular Growth Fund
Strategic Growth Fund
Core Equity Fund
Equity Index Fund
Large Cap Blend Fund
Strategic Value Fund
Diversified Value Fund
Social Principles
68276 552500 2/2000
-----------------
BULK RATE
[LOGO OF EVERGREEN FUNDS] U.S. POSTAGE
PAID
200 Berkeley Street PERMIT NO. 19
Boston, MA 02116 HUDSON, MA
-----------------
<PAGE>
EVERGREEN SELECT SPECIAL EQUITY FUND
PRO FORMA COMBINING
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
Select Special Equity Select Social Principles Pro-Forma Combined
------------------------------------------------------------------------
Shares Mkt Value Shares Mkt Value Shares Mkt Value
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS - 94.8%
Advertising & Related 1.0%
Services -
* Ha Lo Industries, Inc. 117,800 $ 883,500 117,800 883,500
Young & Rubicam, Inc. 28,800 2,037,600 28,800 2,037,600
Aerospace & Defense - 0.2%
* BE Aerospace, Inc. 68,900 581,344 68,900 581,344
Banks - 1.9% 2.8%
* Imperial Bancorp 147,901 3,568,112 147,901 3,568,112
FleetBoston Financial Corp. 36,716 1,278,176 36,716 1,278,176
Mellon Financial Corp. 30,600 1,042,312 30,600 1,042,312
SouthTrust Corp. 54,500 2,060,781 54,500 2,060,781
Summit Bancorp 13,500 413,438 13,500 413,438
Building, Construction & 1.3%
Furnishings -
* Aaon, Inc. 32,574 468,251 32,574 468,251
NCI Building Systems, Inc. 48,394 895,289 48,394 895,289
* Shaw Group, Inc. 46,340 1,172,981 46,340 1,172,981
Southdown, Inc. 27,500 1,419,688 27,500 1,419,688
Business Equipment & 0.9%
Services -
* Circle International Group, Inc.73,400 1,633,150 73,400 1,633,150
* Consolidated Graphics, Inc. 30,000 448,125 30,000 448,125
* Startek, Inc. 12,299 445,839 12,299 445,839
* Vision Twenty One, Inc. 63,630 174,982 63,630 174,982
Chemical & Agricultural 0.9%
Products -
* Chemfirst, Inc. 105,103 2,299,128 105,103 2,299,128
* Hines Horticulture, Inc. 24,233 204,466 24,233 204,466
Communication Systems & 5.0%
Services -
* Active Voice Corp. 14,824 430,823 14,824 430,823
Allen Telecom, Inc. 47,964 554,584 47,964 554,584
* ANADIGICS, Inc. 26,600 1,255,187 26,600 1,255,187
* Gilat Communications, Ltd. 23,962 576,586 23,962 576,586
* Metromedia Fiber Network,
Inc., Cl.A 106,027 5,082,669 30,400 1,457,300 136,427 6,539,969
NorthPoint Communications
Group, Inc. 16,600 398,400 16,600 398,400
* Performance Technologies, Inc. 23,982 416,687 23,982 416,687
Tellabs, Inc. 35,900 2,304,331 35,900 2,304,331
* VDI Media 155,147 2,133,271 155,147 2,133,271
Consumer Products & 3.5%
Services -
Commonwealth Industries, Inc. 54,309 706,017 54,309 706,017
* Guess?, Inc. 47,517 1,033,495 47,517 1,033,495
Harley-Davidson, Inc. 16,700 1,069,844 16,700 1,069,844
* Mobile Mini, Inc. 25,235 542,552 25,235 542,552
* NFO Worldwide, Inc. 35,752 799,951 35,752 799,951
* SCP Pool Corp. 34,411 892,535 34,411 892,535
* Sola International, Inc. 123,994 1,720,417 123,994 1,720,417
Toro Co. 93,683 3,495,547 93,683 3,495,547
Diversified Companies - 0.3%
ITT Industries, Inc. 28,800 963,000 28,800 963,000
Education - 0.3%
* Apollo Group, Inc. 48,300 969,019 48,300 969,019
Electrical Equipment & 3.8%
Services -
American Superconductor Corp. 51,940 1,454,320 51,940 1,454,320
Helix Technology Corp. 41,301 1,850,801 41,301 1,850,801
Linear Technology Corp. 18,200 1,302,438 18,200 1,302,438
* Mattson Technology, Inc. 34,880 597,320 34,880 597,320
* Parlex Corp. 15,452 406,581 15,452 406,581
* Power One, Inc. 16,555 758,426 16,555 758,426
* Radisys Corp. 36,391 1,855,941 36,391 1,855,941
