1933 Act Registration No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14AE
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective [ ] Post-Effective
Amendment No. Amendment No.
EVERGREEN EQUITY TRUST
(Evergreen Equity Income Fund and Evergreen Income and Growth Fund)
[Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (617) 210-3200
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------
(Address of Principal Executive Offices)
Michael H. Koonce, Esq.
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------------
(Name and Address of Agent for Service)
Copies of All Correspondence to:
Robert N. Hickey, Esq.
Sullivan & Worcester LLP 1025 Connecticut Avenue,
N.W.
Washington, D.C. 20036
Approximate date of proposed public offering: As soon as possible after the
effective date of this Registration Statement.
The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment Company
Act of 1940 (File No. 333-37453); accordingly, no fee is payable herewith.
Pursuant to Rule 429, this Registration Statement relates to the aforementioned
registration on Form N-1A. A Rule 24f-2 Notice for the Registrant's fiscal year
ended July 31, 1999 was filed with the Commission on October 28, 1999.
It is proposed that this filing will become effective on May 11, 2000
pursuant to Rule 488 of the Securities Act of 1933.
<PAGE>
EVERGREEN EQUITY TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
Location in Prospectus/
Item of Part A of Form N-14 Proxy Statement
- --------------------------- -----------------------
1. Beginning of Registration Cross Reference Sheet;
Statement and Outside Cover Page
Front Cover Page of
Prospectus
2. Beginning and Outside Table of Contents
Back Cover Page of
Prospectus
3. Fee Table, Synopsis and Summary; Risks
Risk Factors
4. Information About the Cover Page; Summary; Merger
Transaction Information; Information on
Shareholders' Rights; Voting
Information Concerning the
Meeting; Exhibit A (Agreement
and Plan of Reorganization)
5. Information about the Cover Page; Summary;
Registrant Risks; Merger Information;
Information on
Shareholders' Rights;
Additional Information
6. Information about the Cover Page; Summary;
Company Being Acquired Risks; Merger Information;
Information on
Shareholders' Rights;
Voting Information Concerning
the Meeting; Additional
Information
7. Voting Information Cover Page; Summary;
Information on Shareholders'
Rights; Voting Information
Concerning the Meeting;
Instructions for Voting and
Executing Proxy Cards
8. Interest of Certain Financial Statements and
Persons and Experts Experts; Legal Matters
9. Additional Information Inapplicable
Required for Reoffering
by Persons Deemed to be
Underwriters
Location in Statement of
Item of Part B of Form N-14 Additional Information
- --------------------------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. Additional Information Statement of Additional
About the Registrant Information of the
Evergreen Equity Trust, Growth
and Income Funds, Dated
December 1, 1999 as it
relates to Evergreen
Income and Growth Fund
13. Additional Information Statement of Additional
about the Company Being Information of Evergreen
Acquired Equity Trust, Growth and Income
Funds, Dated December 1, 1999
as it relates to Evergreen
Equity Income Fund
14. Financial Statements Annual Report of Evergreen Equity
Trust, Growth and Income Funds,
Dated July 31, 1999 as it relates
to Evergreen Income and Growth
Fund and Evergreen Equity Income
Fund; Semi-Annual Report of
Evergreen Equity Trust, Growth
and Income Funds Dated January
31, 2000 as it relates to
Evergreen Income and Growth Fund
and Evergreen Equity Income Fund;
and Pro forma Financial
Statements Dated as of January
31, 2000 of Evergreen Income
and Growth Fund
Location in Prospectus/
Item of Part C of Form N-14 Proxy Statement
- --------------------------- -----------------------
15. Indemnification Incorporated by Reference
to Part A Caption -
Information on Shareholders'
Rights - "Liability and
Indemnification of
Trustees"
16. Exhibits Exhibits
17. Undertakings Undertakings
<PAGE>
PART A
PROSPECTUS OF INCOME AND GROWTH FUND
AND
PROXY STATEMENT OF EQUITY INCOME FUND
<PAGE>
[This is the front cover]
LOGO
EVERGREEN EQUITY INCOME FUND
200 Berkeley Street
Boston, MA 02116
May 26, 2000
Dear Shareholder,
As a shareholder of Evergreen Equity Income Fund ("Equity Income Fund"), you are
invited to vote on a proposal to merge Equity Income Fund into Evergreen Income
and Growth Fund ("Income and Growth Fund"), another mutual fund within the
Evergreen Family of Funds. The Board of Trustees of Evergreen Equity Trust has
approved the merger and recommends that you vote FOR this proposal.
If approved by shareholders, this is how the merger will work:
o Your Fund will transfer its assets and liabilities to Income and Growth
Fund.
o Income and Growth Fund will issue new shares that will be distributed to
you in an amount equal to the value of your Equity Income Fund shares. You
will receive Class A, Class B, Class C or Class Y shares of Income and
Growth Fund, depending on the class of shares of Equity Income Fund you
currently hold. Although the number of shares you hold may change, the
total value of your investment will not change as a result of the merger.
o You will not incur any sales loads or similar transaction charges as a
result of the merger.
Immediately following the merger, Income and Growth Fund will change its name to
"Evergreen Equity Income Fund."
The merger is intended to be tax free for federal income tax purposes. Details
about Income and Growth Fund's investment objective, portfolio management team,
performance, etc. along with additional information about the proposed merger,
are contained in the attached prospectus/proxy statement. Please take the time
to familiarize yourself with this information. Votes on the proposal will be
cast at a special meeting of Equity Income Fund's shareholders to be held on
July 14, 2000. Although you are welcome to attend the meeting in person, you do
not need to do so in order to vote your shares. If you do not expect to attend
the meeting, please complete, date, sign and return the enclosed proxy card in
the enclosed postage paid envelope, or vote via one of the other methods
mentioned below. Instructions on how to vote are included at the end of the
prospectus/proxy statement.
If you have any questions about the proposal or the proxy card, please call
Shareholder Communications Corporation, our proxy solicitor, at 800-645-8640.
You may record your vote by telephone by calling 800-645-8640. You may also FAX
your completed and signed proxy card (both front and back sides) or vote on the
Internet by following the voting instructions as outlined on your proxy card. If
the Fund does not receive a sufficient number of votes in favor of the merger,
you may receive a telephone call from Shareholder Communications Corporation
requesting your vote. The expenses of the merger, including the costs of
soliciting proxies, will be paid by First Union National Bank.
Thank you for taking this matter seriously and participating in this important
process.
Sincerely,
William M. Ennis
President, Evergreen Funds
<PAGE>
EVERGREEN EQUITY INCOME FUND
200 Berkeley Street
Boston, Massachusetts 02116
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 14, 2000
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Evergreen Equity Income Fund ("Equity Income Fund"), a series of
Evergreen Equity Trust, will be held at the offices of the Evergreen Funds, 26th
Floor, 200 Berkeley Street, Boston, Massachusetts 02116 on July 14, 2000, at
2:00 p.m. for the following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization
(the "Plan") dated as of April 30, 2000, providing for the
acquisition of all the assets of Equity Income Fund by Evergreen
Income and Growth Fund ("Income and Growth Fund"), a series of
Evergreen Equity Trust, in exchange for shares of Income and
Growth Fund and the assumption by Income and Growth Fund of the
identified liabilities of Equity Income Fund. The Plan also
provides for distribution of these shares of Income and Growth
Fund to shareholders of Equity Income Fund in liquidation and
subsequent termination of Equity Income Fund. A vote in favor of
the Plan is a vote in favor of the liquidation and dissolution of
Equity Income Fund.
2. To transact any other business which may properly come before the Meeting or
any adjournment or adjournments thereof.
On behalf of Equity Income Fund, the Trustees of Evergreen Equity Trust
have fixed the close of business on April 28, 2000 as the record date for the
determination of shareholders of the Fund entitled to notice of and to vote at
the Meeting or any adjournment thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND IN PERSON ARE URGED TO SIGN WITHOUT DELAY AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE
ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By order of the Board of Trustees
William M. Ennis
President
May 26, 2000
<PAGE>
INFORMATION RELATING TO THE PROPOSED MERGER
of
EVERGREEN EQUITY INCOME FUND
into
EVERGREEN INCOME AND GROWTH FUND
This prospectus/proxy statement contains the information you should know before
voting on the proposed merger ("Merger") of your Fund into Evergreen Income and
Growth Fund ("Income and Growth Fund"). If approved, the Merger will result in
you receiving shares of Income and Growth Fund in exchange for your shares of
Evergreen Equity Income Fund ("Equity Income Fund"). The investment objectives
of both Funds are similar. The investment objectives of Equity Income Fund are
to seek primarily current income and secondarily capital growth. The investment
objective of Income and Growth Fund is to seek current income and capital growth
in the value of its shares.
Please read this prospectus/proxy statement carefully and retain it for future
reference. Additional information concerning each Fund and the Merger is
contained in the documents described in the box below, all of which have been
filed with the Securities and Exchange Commission ("SEC").
MORE INFORMATION ABOUT THE FUNDS IS AVAILABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
See: How to get these documents:
- ----------------------------------------------------------------- ---------------------------------------------------------------
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Prospectus for both Funds, dated December 1, 1999, with The Funds make all of these documents available to you free
supplement dated February 1, 2000 which accompany this of charge if you:
prospectus/proxy statement. o Call 800-645-8640, or
o Write the Funds at 200 Berkeley Street, Boston,
Statement of additional information for both Funds, dated Massachusetts 02116.
December 1, 1999.
You can also obtain any of these documents for a fee from the
Annual Report for both Funds, dated July 31, 1999. SEC if you:
o Call the SEC at 800-SEC-0330,
Semi-annual report for both Funds, dated January 31, 2000.
Or for free if you:
Statement of additional information, dated May 26, 2000, o Go to the SEC Website (http://www.sec.gov).
which relates to this prospectus/proxy statement and the
Merger.
To ask questions about this prospectus/proxy statement:
o Call 800-645-8640, or
o Write to the Funds at 200 Berkeley Street, Boston,
Massachusetts 02116.
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
Information relating to the Funds contained in the Funds' semi-annual report,
annual report, prospectus and statement of additional information, as well as
the statement of additional information relating to this prospectus/proxy
statement, is incorporated by reference into this prospectus/proxy statement.
This means that such information is legally considered to be part of this
document.
The Securities and Exchange Commission has not determined that the
information in this prospectus/proxy statement is accurate or complete,
nor has it approved or disapproved these securities. Anyone who tells
you otherwise is committing a crime.
The shares offered by this prospectus/proxy statement are not deposits
of a bank, and are not insured, endorsed or guaranteed by the FDIC
or any government agency and involve investment risk, including
possible loss of your original investment.
The address of both Funds is 200 Berkeley Street, Boston, Massachusetts 02116
(Telephone: 800-343-2898).
PROSPECTUS/PROXY STATEMENT DATED MAY 26, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SUMMARY............................................................................................
What are the key features of the Merger?...........................................................
Afer the Merger, what class of shares of Income and Growth Fund will I own?........................
How do the Funds' investment objectives, principal investment strategies and risks compare?........
How do the Funds' sales charges and expenses compare? Will I be able to buy, sell and exchange
shares the same way?...............................................................................
How do the Funds' performance records compare?.....................................................
Who will be the Investment Advisor and Portfolio Manager of my Fund after the Merger? What
will the advisory fee be after the Merger?.........................................................
What will be the primary federal tax consequences of the
Merger?............................................................................................
RISKS..............................................................................................
MERGER INFORMATION.................................................................................
Reasons for the Merger.............................................................................
Agreement and Plan of Reorganization...............................................................
Federal Income Tax Consequences....................................................................
Pro-forma Capitalization...........................................................................
Distribution of Shares.............................................................................
Purchase and Redemption Procedures.................................................................
Exchange Privileges................................................................................
Dividend Policy....................................................................................
INFORMATION ON SHAREHOLDERS' RIGHTS................................................................
Form of Organization...............................................................................
Capitalization.....................................................................................
Shareholder Liability..............................................................................
Shareholder Meetings and Voting Rights.............................................................
Liquidation........................................................................................
Liability and Indemnification of Trustees..........................................................
VOTING INFORMATION CONCERNING THE MEETING..........................................................
Shareholder information............................................................................
FINANCIAL STATEMENTS AND EXPERTS...................................................................
LEGAL MATTERS......................................................................................
ADDITIONAL INFORMATION.............................................................................
OTHER BUSINESS.....................................................................................
INSTRUCTIONS FOR VOTING AND EXECUTING PROXY CARDS..................................................
OTHER WAYS TO VOTE YOUR PROXY......................................................................
EXHIBIT A..........................................................................................
EXHIBIT B..........................................................................................
</TABLE>
SUMMARY
This section summarizes the primary features and consequences of the Merger.
This summary is qualified in its entirety by reference to the additional
information contained elsewhere in this prospectus/proxy statement, each Fund's
prospectus and statement of additional information and in the Agreement and Plan
of Reorganization.
What are the key features of the Merger?
The Agreement and Plan of Reorganization (the "Plan") sets forth the key
features of the Merger. For a complete description of the Merger, see the Plan,
attached as Exhibit A to this prospectus/proxy statement. The Plan generally
provides for the following:
o the transfer of all of the assets of Equity Income Fund in exchange for
shares of Income and Growth Fund.
o the assumption by Income and Growth Fund of the identified liabilities of
Equity Income Fund. (The identified liabilities consist only of those
liabilities reflected on Equity Income Fund's statement of assets and
liabilities determined immediately preceding the Merger.)
o the liquidation of Equity Income Fund by distributing the shares of Income
and Growth Fund to Equity Income Fund's shareholders.
The Merger is scheduled to take place on or about July 24, 2000. Immediately
following the Merger, Income and Growth Fund will change its name to "Evergreen
Equity Income Fund."
After the Merger, what class of shares of Income and Growth Fund will I own?
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
If you own this class of shares of Equity Income Fund: You will get this class of shares of Income and Growth Fund:
- ----------------------------------------------------------------- ---------------------------------------------------------------
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Class A Class A
- ----------------------------------------------------------------- ---------------------------------------------------------------
- ----------------------------------------------------------------- ---------------------------------------------------------------
Class B Class B
- ----------------------------------------------------------------- ---------------------------------------------------------------
- ----------------------------------------------------------------- ---------------------------------------------------------------
Class C Class C
- ----------------------------------------------------------------- ---------------------------------------------------------------
- ----------------------------------------------------------------- ---------------------------------------------------------------
Class Y Class Y
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
The new shares you receive will have the same total value as your Equity Income
Fund shares as of the close of business on the day immediately prior to the
Merger.
The Trustees of Evergreen Equity Trust, including the Trustees who are not
"interested persons" (the "Independent Trustees"), as such term is defined in
the Investment Company Act of 1940 (the "1940 Act"), have concluded that the
Merger would be in the best interest of Equity Income Fund's shareholders, and
that their interest will not be diluted as a result of the Merger. Accordingly,
the Trustees have submitted the Plan for the approval of Equity Income Fund's
shareholders. The Trustees of Evergreen Equity Trust have also approved the Plan
on behalf of Income and Growth Fund.
How do the Funds' investment objectives, principal investment strategies and
risks compare?
The following table highlights the comparison between the Funds with respect to
their investment objectives and principal investment strategies as set forth in
each Fund's prospectus and statement of additional information:
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------- --------------------------------------------- -----------------------------------------------------
Equity Income Fund Income and Growth Fund
- ----------------------------- --------------------------------------------- -----------------------------------------------------
- ----------------------------- --------------------------------------------- -----------------------------------------------------
<S> <C> <C>
INVESTMENT OBJECTIVES To seek primarily current income and To seek current income and capital growth in the
secondarily capital growth. value of its shares.
- ----------------------------- --------------------------------------------- -----------------------------------------------------
- ----------------------------- --------------------------------------------- -----------------------------------------------------
PRINCIPAL INVESTMENT o The portfolio manager attempts to o Invests primarily in common stocks and
STRATEGIES construct a portfolio offering a high securities convertible into common stocks
income stream and low price across all market capitalizations that pay a
fluctuation. yield higher than the average yield of
o Invests at least 65% of its total companies in the S&P 500 Index.
assets in common stocks of large, o May invest up to 25% of its total assets
established companies (above $5 in investment grade, fixed-income securities
billion in market capitalization) with including bonds and convertible debt
a history of dividend payments. securities.
o May invest up to 35% of its total o May invest up to 50% of its total assets
assets in bonds including lower in foreign securities.
quality credit bonds (junk bonds). o Invests in both value and growth
o May invest up to 50% of its total securities. "Value" securities are securities
assets in foreign securities. that the Fund's portfolio managers believe are
o Invests generally in stocks undervalued. "Growth" securities are
believed to be undervalued and which securities of companies which the Fund's
exhibit positive trends in operations portfolio managers believe have anticipated
and earnings expectations. earnings ranging from steady to accelerated
growth.
- ----------------------------- --------------------------------------------- -----------------------------------------------------
</TABLE>
Each Fund may invest up to 100% of its assets in high quality money market
instruments in response to adverse economic, political or market conditions.
This strategy is inconsistent with the Funds' principal investment strategies
and investment goals, and if employed could result in lower returns and loss of
market opportunity.
The Funds have other investment policies, practices and restrictions which,
together with their related risks, are also set forth in each Fund's prospectus
and statement of additional information.
A portion of the securities held by Equity Income Fund may be disposed of in
connection with the Merger and this could result in additional portfolio
transaction costs to the Funds and capital gains to shareholders.
A principal risk of investing in each of the Funds is stock market risk (when
economic growth slows, or interest or inflation rates increase, equity
securities held by the Funds tend to decline in value and may cause a decrease
in dividends paid). Both Funds are also subject to market capitalization risk
(investments primarily in one category may decline in value if that category
falls out of favor). Both Funds are subject to investment style risk (certain
styles such as growth or value also may fall out of favor causing securities
held by the Funds to decline). Both Funds are also subject to interest rate risk
(when interest rates rise, the value of debt securities held by the Funds tend
to decline in value). Both Funds are subject to credit risk (the issuers of the
securities in which the Funds invest will be unable to repay principal and pay
interest on the securities held by a Fund either at all or on time). Because
Equity Income Fund can invest in below investment grade securities, it is
subject to increased credit risk. Both Funds are also subject to foreign
investment risk (political turmoil, economic instability and currency exchange
fluctuations could adversely affect the value of foreign securities held by the
Funds). For a detailed comparison of the Funds' risks, see the section entitled
"Risks" below.
How do the Funds' sales charges and expenses compare? Will I be able to buy,
sell and exchange shares the same way?
The sales charges for the comparable classes of both Funds are the same. Both
Funds offer four classes of shares. You will not pay a sales charge in
connection with the Merger. The procedures for buying, selling and exchanging
shares of the Funds are identical. For more information, see "Purchase and
Redemption Procedures" and "Exchange Privileges" below.
The following tables allow you to compare the sales charges and expenses of the
two Funds. The table entitled "Income and Growth Fund Pro Forma" also shows you
what the sales charges and expenses are estimated to be assuming the Merger
takes place.
<PAGE>
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment)
- ------------------------------------------------------------ ---- --------------------------------------------------------------
Equity Income Fund Income and Growth Fund
- ------------------------------------------------------------ ---- --------------------------------------------------------------
- ------------------- --------- ---------- --------- --------- ---- -------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Class A Class B Class C Class Y Shareholder Class A Class B Class C Class Y
Transaction Transaction
Expenses Expenses
- ------------------- --------- ---------- --------- --------- ---- -------------------- --------- ---------- --------- ----------
- ------------------- --------- ---------- --------- --------- ---- -------------------- --------- ---------- --------- ----------
Maximum sales 4.75% None None None Maximum sales 4.75% None None None
charge imposed on charge imposed on
purchases (as a % purchases (as a %
of offering price) of offering price)
- ------------------- --------- ---------- --------- --------- ---- -------------------- --------- ---------- --------- ----------
- ------------------- --------- ---------- --------- --------- ---- -------------------- --------- ---------- --------- ----------
Maximum deferred None* 5.00% 2.00%** None Maximum deferred None* 5.00% 2.00%** None
sales charge (as sales charge (as a
a % of either the % of either the
redemption amount redemption amount
or initial or initial
investment investment
whichever is whichever is lower)
lower)
- ------------------- --------- ---------- --------- --------- ---- -------------------- --------- ---------- --------- ----------
</TABLE>
- ----------------------------------------------------------------
Income and Growth Fund
Pro Forma
- ----------------------------------------------------------------
- ------------------------ --------- --------- --------- ---------
Shareholder Class A Class B Class C Class Y
Transaction Expenses
- ------------------------ --------- --------- --------- ---------
- ------------------------ --------- --------- --------- ---------
Maximum sales charge 4.75% None None None
imposed on purchases
(as a % of offering
price)
- ------------------------ --------- --------- --------- ---------
- ------------------------ --------- --------- --------- ---------
Maximum deferred sales None* 5.00% 2.00%** None
charge (as a % of
either the redemption
amount or initial
investment whichever
is lower)
- ------------------------ --------- --------- --------- ---------
* Investments of $1 million or more are not subject to a front-end sales
charge, but may be subject to a contingent deferred sales charge ("CDSC")
of 1.00% upon redemption within one year after the month of purchase.
** Class C Shares purchased prior to February 1, 2000 are subject to the
CDSC schedule in place at that time, which included a CDSC of 1.00%.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
- --------------------------------------------------------- -------------------------------------------------------
Equity Income Fund (based on expenses which have been Income and Growth Fund (based on expenses which have
(based on expenses which have been restated to reflect been restated to reflect current contractual rates
current contractual rates as of January 2000) as of January 2000)
- --------------------------------------------------------- -------------------------------------------------------
- ---------- -------------- ------ ---------- ------------- --------- ------------- ------- ---------- ------------
Total Fund Total Fund
Management 12b-1 Other Operating Management 12b-1 Other Operating
Fees Fees Expenses Expenses Fees Fees Expenses Expenses
- ---------- -------------- ------ ---------- ------------- --------- ------------- ------- ---------- ------------
- ---------- -------------- ------ ---------- ------------- --------- ------------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A 0.54% 0.25% 0.39% 1.18% Class A 0.89% 0.25% 0.32% 1.46%
- ---------- -------------- ------ ---------- ------------- --------- ------------- ------- ---------- ------------
- ---------- -------------- ------ ---------- ------------- --------- ------------- ------- ---------- ------------
Class B 0.54% 1.00% 0.39% 1.93% Class B 0.89% 1.00% 0.32% 2.21%
- ---------- -------------- ------ ---------- ------------- --------- ------------- ------- ---------- ------------
- ---------- -------------- ------ ---------- ------------- --------- ------------- ------- ---------- ------------
Class C 0.54% 1.00% 0.39% 1.93% Class C 0.89% 1.00% 0.32% 2.21%
- ---------- -------------- ------ ---------- ------------- --------- ------------- ------- ---------- ------------
- ---------- -------------- ------ ---------- ------------- --------- ------------- ------- ---------- ------------
Class Y 0.54% 0.00% 0.39% 0.93% Class Y 0.89% 0.00% 0.32% 1.21%
- ---------- -------------- ------ ---------- ------------- --------- ------------- ------- ---------- ------------
</TABLE>
- ---------------------------------------------------------------------------
Income and Growth Fund
Pro Forma
(based on what the estimated combined expenses of Income and Growth would have
been for the 12 months ended January 31, 2000)(1)(2)
- ---------------------------------------------------------------------------
- ----------- ------------- --------- -------------- ------------------------
Management 12b-1 Other Total Fund Operating
Fees Fees Expenses Expenses
- ----------- ------------- --------- -------------- ------------------------
- ----------- ------------- --------- -------------- ------------------------
Class A 0.85% 0.25% 0.33% 1.43%
- ----------- ------------- --------- -------------- ------------------------
- ----------- ------------- --------- -------------- ------------------------
Class B 0.85% 1.00% 0.33% 2.18%
- ----------- ------------- --------- -------------- ------------------------
- ----------- ------------- --------- -------------- ------------------------
Class C 0.85% 1.00% 0.33% 2.18%
- ----------- ------------- --------- -------------- ------------------------
- ----------- ------------- --------- -------------- ------------------------
Class Y 0.85% 0.00% 0.33% 1.18%
- ----------- ------------- --------- -------------- ------------------------
(1) From time to time, the Fund's investment advisor may, at its discretion,
reduce or waive its fees or reimburse the Fund for certain of its expenses
in order to reduce expense ratios. The Annual Fund Operating Expenses do
not reflect fee waivers and expense reimbursements. If the Merger takes
place, the Fund's investment advisor has agreed to waive the management fee
and/or reimburse expenses for a period of two years beginning in July 2000
in order to limit Total Fund Operating Expenses at 1.42% for Class A, 2.17%
for Class B, 2.17% for Class C and 1.17% for Class Y.
(2) The expenses above reflect contractual rate changes made on January 3,
2000. At that time the advisory fee was lowered to 0.85% in order to
reflect an increase in the Fund's administrative services to 0.10%.
The table below shows examples of the total expenses you would pay on a $10,000
investment over one-, three-, five- and ten-year periods. The example is
intended to help you compare the cost of investing in Equity Income Fund versus
Income and Growth Fund and for Income and Growth Fund pro forma, assuming the
Merger takes place, and is for illustration only. The example assumes a 5%
average annual return, the imposition of the maximum sales charge (if any) and
that you reinvest all of your dividends. Your actual costs may be higher or
lower. For Class C shares of Income and Growth Fund pro forma, the maximum 2%
CDSC has been applied rather than the maximum 1% CDSC which will be applicable
with regard to Class C shares of Equity Income Fund purchased before February 1,
2000 and exchanged for Class C shares of Income and Growth Fund.
<TABLE>
<CAPTION>
Example of Fund Expenses
- -------------------------------------------------------- --- -------------------------------------------------------------
Equity Income Fund Income and Growth Fund
- -------------------------------------------------------- --- -------------------------------------------------------------
- ----------------------------------------- -------------- --- ----------------------------------------- -------------------
Assuming Redemption at End of Period Assuming No Assuming Redemption at End of Period Assuming No
Redemption Redemption
- ----------------------------------------- -------------- --- ----------------------------------------- -------------------
- ---------- ------- ------- ------ ------- ------- ------ --- ------- ------- -------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class Class Class Class Class Class Class Class B Class C Class Class B Class C
A B C Y B C A Y
- ---------- ------- ------- ------ ------- ------- ------ --- ------- ------- -------- -------- ------- --------- ---------
- ---------- ------- ------- ------ ------- ------- ------ --- ------- ------- -------- -------- ------- --------- ---------
After 1 After
year $590 $696 $396 $95 $196 $196 1 year $617 $724 $424 $123 $224 $224
- ---------- ------- ------- ------ ------- ------- ------ --- ------- ------- -------- -------- ------- --------- ---------
- ---------- ------- ------- ------ ------- ------- ------ --- ------- ------- -------- -------- ------- --------- ---------
After 3 After
years $832 $906 $606 $296 $606 $606 3 $915 $991 $691 $384 $691 $691
years
- ---------- ------- ------- ------ ------- ------- ------ --- ------- ------- -------- -------- ------- --------- ---------
- ---------- ------- ------- ------ ------- ------- ------ --- ------- ------- -------- -------- ------- --------- ---------
After 5 After
years $1,093 $1,242 $1,042 $515 $1,042 $1,042 5 $1,235 $1,385 $1,185 $665 $1,185 $1,185
years
- ---------- ------- ------- ------ ------- ------- ------ --- ------- ------- -------- -------- ------- --------- ---------
- ---------- ------- ------- ------ ------- ------- ------ --- ------- ------- -------- -------- ------- --------- ---------
After 10 After
years $1,839 1,968 $2,254 $1,143 $1,968 $2,254 10 $2,138 $2,266 $2,544 $1,466 $2,266 $2,544
years
- ---------- ------- ------- ------ ------- ------- ------ --- ------- ------- -------- -------- ------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Income and Growth Fund
Pro Forma
-------------------------------------------------------------------------------------
--------------------------------------------------------------- ---------------------
Assuming Redemption at End of Period Assuming No
Redemption
--------------------------------------------------------------- ---------------------
------------------- ----------- ---------- ---------- --------- ---------- ----------
Class A Class B Class C Class Y Class B Class C
------------------- ----------- ---------- ---------- --------- ---------- ----------
------------------- ----------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
After 1 year $614 $721 $421 $120 $221 $221
------------------- ----------- ---------- ---------- --------- ---------- ----------
------------------- ----------- ---------- ---------- --------- ---------- ----------
After 3 years $906 $982 $682 $375 $682 $682
------------------- ----------- ---------- ---------- --------- ---------- ----------
------------------- ----------- ---------- ---------- --------- ---------- ----------
After 5 years $1,219 $1,370 $1,170 $649 $1,170 $1,170
------------------- ----------- ---------- ---------- --------- ---------- ----------
------------------- ----------- ---------- ---------- --------- ---------- ----------
After 10 years $2,107 $2,234 $2,513 $1,432 $2,234 $2,513
------------------- ----------- ---------- ---------- --------- ---------- ----------
</TABLE>
How do the Funds' performance records compare?
The following charts show how each Fund has performed in the past. Past
performance is not an indication of future results.
Year-by-Year Total Return (%)
The chart below shows the percentage gain or loss for Equity Income Fund's Class
A shares and for Income and Growth Fund's Class Y shares in each of the past ten
calendar years. For each Fund the class shown is the oldest class. The chart
should give you a general idea of the risks of investing in each Fund by showing
how each Fund's return has varied from year-to-year. The expenses of Equity
Income Fund's Class A shares are higher than the expenses of Income and Growth
Fund's Class Y shares due to the difference in Rule 12b-1 fees (Rule 12b-1 fees
paid by Class A are 0.25%; Class Y does not pay any 12b-1 fees). If the
performance of Equity Income Fund's Class Y shares were shown on the chart for
the same periods as that for the Fund's Class A shares, performance would have
been higher. This chart includes the effects of Fund expenses, but not sales
charges. Returns would be lower for Equity Income Fund's Class A shares if sales
charges were included. Class Y shares of Income and Growth Fund are not subject
to any sales charges.
<TABLE>
<CAPTION>
- --------------------------------------------------------------- ------ -----------------------------------------------------
Equity Income Fund (Class A) Income and Growth Fund (Class Y)
- --------------------------------------------------------------- ------ -----------------------------------------------------
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
`90 `91 `92 `93 `94 `95 `96 `97 `98 `99 `90 `91 `92 `93 `94 `95 `96 `97 `98 `99
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20% 25.19 29.51 26.9924.07 13.92 20% 22.99 23.86 25.58
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
15% 15% 16.37
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
10% 12.82 10% 10.0312.92 12.89
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
5% 4.72 5%
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
0 0
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
- -5% -2.31 -3.98 -1.16 -5% -6.30 -6.42 -0.79
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
- -10% -10%
- ------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ------ ------ ---- ----- ---- ---- ----- ---- ----- ---- ----- ----
Best Quarter: 4th Quarter 1998 +13.53% Best Quarter: 2nd Quarter 1999 +14.50%
Worst Quarter: 3rd Quarter 1998 -9.55% Worst Quarter: 3rd Quarter 1998 -11.55%
Year to date total return through 3/31/2000 is +0.46%. Year to date total return through 3/31/2000 is -0.80%.
</TABLE>
The next table lists each Fund's average annual total return over the past one,
five and ten years and since inception (through 12/31/1999), including
applicable sales charges. This table is intended to provide you with some
indication of the risks of investing in each Fund by comparing its performance
with an index. At the bottom of the table you can compare Equity Income Fund's
performance with the S&P 500 and the Lehman Brothers Aggregate Bond Index
("LBABI"), and Income and Growth Fund's performance with the Wilshire 5000
Index. The S&P 500 Index is a market value-weighted index measuring the
performance of 500 U.S. stocks chosen for market size, liquidity, and industry
group representation. The LBABI is an unmanaged fixed income index covering the
U.S. investment grade fixed-rate bond market, including U.S. government and U.S.
government agency securities, corporate securities, and asset-backed securities.
The Wilshire 5000 Index is an unmanaged market value-weighted index measuring
the performance of all U.S.-headquartered equity securities with readily
available price data. An index does not include transaction costs associated
with buying and selling securities or any mutual fund expenses. It is not
possible to invest directly in an index.
<TABLE>
<CAPTION>
Average Annual Total Return (for the period ended 12/31/1999)
- -------------------------------------------------------------- -- ---------------------------------------------------------------
Equity Income Fund* Income and Growth Fund**
- -------------------------------------------------------------- -- ---------------------------------------------------------------
- ------------ ---------- ------- -------- -------- ------------ -- --------- ----------- -------- -------- --------- -------------
Inception Performance Inception Performance
Date of 1 5 10 Since Date of 1 5 10 Since
Class year year year 4/14/1987 Class year year year 8/31/1978
- ------------ ---------- ------- -------- -------- ------------ -- --------- ----------- -------- -------- --------- -------------
- ------------ ---------- ------- -------- -------- ------------ -- --------- ----------- -------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A 4/14/1987 -5.87% 16.95% 11.75% 11.48% Class A 1/3/1995 10.60% 13.81% 9.85% 13.74%
- ------------ ---------- ------- -------- -------- ------------ -- --------- ----------- -------- -------- --------- -------------
- ------------ ---------- ------- -------- -------- ------------ -- --------- ----------- -------- -------- --------- -------------
Class B 2/1/1993 -5.96% 16.95% 11.68% 11.43% Class B 1/3/1995 10.24% 13.85% 9.98% 13.81%
- ------------ ---------- ------- -------- -------- ------------ -- --------- ----------- -------- -------- --------- -------------
- ------------ ---------- ------- -------- -------- ------------ -- --------- ----------- -------- -------- --------- -------------
Class C 2/1/1993 -2.67% 17.20% 11.69% 11.44% Class C 1/3/1995 14.24% 14.07% 9.98% 13.80%
- ------------ ---------- ------- -------- -------- ------------ -- --------- ----------- -------- -------- --------- -------------
- ------------ ---------- ------- -------- -------- ------------ -- --------- ----------- -------- -------- --------- -------------
Class Y 1/13/1997 -0.90% 18.19% 12.33% 11.95% Class Y 8/31/1978 16.37% 15.18% 10.51% 14.06%
- ------------ ---------- ------- -------- -------- ------------ -- --------- ----------- -------- -------- --------- -------------
- ------------ ---------- ------- -------- -------- ------------ -- --------------------- -------- -------- --------- -------------
S&P 500 21.04% 28.56% 18.21% 16.61% Wilshire 5000 23.56% 27.06% 17.59% 12.86%
- ------------ ---------- ------- -------- -------- ------------ -- --------------------- -------- -------- --------- -------------
- ------------ ---------- ------- -------- -------- ------------ -- --------------------- -------- -------- --------- -------------
LBABI -0.82% 7.73% 7.70% 7.85%
- ------------ ---------- ------- -------- -------- ------------ -- --------------------- -------- -------- --------- -------------
</TABLE>
* Historical performance shown for Classes B, C, and Y prior to their
inception is based on the performance of Class A, the original class
offered. These historical returns for Classes B, C and Y have not been
adjusted to reflect the effect of each Class' 12b-1 fees. The 12b-1 fee for
Class A is 0.25%, for Class B is 1.00% and for Class C is 1.00%. Class Y
does not pay a 12b-1 fee. If these fees had been reflected, returns for
Class B and Class C would have been lower while returns for Class Y would
have been higher.
** Historical performance shown for Classes A, B and C prior to their
inception is based on the performance of Class Y, the original class
offered. These historical returns for Classes A, B and C have not been
adjusted to reflect the effect of each Class' 12b-1 fees. The 12b-1 fee for
Class A is 0.25%, for Class B is 1.00% and for Class C is 1.00%. Class Y
does not pay a 12b-1 fee. If these fees had been reflected, returns would
have been lower.
For a detailed discussion of the manner of calculating total return, please see
each Fund's statement of additional information. Generally, the calculations of
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment date.
Important information about Income and Growth Fund is also contained in
management's discussion of Income and Growth's performance, attached as Exhibit
B to this prospectus/proxy statement. This information also appears in Income
and Growth Fund's most recent Annual Report.
Who will be the Investment Advisor and Portfolio Manager of my Fund after the
Merger? What will the advisory fee be after the Merger?
Management of the Funds
The overall management of Income and Growth Fund and Equity Income Fund is the
responsibility of, and is supervised by, the Board of Trustees of Evergreen
Equity Trust.
Investment Evergreen Asset Management Corp. ("EAMC") is the investment
Advisor advisor to Income and Growth Fund.
Facts about EAMC:
o Is a subsidiary of First Union National Bank ("FUNB"), which
is a subsidiary of First Union Corporation ("First Union"),
the 6th largest bank holding company in the United States
based on total assets as of March 31, 2000.
o Has served as investment advisor, along with its
predecessors, since 1971.
o Manages over $22.8 billion in assets for 22 of the Evergreen
Funds.
o Manages with its affiliates the Evergreen family of mutual
funds with assets of approximately $82.5 billion as of March
31, 2000.
o Is located at 1311 Mamaroneck Avenue, White Plains, New York
10605.
Portfolio Management The day-to-day management of Income and Growth Fund
is handled by Irene D. O'Neill, CFA and Phillip M. Foreman, CFA.
Irene D. O'Neill, CFA, is lead manager of Income and Growth Fund
and has co-managed the Fund since December 1997. Ms. O'Neill has
been a portfolio manager at EAMC since March 1988. Phillip M.
Foreman, CFA, has been co-manager of Income and Growth Fund since
September 1999. Mr. Foreman has been a portfolio manager at EAMC
since he joined EAMC in January 1999. From November 1991 until he
joined EAMC, he was a portfolio manager at Washington Mutual
Advisors, Inc.
Investment Sub-Advisor Lieber & Company ("Lieber") is the investment sub-advisor
to Income and Growth Fund.
Facts about Lieber:
o Has provided investment research and other investment
services since 1971.
o Is located at 1311 Mamaroneck Avenue, White Plains, New York
10605.
Advisory Fees For its management and supervision of the daily business
affairs of Income and Growth Fund, EAMC is entitled to receive
an annual fee equal to:
0.90% of the first $750 million of the Fund's average daily net
assets, plus 0.80% of the next $250 million in assets, plus 0.70%
of the amounts over $1 billion.
Sub-Advisory Fees Under the terms of the sub-advisory agreement, Lieber is
entitled to be reimbursed by EAMC for the costs of providing
sub-advisory services. The Income and Growth Fund does not pay a
fee to Lieber.
EAMC may, at its discretion, reduce or waive its fee or reimburse the Fund for
certain of its other expenses in order to reduce the expense ratios. Unless
otherwise agreed upon, EAMC may also reduce or cease these voluntary waivers and
reimbursements at any time. If the Merger takes place, EAMC has agreed to waive
the management fee and/or reimburse expenses for a period of two years beginning
in July 2000 in order to limit Income and Growth Fund's Total Fund Operating
Expenses at 1.42% for Class A, 2.17% for Class B, 2,17% for Class C and 1.17%
for Class Y.
What will be the primary federal tax consequences of the Merger?
Prior to or at the completion of the Merger, Equity Income Fund will have
received an opinion from Sullivan & Worcester LLP that the Merger has been
structured so that no gain or loss will be realized by the Fund or its
shareholders for federal income tax purposes as a result of receiving Income and
Growth Fund shares in connection with the Merger. The holding period and
aggregate tax basis of shares of Income and Growth Fund that are received by
Equity Income Fund's shareholders will be the same as the holding period and
aggregate tax basis of shares of the Fund previously held by such shareholders,
provided that shares of the Fund are held as capital assets. In addition, the
holding period and tax basis of the assets of Equity Income Fund in the hands of
Income and Growth Fund as a result of the Merger will be the same as in the
hands of the Fund immediately prior to the Merger, and no gain or loss will be
recognized by Income and Growth Fund upon the receipt of the assets of the Fund
in exchange for shares of Income and Growth Fund and the assumption by Income
and Growth Fund of Equity Income Fund's identified liabilities.
RISKS
What are the primary risks of investing in each Fund?
An investment in each Fund is subject to certain risks. There is no assurance
that investment performance of either Fund will be positive and that the Funds
will meet their investment objectives. The following tables and discussions
highlight the primary risks associated with investment in each of the Funds.
- ---------------------------- -------------------------------------
Equity Income Fund Income and Growth Fund
- ---------------------------- -------------------------------------
- ---------------------------- --------------------------------------
Both Funds are subject to Stock Market Risk. Both Funds invest a significant
portion of their assets in equity securities.
- ---------------------------- --------------------------------------
The Funds' value will be affected by general economic conditions such as
prevailing economic growth, inflation and interest rates. When economic growth
slows, or interest or inflation rates increase, equity securities tend to
decline in value. Such events could also cause companies to decrease the
dividends they pay. If these events were to occur, the value of and dividend
yield and total return earned a shareholder's investment would likely decline.
Even if general economic conditions do not change, a shareholder's investment in
a Fund may decline if the particular sectors, industries or issuers in which the
Fund invests do not perform well.
<PAGE>
- --------------------------- --------------------------------------
Equity Income Fund Income and Growth Fund
- --------------------------- --------------------------------------
- --------------------------- ---------------------------------------
Both Funds are subject to Market Capitalization Risk. Equity
Income Fund invests primarily in large capitalization
companies and Income and Growth Fund invests its assets
across all market capitalizations.
- --------------------------- ----------------------------------------
Stocks fall into three broad market capitalization categories - large, medium
and small. Investing primarily in one category carries the risk that due to
current market conditions that category may be out of favor with investors. If
valuations of large capitalization companies appear to be greatly out of
proportion to the valuations of small or medium capitalization companies,
investors may migrate to the stocks of small and mid-sized companies causing a
Fund that invests in these companies to increase in value more rapidly than a
Fund that invests in larger, fully-valued companies. Investing in medium and
small capitalization companies may be subject to special risks associated with
narrower product lines, more limited financial resources, smaller management
groups, and a more limited trading market for their stocks as compared with
larger companies. As a result, stocks of small and medium capitalization
companies may decline significantly in market downturns. Because Equity Income
Fund invests its assets primarily in large capitalization stocks, its market
capitalization risk is greater than for Income and Growth Fund which invests its
assets across all market capitalizations.
- -------------------------- -------------------------------------
Equity Income Fund Income and Growth Fund
- -------------------------- -------------------------------------
Both Funds are subject to Investment
Style Risk. Equity Income Fund
invests in value stocks and
Income and Growth Fund invests
in both value and growth stocks.
