<PAGE>
- -------------------------------------------------------------------------------
Evergreen
Growth and
Income Funds
July 31, 1998
Annual Report
- -------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[LOGO OF EVERGREEN FUNDS APPEARS HERE]
- -------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Letter to Shareholders.................................................. 1
Evergreen Blue Chip Fund
Fund at a Glance....................................................... 2
Portfolio Manager Interview............................................ 3
Evergreen Growth and Income Fund
Fund at a Glance....................................................... 6
Portfolio Manager Interview............................................ 7
Evergreen Income and Growth Fund
Fund at a Glance....................................................... 10
Portfolio Manager Interview............................................ 11
Evergreen Small Cap Equity Income Fund
Fund at a Glance....................................................... 14
Portfolio Manager Interview............................................ 15
Evergreen Utility Fund
Fund at a Glance....................................................... 19
Portfolio Manager Interview............................................ 20
Evergreen Value Fund
Fund at a Glance....................................................... 22
Portfolio Manager Interview............................................ 23
Evergreen Fund for Total Return
Fund at a Glance....................................................... 26
Portfolio Manager Interview............................................ 27
Financial Highlights
Evergreen Blue Chip Fund............................................... 30
Evergreen Growth and Income Fund....................................... 32
Evergreen Income and Growth Fund....................................... 34
Evergreen Small Cap Equity Income Fund................................. 36
Evergreen Utility Fund................................................. 38
Evergreen Value Fund................................................... 40
Evergreen Fund for Total Return........................................ 42
Schedule of Investments
Evergreen Blue Chip Fund............................................... 44
Evergreen Growth and Income Fund....................................... 46
Evergreen Income and Growth Fund....................................... 51
Evergreen Small Cap Equity Income Fund................................. 54
Evergreen Utility Fund................................................. 58
Evergreen Value Fund................................................... 60
Evergreen Fund for Total Return........................................ 62
Statements of Assets and Liabilities.................................... 64
Statements of Operations................................................ 65
Statements of Changes in Net Assets..................................... 67
Combined Notes to Financial
Statements............................................................. 70
Independent Auditors Reports............................................ 81
Additional Information.................................................. 83
</TABLE>
- -------------------------------------------------------------------------------
Evergreen Funds
- -------------------------------------------------------------------------------
Evergreen Funds is one of the nations fastest growing investment companies
with approximately $50 billion in assets under management.
With over 70 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broader range of quality investment products
and services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
------------------------------------------------------------------------------
This annual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
-----------------------------------------------------------------
Mutual Funds: ARE NOT FDIC INSURED May lose value . Are not bank guaranteed
-----------------------------------------------------------------
Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
September 1998
[PICTURE OF WILLIAM M. ENNIS APPEARS HERE]
William M. Ennis
Managing Director
Dear Shareholders:
The following report covers the Evergreen Growth and Income Funds for the fiscal
year ended July 31, 1998.
Market Review
At the writing of this report -- after the fiscal period ended July 31, 1998 --
the markets have experienced increased volatility, mainly due to financial and
currency crises in the Asian and Russian economies. We encourage investors to
remain focused on their long-term goals, and to keep short-term volatility in
perspective.
Although no one can accurately predict either the timing or the degree, one
thing is certain: the stock market will continue to experience ups and downs.
At this time, we still believe the domestic economy is strong with low
inflation, low unemployment and moderate, yet sustainable growth. We are
confident that the opportunity remains to participate in the continued, dynamic
growth of both U.S. and international companies.
Cost Savings
In an effort to achieve efficiencies and cost savings, we have changed the way
we mail your funds' information. Wherever possible, we are trying to combine
your funds' required mailings so you only receive one per household, based on
the registration last name and exact address./1/ This reduces the mailing costs,
not to mention the amount of paper needed to print, which in turn benefits your
funds by reducing overall expenses. If you prefer to receive separate copies of
reports and prospectuses for each registered shareholder in your household,
please notify us by calling the number on your statement and we will adjust our
records accordingly.
Evergreen Service
Evergreen remains committed to providing investment choices which match a range
of investment objectives, as well as clear and accurate information on all the
Evergreen Funds. We recommend you consult with your financial advisor to
evaluate your asset allocation and ensure you are on target with your investment
time horizon. If you have any questions or need additional information, please
contact one of our service representatives at 800.343.2898. We will be happy to
assist you.
Thank you for your continued investment with Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
Managing Director
Evergreen Funds
/1/ If you purchased your shares through a financial representative, we may not
be able to consolidate your mailings by last name and address, because that
institution controls the mailings.
1
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Blue Chip Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of July 31, 1998
We continued to emphasize the larger-capitalization, blue chip, high-quality
U.S. corporations that are the hallmark of the Fund's investment style.
Portfolio
Management
------------------------
[PICTURE OF JUDITH A. WARNERS APPEARS HERE]
Judith A. Warners
Tenure: January, 1995
CURRENT INVESTMENT STYLE/1/
[STYLE BOX APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 6/30/98.
The Equity Style Box placement is based on a fund's price-to-earnings and
price-to-book ratio relative to the S&P 500, as well as the size of the
companies in which it invests, or median market capitalization.
/1/Source: 1998 Morningstar, Inc.
- --------------------------------------------------------------------------------
Performance and Returns*
-------------------------------------------------------------------------------
Class A Class B Class C
Inception Date 1/20/98 9/11/35 1/22/98
................................................................................
Average Annual Returns
................................................................................
One year with sales charge -- 10.14% --
................................................................................
One year w/o sales charge -- 14.99% --
................................................................................
3 years -- 23.45% --
................................................................................
5 years -- 17.29% --
................................................................................
10 years -- 14.35% --
................................................................................
Since Inception 6.00% 9.04% 8.80%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00%
Front End CDSC CDSC
................................................................................
12-month income dividends per share $0.06 $0.08 $0.02
................................................................................
12-month capital gain distributions per share -- $4.96 --
................................................................................
* Adjusted for maximum sales charge
Note: Class A and C shares were introduced in January 1998, and did not have
average annual returns to quote at this time. Cumulative returns since
inception are provided.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class B S & P 500 Index CPI
Jul-88 10,000 10,000 10,000
Jul-89 12,742 13,193 10,498
Jul-90 13,533 14,051 11,004
Jul-91 14,980 15,844 11,494
Jul-92 15,889 17,870 11,857
Jul-93 17,063 19,430 12,186
Jul-94 17,244 20,433 12,523
Jul-95 19,998 25,768 12,869
Jul-96 22,824 30,037 13,245
Jul-97 33,238 45,698 13,544
Jul-98 38,218 54,510 13,772
Comparison of change in value of a $10,000 investment in Evergreen Blue Chip
Fund Class B, the Standard and Poor's 500 Index (S&P 500), and the Consumer
Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. 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 S&P 500 Index is an unmanaged market 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 an
index.
2
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Blue Chip Fund
- --------------------------------------------------------------------------------
Portfolio Management Interview
- --------------------------------------------------------------------------------
How did the Fund perform?
- --------------------------------------------------------------------------------
The Fund performed well relative to similar funds, while trailing the overall
Standard & Poor's 500 Index, which was dominated by a few large companies. For
the 12 months ended on July 31, 1998, the Evergreen Blue Chip Fund's Class B
shares had a total return of 14.99%, unadjusted for applicable sales charges.
During the same 12-month period, the benchmark S&P 500 Index had a return of
19.29%, while Growth and Income Funds on average returned 11.37%, as measured by
Lipper Analytical Services, Inc., an independent monitor of mutual fund
performance.
Portfolio
Characteristics
---------------
(as of 7/31/98 unless noted)
Total Net Assets $403,408,065
...............................................................................
Number of Holdings 86
...............................................................................
P/E Ratio* 22.1x
...............................................................................
Beta* 0.96
...............................................................................
*as of 6/30/98
- --------------------------------------------------------------------------------
What was the investment
environment like during the year?
- --------------------------------------------------------------------------------
The overall market, as reflected in the popular indexes such as the S&P 500,
moved upward. Interim volatility and periods of relatively flat performance --
when the market moved more sideways than up or down -- punctuated this general
trend, however. As the year progressed, market index performance became more
and more dominated by the very strong returns of a relatively few stocks. We
characterize this period as a standoff between two conflicting influences. On
the one hand, there was fear that economic growth in the United States might
become so strong that the Federal Reserve Board would act to thwart inflation by
raising short-term interest rates. On the other hand, there was the anticipated
fear of the impact that the Asian economic crisis might have on the earnings of
U.S. corporations. In addition, there also was concern about the credibility of
the U.S. political leadership. It seems the concern about Asia was put aside as
the strength of the domestic economy, combined with strong demand from Europe,
helped sustain strong earnings by U.S. multi-national corporations.
The narrowing of market leadership -- to a band of a relatively few companies --
became a progressively more dominant trend as the year progressed. We also have
witnessed a rotating correction for several months, as the market values of
different stocks have dipped. While the overall indexes may have shown positive
results, the stock valuations of a large proportion of publicly traded companies
actually fell. For example, a Merrill Lynch study indicates that as of mid-
August, the stock prices of approximately 70% of New York Stock Exchange
companies actually fell by 20% or more from their highs, and 47% fell by 30% or
more after their highs.
In this environment, the best investment returns tended to come from a
relatively few companies. While they represented a variety of different
industries, they tended to be high-quality, high-visibility companies that often
were leaders of their markets or niches. In the Evergreen Blue Chip Fund's
portfolio, for example, the leading contributors to performance during the 12-
month period included General Electric, Pfizer, Microsoft, Ford Motor Company
and Home Depot. Other performance leaders included companies that were re-
structuring or acquiring new businesses. The list included Viacom, in the
entertainment industry, and Tyco International, a diversified company.
- --------------------------------------------------------------------------------
Within this environment, what were your principal investment themes or
strategies?
- --------------------------------------------------------------------------------
We continued to emphasize the larger-capitalization, blue chip, high-quality
U.S. corporations that are the hallmark of the Fund's investment style. We also
3
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Blue Chip Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
included a sprinkling of higher quality mid-cap growth companies. An excellent
example would be Royal Caribbean Cruises Ltd., which was one of the top
contributors to performance during the 12 months.
At the end of the fiscal year, about 70% of net assets were invested in the
large-cap, U.S. companies, with about 15% invested in mid-cap stocks. Within
this general framework, we sometimes trimmed back the holdings of companies
after their prices had risen dramatically, even buying them back
opportunistically if they became more attractive again after a price correction.
As a by-product of our concern about volatility and high valuations of many
stocks, the cash and cash-equivalent weighting of the Fund rose from 4% to 13.3%
of net assets during the year. Most of that increase came in the final two
months of the fiscal year as we became increasingly concerned about the impact
both of the Asian currency crisis and of questions about political leadership in
Washington. This relatively high cash level is not necessarily permanent,
however. We may re-invest proceeds opportunistically as we see attractive
valuations and if the stock market shows signs of stabilizing.
Top 5 Industries
----------------
(as a percentage of net assets)
Finance & Insurance and Banks 18.5%
..............................................................................
Healthcare Products & Services 13.1%
..............................................................................
Information Services & Technology 10.2%
..............................................................................
Oil / Energy 8.1%
..............................................................................
Retailing & Wholesale 6.0%
..............................................................................
- --------------------------------------------------------------------------------
What sectors, or industries, did you emphasize?
- --------------------------------------------------------------------------------
The greatest emphasis was in financial services, technology, health care --
including pharmaceuticals -- and consumer staples, such as beverages and
household products.
Financial services accounted for about 19% of net assets on July 31, despite
being trimmed back somewhat during the final months of the fiscal year. Among
the holdings that we have reduced are some large, regional banks as the
consolidation trend in the industry appeared to move from the regional banks
toward mergers-of-equals among very large institutions. For example, the
largest financial services positions at the end of the fiscal year, were
American International Group, a global leader in finance, and Travelers Group,
Inc., which has announced a pending merger with Citicorp. One of the major
contributors to performance during the year, particularly in the last six
months, was Morgan Stanley-Dean Witter, another company that is benefiting from
merging and gaining additional cross-selling opportunities. We also have been
interested in investing in financial companies that are leaders in their niches,
including the Federal National Mortgage Association (Fannie Mae) and Associates
First Capital, a leading consumer lender that is a spin-off of Ford Motor Co.
Technology accounted for about 10% of net assets on July 31. We have not
invested broadly in technology, but have owned the stocks of major industry
leaders, including IBM, Intel and Microsoft. In addition, we have owned leaders
in specific market segments, including Sun Microsystems, Gateway Computers, and
EMC, a leader in disc storage. We also have tried to take advantage of emerging
opportunities caused by changes in telecommunications systems and technologies
and the building of integrated communications networks throughout the world.
Among our significant holdings are WorldCom and Cisco Systems, both of which
have been strong contributors to performance.
Healthcare, including pharmaceuticals, accounted for about 13% of net assets at
the end of the fiscal year, even though it was slightly down from a year earlier
4
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Blue Chip Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
because we have taken profits from some successful holdings. Longer term, we
see strong opportunities in the pharmaceutical industry because of the steady
flow of interesting new products and the strong demand caused by the aging of
the population. This industry also continues to consolidate, as illustrated by
the pending merger of American Home Products Corp., a major holding of the Fund,
and Monsanto.
Consumer staples, including beverages and consumer products, accounted for about
12% of assets as of July 31. While this is not an over-weighting, it continues
to be well-represented as domestically oriented consumer companies continue to
produce attractive earnings.
Top 10
Equity Holdings
---------------
(as a percentage of net assets)
-------------------------------
General Electric Co. 3.3%
..............................................................................
Microsoft Corp. 2.8%
..............................................................................
American Home Products Corp. 2.2%
..............................................................................
Texaco, Inc. 2.1%
..............................................................................
British Petroleum Plc, ADR 1.8%
..............................................................................
Coca Cola Co. 1.8%
..............................................................................
Merck & Co., Inc. 1.8%
..............................................................................
Wal-Mart Stores, Inc. 1.7%
..............................................................................
Bristol-Myers Squibb Co. 1.6%
..............................................................................
Travelers Group, Inc. 1.6%
..............................................................................
- --------------------------------------------------------------------------------
What areas have been disappointing?
- --------------------------------------------------------------------------------
Real estate investment trusts, or REITs, have been a disappointment and we have
reduced our holdings substantially, from about 5% of net assets to about 1%.
The market performance of this industry has slumped as investors favored stable
growth companies over yield-oriented companies. There also has been concern
about possible over-building in commercial real estate.
Other disappointments include Analog Devices, a semiconductor company that has
been hurt by the Asian crisis, and Cendant, a consumer services company that has
encountered questions about the reliability of its reported earnings. We have
eliminated our positions in both companies entirely. Philip Morris also has
been disappointing, primarily because of the tobacco controversy.
- --------------------------------------------------------------------------------
What is your outlook?
- --------------------------------------------------------------------------------
We expect continued volatility in the market. In this environment, we plan to
maintain our concentration on fundamental analysis and individual company stock
picking. We expect to emphasize global leaders that understand how to manage in
periods of volatility, both in their businesses and in the stock market. We
also will look for leaders in specific market niches and undervalued businesses.
Given the unsettled market, our emphasis on fundamental research and individual
stock selection should help us find attractively priced opportunities created by
the market volatility and the possibility of over-corrections. In addition,
while we have generally avoided investments in basic materials, we have added
opportunistically to our holdings in the oil industry, which we believe should
ultimately rebound from its recent difficulties.
We have the flexibility to become more defensive if we believe conditions are
worsening, and we also have the ability to increase our weightings in medium-
sized companies should market leadership start changing. The Fund's primary
emphasis, however, should remain with the leading large-capitalization
companies. We believe their quality and liquidity should continue to support
performance in an uncertain period.
5
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Growth and Income fund
- --------------------------------------------------------------------------------
Fund at a Glance as of July 31, 1998
With the sharp decline in the stock market at quarter end, cash reserves began
to be employed in purchasing quality companies with above-average growth
prospects.
Portfolio
Management
--------------------------
[PICTURE OF STEPHEN A. LIEBER APPEARS HERE]
Stephen A. Lieber
Tenure: July 1997
[PICTURE OF GARY R. BUESSER APPEARS HERE]
Gary R. Buesser, CFA
Tenure: July 1997
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[STYLE BOX APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 6/30/98.
The Equity Style Box placement is based on a fund's price-to-earnings and price-
to-book ratio relative to the S&P 500, as well as the size of the companies in
which it invests, or median market capitalization.
/1/Source: 1998 Morningstar, Inc.
- --------------------------------------------------------------------------------
Performance and Returns*
- --------------------------------------------------------------------------------
Class A Class B Class C Class Y
Inception Date 1/3/95 1/3/95 1/3/95 10/15/86
................................................................................
Average Annual Returns
................................................................................
1 year with sales charge 5.97% 5.44% 9.47% n/a
................................................................................
1 year w/o sales charge 11.26% 10.44% 10.47% 11.56%
................................................................................
3 years 19.52% 19.93% 20.64% 21.81%
................................................................................
5 years -- -- -- 19.25%
................................................................................
10 years -- -- -- 16.75%
................................................................................
Since Inception 23.25% 23.57% 24.08% 15.24%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
12-month income dividends
per share $0.13 -- -- $0.20
................................................................................
12-month capital gain
distributions per share $1.01 $1.01 $1.01 $1.01
................................................................................
* Adjusted for maximum applicable sales charge
- -------------------------------------------------------------------------------
LONG TERM GROWTH
- -------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
S&P 400 Lipper Growth &
Date Class A S&P 500 Index Mid-Cap Index Income Fund Average CPI
<S> <C> <C> <C> <C> <C>
1/3/95 9,525 10,000 10,000 10,000 10,000
Jul-95 11,787 12,420 12,359 12,076 10,187
Jul-96 13,529 14,478 13,321 13,781 10,485
Jul-97 18,992 22,026 19,359 19,843 10,721
Jul-98 21,130 26,273 23,015 22,139 10,902
</TABLE>
Comparison of change in value of a $10,000 investment in Evergreen Growth and
Income Fund Class A, the Standard & Poor's 500 Index (S&P 500), the Standard and
Poor's 400 Mid-Cap Index (S&P 400), the Lipper Growth & Income Funds Average
(LGIFA), and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. 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 S&P 500 Index, the S&P 400 Index, and the Lipper Growth
& Income Funds Average are unmanaged market indexes and 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.
6
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Growth and Income fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
- --------------------------------------------------------------------------------
What was the investment performance in the fiscal year?
- --------------------------------------------------------------------------------
The Evergreen Growth and Income Fund Class A, B, C, and Y shares returned
11.26%, 10.44%, 10.47%, and 11.56% respectively, for the fiscal year ended July
31. These returns are unadjusted for applicable sales charges. The performance
reflected a reversal in the fourth quarter of the fiscal year after significant
gains in the first three quarters. The Fund's Class Y shares exceeded the
11.21% performance of the S&P 400 Mid-Cap Index, and even in the weak fourth
quarter of the fiscal year, outperformed the S&P 400 Mid-Cap Index by 0.95%.1
The Fund held an above-average cash position (approximately 20% of assets)
during much of the fiscal year, because we judged that market segments were
overvalued, and together with international economic volatility, might provide
attractive purchase opportunities. With the sharp decline in the stock market at
quarter end, cash reserves began to be employed in purchasing quality companies
with above-average growth prospects.
Portfolio
Characteristics
---------------
(as of 7/31/98 unless noted)
Total Net Assets $2,147,320,878
................................................................................
Number of Holdings 282
................................................................................
P/E Ratio* 21.9x
................................................................................
Beta* 0.91
................................................................................
*as of 6/30/98
- --------------------------------------------------------------------------------
What drove the Fund's performance?
- --------------------------------------------------------------------------------
Considering the cautious cash position, the invested portfolio demonstrated
strong performance. The leadership in performance came from a diverse group of
companies, with the strongest in the broadcasting and communication fields,
where we had established positions earlier with the expectation of significant
benefits from both deregulation and growth. Six of the top ten performers in
the Fund were in this category, four of which had gains of over 100% in the
fiscal year; Mediaone Group, Inc., Chancellor Media Corp., Young Broadcasting
Inc., Class A, and Century Telephone Enterprises, Inc. Pharmaceutical
commitments also provided a group of performance leaders: Pfizer, Inc., +83.2%;
Schering-Plough Corp., +76.5%; and Warner-Lambert Co., +73.7%.
Many issues added to the portfolio during the fiscal year provided outstanding
gains. These gains were led by +105.2% in the shares of Lowe's Companies, Inc.;
+98.8% in the shares of Warner-Lambert Co.; +96.6% in the shares of Kansas City
Southern Industries, Inc.; and +67.9% in the shares of Home Depot, Inc. These
top four led a group of 25 purchases which provided gains of 30% or more.
Top 10
Equity Holdings
---------------
(as a percentage of net assets)
McKesson Corp. 1.5%
................................................................................
Webster Financial Corp. 1.5%
................................................................................
Kansas City Southern Industries, Inc. 1.4%
................................................................................
Lincare Holdings, Inc. 1.2%
................................................................................
Jacor Communications, Inc. 1.2%
................................................................................
Time Warner, Inc. 1.1%
................................................................................
Schering-Plough Corp. 1.0%
................................................................................
Pittston Brink's Group 1.0%
................................................................................
Policy Management Systems Corp. 1.0%
................................................................................
Burlington Northern Santa Fe 1.0%
................................................................................
Several major gains were the result of merger and acquisition offers for our
holdings. Evergreen Media Corp. was acquired by Chancellor Media Corp., and
provided a +109.4% return to the Fund in the fiscal year, and Carson Pirie Scott
& Co. was acquired by
/1/ The Fund will be using the S&P 400 Mid-Cap Index as a benchmark going
forward. Previously, the Fund was compared to the S&P 500 which is a large cap
index. The Fund invests in stocks of predominantly small to mid-sized companies
and, therefore, the S&P 400 Mid-Cap Index is more appropriate.
7
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Growth and Income Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
Proffitt's, Inc., with a +72.3% increase. A total of 22 companies in the
portfolio either completed mergers or acquisitions, or had them pending at the
end of the fiscal year. The financial group represented the largest number of
these transactions; the pending SunTrust Banks, Inc. bid for Crestar Financial
Corp. provided a +230.3% gain from the acquisition price in 1996; Central
Fidelity Banks, Inc. acquisition, a +183.4% gain; Life Bancorp, Inc., a +44.5%
gain; Life Re Corp., a +57.3% gain; and Firstar Corp., a +33.2% gain (the latter
two are pending transactions). We view merger and acquisition offers for Fund
holdings as a validation of our original analysis of them as undervalued issues.
The results of the fiscal year sustained this thesis, with the range of
acquisitions across ten industries suggesting that a continued broad analytical
search for undervaluation is an appropriate long-term strategy for the Fund.
- --------------------------------------------------------------------------------
Where were the disappointments in the fiscal year?
- --------------------------------------------------------------------------------
The major disappointments were among smaller companies, especially those
negatively impacted by the technology market slowdown, or temporary adversities
caused by the Asian financial crisis. Illustratively, we had sold almost half
of the Fund's position in specialty electronic components manufacturer, Unitrode
Corp., early in the fiscal year, with a profit of over 128.8%. We held the
balance with a view toward a longer term optimism, holding a much reduced
position. Nonetheless, with a slow-down in the electronics components industry
by fiscal year-end, the stock had declined 56.1%. In the case of other issues,
such as KLA-Tencor Corp., we had similarly realized major gains (+115.0%), and
then replaced the position at much lower prices. By year-end, however, even the
low price purchases had declined in value by 20.1%. Among larger companies, our
largest decline was in the shares of Union Pacific Corp., 40.4%. We
considerably enlarged the position in this leading railroad system when the
stock fell in value due to the problems of congestion involving the complexities
of integrating the newly acquired Southern Pacific Rail Corp. We believe Union
Pacific's railroad system will recover its previous high earnings power when it
overcomes its short-term problems.
Top 5 Industries
----------------
(as a percentage of net assets)
Healthcare Products & Services 11.4%
................................................................................
Banks 9.1%
................................................................................
Industrial Specialty Products & Services 6.8%
................................................................................
Finance & Insurance 6.3%
................................................................................
Publishing, Broadcasting & Entertainment 4.6%
................................................................................
The top performing groups for the fiscal year were Communications Systems and
Services, +91.1%; Food & Beverage Products, +47.8%; Electric Utilities, +34.6%;
Retail & Wholesale, +33.8%; Telecommunications Services and Equipment, +33.0%;
and Health Care Products and Services, +31.6%. The weakest performers were: Oil
Field Services, down 42.5%, and Information Services and Technology, down 24.6%.
The decline in energy prices toward the end of the fiscal year was a source of
adverse stock performance. The Fund's oil field service company holdings are
concentrated in areas we believe will not be as negatively impacted as the
industry, on average. Our concentration is on deep water drilling companies,
where the very large scale of equipment mitigates against an excess supply
forcing down capacity utilization and day rates.
- --------------------------------------------------------------------------------
How is the Fund positioned for the new fiscal year?
- --------------------------------------------------------------------------------
Anticipating the volatility and the probability of price declines, the Fund has
held a substantial portion of its assets in short-term cash equivalents. This
has given management the opportunity to utilize this sizable balance for the
careful purchase of undervalued securities in periods of market weakness. As
the stock market deteriorated toward the end of the fiscal year
8
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Growth and Income Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
and into August, we have been actively increasing stock investments. The
deterioration was particularly marked among smaller companies, as evidenced by
the 14% decline in the S&P Mid-Cap Index and the 20% decline in the Russell 2000
Index from their April 22 highs through August 24. The performance of these
indices underlines the extent to which the stock market penalized smaller to
mid-capitalization companies, while rewarding larger companies and,
particularly, the higher price/earnings ratio group.
Our "value timing" investment strategy is focused on long-term capital gains in
companies which are undervalued in relation to their earnings growth, cash flow,
and asset realization possibilities. We are taking advantage of weakness in the
pricing of financial institutions to add to the Fund's holdings in banks,
especially mid-sized regional banks, which will play an important role in future
industry consolidations. We continue to add to holdings in the securities
brokerage and investment banking field where positions were established in the
1998 fiscal year. This has proven a highly rewarding group, beginning with our
purchase of Edwards (A.G.), Inc. early in the year, and followed by Lehman
Brothers Holdings, Inc. and Paine Webber Group, Inc. We anticipate both growth
for this industry and a continuing trend of acquisitions with the building of
multi-faceted financial service businesses.
The portfolio is further participating in the utility industry, based on
restructuring opportunities. In its fiscal year, the Fund had a +54.5% increase
from its purchase of Energy East Corp. (formerly New York State Electric and Gas
Corp.), which is in the process of restructuring. Toward the end of the year, a
position was established in Marketspan Corp., the merger of Brooklyn Union Gas
Co. and Long Island Lighting Co. Our emphasis on the growth possibilities of
the technologies of biological science and the pharmaceutical industry
continues, with a recent increase in our investment in Perkin-Elmer Corp. (whose
genetics instrument technology is a leading one), and Beckman Coulter, Inc.
(whose leadership in analytical instruments is expected to be accelerated by a
recent merger).
Several real estate investment trust positions were recently increased, because
the market setback which this industry has had since its strong performance in
the fourth quarter of 1997 has created meaningful new values. For the first
time in many months, numbers of well-established real estate investment trusts
are selling below the indicated value of their underlying property holdings.
In summary, undervalued growth opportunities continue to be the central goal of
this Fund, utilizing the "value timing" strategies which are at the core of its
twelve year performance record.
Will the Fund continue to hold a large cash reserve?
Our objective is to have a more normal cash reserve position, and an almost
fully invested strategy. Market and individual company setbacks are providing
the "value timing" opportunities to effectively utilize the cash reserves. For
example, an inventory problem at Penney (J.C.) Co., Inc. developed during a
particularly strong retail period, led to an over 20% decline in its stock
price. We then began to accumulate this stock for the Fund, and at this
writing, have established a meaningful position. Similarly, a setback
experienced in the demand for chemical products led us to increase the position
in Du Pont (E.I.) De Nemours & Co., Inc. Anticipating recovery because of new
products, we saw a "value timing" opportunity in the shares of Acuson Corp., a
leading ultrasound company, which should allow it to increase market share in
its growth medical technology industry. In these, and in many other cases, our
intensive research effort is expected to provide opportunities to capitalize on
the cautious positioning which we established for the Fund in the 1998 fiscal
year. It should form the base for significant long-term capital appreciation.
9
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Income and Growth Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of July 31, 1998
The Fund's performance was helped by investments in companies in a number of
different industries, including: healthcare, banks and thrifts,
telecommunications, and consumer-related stocks.
Portfolio
Management
- --------------------------------------------------------------------------------
[PICTURE OF NOLA MADDOX FALCONE APPEARS HERE]
Nola Maddox Falcone, CFA
Tenure: August 1978
[PICTURE OF IRENE D. O'NEILL APPEARS HERE]
Irene D. O'Neill
Tenure: December 1997
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[STYLE BOX APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 6/30/98.
The Equity Style Box placement is based on a fund's price-to-earnings and price-
to-book ratio relative to the S&P 500, as well as the size of the companies in
which it invests, or median market capitalization.
/1/Source: 1998 Morningstar, Inc.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Performance and Returns*
- --------------------------------------------------------------------------------
Class A Class B Class C Class Y
Inception Date 1/3/95 1/3/95 1/3/95 8/31/78
<S> <C> <C> <C> <C>
................................................................................
Average Annual Returns
................................................................................
1 year with sales charge 2.80% 2.29% 6.16% n/a
................................................................................
1 year w/o sales charge 7.93% 7.13% 7.13% 8.16%
................................................................................
3 years 12.55% 12.77% 13.56% 14.68%
................................................................................
5 years -- -- -- 10.90%
................................................................................
10 years -- -- -- 10.78%
................................................................................
Since Inception 14.85% 14.99% 15.56% 14.25%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
30-day SEC Yield 2.16% 1.50% 1.60% 2.53%
................................................................................
12-month income dividends
per share $ 1.02 $ 0.85 $ 0.85 $ 1.08
................................................................................
12-month capital gain
distributions per share $ 1.59 $ 1.59 $ 1.59 $ 1.59
................................................................................
</TABLE>
* Adjusted for maximum applicable sales charge
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class A Wilshire 5000 LIFA CPI
1/3/95 9,525 10,000 10,000 10,000
Jul-95 10,962 12,415 11,504 10,187
Jul-96 11,847 14,239 12,602 10,485
Jul-97 15,210 20,960 15,440 10,721
Jul-98 16,409 25,821 16,727 10,902
Comparison of change in value of a $10,000 investment in Evergreen Income and
Growth Fund Class A, the Wilshire 5000 Index, the Lipper Income Funds Average
(LIFA), and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. 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 Wilshire 5000 Index and the Lipper Income Funds Average
are unmanaged market indexes and 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.
10
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Income and Growth Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform during the year?
In the fiscal year ended July 31, 1998, the Fund sustained its above-average
dividend distributions. For Class Y shares, the oldest class, these dividends
were $0.27 per share each quarter, providing a yield in the top quartile of the
Lipper Income Funds category. The Class Y shares have been able to sustain at
least this level of dividend for the past 13 years. Yet, the Class Y shares have
had an average annual total return of 14.25% since inception of the Fund on
August 31, 1978. During the 12-month period that ended on July 31, 1998, the
Fund's Class Y shares had a return of 8.16%. Class A, B and C shares had total
returns of 7.93%, 7.13% and 7.13% respectively, unadjusted for applicable sales
charges. During the same period the average return on the Lipper Income Funds
category was 8.37% and the Wilshire 5000 Index had a return of 17.05%.
Portfolio
Characteristics
---------------
(as of 7/31/98 unless noted)
Total Net Assets $950,653,827
................................................................................
Number of Holdings 150
................................................................................
P/E Ratio* 18.8x
................................................................................
Beta* 0.87
................................................................................
*as of 6/30/98
How would you describe the long-term strategy of the Fund?
The Fund is designed to be an income-producing alternative to bond investing
while providing growth for greater protection against inflation. The investment
strategy uses high yield undervalued convertible bonds, convertible preferred
stocks, and common stocks to enhance both the Fund's income and defensive
quality while aiming for significant capital appreciation.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(as a percentage of net assets)
[PIE CHART APPEARS HERE] Common Stock -- 65.7%
Convertible Preferred Stock -- 30.1%
Convertible Debentures -- 3.3%
Cash/Cash Equivalents -- 0.9%
What were some of the major contributors to performance?
The Fund's performance was helped by investments in companies in a number of
different industries, including: healthcare, banks and thrifts,
telecommunications, and consumer-related stocks.
Within the general health group, a leading performer was Bristol-Myers Squibb
Co., which has produced a steady flow of new products that helped propel the
company stock to a 44.7% return during the year. Another leading performer in
the health group was ADAC Laboratories. This company has introduced an
important imaging device that helps determine the spread of cancer. With strong
revenue growth, this company's stock had a return of 39.8% during the fiscal
year. A third health-related company that was a significant performer was
Shared Medical Systems Corp., which provides computerization services that help
hospitals and other health providers increase their operating efficiency. The
stock in this company was up 41.4% during the fiscal year.
One of the principal investment themes at Evergreen is to invest in companies
that we believe are temporarily
11
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Income and Growth Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
out of favor in the stock market, but have attractive underlying value. We call
this the "value timing" strategy. A good example of this strategy in action was
the Fund's investment in American Home Products, a major pharmaceutical company.
The Fund purchased the stock on September 18, 1997, after the company's stock
price had suffered a steep decline in the face of the controversy over the
effects of the weight-control drug Fen-Phen. Our analysis indicated that the
market had over-reacted to the potential liability and that the company's stock
price was significantly undervalued. The stock produced a return of 46.4% for
the Fund from the investment to the end of the fiscal year.
Consolidation has helped the investments in the bank and thrift industries,
despite a slowdown in merger announcements by smaller banking institutions
during the second half of the fiscal year as attention turned to merger
announcements of very large banks. Among the investments that generated large
returns for the Fund were several banks and thrifts that were acquired by larger
banks. They included Firstbank of Illinois Co., which produced a return of 365%
since the initial investment in March, 1991; Hudson Chartered Bancorp Inc.,
produced a 367% return since the Fund's investment in December, 1992; and Eagle
Financial Corp., which produced a 280% return since the investment in November,
1992.
Among banks that have not been taken over, the best performers were M&T Bank
Corp. (formerly First Empire) of Buffalo, New York, which rose 59.3% during the
year, and First American Corp. of Tenn., which took over another Fund holding;
Deposit Guaranty Corp. The investment in First American returned 67.3% during
the year.
Top 10
Equity Holdings
---------------
(as a percentage of net assets)
-------------------------------
Telecom Corp. New Zealand Ltd. 4.1%
................................................................................
AirTouch Communications, Inc., 6.00%, Conv. Pfd. 3.6%
................................................................................
Qualcomm Financial Trust I, 5.75%, Conv. Pfd. 3.3%
................................................................................
Marketspan Corp. 3.0%
................................................................................
Wendy's Financing I, 5.00%, TECONS 2.8%
................................................................................
Houston Industries, Inc., 7.00%, ACES 2.8%
................................................................................
Armstrong World Industries, Inc. 2.1%
................................................................................
