EVERGREEN EQUITY TRUST /DE/, N-30D, 1999-06-01

EVERGREEN EQUITY TRUST /DE/
N-30D, 1999-06-01

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<PAGE>

[GRAPHIC APPEARS HERE] Interim Report
-------
as of March 31, 1999

Evergreen
Masters Fund

[LOGO OF EVERGREEN FUNDS(SM) APPEARS HERE]
<PAGE>

- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------

Letter to Shareholders .................................................... 1
Evergreen Masters Fund
Fund at a Glance ........................................................ 2
Portfolio Manager Commentary ............................................ 4
Financial Highlights
Evergreen Masters Fund .................................................. 8
Schedule of Investments
Evergreen Masters Fund .................................................. 10
Statements of Assets and Liabilities ...................................... 15
Statements of Operations .................................................. 16
Statements of Changes in Net Assets ....................................... 17
Combined Notes to Financial
Statements ................................................................ 18

- --------------------------------------------------------------------------------
Evergreen Funds
- --------------------------------------------------------------------------------
Evergreen Funds is one of the nation's fastest growing investment companies with
over $50 billion in assets under management.

With over 70 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.

The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
- --------------------------------------------------------------------------------

This report must be preceded or accompanied by a prospectus of an Evergreen fund
contained herein. The prospectus contains more complete information, including
fees, charges and other ongoing expenses, and should be read carefully before
investing or sending money.

------------------------------------------------------------------
Mutual Funds: ARE NOT FDIC INSURED May lose value o Are not bank guaranteed
------------------------------------------------------------------

Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>

Letter to Shareholders
----------------------
May 1999

(PHOTO OF WILLIAM M. ENNIS APPEARS HERE)

William M. Ennis
Managing Director

Dear Evergreen Shareholders,

We are pleased to provide the Evergreen Masters Fund interim report, which
covers the three-month period ended March 31, 1999.

Continued Strength
in the Domestic
Economy

After stock markets around the world, including the United States, declined
dramatically last summer and into the early fall, the Federal Reserve's actions
to lower interest rates in late 1998 helped restore investor confidence. The
U.S. stock market rallied strongly during the final quarter of 1998 and into the
first quarter of 1999.

Throughout the period, the strong performance of large capitalization growth
stocks continued. Investors who focused on this small group of stocks,
particularly technology stocks, fared well. Currently, the stock market is
responding positively to the combination of low inflation, low interest rates
and low unemployment. The economy appears strong and investor confidence seems
high. We remain cautiously optimistic about the stock market.

Year 2000 Preparation/1/

At Evergreen, we continue to prepare ourselves to provide uninterrupted service
and communication with all our shareholders throughout the end of 1999 and right
through the date change into the Year 2000 and beyond. As of the end of April,
when this report was finalized, we have completed 75% of the testing of internal
systems and are rapidly moving through the remaining systems. In March, we
successfully participated in industry-wide testing with the Securities Industry
Association. We are confident that our efforts will enable our shareholders to
receive the same Evergreen products and services we deliver today.

As always, we encourage all shareholders to diversify their mutual fund
portfolios and we suggest you consult with your financial advisor for an
allocation strategy that helps you meet your investment goals and objectives.
Evergreen Funds offers a wide range of funds that includes multiple investment
styles to help you find one that is appropriate in your portfolio.

Thank you for your continued investment in Evergreen Funds.

Sincerely,

/s/ William M. Ennis

William M. Ennis
Managing Director
Evergreen Funds

/1/ The information above constitutes Year 2000 readiness disclosure.

1
<PAGE>

- --------------------------------------------------------------------------------
EVERGREEN
Masters Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of March 31, 1999

- --------------------------------------------------------------------------------
Performance and Returns*
- --------------------------------------------------------------------------------
Portfolio Inception Date: 12/31/98 Class A Class B Class C Class Y

Class Inception Date 12/31/98 12/31/98 12/31/98 12/31/98
................................................................................
Cumulative Since Inception (2.30)% (2.40)% (2.50)% (2.30)%
w/o sales charge
................................................................................
Cumulative Since Inception (6.95%) (7.28%) (3.47%) N/A
with sales charge
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% N/A
Front End CDSC CDSC
................................................................................

- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------

[LINE GRAPH APPEARS HERE]

Evergreen Masters A Consumer Price Index - US S & P 500 Composite S & P Midcap 400 Composite
Period End Value Value Value
<S> <C> <C> <C> <C>
12/31/98
1/31/99 10,000 10,000 10,000 10,000
2/28/99 9,530 10,012 9,689 9,376
3/31/99 9,770 10,024 10,077 9,638
</TABLE>

Comparison of a $10,000 investment in Evergreen Masters Fund, Class A shares,
versus a similar investment in the Standard & Poor's 500(R) Stock Index, the S&P
400 MidCap 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 S&P 500 Stock Index and the S&P 400 MidCap Index are
unmanaged indices. These indices do not include transaction costs associated
with buying and selling securities nor any management fees. The Consumer Price
Index is a commonly used measure of inflation and does not represent an
investment. It is not possible to invest directly in an index.

2
<PAGE>

Market Overview

The Evergreen Masters Fund's performance, since its inception on December 31,
1998, reflects the varied performance of the four investment portfolios in the
Fund. Class A shares had a -2.30% return, unadjusted for any sales charge, for
the three months ended March 31, 1999. In comparison, the Standard & Poor's
500(R) Stock Index (S&P 500) produced a 4.86% return for the same three-month
period and a 27.34% return for the six-month period ended March 31, 1999. The
S&P Midcap 400 Index generated a -6.68% return for the three-month period and a
20.02% return for the six-month period ended March 31, 1999.

During the six-month period reflected in this report, the U.S. stock market made
strong gains. Buoyed by Federal Reserve Board interest rate cuts, a strong
economy and solid corporate profits, the market's rise catapulted the DJIA above
the 10,000 level for the first time in history. The Dow's sharp rise, however,
masked an important trend. Market "breadth" -- the number of stocks that
participated in the market's upward climb -- was very narrow. As had been the
case for all of 1998, investors sought the high quality and liquidity of the
largest of large cap stocks. As a result, large cap stocks were market leaders.
Returns on smaller cap stocks significantly lagged those of large caps, and the
performance of value stocks trailed that of growth stocks.

Evergreen Masters Fund is composed of four separate portfolios; each managed by
a different investment advisor. Together these portfolios provide a diversified
growth fund. Each investment manager brings a unique investment approach to the
Fund. As a result, the Fund has the potential to benefit from various investment
methods and styles.

Portfolio
Characteristics
---------------

Total Net Assets $254,772,065
Number of Holdings 408
P/E Ratio 40.0x

Top 5 Industries
----------------
(based on net assets)

Information Services & Technology 16.0%
Retailing & Wholesale 12.8%
Healthcare Products & Services 12.2%
Finance & Insurance 9.6%
Banks 4.3%

Top 10 Holdings
---------------
(based on net assets)

Microsoft Corp. 2.6%
Wal-Mart Stores, Inc. 1.7%
Gemstar Group Ltd. 1.4%
International Business Machines Corp 1.3%
Intel Corp. 1.2%
BJ's Wholesale Club, Inc. 1.2%
Time Warner, Inc. 1.2%
General Electric Co. 1.1%
Schering-Plough Corp. 1.0%
AT & T Corp. 1.0%

3
<PAGE>

Mid-Cap Value Portfolio

Portfolio
Management
----------

[PHOTO OF STEPHEN A LEIBER APPEARS HERE]

Stephen A Leiber,
Evergreen
Tenure: 12/31/98

This portfolio covers the mid-cap value segment of the investment spectrum. Its
selections are generally companies in the $1 billion to $5 billion market
capitalization range. Our focus in building this portfolio has been on choosing
investments that we feel have outstanding business franchise values and
significant growth potential, yet are comparatively undervalued. While not a
segment which has been popular in the recent phase of the stock market's
advance, this portfolio has had some outstanding gains while remaining
consistent to its strategy.

For the first quarter, the performance leader in the portfolio was Jones Apparel
Group, Inc., whose shares rose 68.6% from our purchase; Gucci Group N.V. was up
59.5%; and Frontier Corp. was up 54.3%. We purchased Jones Apparel Group, Inc.,
shares when they were depressed by the market's negative reaction toward the
company's proposal to acquire Nine West Group Inc.

We purchased Gucci Group N.V. shares when the market was apparently preoccupied
with the risk to its business from slowed Asian economies, and the shares of
Frontier Corp. while it was regarded as just a minor participant in the
telecommunications industry. Gucci Group N.V. subsequently received an
acquisition bid from LVMH-Moet Hennessy Louis Vuitton (France). Frontier Corp.
received a bid from Global Crossing Ltd. Other undervalued business franchises
which performed well during this period included BJ's Wholesale Club Inc., up
16.9%; Newell Rubbermaid Inc., up 15.0%; Tandy Corp., up 14.4%; and BankBoston
Corp., up 10.9%. Each company in this latter group continued its momentum into
the second quarter.