- -------------------------- ----------------------------------------
Stocks with different characteristics tend to shift in and out of favor
depending upon market and economic conditions as well as investor sentiment. A
Fund may outperform or underperform other funds that employ a different style. A
Fund may also employ a combination of styles that impact its risk
characteristics. Examples of different styles include growth and value
investing. Growth stocks may be more volatile than other stocks because they are
more sensitive to investor perceptions of the issuing company's growth of
earnings potential. Growth oriented funds will typically underperform when value
investing is in favor. Value stocks are those that are out of favor or
undervalued in comparison to their peers due to adverse business developments or
other factors. Value oriented funds will typically underperform when growth
investing is in favor. Equity Income Fund invests in stocks that the portfolio
manager believes are undervalued relative to their true values and exhibit
positive trends in their underlying operations and earnings expectations. Income
and Growth Fund's stock selection is based on a diversified style of equity
management that allows it to invest in both value and growth-oriented
securities.
- --------------------------- --------------------------------------
Equity Income Fund Income and Growth Fund
- --------------------------- --------------------------------------
- --------------------------- ---------------------------------------
Both Funds are subject to Interest Rate Risk.
Equity Income Fund may invest up to 35% of its assets in debt securities and
Income and Growth Fund may invest up to 25% of its
assets in debt securities.
- -------------------------- -----------------------------------------
Interest rate risk is triggered by the tendency for the value of debt securities
and certain dividend paying stocks to fall when interest rates go up. Since both
Funds invest a significant portion of their portfolios in debt securities, if
interest rates rise, then the value of the Funds' securities may decline. The
longer the term of the bond or fixed income instrument, the more sensitive it
will be to fluctuations in value from interest rate changes. When interest rates
go down, interest earned by the Funds on their investments may also decline,
which could cause the Funds to reduce the dividend they pay.
- -------------------------- ---------------------------------------
Equity Income Fund Income and Growth Fund
- -------------------------- ---------------------------------------
- -------------------------- ----------------------------------------
Both Funds are subject to Credit Risk.
- -------------------------- ----------------------------------------
The value of a debt security is directly affected by the issuer's ability to
repay principal and pay interest on time. Since the Funds invest in debt
securities, the value of and total return earned on a shareholder's investment
in a Fund may decline if an issuer fails to pay an obligation on a timely basis.
<PAGE>
- ------------------------- ----------------------------------------
Equity Income Fund Income and Growth Fund
- ------------------------- ----------------------------------------
- ------------------------- -----------------------------------------
Both Funds are subject to Foreign Investment Risk.
Both Funds may invest up to 50% of their assets in foreign securities.
- ------------------------- -----------------------------------------
Investments in foreign securities require consideration of certain factors not
normally associated with investments in securities of U.S. issuers. For example,
a change in the value of any foreign currency relative to the U.S. dollar will
result in a corresponding change in the U.S. dollar value of securities
denominated in that currency. Securities markets of foreign countries generally
are not subject to the same degree of regulation as the U.S. markets and may be
more volatile and less liquid. Lack of liquidity may affect a Fund's ability to
purchase or sell large blocks of securities and thus obtain the best price. In
addition, a Fund may incur costs associated with currency hedging and the
conversion of foreign currency into U.S. dollars and may be adversely affected
by restrictions on the conversion or transfer of foreign currency. Other
considerations include political and social instability, expropriation, the lack
of available information, higher transaction costs (including brokerage
charges), increased custodian charges associated with holding foreign securities
and different securities settlement practices. When a Fund invests in foreign
securities, they usually will be denominated in foreign currencies, and a Fund
temporarily may hold funds in foreign currencies. Thus, the value of a Fund's
shares will be affected by changes in exchange rates.
- ------------------------- ----------------------------------------
Equity Income Fund Income and Growth Fund
- ------------------------- ----------------------------------------
- ------------------------- ----------------------------------------
o Is subject to Below o Is not subject to Below Investment
Investment Grade Grade Securities Risk
Securities Risk.
- ------------------------- ----------------------------------------
Equity Income Fund may invest up to 35% of its assets in bonds including
securities rated below Baa by Moody's Investors Service, Inc. ("Moody's") or BBB
by Standard & Poor's Ratings Services ("S&P") (commonly known as "junk bonds").
Below investment grade securities, or junk bonds, generally are considered to be
subject to greater credit risk than higher quality securities because the
issuers of below investment grade securities generally are viewed as having
greater potential for default than issuers of higher quality bonds. An issuer's
ability to make principal and interest payments on its below investment grade
debt may be dramatically affected by developments impacting its financial
performance, including developments within the markets or industries in which it
operates and changes in general economic conditions. Issuers of lower-rated
securities are often highly leveraged and may not have more traditional methods
of financing available to them, so that their ability to service their debt
obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. Further, the risk of loss due to default by such
issuers is significantly greater because lower-rated securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.
Are there any other risks of investing in each Fund?
Both Funds may invest in futures and options which are forms of derivatives.
Such practices are used to hedge a Fund's portfolio to protect against changes
in interest rates, to adjust a portfolio's duration, to maintain a Fund's
exposure to its market, to manage cash or to attempt to increase income.
Although these practices are intended to increase returns, they may actually
reduce returns or increase volatility. Equity Income Fund's portfolio turnover
has been significantly higher than Income and Growth Fund's portfolio turnover.
High portfolio turnover results in greater brokerage and other transaction costs
which are borne by a Fund and its shareholders. It may also result in a Fund
realizing greater net short-term capital gains, distributions from which are
taxable to shareholders as ordinary income.
MERGER INFORMATION
Reasons for the Merger
At a regular meeting held on March 23-24, 2000, all of the Trustees of Evergreen
Equity Trust, including the Independent Trustees, considered and approved the
Merger; they determined that it was in the best interests of shareholders of
Equity Income Fund and that the interests of existing shareholders of Equity
Income Fund will not be diluted as a result of the transactions contemplated by
the Merger.
Before approving the Plan, the Trustees reviewed various factors about the Funds
and the proposed Merger. The Trustees considered among other things:
o the terms and conditions of the Merger;
o whether the Merger would result in the dilution of shareholders' interests;
o expense ratios, fees and expenses of Income and Growth Fund and Equity
Income Fund;
o the comparative performance records of each Fund;
o compatibility of the Funds' investment objectives and principal investment
strategies;
o the fact that FUNB will bear the expenses incurred by Equity Income Fund
and Income and Growth Fund in connection with the Merger;
o the fact that Income and Growth Fund will assume the identified liabilities
of Equity Income Fund;
o the fact that the Merger is expected to be tax free for federal income tax
purposes; and
o alternatives available to shareholders of Equity Income Fund, including the
ability to redeem their shares.
During their consideration of the Merger, the Trustees met with Fund counsel and
counsel to the Independent Trustees regarding the legal issues involved.
In approving the Merger, the Trustees considered the relative size of Equity
Income Fund as well as the similarity of the Funds' investment objectives. The
Trustees evaluated the potential economies of scale associated with larger
mutual funds and concluded that operational efficiencies may be achieved by
combining Equity Income Fund with Income and Growth Fund. As of March 31, 2000,
Income and Growth Fund's total net assets were approximately $974.1 million and
Equity Income Fund's total assets were approximately $92.2 million. The Trustees
considered that Equity Income Fund's size has decreased significantly since the
first quarter of 1998 when the Fund had approximately $185 million in total
assets. The Fund has been in continual net redemption since that time. By
merging into Income and Growth Fund, shareholders of Equity Income Fund would
have the benefit of a larger fund with greater investment flexibility across
market capitalizations than Equity Income Fund, which is more conservative in
nature.
The Trustees also considered that the past one-year and three-years' performance
(for the period ended February 29, 2000) has been higher for Income and Growth
Fund than for Equity Income Fund. The Trustees also considered that for the
month ended February 29, 2000 Income and Growth Fund's Class A share yield was
over three percentage points higher than for Equity Income Fund's Class A
shares. In addition, the Trustees considered the fact that Evergreen Investment
Management Corp., Equity Income Fund's investment advisor, has indicated that
absent the Merger it would propose liquidating Equity Income Fund due to its
lack of size and relative underperformance. For the one-year period ended
February 29, 2000, the average annual total return for the Class A shares of
Equity Income Fund was -5.89% while the total return for Class A shares of
Income and Growth Fund was 13.11%.
The Trustees also considered the relative expenses of the Funds. Currently, the
expense ratio of Equity Income Fund is lower that that of Income and Growth
Fund. If the Merger takes place, EAMC has agreed to waive the management fee
and/or reimburse expenses for a period of two years beginning in July 2000 in
order to limit Total Fund Operating Expenses of Income and Growth Fund at 1.42%
for Class A, 2.17% for Class B, 2.17% for Class C and 1.17% for Class Y. The
Trustees recognized that even with this expense limitation, the expenses of
Income and Growth Fund will be higher than those of Equity Income Fund. However,
as an alternative to liquidation of Equity Income Fund, the Trustees determined
that shareholders of Equity Income Fund should have the opportunity, on an
expected tax-free basis, to have their assets moved to a better-performing,
similar Fund within the Evergreen Family of Funds. The Trustees also considered
the economies of scale that may be achieved in operating a larger mutual fund.
Accordingly, for the reasons noted above and recognizing that there can be no
assurance that any economies of scale or other benefits will be realized, the
Trustees believe that the proposed Merger would be in the best interests of each
Fund and its shareholders.
Agreement and Plan of Reorganization
The following summary is qualified in its entirety by reference to the Plan
(Exhibit A hereto).
The Plan provides that Income and Growth Fund will acquire all of the assets of
Equity Income Fund in exchange for shares of Income and Growth Fund and the
assumption by Income and Growth Fund of the identified liabilities of Equity
Income Fund on or about July 24, 2000 or such other date as may be agreed upon
by the parties (the "Closing Date"). Prior to the Closing Date, Equity Income
Fund will endeavor to discharge all of its known liabilities and obligations.
Income and Growth Fund will not assume any liabilities or obligations of Equity
Income Fund other than those reflected in an unaudited statement of assets and
liabilities of Equity Income Fund prepared as of the close of regular trading on
the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern Time, on the
business day immediately prior to the Closing Date (the "Valuation Time"). The
number of full and fractional shares of each class of Income and Growth Fund to
be received by the shareholders of Equity Income Fund will be determined by
multiplying the number of full and fractional shares of the corresponding class
of Equity Income Fund by a factor which shall be computed by dividing the net
asset value per share of the respective class of shares of Equity Income Fund by
the net asset value per share of the respective class of shares of Income and
Growth Fund. Such computations will take place as of the Valuation Time. The net
asset value per share of each class will be determined by dividing assets, less
liabilities, in each case attributable to the respective class, by the total
number of outstanding shares.
State Street Bank and Trust Company, the custodian for the Funds, will compute
the value of each Fund's respective portfolio of securities. The method of
valuation employed will be consistent with the procedures set forth in the
prospectus and statement of additional information of Income and Growth Fund,
Rule 22c-1 under the 1940 Act, and with the interpretations of such Rule by the
SEC's Division of Investment Management.
At or prior to the Closing Date, Equity Income Fund will have declared a
dividend and distribution which, together with all previous dividends and
distributions, shall have the effect of distributing to the Fund's shareholders
(in shares of the Fund, or in cash, as the shareholder has previously elected)
all of the Fund's net investment company taxable income for the taxable period
ending on the Closing Date (computed without regard to any deduction for
dividends paid), all of the Fund's net tax exempt income and all of its net
capital gains realized in all taxable periods ending on the Closing Date (after
the reductions for any capital loss carryforward).
As soon after the Closing Date as conveniently practicable, Equity Income Fund
will liquidate and distribute pro rata to shareholders of record as of the close
of business on the Closing Date the full and fractional shares of Income and
Growth Fund received by Equity Income Fund. Such liquidation and distribution
will be accomplished by the establishment of accounts in the names of Equity
Income Fund's shareholders on Income and Growth Fund's share records of its
transfer agent. Each account will represent the respective pro rata number of
full and fractional shares of Income and Growth Fund due to the Fund's
shareholders. All issued and outstanding shares of Equity Income Fund, including
those represented by certificates, will be canceled. The shares of Income and
Growth Fund to be issued will have no preemptive or conversion rights. After
these distributions and the winding up of its affairs, Equity Income Fund will
be terminated.
The consummation of the Merger is subject to the conditions set forth in the
Plan, including approval by Equity Income Fund's shareholders, accuracy of
various representations and warranties and receipt of opinions of counsel,
including opinions with respect to those matters referred to in "Federal Income
Tax Consequences" below. Notwithstanding approval of Equity Income Fund's
shareholders, the Plan may be terminated (a) by the mutual agreement of Equity
Income Fund and Income and Growth Fund; or (b) at or prior to the Closing Date
by either party (i) because of a breach by the other party of any
representation, warranty, or agreement contained therein to be performed at or
prior to the Closing Date if not cured within 30 days, or (ii) because a
condition to the obligation of the terminating party has not been met and it
reasonably appears that it cannot be met.
Whether or not the Merger is consummated, FUNB will pay the expenses incurred by
Equity Income Fund and Income and Growth Fund in connection with the Merger
(including the cost of any proxy-soliciting agent). No portion of the expenses
will be borne directly or indirectly by Equity Income Fund, Income and Growth
Fund or their shareholders.
If Equity Income Fund's shareholders do not approve the Merger, the Trustees
will consider other possible courses of action which may be in the best
interests of shareholders including the possible liquidation of the Fund.
Federal Income Tax Consequences
The Merger is intended to qualify for federal income tax purposes as a tax free
reorganization under section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). As a condition to the closing of the Merger, Equity Income
Fund will receive an opinion from Sullivan & Worcester LLP to the effect that,
on the basis of the existing provisions of the Code, U.S. Treasury regulations
issued thereunder, current administrative rules, pronouncements and court
decisions, for federal income tax purposes, upon consummation of the Merger:
(1) The transfer of all of the assets of Equity Income Fund solely in
exchange for shares of Income and Growth Fund and the assumption by
Income and Growth Fund of the identified liabilities, followed by the
distribution of Income and Growth Fund's shares by Equity Income Fund
in dissolution and liquidation of Equity Income Fund, will constitute a
"reorganization" within the meaning of section 368(a)(1)(C) of the
Code, and Income and Growth Fund and Equity Income Fund will each be a
"party to a reorganization" within the meaning of section 368(b) of the
Code.
(2) No gain or loss will be recognized by Equity Income Fund on the
transfer of all of its assets to Income and Growth Fund solely in
exchange for Income and Growth Fund's shares and the assumption by
Income and Growth Fund of the identified liabilities of Equity Income
Fund or upon the distribution of Income and Growth Fund's shares to
Equity Income Fund's shareholders in exchange for their shares of
Equity Income Fund;
(3) The tax basis of the assets transferred will be the same to Income and
Growth Fund as the tax basis of such assets to Equity Income Fund
immediately prior to the Merger, and the holding period of such assets
in the hands of Income and Growth Fund will include the period during
which the assets were held by Equity Income Fund;
(4) No gain or loss will be recognized by Income and Growth Fund upon the
receipt of the assets from Equity Income Fund solely in exchange for
the shares of Income and Growth Fund and the assumption by Income and
Growth Fund of the identified liabilities of Equity Income Fund;
(5) No gain or loss will be recognized by Equity Income Fund's shareholders
upon the issuance of the shares of Income and Growth Fund to them,
provided they receive solely such shares (including fractional shares)
in exchange for their shares of Equity Income Fund; and
(6) The aggregate tax basis of the shares of Income and Growth Fund,
including any fractional shares, received by each of the shareholders
of Equity Income Fund pursuant to the Merger will be the same as the
aggregate tax basis of the shares of Equity Income Fund held by such
shareholder immediately prior to the Merger, and the holding period of
the shares of Income and Growth Fund, including fractional shares,
received by each such shareholder will include the period during which
the shares of Equity Income Fund exchanged therefor were held by such
shareholder (provided that the shares of Equity Income Fund were held
as a capital asset on the date of the Merger).
Opinions of counsel are not binding upon the Internal Revenue Service or the
courts. If the Merger is consummated but does not qualify as a tax free
reorganization under the Code, a shareholder of Equity Income Fund would
recognize a taxable gain or loss equal to the difference between his or her tax
basis in his or her Fund shares and the fair market value of Income and Growth
Fund shares he or she received. Shareholders of Equity Income Fund should
consult their tax advisors regarding the effect, if any, of the proposed Merger
in light of their individual circumstances. Since the foregoing discussion
relates only to the federal income tax consequences of the Merger, shareholders
of Equity Income Fund should also consult their tax advisors as to the state and
local tax consequences, if any, of the Merger.
Any capital loss carryforwards of Equity Income Fund will be available to Income
and Growth Fund to offset capital gains recognized after the Merger subject to
limitations imposed by the Code. These limitations provide generally that the
amount of loss carryforward may be used in any year following the Closing Date
in an amount equal to the value of all of the outstanding stock of Equity Income
Fund immediately prior to the Merger, multiplied by a long-term tax-exempt bond
rate determined monthly by the Internal Revenue Service. A capital loss
carryforward may generally be used without any limit to offset gains recognized
during the five-year period beginning on the date of the Merger on the sale of
assets transferred by Equity Income Fund to Income and Growth Fund pursuant to
the Merger, to the extent of the excess of the value of any such asset on the
Closing Date over its tax basis.
Pro-forma Capitalization
The following table sets forth the capitalizations of Equity Income Fund and
Income and Growth Fund as of January 31, 2000 and the capitalization of Income
and Growth Fund on a pro forma basis as of that date, giving effect to the
proposed acquisition of assets at net asset value. The pro forma data reflects
an exchange ratio of approximately 0.72, 0.72, 0.72 and 0.72 Class A, Class B,
Class C and Class Y shares, respectively, of Income and Growth Fund issued for
each Class A, Class B, Class C and Class Y share, respectively, of Equity Income
Fund.
<TABLE>
<CAPTION>
Capitalization of Equity Income Fund, Income and Growth Fund and Income and Growth Fund (Pro Forma)
Equity Income Fund Income and Growth Fund Income and Growth Fund (After
Merger)
Net Assets
<S> <C> <C> <C>
Class A $38,680,469 $36,138,486 $74,818,955
Class B $55,955,938 $157,782,029 $213,737,967
Class C $11,937,502 $2,325,530 $14,263,032
Class Y $104,908 $803,126,792 $803,231,700
-------- ------------ ------------
Total Net Assets $106,678,817 $999,372,837 $1,106,051,654
============ ============ ==============
Net Asset Value Per Share
Class A $15.71 $21.87 $21.87
Class B $15.60 $21.68 $21.68
Class C $15.62 $21.68 $21.68
Class Y $15.66 $21.88 $21.88
Shares Outstanding
Class A 2,462,451 1,652,578 3,421,401
Class B 3,586,914 7,277,199 9,857,987
Class C 764,049 107,265 657,883
Class Y 6,699 36,708,037 36,712,832
----- ---------- ----------
All Classes 6,820,113 45,745,079 50,650,103
========= ========== ==========
</TABLE>
The table set forth above should not be relied upon to reflect the number of
shares to be received in the Merger; the actual number of shares to be received
will depend upon the net asset value and number of shares outstanding of each
Fund at the time of the Merger.
Distribution of Shares
Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund Services, acts
as underwriter of shares of Income and Growth Fund and Equity Income Fund. EDI
distributes each Fund's shares directly or through broker-dealers, banks
(including FUNB), or other financial intermediaries. Each Fund offers four
classes of shares: Class A, Class B, Class C and Class Y. Each class has a
separate distribution arrangement and bears its own distribution expenses. (See
"Distribution-Related and Shareholder Servicing-Related Expenses" below).
In the proposed Merger, Equity Income Fund shareholders will receive shares of
Income and Growth Fund having the same class designation and the same
arrangements with respect to the imposition of Rule 12b-1 distribution and
service fees as the shares they currently hold. Because the Merger will be
effected at net asset value without the imposition of a sales charge, Equity
Income Fund shareholders will receive Income and Growth Fund shares without
paying any initial sales charge or CDSC as a result of the Merger. Income and
Growth Fund Class B and Class C shares received by Equity Income Fund
shareholders as a result of the Merger will continue to be subject to a CDSC
upon subsequent redemption, but the CDSC will be based on the date of the
original purchase of Equity Income Fund shares and will be subject to the CDSC
schedule applicable to the shares on the date of the original purchase of Equity
Income Fund shares.
The following is a summary description of charges and fees for the Class A,
Class B, Class C and Class Y shares of Income and Growth Fund which will be
received by Equity Income Fund shareholders in the Merger. More detailed
descriptions of the distribution arrangements applicable to the classes of
shares are contained in the Income and Growth Fund and Equity Income Fund
prospectus and in the Funds' statement of additional information.
Class A Shares. Class A shares are sold at net asset value plus an initial sales
charge of up to 4.75% of the offering price and, as indicated below, are subject
to distribution-related fees. For a description of the initial sales charge
applicable to the purchase of Class A shares see "How to Choose the Share Class
that Best Suits You" in the prospectus of Income and Growth Fund. No initial
sales charge will be imposed on Class A shares of Income and Growth Fund
received by Equity Income Fund's shareholders as a result of the Merger.
Class B Shares. Class B shares are sold without an initial sales charge but are
subject to a CDSC, which ranges from 5% to 1% if shares are redeemed during the
first six years after the month of purchase. In addition, Class B shares are
subject to distribution related fees and shareholder servicing-related fees as
described below. Class B shares convert to Class A after seven years following
the month in which they were purchased. For purposes of determining when Class B
shares issued in the Merger to shareholders of Equity Income Fund will convert
to Class A shares, such shares will be deemed to have been purchased as of the
date the Class B shares of Equity Income Fund were originally purchased.
Class B shares are subject to higher distribution-related and shareholder
servicing-related fees than the corresponding Class A shares on which a
front-end sales charge is imposed (until they convert to Class A shares). The
higher fees mean a higher expense ratio, so Class B shares pay correspondingly
lower dividends and may have a lower net asset value than Class A shares of the
Fund.
Class C Shares. Class C shares are sold without initial sales charges, but, as
indicated below, are subject to distribution-related and shareholder
servicing-related fees. Class C shares issued in connection with the Merger are
subject to the CDSC schedule in place at the time of their original purchase.
Class C shares purchased before February 1, 2000 are subject to a 1.00% CDSC if
such shares are redeemed within 13 months of purchase. No CDSC is imposed on
amounts redeemed thereafter. Class C shares purchased on or after February 1,
2000 are subject to a 2.00% CDSC if such shares are redeemed within 13 months of
purchase, and a 1.00% CDSC if redeemed within 12 months thereafter. No CDSC is
imposed on amounts redeemed after 25 months. Class C shares incur higher
distribution-related and shareholder servicing-related fees than Class A shares,
but unlike Class B shares, do not convert to any other class of shares.
Class Y Shares. Class Y shares are sold at net asset value without any initial
or deferred sales charges and are not subject to distribution-related or
shareholder servicing-related fees. Class Y shares are only available to certain
classes of investors as is more fully described in the prospectus for Income and
Growth Fund.
Additional information regarding the classes of shares of each Fund is included
in its prospectus and statement of additional information.
Distribution-Related and Shareholder Servicing-Related Expenses. Each Fund has
adopted a Rule 12b-1 plan with respect to its Class A shares under which the
class may pay for distribution-related expenses at an annual rate which may not
exceed 0.75% of average daily net assets attributable to the class. Payments
with respect to Class A shares are currently limited to 0.25% of average daily
net assets attributable to the class. This amount may be increased to the full
plan rate for each Fund by the Trustees without shareholder approval.
Each Fund has also adopted a Rule 12b-1 plan with respect to its Class B and
Class C shares under which the class may pay for distribution-related expenses
at an annual rate which may not exceed 1.00%. Of the total 1.00% Rule 12b-1
fees, up to 0.25% may be for payment in respect of "shareholder services."
Consistent with the requirements of Rule 12b-1 and the applicable rules of the
National Association of Securities Dealers, Inc., following the Merger, Income
and Growth Fund may make distribution-related and shareholder servicing-related
payments with respect to Equity Income Fund shares sold prior to the Merger.
Additional information regarding the Rule 12b-1 plans adopted by each Fund is
included in its prospectus and statement of additional information.
No Rule 12b-1 plan has been adopted for the Class Y shares of either Fund.
Purchase and Redemption Procedures
Information concerning applicable sales charges and distribution-related and
shareholder servicing-related fees is provided above. Investments in the Funds
are not insured. The minimum initial purchase requirement for each Fund is
$1,000. There is no minimum for subsequent purchases of shares of either Fund.
For more information, see "How to Buy Shares - Minimum Investments" in the
Funds' prospectus. Each Fund provides for telephone, mail or wire redemption of
shares at net asset value, less any CDSC, as next determined after receipt of a
redemption request on each day the NYSE is open for trading. Additional
information concerning purchases and redemptions of shares, including how each
Fund's net asset value is determined, is contained in the Funds' prospectus.
Each Fund may involuntarily redeem shareholders' accounts that have less than
$1,000 of invested funds. All funds invested in each Fund are invested in full
and fractional shares. The Funds reserve the right to reject any purchase order.
Exchange Privileges
Holders of shares of a class of each Fund may exchange their shares for shares
of the same class of any other Evergreen fund. Each Fund limits exchanges to
five per calendar year and three per calendar quarter. No sales charge is
imposed on an exchange. An exchange which represents an initial investment in
another Evergreen fund must amount to at least $1,000. The current exchange
privileges, and the requirements and limitations attendant thereto, are
described in each Fund's prospectus and statement of additional information.
Dividend Policy
Each Fund distributes its investment company taxable income quarterly and its
net realized gains at least annually to shareholders of record on the dividend
record date. Dividends and distributions are reinvested in additional shares of
the same class of the respective Fund, or paid in cash, as a shareholder has
elected. See each Fund's prospectus for further information concerning dividends
and distributions.
After the Merger, shareholders of Equity Income Fund who have elected to have
their dividends and/or distributions reinvested will have dividends and/or
distributions received from Income and Growth Fund reinvested in shares of
Income and Growth Fund. Shareholders of Equity Income Fund who have elected to
receive dividends and/or distributions in cash will receive dividends and/or
distributions from Income and Growth Fund in cash after the Merger, although
they may, after the Merger, elect to have such dividends and/or distributions
reinvested in additional shares of Income and Growth Fund.
Both Income and Growth Fund and Equity Income Fund have qualified and intend to
continue to qualify to be treated as regulated investment companies under the
Code. To remain qualified as a regulated investment company, a Fund must
distribute 90% of its taxable and tax-exempt income. While so qualified, so long
as each Fund distributes all of its net investment company taxable and
tax-exempt income and any net realized gains to shareholders, it is expected
that a Fund will not be required to pay any federal income taxes on the amounts
so distributed. A 4% nondeductible excise tax will be imposed on amounts not
distributed if a Fund does not meet certain distribution requirements by the end
of each calendar year. Each Fund anticipates meeting such distribution
requirements.
INFORMATION ON SHAREHOLDERS' RIGHTS
Form of Organization
Evergreen Equity Trust is an open-end management investment company registered
with the SEC under the 1940 Act, which continuously offers shares to the public.
Evergreen Equity Trust is organized as a Delaware business trust and is governed
by its Declaration of Trust, By-Laws, a Board of Trustees and by applicable
Delaware and federal law. Income and Growth Fund and Equity Income Fund are
series of Evergreen Equity Trust.
Capitalization
The beneficial interests in Income and Growth Fund and Equity Income Fund are
represented by an unlimited number of transferable shares of beneficial
interest, $.001 par value per share. Evergreen Equity Trust's Declaration of
Trust permits the Trustees to allocate shares into an unlimited number of
series, and classes thereof, with rights determined by the Trustees, all without
shareholder approval. Fractional shares may be issued by either Fund. Each
Fund's shares represent equal proportionate interests in the assets belonging to
the Fund. Shareholders of each Fund are entitled to receive dividends and other
amounts as determined by the Trustees. Shareholders of each Fund vote
separately, by class, as to matters, such as approval of or amendments to Rule
12b-1 distribution plans, that affect only their particular class and by Fund as
to matters, such as approval of or amendments to investment advisory agreements
or proposed mergers, that affect only their particular Fund.
Shareholder Liability
Under Delaware law, shareholders of a Delaware business trust are entitled to
the same limitation of personal liability extended to stockholders of Delaware
corporations. Other than in a limited number of states, no similar statutory or
other authority limiting business trust shareholder liability exists in any
other state. As a result, to the extent that Evergreen Equity Trust or a
shareholder is subject to the jurisdiction of courts in those states, it is
possible that a court may not apply Delaware law, and may thereby subject
shareholders of Evergreen Equity Trust to liability. To guard against this risk,
the Declaration of Trust of Evergreen Equity Trust (a) provides that any written
obligation of the Trust may contain a statement that such obligation may only be
enforced against the assets of the Trust or the particular series in question
and the obligation is not binding upon the shareholders of the Trust; however,
the omission of such a disclaimer will not operate to create personal liability
for any shareholder; and (b) provides for indemnification out of Trust property
of any shareholder held personally liable for the obligations of the Trust.
Accordingly, the risk of a shareholder of Evergreen Equity Trust incurring
financial loss beyond that shareholder's investment because of shareholder
liability is limited to circumstances in which: (i) the court refuses to apply
Delaware law; (ii) no contractual limitation of liability was in effect; and
(iii) the Trust itself is unable to meet its obligations. In light of Delaware
law, the nature of the Trust's business, and the nature of its assets, the risk
of personal liability to a shareholder of Evergreen Equity Trust is remote.
Shareholder Meetings and Voting Rights
Evergreen Equity Trust on behalf of Income and Growth Fund and Equity Income
Fund is not required to hold annual meetings of shareholders. However, a meeting
of shareholders for the purpose of voting upon the question of removal of a
Trustee must be called when requested in writing by the holders of at least 10%
of the outstanding shares of Evergreen Equity Trust. In addition, Evergreen
Equity Trust is required to call a meeting of shareholders for the purpose of
electing Trustees if, at any time, less than a majority of the Trustees then
holding office were elected by shareholders. Evergreen Equity Trust does not
currently intend to hold regular shareholder meetings. Cumulative voting is not
permitted. Except when a larger quorum is required by applicable law, with
respect to both Funds, 25% of the outstanding shares entitled to vote
constitutes a quorum for consideration of a matter. For each Fund, a majority
(greater than 50%) of the votes cast and entitled to vote is sufficient to act
on a matter (unless otherwise specifically required by the applicable governing
documents or other law, including the 1940 Act).
Under the Declaration of Trust of Evergreen Equity Trust, each share of Income
and Growth Fund and Equity Income Fund will be entitled to one vote for each
dollar of net asset value applicable to such share.
Liquidation
In the event of the liquidation of Income and Growth Fund or Equity Income Fund,
the shareholders are entitled to receive, when and as declared by the Trustees,
the excess of the assets belonging to such Fund or attributable to the class
over the liabilities belonging to the Fund or attributable to the class. In
either case, the assets so distributable to shareholders of the Fund will be
distributed among the shareholders in proportion to the number of shares of a
class of the Fund held by them and recorded on the books of the Fund.
Liability and Indemnification of Trustees
Under the Declaration of Trust of Evergreen Equity Trust, a Trustee is liable to
the Trust and its shareholders only for such Trustee's own willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of the office of Trustee or the discharge of such Trustee's functions.
As provided in the Declaration of Trust, each Trustee of the Trust is entitled
to be indemnified against all liabilities against him or her, including the
costs of litigation, unless it is determined that the Trustee (i) did not act in
good faith in the reasonable belief that such Trustee's action was in or not
opposed to the best interests of the Trust; (ii) had acted with willful
misfeasance, bad faith, gross negligence or reckless disregard of such Trustee's
duties; and (iii) in a criminal proceeding, had reasonable cause to believe that
such Trustee's conduct was unlawful (collectively, "disabling conduct"). A
determination that the Trustee did not engage in disabling conduct and is,
therefore, entitled to indemnification may be based upon the outcome of a court
action or administrative proceeding or by (a) a vote of a majority of those
Trustees who are neither "interested persons" within the meaning of the 1940 Act
nor parties to the proceeding or (b) an independent legal counsel in a written
opinion. The Trust may also advance money for such litigation expenses provided
that the Trustee undertakes to repay the Trust if his or her conduct is later
determined to preclude indemnification and certain other conditions are met.
The foregoing is only a summary of certain characteristics of the operations of
the Declaration of Trust of Evergreen Equity Trust, its By-Laws and Delaware law
and is not a complete description of those documents or law. Shareholders should
refer to the provisions of such Declaration of Trust, By-Laws and Delaware law
directly for more complete information.
VOTING INFORMATION CONCERNING THE MEETING
This prospectus/proxy statement is being sent to shareholders of Equity Income
Fund in connection with a solicitation of proxies by the Trustees of Evergreen
Equity Trust, to be used at the Special Meeting of Shareholders (the "Meeting)
to be held at 2:00 p.m., July 14, 2000, at the offices of the Evergreen Funds,
200 Berkeley Street, 26th Floor, Boston, Massachusetts 02116, and at any
adjournments thereof. This prospectus/proxy statement, along with a Notice of
the Meeting and a proxy card, is first being mailed to shareholders of Equity
Income Fund on or about May 26, 2000. Only shareholders of record as of the
close of business on April 28, 2000 (the "Record Date") will be entitled to
notice of, and to vote at, the Meeting or any adjournment thereof.
If the enclosed form of proxy is properly executed and returned in time to be
voted at the Meeting, the proxies named therein will vote the shares represented
by the proxy in accordance with the instructions marked thereon. Unmarked
proxies will be voted FOR the proposed Merger and FOR any other matters deemed
appropriate. Proxies that reflect abstentions and "broker non-votes" (i.e.,
shares held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or the persons entitled to vote and (ii) the
broker or nominee does not have discretionary voting power on a particular
matter) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but will not have the effect
of being counted as votes against the Plan, which must be approved by a majority
of the votes cast and entitled to vote. A proxy may be revoked at any time on or
before the Meeting by written notice to the Secretary of Evergreen Equity Trust
at the address set forth on the cover of this prospectus/proxy statement. Unless
revoked, all valid proxies will be voted in accordance with the specifications
thereon or, in the absence of such specifications, FOR approval of the Plan and
the Merger contemplated thereby.
Approval of the Merger will require the affirmative vote of a majority (greater
than 50%) of Equity Income Fund's shares voted and entitled to vote at the
Meeting, assuming a quorum (at least 25% of the Fund's outstanding shares
entitled to vote) is present.
In voting for the Merger, all classes of Equity Income Fund will vote together
as if they were a single class, and each share will be entitled to one vote for
each dollar of net asset value applicable to such share.
Proxy solicitations will be made primarily by mail, but proxy solicitations may
also be made by telephone, through the Internet or personal solicitations
conducted by officers and employees of FUNB, its affiliates or other
representatives of Equity Income Fund (who will not be paid for their soliciting
activities). In addition, proxy solicitations may be made by Shareholder
Communications Corporation, the Fund's proxy solicitor. If you wish to
participate in the Meeting, you may submit the proxy card included with this
prospectus/proxy statement, vote by telephone, fax or by the Internet or attend
in person. (See the back of this prospectus/proxy statement for voting
instructions.) Any proxy given by you is revocable.
If Equity Income Fund shareholders do not vote to approve the Merger, the
Trustees will consider other possible courses of action in the best interests of
shareholders. In the event that sufficient votes to approve the Merger are not
received before the Meeting, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
Any such adjournment will require an affirmative vote by the holders of a
majority of the shares present in person or by proxy at the Meeting. The persons
named as proxies will vote upon such adjournment after consideration of all
circumstances which may bear upon a decision to adjourn the Meeting.
A shareholder who objects to the proposed Merger will not be entitled under
either Delaware law or the Declaration of Trust of Evergreen Equity Trust to
demand payment for, or an appraisal of, his or her shares. However, shareholders
should be aware that the Merger as proposed is not expected to result in
recognition of gain or loss to shareholders for federal income tax purposes and
that, if the Merger is consummated, shareholders will be free to redeem the
shares of Income and Growth Fund which they receive in the transaction at their
then-current net asset value. Shares of Equity Income Fund may be redeemed at
any time prior to the consummation of the Merger. Shareholders of Equity Income
Fund may wish to consult their tax advisors as to any differing consequences of
redeeming Fund shares prior to the Merger or exchanging such shares in the
Merger.
Equity Income Fund does not hold annual shareholder meetings. If the Merger is
not approved, shareholders wishing to submit proposals to be considered for
inclusion in a proxy statement for a subsequent shareholder meeting should send
their written proposals to the Secretary of Evergreen Equity Trust at the
address set forth on the cover of this prospectus/proxy statement so that they
will be received by the Fund in a reasonable period of time prior to the
meeting.
The votes of the shareholders of Income and Growth Fund are not being solicited
by this prospectus/proxy statement and are not required to carry out the Merger.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES. Please
advise Equity Income Fund whether other persons are beneficial owners of shares
for which proxies are being solicited and, if so, the number of copies of this
prospectus/proxy statement needed to supply copies to the beneficial owners of
the respective shares.
Shareholder Information
As of the Record Date, the following number of each class of shares of
beneficial interest of Equity Income Fund was outstanding:
Class of Shares Number of Shares
Class A
Class B
Class C
Class Y
All Classes
As of the Record Date, the officers and Trustees of Evergreen Equity Trust
beneficially owned as a group less than 1% of the outstanding shares of Equity
Income Fund and Income and Growth Fund. To Evergreen Equity Trust's knowledge,
the following persons owned beneficially or of record more than 5% of Equity
Income Fund's total outstanding shares as of the Record Date:
<TABLE>
<CAPTION>
Name and Address Class No. of Shares Percentage of Shares of Percentage of Shares of
- ---------------- ----- ------------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
To Evergreen Equity Trust's knowledge, the following persons owned beneficially
or of record more than 5% of Income and Growth Fund's total outstanding shares
as of the Record Date:
Name and Address Class No. of Shares Percentage of Shares of Percentage of Shares of
- ---------------- ----- ------------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
</TABLE>
FINANCIAL STATEMENTS AND EXPERTS
The Annual Reports of both Funds as of July 31, 1999, and the financial
statements and financial highlights for the periods indicated therein, have been
incorporated by reference herein and in the Registration Statement in reliance
upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Income and Growth
Fund will be passed upon by Sullivan & Worcester LLP, Washington, D.C.
ADDITIONAL INFORMATION
Equity Income Fund and Income and Growth Fund are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance therewith file reports and other information including
proxy material and charter documents with the SEC. These items can be inspected
and copies obtained at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices located at Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New York, New York
10048.
OTHER BUSINESS
The Trustees of Evergreen Equity Trust do not intend to present any other
business at the Meeting. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying form of proxy will
vote thereon in accordance with their judgment.
THE TRUSTEES OF EVERGREEN EQUITY TRUST RECOMMEND APPROVAL OF THE PLAN AND ANY
UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR OF
APPROVAL OF THE PLAN.
May 26, 2000
<PAGE>
INSTRUCTIONS FOR VOTING AND EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to you
and may help to avoid the time and expense involved in validating your vote if
you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the
Registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party signing
should conform exactly to a name shown in the Registration on the proxy
card.
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy card
should be indicated unless it is reflected in the form of Registration. For
example:
REGISTRATION VALID SIGNATURE
CORPORATE ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp. John Doe, Treasurer
c/o John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith John B. Smith, Jr.,
Executor
After completing your proxy card, return it in the enclosed postage paid
envelope.
<TABLE>
<CAPTION>
OTHER WAYS TO VOTE YOUR PROXY
Vote By Telephone: Vote By Internet:
<S> <C>
1. Read the prospectus/proxy statement and have your 1. Read the prospectus/proxy statement and have your
proxy card at hand. proxy card at hand.
2. Call toll-free 800-645-8640. 2. Go to the website indicated on your proxy
card and or to the "Proxy Voting" link on www.evergreen-
funds.com.
3. Enter the 12-digit control number found on your 3. Enter the 12-digit control number found on your
proxy card. proxy card
4. Follow the simple recorded instructions. 4. Follow the simple instructions.
</TABLE>
Vote By Fax:
1. Read the prospectus/proxy statement and have your proxy card at
hand.
2. Fax both front and back sides of your proxy card by calling the
number indicated on your proxy card and following the voting
instructions.
The above methods of voting are generally available 24 hours a day. Do not mail
the proxy card if you are voting by telephone, fax or the internet.
If you have any questions about the proxy card, please call Shareholder
Communications Corporation, our proxy solicitor, at 800-645-8640.
<PAGE>
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 30th day of April, 2000, by and between Evergreen Equity Trust, a
Delaware business trust, with its principal place of business at 200 Berkeley
Street, Boston, Massachusetts 02116 (the "Trust"), with respect to its Evergreen
Income and Growth Fund series (the "Acquiring Fund"), and the Trust, with
respect to its Evergreen Equity Income Fund series (the "Selling Fund").
This Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of (i) the transfer of all of
the assets of the Selling Fund in exchange solely for Class A, Class B, Class C
and Class Y shares of beneficial interest, $.001 par value per share, of the
Acquiring Fund (the "Acquiring Fund Shares"); (ii) the assumption by the
Acquiring Fund of the identified liabilities of the Selling Fund; and (iii) the
distribution, after the Closing Date hereinafter referred to, of the Acquiring
Fund Shares to the shareholders of the Selling Fund in liquidation of the
Selling Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are each a separate
investment series of an open-end, registered investment company of the
management type and the Selling Fund owns securities that generally are assets
of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial
interest;
WHEREAS, the Trustees of the Trust have determined that the exchange of
all of the assets of the Selling Fund for Acquiring Fund Shares and the
assumption of the identified liabilities of the Selling Fund by the Acquiring
Fund on the terms and conditions hereinafter set forth are in the best interests
of the Acquiring Fund's shareholders;
WHEREAS, the Trustees of the Trust have determined that the Selling
Fund should exchange all of its assets and the identified liabilities for
Acquiring Fund Shares and that the interests of the existing shareholders of the
Selling Fund will not be diluted as a result of the transactions contemplated
herein;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
A-23
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR
THE ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND
LIABILITIES AND LIQUIDATION OF THE SELLING FUND
1.1 THE EXCHANGE. Subject to the terms and conditions herein set forth
and on the basis of the representations and warranties contained herein, the
Selling Fund agrees to transfer all of the Selling Fund's assets as set forth in
paragraph 1.2 to the Acquiring Fund. The Acquiring Fund agrees in exchange
therefor (i) to deliver to the Selling Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, computed in the manner and as of the
time and date set forth in paragraphs 2.2 and 2.3; and (ii) to assume the
identified liabilities of the Selling Fund, as set forth in paragraph 1.3. Such
transactions shall take place on the Closing Date provided for in paragraph 3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of the Selling Fund to be
acquired by the Acquiring Fund shall consist of all property, including, without
limitation, all cash, securities, commodities, interests in futures and
dividends or interest receivables, that is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books of the Selling Fund
on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of Selling Fund's
assets as of the date thereof. The Selling Fund hereby represents that as of the
date of the execution of this Agreement there have been no changes in its
financial position as reflected in said financial statements other than those
occurring in the ordinary course of its business in connection with the purchase
and sale of securities and the payment of its normal operating expenses. The
Selling Fund reserves the right to sell any of such securities, but will not,
without the prior written approval of the Acquiring Fund, acquire any additional
securities other than securities of the type in which the Acquiring Fund is
permitted to invest.