Meditrust Co. REIT 2.0%
................................................................................
Bankers Trust Corp. 2.0%
................................................................................
Peoples Energy Corp. 1.9%
................................................................................
Telecommunications-related investments helped the Fund significantly. In fact,
the leading contributor to performance during the fiscal year was Frontier
Corp., which was up 67.3%. This company, the former Rochester Telephone
Company, has expanded its long distance footprint through a savvy investment in
the Quest Communications network, a nationwide state of the art fiber optic
network which provides integrated voice, data and video communications.
Frontier is also a potential acquisition candidate. Another telecommunications
investment that helped the Fund's performance was the Air Touch Communications
Convertible Preferred shares which were up 52% in the year. This company
provides telecommunications services around the world. Worldcom, Inc. which has
announced its intention to buy MCI, also provided a return of 54.8% for the Fund
during the year as investors began to understand the potential for global growth
in the telecommunications industry. These three telecommunications companies
have potential to make inroads in telecom markets less encumbered by regulation
such as that which impacts the Regional Bell Operating Companies.
12
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Income and Growth Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
Consumer-related stocks were a fourth group that helped performance. One of the
leading contributors was La-Z-Boy Chair Co., which had a 51.5% return since the
Fund's investment on August 4, 1997.
The primary weak areas were in the investments in foreign stocks, energy stocks
and real estate investment trusts (REITs). Foreign investments, particularly
Australian investments, suffered in sympathy with the economic crisis in Asia.
During the year, we significantly reduced the foreign weighting in the Fund to
decrease the vulnerability to problems in Asia.
Energy-related stocks were hurt by the mild winter reducing the need for heat
and the worldwide slump in oil prices, while real estate stocks in general
lagged the overall market.
Top 5 Industries
----------------
(as a percentage of net assets)
-------------------------------
Banks 16.1%
................................................................................
Utilities - Electric 9.2%
................................................................................
Real Estate 7.4%
................................................................................
Telecommunication Services & Equipment 7.4%
................................................................................
Utilities - Gas 7.1%
................................................................................
What Is your Outlook?
We expect the U.S. economy to grow with inflation remaining low. The equity
market should be positive, particularly with the continued flow of funds into
stocks and the persistence of merger-and-acquisition activity. We do have
concerns, however, about the slowdown in Asia and the effect it is having on
manufacturing employment in the United States. Because of this, we believe the
market may experience continued volatility, which should produce opportunities
for our value timing strategy. During the past year, the performance of the
major market indices has been helped chiefly by a very narrow base of stocks of
a relatively few large companies. We believe this has left very attractive
investment opportunities in the securities of other companies. We believe our
research discipline should enable us to identify opportunities to buy high-
quality issues with attractive yield at attractive valuations. This positive
outlook, combined with the possibility of further gains from merger-and-
acquisition activity, gives us confidence for improving performance during the
coming year.
13
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Small Cap Equity Income Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of July 31, 1998
We continued to manage the Fund with a consistent emphasis on undervalued income
securities of small companies.
Portfolio
Management
- --------------------------------------------------------------------------------
[PICTURE OF NOLA MADDOX FALCONE APPEARS HERE]
Nola Maddox Falcone, CFA
Tenure: October 1993
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE1
- --------------------------------------------------------------------------------
[STYLE BOX APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 6/30/98.
The Equity Style Box placement is based on a fund's price-to-earnings and price-
to-book ratio relative to the S&P 500, as well as the size of the companies in
which it invests, or median market capitalization.
/1/Source: 1998 Morningstar, Inc.
- --------------------------------------------------------------------------------
Performance and Returns*
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Y
Inception Date 1/3/95 1/3/95 1/24/95 10/1/93
................................................................................
Average Annual Returns
................................................................................
1 year with sales charge (1.66%) (2.51%) 1.49% n/a
................................................................................
1 year w/o sales charge 3.24% 2.49% 2.49% 3.57%
................................................................................
3 years 17.70% 18.03% 18.67% 19.99%
................................................................................
Since Inception 19.30% 19.51% 20.01% 15.62%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
12-month income dividends
per share $ 0.28 $ 0.19 $ 0.19 $ 0.33
................................................................................
12-month capital gain
distributions per share $ 0.19 $ 0.19 $ 0.19 $ 0.19
................................................................................
* Adjusted for maximum applicable sales charge
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class A Russell 2000 Wilshire Small Cap Value CPI
1/3/95 9,525 10,000 10,000 10,000
Jul-95 10,984 12,100 11,736 10,187
Jul-96 12,750 12,936 12,957 10,485
Jul-97 18,214 17,256 18,016 10,721
Jul-98 18,804 19,777 18,965 10,902
Comparison of change in value of a $10,000 investment in Evergreen Small Cap
Equity Income Fund Class A, the Russell 2000 Index, Wilshire Small Cap Value
Index, and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. The Russell 2000 Index and the Wilshire Small Cap Value
Index are unmanaged market indexes and 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.
14
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Small Cap Equity Income Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform?
During the past year, the Fund faced a difficult market climate not only for
small cap stocks, but also for value-oriented stocks. This has been a market
where large cap stocks with high price/earnings ratios excelled as small caps
lagged and lost ground, especially in the latter part of the Fund's fiscal year.
An Evergreen study of the performance of various sectors of the market during
the first seven months of 1998 showed that large companies in the top 25% in
terms of price/earnings ratio had a total return of almost 50%. During the same
seven-month period, small cap companies in the lowest 25% in terms of
price/earnings ratios had a return of (5%). Nevertheless, for the second
consecutive year, the Fund was listed by Barron's, a leading financial magazine,
among the top 100 Funds in the United States based on risk-adjusted performance
for the preceding three years.
For the 12 months that ended on July 31, 1998, the Fund's Class Y shares had a
total return of 3.57%. The Class A shares had a return of 3.24%, while Class B
and C shares each had returns of 2.49%, beating the benchmark Russell 2000
Index, a commonly used barometer of the small company stock market, which had a
return of 2.31%. These returns are unadjusted for applicable sales charges.
The Wilshire Small Cap Value Index had a total return of 5.27%. Since the Fund's
inception on October 1, 1993, the Small Cap Equity Income Fund's Class Y shares
have had a cumulative total return of 101.74%, compared to a 77.64% return of
the Russell 2000 and an 82.72% return of the Wilshire Small Cap Value Index.
Portfolio
Characteristics
---------------
(as of 7/31/98 unless noted)
----------------------------
Total Net Assets $307,086,083
................................................................................
Number of Holdings 150
................................................................................
P/E Ratio* 15.1x
................................................................................
Beta* 0.54
................................................................................
*as of 6/30/98
What strategies did you emphasize during the year?
We continued to manage the Fund with a consistent emphasis on undervalued income
securities of small companies. We believe over the long run, this will give the
Fund the opportunity to generate strong performance with more price protection
in periods of volatility than the typical small company stock fund.
We sought out securities of small companies with market capitalizations of less
than $1 billion that had one or more of the following characteristics:
. Low cash-flow multiples or attractive prices relative to the cash flow they
are able to generate, with an operating catalyst to propel earnings growth.
. Hidden assets that management intends to deploy to achieve growth.
. Stock prices that are temporarily depressed because of some event in the
market and that have the opportunity to recover based upon our analysis of
future cash flows. These are candidates for Evergreen's "value timing"
strategy which seeks out temporarily out-of-favor stocks.
15
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Small Cap Equity Income Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
. Restructuring enterprises which are re-allocating capital resources to
improve profitability.
. Potential merger-and-acquisition candidates that can take advantage of
consolidation trends in their industries or the general economy.
The Fund invests exclusively in securities that offer yield. In industries such
as technology where stocks traditionally have not paid dividends, we have looked
for opportunities among convertible securities as a way to invest in growth with
yield. We also have found that investments in convertible preferred stock and
convertible debentures also offer more price protection and lower volatility
than investments in the underlying stock.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(as a percentage of net assets)
[PIE CHART APPEARS HERE] Common Stock -- 69.3%
Convertible Preferred Stock -- 12.0%
Convertible Debentures -- 13.8%
Cash/Cash Equivalents -- 4.9%
Top 10
Equity Holdings
---------------
(as a percentage of net assets)
-------------------------------
Curtiss Wright Corp. 3.0%
................................................................................
Boston Acoustics, Inc. 2.9%
................................................................................
Matthews International Corp. Cl. A 2.7%
................................................................................
CPI Corp. 2.5%
................................................................................
Owens & Minor Trust I, 5.375%, TECONS 2.2%
................................................................................
Hardinge Brothers, Inc. 2.1%
................................................................................
Lodgian Capital Trust I, 7.00%, CRESTS 1.8%
................................................................................
York Group, Inc. 1.8%
................................................................................
Hvide Capital Trust, 6.50%, Conv. Pfd. 1.8%
................................................................................
Knape & Vogt Manufacturing Co. 1.6%
................................................................................
What are some examples of the implementation of each of these strategies?
Let's look first at companies with low cash-flow multiples and catalysts for
earnings growth. A clear example is Knape & Vogt Manufacturing, which has made
drawer-operating systems for wood office furniture. This company, whose stock
is attractively priced and yet offers a 3 1/2% yield, is entering the metal desk
slide market, with a potential increase in sales of $30 million, or 17%. The
company can enter this market without any additional capital investments, which
means its return on capital has the potential to increase substantially. The
company also has shown an ability to operate more efficiently and reduce
inventories, using the proceeds from cost-savings to reduce debt.
An example of a company with a hidden asset is Curtiss-Wright Corp., which
manufactures components such as landing gear transmissions and flaps for Boeing
737's. This company had cash reserves equal to $7 per share of its stock, with
another $12 per share in over-funded pension contributions. Earlier this year,
it started using its cash reserves to make acquisitions that allowed it to
increase sales by 30%. Over the year, this company's stock has had a return of
43.5%.
The York Group, Inc., is an excellent example of how Evergreen's "value timing"
strategy can find attractive opportunities. The stock price of this casket
manufacturer fell from $23 to $16 on news that it had lost a major contract with
a customer that had been responsible for 20% of sales. Our analysis of the
company's remaining business, however, indicated that it was worth substantially
more than the current stock price. This company remains profitable, with a high
return on capital and an extremely strong position selling to independent
funeral home operators.
16
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Small Cap Equity Income Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
CPI Corp. illustrates the Fund's investment theme of investing in companies that
are re-structuring, or changing their capital allocation. This company sold its
underperforming photo finishing business to Kodak, and used the proceeds to buy
back one-third of the outstanding stock. Its principal remaining business is
operating portrait studios in Sears stores. This is a profitable, improving
business that generates strong cash flow.
How has the mergers-and-acquisition trend affected the Fund during the year?
Industry consolidation has had a huge impact on the Fund. During the year, 18
companies in the portfolio have either merged or been acquired or had
announcements of pending mergers. We have had 13 completed for an average gain
to the Fund of 89.6%.
Among acquisitions that have been completed, we have gains of: 352% in Kinetic
Concepts, Inc., purchased in July 1994; 257.8% from Hudson Chartered Bancorp,
Inc., purchased in January 1996; 117.7% from Computer Language Research
purchased in October 1993; 91.3% from California State Bank purchased in August
1997; 69.9% from People's Savings Financial Corp., purchased in December 1993;
and 55.7% from BGS Systems, Inc., purchased in July 1996. Currently, we have
five pending mergers or takeovers, the most recent of which is First Palm Beach.
Top 5 Industries
----------------
(as a percentage of net assets)
-------------------------------
Consumer Products & Services 10.5%
................................................................................
Banks 7.0%
................................................................................
Oil Field Services 6.0%
................................................................................
Utilities -- Gas 5.9%
................................................................................
Electrical Equipment & Services 5.8%
................................................................................
What industry sectors have helped the Fund's performance during the year?
Two areas stand out: banks and consumer products and services. Banks were the
best performing sector, despite a period in which the market's attention was
captured by news of mergers among very large financial companies. We believe,
however, that the consolidation trend will resume among the smaller companies,
to the benefit of the fund.
What sectors have not helped the Fund's performance?
Performance was not helped by the real estate investment trusts, or REITs, which
slumped during the year, or by investments in energy companies, which were hurt
by a mild winter and the effects of slumping oil prices. While energy-related
stocks were, in general, relatively poor performers during the period, the Fund
attempted to take advantage of temporary weakness in the energy sector to build
up its position. We believe that the price of oil ultimately should stabilize
and that values can be found among companies whose stocks had suffered unfairly
in the general industry slump.
17
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Small Cap Equity Income Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
What is your outlook?
We have a positive outlook for the Evergreen Small Cap Equity Income Fund
because of several trends we see, including:
. A continuation of the general consolidation trend in American industry;
. Signs of a growing recognition of the attractive values to be found among
small company stocks;
. Positive earnings reports from many small companies.
The general merger-and-acquisition trend is not losing steam. Deals totaling
$900 billion were announced during the first half of the year, and the U.S.
Department of Justice's Anti-Trust Division has estimated the total should reach
$1.75 trillion by the end of the year. The strong stock market that has been
favoring large company stocks has given the big companies high stock valuations
they can use as currency to buy smaller companies that have been reporting
stronger growth. Often, larger companies can buy fast-growing small companies
at prices that result in improved earnings-per-share performance for the larger
companies.
Moreover, investment and pension fund consulting companies increasingly are
recommending that their clients enlarge small company stock allocations in their
overall portfolios because of the attractive valuations. Any growth in
institutional investors' purchases of small company stocks should have a
significant effect on cash flow, and therefore stock prices, in the small stock
sector.
Finally, a large portion of the Fund's holdings have issued positive earnings
reports through the fiscal period, validating the value of the independent
research by the Evergreen investment team and supporting our view that small
company value investments that also offer yield have strong potential for the
remainder of 1998.
Funds that invest in stocks of small companies, also called small-cap stocks,
involve certain risks and, therefore, may not be appropriate for all investors.
Although they may offer the potential for greater long-term returns, they also
may experience greater price volatility due to their limited focus on a
particular industry, market, product, or service, or because they invest in
smaller, less established companies.
18
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Utility Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of July 31, 1998
We remain committed to our long-term strategy of pursuing quality utility
companies with strong industry positioning that offer investors a high income,
defensively oriented investment option.
Portfolio
Management
- --------------------------------------------------------------------------------
[PICTURE OF PAUL DILELLA APPEARS HERE]
Paul DiLella
Tenure: May 1996
[PICTURE OF DORIS KELLEY-WATKINS APPEARS HERE]
Doris Kelley-Watkins
Tenure: February 1997
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[STYLE BOX APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 6/30/98.
The Equity Style Box placement is based on a fund's price-to-earnings and
price-to-book ratio relative to the S&P 500, as well as the size of the
companies in which it invests, or median market capitalization.
/1/Source: 1998 Morningstar, Inc.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Y
Inception Date 1/4/94 1/4/94 9/2/94 2/28/94
................................................................................
Average Annual Returns
................................................................................
1 year with sales charge 11.73% 11.31% 15.31% n/a
................................................................................
1 year w/o sales charge 17.30% 16.31% 16.31% 17.60%
................................................................................
3 years 14.25% 14.44% 15.16% 16.34%
................................................................................
Since Inception 10.72% 10.79% 14.25% 13.70%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
12-month income dividends
per share $ 0.44 $ 0.36 $ 0.36 $ 0.48
................................................................................
12-month capital gain
distributions per share $ 1.12 $ 1.12 $ 1.12 $ 1.12
................................................................................
* Adjusted for maximum applicable sales charge
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class A S & P Utilities Index S & P 500 Index CPI
1/4/94 9,525 10,000 10,000 10,000
Jul-94 9,154 9,181 9,979 10,178
Jul-95 10,179 9,946 12,584 10,460
Jul-96 11,197 10,724 14,669 10,765
Jul-97 13,586 17,509 22,317 11,008
Jul-98 15,936 20,251 26,621 11,193
Comparison of change in value of a $10,000 investment in Evergreen Utility Fund
Class A, the Standard and Poor's Utility Index (S&P Utilities), the Standard and
Poor's 500 Index (S&P 500), and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. 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 S&P Utility Index and the S&P 500 Index are unmanaged
market indices and 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.
19
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Utility Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform over the past twelve months?
The Fund's Class A, B, C, and Y shares had a total return of 17.30%, 16.31%,
16.31% and 17.60%, respectively, for the year ended July 31, 1998. These
returns are unadjusted for applicable sales charges. The Fund's returns trailed
the 20.99% return of its benchmark, the S&P Utilities Index.
Portfolio
Characteristics
---------------
(as of 7/31/98 unless noted)
Total Net Assets $141,256,313
................................................................................
Number of Holdings 38
................................................................................
P/E Ratio* 18.6x
................................................................................
Beta* 0.73
................................................................................
*as of 6/30/98
How did the market environment impact performance during the fiscal year?
Over the past 12 months, we experienced an exceptionally narrow market advance
in which a select handful of the largest stocks surged while the majority of
companies lagged. For example, during the first six months of 1998 the ten
largest stocks in the S&P 500 rose 31.7%, while the equally weighted average of
all 500 stocks rose just 8.6%; amazingly, nearly a third actually declined.
In addition, investors have flocked to stocks which they perceive to have higher
prospects for growth, such as technology, while shunning higher dividend paying
companies such as utilities. Undoubtedly, the narrow market advance combined
with this rotation towards growth-oriented stocks had an adverse impact on the
Fund's performance. The simple fact that roughly 75% of the portfolio is
invested in utility stocks -- an income-oriented sector which lagged the broad
market substantially -- accounts for the Fund's rather dramatic underperformance
versus the S&P 500 Index.
Top 5 Industries
----------------
(as a percentage of net assets)
-------------------------------
Utilities -- Electric 56.7%
................................................................................
Utilities -- Telephone 14.4%
................................................................................
Utilities -- Gas 5.1%
................................................................................
Information Services & Technology 4.0%
................................................................................
Communication Systems & Services 3.3%
................................................................................
What adjustments did you make to the portfolio?
It has been extremely frustrating to watch the market climb higher while utility
stocks -- and utility funds -- continue to struggle. Despite any short-term
volatility, however, we remain committed to our long-term strategy of pursuing
quality utility companies with strong industry positioning that offer investors
a high income, defensively oriented investment option.
20
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Utility Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
During the final months of the fiscal period, we made some adjustments regarding
individual securities which we feel will benefit performance going forward. We
sold EVI Inc., a manufacturer of oilfield tools and equipment, due to a
deterioration in their earnings prospects, but not before capturing a solid
gain. With the proceeds from this sale, we purchased R&B Falcon Corp., a
worldwide provider of contract drilling services. We feel R&B Falcon represents
an attractively valued opportunity and was added following a substantial decline
in its share price as a result of plunging oil prices.
Top 10
Equity Holdings
---------------
(as a percentage of net assets)
Houston Industries, Inc. 6.1%
................................................................................
Sprint Corp. 6.0%
................................................................................
Companhia Paranaense de
Energia-Copel, Plc, ADR, Conv. Pfd. 3.8%
................................................................................
Marketspan Corp. 3.5%
................................................................................
AirTouch Communications, Inc., 6.00%, Conv. Pfd. 3.3%
................................................................................
BNDES Participacoes S.A., Conv. Pfd. 3.1%
................................................................................
Central Hudson Gas & Electric Corp. 3.1%
................................................................................
Pinnacle West Capital Corp. 3.0%
................................................................................
U.S. West, Inc. 3.0%
................................................................................
Felcor Lodging Trust, Inc. REIT 2.8%
................................................................................
What areas positively impacted performance?
The Fund's 14% position in Utilities -- Telephone, as of July 31, 1998, enjoyed
a relatively strong fiscal year despite a difficult period for the utility
sector in general. For example, three of the portfolio's holdings -- Ameritech,
U.S. West and Bellsouth -- posted total returns of 52%, 52% and 49%,
respectively. Other noteworthy non-telephone companies include Enron, up 43%,
and Houston Industries (exchangeable for Time Warner common stock), up 48%.
What is your outlook for the utility industry?
The utility industry has experienced some volatility over the past couple of
years as the effects of deregulation have intensified competition and changed
the operating environment within the utility sector. Subsequently, utility
companies are increasingly embracing mergers as an effective vehicle to gain
market share and diversify their source of earnings growth. We anticipate
consolidation among utility companies to continue going forward and are actively
searching for companies that will benefit from this trend.
We are also confident that as the market rotation toward growth-oriented issues
reverses itself, income-oriented stocks -- and the utility sector in particular
- -- will enjoy improved performance. We feel the Evergreen Utility Fund offers
investors an attractive investment option, especially considering the stock
market's current valuation. We continue to adhere to our long-term strategy of
providing shareholders a diversified, high income portfolio with defensive
characteristics.
21
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Value Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of July 31, 1998
We try to identify good companies with attractive stock prices where we can find
improvements in operating performance.
Portfolio
Management
- --------------------------------------------------------------------------------
[PICTURE OF MATTHEW D. FINN APPEARS HERE]
Matthew D. Finn, CFA
Tenure: March 1998
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[STYLE BOX APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 6/30/98.
The Equity Style Box placement is based on a fund's price-to-earnings and price-
to-book ratio relative to the S&P 500, as well as the size of the companies in
which it invests, or median market capitalization.
/1/Source: 1998 Morningstar, Inc.
- --------------------------------------------------------------------------------
Performance and Returns*
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Y
Inception Date 4/12/85 2/2/93 9/2/94 1/31/91
................................................................................
Average Annual Returns
................................................................................
1 year with sales charge 4.35% 4.18% 7.83% n/a
................................................................................
1 year w/o sales charge 9.55% 8.69% 8.74% 9.79%
................................................................................
3 years 17.89% 18.21% 18.95% 20.08%
................................................................................
5 years 16.19% 16.30% -- 17.62%
................................................................................
10 years 14.71% -- -- --
................................................................................
Since Inception 14.05% 15.41% 18.64% 16.85%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
12-month income dividends
per share $0.29 $0.12 $0.12 $0.35
................................................................................
12-month capital gain
distributions per share $4.38 $4.38 $4.38 $4.38
................................................................................
* Adjusted for maximum applicable sales charge
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class A S & P 500 Index CPI
Jul-88 9,525 10,000 10,000
Jul-89 12,580 13,193 10,498
Jul-90 13,322 14,051 11,004
Jul-91 14,841 15,844 11,494
Jul-92 16,426 17,870 11,857
Jul-93 17,741 19,430 12,186
Jul-94 19,070 20,433 12,523
Jul-95 22,926 25,768 12,869
Jul-96 25,310 30,037 13,245
Jul-97 35,996 45,698 13,544
Jul-98 39,434 54,510 13,772
Comparison of change in value of a $10,000 investment in Evergreen Value Fund
Class A, the Standard and Poor's 500 Index (S&P 500), and the Consumer Price
Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. 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 S&P 500 Index is an unmanaged market 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 an
index.
22
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Value Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform during the fiscal year?
The Fund performed positively during a period in which the stock market did not
favor the value style of investing. For the 12 months ended July 31, 1998, the
Evergreen Value Fund's Class A shares had a total return of 9.55%, while the
Class B shares had a total return of 8.69% and the Class C shares had a return
of 8.74%. These returns are unadjusted for applicable sales charges. The Class
Y shares had a return of 9.79% for the fiscal year. During the same 12-month
period, the S&P 500 Index had a return of 19.29% and the S&P's Barra Value Index
had a return of 13.33%.
Portfolio
Characteristics
---------------
(as of 7/31/98 unless noted)
Total Net Assets $990,822,366
................................................................................
Number of Holdings 93
................................................................................
P/E Ratio* 23.8x
................................................................................
Beta* 0.97
................................................................................
*as of 6/30/98
How would you describe the investment environment during the 12 months?
The environment has been dominated by concerns about economic activity in Asia
and the impact it will have on Asia's trading partners. Investors have been
taking the Asian crisis into consideration since the third and fourth quarters
of 1997, although we did have a great move in the U.S. stock market early in
1998. Two types of companies dominated the rally in the U.S. The first were
larger capitalization, stable growth companies which are less susceptible to a
fall-off in economic activity. The second were domestically oriented companies,
such as retailers. This rally appears to have peaked in July, before a
correction set in. Again, investors were concerned about the pace of economic
activity associated with the effects of Asia.
Worldwide, the impact of Asia also has been felt in emerging markets, including
Latin America and Russia. The U.S. consumer and the European industrial sectors
have been the most influential sources of the earnings of multi-national
corporations during the past year.
You became portfolio manager of the Fund, effective on March 16, 1998. How
would you describe your investment style?
The objective and the investment style of the Fund have not changed. We try to
identify good companies with attractive stock prices where we can find
improvements in operating performance. This is very consistent with the manner
in which previous managers have operated. We look for growth of capital first,
with income as a secondary objective.
The Fund invests primarily in value-oriented, large capitalization companies
with improving fundamentals. It is a value strategy that emphasizes quality
companies.
Top 5 Industries
----------------
(as a percentage of net assets)
-------------------------------
Banks 19.3%
................................................................................
Healthcare Products & Services 13.0%
................................................................................
Finance & Insurance 10.3%
................................................................................
Oil / Energy 8.6%
................................................................................
Information Services & Technology 7.1%
................................................................................
23
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Value Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
Within this context, what areas have you emphasized in managing the Fund?
The largest areas of emphasis have been in healthcare, financial services and
some technology. In terms of relative weightings versus the large-
capitalization, value indexes, the heaviest overweighting has been in
healthcare, predominately pharmaceutical companies. We have found in this
industry the best combination of revenue growth, reasonable valuations and
stability of earnings. In addition to increasing our overall weighting, we have
added new positions in companies such as Merck and Pharmacia & Upjohn. We also
sold the stocks of several companies when we became uncomfortable with their
valuation levels, including Tenet Healthcare Corp. and HEALTHSOUTH Corp.
Financial services companies accounted for nearly 30% of net assets at the end
of the period. This has been a significant area of emphasis, even though we are
somewhat underweighted versus the value indexes. We have found valuations that
are still relatively attractive and we have been able to invest in companies
that we believe can achieve their earnings estimates. In addition, we don't
think any downturn will be large enough to affect overall credit quality.
Moreover, we believe the Federal Reserve Board's disposition will be to lower
short-term rates, which should benefit financial services companies. Beyond
increasing the emphasis on the financial services industry overall, we have
added a number of specific companies to the portfolio, including Federal
National Mortgage Association and ReliaStar Financial, an insurance company.
We have emphasized technology because we have found attractive stock valuations
and we believe the long-term outlook for this industry remains favorable,
despite current concerns about economic activity. In technology, we have added
American Power Conversion and Gateway, while selling the Fund's holdings in 3Com
Corp., a networking company.
Top 10
Equity Holdings
---------------
(as a percentage of net assets)
-------------------------------
General Electric Co. 3.5%
................................................................................
Fleet Financial Group, Inc. 2.9%
................................................................................
Bristol-Myers Squibb Co. 2.4%
................................................................................
Wachovia Corp. 2.3%
................................................................................
BankBoston Corp. 2.1%
................................................................................
First Chicago NBD Corp. 2.1%
................................................................................
NationsBank Corp. 2.0%
................................................................................
Cisco Systems, Inc. 1.9%
................................................................................
Equity Residential Properties Trust REIT 1.9%
................................................................................
International Business Machines Corp. 1.9%
................................................................................
What areas have you de-emphasized?
We have reduced the emphasis on stocks of companies in economically sensitive
industries, which tend to be hurt in any economic slowdown. These include
companies in the chemicals, building materials, railroad, energy and metal
products and services. Among the stocks that we sold entirely were those of
Alcoa and Alumax in metal products and services; and Ashland, Tosco and Ultramar
Diamond Shamrock Corp., in energy. We don't expect that we will be emphasizing
the general area of basic materials until supply and demand again are in
balance.
24
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Value Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
What is your outlook?
In our view, the equity market is well on its way to discounting or taking into
consideration in its valuations of stocks, the effects of a slowdown in world
economic activity. This is not to say there may not be more bad news, perhaps
related to a possible slowdown in consumer demand in the United States or in
industrial expansion in Europe. Ultimately, however, we believe we will see an
easing of monetary policy in the major markets, such as the United States and
the United Kingdom. We also believe Japan's government will act to stimulate
the economy. At some point, investors will look beyond temporary dips in
earnings and the equity markets will rally.
With this outlook, we will continue to try to find good quality companies whose
stock prices may have been unduly penalized by short-term events. This should
give us some great opportunities to buy. We don't expect a deep slump. And
even in a slump, we believe we may be able to find companies that can prosper
despite being in out-of-favor industries, such as specialty chemicals.
25
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Fund to Total Return
- --------------------------------------------------------------------------------
Fund at a Glance as of July 31, 1998
We rely on fundamental analysis to determine a company's potential to grow
earnings and the risk to the stock if it fails to meet our targets.
Portfolio
Management
- --------------------------------------------------------------------------------
[PICTURE OF HARLAN R. SONDERLING APPEARS HERE]
Harlan R. Sonderling, CPA, CFA
Tenure: June 1998
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
- --------------------------------------------------------------------------------
[STYP BOX APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 6/30/98.
The Equity Style Box placement is based on a fund's price-to-earnings and price-
to-book ratio relative to the S&P 500, as well as the size of the companies in
which it invests, or median market capitalization.
/1/Source: 1998 Morningstar, Inc.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*
-------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Y
Inception Date 4/14/87 2/1/93 2/1/93 1/31/97
................................................................................
Average Annual Returns
................................................................................
1 year with sales charge 8.44% 8.01% 11.99% n/a
................................................................................
1 year w/o sales charge 13.85% 13.01% 12.99% 14.29%
................................................................................
3 years 22.14% 22.46% 23.13% --
................................................................................
5 years 16.45% 16.45% 16.65% --
................................................................................
10 years 14.65% -- -- --
................................................................................
Since Inception 12.81% 15.84% 15.95% 20.80%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
12-month income dividends
per share $ 0.19 $ 0.06 $ 0.06 $ 0.24
................................................................................
12-month capital gain
distributions per share $ 1.52 $ 1.52 $ 1.52 $ 1.52
................................................................................
* Adjusted for maximum applicable sales charge
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class A S & P 500 Index CPI
Jul-88 9,525 10,000 10,000
Jul-89 11,966 13,193 10,498
Jul-90 12,744 14,051 11,004
Jul-91 14,484 15,844 11,494
Jul-92 15,413 17,870 11,857
Jul-93 17,448 19,430 12,186
Jul-94 18,005 20,433 12,523
Jul-95 20,507 25,768 12,869
Jul-96 23,983 30,037 13,245
Jul-97 34,454 45,698 13,544
Jul-98 39,228 54,510 13,772
Comparison of change in value of a $10,000 investment in Evergreen Fund for
Total Return Class A, the Standard and Poor's 500 Index (S&P 500), and the
Consumer Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. 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 S&P 500 Index is an unmanaged market 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 an
index.
26
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Fund for Total Return
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform?
The Evergreen Fund for Total Return performed well relative to its peer group of
value-oriented, conservative equity mutual funds. For the 12 months ended
July 31, 1998, the Fund's Class A Shares had a total return of 13.85%, while the
Class B Shares had a return of 13.01%, and the Class C Shares had a return of
12.99%. These returns are unadjusted for applicable sales charges. The Class Y
Shares had a return of 14.29% during the period. For the same 12-month period,
the Standard & Poor's 500 Index had a return of 19.29%.
Portfolio
Characteristics
---------------
(as of 7/31/98 unless noted)
Total Net Assets $179,377,032
................................................................................
Number of Holdings 67
................................................................................
P/E Ratio* 20.7x
................................................................................
Beta* 0.98
................................................................................
*as of 6/30/98
How would you describe the investment environment during the 12-month period?
It was very favorable for stocks in general, although the market tended to
reward investments in larger capitalization, high growth companies, with high
price/earnings ratios, over more value- and yield-oriented styles, such as that
emphasized by the Fund. The 12-month period was marked by declining interest
rates, robust economic growth, strong employment, and low and diminishing
inflation. The Asian economic crisis started during the latter part of 1997,
and its effects on the U.S. economy and with the U.S. stock market were only
beginning to be felt in July of 1998.
What investment strategies were employed during the year, and have there been
any changes since you took over as portfolio manager on June 5, 1998?
The basic objective and strategies of the Fund remain the same. We seek total
return from a combination of capital growth and income. The strategy, which has
been in place since the Fund began 11 years ago, is to invest in U.S. stocks,
foreign stocks, bonds and money market instruments with the goal of earning more
consistent total returns, with less price fluctuation, than a portfolio of U.S.
stocks or bonds alone. In investing in stocks, the Fund emphasizes established
companies, principally larger capitalization stocks, with some mid-cap holdings.
We rely on fundamental analysis to determine a company's potential to grow
earnings and the risk to the stock if it fails to meet our targets.
Since taking over as portfolio manager, I have slightly increased the cash level
in the portfolio. When I became portfolio manager in June, about 6% of net
assets were invested in cash and cash-equivalent securities. At the close of
the fiscal year on July 31, 11.4% of net assets were in cash and cash-
equivalents, with about 82% in common stocks of U.S. corporations. I did this
mainly because of concerns about the high valuation levels of many stocks. We
sold fully valued stock holdings, but were unwilling to re-invest all the
proceeds at the high current prices of many stocks. We kept the proceeds in
cash rather than in longer-maturity fixed income securities because cash-
equivalent securities offered almost as much yield, but with much less price
risk.
27
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Fund to Total Return
- --------------------------------------------------------------------------------
Portfolio Manager Interview
We also have increased the dividend yield of the portfolio. We have done this
partly by investing in higher-yielding, relatively undervalued stocks. Over the
long term, our goal is to have a portfolio with a current income, or dividend
yield, that is 20-to-25% higher than that of the S&P 500. At the close of the
fiscal year, the portfolio had a dividend yield 50% higher than that of the S&P.
In addition, we have added several convertible securities to the portfolio to
add income without sacrificing growth opportunities. The Fund did not own any
foreign securities at the close of the fiscal period. We did not believe
valuations of either foreign stocks or currencies justified investment.
Top 5 Industries
----------------
(as a percentage of net assets)
-------------------------------
Healthcare Products & Services 13.1%
................................................................................
Banks 12.0%
................................................................................
Finance & Insurance 8.5%
................................................................................
Retailing & Wholesale 6.0%
................................................................................
Real Estate 5.9%
................................................................................
What sectors or industries have you emphasized?
The Fund's largest area of emphasis is banking and finance, at about 20% of net
assets, compared with about 18% of the S&P 500. In general, financial stocks
have been bolstered by industry consolidation, low interest rates and a strong
economy. In addition, growing fee income has helped many companies. Our two
largest financial holdings are Fleet Financial Group and BankBoston Corp., two
Northeast-based companies with strong competitive positions.
While banking and finance stocks have been strong performers, we are watching
them very carefully for signs of economic slowdown that could cause a
deterioration of credit quality.
The second largest weighting is in healthcare, at about 13.1% of net assets,
compared with about 11.9% in the S&P. We believe pharmaceuticals are among the
most attractive consumer growth industries. These companies have high sales
growth driven by the aging population and the interest of the managed care
industry in emphasizing drug therapy in healthcare. Three of the Fund's top
four holdings are in the pharmaceutical industry. The largest position is
American Home Products Corp., which has especially attractive prospects as the
result of its pending merger with Monsanto. The other two major holdings are
Bristol-Myers Squibb and Merck & Co.