SCI Systems, Inc. 9,600 789,000 9,600 789,000
* Three-Five Systems, Inc. 32,060 1,314,460 32,060 1,314,460
* Windmere Durable Holdings, Inc. 42,308 719,236 42,308 719,236
Electronic Equipment & 3.9%
Services -
* Aavid Thermal Technologies, Inc.36,450 895,303 36,450 895,303
* American Xtal Technology, Inc. 25,913 451,858 25,913 451,858
* Astropower, Inc. 31,445 440,230 31,445 440,230
* Bel Fuse, Inc. 18,103 504,621 18,103 504,621
* C-COR.net Corp. 20,162 1,544,913 20,162 1,544,913
* Elantec Semiconductor, Inc. 19,250 635,250 19,250 635,250
* LTX Corp. 43,045 963,132 43,045 963,132
* Teradyne, Inc. 57,600 3,801,600 57,600 3,801,600
* Universal Electronics, Inc. 12,837 590,502 12,837 590,502
Watkins-Johnson Co. 37,198 1,487,920 37,198 1,487,920
Finance & Insurance - 8.1%
AFLAC, Inc. 16,510 779,066 16,510 779,066
American Capital
Strategies, Ltd. 29,235 665,096 29,235 665,096
Annuity & Life Re, Ltd. 39,700 1,037,162 39,700 1,037,162
Conseco, Inc. 52,300 934,862 52,300 934,862
Countrywide Credit
Industries, Inc. 29,800 752,450 29,800 752,450
Dain Rauscher Corp. 75,153 3,494,614 75,153 3,494,614
Data Broadcasting Corp. 38,740 319,605 38,740 319,605
* Delta Financial Corp. 112,430 463,774 112,430 463,774
E Trade Group, Inc. 31,600 825,550 31,600 825,550
* E. W. Blanch Holdings, Inc. 74,337 4,553,141 74,337 4,553,141
First Sierra Financial, Inc. 20,728 354,967 20,728 354,967
* Insurance Auto Auctions, Inc. 34,589 544,777 34,589 544,777
* National Discount Brokers Group 19,801 522,251 19,801 522,251
* New Century Financial Corp. 53,550 843,413 53,550 843,413
Partnerre, Ltd. 32,710 1,061,031 32,710 1,061,031
ReliaStar Financial Corp. 38,800 1,520,475 38,800 1,520,475
* Southwest Securities Group, Inc.26,126 715,199 26,126 715,199
UICI 256,328 2,707,465 256,328 2,707,465
* WFS Financial, Inc. 109,640 2,316,145 109,640 2,316,145
Food & Beverage Products - 4.6%
* Applebee's International, Inc. 109,670 3,235,265 109,670 3,235,265
* CEC Entertainment, Inc. 68,852 1,953,676 68,852 1,953,676
Dean Foods Co. 28,700 1,140,825 28,700 1,140,825
* Keebler Foods Co. 53,900 1,515,937 53,900 1,515,937
McCormick & Co., Inc. 23,500 699,125 23,500 699,125
* Scheid Vineyards, Inc., Cl. A. 111,570 404,441 111,570 404,441
Triarc Cos, Inc. 61,013 1,121,114 61,013 1,121,114
* Tricon Global Restaurants, Inc. 31,000 1,197,375 31,000 1,197,375
* United States Food Service 133,400 2,234,450 133,400 2,234,450
Forest Products - 0.0% 0.0%
* Deltic Timber Corp. 1,589 34,759 1,589 34,759
Gaming - 0.1%
Argosy Gaming Corp. 22,700 353,269 22,700 353,269
Healthcare Products & 6.3%
Services -
Apria Healthcare Group, Inc. 102,534 1,839,204 102,534 1,839,204
Biogen, Inc. 19,700 1,664,650 19,700 1,664,650
* Brookdale Living
Communities, Inc. 73,534 909,983 73,534 909,983
* Caremark Rx, Inc. 69,150 350,072 69,150 350,072
* Chirex, Inc. 91,420 1,337,017 91,420 1,337,017
* Computer Motion, Inc. 87,910 967,010 87,910 967,010
* Corixa Corp. 25,600 435,200 25,600 435,200
* Dura Pharmaceuticals, Inc. 76,630 1,068,031 76,630 1,068,031
Elan Corp., PLC, ADR 40,100 1,182,950 40,100 1,182,950
Guilford Pharmaceuticals, Inc. 44,140 750,380 44,140 750,380
HEALTHSOUTH Corp. 198,500 1,066,938 198,500 1,066,938
* Hooper Holmes, Inc. 77,024 1,983,368 77,024 1,983,368
* I-STAT Corp. 33,206 481,487 33,206 481,487
MedImmune, Inc. 7,100 1,177,712 7,100 1,177,712
Mylan Laboratories, Inc. 43,202 1,088,150 43,202 1,088,150
Novoste Corp. 34,058 561,957 34,058 561,957
Pediatrix Medical Group, Inc. 55,700 389,900 55,700 389,900