The purchases described above were illustrative of the "value timing" strategy,
which seeks to buy growth stocks on a value basis by careful emphasis of the
timing of purchases. Immediate results from this kind of strategy are not always
assured. Several stocks declined 20% or more subsequent to initial purchase,
including: Centex Corp., Countrywide Credit Industries, Inc., Health Management
Associates, Inc., Saks, Inc., Kaufman & Broad Home Corp., Armstrong World
Industries, Inc., Bowne & Co., Inc., and Rite Aid Corp. Each of these issues,
with the exception of Rite Aid Corp., enjoyed a substantial recovery up to this
writing in the second quarter. Several of these stocks achieved price recoveries
and further advances after the publication of their first quarter 1999 earnings.
We had selected the issues because we thought the market was too pessimistic
about the potential and long-term business values of these companies. Careful,
scaled buying is an area in which the portfolio can find growth opportunities in
undervaluation.

Because corporate profits for the first quarter are generally above anticipated
levels, we expect ever-increasing interest by investment managers and investors
in opportunities in the mid-cap value sector in which this segment of the
Masters Fund is positioned.

4
<PAGE>

Evergreen Mid-Cap Growth Portfolio

Portfolio
Management
- ----------

(PHOTO OF MARK REGAN APPEARS HERE)

Mark Regan, MFS
Tenure 12/31/98

The portfolio's negative relative return was due largely to activity in the
healthcare and technology sectors. Software companies experienced a gap in
business because of mission-critical system lockdowns stemming from Year 2000
and enterprise resource planning fears. BMC Software, Compuware, Citrix and
Edify were affected by these concerns. The portfolio's overweighted healthcare
sector under-performed because of increased government investigations and
reduced hospital and nursing home reimbursements. Total Renal Care, Health
Management Assoc., Lincare and Cytec lost ground. We used the price declines as
opportunities to add to these positions because the companies continue to
exhibit strong fundamentals.

Situations that benefited performance included buyouts of companies in the
technology and leisure sectors, positive performance in business services and
leisure and strong returns from oil services companies. The market is currently
experiencing a "survival of the fittest" trend, as large companies acquire
winners. Ascend Communications, which gained 25% in the first two weeks of the
quarter, was bought by Lucent Technologies. This resulted in a 1.5% contribution
to portfolio performance. Comcast merged with MediaOne, contributing to the
leisure sector's relative outperformance. Gemstar, a significant holding in the
leisure sector nearly doubled, posting a 30% return. Sportsline USA, one of the
portfolio's pure internet holdings, tripled in price. Holdings in the
portfolio's overweighted energy sector were the largest contributors to
performance. Noble Drilling, Cooper Cameron and Diamond Offshore Drilling each
returned more than 30%. We trimmed some of these holdings, as they approached
our price targets.

Earnings-related issues affected several technology and retail holdings. For
example, Sipex, an analog device company, announced higher than expected
earnings; however, we are cautious about the company's short-term revenue
outlook, because the company believes the analog market is soft and subject to
pricing pressure. CompUSA, a leading computer retailer, reported increased unit
sales; however, these were offset by a decrease in unit prices, which resulted
in lower than expected earnings. CompUSA's earnings were further dampened by
costs associated with the buyout of Computer City. We believe both companies are
well positioned for the long term.

We added new names to the portfolio and sold larger holdings that grew to a
level outside the portfolio's capitalization range. As a result, the portfolio's
market capitalization was reduced. We invested in healthcare, business service,
semiconductor and software companies with strong fundamentals and market
capitalizations of $3-$5 billion.

We will continue to seek fundamentally strong companies and will maintain our
long-term approach to investing. We remain focused on four strategies: first,
seeking stocks with strong revenue and earnings-per-share growth; second,
seeking growth at a reasonable price--stocks selling at discounts to expected
earnings growth rates; third, seeking second-chance stocks or those that have
lost favor with investors but which show sound fundamentals; and finally,
seeking non-traditional growth stocks, i.e., stocks in industries traditionally
classified as value.

5
<PAGE>

- --------------------------------------------------------------------------------
E V E R G R E E N
Masters Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary

Large Cap Value Portfolio

Portfolio
Management
- ----------

(PHOTO OF CHARLES ALBERS AND NIKOLAOS MONOYIOS APPEARS HERE)

Charles Albers and Nikolaos Monoyios,
Oppenheimer
Tenure: 12/31/98

We maintained an investment approach that combines macroeconomic and market
analysis with careful valuation of companies that are likely to benefit from the
trends uncovered by "top-down" analysis. To capitalize on the continuing trends
of slower global growth and decreasing inflationary and interest rate pressure,
we continued to focus on large, high quality companies.

Our valuation-based strategy produced mixed results; however, we believe this
strategy will continue to add value over the long term. The portfolio's
large-cap value orientation held back performance during the quarter. This was
because of the continued strength in large, high quality growth stocks and
relatively mediocre performance in value-oriented stocks. The portfolio's
increased exposure to technology stocks provided a boost to performance.

In order to capitalize on the short-term pull back in technology and
telecommunication stocks, we allocated assets to large, high-quality stocks. We
increased exposure to technology and energy sector stocks because their models
identified attractive valuations. We found new opportunities in both energy and
technology. The portfolio had no overseas investments during the quarter.

We were particularly pleased with the performance of selected technology
holdings that were added to the portfolio during March. These companies, which
were purchased at attractive valuations, provided a strong positive contribution
to performance.

We expect continued volatility in the stock market over the next 12 months. We
believe the market will continue to contrast faster economic growth and
commensurate fears of inflation with weak global economic activity and increased
competitive pressures. The current large performance gap between growth and
value stocks may come under pressure if the yield curve grows steeper and
economic fundamentals get stronger. Conversely, if global economic activity
continues to be weak, commodity prices remain low and heightened competition
limits the ability of companies to control pricing, we would anticipate that
large growth companies would continue their market dominance.

6
<PAGE>

- --------------------------------------------------------------------------------
E V E R G R E E N
Masters Fund
- --------------------------------------------------------------------------------
Portfolio Manager Commentary

Large-Cap Growth Portfolio

Portfolio
Management
- ----------

Putnam Growth Team
Tenure: 12/31/98

The longest bull market in history continued its stampede throughout the period.
Market euphoria was aided initially by two Federal Reserve Board rate cuts (in
addition to a September 29 cut) which calmed U.S. and global markets. Strong
economic fundamentals were broadly supportive of equity prices throughout the
period. The U.S. unemployment rate fell to a record 29-year low, Gross Domestic
Product (GDP) was higher than expected, inflation remained benign and consumer
confidence soared. While interest rates rose on fears of a Fed rate hike in
February, the Fed ultimately left interest rates unchanged.

Major merger and acquisition activity was high throughout the period, including
Mobil/Exxon, Deutsche Bank/Bankers Trust, and America Online (AOL)/Netscape.
Cross-border mergers were also numerous, demonstrating the impact of
globalization.

Markets continued to be extremely narrow. Only 10 stocks provided about 80% of
the S&P 500's gain during the second half of the period. Large blue-chip growth
stocks continued to outperform other segments of the market, but not without
their share of turmoil. While large-cap stock prices set records, small-cap
stocks generally did not participate, expanding an already wide performance gap.
Similarly, the rift between growth and value widened throughout the period.

Fueling the portfolio's performance were technology and retail stocks. The
Fund's weakest performers were energy and basic materials. This six-month period
provided investors with a tough lesson in stock market volatility as major
market indexes hit euphoric highs, fell to sobering lows and rose again.

The portfolio's performance was driven by an overweighting in technology, which
was the period's best-performing sector; an underweighting in the weak utilities
sector while having strong portfolio holdings; an overweighting in a robust,
consumer cyclicals sector combined with above-average stock selection; and by
strong stock selection in consumer staples.

Looking ahead, economic fundamentals continue to be favorable for equity prices.
However, we believe the United States will experience slower, closer-to-trend
economic growth. We remain focused on corporate earnings strength, although a
number of macroeconomic factors could have an impact on equity prices. These
include Y2K-related concerns, slowing earnings/profit recession, escalation in
the Kosovo conflict or earnings disappointments for U.S. companies with exposure
to Asia and Latin America.

Both our quantitative analysis and fundamental research indicate that
consistent, sustainable, profit growth will most likely be generated by
companies in consumer cyclicals, technology and consumer staples. Lower interest
rates will likely benefit growth valuations disproportionately; companies that
can grow profits in a slow-growth environment are those that have the capital
available to expand and develop other markets.