Another top sector is Real Estate including the Fund's investments in Real
Estate Investment Trusts, or REITs, at about 6% of net assets. The past six
months have been a difficult period for REITs because the market has favored
large-capitalization, growth companies. We believe REITs remain attractive,
however, because of their growing dividends and their defensive qualities in an
economic slowdown.
Top 10
Equity Holdings
---------------
(as a percentage of net assets)
-------------------------------
American Home Products Corp. 3.4%
................................................................................
Bristol-Myers Squibb Co. 3.2%
................................................................................
General Electric Co. 3.0%
................................................................................
Merck & Co., Inc. 2.7%
................................................................................
Fleet Financial Group, Inc. 2.4%
................................................................................
International Business Machines Corp. 2.2%
................................................................................
BankBoston Corp. 2.2%
................................................................................
Philip Morris Companies, Inc. 1.8%
................................................................................
TCF Financial Corp. 1.8%
................................................................................
Wal-Mart Stores, Inc. 1.8%
................................................................................
28
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Fund to Total Return
- --------------------------------------------------------------------------------
Portfolio Manager Interview
What areas have you de-emphasized?
The two most significant underweightings are in technology and consumer staples,
such as food, personal care and beverage companies.
We have de-emphasized technology companies primarily because of concern that
this industry may be particularly vulnerable to earnings disappointments in the
months ahead. In addition, they tend not to pay high dividends. We do,
however, maintain a core of high quality technology companies, led by the
investment in IBM, at about 2.2% of net assets. We have underweighted consumer
staples because we believe valuations are too high, especially when compared
against pharmaceuticals.
What is your outlook?
Business activity appears to be slowing down, although recession is unlikely.
Sales growth, for example, is at its lowest rate since 1993. The principal
cause of the slowdown is the Asian crisis, which is likely to affect U.S.
businesses by limiting their ability to raise prices and increase their profits.
It is less likely to affect overall economic activity, but concerns will linger.
Very low unemployment and the upward trend in wages also may lead to a squeeze
in corporate profits, despite ongoing productivity enhancements and the
efficiencies of mergers and acquisitions. Slowing earnings growth is a concern
to us because of the high valuations of stocks.
Within this environment, the Fund's focus remains on the stocks of high-quality,
income-producing domestic companies. We will seek to avoid investments in
companies that could have disappointing earnings. As long as the returns of
cash and cash-equivalents remain attractive, we will tend to emphasize cash
rather than longer-maturity fixed income instruments.
We believe this conservative strategy has the potential to continue to deliver
attractive returns, with less price risk than more aggressive investment
strategies. We continue to see investment opportunities in a growing economy
with moderate interest rates and low inflation.
29
<PAGE>
EVERGREEN
Blue Chip Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period Ended
July 31, 1998*
<S> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF PERIOD $ 27.39
--------
.........................................................................
INCOME FROM INVESTMENT OPERATIONS
.........................................................................
Net investment income 0.08
.........................................................................
Net realized and unrealized gains or losses on securities and
foreign currency related transactions 3.01
--------
.........................................................................
Total from investment operations 3.09
--------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment income (0.06)
.........................................................................
From net realized gain on securities and foreign currency
related transactions 0
--------
.........................................................................
Total distributions (0.06)
--------
.........................................................................
NET ASSET VALUE END OF PERIOD $ 30.42
--------
.........................................................................
TOTAL RETURN+ 11.29%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF PERIOD (THOUSANDS) $284,735
.........................................................................
RATIOS TO AVERAGE NET ASSETS:
Total expenses 1.20%++
.........................................................................
Total expenses, excluding indirectly paid expenses 1.20%++
.........................................................................
Net investment income 0.49%++
.........................................................................
PORTFOLIO TURNOVER RATE 112%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended August 31,
Period Ended -------------------------------------------------
July 31, 1998** 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE
BEGINNING OF PERIOD $ 29.79 $ 25.05 $ 22.98 $ 23.21 $ 25.42 $ 23.17
-------- -------- -------- -------- -------- --------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income (0.12) 0.15 0.12 0.25 0.16 0.11
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 5.72 7.97 3.69 2.66 (0.35) 3.11
-------- -------- -------- -------- -------- --------
Total from investment
operations 5.60 8.12 3.81 2.91 (0.19) 3.22
-------- -------- -------- -------- -------- --------
.........................................................................
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (4.96) (3.18) (0.98) (2.78) (1.74) (0.69)
-------- -------- -------- -------- -------- --------
From net investment
income (0.08) (0.20) (0.76) (0.36) (0.28) (0.28)
.........................................................................
Total distributions (5.04) (3.38) (1.74) (3.14) (2.02) (0.97)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE END OF
PERIOD $ 30.35 $ 29.79 $ 25.05 $ 22.98 $ 23.21 $ 25.42
-------- -------- -------- -------- -------- --------
.........................................................................
.........................................................................
.........................................................................
TOTAL RETURN+ 20.89% 34.76% 17.31% 13.87% (0.72%) 14.31%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF PERIOD
(THOUSANDS) $117,893 $312,935 $224,819 $199,456 $208,532 $234,688
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.68%++ 1.57% 1.85% 1.75% 2.07% 2.28%
.........................................................................
Total expenses,
excluding indirectly
paid expenses 1.68%++ 1.56% 1.84% N/A N/A N/A
.........................................................................
Net investment income (0.02%)++ 0.55% 0.52% 1.09% 0.67% 0.47%
.........................................................................
PORTFOLIO TURNOVER RATE 112% 109% 139% 115% 73% 96%
.........................................................................
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 20, 1998 (commencement of class operations) to
July 31, 1998.
** For the eleven-month period ended July 31, 1998. The Fund changed its fiscal
year end from August 31 to July 31, effective July 31, 1998.
See Combined Notes to Financial Statements.
30
<PAGE>
EVERGREEN
Blue Chip Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Period Ended
July 31, 1998*
<S> <C>
CLASS C SHARES
NET ASSET VALUE BEGINNING OF PERIOD $27.70
------
.........................................................................
INCOME FROM INVESTMENT OPERATIONS
.........................................................................
Net investment income 0(a)
.........................................................................
Net realized and unrealized gains or losses on securities and
foreign currency related transactions 2.72
------
.........................................................................
Total from investment operations 2.72
------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment income (0.02)
.........................................................................
From net realized gain on securities and foreign currency
related transactions 0
------
.........................................................................
Total distributions (0.02)
------
.........................................................................
NET ASSET VALUE END OF PERIOD $30.40
------
.........................................................................
TOTAL RETURN+ 9.80%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF PERIOD (THOUSANDS) $ 780
.........................................................................
RATIOS TO AVERAGE NET ASSETS:
Total expenses 2.02%++
.........................................................................
Total expenses, excluding indirectly paid expenses 2.02%++
.........................................................................
Net investment income (0.27%)++
.........................................................................
PORTFOLIO TURNOVER RATE 112%
.........................................................................
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 22, 1998 (commencement of class operations) to
July 31, 1998.
(a) Less than one cent per share.
See Combined Notes to Financial Statements.
31
<PAGE>
EVERGREEN
Growth and Income Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
See Combined Notes to Financial Statements.
<TABLE>
<CAPTION>
Year Ended Year Ended
July 31, December 31,
--------------- ---------------
1998 1997** 1996 1995*
<S> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF YEAR $27.26 $22.53 $18.63 $14.48
------ ------ ------ ------
.........................................................................
INCOME FROM INVESTMENT OPERATIONS
.........................................................................
Net investment income 0.16 0.08 0.12 0.13
.........................................................................
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions 2.86 4.72 4.26 4.64
------ ------ ------ ------
.........................................................................
Total from investment operations 3.02 4.80 4.38 4.77
------ ------ ------ ------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment income (0.13) (0.07) (0.13) (0.14)
.........................................................................
From net realized gain on securities
and foreign currency related
transactions (1.01) 0 (0.35) (0.48)
------ ------ ------ ------
.........................................................................
Total distributions (1.14) (0.07) (0.48) (0.62)
------ ------ ------ ------
.........................................................................
NET ASSET VALUE END OF YEAR $29.14 $27.26 $22.53 $18.63
------ ------ ------ ------
.........................................................................
TOTAL RETURN+ 11.26% 21.33% 23.50% 33.00%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR (MILLIONS) $ 296 $ 166 $ 85 $ 19
.........................................................................
RATIOS TO AVERAGE NET ASSETS:
Total expenses 1.46% 1.47%++ 1.41% 1.55%++
.........................................................................
Total expenses, excluding indirectly
paid expenses 1.46% 1.47%++ N/A N/A
.........................................................................
Total expenses, excluding fee waiv-
ers and expense reimbursements N/A N/A N/A 1.64%++
.........................................................................
Net investment income 0.61% 0.57%++ 0.70% 0.99%++
.........................................................................
PORTFOLIO TURNOVER RATE 20% 6% 14% 17%
.........................................................................
<CAPTION>
Year Ended Year Ended
July 31, December 31,
--------------- ---------------
1998 1997** 1996 1995*
<S> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING OF YEAR $27.10 $22.43 $18.59 $14.48
------ ------ ------ ------
.........................................................................
INCOME FROM INVESTMENT OPERATIONS
.........................................................................
Net investment income (0.02) (0.02) 0(a) 0.05
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions 2.81 4.69 4.20 4.61
------ ------ ------ ------
.........................................................................
Total from investment operations 2.79 4.67 4.20 4.66
------ ------ ------ ------
.........................................................................
.........................................................................
LESS DISTRIBUTIONS
From net realized gain on securities
and foreign currency related
transactions (1.01) 0 (0.35) (0.48)
------ ------ ------ ------
.........................................................................
From net investment income 0 0 (0.01) (0.07)
.........................................................................
Total distributions (1.01) 0 (0.36) (0.55)
------ ------ ------ ------
NET ASSET VALUE END OF YEAR $28.88 $27.10 $22.43 $18.59
------ ------ ------ ------
.........................................................................
.........................................................................
.........................................................................
TOTAL RETURN+ 10.44% 20.82% 22.60% 32.20%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR (MILLIONS) $1,000 $ 542 $ 245 $ 46
.........................................................................
RATIOS TO AVERAGE NET ASSETS:
Total expenses 2.21% 2.25%++ 2.17% 2.24%++
.........................................................................
Total expenses, excluding indirectly
paid expenses 2.21% 2.25%++ N/A N/A
.........................................................................
Total expenses, excluding fee
waivers and expense reimbursements N/A N/A N/A 2.26%++
.........................................................................
Net investment income (0.14%) (0.19%)++ (0.06%) 0.30%++
.........................................................................
PORTFOLIO TURNOVER RATE 20% 6% 14% 17%
.........................................................................
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** For the seven-month period ended July 31, 1997. The Fund changed its fiscal
year end from December 31 to July 31, effective July 31, 1997.
(a) Less than one cent per share.
32
<PAGE>
EVERGREEN
Growth and Income Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
---------------------- ---------------------------
1998 1997** 1996 1995*
<S> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 27.10 $ 22.43 $ 18.58 $ 14.48
--------- --------- ----------- -----------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income (0.02) (0.02) 0(a) 0.06
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 2.82 4.69 4.21 4.60
--------- --------- ----------- -----------
.........................................................................
Total from investment
operations 2.80 4.67 4.21 4.66
--------- --------- ----------- -----------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment
income 0 0 (0.01) (0.08)
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (1.01) 0 (0.35) (0.48)
--------- --------- ----------- -----------
.........................................................................
Total distributions (1.01) 0 (0.36) (0.56)
--------- --------- ----------- -----------
.........................................................................
NET ASSET VALUE END OF
YEAR $ 28.89 $ 27.10 $ 22.43 $ 18.58
--------- --------- ----------- -----------
.........................................................................
TOTAL RETURN+ 10.47% 20.82% 22.60% 32.20%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(MILLIONS) $ 50 $ 24 $ 10 $ 20
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 2.21% 2.25%++ 2.17% 2.15%++
.........................................................................
Total expenses,
excluding indirectly
paid expenses 2.21% 2.25%++ N/A N/A
.........................................................................
Total expenses,
excluding fee waivers
and expense
reimbursements N/A N/A N/A 4.94%++
.........................................................................
Net investment income (0.13%) (0.19%)++ (0.06%) 0.35%++
.........................................................................
PORTFOLIO TURNOVER RATE 20% 6% 14% 17%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
--------------------- ------------------------------
1998 1997** 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 27.29 $ 22.55 $18.64 $14.52 $15.41 $14.18
--------- --------- ------ ------ ------ ------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.24 0.11 0.18 0.18 0.14 0.14
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 2.87 4.73 4.25 4.59 0.12 1.91
--------- --------- ------ ------ ------ ------
Total from investment
operations 3.11 4.84 4.43 4.77 0.26 2.05
--------- --------- ------ ------ ------ ------
.........................................................................
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (1.01) 0 (0.35) (0.48) (1.01) (0.68)
--------- --------- ------ ------ ------ ------
From net investment
income (0.20) (0.10) (0.17) (0.17) (0.14) (0.14)
.........................................................................
Total distributions (1.21) (0.10) (0.52) (0.65) (1.15) (0.82)
--------- --------- ------ ------ ------ ------
NET ASSET VALUE END OF
YEAR $ 29.19 $ 27.29 $22.55 $18.64 $14.52 $15.41
--------- --------- ------ ------ ------ ------
.........................................................................
.........................................................................
.........................................................................
TOTAL RETURN 11.56% 21.52% 23.80% 32.90% 1.70% 14.40%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(MILLIONS) $ 801 $ 616 $ 442 $ 141 $ 73 $ 77
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.20% 1.21%++ 1.16% 1.27% 1.33% 1.26%
.........................................................................
Total expenses,
excluding indirectly
paid expenses 1.20% 1.21%++ 1.16% N/A N/A N/A
.........................................................................
Total expenses,
excluding fee waivers
and expense
reimbursements N/A N/A N/A N/A N/A N/A
.........................................................................
Net investment income 0.86% 0.82%++ 0.93% 1.11% 0.96% 0.99%
.........................................................................
PORTFOLIO TURNOVER RATE 20% 6% 14% 17% 29% 28%
.........................................................................
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to De-
cember 31, 1995.
** For the seven-month period ended July 31, 1997. The Fund changed its fiscal
year end from December 31 to July 31, effective July 31, 1997.
(a) Less than one cent per share.
</TABLE>
See Combined Notes to Financial Statements.
33
<PAGE>
EVERGREEN
Income and Growth Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended January 31,
--------------------- ------------------------
1998 1997** 1997 1996 1995*
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING
OF YEAR $ 23.94 $ 21.79 $ 20.15 $ 17.28 $17.09
--------- --------- ------- ------- ------
.........................................................................
INCOME FROM INVESTMENT OP-
ERATIONS
.........................................................................
Net investment income 1.05 0.52# 1.02 1.01 0.02
.........................................................................
Net realized and
unrealized gains or
losses on securities and
foreign currency related
transactions 0.81 2.15 1.67 2.94 0.17
--------- --------- ------- ------- ------
.........................................................................
Total from investment op-
erations 1.86 2.67 2.69 3.95 0.19
--------- --------- ------- ------- ------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment income (1.02) (0.52) (1.05) (1.08) 0
.........................................................................
From net realized gain on
securities and foreign
currency related
transactions (1.59) 0 0 0 0
--------- --------- ------- ------- ------
.........................................................................
Total distributions (2.61) (0.52) (1.05) (1.08) 0
--------- --------- ------- ------- ------
.........................................................................
NET ASSET VALUE END OF
YEAR $ 23.19 $ 23.94 $ 21.79 $ 20.15 $17.28
--------- --------- ------- ------- ------
.........................................................................
TOTAL RETURN+ 7.93% 12.45% 13.80% 23.40% 1.10%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 15,005 $ 11,955 $ 9,678 $ 4,412 $ 119
.........................................................................
RATIOS TO AVERAGE NET AS-
SETS:
Total expenses 1.50% 1.45%++ 1.44% 1.36% 1.45%++
.........................................................................
Total expenses, excluding
indirectly paid expenses 1.50% 1.45%++ N/A N/A N/A
.........................................................................
Total expenses, excluding
fee waivers and expense
reimbursements N/A N/A N/A 2.50% N/A
.........................................................................
Interest expense N/A N/A 0.03% N/A N/A
.........................................................................
Net investment income 4.20% 4.69%++ 4.93% 5.39% 4.09%++
.........................................................................
PORTFOLIO TURNOVER RATE 133% 72% 168% 138% 151%
.........................................................................
<CAPTION>
Year Ended July 31, Year Ended January 31,
--------------------- ------------------------
1998 1997** 1997 1996 1995*
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING
OF YEAR $ 23.81 $ 21.69 $ 20.08 $ 17.28 $17.09
--------- --------- ------- ------- ------
.........................................................................
INCOME FROM INVESTMENT OP-
ERATIONS
.........................................................................
Net investment income 0.86 0.43# 0.89 0.91 0.02
.........................................................................
Net realized and
unrealized gains or
losses on securities and
foreign currency related
transactions 0.81 2.15 1.64 2.87 0.17
--------- --------- ------- ------- ------
.........................................................................
Total from investment op-
erations 1.67 2.58 2.53 3.78 0.19
--------- --------- ------- ------- ------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment income (0.85) (0.46) (0.92) (0.98) 0
.........................................................................
From net realized gain on
securities and foreign
currency related
transactions (1.59) 0 0 0 0
--------- --------- ------- ------- ------
.........................................................................
Total distributions (2.44) (0.46) (0.92) (0.98) 0
--------- --------- ------- ------- ------
.........................................................................
NET ASSET VALUE END OF
YEAR $ 23.04 $ 23.81 $ 21.69 $ 20.08 $17.28
--------- --------- ------- ------- ------
.........................................................................
TOTAL RETURN+ 7.13% 12.06% 13.00% 22.40% 1.10%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 54,544 $ 43,977 $35,323 $14,750 $ 599
.........................................................................
RATIOS TO AVERAGE NET AS-
SETS:
Total expenses 2.25% 2.20%++ 2.19% 2.11% 2.23%++
.........................................................................
Total expenses, excluding
indirectly paid expenses 2.25% 2.20%++ N/A N/A N/A
.........................................................................
Total expenses, excluding
fee waivers and expense
reimbursements N/A N/A N/A 2.25% N/A
.........................................................................
Interest expense N/A N/A 0.03% N/A N/A
.........................................................................
Net investment income 3.46% 3.94%++ 4.17% 4.69% 3.23%++
.........................................................................
PORTFOLIO TURNOVER RATE 133% 72% 168% 138% 151%
.........................................................................
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
# Net investment income is based on average shares outstanding during the peri-
od.
* For the period from January 3, 1995 (commencement of class operations) to
January 31, 1995.
** For the six-month period ended July 31, 1997. The Fund changed its fiscal
year end from January 31 to July 31, effective July 31, 1997.
</TABLE>
See Combined Notes to Financial Statements.
34
<PAGE>
EVERGREEN
Income and Growth Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended January 31,
--------------------- --------------------------
1998 1997** 1997 1996 1995*
<S> <C> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 23.81 $ 21.69 $ 20.08 $ 17.27 $ 17.09
--------- --------- ------- ------- -------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.87 0.44# 0.87 0.90 0.01
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 0.80 2.14 1.66 2.89 0.17
--------- --------- ------- ------- -------
.........................................................................
Total from investment
operations 1.67 2.58 2.53 3.79 0.18
--------- --------- ------- ------- -------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment
income (0.85) (0.46) (0.92) (0.98) 0
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (1.59) 0 0 0 0
--------- --------- ------- ------- -------
.........................................................................
Total distributions (2.44) (0.46) (0.92) (0.98) 0
--------- --------- ------- ------- -------
.........................................................................
NET ASSET VALUE END OF
YEAR $ 23.04 $ 23.81 $ 21.69 $ 20.08 $ 17.27
--------- --------- ------- ------- -------
.........................................................................
TOTAL RETURN+ 7.13% 12.06% 12.90% 22.40% 1.10%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 1,259 $ 950 $ 982 $ 523 $ 24
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 2.25% 2.20%++ 2.19% 2.11% 2.22%++
.........................................................................
Total expenses,
excluding indirectly
paid expenses 2.25% 2.20%++ N/A N/A N/A
.........................................................................
Total expenses,
excluding fee waivers
and expense
reimbursements N/A N/A N/A 13.03% N/A
.........................................................................
Interest expense N/A N/A 0.03% N/A N/A
.........................................................................
Net investment income 3.48% 4.06%++ 4.15% 4.67% 2.68%++
.........................................................................
PORTFOLIO TURNOVER RATE 133% 72% 168% 138% 151%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended January 31,
--------------------- --------------------------- Year Ended
1998 1997** 1997 1996 1995*** March 31,1994
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 23.98 $ 21.81 $ 20.16 $ 17.28 $ 18.29 $20.90
--------- --------- ------- ------- ------- ------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 1.02 0.55 1.08 1.10 0.87 1.08
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 0.89 2.16 1.66 2.87 (0.55) (1.41)
--------- --------- ------- ------- ------- ------
.........................................................................
Total from investment
operations 1.91 2.71 2.74 3.97 0.32 (0.33)
--------- --------- ------- ------- ------- ------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment
income (1.08) (0.54) (1.09) (1.09) (1.08) (1.08)
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (1.59) 0 0 0 (0.25) (1.20)
--------- --------- ------- ------- ------- ------
.........................................................................
Total distributions (2.67) (0.54) (1.09) (1.09) (1.33) (2.28)
--------- --------- ------- ------- ------- ------
.........................................................................
NET ASSET VALUE END OF
YEAR $ 23.22 $ 23.98 $ 21.81 $ 20.16 $ 17.28 $18.29
--------- --------- ------- ------- ------- ------
.........................................................................
TOTAL RETURN 8.16% 12.65% 14.10% 23.50% 1.90% (2.10)%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(MILLIONS) $ 880 $ 900 $ 858 $ 914 $ 942 $1,065
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
.........................................................................
Total expenses 1.25% 1.20%++ 1.18% 1.19% 1.24%++ 1.18%
.........................................................................
Total expenses,
excluding indirectly
paid expenses 1.25% 1.20%++ N/A N/A N/A N/A
.........................................................................
Total expenses,
excluding fee waivers
and expense
reimbursements N/A N/A N/A N/A N/A N/A
.........................................................................
Interest expense N/A N/A 0.03% N/A N/A N/A
.........................................................................
Net investment income 4.46% 4.97%++ 5.14% 5.70% 5.70%++ 5.29%
.........................................................................
PORTFOLIO TURNOVER RATE 133% 72% 168% 138% 151% 106%
.........................................................................
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
# Net investment income is based on average shares outstanding during the peri-
od.
* For the period from January 3, 1995 (commencement of class operations) to
January 31, 1995.
** For the six-month period ended July 31, 1997. The Fund changed its fiscal
year end from January 31 to July 31, effective July 31, 1997.
*** For the ten-month period ended January 31, 1995. The Fund changed its fis-
cal year end from March 31 to January 31, effective January 31, 1995.
</TABLE>
See Combined Notes to Financial Statements.
35
<PAGE>
EVERGREEN
Small Cap Equity Income Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
---------------------- -------------------------
1998 1997** 1996 1995*
<S> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING
OF YEAR $ 15.69 $ 13.10 $ 11.57 $ 9.64
---------- -------- ----------- -----------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.29 0.14# 0.34 0.34
.........................................................................
Net realized and
unrealized gains or
losses on securities and
foreign currency related
transactions 0.24 2.59 2.13 2.45
---------- -------- ----------- -----------
.........................................................................
Total from investment
operations 0.53 2.73 2.47 2.79
---------- -------- ----------- -----------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment
income (0.28) (0.13) (0.34) (0.37)
.........................................................................
From net realized gain on
securities and foreign
currency related
transactions (0.19) (0.01) (0.60) (0.49)
---------- -------- ----------- -----------
.........................................................................
Total distributions (0.47) (0.14) (0.94) (0.86)
---------- -------- ----------- -----------
.........................................................................
NET ASSET VALUE END OF
YEAR $ 15.75 $ 15.69 $ 13.10 $ 11.57
---------- -------- ----------- -----------
.........................................................................
TOTAL RETURN+ 3.24% 20.99% 22.00% 29.50%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 54,142 $ 4,239 $ 336 $ 216
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.68% 1.71%++ 1.75% 1.75%++
.........................................................................
Total expenses, excluding
indirectly paid expenses 1.68% 1.70%++ N/A N/A
.........................................................................
Total expenses, excluding
fee waivers and expense
reimbursements N/A 1.84%++ 5.03% 24.45%++
.........................................................................
Net investment income 1.95% 1.88%++ 3.08% 3.39%++
.........................................................................
PORTFOLIO TURNOVER RATE 18% 13% 50% 48%
.........................................................................
<CAPTION>
Year Ended July 31, Year Ended December 31,
---------------------- -------------------------
1998 1997** 1996 1995*
<S> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING
OF YEAR $ 15.64 $ 13.09 $ 11.57 $ 9.64
---------- -------- ----------- -----------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.19 0.08# 0.27 0.28
.........................................................................
Net realized and
unrealized gains or
losses on securities and
foreign currency related
transactions 0.22 2.57 2.11 2.43
---------- -------- ----------- -----------
.........................................................................
Total from investment
operations 0.41 2.65 2.38 2.71
---------- -------- ----------- -----------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment
income (0.19) (0.09) (0.26) (0.29)
.........................................................................
From net realized gain on
securities and foreign
currency related
transactions (0.19) (0.01) (0.60) (0.49)
---------- -------- ----------- -----------
.........................................................................
Total distributions (0.38) (0.10) (0.86) (0.78)
---------- -------- ----------- -----------
.........................................................................
NET ASSET VALUE END OF
YEAR $ 15.67 $ 15.64 $ 13.09 $ 11.57
---------- -------- ----------- -----------
.........................................................................
TOTAL RETURN+ 2.49% 20.37% 21.10% 28.70%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 130,191 $ 9,462 $ 692 $ 266
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 2.43% 2.46%++ 2.50% 2.50%++
.........................................................................
Total expenses, excluding
indirectly paid expenses 2.42% 2.45%++ N/A N/A
.........................................................................
Total expenses, excluding
fee waivers and expense
reimbursements N/A 2.59% 5.72% 20.90%++
.........................................................................
Net investment income 1.20% 1.12%++ 2.39% 2.67%++
.........................................................................
PORTFOLIO TURNOVER RATE 18% 13% 50% 48%
.........................................................................
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
# Net investment income is based on average shares outstanding during the peri-
od.
* For the period from January 3, 1995 (commencement of class operations) to De-
cember 31, 1995.
** For the seven-month period ended July 31, 1997. The Fund changed its fiscal
year end from December 31 to July 31, effective July 31, 1997.
</TABLE>
See Combined Notes to Financial Statements.
36
<PAGE>
EVERGREEN
Small Cap Equity Income Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Year Ended
July 31, December 31,
--------------- --------------
1998 1997** 1996 1995*
<S> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE BEGINNING OF YEAR $ 15.63 $13.09 $11.56 $ 9.74
------- ------ ------ ------
.........................................................................
INCOME FROM INVESTMENT OPERATIONS
.........................................................................
Net investment income 0.19 0.10# 0.28 0.28
.........................................................................
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions 0.22 2.54 2.10 2.33
------- ------ ------ ------
.........................................................................
Total from investment operations 0.41 2.64 2.38 2.61
------- ------ ------ ------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment income (0.19) (0.09) (0.25) (0.30)
.........................................................................
From net realized gain on securities and
foreign currency related transactions (0.19) (0.01) (0.60) (0.49)
------- ------ ------ ------
.........................................................................
Total distributions (0.38) (0.10) (0.85) (0.79)
------- ------ ------ ------
.........................................................................
NET ASSET VALUE END OF YEAR $ 15.66 $15.63 $13.09 $11.56
------- ------ ------ ------
.........................................................................
TOTAL RETURN+ 2.49% 20.30% 21.10% 27.30%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR (THOUSANDS) $26,197 $2,770 $ 56 $ 24
.........................................................................
RATIOS TO AVERAGE NET ASSETS:
Total expenses 2.43% 2.45%++ 2.50% 2.50%++
.........................................................................
Total expenses, excluding indirectly
paid expenses 2.42% 2.44%++ N/A N/A
.........................................................................
Total expenses, excluding fee waivers
and expense reimbursements N/A 2.58%++ 5.77% 187.29%++
.........................................................................
Net investment income 1.20% 1.20%++ 2.33% 2.63%++
.........................................................................
PORTFOLIO TURNOVER RATE 18% 13% 50% 48%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
--------------------- ----------------------------------
1998 1997** 1996 1995 1994 1993***
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 15.71 $ 13.12 $11.58 $ 9.70 $10.15 $10.00
--------- --------- ------ ------ ------ ------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.34 0.19# 0.38 0.38 0.34 0.10
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 0.24 2.56 2.13 2.38 (0.41) 0.15
--------- --------- ------ ------ ------ ------
.........................................................................
Total from investment
operations 0.58 2.75 2.51 2.76 (0.07) 0.25
--------- --------- ------ ------ ------ ------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment
income (0.33) (0.15) (0.37) (0.38) (0.33) (0.10)
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (0.19) (0.01) (0.60) (0.50) (0.05) 0
--------- --------- ------ ------ ------ ------
.........................................................................
Total distributions (0.52) (0.16) (0.97) (0.88) (0.38) (0.10)
--------- --------- ------ ------ ------ ------
.........................................................................
NET ASSET VALUE END OF
YEAR $ 15.77 $ 15.71 $13.12 $11.58 $ 9.70 $10.15
--------- --------- ------ ------ ------ ------
.........................................................................
TOTAL RETURN 3.57% 21.09% 22.40% 29.10% (0.70%) 2.50%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 96,556 $ 42,374 $8,592 $4,806 $3,613 $2,236
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.39% 1.39%++ 1.50% 1.50%++ 1.48% 0.00%
.........................................................................
Total expenses,
excluding indirectly
paid expenses 1.39% 1.38%++ N/A N/A N/A N/A
.........................................................................
Total expenses,
excluding fee waivers
and expense
reimbursements N/A 1.59% 4.75% 4.34%++ 4.68% 4.39%
+ Initial sales charge or contingent deferred sales charge is not reflected.
.........................................................................
++ Annualized.
Net investment income 2.23% 2.39%++ 3.36% 3.56%++ 3.72% 4.07%
# Net investment income is based on average shares outstanding during the peri-
od.
.........................................................................
PORTFOLIO TURNOVER RATE 18% 13% 50% 48% 9% 15%
* For the period from January 24, 1995 (commencement of class operations) to
December 31, 1995.
.........................................................................
</TABLE>
** For the seven-month period ended July 31, 1997. The Fund changed its fiscal
year end from December 31 to July 31, effective July 31, 1997.
*** For the period from October 1, 1993 (commencement of class operations) to
December 31, 1993.
See Combined Notes to Financial Statements.
37
<PAGE>
EVERGREEN
Utility Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
--------------------- --------------------------
1998 1997** 1996 1995 1994*
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 11.45 $ 10.57 $ 10.80 $ 9.00 $ 10.00
--------- --------- ------- -------- -------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.43 0.25 0.41 0.44 0.45
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 1.44 0.87 0.05 2.25 (1.01)
--------- --------- ------- -------- -------
Total from investment
operations 1.87 1.12 0.46 2.69 (0.56)
--------- --------- ------- -------- -------
.........................................................................
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (1.12) 0 (0.28) (0.45) 0
--------- --------- ------- -------- -------
From net investment
income (0.44) (0.24) (0.41) (0.44) (0.44)
.........................................................................
Total distributions (1.56) (0.24) (0.69) (0.89) (0.44)
--------- --------- ------- -------- -------
NET ASSET VALUE END OF
YEAR $ 11.76 $ 11.45 $ 10.57 $ 10.80 $ 9.00
--------- --------- ------- -------- -------
.........................................................................
.........................................................................
.........................................................................
TOTAL RETURN+ 17.30% 10.72% 4.40% 30.70% (5.60%)
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 95,300 $ 91,638 $96,243 $107,872 $ 4,190
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 0.99% 1.00%++ 0.87% 0.79% 0.53%++
.........................................................................
Total expenses,
excluding indirectly
paid expenses 0.99% 0.99%++ N/A N/A N/A
.........................................................................
Total expenses,
excluding fee waivers
and expense
reimbursements 1.14% 1.19%++ 1.15% 1.18% 1.43%++
.........................................................................
Net investment income 3.58% 3.85%++ 3.87% 4.51% 5.07%++
.........................................................................
PORTFOLIO TURNOVER RATE 62% 50% 59% 88% 23%
.........................................................................
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 11.46 $ 10.58 $ 10.81 $ 9.00 $ 10.00
--------- --------- ------- -------- -------
<CAPTION>
Year Ended July 31, Year Ended December 31,
--------------------- --------------------------
1998 1997** 1996 1995 1994*
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 1.44 0.87 0.05 2.26 (1.01)
--------- --------- ------- -------- -------
Total from investment
operations 1.78 1.07 0.38 2.63 (0.62)
--------- --------- ------- -------- -------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.34 0.20 0.33 0.37 0.39
From net realized gain
on securities and
foreign currency
related transactions (1.12) 0 (0.28) (0.45) 0
--------- --------- ------- -------- -------
.........................................................................
Total distributions (1.48) (0.19) (0.61) (0.82) (0.38)
--------- --------- ------- -------- -------
NET ASSET VALUE END OF
YEAR $ 11.76 $ 11.46 $ 10.58 $ 10.81 $ 9.00
--------- --------- ------- -------- -------
.........................................................................
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment
income (0.36) (0.19) (0.33) (0.37) (0.38)
.........................................................................
.........................................................................
.........................................................................
.........................................................................
TOTAL RETURN+ 16.31% 10.21% 3.60% 29.90% (6.20%)
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 43,776 $ 36,738 $38,511 $ 35,662 $28,792
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.74% 1.75%++ 1.62% 1.53% 1.27%++
.........................................................................
Total expenses,
excluding indirectly
paid expenses 1.74% 1.74%++ N/A N/A N/A
.........................................................................
Total expenses,
excluding fee waivers
and expense
reimbursements 1.88% 1.94%++ 1.89% 1.93% 2.11%++
.........................................................................
Net investment income 2.82% 3.10%++ 3.12% 3.78% 4.19%++
.........................................................................
PORTFOLIO TURNOVER RATE 62% 50% 59% 88% 23%
.........................................................................
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 4, 1994 (commencement of class operations) to De-
cember 31, 1994.
** For the seven-month period ended July 31, 1997. The Fund changed its fiscal
year end from December 31 to July 31, effective July 31, 1997.
See Combined Notes to Financial Statements.
38
<PAGE>
EVERGREEN
Utility Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
--------------------- ---------------------------
1998 1997** 1996 1995 1994*
<S> <C> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 11.46 $ 10.58 $ 10.82 $ 9.01 $ 9.33
--------- --------- ------- ------- -------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.34 0.20 0.33 0.37 0.12
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 1.44 0.87 0.04 2.26 (0.33)
--------- --------- ------- ------- -------
Total from investment
operations 1.78 1.07 0.37 2.63 (0.21)
--------- --------- ------- ------- -------
.........................................................................