ProxyMed, Inc. 35,556 346,671 35,556 346,671
Wellpoint Health Networks,
Inc., Cl. A 14,400 949,500 14,400 949,500
Industrial Specialty 2.6%
Products & Services -
Global Industrial
Technologies, Inc. 89,526 1,163,838 89,526 1,163,838
II-VI, Inc. 22,099 444,742 22,099 444,742
Magna International, Inc.,
Cl. A 28,400 1,203,450 28,400 1,203,450
* Mark IV Industries, Inc. 198,216 3,505,945 198,216 3,505,945
McDermott International, Inc. 61,820 560,244 61,820 560,244
Steel Technologies, Inc. 43,237 626,937 43,237 626,937
Information Services & 16.2%
Technology -
* 4Front Technologies, Inc. 37,675 503,903 37,675 503,903
* Altera Corp. 28,300 1,402,619 28,300 1,402,619
* Citrix Systems, Inc. 12,600 1,549,800 12,600 1,549,800
CNET, Inc. 19,350 1,098,113 19,350 1,098,113
* Computer Network Technology 31,601 724,848 31,601 724,848
* Compuware Corp. 93,100 3,467,975 93,100 3,467,975
* Concentric Network Corp. 60,850 1,874,941 60,850 1,874,941
* Ibis Technology Corp. 9,016 447,419 9,016 447,419
* JDS Uniphase Corp. 12,420 2,003,501 12,420 2,003,501
* Maxtor Corp. 154,480 1,119,980 154,480 1,119,980
* Metacreations Corp. 47,101 404,774 47,101 404,774
* Mikohn Gaming Corp. 16,968 86,961 16,968 86,961
* MIPS Technologies, Inc. 8,726 453,752 8,726 453,752
* MMC Networks, Inc. 30,316 1,042,112 30,316 1,042,112
* MTI Technology Corp. 22,929 845,507 22,929 845,507
* Netopia, Inc. 15,436 838,368 15,436 838,368
* Peerless Systems Corp. 43,592 337,838 43,592 337,838
* Pinnacle Systems, Inc. 26,965 1,097,138 26,965 1,097,138
* Real Networks, Inc. 31,540 3,794,656 31,540 3,794,656
* PMC-Sierra, Inc. 43,000 6,893,437 43,000 6,893,437
* PSINet, Inc. 25,300 1,562,275 25,300 1,562,275
* S3, Inc. 98,958 1,144,202 98,958 1,144,202
* Sanmina Corp. 31,100 3,106,113 31,100 3,106,113
* Siebel Systems, Inc. 29,000 2,436,000 29,000 2,436,000
* Tecnomatix Technologies, Ltd. 36,858 1,059,667 36,858 1,059,667
* Telescan, Inc. 22,616 558,333 22,616 558,333
* Trimble Navigation, Ltd. 37,521 811,392 37,521 811,392
* Veritas Software Corp. 44,475 6,365,484 44,475 6,365,484
ZixIt Corp. 12,122 480,334 12,122 480,334
Machinery - Diversified - 0.6%
* Applied Science & Tech, Inc. 31,222 1,037,644 31,222 1,037,644
Gasonics International Corp. 38,740 765,115 38,740 765,115
Thermo Sentron, Inc. 1,590 23,055 1,590 23,055
Manufacturing - 0.5%
Distributing -
Lindsay Manufacturing Co. 3,892 71,029 3,892 71,029
* Pentair, Inc. 25,210 970,585 25,210 970,585
Photon Dynamics, Inc. 10,214 395,793 10,214 395,793
Metal Products & Services 1.4%
* Material Sciences Corp. 49,600 505,300 49,600 505,300
Maverick Tube Corp. 22,669 559,641 22,669 559,641
Quanex Corp. 93,360 2,380,680 93,360 2,380,680
Summit Technology, Inc. 44,275 517,464 44,275 517,464
Oil / Energy - 4.0%
* Barrett Resources Corp. 63,700 1,875,169 63,700 1,875,169
El Paso Energy Corp. 47,900 1,859,119 47,900 1,859,119
* Newfield Exploration Co. 78,302 2,094,578 78,302 2,094,578
* Newpark Resources, Inc. 232,400 1,423,450 232,400 1,423,450
* St. Mary Land & Exploration Co. 26,502 655,924 26,502 655,924
Stone Energy Corp. 41,912 1,493,115 41,912 1,493,115
Ultramar Diamond Shamrock Corp. 71,300 1,617,619 71,300 1,617,619
Western Gas Resources, Inc. 52,211 688,533 52,211 688,533
Oil Field Services - 2.2%
* Cal Dive International, Inc. 16,800 556,500 16,800 556,500
* Hanover Compressor Co. 73,100 2,759,525 73,100 2,759,525
* Lone Star Technologies, Inc. 49,110 1,368,941 49,110 1,368,941
Nabors Industries, Inc. 61,112 1,890,653 61,112 1,890,653