The portfolio's investment philosophy remains constant: We believe that
systematic selection of high quality growth stocks combined with rigorous risk
management and a disciplined sell-process should generate attractive risk-
adjusted returns over the course of a market cycle.

7
<PAGE>

<TABLE>
<CAPTION>
Period Ended
March 31, 1999
(Unaudited)
(a)
<S> <C>
CLASS A SHARES
Net asset value, beginning of period $ 10.00
--------
.........................................................................
Income from investment operations
.........................................................................
Net investment loss # (0.01)
.........................................................................
Net realized and unrealized gains or losses on securities and
foreign currency related transactions (0.22)
--------
.........................................................................
Total from investment operations (0.23)
--------
.........................................................................
Net asset value, end of period $ 9.77
--------
.........................................................................
Total return* (2.30%)
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period (thousands) $183,557
.........................................................................
Ratios to average net assets
Expenses 1.58% +
.........................................................................
Net investment loss (0.41%)+
.........................................................................
Portfolio turnover rate 15%
.........................................................................

<CAPTION>
Period Ended
March 31, 1999
(Unaudited)
(a)
<S> <C>
CLASS B SHARES
Net asset value, beginning of period $ 10.00
--------
.........................................................................
Income from investment operations
.........................................................................
Net investment loss # (0.03)
.........................................................................
Net realized and unrealized gains or losses on securities and
foreign currency related transactions (0.21)
--------
.........................................................................
Total from investment operations (0.24)
--------
.........................................................................
Net asset value, end of period $ 9.76
--------
.........................................................................
Total return* (2.40%)
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period (thousands) $ 67,107
.........................................................................
Ratios to average net assets
Expenses 2.37% +
.........................................................................
Net investment income (1.21%)+
.........................................................................
Portfolio turnover rate 15%
.........................................................................
</TABLE>
(a) For the period from December 31, 1998 (commencement of operations) to March
31, 1999.
* Excluding sales charges.
+ Annualized.
# Net investment loss is based on average shares outstanding throughout the pe-
riod.

See Notes to Financial Statements.

8
<PAGE>

<TABLE>
<CAPTION>
Period Ended
March 31, 1999
(Unaudited)
(a)
<S> <C>
CLASS C SHARES
Net asset value, beginning of period $10.00
------
.........................................................................
Income from investment operations
.........................................................................
Net investment loss # (0.01)
.........................................................................
Net realized and unrealized gains or losses on securities and
foreign currency related transactions (0.24)
------
.........................................................................
Total from investment operations (0.25)
------
.........................................................................
Net asset value, end of period $ 9.75
------
.........................................................................
Total return* (2.50%)
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period (thousands) $3,677
.........................................................................
Ratios to average net assets
Expenses 2.36% +
.........................................................................
Net investment loss (1.21%)+
.........................................................................
Portfolio turnover rate 15%
.........................................................................

<CAPTION>
Period Ended
March 31, 1999
(Unaudited)
(a)
<S> <C>
CLASS Y SHARES
Net asset value, beginning of period $10.00
------
.........................................................................
Income from investment operations
.........................................................................
Net investment income # 0.01
.........................................................................
Net realized and unrealized gains or losses on securities and
foreign currency related transactions (0.24)
------
.........................................................................
Total from investment operations (0.23)
------
.........................................................................
Net asset value, end of period $ 9.77
------
.........................................................................
Total return (2.30%)
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period (thousands) $ 432
.........................................................................
Ratios to average net assets
Expenses 0.77%+
.........................................................................
Net investment income 0.39%+
.........................................................................
Portfolio turnover rate 15%
.........................................................................
</TABLE>
(a) For the period from December 31, 1998 (commencement of operations) to March
31, 1999.
* Excluding sales charges.
+ Annualized.
# Net investment income (loss) is based on average shares outstanding through-
out the period.

See Notes to Financial Statements.

9
<PAGE>

Shares Value
<C> <S> <C>

COMMON STOCKS - 94.7%
Advertising & Related Services - 0.5%
2,100 * ADVO, Inc. ........................................... $ 40,556
16,500 Interpublic Group of Co., Inc. ......................... 1,284,938
3,100 RH Donnelley Corp....................................... 47,856
------------
1,373,350
------------
Aerospace & Defense - 0.6%
2,000 General Dynamics Corp. ................................. 128,500
3,600 Goodrich B F Co. ....................................... 123,525
5,700 * Hexcel Corp. New...................................... 40,256
1,400 Lockheed Martin Corp. .................................. 52,762
9,300 United Technologies Corp. .............................. 1,259,569
------------
1,604,612
------------
Automotive Equipment &
Manufacturing - 0.7%
2,400 Arvin Industries, Inc. ................................. 80,850
23,500 Federal-Mogul Corp. .................................... 1,010,500
10,100 Ford Motor Co. ......................................... 573,175
7,700 Meritor Automotive, Inc. ............................... 119,350
2,500 Standard Products Co. .................................. 40,625
2,200 * Tower Automotive, Inc. ............................... 40,975
------------
1,865,475
------------
Banks - 4.3%
2,500 AmSouth Bancorp......................................... 113,750
20,000 Associated Banc Corp. .................................. 638,750
2,000 Bank of New York Co., Inc. ............................. 71,875
2,000 Bank One Corp. ......................................... 110,125
45,000 BankBoston Corp. ....................................... 1,949,062
3,000 BB & T Corp. ........................................... 108,563
3,100 Charter One Financial, Inc. ............................ 89,464
8,800 Comerica, Inc. ......................................... 549,450
6,300 Compass Bancshares, Inc. ............................... 217,350
4,800 Dime Bancorp, Inc. ..................................... 111,300
6,900 Fifth Third Bancorp .................................... 454,969
21,800 First Security Corp. ................................... 421,012
8,800 Firstar Corp. .......................................... 787,600
4,500 Fleet Financial Group, Inc. ............................ 169,313
500 Hibernia Corp. Cl. A.................................... 6,563
50,000 Huntington Bancshares, Inc. ............................ 1,546,875
1,620 M&T Bank Corp. ......................................... 775,980
8,300 National City Corp. .................................... 550,912
5,400 Northern Trust Corp. ................................... 479,587
3,200 Old Kent Financial Corp. ............................... 135,200
2,700 Peoples Heritage Financial Group........................ 48,600
6,300 Regions Financial Corp. ................................ 218,138
20,000 SouthTrust Corp. ....................................... 746,250
5,800 Wachovia Corp. ......................................... 470,887
1,700 Webster Financial Corp. ................................ 49,088
2,000 Wells Fargo Co. ........................................ 70,125
------------
10,890,788
------------
Building, Construction & Furnishings - 2.7%
2,100 * American Standard Companies, Inc. .................... 72,188
22,000 Armstrong World Industries, Inc. ....................... 994,125
</TABLE>
<TABLE>
<CAPTION>

Shares Value
<C> <S> <C>

COMMON STOCKS - continued
Building, Construction & Furnishings - continued
2,900 Centex Construction Products, Inc. ..................... $ 100,956
14,000 Centex Corp. ........................................... 467,250
2,200 * Champion Enterprises, Inc. ........................... 42,625
30,000 Clayton Homes, Inc. .................................... 331,875
26,800 Kaufman & Broad Home Corp. ............................. 604,675
30,000 * Knoll, Inc. .......................................... 738,750
6,100 Lafarge Corp. .......................................... 170,800
70,000 Lennar Corp. ........................................... 1,566,250
3,400 * Lone Star Industries, Inc. ........................... 105,400
35,000 Miller (Herman), Inc. .................................. 638,750
2,000 * Mohawk Industries, Inc. .............................. 60,000
2,200 * NVR, Inc. ............................................ 92,675
2,500 Oakwood Homes Corp. .................................... 35,156
2,000 Owens Corning........................................... 63,625
20,000 * Royal Group Technologies Ltd. ........................ 493,750
2,000 Ryland Group, Inc. ..................................... 50,625
10,700 * Shaw Industries, Inc. ................................ 197,950
------------
6,827,425
------------
Business Equipment & Services - 2.6%
19,100 * Affiliated Computer Services, Inc. ................... 873,825
15,300 Automatic Data Processing, Inc. ........................ 633,037
2,500 * CDI Corp. ............................................ 60,156
28,500 * Computer Sciences Corp. .............................. 1,572,844
3,400 Dun & Bradstreet Corp. ................................. 121,125
28,100 * Fiserv, Inc. ......................................... 1,506,862
2,000 Harte-Hanks, Inc. ...................................... 54,875
3,300 Ikon Office Solutions, Inc. ............................ 42,281
12,900 Olsten Corp. ........................................... 79,819
31,800 * Policy Management Systems Corp. ...................... 973,875
2,300 * Sabre Group Holdings, Inc. ........................... 104,363
30,000 * Zebra Technologies Corp. Cl. A........................ 712,500
------------
6,735,562
------------
Chemical & Agricultural Products - 0.7%
1,500 * Agribrands International, Inc. ....................... 49,313
22,000 Cambrex Corp. .......................................... 486,750
3,500 IMC Global, Inc. ....................................... 71,531
4,200 Schulman (A.), Inc. .................................... 57,225
27,400 Sigma-Aldrich Corp. .................................... 801,450
10,700 Solutia, Inc. .......................................... 185,912
------------
1,652,181
------------
Communication Systems & Services - 3.0%
6,200 * AirTouch Communications, Inc. ........................ 599,075
24,400 * American Tower Systems Corp. ......................... 597,800
16,600 * Cisco Systems, Inc. .................................. 1,818,737
19,400 Lucent Technologies, Inc. .............................. 2,090,350
22,300 * MCI WorldCom, Inc. ................................... 1,974,944
5,200 * Tellabs, Inc. ........................................ 508,300
------------
7,589,206
------------
</TABLE>