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (1.12) 0 (0.28) (0.45) 0
--------- --------- ------- ------- -------
From net investment
income (0.36) (0.19) (0.33) (0.37) (0.11)
.........................................................................
Total distributions (1.48) (0.19) (0.61) (0.82) (0.11)
--------- --------- ------- ------- -------
NET ASSET VALUE END OF
YEAR $ 11.76 $ 11.46 $ 10.58 $ 10.82 $ 9.01
--------- --------- ------- ------- -------
.........................................................................
.........................................................................
.........................................................................
TOTAL RETURN+ 16.31% 10.21% 3.50% 29.80% (2.20%)
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 486 $ 379 $ 396 $ 246 $ 128
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
.........................................................................
Total expenses 1.74% 1.75%++ 1.63% 1.54% 1.94%++
.........................................................................
Total expenses,
excluding indirectly
paid expenses 1.74% 1.74%++ N/A N/A N/A
.........................................................................
Total expenses,
excluding fee waivers
and expense
reimbursements 1.88% 1.94%++ 1.90% 1.93% 2.78%++
.........................................................................
Net investment income 2.82% 3.10%++ 3.13% 3.76% 3.96%++
.........................................................................
PORTFOLIO TURNOVER RATE 62% 50% 59% 88% 23%
.........................................................................
NET ASSET VALUE
BEGINNING OF YEAR $ 11.46 $ 10.58 $ 10.82 $ 9.00 $ 9.51
--------- --------- ------- ------- -------
<CAPTION>
Year Ended July 31, Year Ended December 31,
--------------------- ---------------------------
1998 1997** 1996 1995 1994***
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 1.45 0.88 0.03 2.27 (0.50)
--------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CLASS Y SHARES
Total from investment
operations 1.91 1.13 0.47 2.74 (0.13)
--------- --------- ------- ------- -------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (1.12) 0 (0.28) (0.45) 0
--------- --------- ------- ------- -------
Net investment income 0.46 0.25 0.44 0.47 0.37
.........................................................................
Total distributions (1.60) (0.25) (0.71) (0.92) (0.38)
--------- --------- ------- ------- -------
NET ASSET VALUE END OF
YEAR $ 11.77 $ 11.46 $ 10.58 $ 10.82 $ 9.00
--------- --------- ------- ------- -------
.........................................................................
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment
income (0.48) (0.25) (0.43) (0.47) (0.38)
.........................................................................
.........................................................................
.........................................................................
.........................................................................
TOTAL RETURN 17.60% 10.85% 4.50% 31.30% (1.60%)
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 1,695 $ 1,627 $ 2,000 $ 7,791 $ 5,201
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
.........................................................................
Total expenses 0.74% 0.74%++ 0.61% 0.54% 0.40%++
.........................................................................
Total expenses,
excluding indirectly
paid expenses 0.74% 0.73%++ N/A N/A N/A
.........................................................................
Total expenses,
excluding fee waivers
and expense
reimbursements 0.89% 0.94%++ 0.89% 0.93% 1.24%++
.........................................................................
Net investment income 3.82% 4.06%++ 4.01% 4.76% 4.93%++
.........................................................................
PORTFOLIO TURNOVER RATE 62% 50% 59% 88% 23%
.........................................................................
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from September 2, 1994 (commencement of class operations) to
December 31, 1994.
** For the seven-month period ended July 31, 1997. The Fund changed its fiscal
year end from December 31 to July 31, effective July 31, 1997.
*** For the period from February 28, 1994 (commencement of class operations) to
December 31, 1994.
See Combined Notes to Financial Statements.
39
<PAGE>
EVERGREEN
Value Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
--------------------- -------------------------------------
1998 1997** 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 24.64 $ 20.57 $ 20.45 $ 16.62 $ 17.63 $ 17.11
--------- --------- -------- -------- -------- -------
.............................................................................................
INCOME FROM INVESTMENT
OPERATIONS
.............................................................................................
Net investment income 0.26 0.21 0.38 0.55 0.52 0.47
.............................................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 2.00 4.05 3.49 4.69 (0.20) 1.10
--------- --------- -------- -------- -------- -------
.............................................................................................
Total from investment
operations 2.26 4.26 3.87 5.24 0.32 1.57
--------- --------- -------- -------- -------- -------
.............................................................................................
LESS DISTRIBUTIONS
.............................................................................................
From net investment
income (0.29) (0.19) (0.41) (0.51) (0.51) (0.47)
.............................................................................................
From net realized gain
on securities and
foreign currency
related transactions (4.38) 0 (3.34) (0.90) (0.82) (0.58)
--------- --------- -------- -------- -------- -------
.............................................................................................
Total distributions (4.67) (0.19) (3.75) (1.41) (1.33) (1.05)
--------- --------- -------- -------- -------- -------
.............................................................................................
NET ASSET VALUE END OF
YEAR $ 22.23 $ 24.64 $ 20.57 $ 20.45 $ 16.62 $ 17.63
--------- --------- -------- -------- -------- -------
.............................................................................................
TOTAL RETURN+ 9.55% 20.78% 18.90% 31.80% 1.90% 9.30%
.............................................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................................
NET ASSETS END OF YEAR
(MILLIONS) $ 476 $ 392 $ 328 $ 292 $ 189 $ 190
.............................................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.01% 0.92%++ 0.91% 0.90% 0.93% 0.99%
.............................................................................................
Total expenses,
excluding indirectly
paid expenses 1.01% 0.92%++ N/A N/A N/A N/A
.............................................................................................
Net investment income 1.04% 1.66%++ 1.77% 2.78% 2.96% 2.63%
.............................................................................................
PORTFOLIO TURNOVER RATE 69% 6% 91% 53% 70% 46%
.............................................................................................
<CAPTION>
Year Ended July 31, Year Ended December 31,
--------------------- -------------------------------------
1998 1997** 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 24.63 $ 20.58 $ 20.45 $ 16.62 $ 17.63 $ 17.24
--------- --------- -------- -------- -------- -------
.............................................................................................
INCOME FROM INVESTMENT
OPERATIONS
.............................................................................................
Net investment income 0.08 0.12 0.22 0.39 0.42 0.35
.............................................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 1.99 4.03 3.50 4.70 (0.20) 1.01
--------- --------- -------- -------- -------- -------
.............................................................................................
Total from investment
operations 2.07 4.15 3.72 5.09 0.22 1.36
--------- --------- -------- -------- -------- -------
.............................................................................................
LESS DISTRIBUTIONS
.............................................................................................
From net investment
income (0.12) (0.10) (0.25) (0.36) (0.41) (0.39)
.............................................................................................
From net realized gain
on securities and
foreign currency
related transactions (4.38) 0 (3.34) (0.90) (0.82) (0.58)
--------- --------- -------- -------- -------- -------
.............................................................................................
Total distributions (4.50) (0.10) (3.59) (1.26) (1.23) (0.97)
--------- --------- -------- -------- -------- -------
.............................................................................................
NET ASSET VALUE END OF
YEAR $ 22.20 $ 24.63 $ 20.58 $ 20.45 $ 16.62 $ 17.63
--------- --------- -------- -------- -------- -------
.............................................................................................
TOTAL RETURN+ 8.73% 20.23% 18.10% 30.90% 1.30% 8.00%
.............................................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 326,459 $ 276,256 $197,411 $141,072 $104,297 $59,953
.............................................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.76% 1.67%++ 1.66% 1.65% 1.53% 1.48%++
Total expenses,
excluding indirectly
paid expenses 1.76% 1.67%++ N/A N/A N/A N/A
.............................................................................................
Net investment income 0.30% 0.92%++ 1.01% 2.04% 2.36% 2.09%++
.............................................................................................
PORTFOLIO TURNOVER RATE 69% 6% 91% 53% 70% 46%
.............................................................................................
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from February 2, 1993 (commencement of class operations) to
December 31, 1993.
** For the seven-month period ended July 31, 1997. The Fund changed its fiscal
year end from December 31 to July 31, effective July 31, 1997.
</TABLE>
See Combined Notes to Financial Statements.
40
<PAGE>
EVERGREEN
Value Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
--------------------- --------------------------
1998 1997** 1996 1995 1994*
<S> <C> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 24.61 $ 20.56 $ 20.44 $ 16.61 $ 18.28
--------- --------- ------- ------- -------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.10 0.12 0.22 0.39 0.19
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 1.97 4.03 3.50 4.70 (0.81)
--------- --------- ------- ------- -------
.........................................................................
Total from investment
operations 2.07 4.15 3.72 5.09 (0.62)
--------- --------- ------- ------- -------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment
income (0.12) (0.10) (0.26) (0.36) (0.23)
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (4.38) 0 (3.34) (0.90) (0.82)
--------- --------- ------- ------- -------
.........................................................................
Total distributions (4.50) (0.10) (3.60) (1.26) (1.05)
--------- --------- ------- ------- -------
.........................................................................
NET ASSET VALUE END OF
YEAR $ 22.18 $ 24.61 $ 20.56 $ 20.44 $ 16.61
--------- --------- ------- ------- -------
.........................................................................
TOTAL RETURN+ 8.74% 20.25% 18.10% 30.90% (3.40%)
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 5,125 $ 2,507 $ 1,458 $ 811 $ 485
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.76% 1.66%++ 1.67% 1.65% 1.68%++
.........................................................................
Total expenses,
excluding indirectly
paid expenses 1.76% 1.66%++ N/A N/A N/A
.........................................................................
Net investment income 0.29% 0.94%++ 1.00% 2.03% 2.16%++
.........................................................................
PORTFOLIO TURNOVER RATE 69% 6% 91% 53% 70%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
--------------------- ------------------------------
1998 1997** 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 24.64 $ 20.57 $20.45 $16.61 $17.63 $17.11
--------- --------- ------ ------ ------ ------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.35 0.25 0.44 0.57 0.56 0.52
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 1.97 4.03 3.49 4.72 (0.20) 1.12
--------- --------- ------ ------ ------ ------
Total from investment
operations 2.32 4.28 3.93 5.29 0.36 1.64
--------- --------- ------ ------ ------ ------
.........................................................................
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (4.38) 0 (3.34) (0.90) (0.82) (0.58)
--------- --------- ------ ------ ------ ------
From net investment
income (0.35) (0.21) (0.47) (0.55) (0.56) (0.54)
.........................................................................
Total distributions (4.73) (0.21) (3.81) (1.45) (1.38) (1.12)
--------- --------- ------ ------ ------ ------
NET ASSET VALUE END OF
YEAR $ 22.23 $ 24.64 $20.57 $20.45 $16.61 $17.63
--------- --------- ------ ------ ------ ------
.........................................................................
.........................................................................
.........................................................................
TOTAL RETURN 9.79% 20.93% 19.20% 32.20% 2.10% 9.70%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(MILLIONS) $ 183 $ 1,149 $ 996 $ 761 $ 507 $ 463
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 0.70% 0.67%++ 0.66% 0.65% 0.68% 0.65%
.........................................................................
Total expenses,
excluding indirectly
paid expenses 0.70% 0.67%++ N/A N/A N/A N/A
.........................................................................
Net investment income 1.47% 1.91%++ 2.02% 3.02% 3.21% 2.98%
.........................................................................
PORTFOLIO TURNOVER RATE 69% 6% 91% 53% 70% 46%
.........................................................................
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from September 2, 1994 (commencement of class operations) to
December 31, 1994.
** For the seven-month period ended July 31, 1997. The Fund changed its fiscal
year end from December 31 to July 31, effective July 31, 1997.
</TABLE>
See Combined Notes to Financial Statements.
41
<PAGE>
EVERGREEN
Fund for Total Return
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended November 30,
---------------------- -----------------------------------
1998 1997** 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 20.69 $ 17.33 $ 13.83 $ 11.75 $ 12.31 $ 12.06
---------- --------- ------- ------- ------- -------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.21 0.18 0.26 0.25 0.24 0.21
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 2.46 3.34 3.83 2.80 (0.56) 1.31
---------- --------- ------- ------- ------- -------
.........................................................................
Total from investment
operations 2.67 3.52 4.09 3.05 (0.32) 1.52
---------- --------- ------- ------- ------- -------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment
income (0.19) (0.16) (0.26) (0.32) (0.24) (0.24)
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (1.52) 0 (0.33) (0.65) 0 (1.03)
---------- --------- ------- ------- ------- -------
.........................................................................
Total distributions (1.71) (0.16) (0.59) (0.97) (0.24) (1.27)
---------- --------- ------- ------- ------- -------
.........................................................................
NET ASSET VALUE END OF
YEAR $ 21.65 $ 20.69 $ 17.33 $ 13.83 $ 11.75 $ 12.31
---------- --------- ------- ------- ------- -------
.........................................................................
TOTAL RETURN+ 13.85% 20.40% 29.83% 26.57% (2.65%) 12.67%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 52,667 $ 47,812 $40,487 $27,037 $23,162 $26,367
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
.........................................................................
Total expenses 1.21% 1.24%++ 1.41% 1.69% 1.59% 1.85%
.........................................................................
Total expenses,
excluding indirectly
paid expenses 1.21% 1.22%++ 1.39% N/A N/A N/A
.........................................................................
Net investment income 1.01% 1.46%++ 1.66% 1.94% 1.93% 1.63%
.........................................................................
PORTFOLIO TURNOVER RATE 66% 41% 41% 77% 57% 92%
.........................................................................
<CAPTION>
Year Ended July 31, Year Ended November 30,
---------------------- -----------------------------------
1998 1997** 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 20.63 $ 17.31 $ 13.84 $ 11.77 $ 12.32 $ 12.65
---------- --------- ------- ------- ------- -------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.06 0.09 0.15 0.15 0.15 0.10
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 2.45 3.31 3.80 2.82 (0.56) 0.74
---------- --------- ------- ------- ------- -------
.........................................................................
Total from investment
operations 2.51 3.40 3.95 2.97 (0.41) 0.84
---------- --------- ------- ------- ------- -------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment
income (0.06) (0.08) (0.15) (0.25) (0.14) (0.14)
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (1.52) 0 (0.33) (0.65) 0 (1.03)
---------- --------- ------- ------- ------- -------
.........................................................................
Total distributions (1.58) (0.08) (0.48) (0.90) (0.14) (1.17)
---------- --------- ------- ------- ------- -------
.........................................................................
NET ASSET VALUE END OF
YEAR $ 21.56 $ 20.63 $ 17.31 $ 13.84 $ 11.77 $ 12.32
---------- --------- ------- ------- ------- -------
.........................................................................
TOTAL RETURN+ 13.01% 19.68% 28.73% 25.59% (3.36%) 6.68%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 105,748 $ 94,309 $43,526 $20,605 $ 7,314 $ 4,283
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
.........................................................................
Total expenses 1.97% 2.02%++ 2.18% 2.47% 2.31% 2.64%++
.........................................................................
Total expenses,
excluding indirectly
paid expenses 1.97% 2.00%++ 2.16% 2.46% N/A N/A
.........................................................................
Net investment income 0.25% 0.58%++ 0.88% 1.06% 1.27% 0.84%++
.........................................................................
PORTFOLIO TURNOVER RATE 66% 41% 41% 77% 57% 92%
.........................................................................
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from February 1, 1993 (commencement of class operations) to
December 31, 1993.
** For the eight-month period ended July 31, 1997. The Fund changed its fiscal
year end from December 31 to July 31, effective July 31, 1997.
</TABLE>
See Combined Notes to Financial Statements.
42
<PAGE>
EVERGREEN
Fund for Total Return
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended November 30,
--------------------- --------------------------------
1998 1997** 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE
BEGINNING OF YEAR $ 20.65 $ 17.32 $ 13.85 $11.78 $12.33 $12.65
--------- --------- ------- ------ ------ ------
.........................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................
Net investment income 0.05 0.09 0.14 0.16 0.15 0.10
.........................................................................
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions 2.46 3.32 3.81 2.81 (0.56) 0.75
--------- --------- ------- ------ ------ ------
.........................................................................
Total from investment
operations 2.51 3.41 3.95 2.97 (0.41) 0.85
--------- --------- ------- ------ ------ ------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment
income (0.06) (0.08) (0.15) (0.25) (0.14) (0.14)
.........................................................................
From net realized gain
on securities and
foreign currency
related transactions (1.52) 0 (0.33) (0.65) 0 (1.03)
--------- --------- ------- ------ ------ ------
.........................................................................
Total distributions (1.58) (0.08) (0.48) (0.90) (0.14) (1.17)
--------- --------- ------- ------ ------ ------
.........................................................................
NET ASSET VALUE END OF
YEAR $ 21.58 $ 20.65 $ 17.32 $13.85 $11.78 $12.33
--------- --------- ------- ------ ------ ------
.........................................................................
TOTAL RETURN+ 12.99% 19.73% 28.71% 25.57% (3.36%) 6.76%
.........................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................
NET ASSETS END OF YEAR
(THOUSANDS) $ 20,851 $ 21,125 $14,562 $9,503 $5,968 $5,030
.........................................................................
RATIOS TO AVERAGE NET
ASSETS:
Total expenses 1.97% 2.01%++ 2.17% 2.47% 2.34% 2.64%++
.........................................................................
Total expenses,
excluding indirectly
paid expenses 1.97% 1.99%++ 2.15% 2.44% N/A N/A
.........................................................................
Net investment income 0.25% 0.66%++ 0.89% 1.16% 1.21% 0.83%++
.........................................................................
PORTFOLIO TURNOVER RATE 66% 41% 41% 77% 57% 92%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended July 31,
-----------------------
1998 1997***
<S> <C> <C>
CLASS Y SHARES
NET ASSET VALUE BEGINNING OF YEAR $ 20.62 $ 17.74
--------- ---------
.........................................................................
INCOME FROM INVESTMENT OPERATIONS
.........................................................................
Net investment income 0.24 0.18
.........................................................................
Net realized and unrealized gains or losses on
securities and foreign currency related
transactions 2.51 2.86
--------- ---------
.........................................................................
Total from investment operations 2.75 3.04
--------- ---------
.........................................................................
LESS DISTRIBUTIONS
.........................................................................
From net investment income (0.24) (0.16)
.........................................................................
From net realized gain on securities and foreign
currency related transactions (1.52) 0
--------- ---------
.........................................................................
Total distributions (1.76) (0.16)
--------- ---------
.........................................................................
NET ASSET VALUE END OF YEAR $ 21.61 $ 20.62
--------- ---------
.........................................................................
TOTAL RETURN 14.29% 17.22 %
.........................................................................
RATIOS/SUPPLEMENTAL DATA
NET ASSETS END OF YEAR (THOUSANDS) $ 111 $ 93
.........................................................................
RATIOS TO AVERAGE NET ASSETS:
Total expenses 0.93 % 1.34 %++
.........................................................................
Total expenses, excluding indirectly paid expenses 0.93 % 1.34 %++
.........................................................................
Net investment income 1.31 % 0.79 %++
.........................................................................
PORTFOLIO TURNOVER RATE 66 % 41 %
.........................................................................
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from February 1, 1993 (commencement of class operations) to
November 30, 1993.
** For the eight-month period ended July 31, 1997. The Fund changed its fiscal
year end from December 31 to July 31, effective July 31, 1997.
*** For the period from January 13, 1997 (commencement of class operations) to
July 31, 1997.
See Combined Notes to Financial Statements.
43
<PAGE>
EVERGREEN
Blue Chip Fund
SCHEDULE OF INVESTMENTS
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 85.5%
AUTOMOTIVE EQUIPMENT & MANUFACTURING - 2.5%
72,300 Chrysler Corp. ..................................... $ 4,279,256
55,000 Ford Motor Co. ..................................... 3,131,563
50,000 *Lear Corp. ........................................ 2,653,125
------------
10,063,944
------------
BANKS - 5.8%
50,000 BankAmerica Corp. .................................. 4,487,500
63,000 BankBoston Corp. ................................... 3,047,625
45,000 Fleet Financial Group, Inc. ........................ 3,867,187
65,000 Mellon Bank Corp. .................................. 4,379,375
180,000 North Fork Bancorp, Inc. ........................... 4,387,500
30,000 PNC Bank Corp. ..................................... 1,618,125
60,000 TCF Financial Corp. ................................ 1,732,500
------------
23,519,812
------------
BUILDING, CONSTRUCTION & FURNISHINGS - 1.0%
97,000 Home Depot, Inc. ................................... 4,061,875
------------
BUSINESS EQUIPMENT &
SERVICES - 1.1%
40,000 Xerox Corp. ........................................ 4,222,500
------------
CAPITAL GOODS - 0.1%
12,000 Deere & Co. ........................................ 482,250
------------
CHEMICAL & AGRICULTURAL
PRODUCTS - 0.6%
45,000 Monsanto Co. ....................................... 2,548,125
------------
COMMUNICATION SYSTEMS & SERVICES - 2.2%
40,000 *Cisco Systems, Inc. ............................... 3,831,250
96,500 *WorldCom, Inc. .................................... 5,093,391
------------
8,924,641
------------
CONSUMER PRODUCTS &
SERVICES - 3.7%
28,500 Colgate-Palmolive Co. .............................. 2,634,469
58,000 Gillette Co. ....................................... 3,037,750
75,000 Procter & Gamble Co. ............................... 5,953,125
150,800 Stewart Enterprises, Inc. Cl. A..................... 3,425,987
------------
15,051,331
------------
DIVERSIFIED COMPANIES - 1.2%
80,000 Tyco International Ltd. ............................ 4,955,000
------------
ELECTRICAL EQUIPMENT &
SERVICES - 3.5%
149,500 General Electric Co. ............................... 13,352,219
9,000 Honeywell, Inc. .................................... 754,312
------------
14,106,531
------------
ENVIRONMENTAL SERVICES - 1.0%
162,500 *Republic Services, Inc. ........................... 4,062,500
------------
FINANCE & INSURANCE - 11.7%
35,000 American International Group, Inc................... 5,278,437
64,414 Associates First Capital Corp.
Cl. A.............................................. 5,004,163
45,000 CIGNA Corp. ........................................ 2,972,813
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
FINANCE & INSURANCE - CONTINUED
92,500 Federal National Mortgage Association............... $ 5,735,000
143,800 Greenpoint Financial Corp. ......................... 5,707,062
65,000 Hartford Life, Inc. Cl. A........................... 3,761,875
40,000 Lincoln National Corp. ............................. 3,830,000
29,000 Morgan Stanley, Dean Witter, Discover & Co. ........ 2,524,813
31,500 PMI Group, Inc. .................................... 2,134,125
80,000 SLM Holding Corp. .................................. 3,700,000
96,000 Travelers Group, Inc. .............................. 6,432,000
------------
47,080,288
------------
FOOD & BEVERAGE PRODUCTS - 1.8%
90,500 Coca Cola Co. ...................................... 7,302,219
------------
HEALTHCARE PRODUCTS &
SERVICES - 13.1%
170,000 American Home Products Corp. ....................... 8,755,000
57,000 Bristol-Myers Squibb Co. ........................... 6,494,437
100,400 HBO & Co. .......................................... 2,958,663
150,000 *Health Management Associates, Inc. Cl. A........... 3,525,000
60,000 *HEALTHSOUTH Corp. ................................. 1,507,500
55,000 Johnson & Johnson................................... 4,248,750
82,900 Medtronic, Inc. .................................... 5,134,619
58,500 Merck & Co., Inc. .................................. 7,213,781
46,000 Pfizer, Inc. ....................................... 5,060,000
132,000 Pharmacia & Upjohn, Inc. ........................... 6,253,500
25,000 *Steris Corp. ...................................... 1,528,125
------------
52,679,375
------------
INFORMATION SERVICES & TECHNOLOGY - 10.2%
86,000 *BMC Software, Inc. ................................ 4,238,187
100,500 *EMC Corp. ......................................... 4,924,500
50,000 *Gateway 2000, Inc. ................................ 2,700,000
51,300 Intel Corp. ........................................ 4,330,041
41,000 International Business Machines Corp. .............. 5,432,500
102,600 *Microsoft Corp. ................................... 11,282,794
85,000 *Peoplesoft, Inc. .................................. 3,192,812
105,000 *Sun Microsystems, Inc. ............................ 4,957,969
------------
41,058,803
------------
LEISURE & TOURISM - 2.3%
96,000 Disney Walt Co. .................................... 3,306,000
40,000 Royal Caribbean Cruises Ltd. ....................... 2,972,500
82,500 Seagram Co. Ltd. ................................... 3,031,875
------------
9,310,375
------------
OIL/ENERGY - 8.1%
100,000 Anadarko Petroleum Corp. ........................... 3,431,250
92,000 British Petroleum Plc, ADR.......................... 7,383,000
86,000 Exxon Corp. ........................................ 6,030,750
40,000 Mobil Corp. ........................................ 2,790,000
92,000 Royal Dutch Petroleum Co. .......................... 4,692,000
137,100 Texaco, Inc. ....................................... 8,337,394
------------
32,664,394
------------
</TABLE>
44
<PAGE>
EVERGREEN
Blue Chip Fund
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
PUBLISHING, BROADCASTING & ENTERTAINMENT - 4.7%
117,500 CBS Corp. .......................................... $ 3,987,656
25,000 *Clear Channel Communications, Inc. ................ 1,404,688
23,100 *Tele Communications, Inc. ......................... 963,703
35,000 Time Warner, Inc. .................................. 3,152,187
75,500 *Viacom, Inc. Cl. B................................. 5,171,750
120,000 *World Color Press, Inc. ........................... 4,087,500
------------
18,767,484
------------
REAL ESTATE - 1.2%
112,504 Equity Office Properties Trust REIT................. 2,798,537
80,000 First Industrial Realty Trust, Inc. REIT............ 2,210,000
------------
5,008,537
------------
RETAILING & WHOLESALE - 6.0%
119,500 *Borders Group Inc. ................................ 3,749,312
52,000 *Costco Companies, Inc. ............................ 2,952,625
101,600 CVS Corp. .......................................... 4,165,600
64,600 Dayton Hudson Corp. ................................ 3,088,688
63,125 Dollar General Corp. ............................... 2,588,125
52,500 Pier 1 Imports, Inc. ............................... 817,031
108,000 Wal-Mart Stores, Inc. .............................. 6,817,500
------------
24,178,881
------------
UTILITIES - TELEPHONE - 3.7%
60,000 Ameritech Corp. .................................... 2,951,250
66,100 AT&T Corp. ......................................... 4,007,313
70,000 GTE Corp. .......................................... 3,806,250
75,000 U.S. West, Inc. .................................... 4,003,125
------------
14,767,938
------------
Total Common Stocks
(cost $260,296,892)................................ 344,816,803
------------
</TABLE>
* Non-income producing securities.
(a) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices plus accrued inter-
est at July 31, 1998.
144A Securities that may be resold to "qualified institutional buyers"
under Rule 144A of the securities act of 1933. These securities have
been determined to be liquid under guidelines established by the
Board of Trustees.
SUMMARY OF ABBREVIATIONS:
ADR American Depository Receipts
REIT Real Estate Investment Trust
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - 1.0%
FINANCE & INSURANCE - 1.0%
70,000 Newell Financial Trust I
5.25%, 144A....................................... $ 4,165,000
------------
Total Convertible Preferred
(cost $3,556,250)................................. 4,165,000
------------
<CAPTION>
Principal
Amount
<C> <S> <C>
CONVERTIBLE DEBENTURES - 0.0%
IRON & STEEL - 0.0%
$ 110,000 Compania Vale do Rio Doce Navegacao SA
1.00%, 12/31/99................................... $ 9
------------
Total Convertible Debentures
(cost $0)......................................... 9
------------
REPURCHASE AGREEMENT - 8.5%
34,092,000 Keystone Joint Repurchase Agreement, Investments in
repurchase agreements, in a joint trading account
purchased
7/31/98, 5.65% maturing 8/3/98, maturity value
$34,108,052
(cost $34,092,000) (a)............................ 34,092,000
------------
<CAPTION>
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C>
TOTAL INVESTMENTS -
(COST $297,945,142)......................... 95.0% 383,073,812
OTHER ASSETS AND
LIABILITIES - NET........................... 5.0 20,334,253
----- ------------
NET ASSETS................................... 100.0% $403,408,065
===== ============
</TABLE>
See Combined Notes to Financial Statements.
45
<PAGE>
EVERGREEN
Growth and Income Fund
SCHEDULE OF INVESTMENTS
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 81.6%
AEROSPACE & DEFENSE - 0.5%
282,000 Boeing Co. ....................................... $ 10,945,125
--------------
AUTOMOTIVE EQUIPMENT & MANUFACTURING - 0.5%
50,000 Ford Motor Co. ................................... 2,846,875
430,000 Meritor Automotive, Inc. ......................... 8,707,500
--------------
11,554,375
--------------
BANKS - 9.1%
131,850 AmSouth Bancorp................................... 5,232,797
15,600 Astoria Financial Corp. .......................... 781,950
130,284 Banc One Corp. ................................... 6,734,054
80,000 Bank of New York Co., Inc. ....................... 5,120,000
16,820 BB & T Corp. ..................................... 1,181,605
286,500 BSB Bancorp, Inc. ................................ 9,311,250
135,000 Carolina First Corp. ............................. 3,307,500
14,300 Centura Banks, Inc. .............................. 989,381
38,838 Charter One Financial, Inc. ...................... 1,264,662
67,500 Citicorp.......................................... 11,475,000
12,878 Commerce Bankcorp, Inc. .......................... 585,926
45,750 Crestar Financial Corp. .......................... 3,119,578
55,600 Cullen/Frost Bankers, Inc. ....................... 2,953,750
71,824 First American Corp. ............................. 3,375,728
236,250 First Security Corp. ............................. 5,190,117
114,550 First Virginia Banks, Inc. ....................... 6,293,091
140,100 Firstar Corp. .................................... 6,996,244
23,600 FirstMerit Corp. ................................. 691,775
50,000 Fleet Financial Group, Inc. ...................... 4,296,875
210,000 Hibernia Corp. Cl. A.............................. 3,963,750
15,100 JSB Financial, Inc. .............................. 818,231
221,200 KeyCorp........................................... 7,520,800
22,650 Keystone Financial, Inc. ......................... 757,359
208,400 Marshall & Ilsley Corp. .......................... 11,709,475
53,125 NationsBank Corp. ................................ 4,236,719
167,400 Norwest Corp. .................................... 6,015,938
712,100 Pacific Century Financial Corp. .................. 13,974,962
130,000 Peoples Heritage Financial Group.................. 2,941,250
195,000 SouthTrust Corp. ................................. 7,885,313
27,900 St. Paul Bancorp, Inc. ........................... 627,750
117,300 State Street Corp. ............................... 8,130,356
98,475 Summit Bancorp.................................... 4,406,756
180,000 Susquehanna Bancshares, Inc. ..................... 4,050,000
12,785 Union Planters Corp. ............................. 696,783
53,787 Wachovia Corp. ................................... 4,605,512
1,030,000 Webster Financial Corp. .......................... 31,221,875
52,000 Wilmington Trust Corp. ........................... 3,084,250
--------------
195,548,362
--------------
BUILDING, CONSTRUCTION & FURNISHINGS - 3.3%
13,300 Armstrong World Industries, Inc. ................. 819,613
320,000 *Furniture Brands International, Inc. ............ 9,040,000
80,000 Home Depot, Inc. ................................. 3,350,000
349,100 *Jacobs Engineering Group, Inc. .................. 10,254,812
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
BUILDING, CONSTRUCTION & FURNISHINGS - CONTINUED
218,600 Lennar Corp. ..................................... $ 6,038,825
113,000 Lone Star Industries, Inc. ....................... 8,220,750
280,000 Lowe's Companies, Inc. ........................... 10,780,000
70,400 Southdown, Inc. .................................. 4,404,400
130,000 *Toll Brothers, Inc. ............................. 3,404,375
358,200 *US Home Corp. ................................... 13,410,112
--------------
69,722,887
--------------
BUSINESS EQUIPMENT &
SERVICES - 4.3%
422,500 Air Express International Corp. .................. 9,321,406
794,300 Circle International Group, Inc. ................. 18,169,612
180,000 *Compuware Corp. ................................. 9,686,250
133,000 Equifax, Inc. .................................... 5,436,375
123,436 First Data Corp. ................................. 3,571,929
640,200 Pittston Burlington Group......................... 7,642,388
334,700 *Platinum Technology Corp. ....................... 10,574,428
470,000 *Policy Management Systems Corp. ................. 20,621,250
427,000 Reynolds & Reynolds Co., Cl. A.................... 7,178,938
--------------
92,202,576
--------------
CAPITAL GOODS - 0.3%
127,200 Caterpillar, Inc. ................................ 6,169,200
--------------
CHEMICAL & AGRICULTURAL
PRODUCTS - 3.2%
130,000 Air Products & Chemicals, Inc. ................... 4,550,000
180,000 Du Pont (E.I.) De Nemours & Co. .................. 11,160,000
265,000 Engelhard Corp. .................................. 5,531,875
165,000 *Grace (W.R.) & Co. .............................. 2,753,438
135,300 H.B. Fuller Co. .................................. 7,610,625
255,000 Morton International, Inc. ....................... 6,167,812
180,000 Nalco Chemical Co. ............................... 6,165,000
237,000 Pioneer Hi-Bred International, Inc. .............. 7,495,125
260,000 Praxair, Inc. .................................... 12,805,000
175,000 Solutia, Inc. .................................... 5,195,312
--------------
69,434,187
--------------
COMMUNICATION SYSTEMS & SERVICES - 0.8%
248,820 American Tower Systems Corp. ..................... 5,971,680
72,000 *Cisco Systems, Inc. ............................. 6,894,000
60,000 *WorldCom, Inc. .................................. 3,172,500
--------------
16,038,180
--------------
CONSUMER PRODUCTS &
SERVICES - 3.0%
235,200 Black & Decker Corp. ............................. 13,377,000
90,000 Colgate-Palmolive Co. ............................ 8,319,375
25,000 CPI Corp. ........................................ 625,000
9,800 *GC Companies, Inc. .............................. 458,150
179,000 Gucci Group....................................... 8,703,875
40,700 Harley-Davidson, Inc. ............................ 1,612,738
185,000 Hillenbrand Industries, Inc. ..................... 10,348,437
</TABLE>
46
<PAGE>
EVERGREEN
Growth and Income Fund
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
CONSUMER PRODUCTS &
SERVICES - CONTINUED
162,500 Lancaster Colony Corp. ........................... $ 6,276,562
440,000 Premark International, Inc. ...................... 13,640,000
9,100 Toro Co. ......................................... 246,838
--------------
63,607,975
--------------
DIVERSIFIED COMPANIES - 0.6%
217,500 Harnischfeger Industries, Inc. ................... 5,410,313
200,000 ITT Industries, Inc. ............................. 6,975,000
--------------
12,385,313
--------------
ELECTRICAL EQUIPMENT &
SERVICES - 2.6%
220,000 Baldor Electric Co. .............................. 4,565,000
185,000 Belden, Inc. ..................................... 4,879,375
65,000 Diebold Inc. ..................................... 1,641,250
70,200 General Electric Co. ............................. 6,269,738
175,100 Harman International Industries, Inc. ............ 6,905,506
180,000 Honeywell, Inc. .................................. 15,086,250
106,000 *Jabil Circuit, Inc. ............................. 3,690,125
136,100 Perkin Elmer Corp. ............................... 7,978,862
335,000 Sensormatic Electronics Corp. .................... 3,664,063
152,900 *Unitrode Corp. .................................. 2,025,925
2,331 Zilog, Inc. ...................................... 2,331
--------------
56,708,425
--------------
FINANCE & INSURANCE - 6.3%
120,000 AFLAC, Inc. ...................................... 4,125,000
17,800 American Bankers Insurance Group, Inc. ........... 1,073,563
97,000 Chubb Corp. ...................................... 7,117,375
279,750 Edwards (A.G.), Inc. ............................. 10,927,734
300,000 Federal Home Loan Mortgage Corp. ................. 14,175,000
315,000 Federal National Mortgage Association............. 19,530,000
42,750 First American Financial Corp. ................... 1,132,875
388,740 Frontier Insurance Group, Inc. ................... 6,900,135
200,000 Hartford Financial Services Group, Inc. .......... 10,412,500
115,000 LaSalle Re Holdings Ltd. ......................... 4,025,000
63,866 Legg Mason, Inc. ................................. 3,899,818
200,500 Lehman Brothers Holdings, Inc. ................... 14,436,000
29,100 Life RE Corp. .................................... 2,653,556
67,500 Meadowbrook Insurance Group, Inc. ................ 1,944,844
31,300 Mercury General Corp. ............................ 1,437,844
59,000 Mid Ocean Ltd. ................................... 4,661,000
272,100 Paine Webber Group, Inc. ......................... 12,822,712
212,000 Price (T.) Rowe & Associates, Inc................. 7,526,000
3,300 Reinsurance Group Of America...................... 183,563
125,000 UNUM Corp. ....................................... 6,585,937
--------------
135,570,456
--------------
FOOD & BEVERAGE PRODUCTS - 1.1%
90,000 Bestfoods......................................... 5,006,250
11,250 *Corn Products International, Inc. ............... 334,688
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
FOOD & BEVERAGE PRODUCTS - CONTINUED
350,000 Darden Restaurants, Inc. ......................... $ 6,059,375
50,000 *Dominick's Supermarkets, Inc. ................... 2,253,125
40,000 Sara Lee Corp. ................................... 2,005,000
420,400 *Vlasic Foods International, Inc. ................ 7,383,275
--------------
23,041,713
--------------
FOREST PRODUCTS - 0.1%
120,000 Deltic Timber Corp. .............................. 2,790,000
--------------
HEALTHCARE PRODUCTS &
SERVICES - 11.4%
230,000 Abbott Laboratories............................... 9,559,375
408,200 *Acuson Corp. .................................... 6,735,300
200,000 American Home Products Corp. ..................... 10,300,000
60,000 Baxter International, Inc. ....................... 3,585,000
126,800 Beckman Coulter Inc. ............................. 7,623,850
110,000 *Elan Corp Plc, ADR............................... 7,920,000
362,000 *First Health Group Corp. ........................ 8,914,250
365,000 *Foundation Health Systems, Inc. ................. 7,528,125
401,625 *Health Management Associates, Inc. Cl. A......... 9,438,187
206,000 *HEALTHSOUTH Corp. ............................... 5,175,750
70,100 Johnson & Johnson................................. 5,415,225
70,500 Lilly (Eli) & Co. ................................ 4,741,125
650,000 *Lincare Holdings, Inc. .......................... 25,837,500
60,000 Manor Care, Inc. ................................. 2,238,750
400,000 McKesson Corp. ................................... 32,250,000
20,000 Merck & Co., Inc. ................................ 2,466,250
100,000 Owens & Minor, Inc. .............................. 1,237,500
84,200 Pfizer, Inc. ..................................... 9,262,000
521,500 *Quorum Health Group, Inc. ....................... 13,167,875
226,000 Schering-Plough Corp. ............................ 21,865,500
225,000 Shared Medical System Corp. ...................... 15,271,875
256,000 *Sybron International Corp. ...................... 5,312,000
120,000 *Tenet Healthcare Corp. .......................... 3,592,500
162,000 Warner-Lambert Co. ............................... 12,241,125
65,020 *Wellpoint Health Networks, Inc.