The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a list of the securities, if any, on the
Selling Fund's list referred to in the second sentence of this paragraph that do
not conform to the Acquiring Fund's investment objectives, policies, and
restrictions. The Selling Fund will, within a reasonable period of time prior to
the Closing Date, furnish the Acquiring Fund with a list of its portfolio
securities and other investments. In the event that the Selling Fund holds any
investments that the Acquiring Fund may not hold, the Selling Fund, if requested
by the Acquiring Fund, will dispose of such securities prior to the Closing
Date. In addition, if it is determined that the Selling Fund and the Acquiring
Fund portfolios, when aggregated, would contain investments exceeding certain
percentage limitations imposed upon the Acquiring Fund with respect to such
investments, the Selling Fund if requested by the Acquiring Fund will dispose of
a sufficient amount of such investments as may be necessary to avoid violating
such limitations as of the Closing Date. Notwithstanding the foregoing, nothing
herein will require the Selling Fund to dispose of any investments or securities
if, in the reasonable judgment of the Selling Fund, such disposition would
adversely affect the tax-free nature of the Reorganization or would violate the
Selling Fund's fiduciary duty to its shareholders.
1.3 LIABILITIES TO BE ASSUMED. The Selling Fund will endeavor to
discharge all of its known liabilities and obligations prior to the Closing
Date. The Acquiring Fund shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and Liabilities of the
Selling Fund prepared on behalf of the Selling Fund, as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall assume only those liabilities of the Selling Fund reflected in such
Statement of Assets and Liabilities and shall not assume any other liabilities,
whether absolute or contingent, known or unknown, accrued or unaccrued, all of
which shall remain the obligation of the Selling Fund.
In addition, upon completion of the Reorganization, for purposes of
calculating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by the Acquiring Fund under the National
Association of Securities Dealers, Inc. Conduct Rule 2830 ("Aggregate NASD
Cap"), the Acquiring Fund will add to its Aggregate NASD Cap immediately prior
to the Reorganization the Aggregate NASD Cap of the Selling Fund immediately
prior to the Reorganization, in each case calculated in accordance with such
Rule 2830.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date
as is conveniently practicable (the "Liquidation Date"), (a) the Selling Fund
will liquidate and distribute pro rata to the Selling Fund's shareholders of
record, determined as of the close of business on the Valuation Date (the
"Selling Fund Shareholders"), the Acquiring Fund Shares received by the Selling
Fund pursuant to paragraph 1.1; and (b) the Selling Fund will thereupon proceed
to dissolve as set forth in paragraph 1.8 below. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Selling Fund on the books of the Acquiring
Fund to open accounts on the share records of the Acquiring Fund in the names of
the Selling Fund Shareholders and representing the respective pro rata number of
the Acquiring Fund Shares due such shareholders. All issued and outstanding
shares of the Selling Fund will simultaneously be canceled on the books of the
Selling Fund. The Acquiring Fund shall not issue certificates representing the
Acquiring Fund Shares in connection with such exchange.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Shares of the
Acquiring Fund will be issued in the manner described in the Prospectus/Proxy
Statement on Form N-14 which has been distributed to shareholders of the Selling
Fund as described in paragraph 4.1(o).
1.6 TRANSFER TAXES. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the Selling
Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the
Selling Fund is and shall remain the responsibility of the Selling Fund up to
and including the Closing Date and such later date on which the Selling Fund is
terminated.
1.8 TERMINATION. The Selling Fund shall be terminated promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on the New York Stock Exchange on the
business day next preceding the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the Trust's Declaration of Trust and the Acquiring Fund's then current
prospectus and statement of additional information or such other valuation
procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of the Acquiring
Fund Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Trust's Declaration of Trust and the
Acquiring Fund's then current prospectus and statement of additional
information.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares of
each class to be issued (including fractional shares, if any) in exchange for
the Selling Fund's assets shall be determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of the Selling Fund attributable to each of its
classes by the net asset value per share of the respective classes of the
Acquiring Fund determined in accordance with paragraph 2.2. Holders of Class A,
Class B, Class C and Class Y shares of the Selling Fund will receive Class A,
Class B, Class C and Class Y shares, respectively, of the Acquiring Fund.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
State Street Bank and Trust Company in accordance with its regular practice in
pricing the shares and assets of the Acquiring Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The closing of the Reorganization (the "Closing")
shall take place on or about July 21, 2000 or such other date as the parties may
agree to in writing (the "Closing Date"). All acts taking place at the Closing
shall be deemed to take place simultaneously immediately prior to the opening of
business on the Closing Date unless otherwise provided. The Closing shall be
held as of 9:00 a.m. at the offices of the Evergreen Funds, 200 Berkeley Street,
Boston, MA 02116, or at such other time and/or place as the parties may agree.
3.2 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation
Date (a) the New York Stock Exchange or another primary trading market for
portfolio securities of the Acquiring Fund or the Selling Fund shall be closed
to trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Selling Fund is impracticable, the Valuation Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.3 TRANSFER AGENT'S CERTIFICATE. Evergreen Service Company, as
transfer agent for the Selling Fund, shall deliver at the Closing a certificate
of an authorized officer stating that its records contain the names and
addresses of the Selling Fund Shareholders and the number and percentage
ownership of outstanding shares owned by each such shareholder immediately prior
to the Closing. The Acquiring Fund shall issue and deliver or cause Evergreen
Service Company, its transfer agent, to issue and deliver a confirmation
evidencing the Acquiring Fund Shares to be credited on the Closing Date to the
Secretary of the Trust or provide evidence satisfactory to the Selling Fund that
such Acquiring Fund Shares have been credited to the Selling Fund's account on
the books of the Acquiring Fund. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, share certificates, if any,
receipts and other documents as such other party or its counsel may reasonably
request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE SELLING FUND. The Selling Fund represents
and warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a
Delaware business trust duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
(b) The Selling Fund is a separate investment series of a
Delaware business trust that is registered as an investment company classified
as a management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), is in
full force and effect.
(c) The current prospectus and statement of additional
information of the Selling Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) The Selling Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not result,
in violation of any provision of the Trust's Declaration of Trust or By-Laws or
of any material agreement, indenture, instrument, contract, lease, or other
undertaking to which the Selling Fund is a party or by which it is bound.
(e) The Selling Fund has no material contracts or other
commitments (other than this Agreement) that will be terminated with liability
to it prior to the Closing Date, except for liabilities, if any, to be
discharged or reflected in the Statement of Assets and Liabilities as provided
in paragraph 1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted
by the Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Selling Fund or any of its properties
or assets, which, if adversely determined, would materially and adversely affect
its financial condition, the conduct of its business, or the ability of the
Selling Fund to carry out the transactions contemplated by this Agreement. The
Selling Fund knows of no facts that might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
(g) The unaudited semi-annual financial statements of the
Selling Fund at January 31, 2000 are in accordance with generally accepted
accounting principles consistently applied, and such statements (copies of which
have been furnished to the Acquiring Fund) fairly reflect the financial
condition of the Selling Fund as of such date, and there are no known contingent
liabilities of the Selling Fund as of such date not disclosed therein.
(h) Since January 31, 2000 there has not been any material
adverse change in the Selling Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Selling Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquiring Fund. For the purposes of this subparagraph (h), a
decline in the net asset value of the Selling Fund shall not constitute a
material adverse change.
(i) At the Closing Date, all federal and other tax returns and
reports of the Selling Fund required by law to have been filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid, or provision shall have been made for the
payment thereof. To the best of the Selling Fund's knowledge, no such return is
currently under audit, and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, the Selling Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains.
(k) All issued and outstanding shares of the Selling Fund are,
and at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Selling Fund. All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.3. The Selling Fund does not have outstanding any
options, warrants, or other rights to subscribe for or purchase any of the
Selling Fund shares, nor is there outstanding any security convertible into any
of the Selling Fund shares.
(l) At the Closing Date, the Selling Fund will have good and
marketable title to the Selling Fund's assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.2 and full right, power, and authority to sell,
assign, transfer, and deliver such assets hereunder, and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act, other than as
disclosed to the Acquiring Fund and accepted by the Acquiring Fund.
(m) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Selling
Fund and, subject to approval by the Selling Fund=s shareholders, this Agreement
constitutes a valid and binding obligation of the Selling Fund, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights and to general equity principles.
(n) The information furnished by the Selling Fund for use in
no-action letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with the
transactions contemplated hereby is accurate and complete in all material
respects and complies in all material respects with federal securities and other
laws and regulations thereunder applicable thereto.
(o) The Selling Fund has provided the Acquiring Fund with
information reasonably necessary for the preparation of a prospectus, which
included the proxy statement of the Selling Fund (the "Prospectus/Proxy
Statement"), all of which was included in a Registration Statement on Form N-14
of the Acquiring Fund (the "Registration Statement"), in compliance with the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act") and
the 1940 Act in connection with the meeting of the shareholders of the Selling
Fund to approve this Agreement and the transactions contemplated hereby. The
Prospectus/Proxy Statement included in the Registration Statement (other than
information therein that relates to the Acquiring Fund) does not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Acquiring Fund
represents and warrants to the
Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust that is registered as an investment company classified
as a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect.
(c) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring Fund is
a party or by which it is bound.
(e) Except as otherwise disclosed in writing to the Selling
Fund and accepted by the Selling Fund, no litigation, administrative proceeding
or investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect its financial condition and the conduct of its business or the
ability of the Acquiring Fund to carry out the transactions contemplated by this
Agreement. The Acquiring Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental body
that materially and adversely affects its business or its ability to consummate
the transactions contemplated herein.
(f) The unaudited semi-annual financial statements of the
Acquiring Fund at January 31, 2000 are in accordance with generally accepted
accounting principles consistently applied, and such statements (copies of which
have been furnished to the Selling Fund) fairly reflect the financial condition
of the Acquiring Fund as of such date, and there are no known contingent
liabilities of the Acquiring Fund as of such date not disclosed therein.
(g) Since January 31, 2000 there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Selling Fund. For the purposes of this subparagraph (g), a
decline in the net asset value of the Acquiring Fund shall not constitute a
material adverse change.
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid or provision shall have been made for the
payment thereof. To the best of the Acquiring Fund's knowledge, no such return
is currently under audit, and no assessment has been asserted with respect to
such returns.
(i) For each fiscal year of its operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains.
(j) All issued and outstanding Acquiring Fund Shares are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. The Acquiring Fund does not have outstanding any options,
warrants, or other rights to subscribe for or purchase any Acquiring Fund
Shares, nor is there outstanding any security convertible into any Acquiring
Fund Shares.
(k) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights and to general equity
principles.
(l) The Acquiring Fund Shares to be issued and delivered to
the Selling Fund, for the account of the Selling Fund Shareholders, pursuant to
the terms of this Agreement will, at the Closing Date, have been duly authorized
and, when so issued and delivered, will be duly and validly issued Acquiring
Fund Shares, and will be fully paid and non-assessable.
(m) The information furnished by the Acquiring Fund for use in
no-action letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with the
transactions contemplated hereby is accurate and complete in all material
respects and complies in all material respects with federal securities and other
laws and regulations applicable thereto.
(n) The Prospectus/Proxy Statement included in the
Registration Statement (only insofar as it relates to the Acquiring Fund) does
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
misleading.
(o) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act,
and such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Selling
Fund each will operate its business in the ordinary course between the date
hereof and the Closing Date, it being understood that such ordinary course of
business will include customary dividends and distributions.
5.2 INVESTMENT REPRESENTATION. The Selling Fund covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.3 APPROVAL BY SHAREHOLDERS. The Trust will call a meeting of the
shareholders of the Selling Fund to act upon this Agreement and to take all
other action necessary to obtain approval of the transactions contemplated
herein.
5.4 ADDITIONAL INFORMATION. The Selling Fund will assist the Acquiring
Fund in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Selling Fund shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Selling Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but
in any case within sixty days after the Closing Date, the Selling Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Selling Fund for
federal income tax purposes that will be carried over by the Acquiring Fund as a
result of Section 381 of the Code, and which will be reviewed by KPMG LLP and
certified by the Trust's President and Treasurer.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations, covenants, and warranties of the Acquiring
Fund contained in this Agreement shall be true and correct as of the date hereof
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by a duly authorized officer of the
Trust, in form and substance reasonably satisfactory to the Selling Fund and
dated as of the Closing Date, to such effect and as to such other matters as the
Selling Fund shall reasonably request.
6.2 The Selling Fund shall have received on the Closing Date an opinion
from Sullivan & Worcester LLP, counsel to the Acquiring Fund, dated as of the
Closing Date, in a form reasonably satisfactory to the Selling Fund, covering
the following points:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed, and
delivered by the Acquiring Fund and, assuming due authorization, execution and
delivery of this Agreement by the Selling Fund, is a valid and binding
obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) Assuming that a consideration therefor not less than the
net asset value thereof has been paid, the Acquiring Fund Shares to be issued
and delivered to the Selling Fund on behalf of the Selling Fund Shareholders as
provided by this Agreement are duly authorized and upon such delivery will be
legally issued and outstanding and fully paid and non-assessable, and no
shareholder of the Acquiring Fund has any preemptive rights in respect thereof.
(e) The Registration Statement, to such counsel's knowledge,
has been declared effective by the Commission and no stop order under the 1933
Act pertaining thereto has been issued, and to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the State of Delaware is required for consummation by
the Acquiring Fund of the transactions contemplated herein, except such as have
been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
(f) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Acquiring Fund is
a party or by which it is bound.
(g) Only insofar as they relate to the Acquiring Fund, the
descriptions in the Prospectus/Proxy Statement of statutes, legal and
governmental proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown.
(h) Such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.
(i) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Acquiring Fund or
any of its properties or assets and the Acquiring Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business, other
than as previously disclosed in the Registration Statement.
Such opinion shall contain such assumptions and limitations as shall be in the
opinion of Sullivan & Worcester LLP appropriate to render the opinions expressed
therein.
In this paragraph 6.2, references to the Prospectus/Proxy Statement
include and relate to only the text of such Prospectus/Proxy Statement and not
to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Selling Fund of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
7.1 All representations, covenants, and warranties of the Selling Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date, and the Selling Fund shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by a duly authorized
officer of the Trust, in form and substance satisfactory to the Acquiring Fund
and dated as of the Closing Date, to such effect and as to such other matters as
the Acquiring Fund shall reasonably request.
7.2 The Selling Fund shall have delivered to the Acquiring Fund a
statement of the Selling Fund's assets and liabilities, together with a list of
the Selling Fund's portfolio securities showing the tax costs of such securities
by lot and the holding periods of such securities, as of the Valuation Date,
certified by the Treasurer or Assistant Treasurer of the Trust.
7.3 The Acquiring Fund shall have received on the Closing Date an
opinion of Sullivan & Worcester LLP, counsel to the Selling Fund, in a form
satisfactory to the Acquiring Fund covering the following points:
(a) The Selling Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted.
(b) The Selling Fund is a separate investment series of a
Delaware business trust registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed and
delivered by the Selling Fund and, assuming due authorization, execution, and
delivery of this Agreement by the Acquiring Fund, is a valid and binding
obligation of the Selling Fund enforceable against the Selling Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the State of Delaware is required for consummation by the Selling Fund
of the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act, and as may be required under state
securities laws.
(e) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-laws, or any provision of
any material agreement, indenture, instrument, contract, lease or other
undertaking (in each case known to such counsel) to which the Selling Fund is a
party or by which it or any of its properties may be bound or, to the knowledge
of such counsel, result in the acceleration of any obligation or the imposition
of any penalty, under any agreement, judgment, or decree to which the Selling
Fund is a party or by which it is bound.
(f) Only insofar as they relate to the Selling Fund, the
descriptions in the Prospectus/Proxy Statement of statutes, legal and government
proceedings and material contracts, if any, are accurate and fairly present the
information required to be shown.
(g) Such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquired Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.
(h) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Selling Fund or
any of its respective properties or assets and the Selling Fund is neither a
party to nor subject to the provisions of any order, decree or judgment of any
court or governmental body, which materially and adversely affects its business
other than as previously disclosed in the Prospectus/Proxy Statement.
(i) Assuming that a consideration therefor of not less than
the net asset value thereof has been paid, and assuming that such shares were
issued in accordance with the terms of the Selling Fund's registration
statement, or any amendment thereto, in effect at the time of such issuance, all
issued and outstanding shares of the Selling Fund are legally issued and fully
paid and non-assessable.
Such opinion shall contain such other assumptions and limitations as shall be in
the opinion of Sullivan & Worcester LLP appropriate to render the opinions
expressed therein.
In this paragraph 7.3, references to the Prospectus/Proxy Statement
include and relate to only the text of such Prospectus/Proxy Statement and not
to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE SELLING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Selling Fund in accordance with the provisions of the Trust=s Declaration of
Trust and By-Laws and certified copies of the resolutions evidencing such
approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund or the Selling Fund
may waive the conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, nor instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act and no action, suit or
other proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein.
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of state Blue Sky securities authorities,
including any necessary "no-action" positions of and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Selling Fund,
provided that either party hereto may for itself waive any of such conditions.
8.4 No stop orders suspending the effectiveness of the Registration
Statement shall have been issued and, to the best knowledge of the parties
hereto, no investigation or proceeding for that purpose shall have been
instituted or be pending, threatened or contemplated under the 1933 Act.
8.5 The Selling Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the shareholders of the Selling Fund all of the Selling Fund's net investment
company taxable or tax-exempt income for all taxable periods ending on or prior
to the Closing Date (computed without regard to any deduction for dividends
paid) and all of its net capital gains realized in all taxable periods ending on
or prior to the Closing Date (after reduction for any capital loss
carryforward).
8.6 The parties shall have received a favorable opinion of Sullivan &
Worcester LLP addressed to the Acquiring Fund and the Selling Fund substantially
to the effect that for federal income tax purposes:
(a) The transfer of all of the Selling Fund assets in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund followed by the distribution of the
Acquiring Fund Shares to the Selling Fund Shareholders in dissolution and
liquidation of the Selling Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code and the Acquiring Fund and the
Selling Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code.
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the identified
liabilities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund
upon the transfer of the Selling Fund assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Selling Fund
Shareholders in exchange for their shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund.
(e) The aggregate tax basis for the Acquiring Fund Shares
received by each Selling Fund Shareholder pursuant to the Reorganization will be
the same as the aggregate tax basis of the Selling Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Acquiring Fund Shares to be received by each Selling Fund Shareholder will
include the period during which the Selling Fund shares exchanged therefor were
held by such shareholder (provided the Selling Fund shares were held as capital
assets on the date of the Reorganization).
(f) The tax basis of the Selling Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the Selling
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Selling Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Selling Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Selling Fund may waive the conditions set forth in this paragraph
8.6.
8.7 The Acquiring Fund shall have received from KPMG LLP a letter
addressed to the Acquiring Fund, in form and substance satisfactory to the
Acquiring Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Selling Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the Capitalization Table
appearing in the Registration Statement and Prospectus/Proxy Statement has been
obtained from and is consistent with the accounting records of the Selling Fund;
and
(c) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the data utilized in the
calculations of the pro forma expense ratios appearing in the Registration
Statement and Prospectus/Proxy Statement agree with underlying accounting
records of the Selling Fund or with written estimates by the Selling Fund's
management and were found to be mathematically correct.
In addition, unless waived by the Acquiring Fund, the Acquiring Fund
shall have received from KPMG LLP a letter addressed to the Acquiring Fund dated
on the Closing Date, in form and substance satisfactory to the Acquiring Fund,
to the effect that on the basis of limited procedures agreed upon by the
Acquiring Fund (but not an examination in accordance with generally accepted
auditing standards), the net asset value per share of the Selling Fund as of the
Valuation Date was computed and the valuation of the portfolio was consistent
with the valuation practices of the Acquiring Fund.
8.8 The Selling Fund shall have received from KPMG LLP a letter
addressed to the Selling Fund, in form and substance satisfactory to the Selling
Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards), the Capitalization Table appearing
in the Registration Statement and Prospectus/Proxy Statement has been obtained
from and is consistent with the accounting records of the Acquiring Fund; and
(c) on the basis of limited procedures agreed upon by the
Selling Fund (but not an examination in accordance with generally accepted
auditing standards), the data utilized in the calculations of the pro forma
expense ratios appearing in the Registration Statement and Prospectus/Proxy
Statement agree with written estimates by each Fund's management and were found
to be mathematically correct.
ARTICLE IX
EXPENSES
9.1 Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Selling Fund and the
Acquiring Fund, whether incurred before or after the date of this Agreement,
will be borne by First Union National Bank. Such expenses include, without
limitation, (a) expenses incurred in connection with the entering into and the
carrying out of the provisions of this Agreement; (b) expenses associated with
the preparation and filing of the Registration Statement under the 1933 Act
covering the Acquiring Fund Shares to be issued pursuant to the provisions of
this Agreement; (c) registration or qualification fees and expenses of preparing
and filing such forms as are necessary under applicable state securities laws to
qualify the Acquiring Fund Shares to be issued in connection herewith in each
state in which the Selling Fund Shareholders are resident as of the date of the
mailing of the Prospectus/Proxy Statement to such shareholders; (d) postage; (e)
printing; (f) accounting fees; (g) legal fees; and (h) solicitation costs of the
transaction. Notwithstanding the foregoing, the Acquiring Fund shall pay its own
federal and state registration fees.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties, and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall not survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or
the Selling Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
(a) of a breach by the other of any representation, warranty,
or agreement contained herein to be performed at or prior to the Closing Date,
if not cured within 30 days; or
(b) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Selling Fund, the Trust, its Trustees or officers, to the
other party, but each shall bear the expenses incurred by it incidental to the
preparation and carrying out of this Agreement as provided in paragraph 9.1.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Selling Fund and the Acquiring Fund; provided, however, that no such
amendment may have the effect of changing the provisions for determining the
number of the Acquiring Fund Shares to be issued to the Selling Fund
Shareholders under this Agreement to the detriment of such Shareholders without
their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflicts
of laws provisions thereof.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of the Acquiring Fund
and the Selling Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Trust personally,
but shall bind only the trust property of the Acquiring Fund and of the Selling
Fund, as provided in the Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust on
behalf of the Acquiring Fund and the Selling Fund and signed by authorized
officers of the Trust, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officers shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Acquiring Fund
and of the Selling Fund as provided in the Declaration of Trust of the Trust.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all
as of the date first written above.
EVERGREEN EQUITY TRUST
ON BEHALF OF EVERGREEN INCOME
AND GROWTH FUND
By:
Name:
Title:
EVERGREEN EQUITY TRUST
ON BEHALF OF EVERGREEN EQUITY
INCOME FUND
By:
Name:
Title:
<PAGE>
EVERGREEN
Income and Growth Fund
Fund at a Glance as of July 31, 1999
Portfolio Management
--------------------
[PHOTO OF PHILLIP M. FOREMAN APPEARS HERE]
Phillip M. Foreman,
CFP, CFA
Tenure: September 1999
[PHOTO OF IRENE D. O'NEILL APPEARS HERE]
Irene D. O'Neill, CFA
Tenure: December 1997
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
-------------------------------------------------------------------------------
[CHART APPEARS HERE]
Size Style
Value Blend Growth
Large
Medium X
Small
Morningstar's Style Box is based on a portfolio date as of 7/31/99.
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: 1999 Morningstar, Inc.
/2/ Past performance is no guarantee of future results. The investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than original cost. The performance of each class may
vary based on differences in loads and fees paid by the shareholders investing
in each class.
Historical performance shown for Classes A, B, and C prior to their inception is
based on the performance of Class Y, the original class offered. These
historical returns for Classes A, B, and C have not been adjusted to reflect the
effect of each class' 12b-1 fees. These fees for Class A are 0.25%, for Class B
are 1.00% and for Class C are 1.00%. Class Y does not pay a 12b-1 fee. If these
fees had been reflected, returns would have been lower. Returns reflect expense
limits previously in effect, without which returns would have been lower.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/2/
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Inception Date: 8/31/78 Class A Class B Class C Class Y
Class Inception Date 1/3/95 1/3/95 1/3/95 8/31/78
Average Annual Returns*
<S> <C> <C> <C> <C>
1 year with sales charge 6.80% 6.48% 10.37% n/a
1 year w/o sales charge 12.14% 11.34% 11.34% 12.46%
3 years 13.94% 14.21% 14.96% 16.11%
5 years 12.68% 12.79% 13.01% 14.02%
10 years 9.42% 9.58% 9.58% 10.07%
Since Portfolio Inception 13.85% 13.94% 13.93% 14.18%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC Yield 2.02% 1.37% 1.37% 2.38%
12-month income dividends per share $0.93 $0.80 $0.80 $1.02
12-month capital gain distributions per share $2.13 $2.13 $2.13 $2.13
</TABLE>
* Adjusted for maximum applicable sales charge unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Evergreen Income and Consumer Price Wilshire 5000
Period End Growth A Market Value Index - US Value Value
1/31/95 9,526 10,000 10,000
7/31/95 10,843 10,146 12,149
7/31/96 11,718 10,443 13,933
7/31/97 15,045 10,679 20,510
7/31/98 16,230 10,858 24,005
7/31/99 18,201 11,058 28,314
Comparison of change in value of a $10,000 investment in Evergreen Income and
Growth Fund, Class A, the Wilshire 5000 Index (Wilshire 5000) and the Consumer
Price Index (CPI).
The Wilshire 5000 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.
<PAGE>
EVERGREEN
Income and Growth Fund
Portfolio Manager Interview
How did the Fund perform?
The Fund had very strong performance. For the 12 months ended July 31, 1999, the
Evergreen Income and Growth Fund's Class A shares had a total return, before the
deduction of any applicable sales charges, of 12.14%. During the same 12-month
period, the average return among funds in the income fund category was 5.41%,
according to Lipper, Inc., an independent monitor of mutual fund performance.
The Wilshire 5000 Index reported an 18.35% return for this same period.
One of the noteworthy developments during the year was the merger of the former
Evergreen American Retirement Fund into the Evergreen Income and Growth Fund on
July 31, 1999.
Portfolio
Characteristics
---------------
(as of 7/31/1999 unless noted)
Total Net Assets $1,070,659,522
Number of Holdings 193
P/E Ratio* 19.2x
Beta* 0.66
* as of 6/30/1999
-------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JULY 31, 1999
-------------------------------------------------------------------------------
(as a percentage of net assets)
[PIE CHART APPEARS HERE]
Common Stock - 65.7%
Convertible Preferred Stock - 17.9%
Cash Equivalents and other - 15.0%
Convertible Debentures - 1.4%
What factors affected performance?
The Fund benefited from its emphasis on telecommunications and energy-related
stocks. The rapid growth in telecommunications helped a number of Fund holdings
during the year, while the rise in oil prices early in 1999 led to strong
performance by a number of energy holdings late in the fiscal year. Acquisition
offers for several companies held by the Fund in both the telecommunications and
energy sectors also contributed to performance. In addition, as the 12-month
period progressed, investors began to show renewed interest in value stocks as
market leadership broadened beyond a narrow band of large-cap growth stocks.
During the early months of the fiscal year, value stocks were particularly hard
hit as investors worried that problems in emerging markets would hurt world
economic growth. After interest rates abroad began declining, however, investors
began to regain confidence in foreign markets and in the stocks of many
companies in cyclical industries, i.e., those closely linked to changes in the
economic cycle. This renewed confidence in the direction of the world economy
supported the performance of many value-related stocks in the commodity,
industrial and other cyclical sectors.
What investment themes did you emphasize?
We maintained our long-term, value-oriented focus, looking for opportunities
among consolidating industries where the potential for mergers and acquisitions
would be high, and in companies that were undergoing re-structuring and
cost-cutting programs. We also looked for opportunities in industries undergoing
significant growth, such as in telecommunications. We also took profits from
successful investments in the banking sector and used
<PAGE>
EVERGREEN
Income and Growth Fund
Portfolio Manager Interview
them to re-allocate the portfolio into other areas. We believed, especially in
light of rising interest rates, that there were better opportunities outside
banking.
Although the Fund finished the fiscal year with a relatively high cash position
of about 9.5% of net assets, this was more a temporary result of portfolio
re-allocation moves than a decision to become more defensive by raising cash.
Top 5 Industries
----------------
(as a percentage of net assets)
Banks 13.8%
Utilities -- Electric 11.8%
Healthcare Products & Services 6.3%
Oil / Energy 6.0%
Electrical Equipment & Services 5.4%
What were some examples of Fund investments involved in mergers and
acquisitions?
In the energy sector, worthy of note, is the pending acquisition of Atlantic
Richfield by BP Amoco.
In addition, two fund holdings in the banking industry also are the subject of
pending acquisitions by larger banks. Mercantile Bank Corp. is to be taken over
by Firstar Corp, while First American Corp is scheduled to be acquired by
AmSouth Bank Corp.
Finally, two investments in the utility sector also are the subject of pending
takeovers. TNP Enterprises, an electric company, is being acquired by an
investor group, while Frontier Corp. a telecommunications firm, has received an
acquisition offer from Global Crossing.
What Fund holdings have been involved in restructuring?
The Fund has a long-term record of finding interesting opportunities among
undervalued stocks of companies that are undergoing restructuring programs which
have the potential to increase the value of the business. Two recent examples,
one in the energy sector and one in the transportation sector, illustrate that
theme.
New management has taken over at Equitable Resources, an integrated energy
company whose primary focus is in natural gas, predominately in the Appalachian
region. The new management has undertaken an aggressive cost-cutting program
that also involves redeploying assets and share buybacks. As a result, the
company's return on capital and earnings growth rate have increased, and the
stock has started to perform exceptionally well.
In transportation, Union Pacific had been having problems digesting its
acquisition of another railroad company, Southern Pacific. Union Pacific started
an aggressive re-structuring program in the spring of 1998, resulting in a
substantial improvement in earnings and a rebound in its stock price.
How has the Fund taken advantage of the opportunities in telecommunications?
Telecommunications has been a spectacular performer for the Fund. This industry
has been restructuring since 1984 when the old AT&T was broken up and that
process is accelerating. The recent catalyst for growth is the explosion in
telecommunications traffic in wireless, data transmission and over the internet.
This explosion has created the need for equipment with greater capacity, greater
speed and improved security. Companies are scrambling to gain access to
customers. The need for many companies quickly to become full-service providers
also has led to a heightened rate of industry consolidation.
<PAGE>
EVERGREEN
Income and Growth Fund
Portfolio Manager Interview
Qualcomm, the best-performing stock for the Fund during the fiscal year, is an
excellent example. Qualcomm has developed a proprietary wireless technology that
is being adopted as a global standard for digital systems because of its ability
to increase capacity, add clarity, and secure transmissions.
Frontier Corp. is another example. It started out as a local telephone company
in the Rochester, N.Y., area, but has developed a long distance business and
made strategic investments in a data transmission fiber optic system. With its
access to a customer base, Frontier was an attractive acquisition target in the
current industry consolidation. It is now the subject of an acquisition offer by
Global Crossing.
Another example is Qwest Communications, a long distance fiber optic system
builder and operator that is a relatively recent investment for the Fund. It has
made an acquisition offer for a regional telephone company, U.S. West. This
transaction will expand Qwest's product offering beyond basic long haul service
and provide a new base of customers, resulting in greater revenue and earnings
growth potential.
In addition, Vodafone, a major British-based company, recently acquired
AirTouch, another Fund holding, to gain entry into the U.S. wireless phone
market as well as to expand its international presence.
Finally, a good example of the Fund's search for unusual opportunities is
Houston Industries, a diversified company that sold its cable TV business to
Time Warner. We bought the convertible security of Houston Industries that is
convertible into shares of Time Warner stock.
Top 10 Holdings
---------------
(as a percentage of net assets)
Williams Companies, Inc. 2.4%
Thomas & Betts Corp. 2.3%
Qualcomm Financial Trust I, convertible preferred 2.2%
Dana Corp. 2.2%
New Holland NV 2.2%
National Australia Bank Ltd. 2.1%
Southern Co. 2.0%
Qwest Trends Trust, convertible preferred 1.8%
Frontier Corp. 1.8%
Murphy Oil Corp. 1.7%
What other Fund investments have been particularly notable?
Shared Medical Systems has done exceptionally well. This company provides
healthcare information systems to hospitals and other large healthcare
institutions. Shared Medical has been in a very strong position as the
healthcare sector needs to reduce costs to offset lower rates of Medicare
reimbursement by the government. This trend is driving expanded use of
information technology by hospitals.
What is your outlook?
We have a favorable outlook because we think stocks with significant dividend
yields should provide protection for investors, even in a market downturn. In
the near-term, the market will be focused on interest rates and will be
concerned about whether rising rates could slow economic growth. Inflation,
however, does not appear to be a threat, and so it does not appear likely the
Federal Reserve Board will raise short-term interest rates significantly. Longer
term, we think the Fund's emphasis on value stocks and higher yielding stocks
should continue to provide good investment opportunities.
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
OF
INCOME AND GROWTH FUND
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of Assets of
EVERGREEN EQUITY INCOME FUND
a Series of
EVERGREEN EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898
By and In Exchange For Shares of
EVERGREEN INCOME AND GROWTH FUND
a Series of
EVERGREEN EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets and liabilities of Evergreen Equity Income Fund
("Equity Income Fund"), a series of Evergreen Equity Trust, to Evergreen Income
and Growth Fund ("Income and Growth Fund"), a series of Evergreen Equity Trust,
in exchange for Class A, Class B, Class C and Class Y shares (to be issued to
holders of Class A, Class B, Class C and Class Y shares, respectively, of Equity
Income Fund,) of beneficial interest, $0.001 par value per share, of Income and
Growth Fund, consists of this cover page and the following described documents,
each of which is attached hereto and incorporated by reference herein:
(1) The Statement of Additional Information of Equity Income Fund and Income
and Growth Fund dated December 1, 1999;
(2) Annual Report of Equity Income Fund and Income and Growth Fund for the year
ended July 31, 1999;
(3) Semi-Annual Report of Equity Income Fund and Income and Growth Fund for the
six-month period ended January 31, 2000; and
(4) Pro Forma Financial Statements as of January 31, 2000.
This Statement of Additional Information, which is not a prospectus,
supplements, and should be read in conjunction with, the Prospectus/Proxy
Statement of Equity Income Fund and Income and Growth Fund dated May 26, 2000. A
copy of the Prospectus/Proxy Statement may be obtained without charge by calling
or writing to Evergreen Equity Trust at the telephone numbers or addresses set
forth above.
The date of this Statement of Additional Information is May 26, 2000.
<PAGE>
EVERGREEN EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
GROWTH AND INCOME FUNDS
STATEMENT OF ADDITIONAL INFORMATION
December 1, 1999
Evergreen Blue Chip Fund ("Blue Chip Fund")
Evergreen Equity Income Fund ("Equity Income Fund")
Evergreen Growth and Income Fund ("Growth and Income Fund")
Evergreen Income and Growth Fund ("Income and Growth Fund")
Evergreen Small Cap Value Fund ("Small Cap Value Fund")
Evergreen Utility Fund ("Utility Fund")
Evergreen Value Fund ("Value Fund")
(Each a "Fund"; together, the "Funds")
Each Fund is a series of Evergreen Equity
Trust (the "Trust").
This Statement of Additional Information ("SAI") pertains to all
classes of shares of the Funds listed above. It is not a prospectus but should
be read in conjunction with the prospectus dated December 1, 1999 for the Fund
in which you are interested. The Funds are offered through a single prospectus
offering Class A, Class B, Class C and Class Y shares of each Fund. You may
obtain the prospectus by calling (800) 343-2898.
Certain information may be incorporated by reference to the Funds'
Annual Report dated July 31, 1999. You may obtain a copy of the Annual Report
without charge by calling (800) 343-2898 or downloading it off our website at
www.evergreen-funds.com.
<PAGE>
TABLE OF CONTENTS
PART 1
TRUST HISTORY................................................................1-1
INVESTMENT POLICIES..........................................................1-1
OTHER SECURITIES AND PRACTICES...............................................1-2
PRINCIPAL HOLDERS OF FUND SHARES.............................................1-3
EXPENSES.....................................................................1-8
PERFORMANCE.................................................................1-16
SERVICE PROVIDERS...........................................................1-18
FINANCIAL STATEMENTS........................................................1-20
PART 2
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES................2-1
PURCHASE AND REDEMPTION OF SHARES...........................................2-17
SALES CHARGE WAIVERS AND REDUCTIONS.........................................2-19
PRICING OF SHARES...........................................................2-22
PERFORMANCE CALCULATIONS....................................................2-23
PRINCIPAL UNDERWRITER.......................................................2-25
DISTRIBUTION EXPENSES UNDER RULE 12b-1......................................2-25
TAX INFORMATION.............................................................2-28
BROKERAGE...................................................................2-31
ORGANIZATION................................................................2-32
INVESTMENT ADVISORY AGREEMENT...............................................2-34
MANAGEMENT OF THE TRUST.....................................................2-35
CORPORATE AND MUNICIPAL BOND RATINGS........................................2-38
ADDITIONAL INFORMATION......................................................2-48
<PAGE>
PART 1
TRUST HISTORY
The Trust is an open-end management investment company, which was
organized as a Delaware business trust on September 18, 1997. Each Fund is a
diversified series of the Trust. A copy of the Declaration of Trust is on file
as an exhibit to the Trust's Registration Statement, of which this SAI is a
part. Evergreen Equity Income Fund (formerly Evergreen Fund for Total Return)
changed its name on April 6, 1999. Also on April 6, 1999, Evergreen Small Cap
Value Fund (formerly Evergreen Small Cap Equity Fund) changed its name.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT RESTRICTIONS
Each Fund has adopted the fundamental investment restrictions set forth
below which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined in the Investment Company Act of 1940 (the "1940
Act"). Where necessary, an explanation beneath a fundamental policy describes
the Fund's practices with respect to that policy, as allowed by current law. If
the law governing a policy changes, the Fund's practices may change accordingly
without a shareholder vote. Unless otherwise stated, all references to the
assets of the Fund are in terms of current market value.
1. Diversification
Each Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
Further Explanation of Diversification Policy:
To remain classified as a diversified investment company under the 1940
Act, each Fund must conform with the following: With respect to 75% of its total
assets, a diversified investment company may not invest more than 5% of its
total assets, determined at market or other fair value at the time of purchase,
in the securities of any one issuer, or invest in more than 10% of the
outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to investments in securities issued or
guaranteed by the United States ("U.S.") government or its agencies or
instrumentalities.
2. Concentration
Each Fund may not concentrate its investments in the securities of
issuers primarily engaged in any particular industry (other than securities that
are issued or guaranteed by the U.S. government or its agencies or
instrumentalities), except that Utility Fund will concentrate its investments in
utility industries.
Further Explanation of Concentration Policy: Each Fund except Utility
Fund may not invest more than 25% of its total assets, taken at market value, in
the securities of issuers primarily engaged in any particular industry (other
than securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities), except that Utility Fund is required to invest at least 65%
of its total assets in utility industries.
<PAGE>
3. Issuing Senior Securities
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
4. Borrowing
Each Fund may not borrow money, except to the extent permitted by
applicable law.
Further Explanation of Borrowing Policy:
Each Fund may borrow from banks and enter into reverse repurchase
agreements in an amount up to 33 1/3% of its total assets, taken at market
value. Each Fund may also borrow up to an additional 5% of its total assets from
banks or others. A Fund may borrow only as a temporary measure for extraordinary
or emergency purposes such as the redemption of Fund shares. A Fund may purchase
additional securities so long as borrowings do not exceed 5% of its total
assets. Each Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities. Each Fund may purchase
securities on margin and engage in short sales to the extent permitted by
applicable law
5. Underwriting
Each Fund may not underwrite securities of other issuers, except
insofar as a Fund may be deemed to be an underwriter in connection with the
disposition of its portfolio securities.
6. Real Estate
Each Fund may not purchase or sell real estate, except that, to the
extent permitted by applicable law, a Fund may invest in (a) securities that are
directly or indirectly secured by real estate, or (b) securities issued by
issuers that invest in real estate.
7. Commodities
Each Fund may not purchase or sell commodities or contracts on
commodities, except to the extent that a Fund may engage in financial futures
contracts and related options and currency contracts and related options and may
otherwise do so in accordance with applicable law and without registering as a
commodity pool operator under the Commodity Exchange Act.
8. Lending
Each Fund may not make loans to other persons, except that a Fund may
lend its portfolio securities in accordance with applicable law. The acquisition
of investment securities or other investment instruments shall not be deemed to
be the making of a loan.
Further Explanation of Lending Policy:
To generate income and offset expenses, a Fund may lend portfolio
securities to broker-dealers and other financial institutions in an amount up to
33 1/3% of its total assets, taken at market value. While securities are on
loan, the borrower will pay the Fund any income accruing on the security. The
Fund may invest any collateral it receives in additional portfolio securities,
such as U.S. Treasury notes, certificates of deposit, other high-grade,
short-term obligations or interest bearing cash equivalents. Gains or losses in
the market value of a security lent will affect the Fund and its shareholders.
When a Fund lends its securities, it will require the borrower to give
the Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The Fund has the right to call
a loan and obtain the securities lent any time on notice of not more than five
business days. The Fund may pay reasonable fees in connection with such loans.
OTHER SECURITIES AND PRACTICES
For information regarding securities the Funds may purchase and
investment practices the Funds may use, see the following section in Part 2 of
this SAI under "Additional Information on Securities and Investment Practices."
Information provided in the sections listed below expands upon and supplements
information provided in the Funds' prospectus. The list below applies to all
Funds unless otherwise noted.