10
<PAGE>

Shares Value
<C> <S> <C>

COMMON STOCKS - continued
Consumer Products & Services - 3.0%
4,300 * Avis Rent-A-Car, Inc. ................................ $ 119,056
3,400 * Budget Group, Inc. Cl. A.............................. 41,650
8,700 Clorox Co. ............................................. 1,019,531
12,300 Dial Corp. New.......................................... 422,813
14,000 Gucci Group............................................. 1,127,000
1,200 H & R Block, Inc. ...................................... 56,850
2,000 Harley-Davidson, Inc. .................................. 115,000
1,200 Hertz Corp. ............................................ 64,200
6,800 Lauder Estee Cos., Inc. ................................ 642,600
42,300 * Lo-Jack Corp. ........................................ 325,181
3,400 Maytag Corp. ........................................... 205,275
40,000 Newell Rubbermaid, Inc. ................................ 1,900,000
8,700 Procter & Gamble Co. ................................... 852,056
15,000 Tupperware Corp. ....................................... 270,000
15,000 Valspar Corp. .......................................... 473,438
------------
7,634,650
------------
Diversified Companies - 1.0%
4,700 AlliedSignal, Inc. ..................................... 231,181
4,000 Fluor Corp. ............................................ 108,000
2,600 Minnesota Mining & Manufacturing Co. ................... 183,950
27,500 Tyco International Ltd. ................................ 1,973,125
------------
2,496,256
------------
Education - 0.0%
1,600 * Learning Tree International, Inc. .................... 16,000
200 * Sylvan Learning Systems, Inc. ........................ 5,475
------------
21,475
------------
Electrical Equipment & Services - 2.7%
103,600 * Cable Design Technologies Corp. ...................... 1,139,600
4,200 Emerson Electric Co. ................................... 222,338
24,700 General Electric Co. ................................... 2,732,437
2,000 Linear Technology Corp. ................................ 102,500
63,800 * Sipex Corp. .......................................... 833,387
9,200 * Solectron Corp. ...................................... 446,775
40,000 Thomas & Betts Corp. ................................... 1,502,500
------------
6,979,537
------------
Electronic Equipment & Services - 0.9%
15,600 * Analog Devices, Inc. ................................. 464,100
20,200 * Hadco Corp. .......................................... 636,300
36,000 * Kulicke & Soffa Industries, Inc. ..................... 909,000
6,100 * Micron Technology, Inc. .............................. 294,325
5,100 * MKS Instruments Inc. ................................. 68,212
------------
2,371,937
------------
Environmental Services - 0.2%
13,600 Waste Management, Inc. ................................. 603,500
------------
Finance & Insurance - 9.6%
7,600 AFLAC, Inc. ............................................ 413,725
2,900 Allmerica Financial Corp. .............................. 159,681
15,800 Allstate Corp. ......................................... 585,588
1,600 AMBAC Financial Group, Inc. ............................ 86,400
</TABLE>
<TABLE>
<CAPTION>

Shares Value
<C> <S> <C>

COMMON STOCKS - continued
Finance & Insurance - continued
50,000 American Bankers Insurance Group, Inc. ................. $ 2,600,000
13,900 American Express Co. ................................... 1,633,250
9,200 American General Corp. ................................. 648,600
14,300 American International Group, Inc. ..................... 1,724,937
2,300 * Amerin Corp. ......................................... 46,719
2,600 ARM Financial, Inc. Cl. A............................... 38,838
7,400 Associates First Capital Corp. Cl. A.................... 333,000
2,200 Chicago Title Corp. .................................... 80,025
3,300 CIGNA Corp. ............................................ 276,581
16,800 Citigroup, Inc. ........................................ 1,073,100
25,000 Countrywide Credit Industries, Inc. .................... 937,500
55,900 Edwards (A.G.), Inc. ................................... 1,827,231
1,000 Equitable Companies, Inc. .............................. 70,000
2,700 Everest Reinsurance Holdings, Inc. ..................... 84,206
18,000 Federal Home Loan Mortgage Corp. ....................... 1,028,250
8,500 Federal National Mortgage Assoc. ....................... 588,625
3,000 Financial Security Assured Holdings Ltd. ............... 148,875
9,700 Finova Group, Inc. ..................................... 503,188
2,600 Greenpoint Financial Corp. ............................. 90,350
2,000 Hartford Financial Services Group, Inc. ................ 113,625
2,100 Hartford Life, Inc. Cl. A............................... 115,500
2,700 Jefferson Pilot Corp. .................................. 182,925
800 Lincoln National Corp. ................................. 79,100
15,000 MBIA, Inc. ............................................. 870,000
25,100 MBNA Corp. ............................................. 599,262
4,300 Merrill Lynch & Co., Inc. .............................. 380,281
30,000 MGIC Investment Corp. .................................. 1,051,875
5,000 Morgan Stanley, Dean Witter & Co. ...................... 499,688
40,400 Paine Webber Group, Inc. ............................... 1,610,950
1,700 PMI Group, Inc. ........................................ 78,838
8,700 Providian Financial Corp. .............................. 957,000
1,800 SAFECO Corp. ........................................... 72,788
8,500 Schwab (Charles) & Co., Inc. ........................... 817,062
1,900 Stewart Information Services Corp. ..................... 63,769
35,300 Torchmark Corp. ........................................ 1,116,362
5,200 Transamerica Corp. ..................................... 369,200
13,600 Waddell & Reed Financial, Inc. Cl. A.................... 278,800
3,100 Xl Capital Ltd. ........................................ 188,325
------------
24,424,019
------------
Food & Beverage Products - 2.8%
11,200 Albertsons, Inc. ....................................... 608,300
10,600 Anheuser Busch Cos., Inc. .............................. 807,587
1,900 Corn Products International, Inc. ...................... 45,481
62,400 * Del Monte Foods Company............................... 822,900
19,700 * Keebler Foods Co. .................................... 719,050
12,200 * Kroger Co. ........................................... 730,475
12,600 * Landry's Seafood Restaurant, Inc. .................... 80,719
5,300 McCormick & Co., Inc. .................................. 153,700
13,400 McDonald's Corp. ....................................... 607,188
17,600 Philip Morris Companies, Inc. .......................... 619,300
4,000 * Ryan's Family Steak Houses, Inc. ..................... 48,250
22,800 * Safeway, Inc. ........................................ 1,169,925
6,400 * Tricon Global Restaurants, Inc. ...................... 449,600
</TABLE>