Cl. A............................................ 3,986,539
350,000 West Co., Inc. ................................... 9,734,375
--------------
245,399,976
--------------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES - 6.8%
223,700 AptarGroup, Inc. ................................. 13,771,531
164,625 Autoliv, Inc. .................................... 5,607,539
370,000 Bemis Co., Inc. .................................. 14,291,250
150,000 Borg-Warner Automotive, Inc. ..................... 7,059,375
42,000 Carpenter Technology Corp. ....................... 1,819,125
101,800 Danaher Corp. .................................... 4,154,713
197,000 Dover Corp. ...................................... 5,725,312
226,218 Flowserve Corp. .................................. 4,934,380
71,900 *Halter Marine Group, Inc. ....................... 1,141,413
12,800 J & L Specialty Steel, Inc. ...................... 72,000
270,300 JLG Industries, Inc. ............................. 4,189,650
33,500 Magna International, Inc. Cl. A................... 2,286,375
23,650 Newmont Mining Corp. ............................. 446,394
</TABLE>
47
<PAGE>
EVERGREEN
Growth and Income Fund
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES -
CONTINUED
145,000 Parker Hannifin Corp. ........................... $ 4,975,313
594,000 Pittston Brink's Group .......................... 21,198,375
260,000 Snap-on, Inc. ................................... 9,230,000
284,000 *Strattec Security Corp. ........................ 7,952,000
280,000 Sundstrand Corp. ................................ 14,647,500
15,000 Tecumseh Products Co. Cl. A...................... 787,500
216,300 *UCAR International, Inc. ....................... 5,704,912
680,300 *Unova, Inc. .................................... 14,116,225
25,000 Vulcan Materials Co. ............................ 2,875,000
--------------
146,985,882
--------------
INFORMATION SERVICES & TECHNOLOGY - 2.0%
80,000 *Adaptec, Inc. .................................. 930,000
100,000 *Applied Materials, Inc. ........................ 3,350,000
13,300 *Choicepoint, Inc. .............................. 655,025
400,000 Computer Associates International, Inc. ......... 13,275,000
110,000 *Dupont Photomasks, Inc. ........................ 3,547,500
100,000 Hewlett-Packard Co. ............................. 5,550,000
72,000 Intel Corp. ..................................... 6,079,500
329,800 *KLA-Tencor Corp. ............................... 9,852,775
87,500 *Perceptron, Inc. ............................... 568,750
--------------
43,808,550
--------------
MANUFACTURING -
DISTRIBUTING - 0.1%
136,100 Hussmann International, Inc. .................... 2,415,775
--------------
METAL PRODUCTS &
SERVICES - 0.3%
365,000 *Steel Dynamics, Inc. ........................... 5,292,500
--------------
OIL/ENERGY - 4.1%
50,000 Anadarko Petroleum Corp. ........................ 1,715,625
320,000 Berry Petroleum Co. Cl. A........................ 3,680,000
507,400 Cabot Oil & Gas Corp. ........................... 8,689,225
90,000 Coastal Corp. ................................... 2,947,500
165,000 *Denbury Resources, Inc. ........................ 1,691,250
160,000 *Houston Exploration, Co. ....................... 3,360,000
110,300 Kerr-McGee Corp. ................................ 5,659,769
209,500 Murphy Oil Corp. ................................ 9,283,469
183,900 National Fuel Gas Co. ........................... 7,597,369
221,200 *Nuevo Energy Co. ............................... 5,419,400
495,000 *Oryx Energy Co. ................................ 9,126,562
400,000 *Santa Fe Energy Resources, Inc. ................ 3,525,000
321,600 Southwestern Energy Co. ......................... 2,894,400
100,000 Tosco Corp. ..................................... 2,800,000
325,000 Transocean Offshore, Inc. ....................... 12,817,187
113,520 Union Pacific Resource Group, Inc. .............. 1,589,280
174,000 Williams Companies, Inc. ........................ 5,578,875
--------------
88,374,911
--------------
OIL FIELD SERVICES - 1.9%
298,000 *Atwood Oceanics, Inc. .......................... 9,126,250
52,300 Camco International, Inc. ....................... 3,713,300
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
OIL FIELD SERVICES - CONTINUED
113,140 Halliburton Co. ................................. $ 4,108,396
96,500 Helmerich & Payne, Inc. ......................... 1,978,250
15,500 Lufkin Industries, Inc. ......................... 458,219
914,500 *R & B Falcon Corp. ............................. 15,032,094
380,500 *Varco International, Inc. ...................... 6,040,437
--------------
40,456,946
--------------
PAPER & PACKAGING - 0.3%
88,440 Sealed Air Corp. ................................ 3,537,600
75,000 Westvaco Corp. .................................. 1,879,688
--------------
5,417,288
--------------
PHARMACEUTICALS - 0.1%
100,000 *Dura Pharmaceuticals, Inc. ..................... 2,575,000
--------------
PUBLISHING, BROADCASTING & ENTERTAINMENT - 4.6%
84,000 *Chancellor Media Corp. ......................... 4,053,000
49,805 Comcast Corp. ................................... 2,261,458
270,000 *Emmis Broadcasting Corp. Cl. A.................. 11,542,500
273,800 Gaylord Entertainment Co. ....................... 8,385,125
425,000 *Jacor Communications, Inc. ..................... 24,915,625
40,000 Knight-Ridder, Inc. ............................. 2,110,000
15,000 McGraw-Hill Companies, Inc. ..................... 1,229,063
43,000 Scripps (E.W.) Co. Cl. A......................... 2,262,875
185,000 TCA Cable TV, Inc. .............................. 10,649,062
250,000 Time Warner, Inc. ............................... 22,515,625
1 *Viacom, Inc. Cl. A.............................. 68
2,800 Washington Post Co., Cl. B....................... 1,524,600
95,000 *Young Broadcasting, Inc. Cl. A.................. 6,222,500
--------------
97,671,501
--------------
REAL ESTATE - 2.6%
40,000 AMB Property Corp. REIT.......................... 955,000
20,000 Apartment Investment & Management Co. Cl. A
REIT............................................ 760,000
60,000 Arden Realty Group, Inc. REIT.................... 1,417,500
71,200 Berkshire Realty Co., Inc. REIT.................. 778,750
158,000 Brandywine Realty Trust REIT..................... 3,150,125
145,000 CarrAmerica Realty Corp. REIT.................... 3,905,938
20,000 CBL & Associates Properties, Inc. REIT........... 486,250
78,000 Crescent Real Estate Equities, Inc. REIT......... 2,291,250
75,000 Entertainment Properties Trust REIT.............. 1,378,125
66,100 Gables Residential Trust REIT.................... 1,772,306
100,000 Kilroy Realty Corp. REIT......................... 2,268,750
64,000 Kimco Realty Corp. REIT.......................... 2,368,000
85,000 Liberty Property Trust REIT...................... 2,130,313
165,000 Mack-Cali Realty Corp. REIT...................... 5,125,312
170,000 Meditrust Co. REIT............................... 3,825,000
165,400 Patriot American Hospitality, Inc. REIT.......... 3,142,600
20,000 RFS Hotel Investors, Inc. REIT................... 341,250
160,000 *Servico, Inc. .................................. 2,160,000
199,851 Starwood Hotels & Resorts Trust REIT............. 8,206,382
</TABLE>
48
<PAGE>
EVERGREEN
Growth and Income Fund
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
REAL ESTATE - CONTINUED
132,600 Sunstone Hotel Investors, Inc. REIT............... $ 1,475,175
255,300 Weeks Corp. REIT.................................. 7,371,787
--------------
55,309,813
--------------
RETAILING & WHOLESALE - 2.9%
116,600 *Autozone, Inc. .................................. 3,993,550
169,000 Avnet, Inc. ...................................... 9,273,875
290,600 *Cole National Corp. Cl. A........................ 9,589,800
150,000 J. C. Penney Co., Inc. ........................... 8,803,125
52,600 Longs Drug Stores Corp. .......................... 1,453,075
113,100 Mercantile Stores Co., Inc. ...................... 8,970,244
318,825 *Proffitts, Inc. ................................. 10,042,987
105,000 Rite Aid Corp. ................................... 4,147,500
118,000 *Saks Holdings, Inc. ............................. 3,031,125
20,400 Shopko Stores, Inc. .............................. 596,700
8,200 *Timberland Co. Cl. A............................. 528,900
20,000 *Tommy Hilfiger Corp. ............................ 1,121,250
--------------
61,552,131
--------------
TELECOMMUNICATION SERVICES & EQUIPMENT - 0.5%
168,000 *Aspect Telecommunications Corp. ................. 5,360,250
50,000 Mediaone Group, Inc. ............................. 2,415,625
70,000 *Univision Communications, Inc. Cl. A............. 2,555,000
--------------
10,330,875
--------------
TRANSPORTATION - 4.4%
276,600 *Atlas Air, Inc. ................................. 10,199,625
780,000 Bombardier, Inc., Cl. B........................... 10,737,970
190,000 Burlington Northern Santa Fe...................... 19,558,125
612,600 Kansas City Southern Industries, Inc. ............ 30,093,975
140,000 +Petroleum Helicopters, Inc. ..................... 2,563,750
138,500 Southwest Airlines Co. ........................... 4,561,844
413,000 Union Pacific Corp. .............................. 17,346,000
--------------
95,061,289
--------------
UTILITIES - ELECTRIC - 1.1%
64,000 Commonwealth Energy System........................ 2,272,000
140,900 Energy East Corp. ................................ 5,636,000
70,000 Houston Industries, Inc. ......................... 1,955,625
40,000 Texas Utilities Co. .............................. 1,602,500
400,000 TNP Enterprises, Inc. ............................ 12,900,000
--------------
24,366,125
--------------
UTILITIES - GAS - 0.9%
245,800 Marketspan Corp. ................................. 6,774,863
288,100 Northwest Natural Gas Co. ........................ 7,562,625
184,400 Piedmont Natural Gas Co., Inc. ................... 5,370,650
--------------
19,708,138
--------------
UTILITIES - TELEPHONE - 1.9%
160,000 *AirTouch Communications, Inc. ................... 9,410,000
62,000 AT&T Corp. ....................................... 3,758,750
150,000 Century Telephone Enterprises, Inc. .............. 7,462,500
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
UTILITIES - TELEPHONE - CONTINUED
143,000 Cincinnati Bell, Inc. ............................ $ 4,593,875
200,000 GTE Corp. ........................................ 10,875,000
75,000 MCI Communications Corp. ......................... 4,856,250
1,365 U.S. West, Inc. .................................. 72,857
--------------
41,029,232
--------------
Total Common Stocks
(cost $1,322,443,411)............................ 1,751,474,706
--------------
PREFERRED STOCKS - 0.0%
HEALTHCARE PRODUCTS &
SERVICES - 0.0%
130,000 *Fresenius National Med Care, Inc. Ser. D......... 8,840
--------------
Total Preferred Stocks
(cost $22,740)................................... 8,840
--------------
CONVERTIBLE PREFERRED - 0.1%
PAPER & PACKAGING - 0.1%
78,375 *Sealed Air Corp. ................................ 3,497,485
--------------
Total Convertible Preferred
(cost $2,426,965)................................ 3,497,485
--------------
<CAPTION>
Principal
Amount
<C> <S> <C>
SHORT-TERM INVESTMENTS - 19.7%
COMMERCIAL PAPER - 17.2%
$13,300,000 Akzo Nobel, Inc.
5.62%, 8/6/98.................................... 13,289,618
37,500,000 Banc One Funding Corp.
5.51%, 9/18/98................................... 37,224,500
25,800,000 BHF Finance (De), Inc.
5.52%, 9/18/98................................... 25,610,112
2,800,000 Cambridge Massachusetts
Water Pollution
5.58%, 9/1/98.................................... 2,786,546
19,500,000 Citibank Capital Markets Assets
Yr 1+2
5.57%, 8/28/98................................... 19,418,539
5,850,000 Dollar Thrifty Funding Corp.
5.55%, 8/7/98.................................... 5,845,228
25,000,000 Du Pont (E.I.) De Nemours & Co. 5.54%, 8/24/98.... 24,911,514
36,650,000 Finova Capital Corp.
5.54%, 9/3/98.................................... 36,463,879
37,400,000 General Motors Acceptance Corp. 5.50%, 8/20/98.... 37,291,436
17,400,000 Goldman Sachs Group
5.53%, 8/17/98................................... 17,357,235
Great Lakes Chemical Corp.:
1,000,000 5.51%, 9/1/98..................................... 995,255
14,000,000 5.53%, 8/10/98.................................... 13,980,645
18,000,000 Island Finance Puerto Rico, Inc. 5.55%, 8/11/98... 17,972,250
30,000,000 Knight-Ridder Inc.
5.65%, 8/14/98................................... 29,938,792
Marsh & McLennan Co., Inc.:
2,200,000 5.51%, 9/4/98..................................... 2,188,551
27,000,000 5.54%, 8/27/98.................................... 26,891,970
</TABLE>
49
<PAGE>
EVERGREEN
Growth and Income Fund
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - CONTINUED
COMMERCIAL PAPER - CONTINUED
$ 7,750,000 Massachusetts College of
Pharmacy and Allied Health Services
5.55%, 8/20/98................................... $ 7,727,299
5,800,000 Monsanto Company Series B 5.50%, 9/10/98.......... 5,764,555
12,700,000 Morgan (J.P.) & Co., Inc.
5.52%, 8/17/98................................... 12,668,843
1,000,000 Pfizer, Inc.
5.53%, 8/3/98.................................... 999,693
7,900,000 Power Authority Str New York 5.53%, 9/14/98....... 7,846,605
850,000 Queens Health System
5.55%, 8/6/98.................................... 849,345
22,200,000 Twin Towers, Inc.
5.58%, 8/18/98................................... 22,141,503
--------------
370,163,913
--------------
</TABLE>
* Non-income producing securities.
+ Investment in a non-controlled affiliate. The fund owns over 5% of the
outstanding voting shares of Strattec Security Corp. and Petroleum
Helicopters, Inc. with a cost basis of $4,202,147 and $2,392,500 re-
spectively at July 31, 1998. The Fund earned $7,000 of income from Pe-
troleum Helicopters, Inc. during the period ending July 31, 1998.
(a) Less than one-tenth of a percent.
SUMMARY OF ABBREVIATIONS:
ADR American Depository Receipts
REIT Real Estate Investment Trust.
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - CONTINUED
GOVERNMENT AGENCY NOTES & BONDS - 2.5%
$32,000,000 Federal Home Loan Mortgage Discount Notes
5.46%, 8/28/98.................................. $ 31,868,960
21,000,000 Federal National Mortgage Association Discount
Notes 5.44%, 8/14/98............................ 20,958,747
--------------
52,827,707
--------------
Total Short-Term Investments
(cost $422,991,620)............................. 422,991,620
--------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C>
TOTAL INVESTMENTS -
(COST $1,747,884,736).................... 101.4% 2,177,972,651
OTHER ASSETS AND
LIABILITIES - NET........................ (1.4) (30,651,773)
----- --------------
NET ASSETS................................ 100.0% $2,147,320,878
===== ==============
</TABLE>
See Combined Notes to Financial Statements.
50
<PAGE>
EVERGREEN
Income and Growth
SCHEDULE OF INVESTMENTS
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 65.7%
AUTOMOTIVE EQUIPMENT &
MANUFACTURING - 1.3%
175,900 Dana Corp. .......................................... $ 8,751,025
50,000 General Motors Corp. ................................ 3,615,625
------------
12,366,650
------------
BANKS - 15.5%
26,775 AmSouth Bancorp...................................... 1,062,633
100,000 Associated Banc Corp. ............................... 3,800,000
284,000 BancorpSouth, Inc. .................................. 5,573,500
170,100 Bankers Trust Corp. ................................. 19,061,831
192,500 +CB Bancshares, Inc. ................................ 6,833,750
24,850 CCB Financial Corp. ................................. 2,863,962
200,000 Commonwealth Bank of Australia....................... 2,497,442
77,606 F&M National Corp. .................................. 2,202,070
35,100 First American Corp. ................................ 1,649,700
300,300 First Hawaiian, Inc. ................................ 9,947,437
40,000 First Tennessee National Corp. ...................... 1,255,000
120,750 First Virginia Banks, Inc. .......................... 6,633,703
8,200 FirstMerit Corp. .................................... 240,363
100,000 Fleet Financial Group, Inc. ......................... 8,593,750
319,410 Interchange Financial Services Corp. ................ 6,348,274
100,000 KeyCorp ............................................. 3,400,000
18,271 M & T Bank Corp. .................................... 9,720,172
100,000 Marshall & Ilsley Corp. ............................. 5,618,750
77,346 Mercantile Bancorp, Inc. ............................ 4,205,689
153,000 Norwest Corp. ....................................... 5,498,437
15,625 One Valley Bancorp of West Virginia, Inc. ........... 528,320
50,326 Premier National Bancorp Inc. ....................... 1,056,846
79,254 Second Bancorp, Inc. ................................ 2,219,112
10,000 Summit Bancorp ...................................... 447,500
111,375 Susquehanna Bancshares, Inc. ........................ 2,505,938
228,772 Union Planters Corp. ................................ 12,468,074
7,000 United Bankshares, Inc. ............................. 194,250
107,320 USBancorp, Inc. ..................................... 8,236,810
1,930,402 Westpac Banking Corp., Ltd. ......................... 12,211,023
------------
146,874,336
------------
BUILDING, CONSTRUCTION &
FURNISHINGS - 2.4%
330,000 Armstrong World Industries,Inc. ..................... 20,336,250
37,100 La-Z-Boy Chair Co. .................................. 2,114,700
------------
22,450,950
------------
CAPITAL GOODS - 1.1%
221,500 Caterpillar, Inc. ................................... 10,742,750
------------
COMMUNICATION SYSTEMS &
SERVICES - 0.3%
51,641 *WorldCom, Inc. ..................................... 2,730,518
------------
CONSUMER PRODUCTS &
SERVICES - 0.6%
215,000 Tupperware Corp. .................................... 5,428,750
------------
DIVERSIFIED COMPANIES - 0.5%
225,000 Tomkins Plc, ADR..................................... 4,809,375
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
ELECTRICAL EQUIPMENT &
SERVICES - 1.4%
5,000 Hubbell, Inc. Cl. A.................................. $ 203,750
220,000 Hubbell, Inc. Cl. B.................................. 9,240,000
98,800 Thomas & Betts Corp. ................................ 4,050,800
------------
13,494,550
------------
FINANCE & INSURANCE - 3.7%
170,300 IPC Holdings Ltd. ................................... 4,512,950
100,000 LaSalle Re Holdings Ltd. ............................ 3,500,000
100,000 Mid Ocean Ltd. ...................................... 7,900,000
195,800 Ohio Casualty Corp. ................................. 8,345,975
110,000 Paine Webber Group, Inc. ............................ 5,183,750
143,200 Provident Co., Inc. ................................. 5,280,500
------------
34,723,175
------------
FOOD & BEVERAGE PRODUCTS - 0.2%
1,000 Sara Lee Corp. ...................................... 50,125
62,400 Sbarro, Inc. ........................................ 1,532,700
------------
1,582,825
------------
HEALTHCARE PRODUCTS &
SERVICES - 3.1%
53,000 *ADAC Laboratories................................... 1,444,250
70,000 American Home Products Corp. ........................ 3,605,000
175,000 Baxter International, Inc. .......................... 10,456,250
59,400 Bristol-Myers Squibb Co. ............................ 6,767,887
47,600 Merck & Co., Inc. ................................... 5,869,675
22,500 Shared Medical System Corp. ......................... 1,527,188
------------
29,670,250
------------
METAL PRODUCTS & SERVICES - 0.3%
200,601 Freeport McMoRan Copper & Gold, Inc. Cl. A........... 2,846,027
------------
OIL/ENERGY - 1.7%
100,000 Atlantic Richfield Co. .............................. 6,775,000
26,100 Consolidated Natural Gas Co. ........................ 1,349,044
293,100 Equitable Resources, Inc. ........................... 7,217,588
10,000 National Fuel Gas Co. ............................... 413,125
5,929 *Santa Fe Energy Resources, Inc. .................... 52,249
------------
15,807,006
------------
PUBLISHING, BROADCASTING &
ENTERTAINMENT - 0.1%
50,000 Reader's Digest Association, Inc. (The).............. 1,412,500
------------
REAL ESTATE - 7.4%
55,000 Burnham Pacific Properties, Inc. REIT................ 759,687
1,000,000 Canadian Hotel Properties REIT....................... 7,280,429
324,900 Equity Residential Properties Trust REIT............. 13,645,800
412,700 Gables Residential Trust REIT........................ 11,065,519
462,000 Kranzco Realty Trust REIT............................ 8,316,000
850,000 Meditrust Co. REIT................................... 19,125,000
260,050 Post Property, Inc. REIT............................. 10,320,734
------------
70,513,169
------------
</TABLE>
51
<PAGE>
EVERGREEN
Income and Growth
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
RETAILING & WHOLESALE - 0.8%
100,000 Mercantile Stores Co., Inc. ......................... $ 7,931,250
------------
TELECOMMUNICATION SERVICES &
EQUIPMENT - 4.1%
2,003,000 Telecom Corp. New Zealand Ltd. ...................... 39,308,875
------------
THRIFT INSTITUTIONS - 0.4%
56,000 First Essex Bancorp, Inc. ........................... 1,211,000
122,000 +Jacksonville Bancorp, Inc. ......................... 2,211,250
10,430 Peoples Heritage Financial Group..................... 235,979
------------
3,658,229
------------
TRANSPORTATION - 1.1%
260,000 Union Pacific Corp. ................................. 10,920,000
------------
UTILITIES - ELECTRIC - 7.9%
10,650 Black Hills Corp. ................................... 255,600
100,000 Central & South West Corp. .......................... 2,543,750
6,500 Central Hudson Gas & Electric Corp. ................. 280,313
239,000 FPL Group, Inc. ..................................... 14,534,187
100,000 Houston Industries, Inc. ............................ 2,793,750
123,826 Interstate Energy Corp. ............................. 3,629,650
695,524 LG & E Energy Corp. ................................. 16,953,397
180,000 MDU Resources Group, Inc. ........................... 4,083,750
250,000 Midamerican Energy Holdings Co....................... 5,093,750
301,500 PP&L Resources, Inc. ................................ 6,991,031
275,000 Public Service Enterprise Group, Inc. ............... 8,989,063
101,300 Texas Utilities Co. ................................. 4,058,331
150,200 TNP Enterprises, Inc. ............................... 4,843,950
------------
75,050,522
------------
UTILITIES - GAS - 5.7%
73,300 Chesapeake Utilities Corp. .......................... 1,273,588
1,035,848 Marketspan Corp. .................................... 28,550,560
76,700 New Jersey Resources Corp. .......................... 2,626,975
510,700 Peoples Energy Corp. ................................ 17,874,500
29,300 Piedmont Natural Gas Co., Inc. ...................... 853,363
10,000 South Jersey Industries, Inc. ....................... 258,125
93,685 UGI Corp. ........................................... 2,201,597
8,300 Yankee Energy System, Inc. .......................... 199,719
------------
53,838,427
------------
UTILITIES - TELEPHONE - 2.6%
105,100 Frontier Corp. ...................................... 3,527,419
250,000 GTE Corp. ........................................... 13,593,750
100,000 *Nortel Inversora SA MEDS............................ 6,250,000
20,000 U.S. West, Inc. ..................................... 1,067,500
------------
24,438,669
------------
OTHER SECURITIES - 3.5%.............................. 33,915,403
------------
Total Common Stocks
(cost $568,548,771)................................. 624,514,206
------------
CONVERTIBLE PREFERRED - 30.1%
BANKS - 0.6%
210,000 National Australia Bank, Ltd.
7.875%, Series UNIT................................. 6,168,750
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - CONTINUED
CHEMICAL & AGRICULTURAL
PRODUCTS - 1.5%
485,000 Merrill Lynch & Co., Inc.
6.25%, Series IGL, STRYPES (exchangeable for IMC
Global, Inc. common stock)......................... $ 14,065,000
------------
COMMUNICATION SYSTEMS & SERVICES - 3.6%
700,000 AirTouch Communications, Inc.
6.00%, Series B.................................... 33,950,000
------------
CONSUMER PRODUCTS &
SERVICES - 1.0%
302,000 Cendant Corp.
7.50%, PRIDES...................................... 9,928,250
------------
DIVERSIFIED COMPANIES - 0.2%
35,000 Corning, Inc.
6.00%, MIPS........................................ 1,850,625
------------
ELECTRICAL EQUIPMENT &
SERVICES - 0.7%
165,000 Pioneer Standard Financial Trust
6.75%, 144A........................................ 7,033,950
------------
FINANCE & INSURANCE - 3.1%
100,000 American General Corp.
6.00%, Series A, MIPS.............................. 8,650,000
270,000 Frontier Financing Trust
6.25%, TOPRS....................................... 14,512,500
100,000 St. Paul Capital
6.00%, MIPS........................................ 6,400,000
------------
29,562,500
------------
FOOD & BEVERAGE PRODUCTS - 4.1%
300,000 Dole Food Co.
7.00%, TRACES...................................... 12,750,000
495,300 Wendys Financing I
5.00%, Series A, TECONS............................ 26,374,725
------------
39,124,725
------------
LEISURE & TOURISM - 0.8%
170,000 Lodgian Capital Trust I
7.00%, CRESTS, 144A................................ 7,299,800
------------
METAL PRODUCTS & SERVICES - 1.3%
212,800 Freeport McMoRan Copper & Gold, Inc. 7.00%, EDS..... 3,976,700
100,000 Timet Capital Trust I
6.625%, BUCS, 144A................................. 3,987,500
405,000 Worthington Industries, Inc.
7.25%, DECS
(exchangeable for Rouge Steel Co. common stock).... 4,252,500
------------
12,216,700
------------
OIL/ENERGY - 0.5%
95,000 Callon Petroleum Co.
8.50%, Series A.................................... 2,992,500
48,000 Nuevo Energy Co.
5.75%, Series A, TECONS............................ 2,040,000
------------
5,032,500
------------
</TABLE>
52
<PAGE>
EVERGREEN
Income and Growth Fund
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - CONTINUED
OIL FIELD SERVICES - 0.8%
100,000 EVI, Inc.
5.00%, 144A........................................ $ 3,725,000
100,000 Hvide Capital Trust
6.50%, 144A........................................ 3,963,000
------------
7,688,000
------------
PUBLISHING, BROADCASTING & ENTERTAINMENT - 2.8%
335,000 Houston Industries, Inc.
7.00%, ACES
(exchangeable for Time Warner, Inc. common stock).. 26,213,750
------------
TELECOMMUNICATION SERVICES & EQUIPMENT - 3.3%
600,000 Qualcomm Financial Trust I
5.75%.............................................. 31,164,000
------------
TRANSPORTATION - 1.5%
30,000 CNF Trust I
5.00%, Ser. A, TECONS (exchangeable for CNF
Transportation, Inc. common stock)................. 1,890,000
280,000 Union Pacific Capital Trust
6.25%, 144A........................................ 12,740,000
------------
14,630,000
------------
UTILITIES - ELECTRIC - 1.3%
168,000 BNDES Participacoes S.A.
10.50%, DECS
(exchangeable into Electrobras shares)............. 5,460,000
130,000 Texas Utilities Co.
9.25%, PRIDES...................................... 6,613,750
------------
12,073,750
------------
UTILITIES - GAS - 1.5%
594,500 MCN Corp.
8.75%, PRIDES...................................... 13,784,969
------------
UTILITIES - TELEPHONE - 1.5%
315,000 Philippine Long Distance Telephone Co., GDS
7.00%, Series III.................................. 14,529,375
------------
Total Convertible Preferred
(cost $290,318,758)................................ 286,316,644
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C> <C>
BUSINESS EQUIPMENT &
CONVERTIBLE SERVICES - 0.7%DEBENTURES - 3.3%
HMT Technology Corp.:
$3,500,000 5.75%, 1/15/04, 144A............................. $ 2,590,000
400,000 5.75%, 1/15/04................................... 296,000
4,000,000 Quantum Corp.
7.00%, 8/1/04................................... 3,720,000
250,000 Tecnomatix Technologies Ltd.
5.25%, 2/15/98, 144A............................ 185,938
------------
6,791,938
------------
ELECTRICAL EQUIPMENT &
SERVICES - 1.2%
9,700,000 Photronics, Inc.
6.00%, 6/1/04................................... 9,372,625
1,000,000 Sci Systems, Inc.
5.00%, 5/1/06, 144A............................. 1,670,000
------------
11,042,625
------------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES - 0.2%
1,000,000 Solectron Corp.
6.00%, 3/1/06, 144A............................. 1,515,000
------------
OIL/ENERGY - 0.1%
1,318,000 Swift Energy Co.
6.25%, 11/15/06................................. 1,166,430
------------
OIL FIELD SERVICES - 1.1%
Key Energy Group, Inc.:
5,750,000 5.00%, 9/15/04, 144A............................. 4,111,250
1,250,000 7.00%, 7/1/03, 144A.............................. 1,431,250
Offshore Logistics, Inc.:
3,775,000 6.00%, 12/15/03, 144A............................ 3,218,187
2,000,000 6.00%, 12/15/03.................................. 1,705,000
------------
10,465,687
------------
Total Convertible Debentures
(cost $35,128,220).............................. 30,981,680
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS -
(COST $893,995,749).......................... 99.1% 941,812,530
OTHER ASSETS AND LIABILITIES - NET............ 0.9 8,841,297
----- ------------
NET ASSETS.................................... 100.0% $950,653,827
===== ============
</TABLE>
* Non-income producing securities.
+ Investment in a non-controlled affiliate. The Fund owns over 5% of the out-
standing voting shares of CB Bancshares, Inc. and Jacksonville Bancorp, Inc.
The Fund has a cost basis of $6,024,625 and $1,320,000, respectively, in
these issues at July 31, 1998. The Fund earned $40,425 and $60,500 of income,
respectively, from these investments during the period ending July 31, 1998.
144A Rule 144A securities are restricted as to resale to qualified institu-
tional investors.
SUMMARY OF ABBREVIATIONS:
ACESAutomatically Convertible Equity Securities
ADRAmerican Depository Receipts
BUCSBeneficial Unsecured Convertible Securities
CRESTSConvertible Redeemable Equity Structured Trust Securities
DECSDividend Enhanced Convertible Stock
EDSExchangeable Depository Shares
GDSGlobal Depository Shares
MIPSMonthly Income Preferred Shares
PRIDESPreferred Redeemable Increased Dividend Equity Securities
REITReal Estate Investment Trust
STRYPESStructured Yield Product Exchangeable for Stock
TECONSTerm Convertible Shares
TOPRSTrust Originated Preferred Securities
TRACESTrust Automatic Common Exchangeable Securities
See Combined Notes to Financial Statements.