Money Market Instruments
Convertible Securities
U.S. Government Securities
When-Issued, Delayed-Delivery and Forward Commitment Transactions (not
applicable to Growth and Income Fund, Income and Growth Fund and Small Cap
Value Fund)
Repurchase Agreements
Reverse Repurchase Agreements (not applicable to Growth and Income Fund and
Income and Growth Fund)
Options
Futures Transactions
Foreign Securities (not applicable to Growth and Income Fund)
Foreign Currency Transactions (not applicable to Growth and Income Fund)
High Yield, High Risk Bonds (applicable only to Equity Income Fund and Growth
and Income Fund)
Illiquid and Restricted Securities
Investment in Other Investment Companies
Short Sales (applicable only to Growth and Income Fund and
Income and Growth Fund)
Warrants (applicable only to Blue Chip Fund)
Limited Partnerships (applicable only to Blue Chip Fund)
Payment-in-kind Securities
Securities Lending Swaps, Caps, Floors and Collars
Real Estate Investment Trusts
(applicable only to Income and Growth Fund and Small Cap Value Fund)
PRINCIPAL HOLDERS OF FUND SHARES
As of November 1, 1999, the officers and Trustees of the Trust owned as
a group less than 1% of the outstanding shares of any class of each Fund.
Set forth below is information with respect to each person who, to each
Fund's knowledge, owned beneficially or of record more than 5% of the
outstanding shares of any class of each Fund as of November 1, 1999.
<PAGE>
----------------------------------------------------------------
Blue Chip Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Blue Chip Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Blue Chip Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------
Douglas M. Ellingson 12.74%
1833 East Carver Street
Tempe, AZ 85284-2509
---------------------------------------------------- -----------
---------------------------------------------------- -----------
Douglas M. Ellingson TTEE 8.49%
Ellingson Irrevocable Trust
1833 East Carver Street
Tempe, AZ 85284-2509
---------------------------------------------------- -----------
---------------------------------------------------- -----------
MLPF&S For the Sole Benefit of Its Customers 5.80%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
---------------------------------------------------- -----------
Blue Chip Fund Class Y
---------------------------------------------------- -----------
---------------------------------------------------- -----------
First Union National Bank BK/EB/INT 56.69%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor CMG 1151
Charlotte, NC 28202-1911
---------------------------------------------------- -----------
---------------------------------------------------- -----------
First Union National Bank EB/INT 19.45%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor CMG 1151
Charlotte, NC 28202-1911
---------------------------------------------------- -----------
<PAGE>
----------------------------------------------------------------
Equity Income Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------
MLPF&S For the Sole Benefit of Its Customers 5.13%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
----------------------------------------------------------------
Equity Income Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------
MLPF&S For the Sole Benefit of Its Customers 8.86%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
<PAGE>
----------------------------------------------------------------
Equity Income Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------
Lavedna Ellingson 19.11%
Douglas Ellingson TTEES
Lavedna Ellingson Marital Trust U/A Dtd 5-1-86
8510 McClintock
Tempe, AZ 85284-2527
---------------------------------------------------- -----------
---------------------------------------------------- -----------
MLPF&S for the Sole Benefit of Its Customers 10.60%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
---------------------------------------------------- -----------
State Street Bank and Trust Company Custodian 5.07%
Rollover IRA FBO
Warren C. Smothers
C/O Linsco Private Ledger
4402 Vance Jackson Suite 101
San Antonio, TX 78230-5333
---------------------------------------------------- -----------
----------------------------------------------------------------
Equity Income Fund Class Y
----------------------------------------------------------------
---------------------------------------------------- -----------
First Union National Bank/EB/INT 70.99%
Reinvest Account
Attn: Joe Gainey
401 S. Tryon St. 3rd Fl.
Charlotte, NC 28202-1911
---------------------------------------------------- -----------
---------------------------------------------------- -----------
State Street Bank and Trust Company 6.36%
Custodian Rollover IRA FBO
Arnold Lieber
33 W. 88th Street
New York, NY 10024-2537
---------------------------------------------------- -----------
---------------------------------------------------- -----------
State Street Bank and Trust Company Custodian IRA 5.62%
FBO
Mitchell S. Cohen
23 Gregory Lane
Millwood, NY 10546-1039
---------------------------------------------------- -----------
----------------------------------------------------------------
Growth and Income Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Growth and Income Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
<PAGE>
----------------------------------------------------------------
Growth and Income Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------
MLPF&S For the Sole Benefit of Its Customers 19.38%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
----------------------------------------------------------------
Growth and Income Fund Class Y
----------------------------------------------------------------
---------------------------------------------------- -----------
First Union National Bank EB/INT 49.34%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG 1151
Charlotte, NC 28202-1911
---------------------------------------------------- -----------
---------------------------------------------------- -----------
First Union National Bank EB/INT 25.51%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG 1151
Charlotte, NC 28202-1911
---------------------------------------------------- -----------
<PAGE>
----------------------------------------------------------------
Income and Growth Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Income and Growth Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Income and Growth Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Income and Growth Fund Class Y
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Small Cap Value Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Small Cap Value Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------
MLPF&S For the Sole Benefit of Its Customers 8.28%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
----------------------------------------------------------------
Small Cap Value Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------
MLPF&S For the Sole Benefit of Its Customers 17.12%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
----------------------------------------------------------------
Small Cap Value Fund Class Y
----------------------------------------------------------------
---------------------------------------------------- -----------
First Union National BK EB/INT 64.06%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG 1151
Charlotte, NC 28202-1911
---------------------------------------------------- -----------
---------------------------------------------------- -----------
First Union National Bank EB/INT 17.55%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG 1151
Charlotte, NC 28202-1911
---------------------------------------------------- -----------
----------------------------------------------------------------
Income and Growth Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Income and Growth Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Income and Growth Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Income and Growth Fund Class Y
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Utility Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Utility Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
<PAGE>
----------------------------------------------------------------
Utility Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------
Wexford Clearing Services Corp. 14.43%
Edward S. Carrier
57 Walbridge Road
West Hartford, CT 06119-1344
---------------------------------------------------- -----------
---------------------------------------------------- -----------
MLPF&S For the Sole Benefit of Its Customers 9.61%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
---------------------------------------------------- -----------
State Street Bank and Trust Company 9.11%
Custodian
Rollover IRA FBO
Sandra K. Rosenberg
1558 Park Circle
Mendota Heights, MN 55118-2745
---------------------------------------------------- -----------
---------------------------------------------------- -----------
PaineWebber FBO 5.01%
Dee Ann Thomas
682 Broad Ave. So.
Naples, FL 34102
---------------------------------------------------- -----------
----------------------------------------------------------------
Utility Fund Class Y
----------------------------------------------------------------
---------------------------------------------------- -----------
First Union National Bank 63.83%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28202-1910
---------------------------------------------------- -----------
---------------------------------------------------- -----------
First Union National Bank 13.56%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S.Tryon Street
Charlotte, NC 28202-1910
---------------------------------------------------- -----------
---------------------------------------------------- -----------
Khalid Iqbal C/F 6.11%
Fatima Khalid IQBAL
Unif Gift Min ACT KY
401 Bogle Street
Somerset, KY 42503-2870
---------------------------------------------------- -----------
<PAGE>
----------------------------------------------------------------
Value Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Value Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------
None
---------------------------------------------------- -----------
----------------------------------------------------------------
Value Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------
Donaldson Lufkin Jenrette 13.12%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
---------------------------------------------------- -----------
---------------------------------------------------- -----------
Douglas M. Ellingson 10.37%
1833 East Carver St.
Tempe, AZ 85284-2509
---------------------------------------------------- -----------
---------------------------------------------------- -----------
Douglas M. Ellingson TTEE 6.91%
Ellingson Irrevocable Trust
1833 E. Carver St.
Tempe, AZ 85284-2509
---------------------------------------------------- -----------
----------------------------------------------------------------
Value Fund Class Y
----------------------------------------------------------------
---------------------------------------------------- -----------
First Union National Bank 65.74%
Trust Accounts
Attn: Ginny Batten
CMG-1151 11th Floor
301 S. Tryon Street
Charlotte, NC 28202-1910
---------------------------------------------------- -----------
---------------------------------------------------- -----------
First Union National Bank 25.62%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28202-1910
---------------------------------------------------- -----------
EXPENSES
Advisory Fees
Each Fund has its own investment advisor. (For more information, see
"Investment Advisory Agreements" in Part 2 of this SAI.) Evergreen Asset
Management Corp. ("EAMC") is the investment advisor to Growth and Income Fund,
Income and Growth Fund and Small Cap Value Fund. Lieber & Company acts as
sub-advisor to these Funds, and is reimbursed by EAMC for the costs of providing
sub-advisory services. EAMC is entitled to receive from each of these Funds an
annual fee based on the Fund's average daily net assets, as follows:
<PAGE>
---------------------------------- -----------------
Average Daily Net Assets Fee
---------------------------------- -----------------
---------------------------------- -----------------
first $750 million 1.00%
---------------------------------- -----------------
---------------------------------- -----------------
next $250 million 0.90%
---------------------------------- -----------------
---------------------------------- -----------------
over $1 billion 0.80%
---------------------------------- -----------------
Evergreen Investment Management ("EIM")(formerly known as Capital
Management Group) a division of First Union National Bank is the investment
advisor to Utility Fund and Value Fund. EIM is entitled to receive from each of
these Funds an annual fee equal to 0.50% of the average daily net assets of the
Fund.
Evergreen Investment Management Company ("EIMC"), formerly Keystone
Investment Management Company, is the investment advisor to Blue Chip Fund. EIMC
is entitled to receive from Blue Chip Fund an annual fee based on the Fund's
average daily net assets, as follows:
<PAGE>
---------------------------------- -----------------
Average Daily Net Assets Fee
---------------------------------- -----------------
---------------------------------- -----------------
first $100 million 0.70%
---------------------------------- -----------------
---------------------------------- -----------------
next $100 million 0.65%
---------------------------------- -----------------
---------------------------------- -----------------
next $100 million 0.60%
---------------------------------- -----------------
---------------------------------- -----------------
next $100 million 0.55%
---------------------------------- -----------------
---------------------------------- -----------------
next $100 million 0.50%
---------------------------------- -----------------
---------------------------------- -----------------
next $500 million 0.45%
---------------------------------- -----------------
---------------------------------- -----------------
next $500 million 0.40%
---------------------------------- -----------------
---------------------------------- -----------------
over $1.5 billion 0.35%
---------------------------------- -----------------
EIMC is also the investment advisor to Equity Income Fund. EIMC is
entitled to receive from Equity Income Fund an annual fee based on 1.5% of the
Fund's gross dividend and interest income plus a percentage of the Fund's
average daily net assets, as follows:
---------------------------------- -----------------
Average Daily Net Assets Fee
---------------------------------- -----------------
---------------------------------- -----------------
first $100 million 0.60%
---------------------------------- -----------------
---------------------------------- -----------------
next $100 million 0.55%
---------------------------------- -----------------
---------------------------------- -----------------
next $100 million 0.50%
---------------------------------- -----------------
---------------------------------- -----------------
next $100 million 0.45%
---------------------------------- -----------------
---------------------------------- -----------------
next $100 million 0.40%
---------------------------------- -----------------
---------------------------------- -----------------
next $500 million 0.35%
---------------------------------- -----------------
---------------------------------- -----------------
over $1 billion 0.30%
---------------------------------- -----------------
<PAGE>
Advisory Fees Paid
Below are the advisory fees accrued by each Fund for the last three
fiscal periods.
---------------------------------- ------------------------ ------------------
Fiscal Period/Fund Advisory Fee Waiver
---------------------------------- ------------------------ ------------------
-------------------------------------------------------------------------------
Period Ended July 31, 1999
------------------------------------------------------------------------------
---------------------------------- ------------------------ ------------------
Blue Chip Fund $2,858,644 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Equity Income Fund $983,976 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Growth and Income Fund $17,519,113 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Income and Growth Fund $8,634,036 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Small Cap Value Fund $2,765,667 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Utility Fund $745,510 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Value Fund $4,710,657 -0-
---------------------------------- ------------------------ ------------------
------------------------------------------------------------------------------
Periods Ended 1998
------------------------------------------------------------------------------
---------------------------------- ------------------------ ------------------
Blue Chip Fund (1) $2, 052,676 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Equity Income Fund (2) $1,062,354 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Growth and Income Fund (2) $16,275,918 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Income and Growth Fund (2) $9,685,921 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Small Cap Value Fund (2) $2,055,006 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Utility Fund (2) $704,533 $204,617
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Value Fund (2) $7,023,408 -0-
---------------------------------- ------------------------ ------------------
------------------------------------------------------------------------------
Periods Ended 1997
------------------------------------------------------------------------------
---------------------------------- ------------------------ ------------------
Blue Chip Fund (3) $1,794,364 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Equity Income Fund (7) $546,092 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Growth and Income Fund (4) $5,736,248 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Income and Growth Fund (5) $4,371,784 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Income and Growth Fund (6) $8,823,541 -0-
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Small Cap Value Fund (4) $180,153 $35,183
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Utility Fund (4) $382,537 $146,640
---------------------------------- ------------------------ ------------------
---------------------------------- ------------------------ ------------------
Value Fund (4) $4,753,235 -0-
---------------------------------- ------------------------ ------------------
(1) Eleven months ended 7/31/1998
(2) Year ended 7/31/1998
(3) Year ended 8/31/1997
(4) Seven months ended 7/31/1997
(5) Six months ended 7/31/1997
(6) Year ended 1/31/1997
(7) Eight months ended 7/31/1997
Brokerage Commissions
Below are the brokerage commissions paid by each Fund and brokerage commissions
paid by the applicable Funds to Lieber & Company for the last three fiscal
periods. For more information regarding brokerage commissions, see "Brokerage"
in Part 2 of this SAI.
<TABLE>
<CAPTION>
- - ---------------------------------- ----------------------------- -----------------------
Fiscal Period/Fund Total Paid to All Brokers Total Paid to Lieber
- - ---------------------------------- ----------------------------- -----------------------
- - ----------------------------------------------------------------------------------------
Period Ended July 31, 1999
- - ----------------------------------------------------------------------------------------
- - ---------------------------------- ----------------------------- -----------------------
<S> <C> <C>
Blue Chip Fund $1,128,579 -0-
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Equity Income Fund $376,821 -0-
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Growth and Income Fund $2,254,572 $2,145,290
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Income and Growth Fund $2,647,692 $1,734,853
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Small Cap Value Fund $410,670 $322,591
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Utility Fund $249,350 -0-
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Value Fund $2,327,193 -0-
- - ---------------------------------- ----------------------------- -----------------------
- - ----------------------------------------------------------------------------------------
Periods Ended 1998
- - ----------------------------------------------------------------------------------------
- - ---------------------------------- ----------------------------- -----------------------
Blue Chip Fund (1) $722,562 -0-
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Equity Income Fund (2) $247,967 -0-
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Growth and Income Fund (2) $1,527,103 $1,460,628
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Income and Growth Fund (2) $2,839,407 $1,762,628
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Small Cap Value Fund (2) $382,504 $305,340
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Utility Fund (2) $255,495 -0-
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Value Fund (2) $2,277,475 -0-
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Periods Ended 1997
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Blue Chip Fund (3) $656,022 -0-
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Equity Income Fund (7) $153,935 -0-
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Growth and Income Fund (4) $412,968 $348,590
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Income and Growth Fund (5) $1,575,483 $1,066,378
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Income and Growth Fund (6) $3,529,313 $2,835,293
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Small Cap Value Fund (4) $74,018 $61,390
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Utility Fund (4) $220,091 -0-
- - ---------------------------------- ----------------------------- -----------------------
- - ---------------------------------- ----------------------------- -----------------------
Value Fund (4) $273,045 -0-
- - ---------------------------------- ----------------------------- -----------------------
</TABLE>
(1) Eleven months ended 7/31/1998
(2) Year ended 7/31/1998
(3) Year ended 8/31/1997
(4) Seven months ended 7/31/1997
(5) Six months ended 7/31/1997
(6) Year ended 1/31/1997
(7) Eight months ended 7/31/1997
Percentage of Brokerage Commissions Paid to Lieber & Company
The table below shows, for the fiscal year ended July 31, 1999, (1) the
percentage of aggregate brokerage commissions paid by each applicable Fund to
Lieber & Company and (2) the percentage of each applicable Fund's aggregate
dollar amount of commissionable transactions effected through Lieber & Company.
For more information, see "Selection of Brokers" under "Brokerage" in Part 2 of
this SAI.
<TABLE>
<CAPTION>
- - --------------------------------- -------------------------------- ----------------------------------------
Percentage of Commissions to Percentage of Commissionable
Lieber & Company Transactions through Lieber & Company
Fund
- - --------------------------------- -------------------------------- ----------------------------------------
- - --------------------------------- -------------------------------- ----------------------------------------
<S> <C> <C>
Growth and Income Fund 95.2% 91.4%
- - --------------------------------- -------------------------------- ----------------------------------------
- - --------------------------------- -------------------------------- ----------------------------------------
Income and Growth Fund 65.5% 39.3%
- - --------------------------------- -------------------------------- ----------------------------------------
- - --------------------------------- -------------------------------- ----------------------------------------
Small Cap Value Fund 78.6% 65.0%
- - --------------------------------- -------------------------------- ----------------------------------------
</TABLE>
Portfolio Turnover
The Funds generally do not take portfolio turnover into account in
making investment decisions. This means the Funds could experience a high rate
of portfolio turnover (100% or more) in any given fiscal year, resulting in
greater brokerage and other transaction costs which are borne by the Funds and
their shareholders. It may also result in the Funds realizing greater net
short-term capital gains, distributions from which are taxable to shareholders
as ordinary income.
Underwriting Commissions
Below are the underwriting commissions paid by each Fund and the
amounts retained by the principal underwriter for the last three fiscal periods.
For more information, see "Principal Underwriter" in Part 2 of this SAI.
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------- ----------------------------------- ------------------------------------------
Total Underwriting Commissions Underwriting Commissions Retained
Fiscal Period/Fund
- - -------------------------------------- ----------------------------------- ------------------------------------------
Period ended July 31, 1999
- - ---------------------------------------------------------------------------------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
<S> <C> <C>
Blue Chip Fund $1,387,879 $55,530
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Equity Income Fund $228,712 -0-
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Growth and Income Fund $1,065,602 $36,299
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Income and Growth Fund $145,172 $11,661
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Small Cap Value Fund $472,825 $35,233
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Utility Fund $103,237 -0-
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Value Fund $193,003 $16,490
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------
Periods ended 1998
- - ---------------------------------------------------------------------------------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Blue Chip Fund (1) $1,989,997 $23,620
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Equity Income Fund (2) $849,763 $30,676
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Growth and Income Fund (2) $20,963,554 $603,197
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Income and Growth Fund (2) $649,901 $26,252
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Small Cap Value Fund (2) $6,344,098 $182,887
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Utility Fund (2) $327,363 $13,944
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Value Fund (2) $2,716,315 $109,283
- - -------------------------------------- ----------------------------------- ------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
Periods ended 1997
- - ---------------------------------------------------------------------------------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
<S> <C> <C>
Blue Chip Fund (3) $1,017,961 $363,862
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Equity Income Fund (7) $128,762 $7,709
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Growth and Income Fund (4) $1,796,199 $169,177
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Income and Growth Fund (5) $41,996 $4,196
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Income and Growth Fund (6) $187,403 $20,208
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Small Cap Value Fund (4) $72,045 $8,281
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Utility Fund (4) $15,633 $1,789
- - -------------------------------------- ----------------------------------- ------------------------------------------
- - -------------------------------------- ----------------------------------- ------------------------------------------
Value Fund (4) $479,927 $51,343
- - -------------------------------------- ----------------------------------- ------------------------------------------
</TABLE>
(1) Eleven months ended 7/31/1998
(2) Year ended 7/31/1998
(3) Year ended 8/31/1997
(4) Seven months ended 7/31/1997
(5) Six months ended 7/31/1997
(6) Year ended 1/31/1997
(7) Eight months ended 7/31/1997
12b-1 Fees
Below are the 12b-1 fees paid by each Fund for the fiscal year ended
July 31, 1999. For more information, see "Distribution Expenses Under Rule
12b-1" in Part 2 of this SAI.
<TABLE>
<CAPTION>
- - -------------------- --------------------------------- -------------------------------- ---------------------------------
Class A Class B Class C
Fund
- - -------------------- --------------------------------- -------------------------------- ---------------------------------
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
Distribution Service Fees Distribution Service Fees Distribution Service Fees
Fees Fees Fees
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Blue Chip Fund
-0- $774,362 $1,228,306 $409,435 $11,459 $3,820
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
Equity Income Fund
-0- $127,494 $662,123 $219,982 $139,251 $46,417
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
Growth and Income
Fund -0- $676,478 $7,038,523 $2,346,174 $329,695 $109,898
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
Income and Growth
Fund -0- $34,283 $379,904 $126,634 $8,087 $2,696
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
<PAGE>
- - -------------------- --------------------------------- -------------------------------- ---------------------------------
Class A Class B Class C
Fund
--------------------------------- -------------------------------- ---------------------------------
---------------- ---------------- ---------------- --------------- ---------------- ----------------
Distribution Service Fees Distribution Service Fees Distribution Service Fees
Fees Fees Fees
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
Small Cap Value
Fund -0- $149,687 $889,482 $296,494 $179,951 $59,983
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
Utility Fund -0- $245,543 $357,248 $119,083 $4,596 $1,532
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
Value Fund -0- $1,154,951 $2,433,726 $811,242 $34,053 $11,351
- - -------------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
</TABLE>
Trustee Compensation
Listed below is the Trustee compensation paid by the Trust individually
for the fiscal year ended July 31, 1999 and by the Trust and the eight other
trusts in the Evergreen Fund Complex for the calendar year ended December 31,
1998. The Trustees do not receive pension or retirement benefits from the Funds.
For more information, see "Management of the Trust" in Part 2 of this SAI.
<TABLE>
<CAPTION>
------------------------------- ------------------------------ -----------------------------
Total Compensation from the
Aggregate Compensation from Evergreen Fund Complex for
the Trust for the fiscal the calendar year ended
Trustee year ended 7/31/1999 12/31/1998**
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
<S> <C> <C>
Laurence B. Ashkin $7,013 $75,500
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Charles A. Austin, III $7,043 $75,500
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
K. Dun Gifford $6,937 $73,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
James S. Howell $9,071 $99,500
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Leroy Keith Jr. $6,937 $73,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Gerald M. McDonnell $7,012 $75,500
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Thomas L. McVerry $8,085 $86,500
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
William Walt Pettit $6,937 $68,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
David M. Richardson $6,937 $73,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Russell A. Salton, III $7,162 $79,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Michael S. Scofield* $8,489 $79,500
------------------------------- ------------------------------ -----------------------------
<PAGE>
------------------------------- ------------------------------ -----------------------------
Total Compensation from the
Aggregate Compensation from Evergreen Fund Complex for
the Trust for the fiscal the calendar year ended
year ended 7/31/1999 12/31/1998**
Trustee
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Richard J. Shima $6,937 $73,000
------------------------------- ------------------------------ -----------------------------
</TABLE>
* As of January 1, 2000, Michael S. Scofield will become Chairman
of the Board and James S. Howell will become Trustee Emeritus.
** Certain Trustees have elected to defer all or part of their total
compensation for the calendar year ended December 31, 1998. The
amounts listed below will be payable in later years to the
respective Trustees:
Austin $11,325
Howell $79,200
McDonnell $75,500
McVerry $86,500
Petit $68,000
Salton $78,500
PERFORMANCE
Total Return
Below are the annual total returns for each class of shares of the
Funds (including applicable sales charges) as of July 31, 1999. For more
information, see "Total Return" under "Performance Calculations" in Part 2 of
this SAI.
<TABLE>
<CAPTION>
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Ten Years or Since
Fund/Class One Year Five Years Inception Inception Date
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - -------------------------------------------------------------------------------------------------------------
Blue Chip Fund (1)
- - -------------------------------------------------------------------------------------------------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
Class A 11.71% 20.42% 13.58% 1/20/1998
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class B 11.26% 20.66% 13.31% 9/11/1935
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class C 15.37% 20.74% 13.21% 1/22/1998
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
<PAGE>
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class Y 17.46% 21.88% 14.40% 4/30/1999
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - -------------------------------------------------------------------------------------------------------------
Equity Income Fund (2)
- - -------------------------------------------------------------------------------------------------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class A 3.06% 17.56% 12.95% 4/14/1987
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class B 2.74% 17.56% 12.92% 2/1/1993
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class C 6.45% 17.79% 12.92% 2/1/1993
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class Y 8.44% 18.77% 13.53% 1/13/1997
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
<PAGE>
- - -------------------------------------------------------------------------------------------------------------
Growth and Income Fund (3)
- - -------------------------------------------------------------------------------------------------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class A -0.47% 17.31% 13.60% 1/3/1995
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class B -1.27% 17.50% 13.78% 1/3/1995
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class C 2.69% 17.71% 13.79% 1/3/1995
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class Y 4.75% 18.74% 14.29% 10/15/1986
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - -------------------------------------------------------------------------------------------------------------
Income and Growth Fund (3)
- - -------------------------------------------------------------------------------------------------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class A 6.80% 12.68% 9.42% 1/3/1995
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class B 6.48% 12.79% 9.58% 1/3/1995
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class C 10.37% 13.01% 9.58% 1/3/1995
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class Y 12.46% 14.02% 10.07% 8/31/1978
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - -------------------------------------------------------------------------------------------------------------
Small Cap Value Fund (3)
- - -------------------------------------------------------------------------------------------------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class A -2.71% 14.11% 12.07% 1/3/1995
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class B -3.59% 14.21% 12.25% 1/3/1995
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class C 0.30% 14.40% 12.31% 1/24/1995
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class Y 2.31% 15.50% 13.23% 10/1/1993
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - -------------------------------------------------------------------------------------------------------------
Utility Fund (4)
- - -------------------------------------------------------------------------------------------------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class A 20.03% 15.88% 13.34% 1/4/1994
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class B 20.23% 15.93% 13.42% 1/4/1994
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class C 24.23% 16.17% 13.59% 9/2/1994
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
Class Y 26.35% 17.29% 14.61% 2/28/1994
- - ------------------------- ------------------ --------------------- -------------------- ---------------------
- - -------------------------------------------------------------------------------------------------------------
Value Fund (2)
- - -------------------------------------------------------------------------------------------------------------
- - ----------------------- -------------------- --------------------- -------------------- ---------------------
Class A 8.08% 17.45% 12.98% 4/12/1985
- - ----------------------- -------------------- --------------------- -------------------- ---------------------
- - ----------------------- -------------------- --------------------- -------------------- ---------------------
Class B 7.65% 17.54% 13.03% 2/2/1993
- - ----------------------- -------------------- --------------------- -------------------- ---------------------
- - ----------------------- -------------------- --------------------- -------------------- ---------------------
Class C 11.66% 17.77% 13.13% 9/2/1994
- - ----------------------- -------------------- --------------------- -------------------- ---------------------
- - ----------------------- -------------------- --------------------- -------------------- ---------------------
Class Y 13.81% 18.90% 13.79% 1/3/1991
- - ----------------------- -------------------- --------------------- -------------------- ---------------------
</TABLE>
(1) Historical performance shown for Classes A, C, and Y prior to their
inception is based on the performance of Class B, the original class
offered. These historical returns for Classes A and Y have been adjusted to
eliminate the effect of the higher 12b-1 fees applicable to Class B. The
12b-1 fees for Class A are 0.25%, for Class B are 1.00%, and for Class C
are 1.00%. Class Y does not pay a 12b-1 fee. If these fees had not been
eliminated, returns would have been lower.
(2) Historical performance shown for Classes B, C, and Y prior to their
inception is based on the performance of Class A, the original class
offered. These historical returns for Classes B, C, and Y have not been
adjusted to reflect the effect of each Class' 12b-1 fees. These fees for
Class A are 0.25%, for Class B are 1.00%, and for Class C are 1.00%. Class
Y does not pay a 12b-1 fee. If these fees had been reflected, returns for
Classes B and C would have been lower while returns for Class Y would have
been higher.
(3) Historical performance shown for Classes A, B, and C prior to their
inception is based on the performance of Class Y, the original class
offered. These historical returns for Classes A, B, and C have not been
adjusted to reflect the effect of each Class' 12b-1 fees. These fees for
Class A are 0.25%, for Class B are 1.00%, and for Class C are 1.00%. Class
Y does not pay a 12b-1 fee. If these fees had been reflected, returns would
have been lower.
(4) Historical performance shown for Classes C and Y prior to their inception
is based on the performance of Class A, one of the original classes offered
along with Class B. These historical returns for Classes C and Y have not
been adjusted to reflect the effect of each Class' 12b-1 fees. These fees
for Class A are 0.25%, for Class B are 1.00% and for Class C are 1.00%.
Class Y does not pay a 12b-1 fee. If these fees had been reflected, returns
for Class C would have been lower while returns for Class Y would have been
higher.
COMPUTATION OF CLASS A OFFERING PRICE
Class A shares are sold at the net asset value ("NAV") plus a sales
charge. Below is an example of the method of computing the offering price of
Class A shares of each Fund. The example assumes a purchase of Class A shares of
each Fund aggregating less than $100,000 based upon the NAV of each Fund's Class
A shares at the end of each Fund's latest fiscal period. For more information,
see "Purchase, Redemption and Pricing of Shares."
<TABLE>
<CAPTION>
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
Per Share Sales Offering Price
Fund Date NAV Charge Per Share
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Blue Chip Fund 7/31/1999 $32.88 4.75% $34.52
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
Equity Income Fund 7/31/1999 $20.17 4.75% $21.18
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
Growth and Income Fund 7/31/1999 $29.56 4.75% $31.03
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
Income and Growth Fund 7/31/1999 $22.57 4.75% $23.70
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
Small Cap Value Fund 7/31/1999 $15.57 4.75% $16.35
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
Utility Fund 7/31/1999 $12.85 4.75% $13.49
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
Value Fund 7/31/1999 $24.86 4.75% $26.10
- - --------------------------------- ------------------ ---------------- ------------------- -------------------
</TABLE>
<PAGE>
SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS") serves as administrator for
Utility Fund and Value Fund, subject to the supervision and control of the
Trust's Board of Trustees. EIS provides the Funds with facilities, equipment and
personnel and is entitled to receive a fee from the Fund based on the total
assets of all mutual funds for which EIS serves as administrator and a First
Union Corporation subsidiary serves as investment advisor. The fee paid to EIS
is calculated in accordance with the following schedule:
----------------------- --------------------
Assets Fee
----------------------- --------------------
----------------------- --------------------
First $7 billion 0.050%
----------------------- --------------------
----------------------- --------------------
Next $3 billion 0.035%
----------------------- --------------------
----------------------- --------------------
Next $5 billion 0.030%
----------------------- --------------------
----------------------- --------------------
Next $10 billion 0.020%
----------------------- --------------------
----------------------- --------------------
Next $5 billion 0.015%
----------------------- --------------------
----------------------- --------------------
Over $30 billion 0.010%
----------------------- --------------------
EIS also provides facilities, equipment and personnel to Blue Chip
Fund, Growth and Income Fund, Income and Growth Fund, Small Cap Value Fund and
Equity Income Fund on behalf of the investment advisor. Blue Chip Fund and
Equity Income Fund reimburse EIS for providing such services.
EIS also provides facilities, equipment and personnel to Blue Chip
Fund, Growth and Income Fund, Income and Growth Fund, Small Cap Value Fund and
Equity Income Fund on behalf of the investment advisor. Blue Chip Fund and
Equity Income Fund reimburse EIS for providing such services.
For Growth and Income Fund, Income and Growth Fund and Small Cap Value
Fund, the administration fee is paid by the investment advisor and is not a Fund
expense. Below are the administrative service fees paid for the last three
fiscal years for the Funds referenced:
<PAGE>
<TABLE>
<CAPTION>
- - ------------------------------- ---------------------------- ---------------------------- ----------------------------
Fund 1999 1998 1997
- - ------------------------------- ---------------------------- ---------------------------- ----------------------------
- - ------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Blue Chip Fund $70,063 $53,198(1) $44,985(3)
- - ------------------------------- ---------------------------- ---------------------------- ----------------------------
- - ------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity Income Fund $25,962 $33,743(2) $10,250(4)
- - ------------------------------- ---------------------------- ---------------------------- ----------------------------
- - ------------------------------- ---------------------------- ---------------------------- ----------------------------
Utility Fund $30,350 $32,705(2) $28,507*(5)
- - ------------------------------- ---------------------------- ---------------------------- ----------------------------
- - ------------------------------- ---------------------------- ---------------------------- ----------------------------
Value Fund $192,070 $235,670(2) $352,965*(5)
- - ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
(1) Eleven months ended 7/31/1998
(2) Year ended 7/31/1998
(3) Year ended 8/31/1997
(4) Eight months ended 7/31/1997
(5) Seven months ended 7/31/1997
*Amounts include administration fees paid to EAMC (administrator to funds prior
to March 11, 1997)
Transfer Agent
Evergreen Service Company ("ESC"), a subsidiary of First Union
Corporation, is the Fund's transfer agent. ESC issues and redeems shares, pays
dividends and performs other duties in connection with the maintenance of
shareholder accounts. The transfer agent's address is P.O. Box 2121, Boston,
Massachusetts 02106-2121.
The Fund pays ESC annual fees as follows:
<TABLE>
<CAPTION>
-------------------------------------- ----------------- --------------------
Annual Fee Per Annual Fee Per
Open Account* Closed Account**
Fund Type
-------------------------------------- ----------------- --------------------
-------------------------------------- ----------------- --------------------
<S> <C> <C>
Monthly Dividend Funds $25.50 $9.00
-------------------------------------- ----------------- --------------------
-------------------------------------- ----------------- --------------------
Quarterly Dividend Funds $24.50 $9.00
-------------------------------------- ----------------- --------------------
-------------------------------------- ----------------- --------------------
Semiannual Dividend Funds $23.50 $9.00
-------------------------------------- ----------------- --------------------
-------------------------------------- ----------------- --------------------
Annual Dividend Funds $23.50 $9.00
-------------------------------------- ----------------- --------------------
-------------------------------------- ----------------- --------------------
Money Market Funds $25.50 $9.00
-------------------------------------- ----------------- --------------------
</TABLE>
* For shareholder accounts only. Each Fund pays ESC cost plus
15% for broker accounts.
** Closed accounts are maintained on the system in order to
facilitate historical tax information.
Distributor
Evergreen Distributor, Inc. (the "Distributor") markets the Funds
through broker-dealers and other financial representatives. Its address is
90 Park Avenue, New York, NY 10016.
<PAGE>
Independent Auditors
KPMG LLP, 99 High Street, Boston, Massachusetts 02110, audits the
financial statements of each Fund.
Custodian
State Street Bank and Trust Company is the Funds' custodian. The bank
keeps custody of each Fund's securities and cash and performs other related
duties. The custodian's address is 225 Franklin Street, Boston, Massachusetts
02110.
Legal Counsel
Sullivan & Worcester LLP provides legal advice to the Funds. Its
address is 1025 Connecticut Avenue, N.W., Washington, D.C. 20036.
FINANCIAL STATEMENTS
The audited financial statements and the reports thereon are hereby
incorporated by reference to the Funds' Annual Report, a copy of which may be
obtained without charge from ESC, P.O. Box 2121, Boston, Massachusetts
02106-2121.
<PAGE>
EVERGREEN FUNDS
Statement of Additional Information ("SAI")
PART 2
ADDITIONAL INFORMATION ON SECURITIES
AND INVESTMENT PRACTICES
The prospectus describes the Fund's investment objective and the securities in
which it primarily invests. The following describes other securities the Fund
may purchase and investment strategies it may use. Some of the information below
will not apply to the Fund or the Class in which you are interested. See the
list under Other Securities and Practices in Part 1 of this SAI to determine
which of the sections below are applicable.
Money Market Instruments
The Fund may invest up to 100% of its assets in high quality money
market instruments, such as notes, certificates of deposit, commercial paper,
banker's acceptances, bank deposits or U.S. government securities if, in the
opinion of the investment advisor, market conditions warrant a temporary
defensive investment strategy. Evergreen Equity Income Fund may also invest in
debt securities and high grade preferred stocks for defensive purposes when its
investment advisor determines a temporary defensive strategy is warranted.
U.S. Government Securities
The Fund may invest in securities issued or guaranteed by U.S.
Government agencies or instrumentalities.
These securities are backed by (1) the discretionary authority of the
U.S. Government to purchase certain obligations of agencies or instrumentalities
or (2) the credit of the agency or instrumentality issuing the obligations.
Some government agencies and instrumentalities may not receive
financial support from the U.S. Government. Examples of such agencies are:
(i) Farm Credit System, including the National Bank for
Cooperatives, Farm Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association; and
(vi) Student Loan Marketing Association.
Securities Issued by the Government National Mortgage Association ("GNMA"). The
Fund may invest in securities issued by the GNMA, a corporation wholly-owned by
the U.S. Government. GNMA securities or "certificates" represent ownership in a
pool of underlying mortgages. The timely payment of principal and interest due
on these securities is guaranteed.
Unlike conventional bonds, the principal on GNMA certificates is not
paid at maturity but over the life of the security in scheduled monthly
payments. While mortgages pooled in a GNMA certificate may have maturities of up
to 30 years, the certificate itself will have a shorter average maturity and
less principal volatility than a comparable 30-year bond.
The market value and interest yield of GNMA certificates can vary due
not only to market fluctuations, but also to early prepayments of mortgages
within the pool. Since prepayment rates vary widely, it is impossible to
accurately predict the average maturity of a GNMA pool. In addition to the
guaranteed principal payments, GNMA certificates may also make unscheduled
principal payments resulting from prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available
from other types of U.S. Government securities, they may be less effective as a
means of locking in attractive long-term rates because of the prepayment
feature. For instance, when interest rates decline, prepayments are likely to
increase as the holders of the underlying mortgages seek refinancing. As a
result, the value of a GNMA certificate is not likely to rise as much as the
value of a comparable debt security would in response to same decline. In
addition, these prepayments can cause the price of a GNMA certificate originally
purchased at a premium to decline in price compared to its par value, which may
result in a loss.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
The Fund may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis.
Settlement of such transactions normally occurs within a month or more after the
purchase or sale commitment is made.
The Fund may purchase securities under such conditions only with the
intention of actually acquiring them, but may enter into a separate agreement to
sell the securities before the settlement date. Since the value of securities
purchased may fluctuate prior to settlement, the Fund may be required to pay
more at settlement than the security is worth. In addition, the purchaser is not
entitled to any of the interest earned prior to settlement.
Upon making a commitment to purchase a security on a when-issued,
delayed delivery or forward commitment basis the Fund will hold liquid assets
worth at least the equivalent of the amount due. The liquid assets will be
monitored on a daily basis and adjusted as necessary to maintain the necessary
value.
Purchases made under such conditions may involve the risk that yields
secured at the time of commitment may be lower than otherwise available by the
time settlement takes place, causing an unrealized loss to the Fund. In
addition, when the Fund engages in such purchases, it relies on the other party
to consummate the sale. If the other party fails to perform its obligations, the
Fund may miss the opportunity to obtain a security at a favorable price or
yield.
<PAGE>
Repurchase Agreements
The Fund may enter into repurchase agreements with entities that are
registered as U.S. Government securities dealers, including member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. government securities or other financial institutions believed by the
investment advisor to be creditworthy. In a repurchase agreement the Fund
obtains a security and simultaneously commits to return the security to the
seller at a set price (including principal and interest) within a period of time
usually not exceeding seven days. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security.
The Fund's custodian or a third party will take possession of the
securities subject to repurchase agreements, and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund's investment advisor believes
that under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or disposition
of such securities. The Fund will only enter into repurchase agreements with
banks and other recognized financial institutions, such as broker-dealers, which
are deemed by the investment advisor to be creditworthy pursuant to guidelines
established by the Board of Trustees.
Reverse Repurchase Agreements
As described herein, the Fund may also enter into reverse repurchase
agreements. These transactions are similar to borrowing cash. In a reverse
repurchase agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
Dollar Roll Transactions
The Fund may enter into dollar rolls in which the Fund sells securities
and simultaneously contracts to repurchase substantially similar securities on a
specified future date. In the case of dollar rolls involving mortgage-related
securities, the mortgage-related securities that are purchased typically will be
of the same type and will have the same or similar interest rate and maturity as
those sold, but will be supported by different pools of mortgages. The Fund
forgoes principal and interest paid during the roll period on the securities
sold in a dollar roll, but it is compensated by the difference between the
current sales price and the price for the future purchase as well as by any
interest earned on the proceeds of the securities sold. The Fund could also be
compensated through receipt of fee income.
Dollar rolls may be viewed as a borrowing by the Fund, secured by the security
which is the subject of the agreement. In addition to the general risks involved
in leveraging, dollar rolls are subject to the same risks as repurchase and
reverse repurchase agreements.
Securities Lending
The Fund may lend portfolio securities to brokers, dealers and other
financial institutions to earn additional income for the Fund. These
transactions must be fully collateralized at all times with cash or short-term
debt obligations, but involve some risk to the Fund if the other party should
default on its obligation and the Fund is delayed or prevented from exercising
its rights in respect of the collateral. Any investment of collateral by the
Fund would be made in accordance with the Fund's investment objective and
policies described in the prospectus.
Convertible Securities
The Fund may invest in convertible securities. Convertible securities
include fixed-income securities that may be exchanged or converted into a
predetermined number of shares of the issuer's underlying common stock at the
option of the holder during a specified period. Convertible securities may take
the form of convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants or a combination of the features of
several of these securities. The investment characteristics of each convertible
security vary widely, which allow convertible securities to be employed for a
variety of investment strategies.
The Fund will exchange or convert convertible securities into shares of
underlying common stock when, in the opinion of its investment advisor, the
investment characteristics of the underlying common shares will assist the Fund
in achieving its investment objective. The Fund may also elect to hold or trade
convertible securities. In selecting convertible securities, the investment
advisor evaluates the investment characteristics of the convertible security as
a fixed-income instrument, and the investment potential of the underlying equity
security for capital appreciation. In evaluating these matters with respect to a
particular convertible security, the investment advisor considers numerous
factors, including the economic and political outlook, the value of the security
relative to other investment alternatives, trends in the determinants of the
issuer's profits, and the issuer's management capability and practices.
Warrants
The Fund may invest in warrants. Warrants are options to purchase
common stock at a specific price (usually at a premium above the market value of
the optioned common stock at issuance) valid for a specific period of time.