Paper & Packaging - 0.8%
Pope & Talbot, Inc. 70,192 1,123,072 70,192 1,123,072
Rock Tennessee Co., Cl. A 79,400 1,171,150 79,400 1,171,150
Pharmaceuticals - 1.6%
* Advance Paradigm, Inc. 40,718 877,982 40,718 877,982
* Biocryst Pharmaceuticals, Inc. 17,594 519,023 17,594 519,023
Chiron Corp. 23,600 1,000,050
* SuperGen, Inc. 24,347 715,193 24,347 715,193
* Transkaryotic Therapies, Inc. 44,456 1,711,652 44,456 1,711,652
Triangle Pharmaceuticals, Inc. 70,013 897,042 70,013 897,042
Printing, Publishing, 0.9%
Broadcasting &
Entertainment -
* Ascent Entertainment
Group, Inc. 39,700 503,694 39,700 503,694
Omnicom Group, Inc. 12,600 1,260,000 12,600 1,260,000
* SBS Broadcasting SA 16,910 823,305 16,910 823,305
Real Estate - 2.9%
* Choice Hotels, Inc., REIT 120,125 2,057,141 120,125 2,057,141
FelCor Lodging Trust,
Inc., REIT 54,100 946,749 54,100 946,749
Imperial Credit
Commercial Mortgage 54,400 618,800 54,400 618,800
Indymac Mortgage
Holdings, Inc., REIT 198,792 2,534,598 198,792 2,534,598
LNR Property Corp. 124,116 2,466,805 124,116 2,466,805
Retailing & Wholesale - 6.1%
* Abercrombie & Fitch Co.,
Cl. A 17,160 457,958 17,160 457,958
* Best Buy Co., Inc. 71,026 3,564,617 71,026 3,564,617
* Childrens Place Retail
Stores, Inc. 33,200 545,725 33,200 545,725
Circuit City Stores, Inc. 4,150 187,009 4,150 187,009
* Coldwater Creek, Inc. 22,450 460,225 22,450 460,225
Family Dollar Stores, Inc. 105,000 1,712,812 105,000 1,712,812
* Footstar, Inc. 60,650 1,849,825 60,650 1,849,825
* Intertan, Inc. 22,039 575,769 22,039 575,769
* Jack In The Box, Inc. 95,450 1,974,622 95,450 1,974,622
* Kenneth Cole Productions,
Inc., Cl.A 18,603 851,087 18,603 851,087
* Michaels Stores, Inc. 49,435 1,408,898 49,435 1,408,898
* Movado Group, Inc. 47,204 1,029,637 47,204 1,029,637
* Pacific Sunwear Of California 88,424 2,818,515 88,424 2,818,515
Saks, Inc. 125,100 1,946,869 125,100 1,946,869
Sharper Image Corp. 74,620 946,741 74,620 946,741
* Starbucks Corp. 42,200 1,023,350 42,200 1,023,350
Sunglass Hut
International, Inc. 46,943 528,109 46,943 528,109
Telecommunication Services 5.4%
& Equipment - 5.5%
Anaren Microwave, Inc. 15,284 827,247 15,284 827,247
* Commnet Cellular, Inc. 10,329 331,819 10,329 331,819
Crown Castle International
Corp. 24,220 778,067 24,220 778,067
* Intermedia Communications,
Inc. 18,690 725,406 18,690 725,406
* NEXTLINK Communications,
Inc., Cl.A 74,960 6,226,365 74,960 6,226,365
Qwest Communications
International, Inc. 89,900 3,865,700 89,900 3,865,700
US LEC Corp., Cl. A 69,150 2,230,087 69,150 2,230,087
Voicestream Wireless Corp. 6,400 910,800 6,400 910,800
Thrift Institutions - 0.0%
Warren Bancorp, Inc. 8,342 62,565 8,342 62,565
Transportation - 4.7% 2.6%
American Freightways Corp. 60,459 978,680 60,459 978,680
* Amtran, Inc. 23,499 455,293 23,499 455,293
* Arkansas Best Corp. 149,000 1,788,000 149,000 1,788,000
* CNF Transportation, Inc. 39,300 1,355,850 39,300 1,355,850
* Forward Air Corp. 17,969 779,405 17,969 779,405
* Genesee & Wyoming, Inc. 67,730 872,024 67,730 872,024
* M.S. Carriers, Inc. 49,739 1,187,519 49,739 1,187,519
* Roadway Express, Inc. 61,179 1,322,996 61,179 1,322,996
Utilities - Electric - 1.7%
Cinergy Corp. 71,300 1,720,113 71,300 1,720,113
Sierra Pacific Resources New 73,428 1,271,222 73,428 1,271,222
UtiliCorp United, Inc. 95,600 1,858,225 95,600 1,858,225
Total Common Stocks
(cost $150,830,089) $173,229,186 $104,996,939 278,226,125
SHORT-TERM INVESTMENTS - 6.2%
Repurchase Agreement - 6.2%
Cowen Securities Corp.