53
<PAGE>
EVERGREEN
Small Cap Equity Income Fund
SCHEDULE OF INVESTMENTS
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 69.3%
AEROSPACE & DEFENSE - 3.0%
214,300 Curtiss Wright Corp. ................................ $ 9,094,356
------------
AUTOMOTIVE EQUIPMENT & MANUFACTURING - 0.2%
53,200 Simpson Industries, Inc. ............................ 635,075
------------
BANKS - 6.6%
108,750 ABC Bancorp.......................................... 1,631,250
31,500 Amcore Financial, Inc. .............................. 803,250
6,000 BancorpSouth, Inc. .................................. 117,750
20,000 Bank of Essex........................................ 433,750
18,800 Britton & Koontz Capital Corp. ...................... 411,250
28,800 BSB Bancorp, Inc. ................................... 936,000
2,625 Carrollton Bancorp................................... 97,125
25,000 CB Bancshares, Inc. ................................. 887,500
32,550 Commercial Bankshares, Inc. ......................... 748,650
8,200 Community Bancshares, Inc. .......................... 221,400
40,000 Cowlitz Bancorp...................................... 430,000
2,500 First Midwest Bancorp, Inc. ......................... 103,750
30,000 First Oak Brook Bancshares, Inc. Cl. A............... 1,282,500
95,552 First State Bancorp.................................. 2,161,864
162,000 Granite State Bankshares, Inc. ...................... 4,212,000
30,000 Independent Bankshares, Inc. ........................ 460,312
20,943 Interchange Financial Services Corp. ................ 416,242
15,000 James River Bankshares, Inc. ........................ 330,000
4,000 Northern States Financial Corp. ..................... 127,000
87,125 One Valley Bancorp of West Virginia, Inc. ........... 2,945,914
4,668 Pacific Century Financial Corp. ..................... 91,610
14,620 Premier National Bancorp Inc. ....................... 307,020
24,000 South Alabama Bancorp, Inc. ......................... 474,000
11,250 Susquehanna Bancshares, Inc. ........................ 253,125
23,200 Union Bankshares Corp. .............................. 504,600
------------
20,387,862
------------
BUILDING, CONSTRUCTION & FURNISHINGS - 2.2%
28,000 La-Z-Boy Chair Co. .................................. 1,596,000
315,100 Shelby Williams Industries, Inc. .................... 4,726,500
12,413 *Toll Brothers, Inc. ................................ 325,065
------------
6,647,565
------------
BUSINESS EQUIPMENT &
SERVICES - 0.7%
169,400 Tab Products Co. .................................... 1,990,450
------------
CHEMICAL & AGRICULTURAL
PRODUCTS - 0.9%
95,000 Learonal, Inc. ...................................... 1,941,563
25,500 Stepan Co. .......................................... 733,125
------------
2,674,688
------------
CONSUMER PRODUCTS &
SERVICES - 9.3%
311,500 CPI Corp. ........................................... 7,787,500
85,500 General Housewares Corp. ............................ 881,719
230,140 +Knape & Vogt Manufacturing Co. ..................... 5,005,545
100,000 Mikasa, Inc. Cl. B................................... 1,318,750
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
CONSUMER PRODUCTS &
SERVICES - CONTINUED
100,000 Polaris Industries, Inc. ............................ $ 3,812,500
26,300 Russ Berrie & Co., Inc. ............................. 604,900
310,000 Stride Rite Corp. ................................... 3,758,750
328,600 York Group, Inc. .................................... 5,504,050
------------
28,673,714
------------
DIVERSIFIED COMPANIES - 2.7%
379,000 Matthews International Corp. Cl. A................... 8,338,000
------------
ELECTRICAL EQUIPMENT &
SERVICES - 2.9%
225,800 Boston Acoustics, Inc. .............................. 9,032,000
------------
FINANCE & INSURANCE - 2.4%
26,600 Arthur J. Gallagher & Co. ........................... 1,042,387
5,000 LaSalle Re Holdings Ltd. ............................ 175,000
100,000 Morgan Keegan, Inc. ................................. 2,368,750
122,500 Pxre Corp. .......................................... 3,307,500
16,000 Trenwick Group, Inc. ................................ 556,000
------------
7,449,637
------------
FOOD & BEVERAGE PRODUCTS - 0.7%
101,000 Bridgford Foods Corp. ............................... 1,325,625
20,000 Lance, Inc. ......................................... 378,125
78,800 Smithfield Companies, Inc. .......................... 566,375
------------
2,270,125
------------
HEALTHCARE PRODUCTS &
SERVICES - 0.7%
9,500 Kewaunee Scientific Corp. ........................... 108,656
73,500 West Co., Inc. ...................................... 2,044,219
------------
2,152,875
------------
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES - 3.3%
50,000 Badger Meter, Inc. .................................. 1,671,875
100,000 Federal Signal Corp. ................................ 2,268,750
72,297 Flowserve Corp. ..................................... 1,576,978
84,100 Gorman Rupp Co. ..................................... 1,503,287
63,000 Hach Co. ............................................ 637,875
57,000 Hach Co. Cl. A....................................... 570,000
18,700 Met-Pro Corp. ....................................... 240,763
55,800 Minuteman International, Inc. ....................... 641,700
46,400 Spartech Corp. ...................................... 881,600
8,000 Woodward Governor Co. ............................... 216,000
------------
10,208,828
------------
MACHINERY - DIVERSIFIED - 2.1%
252,750 Hardinge Brothers, Inc. ............................. 6,381,938
------------
OIL/ENERGY - 5.2%
205,800 Berry Petroleum Co. Cl. A............................ 2,366,700
235,500 Cabot Oil & Gas Corp. Cl. A.......................... 4,032,937
155,600 Penn Virginia Corp. ................................. 3,559,350
123,000 Quaker State Corp. .................................. 1,891,125
370,000 Southwestern Energy Co. ............................. 3,330,000
67,600 Wiser Oil Co. ....................................... 637,975
------------
15,818,087
------------
</TABLE>
54
<PAGE>
EVERGREEN
Small Cap Equity Income Fund
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
OIL FIELD SERVICES - 1.4%
146,200 Lufkin Industries, Inc. ............................. $ 4,322,038
------------
PAPER & PACKAGING - 0.5%
102,450 Tuscarora, Inc. ..................................... 1,626,394
------------
REAL ESTATE - 4.3%
86,291 Bradley Real Estate, Inc. REIT....................... 1,839,077
160,000 Eastgroup Properties, Inc. REIT...................... 3,000,000
95,000 Gables Residential Trust REIT........................ 2,547,187
60,000 Innkeepers USA Trust REIT............................ 731,250
90,000 Parkway Properties, Inc. REIT........................ 2,677,500
47,540 Post Property, Inc. REIT............................. 1,886,744
50,000 Sunstone Hotel Investors, Inc. REIT.................. 556,250
------------
13,238,008
------------
RETAILING & WHOLESALE - 0.1%
6,800 Longs Drug Stores Corp. ............................. 187,850
------------
TELECOMMUNICATION SERVICES &
EQUIPMENT - 1.2%
250,000 Communications Systems, Inc. ........................ 3,375,000
126,000 Rohn Industries, Inc. ............................... 433,125
------------
3,808,125
------------
TEXTILE & APPAREL - 1.6%
88,000 Oxford Industries, Inc. ............................. 2,645,500
143,200 Superior Uniform Group, Inc. ........................ 2,148,000
------------
4,793,500
------------
THRIFT INSTITUTIONS - 4.3%
72,000 Dime Financial Corp. ................................ 2,421,000
92,000 First Coastal Bankshares, Inc. ...................... 1,472,000
6,000 First Essex Bancorp, Inc. ........................... 129,750
16,000 First Palm Beach Bancorp, Inc. ...................... 676,000
16,800 *Golden St. Bancorp, Inc. ........................... 463,050
261,900 Horizon Financial Corp. ............................. 4,124,925
38,000 Jacksonville Bancorp, Inc. .......................... 688,750
24,000 Maryland Federal Bancorp, Inc. ...................... 996,000
100,000 St. Paul Bancorp, Inc. .............................. 2,250,000
------------
13,221,475
------------
UTILITIES - ELECTRIC - 2.3%
13,100 Central Hudson Gas & Electric Corp. ................. 564,938
124,100 Madison Gas & Electric Co. .......................... 2,761,225
135,000 MDU Resources Group, Inc. ........................... 3,062,812
26,000 Northwestern Corp. .................................. 646,750
------------
7,035,725
------------
UTILITIES - GAS - 5.9%
34,200 Chesapeake Utilities Corp. .......................... 594,225
30,000 Connecticut Energy Corp. ............................ 768,750
80,000 CTG Resources, Inc. ................................. 1,855,000
64,800 Delta Natural Gas Co., Inc. ......................... 1,125,900
40,000 Eastern Enterprises.................................. 1,597,500
27,400 NUI Corp. ........................................... 606,225
76,600 Public Service Co. of North Carolina, Inc. .......... 1,532,000
200,100 Semco Energy, Inc. .................................. 3,464,231
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
UTILITIES - GAS - CONTINUED
56,000 Southwest Gas Corp. ................................ $ 1,302,000
165,500 UGI Corp. .......................................... 3,889,250
50,000 Yankee Energy System, Inc. ......................... 1,203,125
------------
17,938,206
------------
UTILITIES - TELEPHONE - 1.2%
78,300 Hickory Tech Corp. ................................. 3,650,738
------------
OTHER SECURITIES - 3.6%............................. 11,126,751
------------
Total Common Stocks
(cost $212,015,803)................................ 212,704,010
------------
CONVERTIBLE PREFERRED - 12.0%
ELECTRICAL EQUIPMENT &
SERVICES - 1.5%
110,000 Pioneer Standard Financial Trust
6.75%, 144A........................................ 4,689,300
------------
FINANCE & INSURANCE - 2.1%
12,000 American Heritage Life Investment Corp.
8.50%, PRIDES...................................... 828,000
80,000 Frontier Financing Trust
6.25%, TOPRS....................................... 4,300,000
125,000 Philadelphia Consolidated Holdings, Inc.
7.00%, PRIDES...................................... 1,218,750
------------
6,346,750
------------
HEALTHCARE PRODUCTS &
SERVICES - 2.2%
170,000 Owens & Minor Trust I
5.375%, TECONS, 144A............................... 6,885,000
------------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES - 1.5%
300,000 Cooper Industries, Inc.
6.00%, DECS
(exchangeable for Wyman-Gordon Co. common stock)... 4,500,000
------------
LEISURE & TOURISM - 1.8%
130,000 Lodgian Capital Trust I
7.00%, CRESTS, 144A................................ 5,582,200
------------
METAL PRODUCTS & SERVICES - 0.8%
239,000 Worthington Industries, Inc.
7.25%, DECS
(exchangeable for Rouge Steel Co. common stock).... 2,509,500
------------
OIL/ENERGY - 0.3%
26,000 Callon Petroleum Co.
8.50%, Series A.................................... 819,000
------------
OIL FIELD SERVICES - 1.8%
Hvide Capital Trust:
40,000 6.50%, 144A......................................... 1,585,200
7,000 6.50% Series AI..................................... 277,410
90,000 6.50%............................................... 3,566,700
------------
5,429,310
------------
Total Convertible Preferred
(cost $44,461,012)................................. 36,761,060
------------
</TABLE>
55
<PAGE>
EVERGREEN
Small Cap Equity Income Fund
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - 13.8%
BANKS - 0.4%
$1,350,000 Surety Capital Corp.
9.00%, 3/31/08...................................... $ 1,350,000
------------
BUILDING, CONSTRUCTION & FURNISHINGS - 1.1%
2,500,000 Eagle Hardware & Garden, Inc.
6.25%, 3/15/01...................................... 3,284,375
------------
BUSINESS EQUIPMENT &
SERVICES - 1.7%
2,600,000 HMT Technology Corp.
5.75%, 1/15/04...................................... 1,924,000
1,250,000 Interim Services, Inc.
4.50%, 6/1/05....................................... 1,245,312
200,000 Personnel Group Of America, Inc.
5.75%, 7/1/04....................................... 250,000
Tecnomatix Technologies Ltd.:
500,000 5.25%, 8/15/04, 144A................................. 371,875
2,000,000 5.25%, 8/15/04....................................... 1,487,500
------------
5,278,687
------------
CONSUMER PRODUCTS &
SERVICES - 1.2%
4,000,000 Action Performance Companies, Inc.
4.75%, 4/1/05, 144A................................. 3,670,000
------------
ELECTRICAL EQUIPMENT &
SERVICES - 1.4%
4,550,000 Photronics, Inc.
6.00%, 6/1/04....................................... 4,396,438
------------
HEALTHCARE PRODUCTS &
SERVICES - 1.9%
5,000,000 Alpharma, Inc.
5.75%, 4/1/05, 144A................................. 5,206,500
480,000 Meridian Diagnostics, Inc.
7.00%, 9/1/06....................................... 453,600
------------
5,660,100
------------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES - 0.2%
610,000 Robbins & Myers, Inc.
6.50%, 9/1/03....................................... 724,375
------------
INFORMATION SERVICES & TECHNOLOGY - 0.2%
500,000 May & Speh, Inc.
5.25%, 4/1/03....................................... 684,375
------------
LEISURE & TOURISM - 2.0%
2,400,000 Family Golf Centers, Inc.
5.75%, 10/15/04, 144A............................... 2,877,000
3,370,000 Speedway Motorsports, Inc.
5.75%, 9/30/03...................................... 3,395,275
------------
6,272,275
------------
OIL FIELD SERVICES - 2.8%
Key Energy Group, Inc.:
3,250,000 5.00%, 9/15/04, 144A................................. 2,323,750
250,000 7.00%, 7/1/03, 144A.................................. 286,250
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - CONTINUED
OIL FIELD SERVICES - CONTINUED
Offshore Logistics, Inc.:
$1,425,000 6.00%, 12/15/03, 144A................................ $ 1,214,812
1,750,000 6.00%, 12/15/03...................................... 1,491,875
3,000,000 Seacor Holdings, Inc.
5.375%, 11/15/06.................................... 3,120,000
------------
8,436,687
------------
RETAILING & WHOLESALE - 0.9%
Central Garden & Pet Co.:
500,000 6.00%, 11/15/03, 144A................................ 554,375
2,000,000 6.00%, 11/15/03...................................... 2,217,500
------------
2,771,875
------------
Total Convertible Debentures
(cost $45,859,373).................................. 42,529,187
------------
SHORT-TERM INVESTMENTS - 5.7%
COMMERCIAL PAPER - 3.6%
450,000 Aristar, Inc.
5.60%, 8/13/98...................................... 449,160
640,000 Avnet, Inc.
5.52%, 8/19/98...................................... 638,234
2,960,000 BTR Dunlop Finance, Inc.
5.53%, 8/10/98...................................... 2,955,908
1,990,000 Dollar Thrifty Funding Corp.
5.54%, 8/11/98...................................... 1,986,938
850,000 Glencore Asset Funding Corp.
5.55%, 8/6/98....................................... 849,345
315,000 Newell Co.
5.55%, 8/31/98...................................... 313,543
1,580,000 Park Avenue Recreation Corp.
5.55%, 8/3/98....................................... 1,579,513
1,780,000 PHH Corp.
5.70%, 8/21/98...................................... 1,774,363
450,000 Twin Towers, Inc.
5.54%, 8/7/98....................................... 449,584
------------
10,996,588
------------
GOVERNMENT AGENCY NOTES & BONDS - 2.1%
Federal Home Loan Mortgage Discount Notes:
3,460,000 5.45%, 8/27/98....................................... 3,446,381
615,000 5.48%, 8/21/98....................................... 613,128
2,350,000 5.48%, 8/31/98....................................... 2,339,268
------------
6,398,777
------------
Total Short-Term Investments
(cost $17,395,365).................................. 17,395,365
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS -
(COST $319,731,553)......................... 100.8% 309,389,622
OTHER ASSETS AND
LIABILITIES - NET........................... (0.8) (2,303,539)
----- ------------
NET ASSETS................................... 100.0% $307,086,083
===== ============
</TABLE>
56
<PAGE>
EVERGREEN
Small Cap Equity Income Fund
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
* Non-income producing securities.
+ Investment in a non-controlled affiliate. The fund owns over 5% of the
outstanding voting shares of Knape & Vogt Manufacturing Co. The Fund
has a cost basis of $4,805,148 in the issue at July 31, 1998. The Fund
earned $100,224 of income from this investment during the period ending
July 31, 1998.
144A Rule 144A securities are restricted as to resale to qualified insti-
tutional investors.
SUMMARY OF ABBREVIATIONS:
CRESTSConvertible Redeemable Equity Structured Trust Securities
DECSDividend Enhanced Convertible Stock
PRIDESPreferred Redeemable Increased Dividend Equity Securities
REITReal Estate Investment Trust
TECONSTerm Convertible Shares
TOPRSTrust Originated Preferred Securities
See Combined Notes to Financial Statements.
57
<PAGE>
EVERGREEN
Utility Fund
SCHEDULE OF INVESTMENTS
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 70.3%
BANKS - 2.1%
35,000 Fleet Financial Group, Inc. ......................... $ 3,007,813
------------
INFORMATION SERVICES &
TECHNOLOGY - 1.9%
75,000 *Altera Corp. ....................................... 2,735,156
------------
OIL/ENERGY - 2.6%
70,000 Enron Corp. ......................................... 3,705,625
------------
OIL FIELD SERVICES - 1.8%
150,000 *R & B Falcon Corp. ................................. 2,465,625
------------
REAL ESTATE - 2.8%
145,000 Felcor Lodging Trust Inc. REIT....................... 4,005,625
------------
UTILITIES - ELECTRIC - 44.8%
100,000 Central Hudson Gas & Electric Corp. ................. 4,312,500
100,000 Cinergy Corp. ....................................... 3,156,250
70,000 Duke Power Co. ...................................... 3,998,750
100,000 Energy East Corp. ................................... 4,000,000
170,000 Houston Industries, Inc. ............................ 4,749,375
125,000 Interstate Energy Corp. ............................. 3,664,063
180,000 Marketspan Corp. .................................... 4,961,250
165,000 MDU Resources Group, Inc. ........................... 3,743,437
80,000 New Century Energies, Inc. .......................... 3,330,000
60,000 NIPSCO Industries, Inc. ............................. 1,597,500
100,000 Pinnacle West Capital Corp. ......................... 4,275,000
150,000 PP&L Resources, Inc. ................................ 3,478,125
100,000 Public Service Enterprise Group, Inc. ............... 3,268,750
150,000 *Sempra Energy....................................... 3,778,125
140,000 Teco Energy Inc. .................................... 3,552,500
100,000 UtiliCorp United, Inc. .............................. 3,525,000
135,000 Wisconsin Energy Corp. .............................. 3,839,062
------------
63,229,687
------------
UTILITIES - GAS - 2.9%
75,000 Northwest Natural Gas Co. ........................... 1,968,750
60,000 Peoples Energy Corp. ................................ 2,100,000
------------
4,068,750
------------
UTILITIES - TELEPHONE - 11.4%
55,000 BellSouth Corp. ..................................... 3,757,188
70,000 GTE Corp. ........................................... 3,806,250
60,000 Sprint Corp. ........................................ 4,200,000
80,000 U.S. West, Inc. ..................................... 4,270,000
------------
16,033,438
------------
Total Common Stocks
(cost $85,025,361).................................. 99,251,719
------------
CONVERTIBLE PREFERRED - 25.8%
COMMUNICATION SYSTEMS &
SERVICES - 3.3%
95,000 AirTouch Communications, Inc.
6.00%, Series B..................................... 4,607,500
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - CONTINUED
PUBLISHING, BROADCASTING &
ENTERTAINMENT - 2.8%
50,000 Houston Industries Inc.
7.00%, ACES
(exchangeable for Time Warner common stock)........ $ 3,912,500
------------
TELECOMMUNICATION SERVICES &
EQUIPMENT - 2.6%
70,000 Qualcomm Financial Trust I
5.75%.............................................. 3,675,000
------------
UTILITIES - ELECTRIC - 11.9%
50,000 AES Trust I
5.375%, Series A, TECONS........................... 3,440,625
135,000 BNDES Participacoes S.A.
BNDESPAR, DECS (Eletrobras)........................ 4,387,500
500,000 Companhia Paranaense de
Energia-Copel, Plc, ADR............................ 5,437,500
70,000 Texas Utilities Co.
9.25%, PRIDES...................................... 3,561,250
------------
16,826,875
------------
UTILITIES - GAS - 2.2%
70,000 MCN Financing III
8.00%, PRIDES...................................... 3,158,750
------------
UTILITIES - TELEPHONE - 3.0%
70,000 Sprint Corp.
8.25%, DECS
(exchangeable for Southern N.E. Telephone common
stock)............................................. 4,307,187
------------
Total Convertible Preferred
(cost $33,061,261)................................. 36,487,812
------------
<CAPTION>
Principal
Amount
<C> <S> <C>
CONVERTIBLE DEBENTURES - 2.1%
INFORMATION SERVICES & TECHNOLOGY - 2.1%
$4,000,000 Adaptec, Inc.
4.75%, 2/1/04...................................... 3,050,000
------------
Total Convertible Debentures
(cost $3,530,000).................................. 3,050,000
------------
TOTAL LONG-TERM INVESTMENTS
(COST $121,616,622)................................ 138,789,531
------------
REPURCHASE AGREEMENT - 0.2%
254,895 Donaldson, Lufkin & Jenrette Securities Corp.,
5.62%, purchased 7/31/98, maturing 8/3/98, maturity
value $255,014 (cost $254,895) (a)................. 254,895
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS -
(COST $121,871,517).......................... 98.4% 139,044,426
OTHER ASSETS AND LIABILITIES - NET............ 1.6 2,211,887
----- ------------
NET ASSETS.................................... 100.0% $141,256,313
===== ============
</TABLE>
58
<PAGE>
EVERGREEN
Utility Fund
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
* Non-income producing securities.
(a) At July 31, 1998, the repurchase agreement was collateralized by:
$260,000 U.S. Treasury Bond, 3.625%, 4/15/28; value including inter-
est - $255,763.
SUMMARY OF ABBREVIATIONS:
ACESAutomatically Convertible Equity Securities
ADRAmerican Depository Receipt
DECSDividend Enhanced Convertible Stock
PRIDESPreferred Redeemable Increased Dividend Equity Securities
REITReal Estate Investment Trust
TECONSTerm Convertible Shares
See Combined Notes to Financial Statements.
59
<PAGE>
EVERGREEN
Value Fund
SCHEDULE OF INVESTMENTS
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 90.7%
AUTOMOTIVE EQUIPMENT &
MANUFACTURING - 0.6%
106,900 Ford Motor Co. .................................. $ 6,086,619
--------------
BANKS - 19.3%
77,220 Banc One Corp. .................................. 3,991,309
122,600 BankAmerica Corp. ............................... 11,003,350
430,600 BankBoston Corp. ................................ 20,830,275
84,800 Bankers Trust Corp. ............................. 9,502,900
102,200 Chase Manhattan Corp. ........................... 7,728,875
47,000 Citicorp......................................... 7,990,000
248,200 First Chicago NBD Corp. ......................... 20,802,262
457,400 First Tennessee National Corp. .................. 14,350,925
336,725 Fleet Financial Group, Inc. ..................... 28,937,305
244,056 NationsBank Corp. ............................... 19,463,466
185,700 SouthTrust Corp. ................................ 7,509,244
328,500 TCF Financial Corp. ............................. 9,485,438
107,600 Union Planters Corp. ............................ 5,864,200
271,300 Wachovia Corp. .................................. 23,230,062
--------------
190,689,611
--------------
BUSINESS EQUIPMENT &
SERVICES - 0.1%
10,000 Lucent Technologies, Inc. ....................... 924,375
--------------
CHEMICAL & AGRICULTURAL
PRODUCTS - 1.6%
6,100 Du Pont (E. I.) De Nemours & Co. ................ 378,200
635,000 Morton International, Inc. ...................... 15,359,063
--------------
15,737,263
--------------
COMMUNICATION SYSTEMS &
SERVICES - 1.9%
200,350 *Cisco Systems, Inc. ............................ 19,183,512
--------------
CONSUMER PRODUCTS &
SERVICES - 1.2%
104,100 Colgate-Palmolive Co. ........................... 9,622,744
18,200 Gillette Co. .................................... 953,225
16,800 Procter & Gamble Co. ............................ 1,333,500
--------------
11,909,469
--------------
DIVERSIFIED COMPANIES - 2.0%
156,100 AlliedSignal, Inc. .............................. 6,790,350
212,000 Tyco International Ltd. ......................... 13,130,750
--------------
19,921,100
--------------
ELECTRICAL EQUIPMENT &
SERVICES - 5.2%
383,700 General Electric Co. ............................ 34,269,206
10,200 *LSI Logic....................................... 211,012
295,100 Tandy Corp. ..................................... 16,765,369
--------------
51,245,587
--------------
FINANCE & INSURANCE - 10.3%
296,000 Allstate Corp. .................................. 12,561,500
13,100 American General Corp. .......................... 894,894
70,800 American International Group, Inc. .............. 10,677,525
94,507 Associates First Capital Corp.
Cl. A........................................... 7,342,013
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
FINANCE & INSURANCE - CONTINUED
8,000 Chubb Corp. ..................................... $ 587,000
348,400 CIT Group, Inc. ................................. 11,540,750
30,200 Federal Home Loan Mortgage Corp. ................ 1,426,950
158,700 Federal National Mortgage Association............ 9,839,400
196,000 Greenpoint Financial Corp. ...................... 7,778,750
2,600 Lincoln National Corp. .......................... 248,950
145,700 MBIA, Inc. ...................................... 9,816,537
21,200 Morgan Stanley, Dean Witter, Discover & Co. ..... 1,845,725
237,100 ReliaStar Financial Corp. ....................... 11,766,087
83,950 Travelers Group, Inc. ........................... 5,624,650
242,200 Travelers Property Casualty Corp. Cl. A.......... 10,475,150
--------------
102,425,881
--------------
FOOD & BEVERAGE
PRODUCTS - 6.4%
377,200 American Stores Co. ............................. 8,746,325
550,200 Archer Daniels Midland Co. ...................... 9,422,175
131,300 Coca Cola Co. ................................... 10,594,269
444,200 Fortune Brands, Inc. ............................ 16,407,637
292,300 Philip Morris Companies, Inc. ................... 12,806,394
115,700 Sara Lee Corp. .................................. 5,799,462
--------------
63,776,262
--------------
HEALTHCARE PRODUCTS &
SERVICES - 13.0%
20,000 Abbott Laboratories.............................. 831,250
237,800 American Home Products Corp. .................... 12,246,700
212,800 Bristol-Myers Squibb Co. ........................ 24,245,900
197,800 HBO & Co. ....................................... 5,828,919
380,600 *HEALTHSOUTH Corp. .............................. 9,562,575
244,900 Johnson & Johnson................................ 18,918,525
25,800 Lilly (Eli) & Co. ............................... 1,735,050
129,500 Merck & Co., Inc. ............................... 15,968,969
385,200 Pharmacia & Upjohn, Inc. ........................ 18,248,850
145,300 SmithKline Beecham Plc, ADR...................... 8,318,425
420,399 *Tenet Healthcare Corp. ......................... 12,585,695
--------------
128,490,858
--------------
INFORMATION SERVICES &
TECHNOLOGY - 7.1%
185,700 *American Power Conversion Corp. ................ 5,988,825
244,200 EMC Corp. ....................................... 11,965,800
256,100 *Gateway 2000, Inc. ............................. 13,829,400
18,000 Intel Corp. ..................................... 1,519,875
143,800 International Business Machines Corp. ........... 19,053,500
376,700 *Sun Microsystems, Inc. ......................... 17,799,075
--------------
70,156,475
--------------
LEISURE & TOURISM - 0.1%
30,600 Disney Walt Co. ................................. 1,053,788
--------------
OIL/ENERGY - 8.6%
150,800 Amoco Corp. ..................................... 6,295,900
</TABLE>
60
<PAGE>
EVERGREEN
Value Fund
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
OIL/ENERGY - CONTINUED
83,400 Atlantic Richfield Co. .......................... $ 5,650,350
233,300 Burlington Resources, Inc. ...................... 8,457,125
9,900 Chevron Corp. ................................... 817,988
36,700 Exxon Corp. ..................................... 2,573,588
145,900 Mobil Corp. ..................................... 10,176,525
161,500 Pennzoil Co. .................................... 7,267,500
45,700 Royal Dutch Petroleum Co. ....................... 2,330,700
343,100 Sonat, Inc. ..................................... 10,035,675
166,600 Texaco, Inc. .................................... 10,131,362
297,000 Unocal Corp. .................................... 9,726,750
353,400 Williams Companies, Inc. ........................ 11,330,887
--------------
84,794,350
--------------
PUBLISHING, BROADCASTING &
ENTERTAINMENT - 0.1%
17,200 *Viacom, Inc. Cl. B.............................. 1,178,200
--------------
REAL ESTATE - 1.9%
455,300 Equity Residential Properties Trust REIT......... 19,122,600
--------------
RETAILING & WHOLESALE - 1.5%
299,900 Sears, Roebuck & Co. ............................ 15,219,925
--------------
TELECOMMUNICATION SERVICES &
EQUIPMENT - 1.4%
160,000 Nokia Corp. ADR.................................. 13,940,000
--------------
TEXTILE & APPAREL - 0.8%
160,900 V. F. Corp. ..................................... 7,572,356
--------------
TRANSPORTATION - 1.9%
143,900 Burlington Northern Santa Fe..................... 14,812,706
142,800 Norfolk Southern Corp. .......................... 4,266,150
--------------
19,078,856
--------------
</TABLE>
* Non-income producing securities.
SUMMARY OF ABBREVIATIONS:
ADR American Depository Receipt
REIT Real Estate Investment Trust
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
UTILITIES - ELECTRIC - 2.5%
269,100 CMS Energy Corp. ................................ $ 11,352,656
58,400 GPU, Inc. ....................................... 2,087,800
412,700 Houston Industries, Inc. ........................ 11,529,806
--------------
24,970,262
--------------
UTILITIES - GAS - 1.4%
361,600 NICOR Inc. ...................................... 13,921,600
--------------
UTILITIES - TELEPHONE - 1.8%
211,900 AT&T Corp. ...................................... 12,846,437
20,796 Bell Atlantic Corp. ............................. 943,619
30,300 BellSouth Corp. ................................. 2,069,869
25,500 MCI Communications Corp. ........................ 1,651,125
--------------
17,511,050
--------------
Total Common Stocks
(cost $683,255,436)............................. 898,909,999
--------------
<CAPTION>
Principal
Amount
<C> <S> <C>
SHORT-TERM INVESTMENTS - 10.3%
GOVERNMENT AGENCY NOTES &
BONDS - 10.3%
$102,239,000 Federal Home Loan Mortgage Discount Notes
5.56%, 8/3/98................................... 102,207,420
--------------
Total Short-Term Investments
(cost $102,207,419)............................. 102,207,420
--------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C>
TOTAL INVESTMENTS -
(COST $785,462,855)..................... 101.0% 1,001,117,419
OTHER ASSETS AND LIABILITIES - NET....... (1.0) (10,295,053)
----- --------------
NET ASSETS............................... 100.0% $ 990,822,366
===== ==============
</TABLE>
See Combined Notes to Financial Statements.
61
<PAGE>
EVERGREEN
Fund for Total Return
SCHEDULE OF INVESTMENTS
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 81.7%
AUTOMOTIVE EQUIPMENT &
MANUFACTURING - 4.4%
50,000 Chrysler Corp. ..................................... $ 2,959,375
50,000 Ford Motor Co. ..................................... 2,846,875
40,000 *Lear Corp. ........................................ 2,122,500
------------
7,928,750
------------
BANKS - 12.0%
55,000 Associated Banc Corp. .............................. 2,100,312
30,000 BankAmerica Corp. .................................. 2,692,500
80,000 BankBoston Corp. ................................... 3,870,000
30,000 Chase Manhattan Corp. .............................. 2,268,750
4,000 Citicorp............................................ 680,000
50,000 Firstar Corp. ...................................... 2,496,875
50,000 Fleet Financial Group, Inc. ........................ 4,296,875
110,000 TCF Financial Corp. ................................ 3,176,250
------------
21,581,562
------------
CHEMICAL & AGRICULTURAL
PRODUCTS - 5.0%
30,000 Du Pont (E. I.) De Nemours & Co. ................... 1,860,000
50,000 Monsanto Co. ....................................... 2,831,250
65,000 Morton International, Inc. ......................... 1,572,187
27,000 Rohm & Haas Co. .................................... 2,629,125
------------
8,892,562
------------
COMMUNICATION SYSTEMS &
SERVICES - 1.3%
25,000 *Cisco Systems, Inc. ............................... 2,394,531
------------
CONSUMER PRODUCTS &
SERVICES - 0.9%
20,000 Procter & Gamble Co. ............................... 1,587,500
------------
DIVERSIFIED COMPANIES - 3.0%
50,000 *Owens Illinois, Inc. .............................. 2,206,250
50,000 Tyco International Ltd. ............................ 3,096,875
------------
5,303,125
------------
ELECTRICAL EQUIPMENT &
SERVICES - 4.6%
60,000 General Electric Co. ............................... 5,358,750
60,000 *Solectron Corp. ................................... 2,880,000
------------
8,238,750
------------
FINANCE & INSURANCE - 7.5%
25,000 Hartford Life, Inc. Cl. A........................... 1,446,875
30,000 Lincoln National Corp. ............................. 2,872,500
50,000 Nationwide Financial Services, Inc. Cl. A........... 2,721,875
32,289 PMI Group, Inc. .................................... 2,187,580
35,000 SLM Holding Corp. .................................. 1,618,750
37,500 Travelers Group, Inc. .............................. 2,512,500
------------
13,360,080
------------
FOOD & BEVERAGE PRODUCTS - 2.9%
35,000 H.J. Heinz Co. ..................................... 1,929,375
75,000 Philip Morris Companies, Inc. ...................... 3,285,938
------------
5,215,313
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
HEALTHCARE PRODUCTS &
SERVICES - 12.0%
120,000 American Home Products Corp. ....................... $ 6,180,000
50,000 Bristol-Myers Squibb Co. ........................... 5,696,875
30,000 Johnson & Johnson................................... 2,317,500
40,000 Merck & Co., Inc. .................................. 4,932,500
50,000 Pharmacia & Upjohn, Inc. ........................... 2,368,750
------------
21,495,625
------------
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES - 1.9%
50,000 Trinity Industries, Inc. ........................... 1,996,875
50,000 *United States Filter Corp. ........................ 1,350,000
------------
3,346,875
------------
INFORMATION SERVICES & TECHNOLOGY - 4.5%
50,000 *EMC Corp. ......................................... 2,450,000
30,000 Hewlett-Packard Co. ................................ 1,665,000
30,000 International Business Machines Corp. .............. 3,975,000
------------
8,090,000
------------
LEISURE & TOURISM - 1.2%
56,900 Carnival, Corp. Cl. A............................... 2,101,744
------------
OIL/ENERGY - 5.3%
74,000 Anadarko Petroleum Corp. ........................... 2,539,125
20,000 Exxon Corp. ........................................ 1,402,500
24,000 Mobil Corp. ........................................ 1,674,000
24,000 Texaco, Inc. ....................................... 1,459,500
75,000 Unocal Corp. ....................................... 2,456,250
------------
9,531,375
------------
PUBLISHING, BROADCASTING &
ENTERTAINMENT - 0.9%
50,000 CBS Corp. .......................................... 1,696,875
------------
REAL ESTATE - 5.9%
40,000 Boston Properties, Inc. REIT........................ 1,292,500
50,000 Equity Office Properties Trust REIT................. 1,243,750
25,000 Equity Residential Properties Trust REIT............ 1,050,000
36,000 First Industrial Realty Trust, Inc. REIT............ 994,500
140,000 Indymac Mortgage Holdings, Inc. REIT................ 2,948,750
44,999 Patriot American Hospitality, Inc. REIT............. 854,981
49,000 Prentiss Properties Trust REIT...................... 1,166,812
30,000 Spieker Properties, Inc. REIT....................... 1,078,125
------------
10,629,418
------------
RETAILING & WHOLESALE - 3.3%
50,000 *Costco Companies, Inc. ............................ 2,839,063
50,000 Wal-Mart Stores, Inc. .............................. 3,156,250
------------
5,995,313
------------
</TABLE>
62
<PAGE>
EVERGREEN
Fund for Total Return
SCHEDULE OF INVESTMENTS(continued)
July 31, 1998
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - CONTINUED
UTILITIES - TELEPHONE - 5.1%
40,000 Ameritech Corp. .................................... $ 1,967,500
39,290 AT&T Corp. ......................................... 2,381,956
40,000 GTE Corp. .......................................... 2,175,000
50,000 U.S. West, Inc. .................................... 2,668,750
------------
9,193,206
------------
Total Common Stocks
(cost $105,987,328)................................ 146,582,604
------------
CONVERTIBLE PREFERRED - 3.5%
BUILDING, CONSTRUCTION &
FURNISHINGS - 0.8%
150,000 Kaufman & Broad Home Corp.