Warrants may have a life ranging from less than one year to twenty years, or
they may be perpetual. However, most warrants have expiration dates after which
they are worthless. In addition, a warrant is worthless if the market price of
the common stock does not exceed the warrant's exercise price during the life of
the warrant. Warrants have no voting rights, pay no dividends, and have no
rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may tend to
be greater than the percentage increase or decrease in the market price of the
optioned common stock.
Swaps, Caps, Floors and Collars
The Fund may enter into interest rate, currency and index swaps and the
purchase or sale of related caps, floors and collars. The Fund expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Fund would use these transactions as hedges and not as speculative
investments and would not sell interest rate caps or floors where it does not
own securities or other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. The Fund will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the counterparty, combined with any
credit enhancements, is rated at least A by Standard & Poor's Ratings Services
("S&P") or Moody's Investors Service, Inc. ("Moody's") or has an equivalent
rating from another nationally recognized securities rating organization or is
determined to be of equivalent credit quality by the Fund's investment advisor.
If there is a default by the counterparty, the Fund may have contractual
remedies pursuant to the agreements related to the transaction. As a result, the
swap market has become relatively liquid. Caps, floors and collars are more
recent innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than swaps.
Indexed Securities
The Fund may invest in indexed securities, the values of which are
linked to currencies, interest rates, commodities, indices or other financial
indicators ("reference instruments"). Most indexed securities have maturities of
three years or less.
Indexed securities differ from other types of debt securities in which
the Fund may invest in several respects. First, the interest rate or, unlike
other debt securities, the principal amount payable at maturity of an indexed
security may vary based on changes in one or more specified reference
instruments, such as an interest rate compared with a fixed interest rate or the
currency exchange rates between two currencies (neither of which need be the
currency in which the instrument is denominated). The reference instrument need
not be related to the terms of the indexed security. For example, the principal
amount of a U.S. dollar denominated indexed security may vary based on the
exchange rate of two foreign currencies. An indexed security may be positively
or negatively indexed; that is, its value may increase or decrease if the value
of the reference instrument increases. Further, the change in the principal
amount payable or the interest rate of an indexed security may be a multiple of
the percentage change (positive or negative) in the value of the underlying
reference instrument(s).
Investment in indexed securities involves certain risks. In addition to
the credit risk of the security's issuer and the normal risks of price changes
in response to changes in interest rates, the principal amount of indexed
securities may decrease as a result of changes in the value of reference
instruments. Further, in the case of certain indexed securities in which the
interest rate is linked to a reference instrument, the interest rate may be
reduced to zero, and any further declines in the value of the security may then
reduce the principal amount payable on maturity. Finally, indexed securities may
be more volatile than the reference instruments underlying indexed securities.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which the Fund
is exposed is difficult to hedge or to hedge against the dollar. Proxy hedging
entails entering into a forward contract to sell a currency whose changes in
value are generally considered to be linked to a currency or currencies in which
some or all of the Fund's securities are or are expected to be denominated, and
to buy U.S. dollars. The amount of the contract would not exceed the value of
the Fund's securities denominated in linked currencies. For example, if the
Fund's investment advisor considers that the Austrian schilling is linked to the
German deutschmark (the "D-mark"), the Fund holds securities denominated in
schillings and the investment advisor believes that the value of schillings will
decline against the U.S. dollar, the investment advisor may enter into a
contract to sell D-marks and buy dollars.
Options
An option is a right to buy or sell a security for a specified price
within a limited time period. The option buyer pays the option seller (known as
the "writer") for the right to buy, which is a "call" option, or the right to
sell, which is a "put" option. Unless the option is terminated, the option
seller must then buy or sell the security at the agreed-upon price when asked to
do so by the option buyer.
The Fund may buy or sell put and call options on securities it holds or
intends to acquire, and may purchase put and call options for the purpose of
offsetting previously written put and call options of the same series. The Fund
may also buy and sell options on financial futures contracts. The Fund will use
options as a hedge against decreases or increases in the value of securities it
holds or intends to acquire.
The Fund may write only covered options. With regard to a call option,
this means that the Fund will own, for the life of the option, the securities
subject to the call option. The Fund will cover put options by holding, in a
segregated account, liquid assets having a value equal to or greater than the
price of securities subject to the put option. If the Fund is unable to effect a
closing purchase transaction with respect to the covered options it has sold, it
will not be able to sell the underlying securities or dispose of assets held in
a segregated account until the options expire or are exercised, resulting in a
potential loss of value to the Fund.
Futures Transactions
The Fund may enter into financial futures contracts and write options
on such contracts. The Fund intends to enter into such contracts and related
options for hedging purposes. The Fund will enter into futures on securities or
index-based futures contracts in order to hedge against changes in interest or
exchange rates or securities prices. A futures contract on securities is an
agreement to buy or sell securities at a specified price during a designated
month. A futures contract on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index. The Fund does not make payment or
deliver securities upon entering into a futures contract. Instead, it puts down
a margin deposit, which is adjusted to reflect changes in the value of the
contract and which continues until the contract is terminated.
The Fund may sell or purchase futures contracts. When a futures
contract is sold by the Fund, the value of the contract will tend to rise when
the value of the underlying securities declines and to fall when the value of
such securities increases. Thus, the Fund sells futures contracts in order to
offset a possible decline in the value of its securities. If a futures contract
is purchased by the Fund, the value of the contract will tend to rise when the
value of the underlying securities increases and to fall when the value of such
securities declines. The Fund intends to purchase futures contracts in order to
establish what is believed by the investment advisor to be a favorable price or
rate of return for securities the Fund intends to purchase.
The Fund also intends to purchase put and call options on futures
contracts for hedging purposes. A put option purchased by the Fund would give it
the right to assume a position as the seller of a futures contract. A call
option purchased by the Fund would give it the right to assume a position as the
purchaser of a futures contract. The purchase of an option on a futures contract
requires the Fund to pay a premium. In exchange for the premium, the Fund
becomes entitled to exercise the benefits, if any, provided by the futures
contract, but is not required to take any action under the contract. If the
option cannot be exercised profitably before it expires, the Fund's loss will be
limited to the amount of the premium and any transaction costs.
The Fund may enter into closing purchase and sale transactions in order
to terminate a futures contract and may sell put and call options for the
purpose of closing out its options positions. The Fund's ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that the Fund will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If the
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the contract and to complete
the contract according to its terms, in which case it would continue to bear
market risk on the transaction.
Although futures and options transactions are intended to enable the
Fund to manage market, interest rate or exchange rate risk, unanticipated
changes in interest rates or market prices could result in poorer performance
than if it had not entered into these transactions. Even if the investment
advisor correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of the Fund's futures position did not
correspond to changes in the value of its investments. This lack of correlation
between the Fund's futures and securities positions may be caused by differences
between the futures and securities markets or by differences between the
securities underlying the Fund's futures position and the securities held by or
to be purchased for the Fund. The Fund's investment advisor will attempt to
minimize these risks through careful selection and monitoring of the Fund's
futures and options positions.
The Fund does not intend to use futures transactions for speculation or
leverage. The Fund has the ability to write options on futures, but currently
intends to write such options only to close out options purchased by the Fund.
The Fund will not change these policies without supplementing the information in
the prospectus and SAI.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the aggregate,
the value of the open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the unrealized gain or loss on
those open positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is exceeded at
any time, the Fund will take prompt action to close out a sufficient number of
open contracts to bring its open futures and options positions within this
limitation.
"Margin" in Futures Transactions. Unlike the purchase or sale of a security, the
Fund does not pay or receive money upon the purchase or sale of a futures
contract. Rather the Fund is required to deposit an amount of "initial margin"
in cash or U.S. Treasury bills with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is different
from that of margin in securities transactions in that futures contract initial
margin does not involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or good
faith deposit on the contract which is returned to the Fund upon termination of
the futures contract, assuming all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market". Variation
margin does not represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value the Fund
will mark-to-market its open futures positions. The Fund is also required to
deposit and maintain margin when it writes call options on futures contracts.
Foreign Securities
The Fund may invest in foreign securities or U.S. securities traded in
foreign markets. In addition to securities issued by foreign companies,
permissible investments may also consist of obligations of foreign branches of
U.S. banks and of foreign banks, including European certificates of deposit,
European time deposits, Canadian time deposits and Yankee certificates of
deposit. The Fund may also invest in Canadian commercial paper and Europaper.
These instruments may subject the Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. issuers. Such
risks include the possibility of adverse political and economic developments;
imposition of withholding taxes on interest or other income; seizure,
nationalization, or expropriation of foreign deposits; establishment of exchange
controls or taxation at the source; greater fluctuations in value due to changes
in exchange rates, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. Such investments may also entail higher custodial fees and sales
commissions than domestic investments. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those respecting domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks.
The Fund may also invest in the stocks of companies located in emerging
markets. These countries generally have economic structures that are less
diverse and mature, and political systems that are less stable than those of
developed countries. Emerging markets may be more volatile than the markets of
more mature economies, and the securities of companies located in emerging
markets are often subject to rapid and large price fluctuations; however, these
markets may also provide higher long-term rates of return.
Foreign Currency Transactions
As one way of managing exchange rate risk, the Fund may enter into
forward currency exchange contracts (agreements to purchase or sell currencies
at a specified price and date). The exchange rate for the transaction (the
amount of currency the Fund will deliver and receive when the contract is
completed) is fixed when the Fund enters into the contract. The Fund usually
will enter into these contracts to stabilize the U.S. dollar value of a security
it has agreed to buy or sell. The Fund intends to use these contracts to hedge
the U.S. dollar value of a security it already owns, particularly if the Fund
expects a decrease in the value of the currency in which the foreign security is
denominated. Although the Fund will attempt to benefit from using forward
contracts, the success of its hedging strategy will depend on the investment
advisor's ability to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar. The value of the Fund's investments
denominated in foreign currencies will depend on the relative strengths of those
currencies and the U.S. dollar, and the Fund may be affected favorably or
unfavorably by changes in the exchange rates or exchange control regulations
between foreign currencies and the U.S. dollar. Changes in foreign currency
exchange rates also may affect the value of dividends and interest earned, gains
and losses realized on the sale of securities and net investment income and
gains, if any, to be distributed to shareholders by the Fund. The Fund may also
purchase and sell options related to foreign currencies in connection with
hedging strategies.
Premium Securities
The Fund may at times invest in premium securities which are securities
bearing coupon rates higher than prevailing market rates. Such "premium"
securities are typically purchased at prices greater than the principal amount
payable on maturity. Although the Fund generally amortizes the amount of any
such premium into income, the Fund may recognize a capital loss if such premium
securities are called or sold prior to maturity and the call or sale price is
less than the purchase price. Additionally, the Fund may recognize a capital
loss if it holds such securities to maturity.
High Yield, High Risk Bonds
The Fund may invest a portion of its assets in lower rated bonds. Bonds
rated below BBB by S&P or Fitch IBCA, Inc. ("Fitch") or below Baa by Moody's,
commonly known as "junk bonds," offer high yields, but also high risk. While
investment in junk bonds provides opportunities to maximize return over time,
they are considered predominantly speculative with respect to the ability of the
issuer to meet principal and interest payments. Investors should be aware of the
following risks:
(1) The lower ratings of junk bonds reflect a greater possibility that
adverse changes in the financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates may impair the
ability of the issuer to make payments of interest and principal, especially if
the issuer is highly leveraged. Such issuer's ability to meet its debt
obligations may also be adversely affected by the issuer's inability to meet
specific forecasts or the unavailability of additional financing. Also, an
economic downturn or an increase in interest rates may increase the potential
for default by the issuers of these securities.
(2) The value of junk bonds may be more susceptible to real or
perceived adverse economic or political events than is the case for higher
quality bonds.
(3) The value of junk bonds, like those of other fixed income
securities, fluctuates in response to changes in interest rates, generally
rising when interest rates decline and falling when interest rates rise. For
example, if interest rates increase after a fixed income security is purchased,
the security, if sold prior to maturity, may return less than its cost. The
prices of junk bonds, however, are generally less sensitive to interest rate
changes than the prices of higher-rated bonds, but are more sensitive to news
about an issuer or the economy which is, or investors perceive as, negative.
(4) The secondary market for junk bonds may be less liquid at certain
times than the secondary market for higher quality bonds, which may adversely
effect (a) the bond's market price, (b) the Fund's ability to sell the bond and
the Fund's ability to obtain accurate market quotations for purposes of valuing
its assets.
For bond ratings descriptions, see "Corporate and Municipal Bond
Ratings" below.
Illiquid and Restricted Securities
The Fund may not invest more than 15% (10% for money market funds) of
its net assets in securities that are illiquid. A security is illiquid when the
Fund cannot dispose of it in the ordinary course of business within seven days
at approximately the value at which the Fund has the investment on its books.
The Fund may invest in "restricted" securities, i.e., securities
subject to restrictions on resale under federal securities laws. Rule 144A under
the Securities Act of 1933 ("Rule 144A") allows certain restricted securities to
trade freely among qualified institutional investors. Since Rule 144A securities
may have limited markets, the Board of Trustees will determine whether such
securities should be considered illiquid for the purpose of determining the
Fund's compliance with the limit on illiquid securities indicated above. In
determining the liquidity of Rule 144A securities, the Trustees will consider:
(1) the frequency of trades and quotes for the security; (2) the number of
dealers willing to purchase or sell the security and the number of other
potential buyers; (3) dealer undertakings to make a market in the security; and
(4) the nature of the security and the nature of the marketplace trades.
Investment in Other Investment Companies
The Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, the Fund may not (1) own more
than 3% of the outstanding voting stocks of another investment company, (2)
invest more than 5% of its assets in any single investment company, and (3)
invest more than 10% of its assets in investment companies. However, the Fund
may invest all of its investable assets in securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund. Investing in other investment
companies may expose a Fund to duplicate expenses and lower its value.
Short Sales
A short sale is the sale of a security the Fund has borrowed. The Fund
expects to profit from a short sale by selling the borrowed security for more
than the cost of buying it to repay the lender. After a short sale is completed,
the value of the security sold short may rise. If that happens, the cost of
buying it to repay the lender may exceed the amount originally received for the
sale by the Fund.
The Fund may engage in short sales, but it may not make short sales of
securities or maintain a short position unless, at all times when a short
position is open, it owns an equal amount of such securities or of securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities of the same issue as, and equal in amount to, the
securities sold short. The Fund may effect a short sale in connection with an
underwriting in which the Fund is a participant.
Municipal Bonds
The Fund may invest in municipal bonds of any state, territory or
possession of the United States ("U.S."), including the District of Columbia.
The Fund may also invest in municipal bonds of any political subdivision, agency
or instrumentality (e.g., counties, cities, towns, villages, districts,
authorities) of the U.S. or its possessions. Municipal bonds are debt
instruments issued by or for a state or local government to support its general
financial needs or to pay for special projects such as airports, bridges,
highways, public transit, schools, hospitals, housing and water and sewer works.
Municipal bonds may also may be issued to refinance public debt.
Municipal bonds are mainly divided between "general obligation" and
"revenue" bonds. General obligation bonds are backed by the full faith and
credit of governmental issuers with the power to tax. They are repaid from the
issuer's general revenues. Payment, however, may be dependent upon legislative
approval and may be subject to limitations on the issuer's taxing power.
Enforcement of payments due under general obligation bonds varies according to
the law applicable to the issuer. In contrast, revenue bonds are supported only
by the revenues generated by the project or facility.
The Fund may also invest in industrial development bonds. Such bonds
are usually revenue bonds issued to pay for facilities with a public purpose
operated by private corporations. The credit quality of industrial development
bonds is usually directly related to the credit standing of the owner or user of
the facilities. To qualify as a municipal bond, the interest paid on an
industrial development bond must qualify as fully exempt from federal income
tax. However, the interest paid on an industrial development bond may be subject
to the federal alternative minimum tax.
The yields on municipal bonds depend on such factors as market
conditions, the financial condition of the issuer and the issue's size, maturity
date and rating. Municipal bonds are rated by S&P, Moody's and Fitch. Such
ratings, however, are opinions, not absolute standards of quality. Municipal
bonds with the same maturity, interest rates and rating may have different
yields, while municipal bonds with the same maturity and interest rate, but
different ratings, may have the same yield. Once purchased by the Fund, a
municipal bond may cease to be rated or receive a new rating below the minimum
required for purchase by the Fund. Neither event would require the Fund to sell
the bond, but the Fund's investment advisor would consider such events in
determining whether the Fund should continue to hold it.
The ability of the Fund to achieve its investment objective depends
upon the continuing ability of issuers of municipal bonds to pay interest and
principal when due. Municipal bonds are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors. Such
laws extend the time for payment of principal and/or interest, and may otherwise
restrict the Fund's ability to enforce its rights in the event of default. Since
there is generally less information available on the financial condition of
municipal bond issuers compared to other domestic issuers of securities, the
Fund's investment advisor may lack sufficient knowledge of an issue's
weaknesses. Other influences, such as litigation, may also materially affect the
ability of an issuer to pay principal and interest when due. In addition, the
market for municipal bonds is often thin and can be temporarily affected by
large purchases and sales, including those by the Fund.
From time to time, Congress has considered restricting or eliminating
the federal income tax exemption for interest on municipal bonds. Such actions
could materially affect the availability of municipal bonds and the value of
those already owned by the Fund. If such legislation were passed, the Trust's
Board of Trustees may recommend changes in the Fund's investment objectives and
policies or dissolution of the Fund.
Virgin Islands, Guam and Puerto Rico
The Fund may invest in obligations of the governments of the Virgin
Islands, Guam and Puerto Rico to the extent such obligations are exempt from the
income or intangibles taxes, as applicable, of the state for which the Fund is
named. The Fund does not presently intend to invest more than (a) 10% of its net
assets in the obligations of each of the Virgin Islands and Guam or (b) 25% of
its net assets in the obligations of Puerto Rico. Accordingly, the Fund may be
adversely affected by local political and economic conditions and developments
within the Virgin Islands, Guam and Puerto Rico affecting the issuers of such
obligations.
Master Demand Notes
The Fund may invest in master demand notes. These are unsecured
obligations that permit the investment of fluctuating amounts by the Fund at
varying rates of interest pursuant to direct arrangements between the Fund, as
lender, and the issuer, as borrower. Master demand notes may permit daily
fluctuations in the interest rate and daily changes in the amounts borrowed. The
Fund has the right to increase the amount under the note at any time up to the
full amount provided by the note agreement, or to decrease the amount. The
borrower may repay up to the full amount of the note without penalty. Master
demand notes permit the Fund to demand payment of principal and accrued interest
at any time (on not more than seven days' notice). Notes acquired by the Fund
may have maturities of more than one year, provided that (1) the Fund is
entitled to payment of principal and accrued interest upon not more than seven
days' notice, and (2) the rate of interest on such notes is adjusted
automatically at periodic intervals, which normally will not exceed 31 days, but
may extend up to one year. The notes are deemed to have a maturity equal to the
longer of the period remaining to the next interest rate adjustment or the
demand notice period. Because these types of notes are direct lending
arrangements between the lender and borrower, such instruments are not normally
traded and there is no secondary market for these notes, although they are
redeemable and thus repayable by the borrower at face value plus accrued
interest at any time. Accordingly, the Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. In
connection with master demand note arrangements, the Fund`s investment advisor
considers, under standards established by the Board of Trustees, earning power,
cash flow and other liquidity ratios of the borrower and will monitor the
ability of the borrower to pay principal and interest on demand. These notes are
not typically rated by credit rating agencies. Unless rated, the Fund may invest
in them only if at the time of an investment the issuer meets the criteria
established for high quality commercial paper, i.e., rated A-1 by S&P, Prime-1
by Moody's or F-1 by Fitch.
Brady Bonds
The Fund may also invest in Brady Bonds. Brady Bonds are created
through the exchange of existing commercial bank loans to foreign entities for
new obligations in connection with debt restructurings under a plan introduced
by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan").
Brady Bonds have been issued only recently, and, accordingly, do not have a long
payment history. They may be collateralized or uncollateralized and issued in
various currencies (although most are U.S. dollar-denominated) and they are
actively traded in the over-the-counter secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be
fixed-rate par bonds or floating rate discount bonds, are generally
collateralized in full as to principal due at maturity by U.S. Treasury zero
coupon obligations that have the same maturity as the Brady Bonds. Interest
payments on these Brady Bonds generally are collateralized by cash or securities
in an amount that, in the case of fixed rate bonds, is equal to at least one
year of rolling interest payments based on the applicable interest rate at that
time and is adjusted at regular intervals thereafter. Certain Brady Bonds are
entitled to "value recovery payments" in certain circumstances, which in effect
constitute supplemental interest payments, but generally are not collateralized.
Brady Bonds are often viewed as having up to four valuation components: (1)
collateralized repayment of principal at final maturity, (2) collateralized
interest payments, (3) uncollateralized interest payments, and (4) any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In the event of a default with respect
to collateralized Brady Bonds as a result of which the payment obligations of
the issuer are accelerated, the U.S. Treasury zero coupon obligations held as
collateral for the payment of principal will not be distributed to investors,
nor will such obligations be sold and the proceeds distributed. The collateral
will be held by the collateral agent to the scheduled maturity of the defaulted
Brady Bonds, which will continue to be outstanding, at which time the face
amount of the collateral will equal the principal payments that would have then
been due on the Brady Bonds in the normal course. In addition, in light of the
residual risk of Brady Bonds and, among other factors, the history of defaults
with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, investments in Brady Bonds are to be viewed as
speculative.
Obligations of Foreign Branches of United States Banks
The Fund may invest in obligations of foreign branches of U.S. banks.
These may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by
government regulation. Payment of interest and principal upon these obligations
may also be affected by governmental action in the country of domicile of the
branch (generally referred to as sovereign risk). In addition, evidences of
ownership of such securities may be held outside the U.S. and the Fund may be
subject to the risks associated with the holding of such property overseas.
Examples of governmental actions would be the imposition of currency controls,
interest limitations, withholding taxes, seizure of assets or the declaration of
a moratorium. Various provisions of federal law governing domestic branches do
not apply to foreign branches of domestic banks.
Obligations of United States Branches of Foreign Banks
The Fund may invest in obligations of U.S. branches of foreign banks.
These may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by federal
and state regulation as well as by governmental action in the country in which
the foreign bank has its head office. In addition, there may be less publicly
available information about a U.S. branch of a foreign bank than about a
domestic bank.
Payment-in-kind Securities
The Fund may invest in payment-in-kind ("PIK") securities. PIKs pay
interest in either cash or additional securities, at the issuer's option, for a
specified period. The issuer's option to pay in additional securities typically
ranges from one to six years, compared to an average maturity for all PIK
securities of eleven years. Call protection and sinking fund features are
comparable to those offered on traditional debt issues.
PIKs, like zero coupon bonds, are designed to give an issuer
flexibility in managing cash flow. Several PIKs are senior debt. In other cases,
where PIKs are subordinated, most senior lenders view them as equity
equivalents.
An advantage of PIKs for the issuer -- as with zero coupon securities
- -- is that interest payments are automatically compounded (reinvested) at the
stated coupon rate, which is not the case with cash-paying securities. However,
PIKs are gaining popularity over zeros since interest payments in additional
securities can be monetized and are more tangible than accretion of a discount.
As a group, PIK bonds trade flat (i.e., without accrued interest).
Their price is expected to reflect an amount representing accredit interest
since the last payment. PIKs generally trade at higher yields than comparable
cash-paying securities of the same issuer. Their premium yield is the result of
the lesser desirability of non-cash interest, the more limited audience for
non-cash paying securities, and the fact that many PIKs have been issued to
equity investors who do not normally own or hold such securities.
Calculating the true yield on a PIK security requires a discounted cash
flow analysis if the security (ex interest) is trading at a premium or a
discount because the realizable value of additional payments is equal to the
current market value of the underlying security, not par.
Regardless of whether PIK securities are senior or deeply subordinated,
issuers are highly motivated to retire them because they are usually their most
costly form of capital.
Zero Coupon "Stripped" Bonds
The Fund may invest in zero coupon "stripped" bonds. These represent
ownership in serially maturing interest payments or principal payments on
specific underlying notes and bonds, including coupons relating to such notes
and bonds. The interest and principal payments are direct obligations of the
issuer. Interest zero coupon bonds of any series mature periodically from the
date of issue of such series through the maturity date of the securities related
to such series. Principal zero coupon bonds mature on the date specified
therein, which is the final maturity date of the related securities. Each zero
coupon bond entitles the holder to receive a single payment at maturity. There
are no periodic interest payments on a zero coupon bond. Zero coupon bonds are
offered at discounts from their face amounts.
In general, owners of zero coupon bonds have substantially all the
rights and privileges of owners of the underlying coupon obligations or
principal obligations. Owners of zero coupon bonds have the right upon default
on the underlying coupon obligations or principal obligations to proceed
directly and individually against the issuer and are not required to act in
concert with other holders of zero coupon bonds.
For federal income tax purposes, a purchaser of principal zero coupon
bonds or interest zero coupon bonds (either initially or in the secondary
market) is treated as if the buyer had purchased a corporate obligation issued
on the purchase date with an original issue discount equal to the excess of the
amount payable at maturity over the purchase price. The purchaser is required to
take into income each year as ordinary income an allocable portion of such
discounts determined on a "constant yield" method. Any such income increases the
holder's tax basis for the zero coupon bond, and any gain or loss on a sale of
the zero coupon bonds relative to the holder's basis, as so adjusted, is a
capital gain or loss. If the holder owns both principal zero coupon bonds and
interest zero coupon bonds representing an interest in the same underlying issue
of securities, a special basis allocation rule (requiring the aggregate basis to
be allocated among the items sold and retained based on their relative fair
market value at the time of sale) may apply to determine the gain or loss on a
sale of any such zero coupon bonds.
Mortgage-Backed or Asset-Backed Securities
The Fund may invest in mortgage-backed securities and asset-backed
securities. Two principal types of mortgage-backed securities are collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs"). CMOs are securities collateralized by mortgages, mortgage
pass-throughs, mortgage pay-through bonds (bonds representing an interest in a
pool of mortgages where the cash flow generated from the mortgage collateral
pool is dedicated to bond repayment), and mortgage-backed bonds (general
obligations of the issuers payable out of the issuers' general funds and
additionally secured by a first lien on a pool of single family detached
properties). Many CMOs are issued with a number of classes or series which have
different maturities and are retired in sequence.
Investors purchasing CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligation is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-throughs to be prepaid prior to their
stated maturity. Although some of the mortgages underlying CMOs may be supported
by various types of insurance, and some CMOs may be backed by GNMA certificates
or other mortgage pass-throughs issued or guaranteed by U.S. government agencies
or instrumentalities, the CMOs themselves are not generally guaranteed.
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.
In addition to mortgage-backed securities, the Fund may invest in
securities secured by other assets including company receivables, truck and auto
loans, leases, and credit card receivables. These issues may be traded
over-the-counter and typically have a short-intermediate maturity structure
depending on the pay down characteristics of the underlying financial assets
which are passed through to the security holder.
Credit card receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. Most issuers of
asset-backed securities backed by automobile receivables permit the servicers of
such receivables to retain possession of the underlying obligations. If the
servicers were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of related asset-backed securities backed by
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
In general, issues of asset-backed securities are structured to include
additional collateral and/or additional credit support to protect against the
risk that a portion of the collateral supporting the asset-backed securities may
default and/or may suffer from these defects. In evaluating the strength of
particular issues of asset-backed securities, the investment advisor considers
the financial strength of the guarantor or other provider of credit support, the
type and extent of credit enhancement provided as well as the documentation and
structure of the issue itself and the credit support.
Variable or Floating Rate Instruments
The Fund may invest in variable or floating rate instruments which may
involve a demand feature and may include variable amount master demand notes
which may or may not be backed by bank letters of credit. Variable or floating
rate instruments bear interest at a rate which varies with changes in market
rates. The holder of an instrument with a demand feature may tender the
instrument back to the issuer at par prior to maturity. A variable amount master
demand note is issued pursuant to a written agreement between the issuer and the
holder, its amount may be increased by the holder or decreased by the holder or
issuer, it is payable on demand, and the rate of interest varies based upon an
agreed formula. The quality of the underlying credit must, in the opinion of the
investment advisor, be equivalent to the long-term bond or commercial paper
ratings applicable to permitted investments for the Fund. The investment advisor
will monitor, on an ongoing basis, the earning power, cash flow, and liquidity
ratios of the issuers of such instruments and will similarly monitor the ability
of an issuer of a demand instrument to pay principal and interest on demand.
Real Estate Investment Trusts
The Fund may invest in investments related to real estate including
real estate investment trusts ("REITs"). Risks associated with investments in
securities of companies in the real estate industry include: decline in the
value of real estate; risks related to general and local economic conditions,
overbuilding and increased competition; increases in property taxes and
operating expenses; changes in zoning laws; casualty or condemnation losses;
variations in rental income; changes in neighborhood values; the appeal of
properties to tenants; and increases in interest rates. In addition, equity
REITs may be affected by changes in the values of the underlying property owned
by the trusts, while mortgage real estate investment trusts may be affected by
the quality of credit extended. REITs are dependent upon management skills, may
not be diversified and are subject to the risks of financing projects. Such
REITs are also subject to heavy cash flow dependency, defaults by borrowers,
self liquidation and the possibility of failing to qualify for tax-free
pass-through of income under the Code and to maintain exemption from the 1940
Act. In the event an issuer of debt securities collateralized by real estate
defaults, it is conceivable that the REITs could end up holding the underlying
real estate.
Limited Partnerships
The Fund may invest in limited and master limited partnerships. A
limited partnership is a partnership consisting of one or more general partners,
jointly and severally responsible as ordinary partners, and by whom the business
is conducted, and one or more limited partners who contribute cash as capital to
the partnership and who generally are not liable for the debts of the
partnership beyond the amounts contributed. Limited partners are not involved in
the day-to-day management of the partnership. They receive income, capital gains
and other tax benefits associated with the partnership project in accordance
with terms established in the partnership agreement. Typical limited
partnerships are in real estate, oil and gas and equipment leasing, but they
also finance movies, research and development, and other projects.
For an organization classified as a partnership under the Internal
Revenue Code of 1986, as amended (the "Code"), each item of income, gain, loss,
deduction, and credit is not taxed at the partnership level but flows through to
the holder of the partnership unit. This allows the partnership to avoid double
taxation and to pass through income to the holder of the partnership unit at
lower individual rates.
A master limited partnership is a publicly traded limited partnership.
The partnership units are registered with the Securities and Exchange Commission
("SEC") and are freely exchanged on a securities exchange or in the
over-the-counter market.
PURCHASE AND REDEMPTION OF SHARES
You may buy shares of the Fund through Evergreen Distributor, Inc.
("EDI"), broker-dealers that have entered into special agreements with EDI or
certain other financial institutions. With certain exceptions, the Fund may
offer up to four different classes of shares that differ primarily with respect
to sales charges and distribution fees. Depending upon the class of shares, you
will pay an initial sales charge when you buy the Fund's shares, a contingent
deferred sales charge (a "CDSC") when you redeem the Fund's shares or no sales
charges at all. Each Fund offers different classes of shares. Refer to the
prospectus to determine which classes of shares are offered by each Fund.
Class A Shares
With certain exceptions, when you purchase Class A shares you will pay
a maximum sales charge of 4.75%. The prospectus contains a complete table of
applicable sales charges and a discussion of sales charge reductions or waivers
that may apply to purchases. If you purchase Class A shares in the amount of $1
million or more, without an initial sales charge, the Fund will charge a CDSC of
1.00% if you redeem during the month of your purchase or the 12-month period
following the month of your purchase (see "Contingent Deferred Sales Charge"
below).
No front-end sales charges are imposed on Class A shares purchased by
(a) institutional investors, which may include bank trust departments and
registered investment advisors; (b) investment advisors, consultants or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge such clients a management, consulting, advisory or
other fee; (c) clients of investment advisors or financial planners who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisors or financial planners on the books of the
broker-dealer through whom shares are purchased; (d) institutional clients of
broker-dealers, including retirement and deferred compensation plans and the
trusts used to fund these plans, which place trades through an omnibus account
maintained with the Fund by the broker-dealer; (e) shareholders of record on
October 12, 1990 in any series of Evergreen Investment Trust in existence on
that date, and the members of their immediate families; (f) current and retired
employees of First Union National Bank ("FUNB") and its affiliates, EDI and any
broker-dealer with whom EDI has entered into an agreement to sell shares of the
Fund, and members of the immediate families of such employees; and (g) upon the
initial purchase of an Evergreen Fund by investors reinvesting the proceeds from
a redemption within the preceding 30 days of shares of other mutual funds,
provided such shares were initially purchased with a front-end sales charge or
subject to a CDSC.
Class B Shares
The Fund offers Class B shares at net asset value without an initial
sales charge. With certain exceptions, however, the Fund will charge a CDSC on
shares you redeem within 72 months after the month of your purchase, in
accordance with the following schedule:
<TABLE>
<CAPTION>
REDEMPTION TIME CDSC RATE
<S> <C>
Month of purchase and the first 12-month
period following the month of purchase........................................... 5.00%
Second 12-month period following the month of purchase........................... 4.00%
Third 12-month period following the month of purchase............................ 3.00%
Fourth 12-month period following the month of purchase........................... 3.00%
Fifth 12-month period following the month of purchase............................ 2.00%
Sixth 12-month period following the month of purchase............................ 1.00%
Thereafter....................................................................... 0.00%
</TABLE>
Class B shares that have been outstanding for seven years after the
month of purchase will automatically convert to Class A shares without
imposition of a front-end sales charge or exchange fee. Conversion of Class B
shares represented by stock certificates will require the return of the stock
certificate to ESC.
Class C Shares
Class C shares are available only through broker-dealers who have
entered into special distribution agreements with EDI. The Fund offers Class C
shares at net asset value without an initial sales charge. With certain
exceptions, however, the Fund will charge a CDSC of 1.00% on shares you redeem
within 12-months after the month of your purchase. See "Contingent Deferred
Sales Charge" below.
Class Y Shares
No CDSC is imposed on the redemption of Class Y shares. Class Y shares
are not offered to the general public and are available only to (1) persons who
at or prior to December 31, 1994 owned shares in a mutual fund advised by (2)
certain institutional investors and (3) investment advisory clients of an
investment advisor of an Evergreen Fund or the advisor's affiliates. Class Y
shares are offered at net asset value without a front-end or back-end sales
charge and do not bear any Rule 12b-1 distribution expenses.
Institutional Shares, Institutional Service Shares
Each institutional class of shares is sold without a front-end sales
charge or contingent deferred sales charge. Institutional Service shares pay an
ongoing service fee. The minimum initial investment in any institutional class
of shares is $1 million, which may be waived in certain circumstances. There is
no minimum amount required for subsequent purchases.
Contingent Deferred Sales Charge
The Fund charges a CDSC as reimbursement for certain expenses, such as
commissions or shareholder servicing fees, that it has incurred in connection
with the sale of its shares (see "Distribution Expenses Under Rule 12b-1,"
below). Institutional and Institutional Service shares do not charge a CDSC. If
imposed, the Fund deducts the CDSC from the redemption proceeds you would
otherwise receive. The CDSC is a percentage of the lesser of (1) the net asset
value of the shares at the time of redemption or (2) the shareholder's original
net cost for such shares. Upon request for redemption, to keep the CDSC a
shareholder must pay as low as possible, the Fund will first seek to redeem
shares not subject to the CDSC and/or shares held the longest, in that order.
The CDSC on any redemption is, to the extent permitted by the National
Association of Securities Dealers, Inc., paid to EDI or its predecessor.
SALES CHARGE WAIVERS AND REDUCTIONS
The following information is not applicable to Institutional and
Institutional Service shares.
If you making a large purchase, there are several ways you can combine
multiple purchases of Class A shares in Evergreen Funds and take advantage of
lower sales charges. These are described below.
Combined Purchases
You can reduce your sales charge by combining purchases of Class A
shares of multiple Evergreen Funds. For example, if you invested $75,000 in each
of two different Evergreen Funds, you would pay a sales charge based on a
$150,000 purchase (i.e., 3.75% of the offering price, rather than 4.75%).
<PAGE>
Rights of Accumulation
You can reduce your sales charge by adding the value of Class A shares
of Evergreen Funds you already own to the amount of your next Class A
investment. For example, if you hold Class A shares valued at $99,999 and
purchase an additional $5,000, the sales charge for the $5,000 purchase would be
at the next lower sales charge of 3.75%, rather than 4.75%.
Your account, and therefore your rights of accumulation, can be linked
to immediate family members which includes father and mother, brothers and
sisters, and sons and daughters. The same rule applies with respect to
individual retirement plans. Please note, however, that retirement plans
involving employees stand alone and do not pass on rights of accumulation.
Letter of Intent
You can, by completing the "Letter of Intent" section of the
application, purchase Class A shares over a 13-month period and receive the same
sales charge as if you had invested all the money at once. All purchases of
Class A shares of an Evergreen Fund during the period will qualify as Letter of
Intent purchases.
Waiver of Initial Sales Charges
The Fund may sell its shares at net asset value without an initial
sales charge to:
1. purchasers of shares in the amount of $1 million or more;
2. a corporate or certain other qualified retirement plan or a
non-qualified deferred compensation plan or a Title 1
tax-sheltered annuity or TSA plan sponsored by an organization
having 100 or more eligible employees (a "Qualifying Plan") or
a TSA plan sponsored by a public educational entity having
5,000 or more eligible employees (an "Educational TSA Plan");
3. institutional investors, which may include bank trust
departments and registered investment advisors;
4. investment advisors, consultants or financial planners who
place trades for their own accounts or the accounts of their
clients and who charge such clients a management, consulting,
advisory or other fee;
5. clients of investment advisors or financial planners who place
trades for their own accounts if the accounts are linked to a
master account of such investment advisors or financial
planners on the books of the broker-dealer through whom shares
are purchased;
6. institutional clients of broker-dealers, including retirement
and deferred compensation plans and the trusts used to fund
these plans, which place trades through an omnibus account
maintained with the Fund by the broker-dealer;
7. employees of FUNB, its affiliates, EDI, any broker-dealer with
whom EDI, has entered into an agreement to sell shares of the
Fund, and members of the immediate families of such employees;
8. certain Directors, Trustees, officers and employees of the
Evergreen Funds, EDI or their affiliates and to the immediate
families of such persons; or
9. a bank or trust company acting as trustee for a single account
in the name of such bank or trust company if the initial
investment in any of the Evergreen Funds made pursuant to this
waiver is at least $500,000 and any commission paid at the
time of such purchase is not more than 1% of the amount
invested.
With respect to items 8 and 9 above, the Fund will only sell shares to
these parties upon the purchasers written assurance that the purchase is for
their personal investment purposes only. Such purchasers may not resell the
securities except through redemption by the Fund. The Fund will not charge any
CDSC on redemptions by such purchasers.
Waiver of CDSCs
The Fund does not impose a CDSC when the shares you are redeeming
represent:
1. an increase in the share value above the net cost of such
shares;
2. certain shares for which the Fund did not pay a commission on
issuance, including shares acquired through reinvestment of
dividend income and capital gains distributions;
3. shares that are in the accounts of a shareholder who has died
or become disabled;
4. a lump-sum distribution from a 401(k) plan or other benefit
plan qualified under the Employee Retirement Income Security
Act of 1974 ("ERISA");
5. an automatic withdrawal from the ERISA plan of a shareholder
who is a least 59 years old;
6. shares in an account that we have closed because the account
has an aggregate net asset value of less than $1,000;
7. an automatic withdrawal under an Systematic Income Plan of up
to 1.0% per month of your initial account balance;
8. a withdrawal consisting of loan proceeds to a retirement plan
participant;
9. a financial hardship withdrawal made by a retirement plan
participant;
10. a withdrawal consisting of returns of excess
contributions or excess deferral amounts made to a retirement
plan; or
11. a redemption by an individual participant in a Qualifying Plan
that purchased Class C shares (this waiver is not available in
the event a Qualifying Plan, as a whole, redeems substantially
all of its assets).
<PAGE>
Exchanges
Investors may exchange shares of the Fund for shares of the same class
of any other Evergreen Fund which offers the same class of shares. Shares of any
class of the Evergreen Select Funds may be exchanged for the same class of
shares of any other Evergreen Select Fund. See "By Exchange" under "How to Buy
Shares" in the prospectus. Before you make an exchange, you should read the
prospectus of the Evergreen Fund into which you want to exchange. The Trust's
Board of Trustees reserves the right to discontinue, alter or limit the exchange
privilege at any time.
Automatic Reinvestment
As described in the prospectus, a shareholder may elect to receive
dividends and capital gains distributions in cash instead of shares. However,
ESC will automatically reinvest all dividends and distributions in additional
shares when it learns that the postal or other delivery service is unable to
deliver checks or transaction confirmations to the shareholder's address of
record. When a check is returned, the Fund will hold the check amount in a
no-interest account in the shareholder's name until the shareholder updates his
or her address or automatic reinvestment begins. Uncashed or returned redemption
checks will also be handled in the manner described above.
PRICING OF SHARES
Calculation of Net Asset Value
The Fund calculates its net asset value ("NAV") once daily (or twice
daily, for Money Market Funds) on Monday through Friday, as described in the
prospectus. The Fund will not compute its NAV on the days the New York Stock
Exchange is closed: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
The NAV of the Fund is calculated by dividing the value of the Fund's
net assets attributable to that class by all of the shares issued for that
class.
Valuation of Portfolio Securities
Current values for the Fund's portfolio securities are determined as
follows:
(1) Securities that are traded on an established securities exchange or
the over-the-counter National Market System ("NMS") are valued on the
basis of the last sales price on the exchange where primarily traded or
on the NMS prior to the time of the valuation, provided that a sale has
occurred.
(2) Securities traded on an established securities exchange or in the
over-the-counter market for which there has been no sale and other
securities traded in the over-the-counter market are valued at the mean
of the bid and asked prices at the time of valuation.
(3) Short-term investments maturing in more than 60 days, for which
market quotations are readily available, are valued at current market
value.
(4) Short-term investments maturing in sixty days or less are valued at
amortized cost, which approximates market.
(5) Securities, including restricted securities, for which market
quotations are not readily available; listed securities or those on NMS
if, in the investment advisor's opinion, the last sales price does not
reflect an accurate current market value; and other assets are valued
at prices deemed in good faith to be fair under procedures established
by the Board of Trustees.