11
<PAGE>

Shares Value
<C> <S> <C>

COMMON STOCKS - continued
Food & Beverage Products - continued
10,900 Wendy's International, Inc. ............................ $ 309,969
------------
7,172,444
------------
Healthcare Products & Services - 12.2%
19,000 Abbott Laboratories..................................... 889,437
2,300 Allergan, Inc. ......................................... 202,113
30,000 * Alza Corp. ........................................... 1,147,500
11,500 American Home Products Corp. ........................... 750,375
18,400 * Amgen, Inc. .......................................... 1,377,700
23,000 Beckman Coulter, Inc. .................................. 1,012,000
8,000 * Beverly Enterprises Inc. ............................. 41,000
3,900 * Biogen, Inc. ......................................... 445,819
1,500 Biomet, Inc. ........................................... 62,906
19,200 Bristol-Myers Squibb Co. ............................... 1,234,800
14,400 Cardinal Health, Inc. .................................. 950,400
12,000 * Cyberonics, Inc. ..................................... 114,000
15,000 * Elan Corp Plc, ADR.................................... 1,046,250
5,400 Guidant Corp. .......................................... 326,700
179,100 *Health Management Associates, Inc. Cl. A............... 2,182,781
66,900 * Idexx Laboratories, Inc. ............................. 1,601,419
20,900 IMS Health, Inc. ....................................... 692,313
11,000 Johnson & Johnson....................................... 1,030,562
6,600 Lilly (Eli) & Co. ...................................... 560,175
26,200 * Lincare Holdings, Inc. ............................... 736,875
3,100 Medtronic, Inc. ........................................ 222,425
28,700 Merck & Co., Inc. ...................................... 2,301,381
25,100 * Parexel International Corp. .......................... 519,256
10,500 Pfizer, Inc. ........................................... 1,456,875
14,100 Pharmacia & Upjohn, Inc. ............................... 879,487
7,000 * Phycor, Inc. ......................................... 33,250
22,200 * PSS World Med, Inc. .................................. 195,638
30,900 * Quintiles Transnational Corp. ........................ 1,166,475
4,200 * Quorum Health Group, Inc. ............................ 42,000
48,300 Schering-Plough Corp. .................................. 2,671,594
41,500 * Steris Corp. ......................................... 1,104,937
193,400 * Total Renal Care Holdings, Inc. ...................... 2,127,400
1,000 * VISX, Inc. ........................................... 107,563
26,100 Warner-Lambert Co. ..................................... 1,727,494
------------
30,960,900
------------
Industrial Specialty Products &
Services - 1.1%
2,500 * Albany International Corp. ........................... 46,875
3,100 Flowserve Corp. ........................................ 48,244
2,800 Honeywell, Inc. ........................................ 212,275
30,000 Leggett & Platt, Inc. .................................. 600,000
3,500 Mark IV Industries, Inc. ............................... 45,719
21,300 McDermott International, Inc. .......................... 539,156
32,300 Teleflex, Inc. ......................................... 1,100,219
4,500 Vulcan Materials Co. ................................... 185,906
------------
2,778,394
------------
</TABLE>
<TABLE>
<CAPTION>

Shares Value
<C> <S> <C>

COMMON STOCKS - continued
Information Services &
Technology - 15.9%
6,900 * America Online, Inc. ................................. $ 1,007,400
6,100 * Apple Computer........................................ 219,219
7,800 * Applied Materials, Inc. .............................. 481,163
38,800 * Ardent Software, Inc. ................................ 623,225
34,300 * Aspen Technology, Inc. ............................... 486,631
18,500 Autodesk, Inc. ......................................... 748,094
48,800 * BMC Software, Inc. ................................... 1,808,650
58,800 * Cadence Design Systems, Inc. ......................... 1,514,100
23,200 * Citrix Systems, Inc. ................................. 884,500
2,800 * Computer Horizons Corp. .............................. 30,625
36,600 * Compuware Corp. ...................................... 873,825
3,900 * Comverse Technology, Inc. ............................ 331,500
100 * Critical Path, Inc. .................................. 7,700
21,000 * DST Systems, Inc. Delaware............................ 1,261,312
51,000 * Edify Corp. .......................................... 277,313
6,300 * Electronic Arts....................................... 299,250
9,900 * EMC Corp. ............................................ 1,264,725
51,000 Fair Issac & Co., Inc. ................................. 1,890,187
6,300 * Gartner Group, Inc. New............................... 142,144
10,000 Hewlett-Packard Co. .................................... 678,125
21,500 * IMRglobal Corp. ...................................... 381,625
26,600 Intel Corp. ............................................ 3,162,075
18,300 International Business Machines Corp. .................. 3,243,675
3,700 * Intuit, Inc. ......................................... 376,475
14,300 * JDA Software Group, Inc. ............................. 106,356
1,000 * Legato Systems, Inc. ................................. 51,625
5,200 * Lexmark International Group, Inc. .................... 581,100
6,000 * LSI Logic............................................. 187,125
20,000 * Micros Systems, Inc. ................................. 660,000
73,900 * Microsoft Corp. ...................................... 6,623,287
7,800 * National Semiconductor Corp. ......................... 72,638
3,300 * NCR Corp. ............................................ 165,000
1,000 * Network Appliance, Inc. .............................. 50,625
18,000 * Network Associates, Inc. ............................. 552,375
9,350 * Oracle Systems Corp. ................................. 246,606
9,200 * Rambus, Inc. ......................................... 592,250
40,200 * Security Dynamics Technology.......................... 748,725
50,400 * Sportsline USA, Inc. ................................. 2,299,500
2,300 * Storage Technology Corp. ............................. 64,113
14,100 * Sun Microsystems, Inc. ............................... 1,763,381
20,100 * SunGard Data Systems, Inc. ........................... 804,000
1,200 Symbol Technologies, Inc. .............................. 54,000
40,600 * Synopsys, Inc. ....................................... 2,182,250
103,500 * Technology Solutions Co. ............................. 737,437
4,500 * Vantive Corp. ........................................ 54,281
1,000 * Xircom, Inc. ......................................... 25,125
100 * Ziff Davis Inc. - ZDNet .............................. 1,900
------------
40,617,237
------------
Iron & Steel - 0.0%
1,800 Reliance Steel & Aluminum Co. .......................... 51,863
------------
</TABLE>

12
<PAGE>

Shares Value
<C> <S> <C>

COMMON STOCKS - continued
Leisure & Tourism - 0.4%
4,200 Brunswick Corp. ........................................ $ 80,063
17,000 Carnival, Corp. Cl. A................................... 825,562
------------
905,625
------------
Machinery - Diversified - 0.1%
10,800 * Applied Science & Tech, Inc. ......................... 135,675
------------
Manufacturing - Distributing - 0.1%
1,300 Bandag, Inc. ........................................... 36,563
1,000 Briggs & Stratton Corp. ................................ 49,312
1,700 Dexter Corp. ........................................... 53,550
3,200 * Teradyne, Inc. ....................................... 174,600
------------
314,025
------------
Metal Products & Services - 0.1%
2,300 Crown Cork & Seal Co., Inc. ............................ 65,694
4,900 Cyprus Amax Minerals Co. ............................... 59,413
4,500 Reynolds Metals Co. .................................... 217,406
------------
342,513
------------
Office Equipment & Supplies - 0.3%
3,000 Harland John H Co. ..................................... 38,813
16,000 * Office Max, Inc. ..................................... 138,000
8,200 Pitney Bowes, Inc. ..................................... 522,750
------------
699,563
------------
Oil/Energy - 1.0%
1,600 Ashland, Inc. .......................................... 65,500
10,000 * Berkley Petroleum Corp ............................... 68,897
140,000 * Canadian 88 Energy Corp. ............................. 500,828
3,800 * Chieftain International, Inc. ........................ 46,550
5,600 Conoco, Inc. ........................................... 137,550
12,000 Devon Energy Corp. ..................................... 330,750
3,400 Enron Corp. ............................................ 218,450
8,600 Exxon Corp. ............................................ 606,837
7,700 Paramount Resources Ltd. ............................... 79,066
1,400 Sunoco, Inc. ........................................... 50,488
8,400 Union Pacific Resource Group, Inc. ..................... 99,750
7,400 Vastar Resources, Inc. ................................. 353,350
------------
2,558,016
------------
Oil Field Services - 2.3%
3,000 * Anderson Exploration Ltd. ............................ 28,718
31,900 * Cooper Cameron Corp. ................................. 1,080,613
40,500 Diamond Offshore Drilling, Inc. ........................ 1,280,812
13,000 ENSCO International, Inc. .............................. 173,063
80,200 * Global Industries Ltd. ............................... 812,025
16,000 * Global Marine, Inc. .................................. 188,000
12,000 * Nabors Industries Inc. ............................... 218,250
67,000 * Noble Drilling Corp. ................................. 1,159,937
4,700 Santa Fe International Corp. ........................... 87,831
4,100 * SEACOR SMIT, Inc. .................................... 220,631
5,100 Tidewater, Inc. ........................................ 131,963
12,000 Transocean Offshore, Inc. .............................. 345,750
------------
5,727,593
------------
</TABLE>
<TABLE>
<CAPTION>