2.55%, 1/3/2000(a) 13,370,717 13,370,717 4,863,609 4,863,609 18,234,326 18,234,326
Total Short-Term Investments
(cost $13,370,717) $13,370,717 $4,863,609 18,234,326
Total Investments - 101.0%
(cost $164,200,806) 186,599,903 109,860,548 296,460,451
Other Assets and
Liabilities - net (1.0%) 205,604 (3,197,623) (2,992,019)
Net Assets 100.0% $186,805,507 $106,662,925 293,468,432
* Non-income producing security.
(a) The repurchase agreement is fully collateralized by U.S. Government and/or agency obligations based on market prices plus
accrued interest at December 31, 1999.
Summary of Abbreviations:
- -------------------------
REIT - Real Estate Investment Trust
ADR - American Depository Receipt
See Combined Notes to Financial Statements.
</TABLE>
Evergreen Select Equity Funds
Statements of Operations
Pro Forma Combined
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Special Equity Social Principles Adjustments Pro Forma
Fund Fund Combined
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income
Dividends $ 412,173 $ 1,242,965 1,655,138
Interest 396,647 150,706 547,353
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment income 808,820 1,393,671 2,202,491
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Advisory fee 1,670,346 1,021,270 766,345 (1) 3,457,961
Distribution Plan expenses 46,062 212 - 46,274
Administrative services fee 51,823 30,886 - 82,709
Transfer agent fee 78,791 570 - 79,361
Trustees' fees and expenses 2,784 2,688 - 5,472
Printing and postage expenses - - 40,000 (2) 40,000
Custodian fee 41,524 34,728 - 76,252
Registration and filing fees 42,066 54,456 (54,456)(3) 42,066
Professional fees (2,394) 16,030 3,764 (4) 17,400
Other 785 8,467 - 9,252
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses 1,931,787 1,169,307 755,653 3,856,747
Less: Fee Credits (13,228) (7,591) (20,819)
Fee waivers and reimbursements (602,277) (103,280) (475,893)(5) (1,181,450)
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,316,282 1,058,436 279,760 2,654,478
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income or loss $ (507,462) $ 335,235 (451,987)
===================================================================================================================================
Net realized and unrealized gains or losses on securities and futures contracts
Net realized gains or losses on:
Securities $ 39,446,798 $ 30,038,855 69,485,653
Futures contracts - - -
- ------------------------------------------------------------------- ------------------------------------------------------------
Net realized gains or losses on securities
and futures contracts 39,446,798 30,038,855 69,485,653
- -------------------------------------------------------------------- ------------------------------------------------------------
Net change in unrealized gains or losses on securities
and futures contracts 25,815,837 (26,013,118) (197,281)
- -------------------------------------------------------------------- ------------------------------------------------------------
Net realized and unrealized gains or losses
on securities and futures contracts 65,262,635 4,025,737 69,288,372
- -------------------------------------------------------------------- ------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 64,755,173 $ 4,360,972 69,116,145
- -------------------------------------------------------------------- ============================================================
</TABLE>
(1) Represents advisory fees for the combined fund based on the advisory fee
rates in place for the period for the acquiring fund.
(2) Represents estimate of printing and postage for a normal year; accruals for
calendar year end December 31, 1999 undersated due to over accrual in prior
period.
(3) Represents the reduction in registration and filing fees for the acquired
fund.
(4) Represents estimate of professional fees for a normal year; accruals for
calendar year end December 31, 1999 undersated due to over accrual in prior
period.
(5) Adjustment to Fee waivers and reimbursements necessary to limit overal fund
expenses, excluding distribution fees, to acquiring fund's limit of 1.05%,
on an annual basis, of average daily net assets.