(6) Municipal bonds are valued by an independent pricing service at
fair value using a variety of factors which may include yield,
liquidity, interest rate risk, credit quality, coupon, maturity and
type of issue.
Foreign securities are generally valued on the basis of valuations provided by a
pricing service, approved by the Fund's Board of Trustees, which uses
information with respect to transactions in such securities, quotations from
broker-dealers, market transactions in comparable securities, and various
relationships between securities and yield to maturity in determining value.
PERFORMANCE CALCULATIONS
Total Return
Total return quotations for a class of shares of the Fund as they may
appear from time to time in advertisements are calculated by finding the average
annual compounded rates of return over one, five and ten year periods, or the
time periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. To the initial
investment all dividends and distributions are added, and all recurring fees
charged to all shareholder accounts are deducted. The ending redeemable value
assumes a complete redemption at the end of the relevant periods.
The following is the formula used to calculate average annual total
return:
P(1 + T)n = ERV
P = initial payment of $1,000 T = average annual total return N =
number of years
ERV = ending redeemable value of the initial $1,000
Yield
Described below are yield calculations the Fund may use. Yield
quotations are expressed in annualized terms and may be quoted on a compounded
basis. Yields based on these calculations do not represent the Fund's yield for
any future period.
30-Day Yield
If the Fund invests primarily in bonds, it may quote its 30-day yield
in advertisements or in reports or other communications to shareholders. It is
calculated by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:
a-b
Yield = 2[(----- +1)6 - 1]
cd
Where:
a = Dividends and interest earned during the period b = Expenses
accrued for the period (net of reimbursements) c = The average daily
number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the period
7-Day Current and Effective Yield
If the Fund invests primarily in money market instruments, it may quote
its 7-day current yield or effective yield in advertisements or in reports or
other communications to shareholders.
The current yield is calculated by determining the net change,
excluding capital changes and income other than investment income, in the value
of a hypothetical, pre-existing account having a balance of one share at the
beginning of the 7-day base period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7).
The effective yield is based on a compounding of the current yield,
according to the following formula:
Effective Yield = [(base period return)] + 1) 365/7] - 1
Tax Equivalent Yield
If the Fund invests primarily in municipal bonds, it may quote in
advertisements or in reports or other communications to shareholders a tax
equivalent yield, which is what an investor would generally need to earn from a
fully taxable investment in order to realize, after income taxes, a benefit
equal to the tax free yield provided by the Fund. Tax equivalent yield is
calculated using the following formula:
Yield
Tax Equivalent Yield = ---------------------
1 - Income Tax Rate
The quotient is then added to that portion, if any, of the
Fund's yield that is not tax exempt. Depending on the Fund's objective, the
income tax rate used in the formula above may be federal or a combination of
federal and state.
<PAGE>
PRINCIPAL UNDERWRITER
EDI is the principal underwriter for the Trust and with respect to each
class of shares of the Fund. The Trust has entered into a Principal Underwriting
Agreement ("Underwriting Agreement") with EDI with respect to each class of the
Fund. EDI is a subsidiary of The BISYS Group, Inc.
EDI, as agent, has agreed to use its best efforts to find purchasers
for the shares. EDI may retain and employ representatives to promote
distribution of the shares and may obtain orders from broker-dealers, and
others, acting as principals, for sales of shares to them. The Underwriting
Agreement provides that EDI will bear the expense of preparing, printing, and
distributing advertising and sales literature and prospectuses used by it.
All subscriptions and sales of shares by EDI are at the public offering
price of the shares, which is determined in accordance with the provisions of
the Trust's Declaration of Trust, By-Laws, current prospectuses and SAI. All
orders are subject to acceptance by the Fund and the Fund reserves the right, in
its sole discretion, to reject any order received. Under the Underwriting
Agreement, the Fund is not liable to anyone for failure to accept any order.
EDI has agreed that it will, in all respects, duly conform with all
state and federal laws applicable to the sale of the shares. EDI has also agreed
that it will indemnify and hold harmless the Trust and each person who has been,
is, or may be a Trustee or officer of the Trust against expenses reasonably
incurred by any of them in connection with any claim, action, suit, or
proceeding to which any of them may be a party that arises out of or is alleged
to arise out of any misrepresentation or omission to state a material fact on
the part of EDI or any other person for whose acts EDI is responsible or is
alleged to be responsible, unless such misrepresentation or omission was made in
reliance upon written information furnished by the Trust.
The Underwriting Agreement provides that it will remain in effect as
long as its terms and continuance are approved annually (i) by a vote of a
majority of the Trust's Trustees who are not interested persons of the Fund, as
defined in the 1940 Act (the "Independent Trustees"), and (ii) by vote of a
majority of the Trust's Trustees, in each case, cast in person at a meeting
called for that purpose.
The Underwriting Agreement may be terminated, without penalty, on 60
days' written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its "assignment," as that term is defined in the
1940 Act.
From time to time, if, in EDI's judgment, it could benefit the sales of
shares, EDI may provide to selected broker-dealers promotional materials and
selling aids, including, but not limited to, personal computers, related
software, and data files.
DISTRIBUTION EXPENSES UNDER RULE 12b-1
The Fund bears some of the costs of selling its Class A, Class B, Class
C and Institutional Service shares, as applicable, including certain
advertising, marketing and shareholder service expenses, pursuant to Rule 12b-1
of the 1940 Act. These 12b-1 fees are indirectly paid by the shareholder, as
shown by the Fund's expense table in the prospectus.
Under the Distribution Plans (each a "Plan," together, the "Plans")
that the Fund has adopted for its Class A, Class B, Class C and Institutional
Service shares, as applicable, the Fund may incur expenses for 12b-1 fees up to
a maximum annual percentage of the average daily net assets attributable to a
class, as follows:
------------------------------- ---------------
Class A 0.75%*
------------------------------- ---------------
------------------------------- ---------------
Class B 1.00%
------------------------------- ---------------
------------------------------- ---------------
Class C 1.00%
------------------------------- ---------------
------------------------------- ---------------
Institutional Service 0.75%*
------------------------------- ---------------
* Currently limited to 0.25% or less to be used exclusively as a
shareholder service fee. See the expense table in the prospectus
of the Fund in which you are interested.
Of the amounts above, each class may pay under its Plan a maximum
service fee of 0.25% to compensate organizations, which may include the Fund's
investment advisor or its affiliates, for personal services provided to
shareholders and the maintenance of shareholder accounts. The Fund may not,
during any fiscal period, pay distribution or service fees greater than the
amounts above.
Amounts paid under the Plans are used to compensate EDI pursuant to
Distribution Agreements (each an "Agreement," together, the "Agreements") that
the Fund has entered into with respect to its Class A, Class B, Class C and
Institutional Service shares, as applicable. The compensation is based on a
maximum annual percentage of the average daily net assets attributable to a
class, as follows:
----------------------------- -------------
Class A 0.25%*
----------------------------- -------------
----------------------------- -------------
Class B 1.00%
----------------------------- -------------
----------------------------- -------------
Class C 1.00%
----------------------------- -------------
----------------------------- -------------
Institutional Service 0.25%*
----------------------------- -------------
*May be lower. See the expense table in the prospectus of the Fund in
which you are interested.
The Agreements provide that EDI will use the distribution fees received
from the Fund for the following purposes:
(1) to compensate broker-dealers or other persons for distributing
Fund shares;
(2) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's
shareholders; and
(3) to otherwise promote the sale of Fund shares.
The Agreements also provide that EDI may use distribution fees to make
interest and principal payments in respect of amounts that have been financed to
pay broker-dealers or other persons for distributing Fund shares. EDI may assign
its rights to receive compensation under the Plans to secure such financings.
FUNB or its affiliates may finance payments made by EDI to compensate
broker-dealers or other persons for distributing shares of the Fund.
In the event the Fund acquires the assets of another mutual fund,
compensation paid to EDI under the Agreements may be paid by the Fund's
Distributor to the acquired fund's distributor or its predecessor.
Since EDI's compensation under the Agreements is not directly tied to
the expenses incurred by EDI, the compensation received by it under the
Agreements during any fiscal year may be more or less than its actual expenses
and may result in a profit to EDI. Distribution expenses incurred by EDI in one
fiscal year that exceed the compensation paid to EDI for that year may be paid
from distribution fees received from the Fund in subsequent fiscal years.
Distribution fees are accrued daily and paid at least annually on Class
B and Class C shares and are charged as class expenses, as accrued. The
distribution fees attributable to the Class B and Class C shares are designed to
permit an investor to purchase such shares through broker-dealers without the
assessment of a front-end sales charge, while at the same time permitting EDI to
compensate broker-dealers in connection with the sale of such shares.
Service fees are accrued daily and paid at least annually on Class A, Class B,
Class C, and Institutional Service shares and are charged as class expenses, as
accrued.
Under the Plans, the Treasurer of the Trust reports the amounts
expended under the Plans and the purposes for which such expenditures were made
to the Trustees of the Trust for their review on a quarterly basis. Also, each
Plan provides that the selection and nomination of the Independent Trustees are
committed to the discretion of such Independent Trustees then in office.
The investment advisor may from time to time from its own funds or such
other resources as may be permitted by rules of the SEC make payments for
distribution services to EDI; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.
Each Plan and the Agreement will continue in effect for successive
12-month periods provided, however, that such continuance is specifically
approved at least annually by the Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities of that class and, in
either case, by a majority of the Independent Trustees of the Trust.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B, Class C and
Institutional Service shares. The Plans are designed to (i) stimulate brokers to
provide distribution and administrative support services to the Fund and holders
of Class A, Class B, Class C and Institutional Service shares and (ii) stimulate
administrators to render administrative support services to the Fund and holders
of Class A, Class B, Class C and Institutional Service shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding Class
A, Class B, Class C and Institutional Service shares; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as the Fund reasonably requests for its Class A, Class B,
Class C and Institutional Service shares.
In the event that the Plan or Distribution Agreement is terminated or
not continued with respect to one or more classes of the Fund, (i) no
distribution fees (other than current amounts accrued but not yet paid) would be
owed by the Fund to EDI with respect to that class or classes, and (ii) the Fund
would not be obligated to pay EDI for any amounts expended under the
Distribution Agreement not previously recovered by the EDI from distribution
services fees in respect of shares of such class or classes through deferred
sales charges.
All material amendments to any Plan or Agreement must be approved by a
vote of the Trustees of the Trust or the holders of the Fund's outstanding
voting securities, voting separately by class, and in either case, by a majority
of the Independent Trustees, cast in person at a meeting called for the purpose
of voting on such approval; and any Plan or Distribution Agreement may not be
amended in order to increase materially the costs that a particular class of
shares of the Fund may bear pursuant to the Plan or Distribution Agreement
without the approval of a majority of the holders of the outstanding voting
shares of the class affected. Any Plan or Distribution Agreement may be
terminated (i) by the Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting separately by
class or by a majority vote of the Independent Trustees, or (ii) by EDI. To
terminate any Distribution Agreement, any party must give the other parties 60
days' written notice; to terminate a Plan only, the Fund need give no notice to
EDI. Any Distribution Agreement will terminate automatically in the event of its
assignment. For more information about 12b-1 fees, see "Expenses" in the
prospectus and "12b-1 Fees" under "Expenses" in Part 1 of this SAI.
TAX INFORMATION
Requirements for Qualifications as a Regulated Investment Company
The Fund intends to qualify for and elect the tax treatment applicable
to regulated investment companies ("RIC") under Subchapter M of the Code, as
amended. (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a RIC, the Fund must, among other things, (i) derive at least 90% of
its gross income from dividends, interest, payments with respect to proceeds
from securities loans, gains from the sale or other disposition of securities or
foreign currencies and other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in such
securities; and (ii) diversify its holdings so that, at the end of each quarter
of its taxable year, (a) at least 50% of the market value of the Fund's total
assets is represented by cash, U.S. government securities and other securities
limited in respect of any one issuer, to an amount not greater than 5% of the
Fund's total assets and 10% of the outstanding voting securities of such issuer,
and (b) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. government securities and
securities of other regulated investment companies). By so qualifying, the Fund
is not subject to federal income tax if it timely distributes its investment
company taxable income and any net realized capital gains. A 4% nondeductible
excise tax will be imposed on the Fund to the extent it does not meet certain
distribution requirements by the end of each calendar year. The Fund anticipates
meeting such distribution requirements.
<PAGE>
Taxes on Distributions
Unless the Fund is a municipal bond fund, distributions will be taxable
to shareholders whether made in shares or in cash. Shareholders electing to
receive distributions in the form of additional shares will have a cost basis
for federal income tax purposes in each share so received equal to the net asset
value of a share of the Fund on the reinvestment date.
To calculate ordinary income for federal income tax purposes,
shareholders must generally include dividends paid by the Fund from its
investment company taxable income (net taxable investment income plus net
realized short-term capital gains, if any). The Fund will include dividends it
receives from domestic corporations when the Fund calculates its gross
investment income. Unless the Fund is a municipal bond fund or U.S. Treasury or
U.S. Government money market fund, it anticipates that all or a portion of the
ordinary dividends which it pays will qualify for the 70% dividends-received
deduction for corporations. The Fund will inform shareholders of the amounts
that so qualify. If the Fund is a municipal bond fund or U.S. Treasury or U.S.
Government money market fund, none of its income will consist of corporate
dividends; therefore, none of its distributions will qualify for the 70%
dividends-received deduction for corporations.
From time to time, the Fund will distribute the excess of its net
long-term capital gains over its short-term capital loss to shareholders (i.e.,
capital gain dividends). For federal tax purposes, shareholders must include
such capital gain dividends when calculating their net long-term capital gains.
Capital gain dividends are taxable as net long-term capital gains to a
shareholder, no matter how long the shareholder has held the shares.
Distributions by the Fund reduce its NAV. A distribution that reduces
the Fund's NAV below a shareholder's cost basis is taxable as described above,
although from an investment standpoint, it is a return of capital. In
particular, if a shareholder buys Fund shares just before the Fund makes a
distribution, when the Fund makes the distribution the shareholder will receive
what is in effect a return of capital. Nevertheless, the shareholder may incur
taxes on the distribution. Therefore, shareholders should carefully consider the
tax consequences of buying Fund shares just before a distribution.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her federal income tax return. Each shareholder
should consult a tax advisor to determine the state and local tax implications
of Fund distributions.
If more than 50% of the value of the Fund's total assets at the end of
a fiscal year is represented by securities of foreign corporations and the Fund
elects to make foreign tax credits available to its shareholders, a shareholder
will be required to include in his gross income both cash dividends and the
amount the Fund advises him is his pro rata portion of income taxes withheld by
foreign governments from interest and dividends paid on the Fund's investments.
The shareholder may be entitled, however, to take the amount of such foreign
taxes withheld as a credit against his U.S. income tax, or to treat the foreign
tax withheld as an itemized deduction from his gross income, if that should be
to his advantage. In substance, this policy enables the shareholder to benefit
from the same foreign tax credit or deduction that he would have received if he
had been the individual owner of foreign securities and had paid foreign income
tax on the income therefrom. As in the case of individuals receiving income
directly from foreign sources, the credit or deduction is subject to a number of
limitations.
<PAGE>
Special Tax Information for Shareholders of Municipal Bond Funds
The Fund expects that substantially all of its dividends will be
"exempt interest dividends," which should be treated as excludable from federal
gross income. In order to pay exempt interest dividends, at least 50% of the
value of the Fund's assets must consist of federally tax-exempt obligations at
the close of each quarter. An exempt interest dividend is any dividend or part
thereof (other than a capital gain dividend) paid by the Fund with respect to
its net federally excludable municipal obligation interest and designated as an
exempt interest dividend in a written notice mailed to each shareholder not
later than 60 days after the close of its taxable year. The percentage of the
total dividends paid by the Fund with respect to any taxable year that qualifies
as exempt interest dividends will be the same for all shareholders of the Fund
receiving dividends with respect to such year. If a shareholder receives an
exempt interest dividend with respect to any share and such share has been held
for six months or less, any loss on the sale or exchange of such share will be
disallowed to the extent of the exempt interest dividend amount.
Any shareholder of the Fund who may be a "substantial user" (as defined
by the Code, as amended.) of a facility financed with an issue of tax-exempt
obligations or a "related person" to such a user should consult his tax advisor
concerning his qualification to receive exempt interest dividends should the
Fund hold obligations financing such facility.
Under regulations to be promulgated, to the extent attributable to
interest paid on certain private activity bonds, the Fund's exempt interest
dividends, while otherwise tax-exempt, will be treated as a tax preference item
for alternative minimum tax purposes. Corporate shareholders should also be
aware that the receipt of exempt interest dividends could subject them to
alternative minimum tax under the provisions of Section 56(g) of the Code
(relating to "adjusted current earnings").
Interest on indebtedness incurred or continued by shareholders to
purchase or carry shares of the Fund will not be deductible for federal income
tax purposes to the extent of the portion of the interest expense relating to
exempt interest dividends. Such portion is determined by multiplying the total
amount of interest paid or accrued on the indebtedness by a fraction, the
numerator of which is the exempt interest dividends received by a shareholder in
his taxable year and the denominator of which is the sum of the exempt interest
dividends and the taxable distributions out of the Fund's investment income and
long-term capital gains received by the shareholder.
Taxes on The Sale or Exchange of Fund Shares
Upon a sale or exchange of Fund shares, a shareholder will realize a
taxable gain or loss depending on his or her basis in the shares. A shareholder
must treat such gains or losses as a capital gain or loss if the shareholder
held the shares as capital assets. Capital gain on assets held for more than 12
months is generally subject to a maximum federal income tax rate of 20% for an
individual. Generally, the Code will not allow a shareholder to realize a loss
on shares he or she has sold or exchanged and replaced within a 61-day period
beginning 30 days before and ending 30 days after he or she sold or exchanged
the shares. The Code will not allow a shareholder to realize a loss on the sale
of Fund shares held by the shareholder for six months or less to the extent the
shareholder received exempt interest dividends on such shares. Moreover, the
Code will treat a shareholder's loss on shares held for six months or less as a
long-term capital loss to the extent the shareholder received distributions of
net capital gains on such shares.
Shareholders who fail to furnish their taxpayer identification numbers
to the Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisors about the applicability of the backup withholding provisions.
Other Tax Considerations
The foregoing discussion relates solely to U.S. federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
domestic corporations, partnerships, trusts and estates). It does not reflect
the special tax consequences to certain taxpayers (e.g., banks, insurance
companies, tax exempt organizations and foreign persons). Shareholders are
encouraged to consult their own tax advisors regarding specific questions
relating to federal, state and local tax consequences of investing in shares of
the Fund.
Each shareholder who is not a U.S. person should consult his or her tax advisor
regarding the U.S. and foreign tax consequences of ownership of shares of the
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 30% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
BROKERAGE
Brokerage Commissions
If the Fund invests in equity securities, it expects to buy and sell
them through brokerage transactions for which commissions are payable. Purchases
from underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark-up
or reflect a dealer's mark-down. Where transactions are made in the
over-the-counter market, the Fund will deal with primary market makers unless
more favorable prices are otherwise obtainable.
If the Fund invests in fixed income securities, it expects to buy and
sell them directly from the issuer or an underwriter or market maker for the
securities. Generally, the Fund will not pay brokerage commissions for such
purchases. When the Fund buys a security from an underwriter, the purchase price
will usually include an underwriting commission or concession. The purchase
price for securities bought from dealers serving as market makers will similarly
include the dealer's mark up or reflect a dealer's mark down. When the Fund
executes transactions in the over-the-counter market, it will deal with primary
market makers unless more favorable prices are otherwise obtainable.
Selection of Brokers
When buying and selling portfolio securities, the advisor seeks brokers
who can provide the most benefit to the Fund. When selecting a broker, the
investment advisor will primarily look for the best price at the lowest
commission, but in the context of the broker's:
1. ability to provide the best net financial result to the Fund;
2. efficiency in handling trades;
3. ability to trade large blocks of securities;
4. readiness to handle difficult trades;
5. financial strength and stability; and
6. provision of "research services," defined as (a) reports and
analyses concerning issuers, industries, securities and
economic factors and (b) other information useful in making
investment decisions.
The Fund may pay higher brokerage commissions to a broker providing it
with research services, as defined in item 6, above. Pursuant to Section 28(e)
of the Securities Exchange Act of 1934, this practice is permitted if the
commission is reasonable in relation to the brokerage and research services
provided. Research services provided by a broker to the investment advisor do
not replace, but supplement, the services the investment advisor is required to
deliver to the Fund. It is impracticable for the investment advisor to allocate
the cost, value and specific application of such research services among its
clients because research services intended for one client may indirectly benefit
another.
When selecting a broker for portfolio trades, the investment advisor
may also consider the amount of Fund shares a broker has sold, subject to the
other requirements described above.
If the Fund is advised by Evergreen Asset Management Company ("EAMC"),
Lieber & Company, an affiliate of EAMC and a member of the New York and American
Stock Exchanges, will, to the extent practicable, effect substantially all of
the portfolio transactions effected on those exchanges for the Fund.
Simultaneous Transactions
The investment advisor makes investment decisions for the Fund
independently of decisions made for its other clients. When a security is
suitable for the investment objective of more than one client, it may be prudent
for the investment advisor to engage in a simultaneous transaction, that is, buy
or sell the same security for more than one client. The investment advisor
strives for an equitable result in such transactions by using an allocation
formula. The high volume involved in some simultaneous transactions can result
in greater value to the Fund, but the ideal price or trading volume may not
always be achieved for the Fund.
ORGANIZATION
The foregoing is qualified in its entirety by reference to the Trust's
Declaration of Trust.
Description of Shares
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and classes of shares. Each share of
the Fund represents an equal proportionate interest with each other share of
that series and/or class. Upon liquidation, shares are entitled to a pro rata
share of the Trust based on the relative net assets of each series and/or class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.
<PAGE>
Voting Rights
Under the terms of the Declaration of Trust, the Trust is not required
to hold annual meetings. At meetings called for the initial election of Trustees
or to consider other matters, each share is entitled to one vote for each dollar
of "NAV"applicable to such share. Shares generally vote together as one class on
all matters. Classes of shares of the Fund have equal voting rights. No
amendment may be made to the Declaration of Trust that adversely affects any
class of shares without the approval of a majority of the votes applicable to
the shares of that class. Shares have non-cumulative voting rights, which means
that the holders of more than 50% of the votes applicable to shares voting for
the election of Trustees can elect 100% of the Trustees to be elected at a
meeting and, in such event, the holders of the remaining shares voting will not
be able to elect any Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law (for such reasons as electing or removing Trustees, changing fundamental
policies, and approving advisory agreements or 12b-1 plans), unless and until
such time as less than a majority of the Trustees holding office have been
elected by shareholders, at which time, the Trustees then in office will call a
shareholders' meeting for the election of Trustees.
Limitation of Trustees' Liability
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
Banking Laws
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered, open-end investment companies such as the Trust. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment advisor, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. FUNB and
its affiliates are subject to, and in compliance with, the aforementioned laws
and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in FUNB and its affiliates being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of
the Fund by its customers. If FUNB and its affiliates were prevented from
continuing to provide for services called for under the investment advisory
agreement, it is expected that the Trustees would identify, and call upon the
Fund's shareholders to approve a new investment advisor. If this were to occur,
it is not anticipated that the shareholders of the Fund would suffer any adverse
financial consequences.
INVESTMENT ADVISORY AGREEMENT
On behalf of the Fund, the Trust has entered into an investment
advisory agreement with the Fund's investment advisor (the "Advisory
Agreement"). Under the Advisory Agreement, and subject to the supervision of the
Trust's Board of Trustees, the investment advisor furnishes to the Fund (unless
the Fund is Evergreen Masters Fund) investment advisory, management and
administrative services, office facilities, and equipment in connection with its
services for managing the investment and reinvestment of the Fund's assets. The
investment advisor pays for all of the expenses incurred in connection with the
provision of its services.
If the Fund is Evergreen Masters Fund, the Advisory Agreement is
similar to the above except that the investment advisor selects sub-advisors
(hereinafter referred to as "Managers") for the Fund and monitors each Manager's
investment program and results. The investment advisor has primary
responsibility under the multi-manager strategy to oversee the Managers,
including making recommendations to the Trust regarding the hiring, termination
and replacement of Managers.
The Fund pays for all charges and expenses, other than those
specifically referred to as being borne by the investment advisor, including,
but not limited to, (1) custodian charges and expenses; (2) bookkeeping and
auditors' charges and expenses; (3) transfer agent charges and expenses; (4)
fees and expenses of Independent Trustees; (5) brokerage commissions, brokers'
fees and expenses; (6) issue and transfer taxes; (7) applicable costs and
expenses under the Distribution Plan (as described above) (8) taxes and trust
fees payable to governmental agencies; (9) the cost of share certificates; (10)
fees and expenses of the registration and qualification of the Fund and its
shares with the SEC or under state or other securities laws; (11) expenses of
preparing, printing and mailing prospectuses, SAIs, notices, reports and proxy
materials to shareholders of the Fund; (12) expenses of shareholders' and
Trustees' meetings; (13) charges and expenses of legal counsel for the Fund and
for the Independent Trustees on matters relating to the Fund; (14) charges and
expenses of filing annual and other reports with the SEC and other authorities;
and (15) all extraordinary charges and expenses of the Fund. For information on
advisory fees paid by the Fund, see "Expenses" in Part 1 of this SAI.
The Advisory Agreement continues in effect for two years from its
effective date and, thereafter, from year to year only if approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of the
Fund's outstanding shares. In either case, the terms of the Advisory Agreement
and continuance thereof must be approved by the vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreement may be terminated, without
penalty, on 60 days' written notice by the Trust's Board of Trustees or by a
vote of a majority of outstanding shares. The Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
Managers (Evergreen Masters Fund only)
Evergreen Masters Fund's investment program is based upon the
investment advisor's multi-manager concept. The investment advisor allocates the
Fund's portfolio assets on an equal basis among a number of investment
management organizations - currently four in number - each of which employs a
different investment style, and periodically rebalances the Fund's portfolio
among the Managers so as to maintain an approximate equal allocation of the
portfolio among them throughout all market cycles. Each Manager provides these
services under a Portfolio Management Agreement. Each Manager has discretion,
subject to oversight by the Trustees and the investment advisor, to purchase and
sell portfolio assets consistent with the Fund's investment objectives, policies
and restrictions and specific investment strategies developed by the investment
advisor. The Fund's current Managers are EAMC, MFS Institutional Advisors, Inc.,
OppenheimerFunds, Inc. and Putnam Investment Management, Inc.
The Trust and FUNB have received an order from the SEC that permits the
investment advisor to employ a "manager of managers" strategy in connection with
its management of the Fund. The exemptive order permits the investment advisor,
subject to certain conditions, and without shareholder approval, to: (a) select
new Managers who are unaffiliated with the investment advisor with the approval
of the Trust's Board of Trustees; (b) change the material terms of the Portfolio
Management Agreements with the Managers; and (c) continue the employment of a
Manager after an event which would otherwise cause the automatic termination of
a Portfolio Management Agreement. Shareholders would be notified of any Manager
changes. Shareholders have the right to terminate arrangements with a Manager by
vote of a majority of the outstanding shares of the Fund. The order also permits
the Fund to disclose the Managers' fees only in the aggregate.
Transactions Among Advisory Affiliates
The Trust has adopted procedures pursuant to Rule 17a-7 of the 1940 Act
("Rule 17a-7 Procedures"). The Rule 17a-7 Procedures permit the Fund to buy or
sell securities from another investment company for which a subsidiary of First
Union Corporation is an investment advisor. The Rule 17a-7 Procedures also allow
the Fund to buy or sell securities from other advisory clients for whom a
subsidiary of First Union Corporation is an investment advisor. The Fund may
engage in such transaction if it is equitable to each participant and consistent
with each participant's investment objective.
MANAGEMENT OF THE TRUST
The Trust is supervised by a Board of Trustees that is responsible for
representing the interest of the shareholders. The Trustees meet periodically
throughout the year to oversee the Fund's activities, reviewing, among other
things, the Fund's performance and its contractual arrangements with various
service providers. Each Trustee is paid a fee for his or her services.
See "Expenses-Trustee Compensation" in Part 1 of this SAI.
The Trust has an Executive Committee which consists of the Chairman of
the Board, James Howell, the Vice Chairman of the Board, Michael Scofield, and
Russell Salton, each of whom is an Independent Trustee. Commencing January 1,
2000, the Trust's Executive Committee will consist of the Chairman of the Board,
Michael Scofield, K. Dunn Gifford and Russell Salton. The Executive Committee
recommends Trustees to fill vacancies, prepares the agenda for Board Meetings
and acts on routine matters between scheduled Board meetings.
Set forth below are the Trustees and officers of the Trust and their
principal occupations and affiliations over the last five years. Unless
otherwise indicated, the address for each Trustee and officer is 200 Berkeley
Street, Boston, Massachusetts 02116. Each Trustee is also a Trustee of each of
the other Trusts in the Evergreen Fund complex.
<PAGE>
<TABLE>
<CAPTION>
Name Position with Trust Principal Occupations for Last Five Years
<S> <C> <C>
Laurence B. Ashkin Trustee Real estate developer and construction consultant; and
(DOB: 2/2/28) President of Centrum Equities (real estate development) and
Centrum Properties, Inc.(real estate development).
Charles A. Austin III Trustee Investment Counselor to Appleton Partners, Inc.(investment
(DOB: 10/23/34) advice); former Director, Executive Vice President and
Treasurer, State Street Research & Management Company
(investment advice); Director, The Andover Companies
(insurance); and Trustee, Arthritis Foundation of New
England.
K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the Finance Committee,
(DOB: 10/12/38) Cambridge College; Chairman Emeritus and Director, American
Institute of
Food and Wine; Chairman and President, Oldways Preservation and
Exchange Trust (education); former Chairman of the Board,
Director, and Executive Vice President, The London Harness
Company (leather goods purveyor); former Managing Partner,
Roscommon Capital Corp.; former Chief Executive Officer, Gifford
Gifts of Fine Foods; former Chairman, Gifford, Drescher &
Associates (environmental consulting).
James S. Howell* Chairman of the Board Former Chairman of the Distribution Committee, Foundation
(DOB: 8/13/24) of Trustees for the Carolinas; and former Vice President of Lance Inc.
(food manufacturing).
Leroy Keith, Jr. Trustee Chairman of the Board and Chief Executive Officer, Carson
(DOB: 2/14/39) Products Company (manufacturing); Director of Phoenix Total
Return Fund and Equifax, Inc. (worldwide information
management); Trustee of Phoenix Series Fund, Phoenix
Multi-Portfolio Fund, and The Phoenix Big Edge Series Fund;
and former President, Morehouse College.
Gerald M. McDonnell Trustee Sales and Marketing Management with Nucor-Yamoto, Inc.
(DOB: 7/14/39) (steel producer).
Thomas L. McVerry Trustee Former Vice President and Director of Rexham Corporation
(DOB: 8/2/39) (manufacturing); and Director of Carolina Cooperative
Credit Union.
William Walt Pettit Trustee Partner in the law firm of William Walt Pettit, P.A.
(DOB: 8/26/55)
<PAGE>
Name Position with Trust Principal Occupations for Last Five Years
David M. Richardson Trustee Vice Chair and former Executive Vice President, DHR
(DOB: 9/14/41) International, Inc. (executive recruitment); former Senior
Vice President, Boyden International Inc. (executive
recruitment); and Director, Commerce and Industry
Association of New Jersey, 411 International, Inc.
(communications), and J&M Cumming Paper Co.
Russell A. Salton, III MD Trustee Medical Director, U.S. Health Care/Aetna Health Services;
(DOB: 6/2/47) former Managed Health Care Consultant; and former
President, Primary Physician Care.
Michael S. Scofield* Vice Chairman of the Attorney, Law Offices of Michael S. Scofield.
(DOB: 2/20/43) Board of Trustees
Richard J. Shima Trustee Independent Consultant; former Chairman, Environmental
(DOB: 8/11/39) Warranty, Inc. (insurance agency); former Executive
Consultant, Drake Beam Morin, Inc. (executive
outplacement); Director of CTG Resources, Inc. (natural
gas), Hartford Hospital, Old State House Association, and
Enhance Financial Services, Inc.; former Director Middlesex
Mutual Assurance Company; former Chairman, Board of
Trustees, Hartford Graduate Center; Trustee, Greater
Hartford YMCA.
Anthony J. Fischer** President and Treasurer Vice President/Client Services, BISYS Fund Services.
(DOB:2/10/59)
Nimish S. Bhatt*** Vice President and Vice President, Tax, BISYS Fund Services; former Assistant
(DOB: 6/6/63) Assistant Treasurer Vice President, EAMC/First Union National Bank; former
Senior Tax Consulting/Acting Manager, Investment Companies
Group, PricewaterhouseCoopers LLP, New York.
Bryan Haft*** Vice President Team Leader, Fund Administration, BISYS Fund Services.
(DOB: 1/23/65)
Senior Vice President and Assistant General Counsel, First
Michael H. Koonce Secretary Union Corporation; former Senior Vice President and General
(DOB: 4/20/60) Counsel, Colonial Management Associates, Inc.
</TABLE>
* As of January 1, 2000, Michael S. Scofield will become Chairman of the
Board and James S. Howell will become Trustee Emeritis.
** Address: BISYS Fund Services, 90 Park Avenue, New York, New York 10016
*** Address: BISYS, 3435 Stelzer Road, Columbus, Ohio 43219-8001
<PAGE>
CORPORATE AND MUNICIPAL BOND RATINGS
The Fund relies on ratings provided by independent rating services to
help determine the credit quality of bonds and other obligations the Fund
intends to purchase or already owns. A rating is an opinion of an issuer's
ability to pay interest and/or principal when due. Ratings reflect an issuer's
overall financial strength and whether it can meet its financial commitments
under various economic conditions.
If a security held by the Fund loses its rating or has its rating
reduced after the Fund has purchased it, the Fund is not required to sell or
otherwise dispose of the security, but may consider doing so.
The principal rating services, commonly used by the Fund and investors
generally, are S&P and Moody's. The Fund may also rely on ratings provided by
Fitch. Rating systems are similar among the different services. As an example,
the chart below compares basic ratings for long-term bonds. The "Credit Quality"
terms in the chart are for quick reference only. Following the chart are the
specific definitions each service provides for its ratings.
COMPARISON OF LONG-TERM BOND RATINGS
<TABLE>
<CAPTION>
----------------- ---------------- --------------- =================================================
MOODY'S S&P FITCH Credit Quality
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
<S> <C> <C> <C>
Aaa AAA AAA Excellent Quality (lowest risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Aa AA AA Almost Excellent Quality (very low risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
A A A Good Quality (low risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Baa BBB BBB Satisfactory Quality (some risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Ba BB BB Questionable Quality (definite risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
B B B Low Quality (high risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Caa/Ca/C CCC/CC/C CCC/CC/C In or Near Default
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
D DDD/DD/D In Default
----------------- ---------------- --------------- =================================================
</TABLE>
CORPORATE BONDS
LONG-TERM RATINGS
Moody's Corporate Long-Term Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations, (i.e.
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. The modifier 1 indicates that the company ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range raking and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S&P Corporate Long-Term Bond Ratings
AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC, CC, and
C are regarded as having significant speculative characteristics. BB indicates
the least degree of speculation and C the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions, which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet it financial
commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred--and not where a default is only
expected. S&P changes ratings to D either:
o On the day an interest and/or principal payment is due and is not paid.
An exception is made if there is a grace period and S&P believes that a
payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is
made if S&P expects that debt service payments will continue to be made
on a specific issue. In the absence of a payment default or bankruptcy
filing, a technical default (i.e., covenant violation) is not
sufficient for assigning a D rating.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
Fitch Corporate Long-Term Bond Ratings
Investment Grade
AAA Highest credit quality. AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA Very high credit quality. AA ratings denote a very low expectation of credit
risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A High credit quality. A ratings denote a lower expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade
BB Speculative. BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met.
Securities rated in this category are not investment grade.
B Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitment is solely reliant upon sustained, favorable
business or economic developments. A CC rating indicates that default of some
kind appears probable. C ratings signal imminent default.
DDD, DD, D Default. Securities are not meeting current obligations and are
extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. For U.S. corporates, for
example, DD indicates expected recovery of 50%-90% of such outstandings, and D
the lowest recovery potential, i.e. below 50%.
+ or - may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the AAA rating category or to
categories below CCC.
CORPORATE SHORT-TERM RATINGS
Moody's Corporate Short-Term Issuer Ratings
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics.
- - -- Leading market positions in well-established industries.
- - -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- -- Broad margins in earnings coverage of fixed financial changes and high
internal cash generation.
- -- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime rating
categories.
S&P Corporate Short-Term Obligation Ratings
A-1 A short-term obligation rated A-1 is rated in the highest category by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category certain obligations are designated with a plus sign
(+). This indicates that the obligor's capacity to meet its financial commitment
on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred--and not where a default is only
expected. S&P changes ratings to D either:
o On the day an interest and/or principal payment is due and is not paid. An
exception is made if there is a grace period and S&P believes that a
payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action, An exception is made if
S&P expects that debt service payments will continue to be made on a
specific issue. In the absence of a payment default or bankruptcy filing, a
technical default (i.e., covenant violation) is not sufficient for
assigning a D rating.
Fitch Corporate Short-Term Obligation Ratings
F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial commitments
is adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D Default. Denotes actual or imminent payment default.
MUNICIPAL BONDS
LONG-TERM RATINGS
Moody's Municipal Long-Term Bond Ratings
Aaa Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the Aaa securities.
A Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds rated Baa are considered as medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well-assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa Bonds rated Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest.
Ca Bonds rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C Bonds rated C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range raking and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S&P Municipal Long-Term Bond Ratings
AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC, CC, and
C are regarded as having significant speculative characteristics. BB indicates
the least degree of speculation and C the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions, which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet it financial
commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
Fitch Municipal Long-Term Bond Ratings
Investment Grade
AAA Highest credit quality. AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA Very high credit quality. AA ratings denote a very low expectation of credit
risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A High credit quality. A ratings denote a lower expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade
BB Speculative. BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met.
Securities rated in this category are not investment grade.
B Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A CC rating indicates that default of some
kind appears probable. C ratings signal imminent default.
DDD, DD, D Default. Securities are not meeting current obligations and are
extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. DD designates lower recovery
potential and D the lowest.
+ or - may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the AAA rating category or to
categories below CCC.
SHORT-TERM MUNICIPAL RATINGS
Moody's Municipal Short-Term Issuer Ratings
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidence by many of the following characteristics.
- - -- Leading market positions in well-established industries.
- - -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- -- Broad margins in earnings coverage of fixed financial changes and high
internal cash generation.
- -- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Moody's Municipal Short-Term Loan Ratings
MIG 1 This designation denotes best quality. There is strong protection by
established cash flows, superior liquidity support, or demonstrated broad-based
access to the market for refinancing.
MIG 2 This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3 This designation denotes favorable quality. Liquidity and cash-flow
protection may be narrow and market access for refinancing is likely to be less
well established.
SG This designation denotes speculative quality. Debt instruments in this
category may lack margins of protection.
S&P Commercial Paper Ratings
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.
A-3 Issues carrying this designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B Issues rated B are regarded as having only speculative capacity for timely
payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes such payments
will be made during such grace period.
<PAGE>
S&P Municipal Short-Term Obligation Ratings
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3 Speculative capacity to pay principal and interest.
Fitch Municipal Short-Term Obligation Ratings
F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial commitments
is adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D Default. Denotes actual or imminent payment default.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectus or required by law, the
Fund reserves the right to change the terms of the offer stated in its
prospectus without shareholder approval, including the right to impose or change
fees for services provided.
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in the Fund's
prospectus, SAI or in supplemental sales literature issued by the Fund or EDI,
and no person is entitled to rely on any information or representation not
contained therein.
The Fund's prospectus and SAI omit certain information contained in the
Trust's registration statement, which you may obtain for a fee from the SEC in
Washington, D.C.
<PAGE>
Annual Report
as of July 31, 1999
Evergreen
Growth and Income Funds
[GRAPHIC APPEARS HERE]
[LOGO OF Evergreen Funds
EVERGREEN
APPEARS HERE] SINCE 1932
<PAGE>
Table of Contents
Letter to Shareholders .................................................. 1
Evergreen Blue Chip Fund
Fund at a Glance ...................................................... 2
Portfolio Manager Interview ........................................... 3
Evergreen Equity Income Fund
Fund at a Glance ...................................................... 6
Portfolio Manager Interview ........................................... 7
Evergreen Growth and Income Fund
Fund at a Glance ...................................................... 10
Portfolio Manager Interview ........................................... 11
Evergreen Income and Growth Fund
Fund at a Glance ...................................................... 14
Portfolio Manager Interview ........................................... 15
Evergreen Small Cap Value Fund
Fund at a Glance ...................................................... 18
Portfolio Manager Interview ........................................... 19
Evergreen Utility Fund
Fund at a Glance ...................................................... 21
Portfolio Manager Interview ........................................... 22
Evergreen Value Fund
Fund at a Glance ...................................................... 25
Portfolio Manager Interview ........................................... 26
Financial Highlights
Evergreen Blue Chip Fund .............................................. 28
Evergreen Equity Income Fund .......................................... 30
Evergreen Growth and Income Fund ...................................... 32
Evergreen Income and Growth Fund ...................................... 34
Evergreen Small Cap Value Fund ........................................ 36
Evergreen Utility Fund ................................................ 38
Evergreen Value Fund .................................................. 40
Schedule of Investments
Evergreen Blue Chip Fund .............................................. 42
Evergreen Equity Income Fund .......................................... 44
Evergreen Growth and Income Fund ...................................... 46
Evergreen Income and Growth Fund ...................................... 50
Evergreen Small Cap Value Fund ........................................ 54
Evergreen Utility Fund ................................................ 57
Evergreen Value Fund .................................................. 58
Statements of Assets and Liabilities ..................................... 60
Statements of Operations ................................................. 61
Statements of Changes in Net Assets ...................................... 62
Combined Notes to Financial Statements ................................... 65
Independent Auditors' Report ............................................. 76
Additional Information ................................................... 77
Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies with
over $70 billion in assets under management.
With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This annual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
Mutual Funds: ARE NOT FDIC INSURED May lose value . Are not bank guaranteed
Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
September 1999
[PHOTO OF WILLIAM M. ENNIS APPEARS HERE]
William M. Ennis
President and CEO
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Growth and Income Funds annual report,
which covers the fiscal year ended July 31, 1999.