Shares Value
<C> <S> <C>

COMMON STOCKS - continued
Paper & Packaging - 0.1%
2,400 Kimberly-Clark Corp. .................................. $ 115,050
2,700 Louisiana Pacific Corp. ............................... 50,288
------------
165,338
------------
Pharmaceuticals - 0.3%
12,600 * Cytoclonal Pharmaceutics, Inc. ...................... 106,313
5,100 * Sepracor, Inc. ...................................... 572,475
------------
678,788
------------
Printing, Publishing, Broadcasting & Entertainment -
5.5%
14,104 AT&T Corp.
(Liberty Media Group) Class A......................... 742,223
36,200 Bowne & Co., Inc. ..................................... 423,088
7,200 * CBS Corp. ........................................... 294,750
2,200 * Clear Channel Communications, Inc. .................. 147,538
4,700 Comcast Corp. ......................................... 295,806
100 * Entercom Communications Corp. ....................... 3,538
4,000 Gannett Co., Inc. ..................................... 252,000
46,440 * Gemstar International Group Ltd. .................... 3,494,610
10,300 * Heftel Broadcasting Corp. ........................... 446,762
20,000 Houghton Mifflin Co. .................................. 937,500
5,300 Meredith Corp. ........................................ 166,619
20,500 * Scholastic Corp. .................................... 1,001,937
42,500 Time Warner, Inc. ..................................... 3,020,156
3,800 * USA Networks, Inc. .................................. 136,088
200 * Valley Media, Inc. .................................. 4,550
19,400 * Viacom, Inc. Cl. B................................... 1,628,387
48,000 * Ziff Davis, Inc. .................................... 1,032,000
------------
14,027,552
------------
Real Estate - 0.6%
15,000 Boston Properties, Inc. REIT........................... 474,375
1,900 Del Webb Corp. ........................................ 41,206
3,300 Marriott International, Inc. Cl. A..................... 110,963
60,000 Meditrust Co. REIT..................................... 746,250
4,900 * Prime Hospitality Corp. ............................. 48,694
------------
1,421,488
------------
Retailing & Wholesale - 12.8%
4,000 * Abercrombie & Fitch Co. ............................. 368,000
1,500 * Amazon Common, Inc. ................................. 258,281
1,500 * American Eagle Outfitters............................ 107,531
35,000 * Autozone, Inc. ...................................... 1,063,125
25,000 * Barnes & Noble, Inc. ................................ 803,125
12,300 * Best Buy Co., Inc. .................................. 639,600
118,300 * BJ's Wholesale Club, Inc. ........................... 3,127,556
75,400 * Borders Group Inc. .................................. 1,060,313
6,500 * CHS Electronics, Inc. ............................... 20,719
167,600 * CompUSA, Inc. ....................................... 1,173,200
17,400 * Costco Companies, Inc. .............................. 1,593,187
37,500 CVS Corp. ............................................. 1,781,250
30,000 Ethan Allen Interiors, Inc. ........................... 1,246,875
4,500 * Federated Department Stores, Inc. ................... 180,563
19,100 * Fred Meyer, Inc. .................................... 1,124,513
21,700 Gap, Inc. ............................................. 1,460,681
</TABLE>

13
<PAGE>

Shares Value
<C> <S> <C>

COMMON STOCKS - continued
Retailing & Wholesale - continued
29,700 Home Depot, Inc. ................................... $ 1,848,825
47,200 * Jones Apparel Group, Inc. ........................ 1,318,650
1,300 * Linens 'N Things, Inc. ........................... 58,988
3,000 Lowe's Companies, Inc. ............................. 181,500
4,950 May Department Stores Co. .......................... 193,669
13,500 * Nine West Group, Inc. ............................ 333,281
2,000 * Payless Shoesource, Inc. ......................... 93,000
5,200 Pier 1 Imports, Inc. ............................... 42,250
50,000 Rite Aid Corp. ..................................... 1,250,000
42,900 Ross Stores, Inc. .................................. 1,879,556
20,000 * Saks, Inc. ....................................... 520,000
1,000 * Shopko Stores, Inc. .............................. 29,875
21,000 Tandy Corp. ........................................ 1,340,062
26,500 TJX Co., Inc. ...................................... 901,000
47,800 Wal-Mart Stores, Inc. .............................. 4,406,562
53,900 Walgreen Co. ....................................... 1,522,675
20,000 * Williams Sonoma, Inc. ............................ 565,000
3,000 * Zale Corporation New.............................. 102,563
------------
32,595,975
------------
Telecommunication Services & Equipment - 1.0%
54,300 * Aerial Communications, Inc. ...................... 420,825
8,600 * General Instrument Corp. ......................... 260,688
7,700 * MediaOne Group, Inc. ............................. 488,950
3,900 Nokia Corp. ADR..................................... 607,425
3,300 * Qualcomm, Inc. ................................... 410,437
5,400 *Qwest Communications International, Inc. .......... 389,306
------------
2,577,631
------------
Textile & Apparel - 0.1%
3,000 Guilford Mills, Inc. ............................... 26,250
1,700 Kellwood Co. ....................................... 37,506
5,500 Unifi, Inc. ........................................ 70,125
1,200 V. F. Corp. ........................................ 56,625
------------
190,506
------------
Thrift Institutions - 0.0%
2,600 * Golden St. Bancorp, Inc. ......................... 57,850
2,090 Washington Federal, Inc. ........................... 43,890
------------
101,740
------------
Transportation - 1.4%
5,100 Airborne Freight Corp. ............................. 158,737
3,000 * Alaska Air Group, Inc. ........................... 142,500
1,500 Burlington Northern Santa Fe Corp. ................. 49,313
42,750 Comair Holdings, Inc. .............................. 1,009,969
3,000 * Continental Airlines, Inc. ....................... 114,000
5,600 Delta Air Lines, Inc. .............................. 389,200
4,200 * FDX Corp. ........................................ 389,812
4,100 Rollins Truck Leasing Corp. ........................ 38,694
</TABLE>
<TABLE>
<CAPTION>

Shares Value
<C> <S> <C>

COMMON STOCKS - continued
Transportation - continued
1,700 * UAL Corp. ....................................... $ 132,175
1,500 Union Pacific Corp. ............................... 80,156
20,000 * US Airways Group, Inc. .......................... 976,250
2,400 Xtra Corp. ........................................ 91,950
------------
3,572,756
------------
Utilities - Electric - 0.5%
1,900 * Calpine Corp. ................................... 69,231
2,200 Conectiv, Inc. .................................... 42,625
1,300 Consolidated Edison, Inc. ......................... 58,906
2,000 Firstenergy Corp. ................................. 55,875
2,800 Florida Progress Corp. ............................ 105,700
3,400 FPL Group, Inc. ................................... 181,050
2,000 Ipalco Enterprises................................. 43,875
3,600 Oge Energy Corp. .................................. 81,225
4,100 PECO Energy Co. ................................... 189,625
10,000 PG & E Corp. ...................................... 310,625
1,200 Pinnacle West Capital Corp. ....................... 43,650
3,000 Public Service Enterprise Group, Inc. ............. 114,563
1,400 TNP Enterprises, Inc. ............................. 40,250
------------
1,337,200
------------
Utilities - Telephone - 3.6%
16,900 Ameritech Corp. ................................... 978,088
23,290 AT&T Corp. ........................................ 1,858,855
8,700 Bell Atlantic Corp. ............................... 449,681
25,000 BellSouth Corp. ................................... 1,001,563
4,600 Century Telephone Enterprises, Inc. ............... 323,150
24,000 Frontier Corp. .................................... 1,245,000
3,000 GTE Corp. ......................................... 181,500
19,500 SBC Communications, Inc. .......................... 918,938
18,900 Sprint Corp. ...................................... 1,854,562
6,000 * Sprint Corp. (PCS Group)......................... 265,875
3,700 U.S. West, Inc. ................................... 203,731
------------
9,280,943
------------
Total Common Stocks
(cost $244,402,860)............................... 241,283,738
------------
<CAPTION>
Principal
Amount
<C> <S> <C>
SHORT-TERM INVESTMENTS - 6.0%
Repurchase Agreement - 6.0%
$15,234,000 State Street Bank & Trust Company purchased
3/31/99, 4.00% maturing 4/1/99, maturity value
$15,235,693 (cost $15,234,000) (a)................ 15,234,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $259,636,860)........................ 100.7% 256,517,738
Other Assets and
Liabilities - net.......................... (0.7) (1,745,673)
----- ------------
Net Assets.................................. 100.0% $254,772,065
===== ============
</TABLE>
* Non-income producing securities.
(a) At March 31, 1999, the repurchase agreement was collateralized by:
$14,715,000 U.S. Treasury Bills, 6.25%, 8/15/23; value including ac-
crued interest - $15,542,719.

Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust

See Notes to Financial Statements.