<TABLE>
<S> <C> <C> <C>
26,032.42 (12,826.75) 13,206
120,890,801 127,827,875 248,718,676
110,227,327 138,491,349 248,718,676
127,815,047.89
Assets 120,916,833.65 127,815,047.89 248,731,882
</TABLE>
<PAGE>
Evergreen Select Equity Funds
Statements of Assets and Liabilities
Pro Forma Combined
(Special Equity and Social Principles)
December 31, 1999
<TABLE>
<CAPTION>
Special Equity Social Principle Adjustments Pro Forma
Fund Fund Combined
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Identified cost of securities $ 164,200,806 $ 87,740,888 $ 251,941,694
Net unrealized gains on securities 22,399,097 22,119,660 44,518,757
- -----------------------------------------------------------------------------------------------------------------------------
Market value of securities 186,599,903 109,860,548 296,460,451
Receivable for securities sold 1,410,770 0 1,410,770
Receivable for Fund shares sold 1,357,726 0 1,357,726
Dividends and interest receivable 38,375 88,571 126,946
Prepaid expenses and other assets 106,536 11,393 117,929
- -----------------------------------------------------------------------------------------------------------------------------
Total assets 189,513,310 109,960,512 299,473,822
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities -
Payable for securities purchased 2,355,035 0 2,355,035
Payable for Fund shares redeemed 167,955 3,216,471 3,384,426
Advisory fee payable 127,465 70,006 197,471
Distribution Plan expenses payable 2,153 0 2,153
Due to other related parties 14,868 1,952 16,820
Accrued expenses and other liabilities 40,327 9,158 49,485
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,707,803 3,297,587 6,005,390
- -----------------------------------------------------------------------------------------------------------------------------
Net assets $ 186,805,507 $ 106,662,925 $ 293,468,432
=============================================================================================================================
Net assets represented by -
Paid-in capital $ 144,211,515 $ 78,022,790 $ 222,234,305
Undistributed (overdistributed) net investment income or -277,608 9,227 (268,381)
Accumulated net realized gains or losses on securities
and futures contracts 20,472,503 6,511,248 26,983,751
Net unrealized gains on securities
and futures contracts 22,399,097 22,119,660 44,518,757
- -----------------------------------------------------------------------------------------------------------------------------
Total net assets $ 186,805,507 $ 106,662,925 $ 293,468,432
=============================================================================================================================
Net assets consists of -
Class I $ 144,593,189 $ 106,611,192 $ 251,204,381
Class IS 6,928,475 51,733 6,980,208
Class A 12,340,316 12,340,316
Class B 14,437,244 14,437,244
Class C 8,506,283 8,506,283
- -----------------------------------------------------------------------------------------------------------------------------
Total net assets $ 186,805,507 $ 106,662,925 $ 293,468,432
=============================================================================================================================
Shares outstanding -
Class I 9,681,898 3,578,768 3,561,987 (1) 16,822,653
Class IS 470,141 1,741 1,768 (1) 473,650
Class A 838,202 838,202
Class B 982,262 982,262
Class C 578,462 578,462
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value per share
Class I 14.93 29.79 14.93
- -----------------------------------------------------------------------------------------------------------------------------
Class IS 14.74 29.71 14.74
- -----------------------------------------------------------------------------------------------------------------------------
Class A 14.72 14.72
- -----------------------------------------------------------------------------------------------------------------------------
Class A (offering price) 15.46 15.46
- -----------------------------------------------------------------------------------------------------------------------------
Class B 14.70 14.70
- -----------------------------------------------------------------------------------------------------------------------------
Class C 14.70 14.70
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Adjustment represents change in shares outstanding as a result of merger
transaction.
<PAGE>
EVERGREEN SELECT EQUITY TRUST
PART C
OTHER INFORMATION
Item 15. Indemnification.
The response to this item is incorporated by reference to "Liability and
Indemnification of Trustees" under the caption "Information on Shareholders'
Rights" in Part A of this Registration Statement.
Item 16. Exhibits:
1. Declaration of Trust. Incorporated by reference to Evergreen Select
Equity Trust's Pre-Effective Amendment No. 2 filed on November 17, 1997
Registration No. 333-36047 ("Pre-Effective Amendment No. 2").
2. Bylaws. Incorporated by reference to Pre-Effective Amendment No. 2.
3. Not applicable.
4. Agreement and Plan of Reorganization. Exhibit A to Prospectus
contained in Part A of this Registration Statement.
5. Declaration of Trust Articles III, V, VI, VIII and IX; By-Laws
Articles II and VI. Incorporated by reference to Pre-Effective Amendment No. 2.
6. Investment Management and Advisory Agreement between First Union
National Bank and Evergreen Select Equity Trust. Incorporated by reference to
Evergreen Select Equity Trust's Post-Effective Amendment No. 4. filed on June
30, 1998 Registration No. 333-36047 ("Post-Effective Amendment No. 4").
7. Principle Underwriting Agreement between Evergreen Distributor, Inc.
and Evergreen Select Equity Trust. Incorporated by reference to Post-Effective
Amendment No. 4.
8. Form of Deferred Compensation Plan. Incorporated by reference to
Pre-Effective Amendment No. 2.
9. Custody Agreement between State Street Bank and Trust Company and
Evergreen Select Equity Trust. Incorporated by reference to Post-Effective
Amendment No. 4.
10(a). Rule 12b-1 Distribution Plan for the Institutional Service shares.
Incorporated by reference to Post-Effective Amendment No. 4.
10(b). Multiple Class Plan. Incorporated by reference to Evergreen Select
Equity Trust's Post-Effective Amendment No. 9 filed on April 30, 1999
Registration No. 333-36047.
11. Opinion and Consent of Sullivan & Worcester LLP. Filed herewith.
12. Tax Opinion and Consent of Sullivan & Worcester LLP. To be filed
by amendment.
13(a). Administration Agreement between Evergreen Investment Services, Inc.
and Evergreen Select Equity Trust. Incorporated by reference to Post-Effective
Amendment No. 4.
13(b). Transfer Agent Agreement between Evergreen Service Company and
Evergreen Select Equity Trust. Incorporated by reference to Post-Effective
Amendment No. 4.