Continued Strength in the Domestic Economy
Early in the fiscal period, stock markets around the world declined dramatically
during the summer and into the early fall of 1998. The Federal Reserve lowered
interest rates three separate times in order to help stabilize global markets
and these actions successfully restored investor confidence. As a result, the
U.S. stock market rallied strongly in the final quarter of 1998 and into the
first half of 1999.
During the first quarter of 1999, a handful of large capitalization growth
stocks, technology stocks in particular, continued to dominate market
performance. During the second quarter, participation broadened to include both
value stocks and small company stocks: two areas that had disappointed investors
for several years. The recent growth in these areas may be a sign that the
record bull market is repositioning itself to continue.
Inflation fears persist, however, and the Federal Reserve increased interest
---------
rates in June and again in late August in an effort to contain stock and bond
prices. Investors will watch carefully to see whether there will be a third rate
increase in October. Despite the anxiety over interest rates, many experts agree
that the economy is still fundamentally strong, and we remain cautiously
optimistic about the prospects for continued growth in the markets.
Year 2000 Preparation/1/
We continue to progress with our preparations for year 2000. Our aim is to
provide uninterrupted service and communication with shareholders through the
end of December 1999 and into January 2000. At the end of September, when this
report was finalized, we completed all the regulatory requirements for testing
and certification of our systems. In March, we participated in the industry's
"Street Test" with the Securities Industry Association, which helped us evaluate
the readiness of one of the industry's critical trading networks. We are
confident that our long-term approach to planning and preparation will enable us
to continue to deliver the high quality products and services that you have come
to expect.
Once again, we remind you to take advantage of your financial
advisor's expertise and work together to develop an asset allocation strategy
that will help you to meet your investment goals and objectives. Evergreen Funds
offers a wide range of funds that includes multiple investment styles to help
you find those that will be appropriate for your portfolio.
Thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
/1/ The information above constitutes Year 2000 readiness disclosure.
1
<PAGE>
EVERGREEN
Blue Chip Fund
Fund at a Glance as of July 31, 1999
Portfolio
Management
---------
[PHOTO OF JUDITH A. WARNERS APPEARS HERE]
Judith A. Warners
Tenure: January 1995
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE /1/
-------------------------------------------------------------------------------
Size Style
Value Blend Growth
Large X
Medium
Small
Morningstar's Style Box is based on a portfolio date as of 7/31/99.
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: 1999 Morningstar, Inc.
/2/ Past performance is no guarantee of future results. The investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than original cost. The performance of each class may
vary based on differences in loads and fees paid by the shareholders investing
in each class.
Historical performance shown for Classes A, C, and Y prior to their inception is
based on the performance of Class B, the original class offered. These
historical returns for Classes A and Y have not been adjusted to eliminate the
effect of the higher 12b-1 fees applicable to Class B. The 12b-1 fees for Class
A are 0.25%, for Class B are 1.00% and for Class C are 1.00%. Class Y does not
pay a 12b-1 fee. If these fees had not been eliminated, returns would have been
lower.
-------------------------------------------------------------------------------
Performance and Returns /2/
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Inception Date:9/11/35 Class A Class B Class C Class Y
Class Inception Date 1/20/98 9/11/35 1/22/98 4/30/99
Average Annual Returns*
<S> <C> <C> <C> <C>
1 year with sales charge 11.71% 11.26% 15.37% n/a
1 year w/o sales charge 17.29% 16.26% 16.37% 17.46%
3 years 23.59% 24.24% 24.74% 25.88%
5 years 20.42% 20.66% 20.74% 21.88%
10 years 13.58% 13.31% 13.21% 14.40%
Since Portfolio Inception 9.28% 9.16% 9.13% 9.43%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
12-month income dividends per share $0.03 -- -- --
12-month capital gain distributions per share $2.38 $2.38 $2.38 --
</TABLE>
* Adjusted for maximum applicable sales charges unless noted.
-------------------------------------------------------------------------------
Long Term Growth
-------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Evergreen Blue Chip B Consumer Price S & P 500
Period End Market Value Index - US Value Composite Value
7/31/89 10,000 10,000 10,000
7/31/90 10,621 10,482 10,623
7/31/91 11,755 10,949 11,977
7/31/92 12,469 11,294 13,510
7/31/93 13,390 11,608 14,684
7/31/94 13,531 11,929 15,442
7/31/95 15,692 12,259 19,463
7/31/96 17,909 12,617 22,687
7/31/97 26,084 12,902 34,493
7/31/98 29,994 13,119 41,113
7/31/99 34,882 13,360 49,002
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).
The S&P 500 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 Manager Interview
How did the Fund perform?
The Fund did very well when measured against other growth and income funds. For
the 12 months ended July 31, 1999, the Evergreen Blue Chip Fund's Class B shares
had a return, before deduction of any applicable sales charges, of 16.26%.
During the same 12-month period, the average return of the growth and income
funds was 12.22%, according to Lipper, Inc., an independent monitor of mutual
fund performance. The Standard & Poor's 500 Index, a benchmark for the overall
market, had a return of 20.20%.
Portfolio
Characteristics
---------------
(as of 7/31/1999 unless noted)
Total Net Assets $641,440,091
Number of Holdings 102
P/E Ratio* 35.3x
Beta* 0.97
*as of 6/30/1999
What was the investment environment like during the 12-month period?
It was a period of almost constant change. We began in August 1998 in a time of
great fear that the problems of the emerging markets would spread to developed
economies, including the United States, and lead to a global economic slowdown.
This period of high anxiety came to an end when the U.S. Federal Reserve lowered
short-term interest rates three successive times in the fall of 1998, restoring
confidence and leading to a significant rally in late 1998 and early 1999. As
had been true for the previous two years, this rally was dominated by a narrow
group of large-cap growth companies, especially in the technology industry.
In the first quarter of 1999, investors realized we were not going to have a
global meltdown. Signs of a recovery were evident in Japan and in some emerging
markets. This kicked off a rally in cyclical stocks--or stocks of companies that
do best when the economy is expanding--and in value stocks. Energy stocks, which
had slumped badly during 1998 as world oil prices fell, recovered sharply as the
price of crude oil started climbing.
As the spring of 1999 progressed, however, the repeated signs of stronger
economic growth resulted in rising interest rates. This particularly hurt
financial services stocks and other interest rate sensitive sectors. Late in
June, concern about further increases in interest rates caused a reversal of the
market's direction, with financial, technology and retail stocks particularly
hard hit in July 1999. In fact, late in June, the U.S. Federal Reserve raised
short-term interest rates once.
Top 5 Industries
----------------
(as a percentage of net assets)
Information Services & Technology 17.6%
Retailing & Wholesale 8.7%
Oil / Energy 8.6%
Telecommunication Services &Equipment 8.5%
Finance &Insurance 7.5%
3
<PAGE>
EVERGREEN
Blue Chip Fund
Portfolio Manager Interview
What strategies did you pursue in this environment?
As we ended the first six months of the year, we were de-emphasizing financials
and energy stocks, while emphasizing technology and consumer staples.
As the second six months began, we continued to under-weight financial stocks
versus the indices. We maintained over-weighted positions in technology and
telecommunications, with investments in companies such as IBM, Hewlett-Packard,
Motorola, ADC Telecom, Tellabs and adding to our position in Intel. We also
maintained positions in industry-leading companies such as Microsoft, Sun
Microsystems, EMC, America Online and Cisco Systems.
Increasingly, as we progressed in 1999, we added to our energy position, raising
the industry weighting from about 4% of net assets at the end of January to 9%
at the end of the fiscal year in July. Our investments included shares of
integrated energy companies such as Texaco, international companies such as
Royal Dutch Petroleum and BP Amoco, exploration company Unocal and oil drillers
such as Apache and Anadarko.
We also maintained a very strong emphasis on consumer-related industries,
including retailers and specialty retailers. We invested in companies such as
Tandy and Federated Department Stores, while maintaining positions in Home
Depot, Wal-Mart, Dayton-Hudson and Costco.
What were some of the leading contributors to the Fund's performance?
Some of the better-performing stocks during the year included: IBM; Biogen, a
biotech company; Tyco International, a diversified industrial company;
Univision, the leading Spanish-language broadcaster; and oil company Unocal.
Tandy, which operates the Radio Shack retail chain, was an excellent performer.
The Fund's performance also received lifts from two sub-themes:
telecommunications and basic materials. The entire telecommunications sector
tended to do very well, including regional telephone operating companies,
wireless companies and equipment companies. Among the contributors to
performance were Winstar and Qualcomm. In basic materials, we focused on special
situations, rather than commodities, such as Raychem, a specialty chemical
company that was purchased by Tyco International.
Top 10 Holdings
---------------
(as a percentage of net assets)
Microsoft Corp. 3.5%
General Electric Co. 3.3%
International Business Machines Corp. 2.2%
Intel Corp. 2.0%
Cisco Systems, Inc. 1.9%
Tyco International Ltd. 1.9%
Atlantic Richfield Co. 1.7%
Hewlett-Packard Co. 1.6%
Safeway, Inc. 1.5%
Wal-Mart Stores, Inc. 1.5%
4
<PAGE>
EVERGREEN
Blue Chip Fund
Portfolio Manager Interview
Were there any disappointments?
Yes, Waste Management was a poor performer. The company had management
difficulties after its merger with USA Waste. Fortunately, we sold out of our
position in Waste Management at the first signal of problems. We also sold our
position in Daimler-Chrysler, which has been a poor performer. Coca-Cola also
was a disappointment, although we did not have a major position in the company.
What is your outlook?
We expect to see continued volatility and shifts in market sentiment as
investors watch the rate of economic growth and the direction of interest rates.
One of the big issues to watch will be the sustainability of the global economic
growth we started to see during the past year.
Overall, we have a positive outlook. Corporations have shown they can continue
to generate earnings growth through re-structuring programs and overcoming a
tight labor market through greater efficiencies. During the past few months, we
have seen market leadership broaden beyond the few large-cap, growth companies
that had been the dominant performers over the past two years. We believe
sustained global economic growth can continue to lead to earnings improvements
across a broad array of companies. One of the things we have seen, over the past
year, is that companies have consistently shown earnings improvements.
5
<PAGE>
EVERGREEN
Equity Income Fund
Fund at a Glance as of July 31, 1999
Portfolio
Management
---------
[PHOTO OF HARLAN R. SONDERLING APPEARS HERE]
Harlan R. Sonderling,
CPA, CFA
Tenure: June 1998
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE /1/
-------------------------------------------------------------------------------
Size Style
Value Blend Growth
Large X
Medium
Small
Morningstar's Style Box is based on a portfolio date as of 7/31/99.
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: 1999 Morningstar, Inc.
/2/ Past performance is no guarantee of future results. The investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than original cost. The performance of each class may
vary based on differences in loads and fees paid by the shareholders investing
in each class.
Historical performance shown for Classes B, C, and Y prior to their inception is
based on the performance of Class A, the original class offered. These
historical returns for Classes B, C, and Y have not been adjusted to reflect the
effect of each Class' 12b-1 fees. These fees for Class A are 0.25%, for Class B
are 1.00% and for Class C are 1.00%. Class Y does not pay a 12b-1 fee. If these
fees had been reflected, returns for Classes B and C would have been lower while
returns for Class Y would have been higher. Returns reflect expense limits
previously in effect, without which returns would have been lower.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS /2/
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Inception Date: 4/14/87 Class A Class B Class C Class Y
Class Inception Date 4/14/87 2/1/93 2/1/93 1/13/97
Average Annual Returns*
<S> <C> <C> <C> <C>
1 year with sales charge 3.06% 2.74% 6.45% n/a
1 year w/o sales charge 8.20% 7.39% 7.38% 8.44%
3 years 19.02% 19.32% 20.05% 21.07%
5 years 17.56% 17.56% 17.79% 18.77%
10 years 12.95% 12.92% 12.92% 13.53%
Since Portfolio Inception 12.44% 12.42% 12.43% 12.92%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC Yield 1.66% 0.97% 0.97% 1.72%
12-month income dividends per share $0.29 $0.15 $0.15 $0.34
12-month capital gain distributions per share $2.74 $2.74 $2.74 $2.74
</TABLE>
* Adjusted for maximum applicable sales charge unless noted. long term growth
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Evergreen Equity Income A Consumer Price S & P 500 Lehman Brothers
Period End Market Value Index - US Value Composite Value Aggregate Value
<S> <C> <C> <C> <C>
7/31/89 9,527 10,000 10,000 10,000
7/31/90 10,147 10,482 10,623 10,707
7/31/91 11,532 10,949 11,977 11,853
7/31/92 12,273 11,294 13,510 13,604
7/31/93 13,893 11,608 14,684 14,988
7/31/94 14,336 11,929 15,442 15,002
7/31/95 16,329 12,259 19,463 16,518
7/31/96 19,097 12,617 22,687 17,433
7/31/97 27,435 12,902 34,493 19,313
7/31/98 31,233 13,119 41,113 20,828
7/31/99 33,828 13,360 49,002 21,345
</TABLE>
Comparison of change in value of a $10,000 investment in Evergreen Equity Income
Fund, Class A, the Standard and Poor's 500 Index (S&P 500), Lehman Brothers
Aggregate Index (LBAI) and the Consumer Price Index (CPI).
The S&P 500 and LBAI 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.
6
<PAGE>
EVERGREEN
Equity Income Fund
Portfolio Manager Interview
How did the Fund perform?
During the 12 months ended July 31, 1999, the Evergreen Equity Income Fund,
Class A shares had a total return, before deduction of any applicable sales
charges, of 8.20%. For the same 12 months, the average return of equity income
funds was 10.80%, according to Lipper Inc., an independent monitor of mutual
fund performance, and the Standard & Poor's 500 Index returned 20.20%.
Portfolio
Characteristics
---------------
(as of 7/31/1999 unless noted)
Total Net Assets $145,864,030
Number of Holdings 68
P/E Ratio* 18.4x
Beta* 0.78
* as of 6/30/1999
What factors affected performance during the 12 months?
The Fund was over-weighted in small- and medium-sized issues during a period in
which large cap stocks generally performed better. The Fund also was
over-weighted in financial services stocks, which lagged the overall market
because of concerns about credit quality first, and then rising interest rates
and the sustainability of revenue growth rates. Only since April 1999 have small
and medium cap stocks performed well relative to large cap stocks. We continue
to believe these stocks offer compelling valuations, dividend yields and
dividend growth potential when compared to large cap stocks. Relative
performance also was hurt by the Fund's position in REITs (real estate
investment trusts), which performed poorly during the year, and by the Fund's
underweighted position in technology stocks, which performed well. As a general
rule, technology companies pay small dividends, if any.
On the positive side, the Fund's performance was helped by its energy position.
We persisted with our energy holdings during first-half weakness. In the final
six months of the fiscal year, energy stocks rallied sharply when oil prices
rose as a result of OPEC's renewed pricing discipline. Our positions in
telecommunications stocks, primarily regional phone operating companies, also
boosted performance. These companies offered attractive dividend yields and
earnings growth rates. Our largest single position, the industrial conglomerate
Tyco International, performed very well.
Top 5 Industries
----------------
(as a percentage of net assets)
Banks 15.0%
Finance & Insurance 11.2%
Oil/ Energy 10.4%
Utilities - Telephone 8.5%
Utilities - Electric 7.5%
What was the investment environment like for the yield-oriented stocks that the
Fund emphasizes?
Yield-oriented stocks were largely out of favor for much of the fiscal year as
large cap stocks with high price-to-earnings ratios and low dividend yields
drove the market higher. That trend changed in April 1999 when economic growth
exceeded investor expectations and value-oriented, higher-yielding industrial
and commodity stocks began to outperform the market. This was a trend that
persisted through June.
7
<PAGE>
EVERGREEN
Equity Income Fund
Portfolio Manager Interview
Some yield-oriented sectors, such as financial services and utilities, did not
participate in this rally despite their attractive features. The rally was led
by economically sensitive, more cyclical industries, such as commodities and
capital equipment.
What have been your principal strategies?
We have consistently pursued our long-term strategy of owning high-quality
companies with improving fundamental performance and attractive stock prices. In
our stock selection process, we view dividend income as an important component
of total return. We have concentrated on medium and large capitalization stocks,
generally with total market capitalizations of more than $5 billion. We have
kept the Fund well diversified among sectors and fully invested in common stocks
and convertible securities. Our investment process tends to be more bottom-up,
relying on the findings of our team of senior analysts, who emphasize strong
business fundamentals, high current yield and dividend growth in their research
for the Fund.
Throughout the year, this strategy has led us to emphasize these industries:
financial services; energy; consumer cyclicals, including automobile and
retailing companies; communications, including regional phone companies;
electrical utilities; and capital goods. Although financial services and
utilities underperformed the market during the fiscal year, we have maintained
strong representation in these stock sectors. In the case of financial services,
we have emphasized companies with attractive valuations for their consistent
earnings and dividend growth and growing market share. An example is Lincoln
National Corp. In the case of utility stocks, we have emphasized companies with
attractive dividend yields and stock valuations that have the potential to
benefit from industry re-structuring. An example is Duke Power.
We have de-emphasized consumer staples, such as food and beverage company
stocks; healthcare, and technology because of their relatively high
price-to-earnings ratios and generally lower dividend yields. In the case of
healthcare, we have long-term investments in several high-quality pharmaceutical
companies that fit our investment criteria, such as Merck and Pharmacia &
Upjohn.
Throughout the year, we have sought to increase the Fund's dividend yield. This
has led us to emphasize two themes: investing for income and investing for
dividend growth. The overall portfolio structure has changed to reflect these
themes. Income investments include utilities, energy and basic materials
companies that have consistent, above-average dividends. We define dividend
growth stocks as those that may have lower current dividend yields, but that
offer the prospect of sustainable dividend growth at rates well above stock
market averages. These companies are often found in the financial services,
consumer and pharmaceutical industries.
The two broad themes of income stocks and dividend-growth stocks each comprise
more than 40% of the Fund's portfolio. The remaining portion of the portfolio,
about 10% of net assets at the end of the fiscal year, is invested for capital
appreciation potential rather than for current income. These opportunity stocks
typically are in the technology, media and growth retail industries.
Top 10 Holdings
---------------
(as a percentage of net assets)
Tyco International Ltd. 3.5%
Unocal Corp. 3.0%
International Business Machines Corp. 2.7%
Greenpoint Financial Corp. 2.7%
General Electric Co. 2.5%
Bell Atlantic Corp. 2.4%
Philip Morris Companies, Inc. 2.3%
U.S. West, Inc. 2.2%
North Fork Bancorp, Inc. 2.1%
Costco Companies, Inc. 2.0%
8
<PAGE>
EVERGREEN
Equity Income Fund
Portfolio Manager Interview
What are some of the investments that illustrate these themes?
A good example of investing for income is the Fund's investment in Equity Office
Properties, a real estate investment trust that is the nation's largest owner of
high quality, downtown office buildings. This company offers a current dividend
yield of almost 7% and has reported consistent growth in its operating cash
flows, which we believe is sustainable. An excellent example of the dividend
growth theme is the Fund's investment in Greenpoint Financial Corp., a finance
company emphasizing specialty-housing lending. This investment has a current
dividend yield of 2.8% after increasing its dividend in February by 38% to
compensate for the temporary suspension of its long-time share repurchase
program. The company's record of sustained earnings growth gives it the
potential to offer consistent, double-digit dividend growth in the future. Tyco
International, which I mentioned earlier, is a good example of the opportunity,
or capital appreciation, theme. This diversified industrial company has
generated strong earnings growth from both internal operations and strategic
acquisitions, resulting in excellent stock performance.
What is your outlook?
Following more than four years of outstanding returns from the stock market, we
believe investors would be wise to temper their expectations for future gains.
The Federal Reserve Board raised short-term interest rates to thwart any
inflationary pressures. While concerns of economic overheating are probably
exaggerated, this bias suggests that historically high valuations for many
stocks may have peaked, and that future price gains may be driven more by
earnings and dividend growth than by stock price momentum or company size.
Earnings and dividend growth are qualities we emphasize. Within this context, we
plan to continue to practice our investment discipline, buying income-producing
stocks of quality companies and selling those stocks when they have reached
target prices or when their fundamentals start to disappoint us. We expect to
remain fully invested and well diversified.
9
<PAGE>
EVERGREEN
Growth and Income Fund
Fund at a Glance as of July 31, 1999
Portfolio Management
--------------------
[PHOTO OF PHILLIP M. FOREMAN APPEARS HERE]
Phillip M. Foreman,
CFP, CFA
Tenure: January 1999
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
-------------------------------------------------------------------------------
[CHART APPEARS HERE]
Size Style
Value Blend Growth
Large
Medium X
Small
Morningstar's Style Box is based on a portfolio date as of 7/31/99.
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: 1999 Morningstar, Inc.
/2/ Past performance is no guarantee of future results. The investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than original cost. The performance of each class may
vary based on differences in loads and fees paid by the shareholders investing
in each class.
Historical performance shown for Classes A, B, and C prior to their inception is
based on the performance of Class Y, the original class offered. These
historical returns for Classes A, B, and C have not been adjusted to reflect the
effect of each class' 12b-1 fees. These fees for Class A are 0.25%, for Class B
are 1.00% and for Class C are 1.00%. Class Y does not pay a 12b-1 fee. If these
fees had been reflected, returns would have been lower. Returns reflect expense
limits previously in effect, without which returns would have been lower.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/2/
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Inception Date: 10/15/86 Class A Class B Class C Class Y
Class Inception Date 1/3/95 1/3/95 1/3/95 10/15/86
Average Annual Returns*
<S> <C> <C> <C> <C>
1 year with sales charge -0.47% -1.27% 2.69% n/a
1 year w/o sales charge 4.48% 3.73% 3.69% 4.75%
3 years 15.83% 16.13% 16.84% 18.02%
5 years 17.31% 17.50% 17.71% 18.74%
10 years 13.60% 13.78% 13.79% 14.29%
Since Portfolio Inception 13.87% 14.01% 14.01% 14.40%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
12-month income dividends per share $0.06 - - $0.10
12-month capital gain distributions per share $0.78 $0.78 $0.78 $0.78
</TABLE>
* Adjusted for maximum applicable sales charge unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Evergreen Growth & Income Consumer Price S & P 400
Period End Fund A Market Value Index - US Value Midcap Value
1/31/95 9,528 10,000 10,000
7/31/95 11,590 10,146 12,248
7/31/96 13,303 10,443 13,202
7/31/97 18,674 10,679 19,185
7/31/98 20,776 10,858 21,300
7/31/99 21,700 11,058 25,342
Comparison of change in value of a $10,000 investment in Evergreen Growth and
Income Fund, Class A, the Standard and Poor's 400 Mid-Cap Index (S&P 400) and
the Consumer Price Index (CPI).
The S&P 400 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.
10
<PAGE>
EVERGREEN
Growth and Income Fund
Portfolio Manager Interview
How did the Fund perform?
For the 12 months ended July 31, 1999, the Evergreen Growth and Income Fund
Class A shares had a total return, before deduction of any applicable sales
charges, of 4.48%. During the same 12-month period, the Standard & Poor's Midcap
400 Index, a benchmark for the mid-sized company stocks that the Fund
emphasizes, returned 4.60%.
Portfolio
Characteristics
---------------
(as of 7/31/1999 unless noted)
Total Net Assets $1,812,220,464
Number of Holdings 248
P/E Ratio* 21.1x
Beta* 0.79
* as of 6/30/1999
What factors affected performance during the 12 months?
The fiscal year started in August 1998 with a very poor investment environment,
as investors were concerned that problems in Asia, Russia and Latin America
would lead to a global economic slowdown. That discouraging backdrop changed,
however, beginning in October as the U.S. Federal Reserve started to cut
short-term interest rates. The immediate, primary beneficiaries of the improved
environment were the large-cap growth stocks that had been the market leaders
earlier in 1998. This is consistent with historic trends; large-cap stocks tend
to do relatively better than other classes of stocks when economic growth is
uncertain. Mid-cap stocks tended to lag, but beginning in the spring of 1999,
mid-cap stocks began to improve performance as the effects of the Federal
Reserve's interest rate reductions of several months earlier began to be felt in
the economy.
Starting in January, merger-and-acquisition activity started to increase, and
this helped the performance of many mid-cap companies, including several
portfolio holdings. Portfolio investments involved in completed or pending
merger or acquisition deals included:
.Media One, the cable TV company, was acquired by AT&T.
.AirTouch, a telecommunications firm, was acquired by Vodafone Group, forming
Vodafone AirTouch.
.Pioneer HI-BRED, a bio-technology company involved in seed development, was
acquired by Du Pont (E.I.) De Nemours & Co.
.Honeywell is the subject of a pending acquisition by Allied Signal.
.ARCO is the subject of a pending acquisition by BP Amoco.
The Fund's under-weighting in technology held back performance. The emphasis on
energy stocks tended to hurt performance during the first part of the fiscal
year, although it helped later in the year as energy prices started to rise and
energy stocks began to recover.
Top 5 Industries
----------------
(as a percentage of net assets)
Banks 10.6%
Printing, Publishing, Broadcasting & Entertainment 9.1%
Healthcare Products & Services 8.7%
Finance & Insurance 7.2%
Consumer Products & Services 6.5%
11
<PAGE>
EVERGREEN
Growth and Income Fund
Portfolio Manager Interview
What strategies did you pursue during the period?
Our fundamental, long-term strategy remains the same: to buy outstanding
businesses when they are on sale. We tend to invest at least 75% of net assets
in mid-cap companies.
By "outstanding businesses," we refer to companies with some kind of competitive
advantage, those that operate with barriers to protect against competitors and
those that generate high returns on capital and have significant ownership by
executives and directors. By "on sale" we refer to companies whose stocks are
trading at major discounts to the private market value of the firm, i.e., what
another company is willing to pay in a merger.
A good example of the strategy at work is our investment in Sony Corp. early
this year. The company's stock was trading at an attractive valuation and was
undergoing a major re-structuring. At the same time, signs of an economic
recovery in Japan looked encouraging, and the company was launching a number of
new products, including digital cameras and operating software for cable
television systems. The company has been the Fund's largest position since March
1999, and the stock has performed exceptionally well.
Another good example is Gaylord Entertainment, which recently sold its
television stations to CBS, acquiring a significant block of CBS stock in the
transaction. We think the company's stock has been trading at half the true
value of the remaining businesses--including a hotel, a radio station and a
music company--after the market value of the CBS stock is taken out.
One of the changes we have made during the year is to reduce the number of
portfolio holdings from 282 to 248. As the number of names declined, we focused
more on fewer names that meet our criteria for quality businesses. We expect the
number of names in the Fund's portfolio may continue to go down.
Top 10 Holdings
---------------
(as a percentage of net assets)
Sony Corp., ADR 2.1%
Time Warner, Inc. 1.7%
Kansas City Southern Industries, Inc. 1.7%
Clear Channel Communications, Inc. 1.5%
New York Times Co. Cl. A 1.4%
Webster Financial Corp. 1.3%
TCA Cable TV, Inc. 1.3%
Mellon Bank Corp. 1.2%
Union Pacific Corp. 1.2%
Federal National Mortgage Assoc. 1.2%
12
<PAGE>
EVERGREEN
Growth and Income Fund
Portfolio Manager Interview
What is your outlook?
We are positive. Many of the names in the Fund's portfolio are trading at a
substantial discount, 30% to 40%, to their market values. Although the
investment environment has become uncertain because of the possibility of
further interest rate increases by the U.S. Federal Reserve, mid-cap stocks
haven't reached the high valuations and therefore don't pose as much risk as
many large-cap stocks, in our opinion.
We believe merger-and-acquisition activity will continue as large-cap companies
find they can increase their earnings growth rates by buying the franchises of
smaller companies that they cannot duplicate. In addition, the volatility in the
market creates opportunities for investors hunting for values. On any individual
day, several stocks may lose significant portions of their market value because
of market reaction to bad news. This can create investment opportunity for
investors doing fundamental research on the underlying market value of
companies. We believe we can find enough stocks to remain fully invested and do
well over the long term. As I said earlier, we look for companies in which
insiders have large ownership positions in the businesses they manage. We have
tried to be consistent with that position, and have invested our own money in
this Fund, making our personal interests the same as those of the Fund's
shareholders.
13
<PAGE>
EVERGREEN
Income and Growth Fund
Fund at a Glance as of July 31, 1999
Portfolio Management
--------------------
[PHOTO OF PHILLIP M. FOREMAN APPEARS HERE]
Phillip M. Foreman,
CFP, CFA
Tenure: September 1999
[PHOTO OF IRENE D. O'NEILL APPEARS HERE]
Irene D. O'Neill, CFA
Tenure: December 1997
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
-------------------------------------------------------------------------------
[CHART APPEARS HERE]
Size Style
Value Blend Growth
Large
Medium X
Small
Morningstar's Style Box is based on a portfolio date as of 7/31/99.
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: 1999 Morningstar, Inc.
/2/ Past performance is no guarantee of future results. The investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than original cost. The performance of each class may
vary based on differences in loads and fees paid by the shareholders investing
in each class.
Historical performance shown for Classes A, B, and C prior to their inception is
based on the performance of Class Y, the original class offered. These
historical returns for Classes A, B, and C have not been adjusted to reflect the
effect of each class' 12b-1 fees. These fees for Class A are 0.25%, for Class B
are 1.00% and for Class C are 1.00%. Class Y does not pay a 12b-1 fee. If these
fees had been reflected, returns would have been lower. Returns reflect expense
limits previously in effect, without which returns would have been lower.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/2/
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Inception Date: 8/31/78 Class A Class B Class C Class Y
Class Inception Date 1/3/95 1/3/95 1/3/95 8/31/78
Average Annual Returns*
<S> <C> <C> <C> <C>
1 year with sales charge 6.80% 6.48% 10.37% n/a
1 year w/o sales charge 12.14% 11.34% 11.34% 12.46%
3 years 13.94% 14.21% 14.96% 16.11%
5 years 12.68% 12.79% 13.01% 14.02%
10 years 9.42% 9.58% 9.58% 10.07%
Since Portfolio Inception 13.85% 13.94% 13.93% 14.18%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC Yield 2.02% 1.37% 1.37% 2.38%
12-month income dividends per share $0.93 $0.80 $0.80 $1.02
12-month capital gain distributions per share $2.13 $2.13 $2.13 $2.13
</TABLE>
* Adjusted for maximum applicable sales charge unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Evergreen Income and Consumer Price Wilshire 5000
Period End Growth A Market Value Index - US Value Value
1/31/95 9,526 10,000 10,000
7/31/95 10,843 10,146 12,149
7/31/96 11,718 10,443 13,933
7/31/97 15,045 10,679 20,510
7/31/98 16,230 10,858 24,005
7/31/99 18,201 11,058 28,314
Comparison of change in value of a $10,000 investment in Evergreen Income and
Growth Fund, Class A, the Wilshire 5000 Index (Wilshire 5000) and the Consumer
Price Index (CPI).
The Wilshire 5000 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.
14
<PAGE>
EVERGREEN
Income and Growth Fund
Portfolio Manager Interview
How did the Fund perform?
The Fund had very strong performance. For the 12 months ended July 31, 1999, the
Evergreen Income and Growth Fund's Class A shares had a total return, before the
deduction of any applicable sales charges, of 12.14%. During the same 12-month
period, the average return among funds in the income fund category was 5.41%,
according to Lipper, Inc., an independent monitor of mutual fund performance.
The Wilshire 5000 Index reported an 18.35% return for this same period.
One of the noteworthy developments during the year was the merger of the former
Evergreen American Retirement Fund into the Evergreen Income and Growth Fund on
July 31, 1999.
Portfolio
Characteristics
---------------
(as of 7/31/1999 unless noted)
Total Net Assets $1,070,659,522
Number of Holdings 193
P/E Ratio* 19.2x
Beta* 0.66
* as of 6/30/1999
-------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JULY 31, 1999
-------------------------------------------------------------------------------
(as a percentage of net assets)
[PIE CHART APPEARS HERE]
Common Stock - 65.7%
Convertible Preferred Stock - 17.9%
Cash Equivalents and other - 15.0%
Convertible Debentures - 1.4%
What factors affected performance?
The Fund benefited from its emphasis on telecommunications and energy-related
stocks. The rapid growth in telecommunications helped a number of Fund holdings
during the year, while the rise in oil prices early in 1999 led to strong
performance by a number of energy holdings late in the fiscal year. Acquisition
offers for several companies held by the Fund in both the telecommunications and
energy sectors also contributed to performance. In addition, as the 12-month
period progressed, investors began to show renewed interest in value stocks as
market leadership broadened beyond a narrow band of large-cap growth stocks.
During the early months of the fiscal year, value stocks were particularly hard
hit as investors worried that problems in emerging markets would hurt world
economic growth. After interest rates abroad began declining, however, investors
began to regain confidence in foreign markets and in the stocks of many
companies in cyclical industries, i.e., those closely linked to changes in the
economic cycle. This renewed confidence in the direction of the world economy
supported the performance of many value-related stocks in the commodity,
industrial and other cyclical sectors.
What investment themes did you emphasize?
We maintained our long-term, value-oriented focus, looking for opportunities
among consolidating industries where the potential for mergers and acquisitions
would be high, and in companies that were undergoing re-structuring and
cost-cutting programs. We also looked for opportunities in industries undergoing
significant growth, such as in telecommunications. We also took profits from
successful investments in the banking sector and used
15
<PAGE>
EVERGREEN
Income and Growth Fund
Portfolio Manager Interview
them to re-allocate the portfolio into other areas. We believed, especially in
light of rising interest rates, that there were better opportunities outside
banking.
Although the Fund finished the fiscal year with a relatively high cash position
of about 9.5% of net assets, this was more a temporary result of portfolio
re-allocation moves than a decision to become more defensive by raising cash.
Top 5 Industries
----------------
(as a percentage of net assets)
Banks 13.8%
Utilities -- Electric 11.8%
Healthcare Products & Services 6.3%
Oil / Energy 6.0%
Electrical Equipment & Services 5.4%
What were some examples of Fund investments involved in mergers and
acquisitions?
In the energy sector, worthy of note, is the pending acquisition of Atlantic
Richfield by BP Amoco.
In addition, two fund holdings in the banking industry also are the subject of
pending acquisitions by larger banks. Mercantile Bank Corp. is to be taken over
by Firstar Corp, while First American Corp is scheduled to be acquired by
AmSouth Bank Corp.
Finally, two investments in the utility sector also are the subject of pending
takeovers. TNP Enterprises, an electric company, is being acquired by an
investor group, while Frontier Corp. a telecommunications firm, has received an
acquisition offer from Global Crossing.
What Fund holdings have been involved in restructuring?
The Fund has a long-term record of finding interesting opportunities among
undervalued stocks of companies that are undergoing restructuring programs which
have the potential to increase the value of the business. Two recent examples,
one in the energy sector and one in the transportation sector, illustrate that
theme.
New management has taken over at Equitable Resources, an integrated energy
company whose primary focus is in natural gas, predominately in the Appalachian
region. The new management has undertaken an aggressive cost-cutting program
that also involves redeploying assets and share buybacks. As a result, the
company's return on capital and earnings growth rate have increased, and the
stock has started to perform exceptionally well.
In transportation, Union Pacific had been having problems digesting its
acquisition of another railroad company, Southern Pacific. Union Pacific started
an aggressive re-structuring program in the spring of 1998, resulting in a
substantial improvement in earnings and a rebound in its stock price.
How has the Fund taken advantage of the opportunities in telecommunications?
Telecommunications has been a spectacular performer for the Fund. This industry
has been restructuring since 1984 when the old AT&T was broken up and that
process is accelerating. The recent catalyst for growth is the explosion in
telecommunications traffic in wireless, data transmission and over the internet.
This explosion has created the need for equipment with greater capacity, greater
speed and improved security. Companies are scrambling to gain access to
customers. The need for many companies quickly to become full-service providers
also has led to a heightened rate of industry consolidation.
16
<PAGE>
EVERGREEN
Income and Growth Fund
Portfolio Manager Interview
Qualcomm, the best-performing stock for the Fund during the fiscal year, is an
excellent example. Qualcomm has developed a proprietary wireless technology that
is being adopted as a global standard for digital systems because of its ability
to increase capacity, add clarity, and secure transmissions.
Frontier Corp. is another example. It started out as a local telephone company
in the Rochester, N.Y., area, but has developed a long distance business and
made strategic investments in a data transmission fiber optic system. With its
access to a customer base, Frontier was an attractive acquisition target in the
current industry consolidation. It is now the subject of an acquisition offer by
Global Crossing.
Another example is Qwest Communications, a long distance fiber optic system
builder and operator that is a relatively recent investment for the Fund. It has
made an acquisition offer for a regional telephone company, U.S. West. This
transaction will expand Qwest's product offering beyond basic long haul service
and provide a new base of customers, resulting in greater revenue and earnings
growth potential.
In addition, Vodafone, a major British-based company, recently acquired
AirTouch, another Fund holding, to gain entry into the U.S. wireless phone
market as well as to expand its international presence.
Finally, a good example of the Fund's search for unusual opportunities is
Houston Industries, a diversified company that sold its cable TV business to
Time Warner. We bought the convertible security of Houston Industries that is
convertible into shares of Time Warner stock.
Top 10 Holdings
---------------
(as a percentage of net assets)
Williams Companies, Inc. 2.4%
Thomas & Betts Corp. 2.3%
Qualcomm Financial Trust I, convertible preferred 2.2%
Dana Corp. 2.2%
New Holland NV 2.2%
National Australia Bank Ltd. 2.1%
Southern Co. 2.0%
Qwest Trends Trust, convertible preferred 1.8%
Frontier Corp. 1.8%
Murphy Oil Corp. 1.7%
What other Fund investments have been particularly notable?
Shared Medical Systems has done exceptionally well. This company provides
healthcare information systems to hospitals and other large healthcare
institutions. Shared Medical has been in a very strong position as the
healthcare sector needs to reduce costs to offset lower rates of Medicare
reimbursement by the government. This trend is driving expanded use of
information technology by hospitals.
What is your outlook?
We have a favorable outlook because we think stocks with significant dividend
yields should provide protection for investors, even in a market downturn. In
the near-term, the market will be focused on interest rates and will be
concerned about whether rising rates could slow economic growth. Inflation,
however, does not appear to be a threat, and so it does not appear likely the
Federal Reserve Board will raise short-term interest rates significantly. Longer
term, we think the Fund's emphasis on value stocks and higher yielding stocks
should continue to provide good investment opportunities.
17
<PAGE>
EVERGREEN
Small Cap Value Fund
Fund at a Glance as of July 31, 1999
Portfolio Management
--------------------
[PHOTO OF JORDAN ALEXANDER APPEARS HERE]
Jordan Alexander, CFA
Tenure: January 1999
[PHOTO OF EDWIN D. MISKA APPEARS HERE]
Edwin D. Miska
Tenure: September 1996
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
-------------------------------------------------------------------------------
Size Style
Value Blend Growth
Large
Medium
Small X
Morningstar's Style Box is based on a portfolio date as of 7/31/99.
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: 1999 Morningstar, Inc.
/2/ Past performance is no guarantee of future results. The investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than original cost. The performance of each class may
vary based on differences in loads and fees paid by the shareholders investing
in each class.
Historical performance shown for Classes A, B, and C prior to their inception is
based on the performance of Class Y, the original class offered. These
historical returns for Classes A, B, and C have not been adjusted to reflect the
effect of each class' 12b-1 fees. These fees for Class A are 0.25%, for Class B
are 1.00% and for Class C are 1.00%. Class Y does not pay a 12b-1 fee. If these
fees had been reflected, returns would have been lower.
Small capitalization stock investing may offer the potential for greater long
term results; however, it is also generally associated with greater price
volatility due to the higher risk of failure.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/2/
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Inception Date: 10/1/93 Class A Class B Class C Class Y
Class Inception Date 1/3/95 1/3/95 1/24/95 10/1/93
<S> <C> <C> <C> <C>
Average Annual Returns*
1 year with sales charge -2.71% -3.59% 0.30% n/a
1 year w/o sales charge 2.17% 1.35% 1.28% 2.31%
3 years 12.81% 12.97% 13.73% 14.92%
5 years 14.11% 14.21% 14.40% 15.50%
Since Portfolio Inception 12.07% 12.25% 12.31% 13.23%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC Yield 0.76% 0.05% 0.06% 1.05%
12-month income dividends per share $ 0.30 $ 0.19 $ 0.19 $ 0.33
12-month capital gain distributions per share $ 0.18 $ 0.18 $ 0.18 $ 0.18
</TABLE>
* Adjusted for maximum applicable sales charge unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Evergreen Small Cap Consumer Price Wilshire Small Russell 2000
Period End Value A Market Value Index - US Value Cap Value Value Value
<S> <C> <C> <C> <C>
1/31/95 9,521 10,000 10,000 10,000
7/31/95 10,867 10,146 11,501 12,255
7/31/96 12,613 10,443 12,697 13,102
7/31/97 18,019 10,679 17,654 17,476
7/31/98 18,603 10,858 18,584 17,880
7/31/99 19,008 11,058 18,014 19,205
</TABLE>
Comparison of change in value of a $10,000 investment in Evergreen Small Cap
Value Fund, Class A, the Russell 2000 Index (Russell 2000), the Wilshire Small
Cap Value Index (Wilshire Small Cap Value), and the Consumer Price Index (CPI).
The Russell 2000 and the Wilshire Small Cap Value 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.
18
<PAGE>
EVERGREEN
Small Cap Value Fund
Portfolio Manager Interview
How did the Fund perform?
The Evergreen Small Cap Value Fund outperformed the Wilshire Small
Cap Value Index, the Fund's benchmark, for the year ended July 31, 1999. During
the 12-month period, the Fund's Class A shares had a total return, before the
deduction of any applicable sales charges, of 2.17%, while the Wilshire Small
Cap Value Index declined by 4.22%.
Portfolio Characteristics
-------------------------
(as of 7/31/1999 unless noted)
Total Net Assets $250,006,034
Number of Holdings 125
P/E Ratio* 17.2x
Beta* 0.53
*as of 6/30/1999
What factors affected performance?
The performance of the Fund was helped by a strong pace of merger and
acquisition activity and an increased weighting of names in the technology,
healthcare and consumer sectors.