14
<PAGE>

- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Identified cost of securities................................. $259,636,860
Net unrealized gain or loss on securities..................... (3,119,122)
- ------------------------------------------------------------------------------
Market value of securities.................................... $256,517,738
Cash.......................................................... 801
Receivable for securities sold................................ 640,852
Receivable for Fund shares sold............................... 2,403,137
Dividends and interest receivable............................. 144,105
Prepaid expenses and other assets............................. 116,838
- ------------------------------------------------------------------------------
Total assets................................................. 259,823,471
- ------------------------------------------------------------------------------
Liabilities
Payable for securities purchased.............................. 3,757,275
Payable for Fund shares redeemed.............................. 969,351
Advisory fee payable.......................................... 160,791
Distribution Plan expenses payable............................ 52,653
Due to other related parties.................................. 5,320
Accrued expenses and other liabilities........................ 106,016
- ------------------------------------------------------------------------------
Total liabilities............................................ 5,051,406
- ------------------------------------------------------------------------------
Net assets.................................................... $254,772,065
- ------------------------------------------------------------------------------
Net assets represented by
Paid-in capital............................................... $259,200,092
Undistributed net investment loss............................. (286,343)
Accumulated net realized gains or losses on securities and
foreign currency related transactions........................ (1,022,562)
Net unrealized gains or losses on securities.................. (3,119,122)
- ------------------------------------------------------------------------------
Total net assets.............................................. $254,772,065
- ------------------------------------------------------------------------------
Net assets consist of
Class A....................................................... $183,556,637
Class B....................................................... 67,106,626
Class C....................................................... 3,676,906
Class Y....................................................... 431,896
- ------------------------------------------------------------------------------
Total net assets.............................................. $254,772,065
- ------------------------------------------------------------------------------
Shares outstanding
Class A....................................................... 18,794,748
Class B....................................................... 6,874,960
Class C....................................................... 377,166
Class Y....................................................... 44,197
- ------------------------------------------------------------------------------
Net asset value per share
Class A....................................................... $ 9.77
- ------------------------------------------------------------------------------
Class A--Offering price (based on sales charge of 4.75%)...... $ 10.26
- ------------------------------------------------------------------------------
Class B....................................................... $ 9.76
- ------------------------------------------------------------------------------
Class C....................................................... $ 9.75
- ------------------------------------------------------------------------------
Class Y....................................................... $ 9.77
- ------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements.

15
<PAGE>

- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income
Dividends (net of foreign withholding taxes of $601)........... $ 363,543
Interest....................................................... 236,698
- -------------------------------------------------------------------------------
Total investment income........................................ 600,241
- -------------------------------------------------------------------------------
Expenses
Advisory fee................................................... 489,251
Distribution Plan expenses..................................... 201,191
Transfer agent fee............................................. 90,596
Administrative services fees................................... 13,136
Trustees' fees and expenses.................................... 2,024
Registration and filing fees................................... 83,690
Organization expenses.......................................... 20,154
Other.......................................................... 57,642
- -------------------------------------------------------------------------------
Total expenses................................................ 957,684
Less: Fee credits............................................. (2,143)
Fee waivers................................................. (68,957)
- -------------------------------------------------------------------------------
Net expenses.................................................. 886,584
- -------------------------------------------------------------------------------
Net investment loss............................................ (286,343)
- -------------------------------------------------------------------------------
Net realized and unrealized gains or losses on securities and
foreign currency related transactions
Net realized gains or losses on:
Securities.................................................... (1,020,003)
Foreign currency related transactions......................... (2,559)
- -------------------------------------------------------------------------------
Net realized gains or losses on securities and foreign currency
related transactions.......................................... (1,022,562)
- -------------------------------------------------------------------------------
Net change in unrealized gains or losses on securities......... (3,119,122)
- -------------------------------------------------------------------------------
Net realized and unrealized gains or losses on securities and
foreign currency related transactions......................... (4,141,684)
- -------------------------------------------------------------------------------
Net decrease in net assets resulting from operations........... $(4,428,027)
- -------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements.

16
<PAGE>

- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Operations
Net investment loss............................................. $ (286,343)
Net realized gains or losses on securities and foreign currency
related transactions........................................... (1,022,562)
Net change in unrealized gains or losses on securities.......... (3,119,122)
- --------------------------------------------------------------------------------
Net decrease in net assets resulting from operations........... (4,428,027)
- --------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold....................................... 274,901,232
Payment for shares redeemed..................................... (15,701,140)
- --------------------------------------------------------------------------------
Net increase in net assets resulting from capital shares
transactions.................................................. 259,200,092
- --------------------------------------------------------------------------------
Total increase in net assets.................................. 254,772,065
- --------------------------------------------------------------------------------
Net assets
Beginning of period............................................. 0
- --------------------------------------------------------------------------------
End of period................................................... $254,772,065
- --------------------------------------------------------------------------------
Undistributed net investment loss............................... $ (286,343)
- --------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements.

17
<PAGE>

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
1. ORGANIZATION

The Evergreen Masters Fund (the "Fund") is a diversified series of Evergreen
Equity Trust (the "Trust"), a Delaware business trust organized on September
18, 1997. The Trust is an open-end management investment company registered un-
der the Investment Company Act of 1940, as amended (the "1940 Act").

The Fund offers 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 B shares purchased after January 1,
1997 will automatically convert to Class A shares after seven years. Class C
shares are sold subject to a contingent deferred sales charge payable on shares
redeemed within one year after the month of purchase. 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 Corporation ("First Union") and its affiliates, certain institu-
tional investors or Class Y shareholders of record of certain other funds man-
aged by First Union and its affiliates as of December 30, 1994.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect amounts
reported herein. Actual results could differ from these estimates.

A. Valuation of Securities
Securities traded on a national securities exchange or included on the Nasdaq
National Market System ("NMS") and other securities traded in the over-the-
counter market are valued at the last reported sales price on the exchange
where primarily traded. Securities traded on an exchange or NMS for which there
has been no sale and other securities traded in the over-the-counter market are
valued at the mean between the last reported bid and asked price. Securities
for which market quotations are not readily available, including restricted
securities, are valued at fair value as determined in good faith according to
procedures approved by the Board of Trustees.

Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.

B. Repurchase Agreements
The Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. The Fund monitors the adequacy of the collateral daily and
will require the seller to provide additional collateral in the event the mar-
ket value of the securities pledged falls below the carrying value of the re-
purchase agreement, including accrued interest. The 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 es-
tablished by the Board of Trustees.

C. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts. Dividend income is recorded on the ex-dividend date or in the
case of some foreign securities, on the date thereafter when the Fund is made
aware of the dividend. Foreign income may be subject to foreign withholding
taxes, which are accrued as applicable.

D. Federal Taxes
The Fund is qualified and intends to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Fund will not incur any federal income

18
<PAGE>

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (continued)

tax liability since it is expected to distribute all of the net investment
company taxable income, and net capital gains, if any, to their shareholders.
The Fund also intends to avoid any excise tax liability by making the required
distributions under the Code. Accordingly, no provision for federal taxes is
required. To the extent that realized capital gains can be offset by capital
loss carryforwards, it is the Fund's policy not to distribute such gains.

E. Distributions
Distributions from net investment income for the Fund are declared and paid an-
nually. Distributions from net realized capital gains, if any, are paid at
least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.

Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.

F. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the
relative net assets of each class. Currently, class specific expenses are
limited to expenses incurred under the Distribution Plans for each class.

G. Organization Expenses
Expenses relating to the organization of the Fund are amortized to operations
over its initial fiscal year on a straight-line basis.

3. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS

Evergreen Investment Management ("EIM"), a division of First Union National
Bank ("First Union"), serves as the investment advisor to the Fund and is paid
an advisory fee that is computed daily and paid monthly at an annual rate of
0.95% of the Fund's average daily net assets.

Evergreen Asset Management Corp. ("EAMC"), a wholly-owned subsidiary of First
Union, MFS Institutional Advisors, Inc., OppenheimerFunds, Inc. and Putnam In-
vestment Management, Inc. are investment managers to the Fund. Subject to the
supervision of EIM, each Manager manages a segment of the Fund's portfolio in
accordance with the Fund's investment objective and policies. The Fund pays no
direct fees to the investment managers for their services.

EAMC has entered into a sub-advisory agreement with Lieber & Company, an indi-
rect wholly owned subsidiary of First Union. Lieber & Company also provides
brokerage services with respect to substantially all security transactions exe-
cuted for that segment of the Fund managed by EAMC which were effected on the
New York or American Stock Exchanges. For the period ended March 31, 1999, the
Fund incurred brokerage commissions of $98,131 with Lieber & Company. Lieber &
Company is reimbursed by EAMC for providing investment sub-advisory services at
no additional expense to the Fund.

During the period ended March 31, 1999, the amount of investment advisory fees
waived by EIM and the impact on the Fund's expense ratio represented as a per-
centage of its average net assets were $68,957 and 0.13%, respectively.