14 Consent of KPMG LLP. Filed herewith.
15. Not applicable.
16. Powers of Attorney. filed herewith.
17. Form of Proxy Card. Filed herewith.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus that is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act the Trust has duly caused this Registration Statement to be signed
on its behalf by the undersigned, duly authorized, in the City of Boston, and
Commonwealth of Massachusetts, on the 3rd day of April, 2000.
EVERGREEN SELECT EQUITY TRUST
By: /s/ William M. Ennis
----------------------
Name: William M. Ennis*
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 3rd day of April, 2000.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/William M. Ennis /s/ Laurence B. Ashkin /s/ Charles A. Austin, III
- ---------------------------- ----------------------------- --------------------------------
William M. Ennis* Laurence B. Ashkin* Charles A. Austin III*
President Trustee Trustee
/s/ K. Dun Gifford /s/ Arnold H. Dreyfuss /s/ William Walt Pettit
- ---------------------------- ---------------------------- --------------------------------
K. Dun Gifford* Arnold H. Dreyfuss* William Walt Pettit*
Trustee Trustee Trustee
/s/Gerald M. McDonnell /s/ Thomas L. McVerry /s/ Michael S. Scofield
- ---------------------------- ----------------------------- --------------------------------
Gerald M. McDonell* Thomas L. McVerry* Michael S. Scofield*
Trustee Trustee Trustee
/s/ David M. Richardson /s/ Russell A. Salton, III MD /s/ Louis W. Moelchert, Jr.
- ---------------------------- ------------------------------ -------------------------------
David M. Richardson* Russell A. Salton, III MD* Louis W. Moelchert, Jr.*
Trustee Trustee Trustee
/s/ Richard J. Shima /s/ Richard K. Wagoner /s/ Leroy Keith, Jr.
- ---------------------------- ------------------------------ -------------------------------
Richard J. Shima* Richard K. Wagoner* Leroy Keith, Jr*
Trustee Trustee Trustee
/s/ Carol Kosel
- -------------------------------
Carol Kosel*
Treasurer (Principal Financial
and Accounting Officer)
*By: /s/ Maureen E. Towle
- ----------------------------
Maureen E. Towle
Attorney-in-Fact
</TABLE>
*Maureen E. Towle, by signing her name hereto, does hereby sign this
document on behalf of each of the applicable above-named individuals pursuant to
powers of attorney duly executed by such persons.
<PAGE>
INDEX TO EXHIBITS
N-14
EXHIBIT NO.
11 Opinion and Consent of Sullivan & Worcester LLP
14 Consent of KPMG LLP
16 Powers of Attorney
17 Form of Proxy Card
SULLIVAN & WORCESTER LLP
1025 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
TELEPHONE: 202-775-8190
FACSIMILE: 202-293-2275
767 THIRD AVENUE ONE POST OFFICE SQUARE
NEW YORK, NEW YORK 10017 BOSTON, MASSACHUSETTS 02109
TELEPHONE: 212-486-8200 TELEPHONE: 617-338-2800
FACSIMILE: 212-758-2151 FACSIMILE: 617-338-2880
April 3, 2000
Evergreen Select Equity Trust
200 Berkeley Street
Boston, Massachusetts 02116
Ladies and Gentlemen:
We have been requested by the Evergreen Select Equity Trust, a Delaware
business trust with transferable shares (the "Trust") established under an
Agreement and Declaration of Trust dated September 18, 1997, as amended (the
"Declaration"), for our opinion with respect to certain matters relating to
Evergreen Select Special Equity Fund (the "Acquiring Fund"), a series of the
Trust. We understand that the Trust is about to file a Registration Statement on
Form N-14 for the purpose of registering shares of the Trust under the
Securities Act of 1933, as amended (the "1933 Act"), in connection with the
proposed acquisition by the Acquiring Fund of all of the assets of Evergreen
Select Social Principles Fund (the "Acquired Fund"), a series of the Trust, in
exchange solely for shares of the Acquiring Fund and the assumption by the
Acquiring Fund of the identified liabilities of the Acquired Fund pursuant to an
Agreement and Plan of Reorganization, the form of which is included in the Form
N-14 Registration Statement (the "Plan").
We have, as counsel, participated in various business and other
proceedings relating to the Trust. We have examined copies, either certified or
otherwise proved to be genuine to our satisfaction, of the Trust's Declaration
and By-Laws, and other documents relating to its organization, operation, and
proposed operation, including the proposed Plan and we have made such other
investigations as, in our judgment, are necessary or appropriate to enable us to
render the opinion expressed below.
We are admitted to the Bars of The Commonwealth of Massachusetts and
the District of Columbia and generally do not purport to be familiar with the
laws of the State of Delaware. To the extent that the conclusions based on the
laws of the State of Delaware are involved in the opinion set forth herein
below,
<PAGE>
Evergreen Fixed Income Trust
April 3, 2000
Page 2
we have relied, in rendering such opinions, upon our examination of Chapter 38
of Title 12 of the Delaware Code Annotated, as amended, entitled "Treatment of
Delaware Business Trusts" (the "Delaware business trust law") and on our
knowledge of interpretation of analogous common law of The Commonwealth of
Massachusetts.