8.25%, PRIDES...................................... 1,443,750
------------
FINANCE & INSURANCE - 1.0%
30,000 Newell Financial Trust I
5.25%, 144A........................................ 1,785,000
------------
RETAILING & WHOLESALE - 1.7%
50,000 Kmart Financing I
7.75%.............................................. 3,100,000
------------
Total Convertible Preferred
(cost $5,610,665).................................. 6,328,750
------------
<CAPTION>
Principal
Amount
<C> <S> <C>
CONVERTIBLE DEBENTURES - 3.0%
CONSUMER PRODUCTS &
SERVICES - 0.6%
$ 1,000,000 Sunrise Assisted Living, Inc.
5.50%, 6/15/02, 144A............................... 1,044,820
------------
</TABLE>
* Non-income producing securities.
(a) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices plus accrued inter-
est at July 31, 1998.
144A Rule 144A securities are restricted as to resale to qualified insti-
tutional investors.
SUMMARY OF ABBREVIATIONS:
BUCS Beneficial Unsecured Convertible Securities.
PRIDES Preferred Redeemable Increased Dividend Equity Securities.
REIT Real Estate Investment Trust.
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - CONTINUED
HEALTHCARE PRODUCTS &
SERVICES - 1.1%
$ 2,000,000 Healthsouth Corp.
3.25%, 4/1/03, 144A............................... $ 2,017,500
------------
RETAILING & WHOLESALE - 1.0%
750,000 Staples, Inc.
4.50%, 10/1/00, 144A.............................. 1,707,188
------------
TELECOMMUNICATION SERVICES &
EQUIPMENT - 0.3%
500,000 Antec Corp.
4.50%, 5/15/03, 144A.............................. 570,000
------------
Total Convertible Debentures
(cost $4,250,000)................................. 5,339,508
------------
SHORT-TERM INVESTMENTS - 11.4%
REPURCHASE AGREEMENT - 11.4%
20,376,000 Keystone Joint Repurchase Agreement
5.65%, purchased 7/31/98,
maturing 8/3/98, maturity value $20,385,594 (cost
$20,376,000) (a).................................. 20,376,000
------------
Total Short-Term Investments
(cost $20,376,000)................................ 20,376,000
------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C>
TOTAL INVESTMENTS -
(COST $136,223,993)......................... 99.6% 178,626,862
OTHER ASSETS AND LIABILITIES - NET........... 0.4 750,170
----- ------------
NET ASSETS................................... 100.0% $179,377,032
===== ============
</TABLE>
See Combined Notes to Financial Statements.
63
<PAGE>
EVERGREEN
Growth and Income Funds
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 1998
<TABLE>
<CAPTION>
GROWTH & INCOME & SMALL CAP
BLUE CHIP INCOME GROWTH EQUITY INCOME UTILITY VALUE FUND FOR
FUND FUND FUND FUND FUND FUND TOTAL RETURN
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments at value
(identified cost --
$297,945,142,
$1,747,884,736,
$893,995,749,
$319,731,553,
$121,871,517,
$785,462,855 and
$136,223,993,
respectively).......... $383,073,812 $2,177,972,651 $941,812,530 $309,389,622 $139,044,426 $1,001,117,419 $178,626,862
Cash.................... 700 58,546 164,295 16,486 0 48,239 313
Receivable for
investments sold....... 36,513,342 4,727,680 25,024,357 0 2,760,788 5,129,220 1,405,282
Receivable for Fund
shares sold............ 1,882,250 6,642,137 176,442 4,313,582 84,885 824,790 147,233
Dividends and interest
receivable............. 423,533 1,166,850 3,272,724 947,695 617,985 1,248,745 342,345
Unamortized
organization
expenses............... 0 0 0 2,482 0 0 0
Prepaid expenses and
other assets........... 72,244 66,619 44,731 40,706 24,461 37,363 70,135
- ------------------------------------------------------------------------------------------------------------------------------
Total assets.......... 421,965,881 2,190,634,483 970,495,079 314,710,573 142,532,545 1,008,405,776 180,592,170
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments
purchased.............. 16,939,811 35,092,472 5,271,218 1,267,324 1,062,250 11,805,124 0
Payable for Fund shares
repurchased............ 1,170,650 5,100,629 601,200 5,761,900 97,290 4,672,270 969,418
Demand note payable..... 0 0 12,800,000 0 0 0 0
Advisory fee payable.... 215,367 1,667,830 819,191 275,512 61,885 445,512 94,340
Distribution fee
payable................ 160,609 987,570 52,500 149,321 45,943 397,253 119,892
Due to related
parties................ 5,000 0 0 0 3,535 25,469 1,916
Foreign taxes payable... 8,844 3,410 38,063 12,104 0 0 0
Accrued expenses and
other liabilities...... 57,535 461,694 259,080 158,329 5,329 237,782 29,572
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities..... 18,557,816 43,313,605 19,841,252 7,624,490 1,276,232 17,583,410 1,215,138
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS.............. $403,408,065 $2,147,320,878 $950,653,827 $307,086,083 $141,256,313 $ 990,822,366 $179,377,032
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS REPRESENTED
BY
Paid-in capital......... $286,984,109 $1,659,627,550 $833,102,573 $313,505,223 $108,709,536 $ 774,854,885 $118,660,810
Undistributed net
investment income...... (14,966) 360,888 13,459,757 173,362 (7,868) (82,792) 430,969
Accumulated
undistributed net
realized gains or
losses on securities
and foreign currency
related transactions... 31,310,252 57,244,858 56,431,275 3,749,429 15,381,736 395,709 17,882,384
Net unrealized gains or
losses on securities
and foreign currency
related transactions... 85,128,670 430,087,582 47,660,222 (10,341,931) 17,172,909 215,654,564 42,402,869
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS...... $403,408,065 $2,147,320,878 $950,653,827 $307,086,083 $141,256,313 $ 990,822,366 $179,377,032
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSISTS OF
Class A................. $284,734,787 $ 296,312,480 $ 15,005,424 $ 54,142,181 $ 95,300,077 $ 476,169,512 $ 52,667,235
Class B................. 117,893,339 999,503,080 54,544,427 130,191,440 43,775,719 326,459,414 105,747,682
Class C................. 779,939 50,160,238 1,258,970 26,196,901 485,778 5,125,086 20,851,084
Class Y................. -- 801,345,080 879,845,006 96,555,561 1,694,739 183,068,354 111,031
- ------------------------------------------------------------------------------------------------------------------------------
$403,408,065 $2,147,320,878 $950,653,827 $307,086,083 $141,256,313 $ 990,822,366 $179,377,032
- ------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
Class A................. 9,360,366 10,168,501 647,121 3,436,877 8,104,711 21,422,851 2,432,921
Class B................. 3,884,909 34,605,795 2,367,514 8,307,846 3,721,068 14,707,068 4,904,830
Class C................. 25,659 1,736,422 54,643 1,673,076 41,291 231,038 966,154
Class Y................. -- 27,448,762 37,891,181 6,124,137 144,020 8,234,209 5,137
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER
SHARE
Class A................. $ 30.42 $ 29.14 $ 23.19 $ 15.75 $ 11.76 $ 22.23 $ 21.65
- ------------------------------------------------------------------------------------------------------------------------------
Class A -- Offering
price (based on sales
charge of 4.75%)....... $ 31.94 $ 30.59 $ 24.35 $ 16.54 $ 12.35 $ 23.34 $ 22.73
- ------------------------------------------------------------------------------------------------------------------------------
Class B................. $ 30.35 $ 28.88 $ 23.04 $ 15.67 $ 11.76 $ 22.20 $ 21.56
- ------------------------------------------------------------------------------------------------------------------------------
Class C................. $ 30.40 $ 28.89 $ 23.04 $ 15.66 $ 11.76 $ 22.18 $ 21.58
- ------------------------------------------------------------------------------------------------------------------------------
Class Y................. -- $ 29.19 $ 23.22 $ 15.77 $ 11.77 $ 22.23 $ 21.61
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
64
<PAGE>
EVERGREEN
Growth and Income Funds
STATEMENTS OF OPERATIONS
Year Ended July 31, 1998
<TABLE>
<CAPTION>
SMALL CAP
BLUE CHIP GROWTH & INCOME INCOME & GROWTH EQUITY INCOME UTILITY VALUE FUND FOR
FUND* FUND FUND FUND FUND FUND TOTAL RETURN
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (net of
foreign withholding
taxes of $56,392,
$25,234, $689,197,
$12,104, $10,435,
$130,187 and $5,544,
respectively)......... $ 4,313,767 $ 15,668,809 $ 52,734,876 $ 4,983,605 $ 6,208,578 $ 25,677,634 $ 3,235,512
Interest............... 1,099,735 21,896,927 4,016,267 2,459,788 225,962 3,900,639 615,022
- -------------------------------------------------------------------------------------------------------------------------------
Total income.......... 5,413,502 37,565,736 56,751,143 7,443,393 6,434,540 29,578,273 3,850,534
- -------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Advisory fee........... 2,052,676 16,275,918 9,685,921 2,055,006 704,533 7,023,408 1,062,354
Distribution Plan
expenses.............. 1,628,814 8,865,387 566,084 988,649 660,925 4,211,807 1,350,540
Transfer agent fees.... 670,296 3,658,406 1,768,773 515,179 268,742 1,670,576 324,338
Administrative service
fees.................. 53,198 0 0 0 42,854 438,523 33,743
Trustees' fees and
expenses.............. 13,999 45,947 29,888 11,331 3,511 39,273 7,325
Printing............... 160,647 916,116 474,221 87,074 90,104 526,008 100,958
Custodian fees......... 71,500 527,465 306,190 56,140 39,916 374,521 56,522
Registration fees...... 49,119 352,740 61,854 150,185 68,826 57,916 51,507
Amortization of
organization
expenses.............. 0 0 0 5,727 0 0 0
Other.................. 36,983 128,241 105,638 26,166 28,756 107,017 41,618
- -------------------------------------------------------------------------------------------------------------------------------
Total expenses........ 4,737,232 30,770,220 12,998,569 3,895,457 1,908,167 14,449,049 3,028,905
Less: Indirectly paid
expenses.............. (3,604) (21,867) (28,957) (7,877) (2,764) (10,190) (1,267)
Fee waivers and/or
reimbursement from
investment adviser.... 0 0 0 0 (204,617) 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Net expenses.......... 4,733,628 30,748,353 12,969,612 3,887,580 1,700,786 14,438,859 3,027,638
- -------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME.. 679,874 6,817,383 43,781,531 3,555,813 4,733,754 15,139,414 822,896
- -------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAINS OR
LOSSES ON SECURITIES
AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gains or
losses on:
Securities............ 45,240,695 89,769,570 88,022,951 4,125,256 16,449,359 382,225,398 21,844,245
Foreign currency
related
transactions......... (58,529) 0 52,503 0 0 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gains or
losses on securities
and foreign currency
related transactions.. 45,182,166 89,769,570 88,075,454 4,125,256 16,449,359 382,225,398 21,844,245
- -------------------------------------------------------------------------------------------------------------------------------
Net change in
unrealized gains or
losses on securities
and foreign currency
related transactions.. 18,537,520 54,312,938 (54,214,289) (17,882,408) 197,673 (290,896,507) (1,065,798)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions.. 63,719,686 144,082,508 33,861,165 (13,757,152) 16,647,032 91,328,891 20,778,447
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS............ $64,399,560 $150,899,891 $ 77,642,696 $(10,201,339) $21,380,786 $ 106,468,305 $21,601,343
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*For the eleven-month period ended July 31, 1998. The Fund changed its fiscal
year end from August to July, effective July 31, 1998.
See Combined Notes to Financial Statements.
65
<PAGE>
EVERGREEN
Growth and Income Funds
STATEMENTS OF OPERATIONS
Year Ended August 31, 1997
<TABLE>
<CAPTION>
BLUE CHIP
FUND
- -------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $58,633)........ $ 5,155,917
Interest....................................................... 533,010
- -------------------------------------------------------------------------------
Total income.................................................. 5,688,927
- -------------------------------------------------------------------------------
EXPENSES
Advisory fee................................................... 1,794,364
Distribution Plan expenses..................................... 1,535,556
Transfer agent fees............................................ 683,706
Administrative service fees.................................... 44,985
Trustees' fees and expenses.................................... 5,931
Professional fees.............................................. 41,471
Custodian fees................................................. 136,192
Printing....................................................... 31,980
Registration fees.............................................. 47,804
Other.......................................................... 6,423
- -------------------------------------------------------------------------------
Total expenses................................................ 4,328,412
Less: Indirectly paid expenses................................. (20,588)
- -------------------------------------------------------------------------------
Net expenses.................................................. 4,307,824
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME.......................................... 1,381,103
- -------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS OR LOSSES ON SECURITIES AND
FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gains or losses on:
Securities.................................................... 42,390,850
Foreign currency related transactions......................... (12,863)
- -------------------------------------------------------------------------------
Net realized gains or losses on securities and foreign currency
related transactions.......................................... 42,377,987
Net change in unrealized gains or losses on securities and
foreign currency related transactions......................... 35,362,301
- -------------------------------------------------------------------------------
Net realized and unrealized gains or losses on securities and
foreign currency related transactions......................... 77,740,288
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $79,121,391
- -------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
66
<PAGE>
EVERGREEN
Growth and Income Funds
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended July 31, 1998
<TABLE>
<CAPTION>
SMALL CAP
BLUE CHIP GROWTH & INCOME INCOME & GROWTH EQUITY INCOME UTILITY VALUE FUND FOR
FUND* FUND FUND FUND FUND FUND TOTAL RETURN
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment
income.......... $ 679,874 $ 6,817,383 $ 43,781,531 $ 3,555,813 $ 4,733,754 $ 15,139,414 $ 822,896
Net realized
gains or losses
on securities
and foreign
currency related
transactions.... 45,182,166 89,769,570 88,075,454 4,125,256 16,449,359 382,225,398 21,844,245
Net change in
unrealized gains
or losses on
securities and
foreign currency
related
transactions.... 18,537,520 54,312,938 (54,214,289) (17,882,408) 197,673 (290,896,507) (1,065,798)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
operations..... 64,399,560 150,899,891 77,642,696 (10,201,339) 21,380,786 106,468,305 21,601,343
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net
investment
income
Class A......... (572,879) (1,133,476) (582,857) (585,054) (3,623,474) (4,928,756) (457,652)
Class B......... (753,205) 0 (1,826,984) (875,495) (1,224,827) (1,461,990) (258,225)
Class C......... (10) 0 (40,251) (178,326) (12,408) (15,608) (55,586)
Class Y......... 0 (5,146,565) (41,136,147) (1,701,966) (71,410) (11,332,854) (895)
From net realized
gains
Class A......... 0 (7,164,362) (827,257) (213,842) (8,654,842) (79,220,878) (3,551,251)
Class B......... (51,043,219) (23,729,561) (3,160,159) (507,582) (3,545,873) (55,199,824) (7,082,118)
Class C......... 0 (1,087,731) (63,045) (100,773) (34,234) (713,832) (1,542,452)
Class Y......... 0 (23,937,007) (58,431,404) (758,969) (166,884) (82,980,185) (3,495)
- -------------------------------------------------------------------------------------------------------------------------------
Total
distributions
to
shareholders... (52,369,313) (62,198,702) (106,068,104) (4,922,007) (17,333,952) (235,853,927) (12,951,674)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE
TRANSACTIONS
Proceeds from
shares sold..... 114,811,777 982,241,448 36,821,129 324,098,172 27,354,893 209,984,754 40,160,932
Payment for
shares
redeemed........ (99,812,547) (402,984,465) (109,733,628) (64,094,835) (24,559,873) (1,216,417,479) (44,846,695)
Net asset value
of shares issued
in reinvestment
of
distributions... 45,932,435 54,748,017 95,522,782 3,360,906 4,031,786 202,246,215 12,075,357
Shares issued in
acquisition of
Blanchard Growth
& Income Fund... 17,510,672 0 0 0 0 0 0
Shares issued in
acquisition of
Virtus Style
Manager Fund.... 0 75,922,310 0 0 0 0 0
Shares issued in
acquisition of
Virtus Style
Manager; Large
Cap Fund........ 0 0 0 0 0 104,172,578 0
- -------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
capital share
transactions... 78,442,337 709,927,310 22,610,283 263,364,243 6,826,806 (700,013,932) 7,389,594
- -------------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in
net assets.... 90,472,584 798,628,499 (5,815,125) 248,240,897 10,873,640 (829,399,554) 16,039,263
NET ASSETS
Beginning of
period.......... 312,935,481 1,348,692,379 956,468,952 58,845,186 130,382,673 1,820,221,920 163,337,769
- -------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD.... $403,408,065 $2,147,320,878 $ 950,653,827 $307,086,083 $141,256,313 $ 990,822,366 $179,377,032
- -------------------------------------------------------------------------------------------------------------------------------
Undistributed net
investment
income.......... $ (14,966) $ 360,888 $ 13,459,757 $ 173,362 $ (7,868) $ (82,792) $ 430,969
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*For the eleven-month period ended July 31, 1998. The Fund changed its fiscal
year end from August to July, effective July 31, 1998.
See Combined Notes to Financial Statements.
67
<PAGE>
EVERGREEN
Growth and Income Funds
STATEMENTS OF CHANGES IN NET ASSETS
Fiscal year ended July 31, or August 31, 1997
<TABLE>
<CAPTION>
SMALL CAP
BLUE CHIP GROWTH & INCOME INCOME & GROWTH EQUITY INCOME UTILITY VALUE FUND FOR
FUND* FUND** FUND** FUND** FUND** FUND** TOTAL RETURN**
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment
income............ $ 1,381,103 $ 2,407,908 $ 21,889,648 $ 385,091 $ 2,786,986 $ 16,353,679 $ 766,801
Net realized gains
or losses on
securities and
foreign currency
related
transactions...... 42,377,987 23,375,321 44,086,999 1,108,151 11,377,530 58,756,392 8,633,551
Net change in
unrealized gains
or losses on
securities and
foreign currency
related
transactions...... 35,362,301 188,382,086 42,180,501 6,035,485 (1,002,220) 239,837,361 15,979,989
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in
net assets
resulting from
operations....... 79,121,391 214,165,315 108,157,148 7,528,727 13,162,296 314,947,432 25,380,341
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net
investment income
Class A........... 0 (357,479) (248,453) (11,097) (2,030,267) (2,943,697) (368,590)
Class B........... (2,021,947) 0 (790,199) (17,755) (639,939) (1,098,593) (315,494)
Class C........... 0 0 (19,512) (6,915) (6,346) (9,131) (78,332)
Class Y........... 0 (2,157,823) (20,540,101) (297,079) (40,667) (10,102,012) 0
From net realized
gains
Class A........... 0 0 0 (1,322) 0 0 0
Class B........... (30,039,258) 0 0 (2,116) 0 0 0
Class C........... 0 0 0 (824) 0 0 0
Class Y........... 0 0 0 (35,401) 0 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Total
distributions to
shareholders.... (32,061,205) (2,515,302) (21,598,265) (372,509) (2,717,219) (14,153,433) (762,416)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE
TRANSACTIONS
Proceeds from
shares sold....... 103,353,377 465,092,821 17,909,857 50,579,448 2,117,468 210,144,988 63,866,407
Payment for shares
redeemed.......... (89,890,447) (111,499,306) (71,220,009) (8,771,326) (21,527,215) (224,625,243) (24,402,541)
Net asset value of
shares issued in
reinvestment of
distributions..... 27,593,101 1,997,489 18,977,783 204,650 2,197,790 10,671,545 680,769
- -------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
capital share
transactions..... 41,056,031 355,591,004 (34,332,369) 42,012,772 (17,211,957) (3,808,710) 40,144,635
- -------------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in
net assets...... 88,116,217 567,241,017 52,226,514 49,168,990 (6,766,880) 296,985,289 64,762,560
NET ASSETS
Beginning of
period............ 224,819,264 781,451,362 904,242,438 9,676,196 137,149,553 1,523,236,631 98,575,209
- -------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD...... $312,935,481 $1,348,692,379 $956,468,952 $58,845,186 $130,382,673 $1,820,221,920 $163,337,769
- -------------------------------------------------------------------------------------------------------------------------------
Undistributed net
investment
income............ $ 16,188 $ (10,791) $ 1,748,160 $ 54,884 $ 170,484 $ 2,948,270 $ (165,774)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* For the year ended August 31, 1997.
** Each of the Funds changed their fiscal year end to July 31. The Statements
of Changes in Net Assets are for the following periods: for Growth and In-
come Fund, Small Cap Equity Income Fund, Utility Fund and Value Fund, the
seven-month period ended July 31, 1997; for Income and Growth Fund, the six-
month period ended July 31, 1997 and for Fund for Total Return, the eight-
month period ended July 31, 1997.
See Combined Notes to Financial Statements.
68
<PAGE>
EVERGREEN
Growth and Income Funds
STATEMENTS OF CHANGES IN NET ASSETS
Prior Periods
See Combined Notes to Financial Statements.
<TABLE>
<CAPTION>
SMALL CAP
BLUE CHIP GROWTH & INCOME INCOME & GROWTH EQUITY INCOME UTILITY VALUE FUND FOR
FUND**** FUND** FUND* FUND** FUND** FUND** TOTAL RETURN***
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment
income.......... $ 1,158,899 $ 3,525,699 $ 45,851,306 $ 207,498 $ 5,338,113 $ 25,598,949 $ 853,438
Net realized
gains or losses
on securities
and foreign
currency related
transactions.... 35,400,173 11,660,346 28,617,120 329,191 3,459,558 216,135,176 1,913,430
Net change in
unrealized gains
or losses on
securities and
foreign currency
related
transactions.... (2,334,533) 102,653,116 43,508,253 833,605 (3,509,310) 11,014,356 16,084,525
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in
net assets
resulting from
operations..... 34,224,539 117,839,161 117,976,679 1,370,294 5,288,361 252,748,481 18,851,393
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net
investment
income
Class A......... 0 (347,567) (379,400) (7,618) (3,887,411) (5,758,586) (539,949)
Class B......... (6,695,266) (65,556) (1,152,510) (9,798) (1,173,301) (1,939,188) (273,356)
Class C......... 0 (2,719) (39,024) (710) (11,835) (14,165) (112,998)
Class Y......... 0 (3,098,681) (45,453,926) (186,039) (229,804) (19,538,457) 0
From net realized
gains
Class A......... 0 (1,260,337) 0 (12,475) (2,482,046) (46,062,049) (754,551)
Class B......... (8,574,523) (3,666,284) 0 (27,933) (986,367) (27,670,352) (808,105)
Class C......... 0 (142,360) 0 (1,936) (10,122) (205,316) (270,058)
Class Y......... 0 (6,654,395) 0 (279,606) (53,545) (142,552,378) 0
- ------------------------------------------------------------------------------------------------------------------------------
Total
distributions
to
shareholders... (15,269,789) (15,237,899) (47,024,860) (526,115) (8,834,431) (243,740,491) (2,759,017)
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE
TRANSACTIONS
Proceeds from
shares sold..... 54,640,514 470,077,641 55,014,841 4,304,325 12,422,675 396,972,164 41,871,515
Payment for
shares
redeemed........ (61,283,587) (171,525,826) (197,670,999) (1,159,053) (30,379,907) (375,117,185) (19,063,497)
Net asset value
of shares issued
in reinvestment
of
distributions... 13,051,460 13,005,089 41,805,502 374,529 7,082,140 187,361,591 2,530,195
Shares issued in
acquisition of
FFB Lexicon
Capital
Appreciation
Fund Class Y.... 0 159,432,723 0 0 0 0 0
Shares issued in
acquisition of
FFB Lexicon
Select Value
Fund Class Y.... 0 0 0 0 0 95,883,824 0
Shares issued in
acquisition of
FFB Lexicon
Equity Fund
Class Y......... 0 0 0 0 0 14,077,973 0
- ------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
capital share
transactions... 6,408,387 470,989,627 (100,850,656) 3,519,801 (10,875,092) 319,178,367 25,338,213
- ------------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in
net assets.... 25,363,137 573,590,889 (29,898,837) 4,363,980 (14,421,162) 328,186,357 41,430,589
NET ASSETS
Beginning of
period.......... 199,456,127 207,860,473 934,141,275 5,312,216 151,570,715 1,195,050,274 57,144,620
- ------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD.... $224,819,264 $781,451,362 $904,242,438 $9,676,196 $137,149,553 $1,523,236,631 $98,575,209
- ------------------------------------------------------------------------------------------------------------------------------
Undistributed net
investment
income.......... $ 5,624,332 $ 6,087 $ 1,321,369 $ 3,333 $ 100,717 $ 292,413 $ (233,100)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* For the year ended January 31, 1997.
** For the year ended December 31, 1996.
*** For the year ended November 30, 1996.
**** For the year ended August 31, 1996.
See Combined Notes to Financial Statements.
69
<PAGE>
LOGO
COMBINED NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Evergreen Growth and Income Funds consist of Evergreen Blue Chip Fund
("Blue Chip"), Evergreen Growth and Income Fund ("Growth and Income"), Ever-
green Income and Growth Fund ("Income and Growth"), Evergreen Small Cap Equity
Income Fund ("Small Cap"), Evergreen Utility Fund ("Utility"), Evergreen Value
Fund ("Value") and Evergreen Fund for Total Return ("Total Return"), which are
collectively referred to herein as the "Funds". Each of the Funds is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as di-
versified, open-end management investment companies. Each Fund is a series of
the Evergreen Equity Trust, a Delaware business Trust organized on September
18, 1997.
The Funds offer Class A, Class B, Class C and Class Y shares. Class A shares
are sold with a maximum front-end sales charge of 4.75%. Class B and Class C
shares are sold without a front-end sales charge, but pay a higher ongoing dis-
tribution fee than Class A. Class B shares are sold subject to a contingent de-
ferred sales charge that is payable upon redemption and decreases depending on
how long the shares have been held. Class C shares are sold subject to a con-
tingent deferred sales charge payable on shares redeemed within one year after
the month of purchase. Class B shares purchased after January 1, 1997 will au-
tomatically convert to Class A shares after seven years. Class B shares pur-
chased prior to January 1, 1997 retain their existing conversion rights. Class
Y shares are sold at net asset value and are not subject to contingent deferred
sales charges or distribution fees. Class Y shares are sold only to investment
advisory clients of First Union and its affiliates, certain institutional in-
vestors or Class Y shareholders of record of certain other funds managed by
First Union and its affiliates.
2. REORGANIZATION OF EVERGREEN VALUE FUND
On January 21, 1998, Evergreen Value Fund, Class Y, executed a redemption in-
kind transaction of $793,367,277. This transaction resulted in the liquidation
of substantially all of the net assets of Value, Class Y shares. In turn, the
assets were transferred to Evergreen Select Diversified Value Fund, Class I, an
institutional fund.
To fund this redemption, investment securities, excluding cash and cash equiva-
lents, with a market value of $774,879,156, including unrealized appreciation
of $221,367,103, were transferred. Additionally the Fund used cash and cash
equivalents of $23,488,121 to complete the transaction. The gains realized from
this sale of securities are not taxable to the Fund and are not required to be
distributed for federal income tax purposes.
3. ACQUISITION INFORMATION
Effective December 1, 1997, Signet Banking Corporation ("Signet") merged with
First Union Corporation ("First Union").
Effective at the close of business on February 27, 1998, Blue Chip acquired
substantially all of the net assets of Blanchard Growth & Income Fund, an open-
end management investment company managed by a subsidiary of Signet and regis-
tered under the 1940 Act, valued at $17,510,672. The net assets were exchanged
through a non-taxable transaction for 596,231 Class A shares of Blue Chip val-
ued at $29.37 per share. The acquired net assets consisted primarily of portfo-
lio securities with unrealized appreciation of $5,643,636. The aggregate net
assets of Blue Chip after the acquisition were $365,442,145.
Effective at the close of business on February 27, 1998, Growth and Income ac-
quired substantially all of the net assets of Virtus Style Manager Fund, an
open-end management investment company managed by a subsidiary of Signet and
registered under the 1940 Act, valued at $75,922,310. The net assets were ex-
changed through a non-taxable transaction for 2,555,807 Class Y shares of
Growth and Income valued at $29.71 per share. The acquired net assets consisted
primarily of portfolio securities with unrealized appreciation of $10,049,313.
The aggregate net assets of Growth and Income after the acquisition were
$1,945,327,504.
Effective at the close of business on February 27, 1998, Value acquired sub-
stantially all of the net assets of Virtus Style Manager; Large Cap Fund, an
open-end management investment company managed by a subsidi-
70
<PAGE>
LOGO
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
ary of Signet and registered under the 1940 Act, valued at $104,172,578. The
net assets were exchanged through a non-taxable transaction for 3,109,878 and
924,632 Class A and Y shares, respectively, of Value. The per share value on
the acquisition date was $25.82 and $25.83 for Class A and Class Y, respective-
ly. The acquired net assets consisted primarily of portfolio securities with
unrealized appreciation of 28,824,982. The aggregate net assets of Value after
the acquisition were $1,097,437,360.
4. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. VALUATION OF SECURITIES
The Funds value securities traded on a national securities exchange or included
on the NASDAQ National Market System ("NMS") at the last reported sales price
on the exchange where primarily traded. The Funds value securities traded on an
exchange or NMS for which there has been no sale and other securities traded in
the over-the-counter market at the mean between the last reported bid and asked
price. U.S. government obligations held by the Funds are valued at the mean be-
tween the over-the-counter bid and asked prices. Corporate bonds, other fixed-
income securities, and mortgage and other asset-backed securities are valued at
prices provided by an independent pricing service. In determining value for
normal institutional-size transactions, the pricing service uses methods based
on market transactions for comparable securities and analysis of various rela-
tionships between similar securities which are generally recognized by institu-
tional traders. Securities for which valuations are not 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 are carried at amortized cost, which approximates market value.
B. REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held by the custodian on the Fund's behalf. Each
Fund monitors the adequacy of the collateral daily and will require the seller
to provide additional collateral in the event the market value of the 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
advisor to be creditworthy pursuant to guidelines established by the Board of
Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange Commis-
sion, Blue Chip and Total Return, along with certain other funds managed by
Keystone Investment Management Company ("Keystone"), a subsidiary of First
Union, 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. REVERSE REPURCHASE AGREEMENTS
To obtain short-term financing, the Small Cap, Total Return, Utility and Value
may enter into reverse repurchase agreements with qualified third-party broker-
dealers. Interest on the value of reverse repurchase agreements is based upon
competitive market rates at the time of issuance. At the time a Fund enters
into a reverse repurchase agreement, it will establish and maintain a segre-
gated account with the custodian containing qualifying assets having a value
not less than the repurchase price, including accrued interest. If the
counterparty to the transaction is rendered insolvent, the ultimate realization
of the securities to be repurchased by the Fund may be delayed or limited.
71
<PAGE>
LOGO
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
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, assets and liabilities at the daily rate of ex-
change; 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 gains or losses on secu-
rities and foreign currency related transactions. Net realized foreign currency
gains and losses resulting from changes in exchange rates include: foreign cur-
rency gains and losses between trade date and settlement date on investment se-
curities and foreign currency related transactions and the difference between
the amounts of interest and dividends recorded on the books of the Fund and the
amount actually received. The portion of foreign currency gains and losses re-
lated to fluctuations in exchange rates between the initial purchase trade date
and subsequent sale trade date is included in realized gains or losses on secu-
rities transactions.
E. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Funds may enter into forward foreign currency exchange contracts ("forward
contracts") to settle portfolio purchases and sales of securities denominated
in a foreign currency and to hedge certain foreign currency assets or liabili-
ties. Forward contracts are recorded at the forward rate and marked-to-market
daily. Realized gains and losses arising from such transactions are included in
net realized gains or losses on foreign currency related transactions. The Fund
bears the risk of an unfavorable change in the foreign currency exchange rate
underlying the forward contract and is subject to the credit risk that the
other party will not fulfill their obligations under the contract. Forward con-
tracts involve elements of market risk in excess of the amount reflected in the
statement of assets and liabilities.
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-dividend date or in the case of some foreign securities, on the date there-
after when the Fund is made aware of the dividend. Foreign income may be sub-
ject to foreign withholding taxes which are accrued as applicable. Capital
gains realized on some foreign securities may be subject to foreign taxes and
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 (the "Code"). As such, the Funds
will not incur any federal income tax liability since they are expected to dis-
tribute all of their net investment company taxable income and net realized
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 income 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 Utility, are de-
clared and paid quarterly. Distributions for Utility from net investment income
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. The differences between financial statements amounts
available for distribution and distributions made in accordance with income tax
regulations are primarily due to differing treatment for certain distributions
received from real estate investment trusts and net realized foreign currency
gains (losses).
72
<PAGE>
LOGO
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
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 for each class.
J. ORGANIZATION EXPENSES
Organization expenses incurred prior to June 30, 1998 are amortized to opera-
tions over a five-year period on a straight-line basis. In the event any of the
initial shares of the Funds are redeemed by any holder during the five-year am-
ortization period, redemption proceeds will be reduced by any unamortized or-
ganization expenses in the same proportion as the number of initial shares be-
ing redeemed bears to the number of initial shares outstanding at the time of
the redemption.
5. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest authorized
with a $0.001 par value. Shares of beneficial interest of the Funds are cur-
rently divided into Class A, Class B, Class C and Class Y. Blue Chip currently
does not have any Class Y shares. Transactions in shares of the Funds were as
follows:
Blue Chip
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
July 31, 1998 * August 31, 1997 August 31, 1996
------------------------- ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold............. 812,276 $ 24,596,278 0 0 0 0
Automatic conversion of
Class B shares to
Class A shares......... 9,140,449 250,374,069 0 0 0 0
Shares redeemed......... (1,203,287) (36,027,532) 0 0 0 0
Shares issued on
reinvestment of
distribution........... 14,697 447,340 0 0 0 0
Shares issued in
acquisition of
Blanchard Growth &
Income Fund............ 596,231 17,510,672 0 0 0 0
- -------------------------------------------------------------------------------------------------------
Net increase............ 9,360,366 256,900,827 0 0 0 0
- -------------------------------------------------------------------------------------------------------
CLASS B
Shares sold............. 3,020,854 89,396,767 3,800,615 $103,353,377 2,238,539 $ 54,640,514
Automatic conversion of
Class B shares to
Class A shares......... (9,140,449) (250,374,069) 0 0 0 0
Shares redeemed......... (2,178,914) (63,756,605) (3,349,695) (89,890,447) (2,509,938) (61,283,587)
Shares issued on
reinvestment of
distribution........... 1,678,649 45,485,085 1,079,325 27,593,101 568,144 13,051,460
- -------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (6,619,860) (179,248,822) 1,530,245 41,056,031 296,745 6,408,387
- -------------------------------------------------------------------------------------------------------
CLASS C
Shares sold............. 26,608 818,732 0 0 0 0
Shares redeemed......... (949) (28,410) 0 0 0 0
Shares issued on
reinvestment of
distribution........... 0 10 0 0 0 0
- -------------------------------------------------------------------------------------------------------
Net increase............ 25,659 790,332 0 0 0 0
- -------------------------------------------------------------------------------------------------------
Net increase............ 2,766,165 $ 78,442,337 1,530,245 $ 41,056,031 296,745 $ 6,408,387
- -------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund changed its fiscal year end from August 31 to July 31, effective
July 31, 1998.
73
<PAGE>
LOGO
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
Growth and Income
<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended
July 31, 1998 July 31, 1997* December 31, 1996
------------------------- ------------------------ -------------------------
Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold............. 7,300,804 $ 214,673,895 2,967,692 $ 71,457,862 3,719,917 $ 76,959,622
Shares redeemed......... (3,520,816) (103,702,934) (645,446) (15,573,680) (1,044,500) (21,729,967)
Shares issued on
reinvestment of
distribution........... 287,118 8,071,240 14,532 352,344 69,271 1,546,893
- --------------------------------------------------------------------------------------------------------
Net increase............ 4,067,106 119,042,201 2,336,778 56,236,526 2,744,688 56,776,548
- --------------------------------------------------------------------------------------------------------
CLASS B
Shares sold............. 16,476,196 481,475,327 9,881,863 236,281,947 8,914,571 185,314,202
Shares redeemed......... (2,725,060) (79,579,083) (779,920) (18,705,681) (646,461) (13,411,376)
Shares issued on
reinvestment of
distribution........... 837,176 23,198,143 166 3,746 160,953 3,613,927
- --------------------------------------------------------------------------------------------------------
Net increase............ 14,588,312 425,094,387 9,102,109 217,580,012 8,429,063 175,516,753
- --------------------------------------------------------------------------------------------------------
CLASS C
Shares sold............. 1,131,563 32,986,181 511,624 12,290,220 348,918 7,294,757
Shares redeemed......... (317,773) (9,241,480) (55,491) (1,340,999) (29,065) (597,615)
Shares issued on
reinvestment of
distribution........... 38,010 1,053,643 0 0 5,130 115,108
- --------------------------------------------------------------------------------------------------------
Net increase............ 851,800 24,798,344 456,133 10,949,221 324,983 6,812,250
- --------------------------------------------------------------------------------------------------------
CLASS Y
Shares sold............. 8,658,868 253,053,137 6,060,064 145,062,792 9,899,164 200,509,060
Shares redeemed......... (7,135,642) (210,408,060) (3,163,527) (75,878,946) (6,820,349) (135,786,868)
Shares issued on
reinvestment of
distribution........... 797,581 22,424,991 67,571 1,641,399 349,251 7,729,161
Shares issued in
acquisition of
Virtus Style Manager
Fund................... 2,555,807 75,922,310 0 0 0 0
Shares issued in
acquisition of
FFB Lexicon Capital
Appreciation Fund...... 0 0 0 0 8,631,861 159,432,723
- --------------------------------------------------------------------------------------------------------
Net increase............ 4,876,614 140,992,378 2,964,108 70,825,245 12,059,927 231,884,076
- --------------------------------------------------------------------------------------------------------
Net increase............ 24,383,832 $ 709,927,310 14,859,128 $355,591,004 23,558,661 $ 470,989,627
- --------------------------------------------------------------------------------------------------------
*The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
Income and Growth
<CAPTION>
Year Ended Period Ended Year Ended
July 30, 1998 July 31, 1997* January 31, 1997
------------------------- ------------------------ -------------------------
Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold............. 204,121 $ 4,959,183 96,124 $ 2,114,635 288,739 $ 5,918,321
Shares redeemed......... (112,612) (2,739,976) (51,264) (1,121,079) (80,074) (1,646,836)
Shares issued on
reinvestment of
distribution........... 56,318 1,325,926 10,209 225,329 16,567 341,281
- --------------------------------------------------------------------------------------------------------
Net increase............ 147,827 3,545,133 55,069 1,218,885 225,232 4,612,766
- --------------------------------------------------------------------------------------------------------
CLASS B
Shares sold............. 633,299 15,295,755 308,925 6,799,151 973,616 19,899,458
Shares redeemed......... (310,711) (7,455,874) (123,038) (2,685,666) (128,458) (2,649,792)
Shares issued on
reinvestment of
distribution........... 198,183 4,626,554 32,359 710,178 48,861 1,003,747
- --------------------------------------------------------------------------------------------------------
Net increase............ 520,771 12,466,435 218,246 4,823,663 894,019 18,253,413
- --------------------------------------------------------------------------------------------------------
CLASS C
Shares sold............. 27,805 674,067 2,951 66,274 33,684 684,918
Shares redeemed......... (16,763) (402,792) (9,060) (189,123) (15,865) (328,507)
Shares issued on
reinvestment of
distribution........... 3,708 86,620 712 15,602 1,429 29,305
- --------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 14,750 357,895 (5,397) (107,247) 19,248 385,716
- --------------------------------------------------------------------------------------------------------
CLASS Y
Shares sold............. 641,797 15,892,124 407,330 8,929,797 1,398,445 28,512,144
Shares redeemed......... (4,066,667) (99,134,986) (3,049,701) (67,224,141) (9,386,347) (193,045,864)
Shares issued on
reinvestment of
distribution........... 3,795,361 89,483,682 816,636 18,026,674 1,968,663 40,431,169
- --------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 370,491 6,240,820 (1,825,735) (40,267,670) (6,019,239) (124,102,551)
- --------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 1,053,839 $ 22,610,283 (1,557,817) $(34,332,369) (4,880,740) $(100,850,656)
- --------------------------------------------------------------------------------------------------------
</TABLE>
*The Fund changed its fiscal year end from January 31 to July 31, effective
July 31, 1997.
74
<PAGE>
LOGO
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
Small Cap
<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended
July 31, 1998 July 31, 1997* December 31, 1996
------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold............. 4,328,382 $ 72,341,164 246,413 $ 3,587,404 23,318 $ 285,774
Shares redeemed......... (1,207,491) (20,046,565) (2,663) (37,984) (17,926) (213,193)
Shares issued on
reinvestment of
distribution........... 45,725 753,748 854 12,209 1,564 19,575
- ------------------------------------------------------------------------------------------------------
Net increase............ 3,166,616 53,048,347 244,604 3,561,629 6,956 92,156
- ------------------------------------------------------------------------------------------------------
CLASS B
Shares sold............. 8,426,642 140,304,860 560,543 8,164,490 27,963 341,494
Shares redeemed......... (803,676) (13,366,175) (9,769) (142,514) (966) (11,697)
Shares issued on
reinvestment of
distribution........... 79,883 1,323,369 1,366 19,472 2,883 36,358
- ------------------------------------------------------------------------------------------------------
Net increase............ 7,702,849 128,262,054 552,140 8,041,448 29,880 366,155
- ------------------------------------------------------------------------------------------------------
CLASS C
Shares sold............. 1,760,785 29,361,569 178,877 2,529,352 3,956 48,265
Shares redeemed......... (281,072) (4,699,621) (6,447) (91,950) (1,838) (22,125)
Shares issued on
reinvestment of
distribution........... 16,111 266,637 524 7,467 136 1,697
- ------------------------------------------------------------------------------------------------------
Net increase............ 1,495,824 24,928,585 172,954 2,444,869 2,254 27,837
- ------------------------------------------------------------------------------------------------------
CLASS Y
Shares sold............. 4,923,790 82,090,579 2,593,853 36,298,202 289,906 3,628,792
Shares redeemed......... (1,558,339) (25,982,474) (562,869) (8,498,878) (75,598) (912,038)
Shares issued on
reinvestment of
distribution........... 61,107 1,017,152 11,719 165,502 25,358 316,899
- ------------------------------------------------------------------------------------------------------
Net increase............ 3,426,558 57,125,257 2,042,703 27,964,826 239,666 3,033,653
- ------------------------------------------------------------------------------------------------------
Net increase............ 15,791,847 $263,364,243 3,012,401 $ 42,012,772 278,756 $ 3,519,801
- ------------------------------------------------------------------------------------------------------
*The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
Utility
<CAPTION>
Year Ended Period Ended Year Ended
July 31, 1998 July 31, 1997* December 31, 1996
------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold............. 1,266,778 $ 14,554,038 45,144 $ 494,721 246,512 $ 2,626,118
Shares redeemed......... (1,407,032) (16,718,124) (1,294,589) (14,079,531) (1,609,448) (16,984,094)
Shares issued on
reinvestment of
distribution........... 243,720 2,889,027 147,141 1,602,820 478,287 5,051,093
- ------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 103,466 724,941 (1,102,304) (11,981,990) (884,649) (9,306,883)
- ------------------------------------------------------------------------------------------------------
CLASS B
Shares sold............. 974,483 11,445,916 123,876 1,349,827 787,800 8,401,385
Shares redeemed......... (551,773) (6,555,500) (611,224) (6,601,705) (630,402) (6,652,890)
Shares issued on
reinvestment of
distribution........... 93,247 1,107,337 52,424 571,837 183,056 1,935,353
- ------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 515,957 5,997,753 (434,924) (4,680,041) 340,454 3,683,848
- ------------------------------------------------------------------------------------------------------
CLASS C
Shares sold............. 13,355 157,299 1,231 13,731 25,812 274,673
Shares redeemed......... (6,139) (72,067) (6,079) (66,033) (13,100) (135,909)
Shares issued on
reinvestment of
distribution........... 980 11,662 536 5,855 1,963 20,723
- ------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 8,196 96,894 (4,312) (46,447) 14,675 159,487
- ------------------------------------------------------------------------------------------------------
CLASS Y
Shares sold............. 100,754 1,197,639 23,627 259,189 106,165 1,120,499
Shares redeemed......... (100,753) (1,214,182) (72,220) (779,946) (644,560) (6,607,014)
Shares issued on
reinvestment of
distribution........... 2,014 23,760 1,585 17,278 7,089 74,971
- ------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 2,015 7,217 (47,008) (503,479) (531,306) (5,411,544)
- ------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 629,634 $ 6,826,805 (1,588,548) $(17,211,957) (1,060,826) $(10,875,092)
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
75
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COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
Value
<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended
July 31, 1998 July 31, 1997* December 31, 1996
---------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold............. 1,587,252 $ 40,192,765 948,931 $ 21,010,689 1,109,850 $ 23,895,251
Shares redeemed......... (2,758,581) (68,967,117) (1,099,102) (24,085,514) (1,836,296) (39,736,035)
Shares issued on
reinvestment of
distribution........... 3,563,487 81,070,016 127,041 2,835,467 2,371,895 49,562,452
Shares issued in the
acquisition of Virtus
Style Manager; Large
Cap Fund............... 3,109,878 80,290,504 0 0 0 0
- -------------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 5,502,036 132,586,168 (23,130) (239,358) 1,645,449 33,721,668
- -------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold............. 2,346,146 58,297,020 2,284,482 50,184,755 2,197,426 47,442,303
Shares redeemed......... (1,290,986) (31,809,835) (709,716) (15,577,742) (873,740) (18,943,891)
Shares issued on
reinvestment of
distribution........... 2,433,973 55,281,719 48,527 1,086,571 1,374,236 28,693,188
- -------------------------------------------------------------------------------------------------------------
Net increase............ 3,489,133 81,768,904 1,623,293 35,693,584 2,697,922 57,191,600
- -------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold............. 170,261 4,223,998 46,777 1,018,408 38,761 832,827
Shares redeemed......... (72,103) (1,793,135) (16,263) (355,395) (17,818) (377,207)
Shares issued on
reinvestment of
distribution........... 31,015 701,653 410 9,201 10,328 215,421
- -------------------------------------------------------------------------------------------------------------
Net increase............ 129,173 3,132,516 30,924 672,214 31,271 671,041
- -------------------------------------------------------------------------------------------------------------
CLASS Y
Shares sold............. 4,385,718 107,270,971 6,289,283 137,931,136 15,195,754 324,801,783
Shares redeemed......... (46,491,232) (1,113,847,392) (8,383,008) (184,606,592) (14,584,293) (316,060,052)
Shares issued on
reinvestment of
distribution........... 2,771,230 65,192,827 302,057 6,740,306 5,208,388 108,890,530
Shares issued in
acquisition of Virtus
Style Manager; Large
Cap Fund............... 924,632 23,882,074 0 0 0 0
Shares issued in
acquisition of FFB
Lexicon Select Value
Fund................... 0 0 0 0 4,720,676 95,883,824
Shares issued in
acquisition of FFB
Equity Fund............ 0 0 0 0 692,924 14,077,973
- -------------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (38,409,652) (917,501,520) (1,791,668) (39,935,150) 11,233,449 227,594,058
- -------------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (29,289,310) $ (700,013,932) (160,581) $ (3,808,710) 15,608,091 $ 319,178,367
- -------------------------------------------------------------------------------------------------------------
*The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
Total Return
<CAPTION>
Year Ended Period Ended Year Ended
July 31, 1998 July 31, 1997* November 30, 1996
---------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold............. 405,327 $ 8,477,778 521,092 $ 9,464,499 756,854 $ 11,818,891
Shares redeemed......... (476,275) (9,979,937) (564,385) (10,121,645) (446,563) (6,837,747)
Shares issued on
reinvestment of
distribution........... 192,513 3,761,047 18,071 331,175 71,945 1,193,118
- -------------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 121,565 2,258,888 (25,222) (325,971) 382,236 6,174,262
- -------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold............. 1,312,799 27,194,053 2,651,702 48,001,066 1,503,008 23,867,265
Shares redeemed......... (1,328,176) (27,515,826) (609,684) (11,087,288) (534,970) (8,156,600)
Shares issued on
reinvestment of
distribution........... 348,818 6,752,535 15,072 275,911 57,897 974,432
- -------------------------------------------------------------------------------------------------------------
Net increase............ 333,441 6,430,762 2,057,090 37,189,689 1,025,935 16,685,097
- -------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold............. 212,115 4,372,780 350,562 6,315,824 398,635 6,185,359
Shares redeemed......... (349,166) (7,245,174) (172,539) (3,193,608) (265,577) (4,069,150)
Shares issued on
reinvestment of
distribution........... 80,168 1,557,317 4,023 73,683 21,672 362,645
- -------------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (56,883) (1,315,077) 182,046 3,195,899 154,730 2,478,854
- -------------------------------------------------------------------------------------------------------------
CLASS Y
Shares sold............. 5,560 116,322 4,487 85,018 0 0
Shares redeemed......... (5,138) (105,758) 0 0 0 0
Shares issued on
reinvestment of
distribution........... 228 4,458 0 0 0 0
- -------------------------------------------------------------------------------------------------------------
Net increase............ 650 15,022 4,487 85,018 0 0
- -------------------------------------------------------------------------------------------------------------
Net increase............ 398,773 $ 7,389,595 2,218,401 $ 40,144,635 1,562,901 $ 25,338,213
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund share activity for Class Y shares reflect the period from June 10,
1997 (commencement of class operations) through July 31, 1997. The Fund
changed its fiscal year end from November 30 to July 31, effective July 31,
1997.
76
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COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
6. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments, were as follows for the period ended July 31, 1998:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
<S> <C> <C>
-----------------------------
Blue Chip*........................ $ 360,931,375 $ 391,549,349
Growth and Income................. 846,628,227 288,979,809
Income and Growth................. 1,281,952,042 1,315,701,331
Small Cap......................... 285,721,810 35,249,915
Utility........................... 86,344,853 94,184,507
Value............................. 902,213,731 1,820,554,640
Total Return...................... 107,895,706 127,869,229
</TABLE>
-------
* For the eleven-month period ended July 31,
1998. The Fund changed its fiscal year end
from August 31 to July 31, effective July 31,
1998. For the year ended August 31, 1997, cost
of purchases and proceeds from sales of in-
vestment securities for Blue Chip, excluding
short-term investments, were $295,493,216 and
$285,581,225, respectively.
On July 31, 1998, 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>
Net
Gross Gross Unrealized
Unrealized Unrealized Appreciation /
Tax Cost Appreciation Depreciation (Depreciation)
---------------------------------------------------
<S> <C> <C> <C> <C>
Blue Chip..... $ 298,069,328 $ 87,560,884 $ 2,556,400 $ 85,004,484
Growth and
Income....... 1,747,719,854 510,629,570 80,376,773 430,252,797
Income and
Growth....... 896,608,201 117,051,419 71,847,090 45,204,329
Small Cap..... 319,633,756 18,497,845 28,741,979 (10,244,134)
Utility....... 121,862,772 24,225,433 7,043,779 17,181,654
Value......... 786,172,180 244,288,036 29,342,797 214,945,239
Total Return.. 136,194,805 44,760,810 2,328,754 42,432,056
</TABLE>
7. DISTRIBUTION PLANS
Evergreen Distributor, Inc. (formerly, Evergreen Keystone Distributor, Inc.)
("EDI"), a wholly-owned subsidiary of The BISYS Group Inc. ("BISYS") serves as
principal underwriter to the Funds.
Each Fund has adopted Distribution Plans for each class of shares as allowed by
Rule 12b-1 of the 1940 Act. Distribution plans permit the 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
services fees to broker-dealers who sell shares of the fund, are paid by share-
holders through expenses called "Distribution Plan expenses". Each class, ex-
cept Class Y, currently pays a service fee equal to 0.25% of the average daily
net assets of the class. Class B and Class C also presently pay distribution
fees equal to 0.75% of the average daily net assets of the Class. Distribution
Plan expenses are calculated daily and paid monthly. With respect to Class B
and Class C shares, the principal underwriter may pay 12b-1 fees greater than
the allowable annual amounts the Fund is permitted to pay. The Fund may reim-
burse the principal underwriter for such excess amounts in later years with an-
nual interest at the prime rate plus 1.00%.
77
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COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
During the period ended July 31, 1998, amounts paid to EDI and/or its predeces-
sor pursuant to each Fund's Class A, Class B and Class C Distribution Plans
were as follows:
<TABLE>
<CAPTION>
Year Ended July 31, 1998
------------------------------
Class A Class B Class C
<S> <C> <C> <C>
------------------------------
Blue Chip*...................... $ 367,809 $1,259,943 $ 1,062
Growth and Income............... 597,754 7,890,229 377,404
Income and Growth............... 34,738 520,041 11,305
Small Cap....................... 80,328 755,179 153,142
Utility......................... 243,362 413,364 4,199
Value........................... 1,088,998 3,088,393 34,416
Total Return.................... 124,034 1,012,065 214,441
</TABLE>
-------
* For the eleven-month period ended July 31,
1998. The Fund changed its fiscal year end
from August 31 to July 31, effective July 31,
1998. For the year ended August 31, 1997, Blue
Chip paid $1,535,556 to EDI and/or its prede-
cessor pursuant to the Fund's Class B Distri-
bution Plan.
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.
Contingent deferred sales charges paid by redeeming shareholders are paid to
EDI or its predecessor.
8. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED
TRANSACTIONS
Keystone is the investment adviser for Blue Chip and Total Return. In return
for providing investment management and administrative services to Blue Chip
and Total Return, the Funds pay Keystone a management fee that is calculated
daily and paid monthly. The management fee for Blue Chip is determined by ap-
plying percentage rates starting at 0.70% and declining as assets increase to
0.35% per annum, to the average daily net asset value of the Fund. The manage-
ment fee for Total Return is computed at an annual rate of 1.50% of Total Re-
turn's gross investment income plus an amount determined by applying percentage
rates starting at 0.60% and declining to 0.30% per annum as net assets in-
crease, to the average daily net asset value of the Fund.
Pursuant to an agreement with Growth and Income's, Income and Growth's and
Small Cap's investment adviser, Evergreen Asset Management Corp. ("Evergreen
Asset"), a wholly owned subsidiary of First Union, is entitled to an annual fee
based on each of Growth and Income's, Income and Growth's and Small Cap's aver-
age daily net assets, respectively, in accordance with the following schedule:
<TABLE>
<S> <C>
First $750 million......................................... 1.00%
Next $250 million.......................................... 0.90%
Over $1 billion............................................ 0.80%
</TABLE>
Evergreen Asset has agreed to reimburse Small Cap to the extent that the Fund's
operating expenses (including the investment advisory fee and amortization of
organizational expenses but excluding interest, taxes, brokerage commissions,
12b-1 distribution and shareholder services fees and extraordinary expenses)
exceed 1.50% of its average daily net assets. First Union and Evergreen Asset
can modify or terminate voluntary waivers at any time.
First Union is entitled to an annual fee of 0.50% Utility's and Value's average
daily net assets pursuant to each Fund's investment advisory agreement. First
Union voluntarily waived $204,617 of its fee for Utility for the year ended
July 31, 1998.
Evergreen Investment Services ("EIS") (formerly Evergreen Keystone Investment
Services, Inc.), a subsidiary of First Union, is the administrator and BISYS
Fund Services is sub-administrator to the Funds. As administrator, EIS provides
the Funds with facilities, equipment and personnel. As sub-administrator to the
Funds, BISYS Fund Services provides the officers of the Funds. The administra-
tor and sub-administrator for each Fund are entitled to an annual fee based on
the average daily net assets of the funds administered by EIS for which First
Union or its investment advisory subsidiaries are also the investment advisers.
The administration fee is calculated by applying percentage rates, which start
at 0.05% and decline to 0.01% per annum as net assets
78
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COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
increase, to the average daily net asset value of the Fund. The sub-administra-
tion fee is calculated by applying percentage rates, which start at 0.01% and
decline to .004% per annum as net assets increase, to the average daily net as-
set value of the Fund. For Blue Chip, Growth and Income, Income and Growth,
Small Cap and Total Return the administration and sub-administration fee is
paid by their respective investment adviser and is not a Fund expense. For the
year ended July 31, 1998, Utility and Value paid $42,854 and $438,523, respec-
tively, to EIS for providing administrative services.
For the period ended July 31, 1998, Blue Chip and Total Return paid $53,198 and
$33,743, respectively, to Keystone, as reimbursement of certain administrative
expenses.
Evergreen Service Company ("ESC"), a subsidiary of First Union, serves as the
transfer and dividend disbursing agent for the Funds.
Lieber & Company, an affiliate of First Union, is the investment sub-adviser to
Growth and Income, Income and Growth, and Small Cap and also provides brokerage
services with respect to substantially all security transactions of each Fund
effected on the New York or American Stock Exchanges. For the year ended
July 31, 1998, Growth and Income, Income and Growth, and Small Cap incurred the
following brokerage commissions with Lieber & Company:
<TABLE>
<S> <C>
Growth and Income..................................... $1,460,807
Income and Growth..................................... 1,762,628
Small Cap............................................. 305,350
</TABLE>
Lieber & Company is reimbursed by Evergreen Asset, at no additional expense to
the Fund, for its cost of providing investment advisory services.
Evergreen Service Company ("ESC"), a wholly-owned subsidiary of Keystone,
serves as the transfer and dividend disbursing agent for the Funds.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
9. EXPENSE OFFSET ARRANGEMENT
The Funds have entered into an expense offset arrangement with their custodian.
The assets deposited with the custodian under this expense offset arrangement
could have been invested in income-producing assets.
10. DEFERRED TRUSTEES' FEES
Each Independent Trustee of the Funds may defer any or all compensation related
to performance of duties as a Trustee. Each Trustee's deferred balances are al-
located to deferral accounts which are included in the accrued expenses for
each 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 each Funds' Trustees' fees
and expenses. Trustees will be paid either in one lump sum or in quarterly in-
stallments for up to ten years at their election, not earlier than either the
year in which the Trustee ceases to be a member of the Board of Trustees or
January 1, 2000. As of July 31, 1998, the value of the Trustees deferral ac-
count for Blue Chip, Growth and Income, Income and Growth, Small Cap, Utility,
Value and Total Return was $7,071, $32,760, $87,575, $8,678, $7,867, $82,792
and $2,334.
11. FINANCING AGREEMENT
On October 31, 1996, a financing agreement among certain of the Evergreen
Funds, State Street Bank & Trust ("State Street") and a group of Banks (the
"Banks") became effective. Under this agreement, the Banks provided an
unsecured credit facility in the aggregate amount of $225 million ($112.5 mil-
lion committed and $112.5 million uncommitted) allocated evenly among the
Banks. Borrowings under this facility bore interest at 0.75% per annum above
the Federal Funds rate. A commitment fee of 0.10% per annum was incurred on the
unused portion of the committed facility, which was allocated to all partici-
pating Funds. State Street served as agent for the Banks, and as agent was en-
titled to a fee of $15,000 which was allocated to all of the participating
Funds. This agreement was terminated on October 31, 1997.
79
<PAGE>
LOGO
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
On October 31, 1997, a temporary financing agreement between the participating
Funds and First Union became effective. Under this agreement, First Union pro-
vided a fully committed unsecured credit facility in the aggregate amount of
$300 million. Borrowings under this facility bore interest at 1.00% per annum
above the Federal Funds rate. State Street served as administrative agent under
this agreement, but received no compensation for its services. This agreement
was terminated on December 22, 1997.
On December 22, 1997, a financing agreement among all of the Evergreen Funds,
State Street Bank and Trust ("State Street") and a group of Banks became effec-
tive. 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 among the Banks, under the terms
of the financing agreement. The credit facility is to be accessed by the Funds
for temporary or emergency purposes only and is subject to each Fund's borrow-
ing restrictions. Borrowings under this facility bear interest at 0.50% per an-
num above the Federal Funds rate. A commitment fee of 0.065% per annum will be
incurred on the unused portion of the committed facility, which will be allo-
cated to all funds. State Street serves as administrative agent for the Banks,
and as administrative agent is entitled to a fee of $20,000 per annum which is
allocated to all of the Funds.
During the period ended July 31, 1998, the Funds, except Income and Growth, had
no significant borrowings under these agreements. At July 31, 1998, Income and
Growth had a balance pursuant to this agreement of $12,800,000.
12. CONCENTRATION OF CREDIT RISK
Utility invests a substantial portion of its assets in issuers in the Utilities
industry, therefore, it may be more affected by economic and political develop-
ments in that industry than would be a comparable general equity fund.
80
<PAGE>
LOGO
INDEPENDENT AUDITORS' REPORTS
The Trustees and Shareholders of
Evergreen Equity Trust
We have audited the accompanying statements of assets and liabilities, includ-
ing the schedules of investments, of six of the funds comprising Evergreen Eq-
uity Trust as listed below as of July 31, 1998, and the related statements of
operations, statements of changes in net assets and financial highlights for
each of the years or periods listed below:
Evergreen Blue Chip Fund -- statements of operations for the eleven months
ended July 31, 1998 and the year ended August 31, 1997, statements of
changes in net assets for the eleven months ended July 31, 1998 and each of
the years in the two-year period ended August 31, 1998 and financial high-
lights for the periods presented on pages 30 and 31.
Evergreen Growth and Income Fund -- statement of operations for the year
ended July 31, 1998, statements of changes in net assets for the year ended
July 31, 1998, the seven months ended July 31, 1997 and the year ended De-
cember 31, 1996 and financial highlights for the periods presented on pages
32 and 33, except for the periods ended prior to December 31, 1996. The fi-
nancial highlights for the periods ended prior to December 31, 1996 were au-
dited by other auditors, whose opinion thereon dated February 15, 1996 was
unqualified.
Evergreen Small Cap Equity Income Fund -- statement of operations for the
year ended July 31, 1998, statements of changes in net assets for the year
ended July 31, 1998, the seven months ended July 31, 1997 and the year ended
December 31, 1996 and financial highlights for the periods presented on
pages 36 and 37, except for the periods ended prior to December 31, 1996.
The financial highlights for the periods ended prior to December 31, 1996
were audited by other auditors, whose opinion thereon dated February 15,
1996 was unqualified.
Evergreen Utility Fund -- statement of operations for the year ended July
31, 1998, statements of changes in net assets for the year ended July 31,
1998, the seven months ended July 31, 1997 and the year ended December 31,
1996 and financial highlights for the periods presented on pages 38 and 39.
Evergreen Value Fund -- statement of operations for the year ended July 31,
1998, the statements of changes in net assets for the year ended July 31,
1998, the seven months ended July 31, 1997 and the year ended December 31,
1996 and financial highlights for the periods presented on pages 40 and 41.
Evergreen Fund for Total Return -- statement of operations for the year
ended July 31, 1998, statements of changes in net assets for the year ended
July 31, 1998, the eight months ended July 31, 1997 and the year ended No-
vember 30, 1996 and financial highlights for the periods presented on pages
42 and 43.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these fi-
nancial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted audited stan-
dards. Those standards require that we plan and perform our audit 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 and financial highlights. Our procedures included confirmation of
securities owned as of July 31, 1998 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall fi-
nancial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ever-
green Blue Chip Fund, Evergreen Growth and Income Fund, Evergreen Small Cap Eq-
uity Income Fund, Evergreen Utility Fund, Evergreen Value Fund and Evergreen
Fund for Total Return (six of the funds comprising Evergreen Equity Trust) as
of July 31, 1998, the results of their operations, changes in their net assets
and financial highlights for each of the years or periods specified in the
first paragraph above in conformity with generally accepted accounting princi-
ples.
KPMG Peat Marwick LLP
Boston, Massachusetts
September 4, 1998
81
<PAGE>
LOGO
INDEPENDENT AUDITORS' REPORTS
To the Trustees and Shareholders of
Evergreen Income and Growth Fund
In our opinion, the accompanying Statement of Assets and Liabilities, including
the Schedule of Investments, and the related Statements of Operations and of
Changes in Net Assets and the Financial Highlights present fairly, in all mate-
rial respects, the financial position of Evergreen Income and Growth Fund (the
"Fund") at July 31, 1998, the results of its operations for the year then ended
and the changes in its net assets and the financial highlights for the year
ended July 31, 1998, the period ended July 31, 1997, and the year ended January
31, 1997, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as "finan-
cial statements") are the responsibility of the Fund's management; our respon-
sibility is to express an opinion on these financial statements based on our
audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and per-
form the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presenta-
tion. We believe that our audits, which included confirmation of securities at
July 31, 1998 by correspondence with the custodian, provide a reasonable basis
for the opinion expressed above. The financial highlights presented for each of
the years or periods ended through January 31, 1996 were audited by other audi-
tors, whose report dated March 31, 1996 was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
September 15, 1998
82
<PAGE>
LOGO
FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
Pursuant to section 852 of the Internal Revenue Code, the Funds have
designated the following amounts as long-term 28% capital gain dis-
tributions and long-term 20% capital gain distributions for the fis-
cal year ended July 31, 1998:
<TABLE>
<CAPTION>
Aggregate Per Share
----------------------- -------------
28% 20% 28% 20%
---------------------------------
<S> <C> <C> <C> <C>
Blue Chip............... $18,080,605 $16,417,783 $1.758 $1.597
Growth and Income....... 14,384,603 26,192,557 0.259 0.471
Income and Growth....... 0 0 0.000 0.000
Small Cap............... 81,536 420,422 0.004 0.022
Utility................. 5,039,111 2,587,648 0.420 0.215
Value................... 77,345,830 115,539,118 1.734 2.591
Total Return............ 4,898,662 4,494,746 0.590 0.541
</TABLE>
For corporate shareholders, the following percentages of ordinary in-
come dividends paid during the fiscal year ended July 31, 1998 quali-
fied for the dividends received deduction.
<TABLE>
<S> <C>
Blue Chip................................................. 35.96%
Growth and Income......................................... 43.91%
Income and Growth......................................... 14.91%
Small Cap................................................. 72.93%
Utility................................................... 79.50%
Value..................................................... 83.91%
Total Return.............................................. 57.85%
</TABLE>
83
<PAGE>
Evergreen Funds
<TABLE>
<S> <C> <C>
Money Market Income Domestic Growth
Treasury Money Market Fund Capital Preservation and Income Fund Strategic Growth Fund
Money Market Fund Short Intermediate Bond Fund Stock Selector Fund
Municipal Money Market Fund Intermediate Term Government Securities Fund Evergreen Fund
Pennsylvania Municipal Money Market Fund Intermediate Term Bond Fund Omega Fund
U.S. Government Fund Small Company Growth Fund
Tax Exempt Diversified Bond Fund Aggressive Growth Fund
Short Intermediate Municipal Fund Strategic Income Fund Micro Cap Fund
High Grade Tax Free Fund High Yield Bond Fund
Tax Free Fund Global International
California Tax Free Fund Balanced Global Leaders Fund
Connecticut Municipal Bond Fund American Retirement Fund International Growth Fund
Florida Municipal Bond Fund Balanced Fund Global Opportunities Fund
Florida High Income Municipal Bond Fund Tax Strategic Foundation Fund Precious Metals Fund
Georgia Municipal Bond Fund Foundation Fund Emerging Markets Growth Fund
Maryland Municipal Bond Fund Latin America Fund
Massachusetts Tax Free Fund Growth & Income
Missouri Tax Free Fund Utility Fund Express Line
New Jersey Tax Free Income Fund Income and Growth Fund 800.346.3858
New York Tax Free Fund Fund for Total Return
North Carolina Municipal Bond Fund Value Fund Investor Services
Pennsylvania Tax Free Fund Blue Chip Fund 800.343.2898
South Carolina Municipal Bond Fund Growth and Income Fund
Virginia Municipal Bond Fund Small Cap Equity Income Fund Retirement Plan Services
800.247.4075
www.evergreenfunds.com
</TABLE>
63305 543691 RV0 9/98
---------------
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 19
HUDSON, MA
---------------
[LOGO OF EVERGREEN FUNDS(SM)
APPEARS HERE]
200 BERKELEY STREET
BOSTON, MA 02116