Evergreen Investment Services ("EIS"), a subsidiary of First Union, serves as
the administrator and The BISYS Group, Inc. ("BISYS") serves as the sub-admin-
istrator to the Fund. As administrator, EIS provides the Fund with facilities,
equipment and personnel. As sub-administrator to the Funds, BISYS provides the
officers of the Funds. Officers of the Funds and affiliated Trustees receive no
compensation directly from the Funds.

The administrator and sub-administrator for the Fund are entitled to an annual
fee based on the average daily net assets of the funds administered by EIS for
which First Union or its investment advisory subsidiaries are also the invest-
ment advisors. The administration fee is calculated by applying percentage
rates, which start at 0.05% and decline to 0.01% per annum as net assets in-
crease, to the average daily net asset value of the Fund.

19
<PAGE>

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (continued)

The sub-administration fee is calculated by applying percentage rates, which
start at 0.01% and decline to 0.004% per annum as net assets increase, to the
average daily net asset value of the Fund.

During the period ended March 31, 1999, the Fund paid or accrued $10,461 and
$2,675, respectively, for administrative and sub-administrative services.

Evergreen Service Company ("ESC"), an indirectly, wholly owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the Fund.

4. DISTRIBUTION PLANS

Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of BISYS, serves
as principal underwriter to the Fund.

The Fund has adopted a Distribution Plan, as allowed by Rule 12b-1 of the 1940
Act, for each class of shares, except Class Y. Distribution plans permit a Fund
to compensate its principal underwriter for costs related to selling shares of
the Fund and for various other services. These costs, which consist primarily
of commissions and service fees to broker-dealers who sell shares of the Fund,
are paid by the Fund through "Distribution Plan expenses". Each class, except
Class Y, currently pays a service fee equal to 0.25% of the average daily net
asset of the class. Class B and Class C also pay distribution fees equal to
0.75% of the average daily net assets of the class. Distribution Plan expenses
are calculated daily and are paid at least quarterly.

During the period ended March 31, 1999, amounts paid or accrued to EDI pursuant
to Class A, Class B, and Class C Distribution Plans were $104,104, $91,907 and
$5,180, respectively.

With respect to Class B, and Class C shares, the principal underwriter may pay
distribution fees greater than the allowable annual amounts each Fund is per-
mitted to pay under the Distribution Plans.

Each of the Distribution Plans may be terminated at any time by vote of the In-
dependent Trustees or by vote of a majority of the outstanding voting shares of
the respective class.

5. CAPITAL SHARE TRANSACTIONS

The Fund has an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Fund are currently
divided into Class A, Class B, Class C and Class Y. Transactions in shares of
the Fund were as follows:
<TABLE>
<CAPTION>
Period Ended
March 31, 1999 (a)
------------------------
Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C>
Class A
Shares sold......................................... 19,576,878 $195,337,801
Shares redeemed..................................... (782,130) (7,631,554)
- ------------------------------------------------------------------------------
Net increase........................................ 18,794,748 $187,706,247
- ------------------------------------------------------------------------------
Class B
Shares sold......................................... 7,014,966 $ 68,771,375
Shares redeemed..................................... (140,006) (1,362,859)
- ------------------------------------------------------------------------------
Net increase........................................ 6,874,960 $ 67,408,516
- ------------------------------------------------------------------------------
Class C
Shares sold......................................... 393,971 $ 3,851,464
Shares redeemed..................................... (16,805) (163,391)
- ------------------------------------------------------------------------------
Net increase........................................ 377,166 $ 3,688,073
- ------------------------------------------------------------------------------
Class Y
Shares sold......................................... 694,752 $ 6,940,592
Shares redeemed..................................... (650,555) (6,543,336)
- ------------------------------------------------------------------------------
Net increase........................................ 44,197 $ 397,256
- ------------------------------------------------------------------------------
Net increase in net assets resulting from capital
share transactions................................. $259,200,092
- ------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 31, 1998 (commencement of operations) to March
31, 1999.

20
<PAGE>

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (continued)

6. SECURITIES TRANSACTIONS

For the period ended March 31, 1999, cost of purchases and proceeds from sales
of investment securities (excluding short-term securities) were $277,930,936
and $32,508,072, respectively.

7. EXPENSE OFFSET ARRANGEMENTS

The Fund has entered into expense offset arrangements with ESC and their custo-
dian whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's related expenses. The assets deposited with
ESC and the custodian under these expense offset arrangements could have been
invested in income-producing assets. The amount of fee credits received by the
Fund and the impact on the Fund's expense ratio represented as a percentage of
its average net assets were $2,143 and 0.01%, respectively, for the period
ended March 31, 1999.

8. DEFERRED TRUSTEES' FEES

Each Independent Trustee of the Fund may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Fund's Trustees' fees and
expenses. Trustees will be paid either in one lump sum or in quarterly install-
ments for up to ten years at their election, not earlier than either the year
in which the Trustee ceases to be a member of the Board of Trustees or January
1, 2000.

9. FINANCING AGREEMENTS

Certain Evergreen Funds and State Street Bank and Trust Company ("State
Street") and a group of banks (collectively, the "Banks") entered into a fi-
nancing agreement dated December 22, 1997, as amended on November 20, 1998. Un-
der this agreement, the Banks provided an unsecured credit facility in the ag-
gregate amount of $400 million ($275 million committed and $125 million uncom-
mitted). The credit facility was allocated, under the terms of the financing
agreement, among the Banks. The credit facility was accessed by the Funds for
temporary or emergency purposes only and was subject to each Fund's borrowing
restrictions. Borrowings under this facility bear interest at 0.50% per annum
above the Federal Funds rate. A commitment fee of 0.065% per annum will be in-
curred on the unused portion of the committed facility, which was allocated to
all funds. For its assistance in arranging this financing agreement, the Capi-
tal Market Group of First Union was paid a one-time arrangement fee of $27,500.
State Street serves as administrative agent for the Banks, and as administra-
tive agent is entitled to a fee of $20,000 per annum which is allocated to all
of the funds.

This agreement was amended and renewed on December 22, 1998. The amended fi-
nancing agreement became effective on December 22, 1998 among all of the Ever-
green Funds, State Street and The Bank of New York ("BONY"). Under this agree-
ment, State Street and BONY provide an unsecured credit facility in the aggre-
gate amount of $150 million ($125 million committed and $25 million uncommit-
ted). The remaining terms and conditions of the agreement are unaffected. Dur-
ing the period ended March 31, 1999, the Fund had no borrowings under these
agreements.

10. YEAR 2000

Like other investment companies, the Fund could be adversely affected if the
computer systems used by its investment advisor and other service providers are
not able to perform their intended functions effectively after 1999 because of
the inability of computer software to distinguish the year 2000 from the year
1900. The Fund's investment advisor is taking steps to address this potential
year 2000 problem with respect to the computer systems that it uses and to ob-
tain satisfactory assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact on
the Fund from this problem.

21
<PAGE>

Evergreen Funds

Money Market
Treasury Money Market Fund
Money Market Fund
Municipal Money Market Fund
Florida Municipal Money Market Fund
New Jersey Municipal Money Market Fund
Pennsylvania Municipal Money Market Fund

Tax Advantaged
Short Intermediate Municipal Fund
High Grade Municipal Bond Fund
Municipal Bond Fund
California Municipal Bond Fund
Connecticut Municipal Bond Fund
Florida Municipal Bond Fund
Florida High Income Municipal Bond Fund
Georgia Municipal Bond Fund
Maryland Municipal Bond Fund
Massachusetts Municipal Bond Fund
Missouri Municipal Bond Fund
New Jersey Municipal Bond Fund
New York Municipal Bond Fund
North Carolina Municipal Bond Fund
Pennsylvania Municipal Bond Fund
South Carolina Municipal Bond Fund
Virginia Municipal Bond Fund

Income
Capital Preservation and Income Fund
Short Intermediate Bond Fund
Intermediate Term Government Securities Fund
Intermediate Term Bond Fund
U.S. Government Fund
Diversified Bond Fund
Strategic Income Fund
High Yield Bond Fund

Balanced
American Retirement Fund
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund

Growth & Income
Utility Fund
Income and Growth Fund
Equity Income Fund
Value Fund
Blue Chip Fund
Growth and Income Fund
Small Cap Value Fund

Domestic Growth
Tax Strategic Equity Fund
Strategic Growth Fund
Stock Selector Fund
Evergreen Fund
Masters Fund
Omega Fund
Small Company Growth Fund
Aggressive Growth Fund
Micro Cap Fund

Global International
Global Leaders Fund
International Growth Fund
Global Opportunities Fund
Precious Metals Fund
Emerging Markets Growth Fund
Latin America Fund

Express Line
800.346.3858

Investor Services
800.343.2898

www.evergreen-funds.com

81674 548737 05/99

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