Based upon the foregoing, and assuming the approval by shareholders of
the Acquired Fund of certain matters scheduled for their consideration at a
meeting presently anticipated to be held on July 14, 2000, it is our opinion
that the shares of the Acquiring Fund currently being registered, when issued in
accordance with the Plan and the Trust's Declaration and By-Laws, will be
legally issued, fully paid and non-assessable by the Trust, subject to
compliance with the 1933 Act, the Investment Company Act of 1940, as amended and
applicable state laws regulating the offer and sale of securities.
We hereby consent to the filing of this opinion with and as a part of
the Registration Statement on Form N-14 and to the reference to our firm under
the caption "Legal Matters" in the Prospectus/Proxy Statement filed as part of
the Registration Statement. In giving such consent, we do not thereby admit that
we come within the category of persons whose consent is required under Section 7
of the 1933 Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/SULLIVAN & WORCESTER LLP
---------------------------
SULLIVAN & WORCESTER LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Evergreen Select Equity Trust
We consent to the use of our report, dated August 6, 1999, for Evergreen Select
Special Equity Fund and Evergreen Select Social Principles Fund each a portfolio
of Evergreen Select Equity Trust, incorporated herein by reference and to the
references to our firm under the caption "FINANCIAL STATEMENTS AND EXPERTS in
the Prospectus/Proxy Statement.
/s/KPMG LLP
Boston, Massachusetts
April 3, 2000
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter a
Trustee and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
December 17, 1999.
Signature Title
/s/Richard Wagoner Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter a
Trustee and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
December 17, 1999.
Signature Title
/s/Arnold H. Dreyfuss Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter the
Treasurer and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
15, 2000.
Signature Title
/s/Carol A. Kosel Treasurer
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter the
President and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
15, 2000.
Signature Title
/s/William M. Ennis President
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter a
Trustee and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
December 17, 1999.
Signature Title
/s/Leroy Keith, Jr. Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Charles A. Austin III Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/K. Dun Gifford Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Laurence B. Ashkin Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/William W. Pettit Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Gerald M. McDonnell Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Thomas L. McVerry Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/David M. Richardson Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Richard J. Shima Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Michael S. Scofield Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Russell A. Salton, III M.D. Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter a
Trustee and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
December 17, 1999.
Signature Title
/s/Louis W. Moelchert, Jr. Trustee
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE TODAY!
Please detach at perforation before mailing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
EVERGREEN SELECT SOCIAL PRINCIPLES FUND,
a series of Evergreen Select Equity Trust
PROXY FOR THE MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 14, 2000
The undersigned, revoking all Proxies heretofore given, hereby appoints
Michael H. Koonce, Maureen E. Towle, Sally E. Ganem, Catherine E. Foley and Beth
K. Werths or any of them as Proxies of the undersigned, with full power of
substitution, to vote on behalf of the undersigned all shares of Evergreen
Select Social Principles Fund, a series of Evergreen Select Equity Trust,
("Social Principles") that the undersigned is entitled to vote at the special
meeting of shareholders of Social Principles to be held at 2:00 p.m. on July 14,
2000 at the offices of the Evergreen Funds, 200 Berkeley Street, 26th Floor,
Boston, Massachusetts 02116 and at any adjournments thereof, as fully as the
undersigned would be entitled to vote if personally present.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS PROXY. If joint
owners, EITHER may sign this Proxy. When signing as attorney, executor,
administrator, trustee, guardian, or custodian for a minor, please give your
full title. When signing on behalf of a corporation or as a partner for a
partnership, please give the full corporate or partnership name and your title,
if any.
Date , 2000
----------------------------------------
----------------------------------------
Signature(s) and Title(s), if applicable
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF EVERGREEN
SELECT EQUITY TRUST. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO
THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSALS. THE SHARES REPRESENTED HEREBY
WILL BE VOTED AS INDICATED OR FOR THE PROPOSALS IF NO CHOICE IS INDICATED. THE
BOARD OF TRUSTEES OF EVERGREEN SELECT EQUITY TRUST RECOMMENDS A VOTE FOR THE
PROPOSALS. PLEASE MARK YOUR VOTE BELOW IN BLUE OR BLACK INK. DO NOT USE RED INK.
EXAMPLE: X
1. To approve an Agreement and Plan of Reorganization whereby Evergreen
Select Special Equity Fund, a series of Evergreen Select Equity Trust, will
(i) acquire all of the assets of Social Principles in exchange for shares of
Evergreen Select Special Equity Fund; and (ii) assume the identified liabilities
of Social Principles, as substantially described in the accompanying
Prospectus/Proxy Statement.
---- FOR ---- AGAINST ---- ABSTAIN
2. To consider and vote upon such other matters as may properly come before
said meeting or any adjournments thereof.
---- FOR ---- AGAINST ---- ABSTAIN