Our strategy of focusing on undervalued small cap companies with good growth
prospects led us to invest in many companies that ultimately became acquisition
candidates. During the twelve-month period, 20 companies in the portfolio were
involved in completed or pending merger or acquisition transactions. The deals
having the most significant impact on the performance of the Fund included CPI
Corp., an operator of photography studios that is the subject of a pending
leveraged buyout, and Hach Co., a manufacturer of water testing equipment for
the industrial, commercial and consumer markets. In the case of CPI, if the
buyout is completed the potential gain to the Fund is 67.8% since the initial
investment in this issue in December 1997. The gain for Hach Co., which was
acquired by Danaher Corp. in July 1999, provided the Fund with an 84.7% gain
since the initial investment in May 1998.
In addition, there were eight transactions in the Fund involving companies in
the banking and thrift sector and four in the utility sector. In the utility
sector, the Fund's performance was most helped by the pending acquisitions of
Yankee Energy System (potential gain upon completion of 91.3% from initial
purchase in October 1997) and Public Service Co. of North Carolina (potential
gain upon completion of 82.4% from initial purchase in March 1995).
-------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JULY 31, 1999
-------------------------------------------------------------------------------
(as a percentage of net assets)
[PIE CHART APPEARS HERE]
Common Stock - 88.2%
Convertible Debentures - 9.5%
Cash equivalents and Other - 1.2%
Convertible Preferred Stock - 1.1%
What were some examples of the Fund's investments in technology?
The best-performing issues in the Fund's technology sector included Helix
Technology, Scientific-Atlanta and Antec Corp. Helix Technology, a supplier of
vacuum pumps and instrument components for semiconductor equipment
manufacturers, gained 116.4% during the period. The company, which is a leading
supplier with more than 80% share of the market, is benefiting from the
introduction of new services, operating leverage and a strong recovery in the
semiconductor capital equipment market.
Other top performers for the Fund in the technology sector are in the cable
equipment manufacturing business, an industry benefiting from the upgrading of
the cable TV infrastructure. Scientific-Atlanta, a cable equipment manufacturer,
gained 87.5% during the
19
<PAGE>
EVERGREEN
Small Cap Value Fund
Portfolio Manager Interview
period. The company, which manufactures set-top boxes and other communications
equipment, has seen stronger earnings in recent quarters fueled by increased
capital expenditures for two-way digital cable services by cable companies.
Antec Corp., a cable equipment manufacturer and distributor, also is benefiting
from the upgrading of the cable TV infrastructure and increased capital spending
from AT&T. AT&T, which owns 20% of Antec, plans to provide cable telephone
services using equipment developed by an Antec joint venture. The Fund's
investment in Antec convertible bonds appreciated 100.0% during the period.
Top 5 Industries
----------------
(as a percentage of net assets)
Banks 11.1%
Consumer Products & Services 10.6%
Healthcare Products & Services 10.4%
Telecommunication Services & Equipment 6.9%
Oil/Energy 6.3%
What healthcare industry and consumer products investments helped performance?
The best performing issues in the Fund in the healthcare sector included Jones
Pharma and ArthroCare Corp. ArthroCare, a medical device company that is
leveraging its proprietary technology in orthopedic, head and neck, and cosmetic
surgery, gained 75.9% during the period. Jones Pharma, a specialty
pharmaceutical company focused on critical care and thyroid disorders, is seeing
stronger prescription growth in several key areas. The Fund's investment in
Jones Pharma appreciated 44.9% during the period.
In the consumer sector, the Fund's investment in International Multifoods Corp.
gained 28.7% during the period. The company, which has foodservice distribution
and food processing operations in North America, is restructuring its operations
under a new management team. We expect the restructuring to position the company
for consistent and strong earnings growth over the next several years.
Top 10 Holdings
---------------
(as a percentage of net assets)
CPI Corp. 4.2%
Curtiss Wright Corp. 3.1%
Helix Technology Corp. 3.1%
International Multifoods Corp. 2.9%
Semco Energy, Inc. 2.9%
Alpharma, Inc., convertible debenture 2.8%
Antec Corp., convertible debenture 2.1%
Granite State Bankshares, Inc. 2.1%
Carematrix, convertible debenture 1.8%
Cabot Oil & Gas Corp., CI. A 1.7%
What is your outlook?
We continue to see many opportunities to invest in undervalued, small cap
companies with favorable growth prospects. While the small cap market has seen
improved performance in recent months, the disparity of small cap valuations
relative to large caps remains very high. We believe this valuation differential
should continue to fuel stock buyback programs and merger and acquisition
activity among smaller companies, which should have a positive impact on the
future performance of the Fund.
20
<PAGE>
EVERGREEN
Utility Fund
Fund at a Glance as of July 31, 1999
Portfolio Management
--------------------
[PHOTO OF MATTHEW D. FINN APPEARS HERE]
Matthew D. Finn, CFA
Tenure: May 1999
[PHOTO OF DORIS KELLEY-WATKINS APPEARS HERE]
Doris Kelley-Watkins
Tenure: February 1997
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
-------------------------------------------------------------------------------
Size Style
Value Blend Growth
Large
Medium X
Small
Morningstar's Style Box is based on a portfolio date as of 7/31/99.
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: 1999 Morningstar, Inc.
/2/ Past performance is no guarantee of future results. The investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than original cost. The performance of each class may
vary based on differences in loads and fees paid by the shareholders investing
in each class.
Historical performance shown for Class C and Y prior to their inception is based
on the performance of Class A, one of the original classes offered along with
Class B. These historical returns for Classes C and Y have not been adjusted to
reflect the effect of each Class' 12b-1 fees. These fees for Class A are 0.25%,
for Class B are 1.00% and for Class C are 1.00%. Class Y does not pay a 12b-1
fee. If these fees had been reflected, returns for Class C would have been lower
while returns for Class Y would have been higher. Returns reflect expense limits
previously in effect, without which returns would have been lower.
Funds that concentrate their investments in a single industry may face increased
risk of price fluctuation due to adverse developments within that industry
compared with more diversified funds.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/2/
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Inception Date: 1/4/94 Class A Class B Class C Class Y
Class Inception Date 1/4/94 1/4/94 9/2/94 2/28/94
Average Annual Returns*
<S> <C> <C> <C> <C>
1 year with sales charge 20.03% 20.23% 24.23% n/a
1 year w/o sales charge 26.05% 25.23% 25.23% 26.35%
3 years 19.56% 19.91% 20.60% 21.75%
5 years 15.88% 15.93% 16.17% 17.29%
Since Portfolio Inception 13.34% 13.42% 13.59% 14.61%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC Yield 1.72% 1.06% 1.06% 2.06%
12-month income dividends per share $0.42 $0.33 $0.33 $0.45
12-month capital gain distributions per share $1.28 $1.28 $1.28 $1.28
</TABLE>
* Adjusted for maximum applicable sales charge unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Evergreen Utility A Consumer Price S & P 500 S & P Utility
Period End Market Value Index - US Value Composite Value Value
<S> <C> <C> <C> <C>
1/31/94 9,523 10,000 10,000 10,000
7/31/94 9,126 10,150 9,656 9,420
7/31/95 10,143 10,431 12,170 10,776
7/31/96 11,158 10,736 14,186 12,081
7/31/97 13,537 10,978 21,568 13,917
7/31/98 15,880 11,163 25,708 16,840
7/31/99 20,016 11,368 30,641 19,035
</TABLE>
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).
The S&P Utilities and the S&P 500 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.
21
<PAGE>
EVERGREEN
Utility Fund
Portfolio Manager Interview
How did the Fund perform?
The Fund had excellent performance. For the 12 months ended July 31,
1999, the Evergreen Utility Fund's Class A shares had a total return, before
deduction of any applicable sales charges, of 26.05%. During the 12 months, the
Fund's benchmark, the S&P Utilities Index, returned 13.04%. For the same period,
the utility fund average return was 16.5%, according to Lipper, Inc., an
independent monitor of mutual fund performance.
Portfolio Characteristics
-------------------------
(as of 7/31/1999 unless noted)
Total Net Assets $166,251,487
Number of Holdings 40
P/E Ratio* 21.4x
Beta* 0.47
* as of 6/30/1999
What factors contributed to the strong performance?
We began 1999 by increasing emphasis on the faster-growing telecommunications
area, particularly wireless communications. Interest rates appeared to have
bottomed late in 1998, which removed the favorable environment for interest-rate
sensitive stocks, such as gas and electric utility companies.
Revenue growth from, and customer demand for, telecommunication products and
services are rising sharply. There has been consolidation within the telecom
industry, which can be profitable for investors. Early this year, we lifted the
Fund's holdings in selected shares of telecommunication companies, including
wireless names, but maintained an investment presence in electric and gas
utilities.
-------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JULY 31, 1999
-------------------------------------------------------------------------------
(as a percentage of net assets)
[PIE CHART APPEARS HERE]
Common Stock--75.2%
Convertible Preferred--21.5%
Convertible Debentures--2.4%
Cash Equivalents and Other--0.9%
Top 5 Industries
----------------
(as a percentage of net assets)
Utilities--Electric 45.1%
Utilities--Telephone 21.7%
Utilities--Gas 10.5%
Telecommunication Services & Equipment 10.4%
Oil/Energy 3.6%
What strategies did you pursue as you increased investments in
telecommunications?
In general, we increased our investments in companies that could offer customers
maximum telecom product choices. We felt those types of companies would be most
successful in the competitive environment. We also added to our wireless
communication names. AT&T and Nextel are examples of our increased interest in
telecommunications investments. We also held a position in MCI WorldCom. We did
not add to our positions in regional operating telephone companies, primarily
because we thought those companies were well represented in the portfolio.
Frontier Corp., a telecommunications company that provides local, long distance,
internet and other services was also added earlier this year.
22
<PAGE>
EVERGREEN
Utility Fund
Portfolio Manager Interview
What is behind the rapid growth in telecommunications?
Growth in telecommunications is global with demand for wireless communications
particularly pronounced. Technology advances continue to drive cost down and
services up, expanding the markets for telecommunications in both developed and
less developed countries. This trend has been apparent for several years.
Spurred by lower costs, expanded product features and greater communications
traffic capacity, growth in wireless communications has been nothing short of
explosive both domestically and globally. A leading wireless equipment company
estimates that there will be 300 million mobile wireless users in the world by
the end of 1999 and 1 billion users by 2005.
One long-held name for the Fund, Qualcomm, developed a proprietary digital
technology, CDMA, that is becoming one of the worldwide standards for wireless
communications. This has resulted in a sharp rise in projected profit growth for
this wireless equipment company. Its convertible preferred shares, which we own,
have risen in concert.
What strategies have you followed for investing in traditional gas and electric
utilities?
We did not abandon traditional gas and electric utilities. We found
opportunities among companies in service territories undergoing deregulation.
While competition is increasing for companies in deregulating markets, greater
earnings opportunities are released as well. Many utilities are investing in
areas outside of their original service territories that offer less restrictive
pricing opportunity.
Top 10 Holdings
---------------
(as a percentage of net assets)
Qualcomm Financial Trust I, convertible preferred 7.0%
Companhia Paranaense de Energia-Copel, Plc, ADR 3.7%
Enron Corp. 3.6%
Nextel Communications, Inc. Cl. A 3.5%
Frontier Corp. 3.3%
BellSouth Corp. 3.2%
Sprint Corp., convertible preferred 3.1%
Niagara Mohawk Holdings, Inc. 3.1%
Sprint Corp. 3.1%
GTE Corp 3.1%
We added Calpine Corp., an independent electric power producer, to the portfolio
and we also purchased shares in two small-cap electric companies, NUI Corp. and
UGI Corp. In addition, we added investments in electric companies PacifiCorp.
and Niagara Mohawk Holdings.
23
<PAGE>
EVERGREEN
Utility Fund
Portfolio Manager Interview
What is your outlook?
Although we have been emphasizing telecommunications, we continue to follow
developments in the gas and electric utility areas. We believe attractive
investment opportunities among gas and electric utilities can be found if we are
selective and opportunistic.
For electric power companies, we expect continued movement toward competition
and less regulation, with opportunities created by mergers, acquisitions and
financial restructuring. Among gas stocks, we expect further consolidation and
convergence between gas and electric companies. Gas companies continue to be
greatly affected by the weather, which depressed last year's results, but we
look for successful business diversification to help reduce this concern and
lift the investment appeal of the stocks.
We believe telecommunications companies will continue to offer greater growth
opportunity. However, we think this sector requires close scrutiny, particularly
as the explosive demand for telecommunications services requires great increases
in capital spending. This could become troublesome if interest rates were to
increase substantially.
Our universe of telecom and utility companies is witnessing unprecedented
fundamental change, much of it being introduced by competition. This is likely
to create tremendous investment opportunity, but also some investment challenges
and problems, which must be studied and understood.
24
<PAGE>
EVERGREEN
Value Fund
Fund at a Glance as of July 31, 1999
Portfolio Management
--------------------
[PHOTO OF MATTHEW D. FINN APPEARS HERE]
Matthew D. Finn, CFA
Tenure: March 1998
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
-------------------------------------------------------------------------------
Size Style
Value Blend Growth
Large X
Medium
Small
Morningstar's Style Box is based on a portfolio date as of 7/31/99.
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: 1999 Morningstar, Inc.
/2/ Past performance is no guarantee of future results. The investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than original cost. The performance of each class may
vary based on differences in loads and fees paid by the shareholders investing
in each class.
Historical performance shown for Classes B, C, and Y prior to their inception is
based on the performance of Class A, the original class offered. These
historical returns for Classes B, C, and Y have not been adjusted to reflect the
effect of each Class' 12b-1 fees. These fees for Class A are 0.25%, for Class B
are 1.00% and for Class C are 1.00%. Class Y does not pay a 12b-1 fee. If these
fees had been reflected, returns for Classes B and C would have been lower while
returns for Class Y would have been higher. Returns reflect expense limits
previously in effect, without which returns would have been lower.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/2/
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Inception Date: 4/12/85 Class A Class B Class C Class Y
Class Inception Date 4/12/85 2/2/93 9/2/94 1/3/91
Average Annual Returns*
<S> <C> <C> <C> <C>
1 year with sales charge 8.08% 7.65% 11.66% n/a
1 year w/o sales charge 13.48% 12.65% 12.66% 13.81%
3 years 18.97% 19.34% 20.05% 21.23%
5 years 17.45% 17.54% 17.77% 18.90%
10 years 12.98% 13.03% 13.13% 13.79%
Since Portfolio Inception 14.05% 14.09% 14.16% 14.63%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC Yield 0.48% -0.26% -0.26% 0.76%
12-month income dividends per share $0.21 $0.05 $0.05 $0.26
12-month capital gain distributions per share $0.13 $0.13 $0.13 $0.13
</TABLE>
* Adjusted for maximum applicable sales charge unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Evergreen Value A Consumer Price S & P 500 Composite
Period End Market Value Index - US Value Value
7/31/89 9,526 10,000 10,000
7/31/90 10,088 10,482 10,623
7/31/91 11,238 10,949 11,977
7/31/92 12,444 11,294 13,510
7/31/93 13,408 11,608 14,684
7/31/94 14,412 11,929 15,442
7/31/95 17,325 12,259 19,463
7/31/96 19,126 12,617 22,687
7/31/97 27,202 12,902 34,493
7/31/98 29,799 13,119 41,113
7/31/99 33,817 13,360 49,002
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).
The S&P 500 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.
25
<PAGE>
EVERGREEN
Value Fund
Portfolio Manager Interview
How did the Fund perform?
The Evergreen Value Fund's Class A shares had a return, before deduction of any
applicable sales charges, of 13.48% for the 12 months ended July 31, 1999.
During the same period, the median return of funds in the Multi-Cap Value Fund
Category was 11.03%, while the Russell 1000 Value Index had a return of 14.99%.
Portfolio Characteristics
-------------------------
(as of 7/31/1999 unless noted)
Total Net Assets $932,043,300
Number of Holdings 87
P/E Ratio* 20.5x
Beta* 0.88
(as of 6/30/1999)
What factors affected performance?
The Fund performed well during the market decline early in the fiscal year.
However, the portfolio's defensive posture held back relative performance during
the market rally in October and November 1998. After the portfolio was
repositioned in December by reducing allocations in defensive areas, such as
healthcare, and adding to technology and basic materials, the Fund's performance
improved.
What was the investment like for the period?
After a two-year period in which the growth style of investing outperformed the
value style, the value indices substantially outperformed the S&P 500 Index
during April. Since April, we have not seen a clear trend favoring either
growth- or value-oriented stocks. Value-oriented stocks include many cyclical
companies, whose sales and earnings are sensitive to changes in the economic
cycle. Because of this, the environment for value-oriented stocks has improved
as the economy has improved. Late in the period, concerns arose about a
potential slowing of economic activity as both short-term and long-term interest
rates moved up. At the same time, market leadership broadened out beyond the
large-cap growth companies and has begun to include many mid-cap and small-cap
companies. We believe this is an encouraging sign of a healthy market.
Top 5 Industries
----------------
(as a percentage of net assets)
Finance & Insurance 13.1%
Banks 13.1%
Oil/Energy 10.9%
Information Services & Technology 8.3%
Utilities--Telephone 8.1%
What investments supported performance?
Throughout most of the year, stock selection in the consumer cyclical and
technology sectors helped performance. In the consumer cyclical area, the
portfolio owned significant positions in three retailers that performed very
well: Tandy, Federated Department Stores and Tommy Hilfiger. Among technology
investments, Hewlett-Packard and Motorola were the best performers. The
portfolio continued to own all these stocks at the end of the fiscal period, the
positions in Tandy and Hewlett-Packard had been reduced.
26
<PAGE>
EVERGREEN
Value Fund
Portfolio Manager Interview
The capital goods sector was the area that held back performance the most. The
Fund's investment in Waste Management also hurt performance after the company
announced it would not meet second quarter earnings expectations. The Fund has
sold its position in Waste Management.
Top 10 Holdings
---------------
(as a percentage of net assets)
Tommy Hilfiger Corp. 3.3%
Federated Department Stores, Inc. 3.1%
Exxon Corp. 2.8%
BankAmerica Corp. 2.8%
Texaco Inc. 2.5%
Citigroup, Inc. 2.5%
Hewlett-Packard Co. 2.5%
Pharmacla & Upjohn, Inc. 2.4%
Tyco International Ltd. 2.4%
Chase Manhatten Corp. 2.2%
What is your outlook?
We believe economic growth will slow toward the end of this year to a more
sustainable pace because of both the Federal Reserve Board's actions in raising
short-term interest rates and the increases in mortgage and other interest
rates. We also believe the 4% annual growth rate in Gross Domestic Product
during the first quarter of the calendar year is sustainable. However, we
believe earnings should still grow as previously depressed industries, including
energy and basic materials, recover. In addition, U.S. multinational
corporations should benefit from the emerging economic recovery overseas.
Finally, many U.S. companies should have a relatively easy time exceeding their
earnings of the third and fourth calendar quarters of 1999, supporting their
stock performance.
We believe the primary risk to stock performance is a broad-based, sustained
acceleration in inflation. We do not think this is likely to occur in the short
run.
27
<PAGE>
EVERGREEN
BLUE CHIP FUND
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31,
----------------------
1999 1998 (a)
<S> <C> <C>
CLASS A
Net asset value, beginning of period $ 30.42 $ 27.39
--------- ---------
Income from investment operations
Net investment income 0.05 0.08
Net realized and unrealized gains on securities 4.82 3.01
--------- ---------
Total from investment operations 4.87 3.09
--------- ---------
Distributions to shareholders from
Net investment income (0.03) (0.06)
Net realized gains (2.38) 0
--------- ---------
Total distributions (2.41) (0.06)
--------- ---------
Net asset value, end of period $ 32.88 $ 30.42
--------- ---------
Total return* 17.29% 11.29%
Ratios and supplemental data
Net assets, end of period (thousands) $ 382,499 $ 284,735
Ratios to average net assets:
Expenses** 1.20% 1.20%+
Net investment income 0.19% 0.49%+
Portfolio turnover rate 111% 112%
</TABLE>
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended August 31,
----------------------- --------------------------------------
1999 1998 (b) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Net asset value,
beginning of period $ 30.35 $ 29.79 $ 25.05 $ 22.98 $ 23.21 $ 25.42
--------- --------- -------- -------- -------- --------
Income from investment
operations
Net investment income (0.05) (0.12) 0.15 0.12 0.25 0.16
Net realized and
unrealized gains or
losses on securities 4.62 5.72 7.97 3.69 2.66 (0.35)
--------- --------- -------- -------- -------- --------
Total from investment
operations 4.57 5.60 8.12 3.81 2.91 (0.19)
--------- --------- -------- -------- -------- --------
Distributions to
shareholders from
Net realized gains (2.38) (4.96) (3.18) (0.98) (2.78) (1.74)
--------- --------- -------- -------- -------- --------
Net investment income 0 (0.08) (0.20) (0.76) (0.36) (0.28)
Total distributions (2.38) (5.04) (3.38) (1.74) (3.14) (2.02)
--------- --------- -------- -------- -------- --------
Net asset value, end of
period $ 32.54 $ 30.35 $ 29.79 $ 25.05 $ 22.98 $ 23.21
--------- --------- -------- -------- -------- --------
Total return* 16.26% 20.89% 34.76% 17.31% 13.87% (0.72%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $ 255,182 $ 117,893 $312,935 $224,819 $199,456 $208,532
Ratios to average net
assets:
Expenses** 1.95% 1.68%+ 1.57% 1.85% 1.75% 2.07%
Net investment income (0.60%) (0.02%)+ 0.55% 0.52% 1.09% 0.67%
Portfolio turnover rate 111% 112% 109% 139% 115% 73%
</TABLE>
(a) For the period from January 20, 1998 (commencement of class operations) to
July 31, 1998.
(b) For the eleven months ended July 31, 1998. The Fund changed its fiscal year
end from August 31 to July 31, effective July 31, 1998.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
See Combined Notes to Financial Statements.
28
<PAGE>
EVERGREEN
BLUE CHIP FUND
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31,
-----------------------
1999 1998 (a)
<S> <C> <C>
CLASS C
Net asset value,
beginning of period $ 30.40 $ 27.70
--------- ---------
Income from investment
operations
Net investment income (0.11) 0
Net realized and
unrealized gains on
securities 4.72 2.72
--------- ---------
Total from investment
operations 4.61 2.72
--------- ---------
Distributions to
shareholders from
Net realized gains (2.38) 0
--------- ---------
Net investment income 0 (0.02)
Total distributions (2.38) (0.02)
--------- ---------
Net asset value, end of
period $ 32.63 $ 30.40
--------- ---------
Total return* 16.37% 9.80%
Ratios and supplemental
data
Net assets, end of
period (thousands) $ 2,969 $ 780
Ratios to average net
assets:
Expenses** 1.95% 2.02%+
Net investment income (0.67%) (0.27%)+
Portfolio turnover rate 111% 112%
</TABLE>
<TABLE>
<CAPTION>
Period Ended
July 31, 1999 (b)
<S> <C>
CLASS Y
Net asset value, beginning of period $32.30
------
Income from investment operations
Net investment income 0
Net realized and unrealized gains on securities 0.32
------
Total from investment operations 0.32
------
Net asset value, end of period $32.62
------
Total return 0.99%
Ratios and supplemental data
Net assets, end of period (thousands) $ 789
Ratios to average net assets:
Expenses** 0.95%+
Net investment income 0.08%+
Portfolio turnover rate 111%
</TABLE>
(a) For the period from January 22, 1998 (commencement of class operations) to
July 31, 1998.
(b) For the period from April 30, 1999 (commencement of class operations) to
July 31, 1999
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
See Combined Notes to Financial Statements.
29
<PAGE>
EVERGREEN
EQUITY INCOME FUND
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended November 30,
-------------------------- -------------------------
1999 # 1998 1997 (a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Net asset value,
beginning of period $ 21.65 $ 20.69 $ 17.33 $ 13.83 $ 11.75 $ 12.31
------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.33 0.21 0.18 0.26 0.25 0.24
Net realized and
unrealized gains or
losses on securities 1.22 2.46 3.34 3.83 2.80 (0.56)
------- ------- ------- ------- ------- -------
Total from investment
operations 1.55 2.67 3.52 4.09 3.05 (0.32)
------- ------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.29) (0.19) (0.16) (0.26) (0.32) (0.24)
Net realized gains (2.74) (1.52) 0 (0.33) (0.65) 0
------- ------- ------- ------- ------- -------
Total distributions (3.03) (1.71) (0.16) (0.59) (0.97) (0.24)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 20.17 $ 21.65 $ 20.69 $ 17.33 $ 13.83 $ 11.75
------- ------- ------- ------- ------- -------
Total return* 8.20% 13.85% 20.40% 29.83% 26.57% (2.65%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $50,213 $52,667 $47,812 $40,487 $27,037 $23,162
Ratios to average net
assets:
Expenses** 1.17% 1.21% 1.24%+ 1.41% 1.69% 1.59%
Net investment income 1.68% 1.01% 1.46%+ 1.66% 1.94% 1.93%
Portfolio turnover rate 106% 66% 41% 41% 77% 57%
</TABLE>
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended November 30,
--------------------------- ---------------------------
1999 # 1998 1997 (a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Net asset value,
beginning of period $ 21.56 $ 20.63 $ 17.31 $ 13.84 $ 11.77 $ 12.32
------- -------- ------- -------- -------- -------
Income from investment
operations
Net investment income 0.18 0.06 0.09 0.15 0.15 0.15
Net realized and
unrealized gains or
losses on securities 1.21 2.45 3.31 3.80 2.82 (0.56)
------- -------- ------- -------- -------- -------
Total from investment
operations 1.39 2.51 3.40 3.95 2.97 (0.41)
------- -------- ------- -------- -------- -------
Distributions to
shareholders from
Net investment income (0.15) (0.06) (0.08) (0.15) (0.25) (0.14)
Net realized gains (2.74) (1.52) 0 (0.33) (0.65) 0
------- -------- ------- -------- -------- -------
Total distributions (2.89) (1.58) (0.08) (0.48) (0.90) (0.14)
------- -------- ------- -------- -------- -------
Net asset value, end of
period $ 20.06 $ 21.56 $ 20.63 $ 17.31 $ 13.84 $ 11.77
------- -------- ------- -------- -------- -------
Total return* 7.39% 13.01% 19.68% 28.73% 25.59% (3.36%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $78,049 $105,748 $94,309 $ 43,526 $ 20,605 $ 7,314
Ratios to average net
assets:
Expenses** 1.93% 1.97% 2.02%+ 2.18% 2.47% 2.31%
Net investment income 0.91% 0.25% 0.58%+ 0.88% 1.06% 1.27%
Portfolio turnover rate 106% 66% 41% 41% 77% 57%
</TABLE>
(a) For the eight months ended July 31, 1997. The Fund changed its fiscal year
end from November 30 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
30
<PAGE>
EVERGREEN
EQUITY INCOME FUND
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended November 30,
-------------------------- --------------------------
1999 # 1998 1997 (a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS C
Net asset value,
beginning of period $ 21.58 $ 20.65 $ 17.32 $ 13.85 $ 11.78 $ 12.33
------- ------- ------- -------- ------- -------
Income from investment
operations
Net investment income 0.18 0.05 0.09 0.14 0.16 0.15
Net realized and
unrealized gains or
losses on securities 1.21 2.46 3.32 3.81 2.81 (0.56)
------- ------- ------- -------- ------- -------
Total from investment
operations 1.39 2.51 3.41 3.95 2.97 (0.41)
------- ------- ------- -------- ------- -------
Distributions to
shareholders from
Net investment income (0.15) (0.06) (0.08) (0.15) (0.25) (0.14)
Net realized gains (2.74) (1.52) 0 (0.33) (0.65) 0
------- ------- ------- -------- ------- -------
Total distributions (2.89) (1.58) (0.08) (0.48) (0.90) (0.14)
------- ------- ------- -------- ------- -------
Net asset value, end of
period $ 20.08 $ 21.58 $ 20.65 $ 17.32 $ 13.85 $ 11.78
------- ------- ------- -------- ------- -------
Total return* 7.38% 12.99% 19.73% 28.71% 25.57% (3.36%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $16,952 $20,851 $21,125 $ 14,562 $ 9,503 $ 5,968
Ratios to average net
assets:
Expenses** 1.93% 1.97% 2.01%+ 2.17% 2.47% 2.34%
Net investment income 0.91% 0.25% 0.66%+ 0.89% 1.16% 1.21%
Portfolio turnover rate 106% 66% 41% 41% 77% 57%
</TABLE>
<TABLE>
<CAPTION>
Year Ended July 31,
------------------------
1999 # 1998 1997 (b)
<S> <C> <C> <C>
CLASS Y
Net asset value, beginning of period $21.61 $20.62 $17.74
------ ------ ------
Income from investment operations
Net investment income 0.37 0.24 0.18
Net realized and unrealized gains on securities 1.22 2.51 2.86
------ ------ ------
Total from investment operations 1.59 2.75 3.04
------ ------ ------
Distributions to shareholders
Net investment income (0.34) (0.24) (0.16)
Net realized gains (2.74) (1.52) 0
------ ------ ------
Total distributions (3.08) (1.76) (0.16)
------ ------ ------
Net asset value, end of period $20.12 $21.61 $20.62
------ ------ ------
Total return 8.44% 14.29% 17.22%
Ratios and supplemental data
Net assets, end of period (thousands) $ 651 $ 111 $ 93
Ratios to average net assets:
Expenses** 0.87% 0.93% 1.34%+
Net investment income 1.98% 1.31% 0.79%+
Portfolio turnover rate 106% 66% 41%
</TABLE>
(a) For the eight months ended July 31, 1997. The Fund changed its fiscal year
end from November 30 to July 31, effective July 31, 1997.
(b) For the period from January 13, 1997 (commencement of class operations) to
July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
31
<PAGE>
EVERGREEN
GROWTH AND INCOME FUND
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Year Ended July 31, December 31,
-------------------------- -----------------
1999 1998 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS A
Net asset value, beginning of
period $29.14 $27.26 $22.53 $18.63 $14.48
------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.10 0.16 0.08 0.12 0.13
Net realized and unrealized
gains on securities and
foreign currency related
transactions 1.16 2.86 4.72 4.26 4.64
------ ------ ------ ------ ------
Total from investment
operations 1.26 3.02 4.80 4.38 4.77
------ ------ ------ ------ ------
Distributions to shareholders
from
Net investment income (0.06) (0.13) (0.07) (0.13) (0.14)
Net realized gains (0.78) (1.01) 0 (0.35) (0.48)
------ ------ ------ ------ ------
Total distributions (0.84) (1.14) (0.07) (0.48) (0.62)
------ ------ ------ ------ ------
Net asset value, end of period $29.56 $29.14 $27.26 $22.53 $18.63
------ ------ ------ ------ ------
Total return* 4.48% 11.26% 21.33% 23.50% 33.00%
Ratios and supplemental data
Net assets, end of period
(millions) $ 250 $ 296 $ 166 $ 85 $ 19
Ratios to average net assets:
Expenses** 1.43% 1.46% 1.47%+ 1.41% 1.55%+
Net investment income 0.33% 0.61% 0.57%+ 0.70% 0.99%+
Portfolio turnover rate 39% 20% 6% 14% 17%
<CAPTION>
Year Ended
Year Ended July 31, December 31,
-------------------------- -----------------
1999 1998 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS B
Net asset value, beginning of
period $28.88 $27.10 $22.43 $18.59 $14.48
------ ------ ------ ------ ------
Income from investment
operations
Net investment income (0.14) (0.02) (0.02) 0 0.05
Net realized and unrealized
gains on securities and
foreign currency related
transactions 1.18 2.81 4.69 4.20 4.61
------ ------ ------ ------ ------
Total from investment
operations 1.04 2.79 4.67 4.20 4.66
------ ------ ------ ------ ------
Distributions to shareholders
from
Net investment income 0 0 0 (0.01) (0.07)
Net realized gains (0.78) (1.01) 0 (0.35) (0.48)
------ ------ ------ ------ ------
Total distributions (0.78) (1.01) 0 (0.36) (0.55)
------ ------ ------ ------ ------
Net asset value, end of period $29.14 $28.88 $27.10 $22.43 $18.59
------ ------ ------ ------ ------
Total return* 3.73% 10.44% 20.82% 22.60% 32.20%
Ratios and supplemental data
Net assets, end of period
(millions) $ 891 $1,000 $ 542 $ 245 $ 46
Ratios to average net assets:
Expenses** 2.18% 2.21% 2.25%+ 2.17% 2.24%+
Net investment income (0.43%) (0.14%) (0.19%)+ (0.06%) 0.30%+
Portfolio turnover rate 39% 20% 6% 14% 17%
</TABLE>
(a) For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
(b) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
See Combined Notes to Financial Statements.
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,
-------------------------- ---------------------------
1999 1998 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS C
Net asset value,
beginning of period $28.89 $27.10 $22.43 $ 18.58 $ 14.48
------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income (0.16) (0.02) (0.02) 0 0.06
Net realized and
unrealized gains on
securities and foreign
currency related
transactions 1.19 2.82 4.69 4.21 4.60
------ ------ ------ ----------- -----------
Total from investment
operations 1.03 2.80 4.67 4.21 4.66
------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income 0 0 0 (0.01) (0.08)
Net realized gains (0.78) (1.01) 0 (0.35) (0.48)
------ ------ ------ ----------- -----------
Total distributions (0.78) (1.01) 0 (0.36) (0.56)
------ ------ ------ ----------- -----------
Net asset value, end of
period $29.14 $28.89 $27.10 $ 22.43 $ 18.58
------ ------ ------ ----------- -----------
Total return* 3.69% 10.47% 20.82% 22.60% 32.20%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 37 $ 50 $ 24 $ 10 $ 20
Ratios to average net
assets:
Expenses** 2.18% 2.21% 2.25%+ 2.17% 2.15%+
Net investment income (0.42%) (0.13%) (0.19%)+ (0.06%) 0.35%+
Portfolio turnover rate 39% 20% 6% 14% 17%
</TABLE>
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
------------------------ -------------------------
1999 1998 1997 (b) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS Y
Net asset value,
beginning of period $29.19 $27.29 $22.55 $ 18.64 $ 14.52 $ 15.41
------ ------ ------ ------- ------- -------
Income from investment
operations
Net investment income 0.19 0.24 0.11 0.18 0.18 0.14
Net realized and
unrealized gains on
securities and foreign
currency related
transactions 1.15 2.87 4.73 4.25 4.59 0.12
------ ------ ------ ------- ------- -------
Total from investment
operations 1.34 3.11 4.84 4.43 4.77 0.26
------ ------ ------ ------- ------- -------
Distributions to
shareholders from
Net investment income (0.10) (0.20) (0.10) (0.17) (0.17) (0.14)
Net realized gains (0.78) (1.01) 0 (0.35) (0.48) (1.01)
------ ------ ------ ------- ------- -------
Total distributions (0.88) (1.21) (0.10) (0.52) (0.65) (1.15)
------ ------ ------ ------- ------- -------
Net asset value, end of
period $29.65 $29.19 $27.29 $ 22.55 $ 18.64 $ 14.52
------ ------ ------ ------- ------- -------
Total return 4.75% 11.56% 21.52% 23.80% 32.90% 1.70%
Ratios and supplemental
data
Net assets, end of period
(millions) $ 634 $ 801 $ 616 $ 442 $ 141 $ 73
Ratios to average net
assets:
Expenses** 1.18% 1.20% 1.21%+ 1.16% 1.27% 1.33%
Net investment income 0.57% 0.86% 0.82%+ 0.93% 1.11% 0.96%
Portfolio turnover rate 39% 20% 6% 14% 17% 29%
</TABLE>
(a) For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
(b) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
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,
----------------------------- --------------------------
1999 # 1998 1997 (b) # 1997 1996 1995 (a)
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Net asset value,
beginning of period $ 23.19 $ 23.94 $ 21.79 $ 20.15 $ 17.28 $17.09
-------- ------- ------- ------- ------- ------
Income from investment
operations
Net investment income 0.94 1.05 0.52 1.02 1.01 0.02
Net realized and
unrealized gains on
securities and foreign
currency related
transactions 1.50 0.81 2.15 1.67 2.94 0.17
-------- ------- ------- ------- ------- ------
Total from investment
operations 2.44 1.86 2.67 2.69 3.95 0.19
-------- ------- ------- ------- ------- ------
Distributions to
shareholders from
Net investment income (0.93) (1.02) (0.52) (1.05) (1.08) 0
Net realized gains (2.13) (1.59) 0 0 0 0
-------- ------- ------- ------- ------- ------
Total distributions (3.06) (2.61) (0.52) (1.05) (1.08) 0
-------- ------- ------- ------- ------- ------
Net asset value, end of
period $ 22.57 $ 23.19 $ 23.94 $ 21.79 $ 20.15 $17.28
-------- ------- ------- ------- ------- ------
Total return* 12.14% 7.93% 12.45% 13.80% 23.40% 1.10%
Ratios and supplemental
data
Net assets, end of
period (thousands) $ 35,714 $15,005 $11,955 $ 9,678 $ 4,412 $ 119
Ratios to average net
assets:
Expenses** 1.46% 1.50% 1.45%+ 1.44% 1.36% 1.45%+
Interest expense N/A N/A N/A 0.03% N/A N/A
Net investment income 4.39% 4.20% 4.69%+ 4.93% 5.39% 4.09%+
Portfolio turnover rate 124% 133% 72% 168% 138% 151%
<CAPTION>
Year Ended July 31, Year Ended January 31,
----------------------------- --------------------------
1999 # 1998 1997 (b) # 1997 1996 1995 (a)
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Net asset value,
beginning of period $ 23.04 $ 23.81 $ 21.69 $ 20.08 $ 17.28 $17.09
-------- ------- ------- ------- ------- ------
Income from investment
operations
Net investment income 0.76 0.86 0.43 0.89 0.91 0.02
Net realized and
unrealized gains on
securities and foreign
currency related
transactions 1.51 0.81 2.15 1.64 2.87 0.17
-------- ------- ------- ------- ------- ------
Total from investment
operations 2.27 1.67 2.58 2.53 3.78 0.19
-------- ------- ------- ------- ------- ------
Distributions to
shareholders from
Net investment income (0.80) (0.85) (0.46) (0.92) (0.98) 0
Net realized gains (2.13) (1.59) 0 0 0 0
-------- ------- ------- ------- ------- ------
Total distributions (2.93) (2.44) (0.46) (0.92) (0.98) 0
-------- ------- ------- ------- ------- ------
Net asset value, end of
period $ 22.38 $ 23.04 $ 23.81 $ 21.69 $ 20.08 $17.28
-------- ------- ------- ------- ------- ------
Total return* 11.34% 7.13% 12.06% 13.00% 22.40% 1.10%
Ratios and supplemental
data
Net assets, end of
period (thousands) $185,177 $54,544 $43,977 $35,323 $14,750 $ 599
Ratios to average net
assets:
Expenses** 2.21% 2.25% 2.20%+ 2.19% 2.11% 2.23%+
Interest expense N/A N/A N/A 0.03% N/A N/A
Net investment income 3.61% 3.46% 3.94%+ 4.17% 4.69% 3.23%+
Portfolio turnover rate 124% 133% 72% 168% 138% 151%
</TABLE>
(a) For the period from January 3, 1995 (commencement of class operations) to
January 31, 1995.
(b) For the six months ended July 31, 1997. The Fund changed its fiscal year
end from January 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
34
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
Financial Highlights
(For a share outstanding throughout each period)
Year Ended July 31, Year Ended January 31,
------------------------- -----------------------
1999 # 1998 1997 (b) # 1997 1996 1995 (a)
CLASS C
Net asset value,
beginning of period $23.04 $23.81 $21.69 $20.08 $17.27 $17.09
------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.76 0.87 0.44 0.87 0.90 0.01
Net realized and
unrealized gains on
securities and foreign
currency related
transactions 1.51 0.80 2.14 1.66 2.89 0.17
------ ------ ------ ------ ------ ------
Total from investment
operations 2.27 1.67 2.58 2.53 3.79 0.18
------ ------ ------ ------ ------ ------
Distributions to
shareholders from
Net realized gains (2.13) (1.59) 0 0 0 0
------ ------ ------ ------ ------ ------
Net investment income (0.80) (0.85) (0.46) (0.92) (0.98) 0
Total distributions (2.93) (2.44) (0.46) (0.92) (0.98) 0
------ ------ ------ ------ ------ ------
Net asset value, end of
period $22.38 $23.04 $23.81 $21.69 $20.08 $17.27
------ ------ ------ ------ ------ ------
Total return* 11.34% 7.13% 12.06% 12.90% 22.40% 1.10%
Ratios and supplemental
data
Net assets, end of period
(thousands) $2,502 $1,259 $ 950 $ 982 $ 523 $ 24
Ratios to average net
assets:
Expenses** 2.21% 2.25% 2.20%+ 2.19% 2.11% 2.22%+
Interest expense N/A N/A N/A 0.03% N/A N/A
Net investment income 3.60% 3.48% 4.06%+ 4.15% 4.67% 2.68%+
Portfolio turnover rate 124% 133% 72% 168% 138% 151%
Year Ended July 31, Year Ended January 31,
------------------------- -----------------------
1999 # 1998 1997 (b) # 1997 1996 1995 (c)
CLASS Y
Net asset value,
beginning of period $23.22 $23.98 $21.81 $20.16 $17.28 $18.29
------ ------ ------ ------ ------ ------
Net investment income 0.99 1.02 0.55 1.08 1.10 0.87
Net realized and
unrealized gains or
losses on securities and
foreign currency related
transactions 1.52 0.89 2.16 1.66 2.87 (0.55)
------ ------ ------ ------ ------ ------
Total from investment
operations 2.51 1.91 2.71 2.74 3.97 0.32
------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income (1.02) (1.08) (0.54) (1.09) (1.09) (1.08)
Net realized gains (2.13) (1.59) 0 0 0 (0.25)
------ ------ ------ ------ ------ ------
Total distributions (3.15) (2.67) (0.54) (1.09) (1.09) (1.33)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $22.58 $23.22 $23.98 $21.81 $20.16 $17.28
------ ------ ------ ------ ------ ------
Distributions to
shareholders from
Total return 12.46% 8.16% 12.65% 14.10% 23.50% 1.90%
Ratios and supplemental
data
Net assets, end of period
(millions) $ 847 $ 880 $ 900 $ 858 $ 914 $ 942
Ratios to average net
assets:
Expenses** 1.21% 1.25% 1.20%+ 1.18% 1.19% 1.24%+
Interest expense N/A N/A N/A 0.03% N/A N/A
Net investment income 4.61% 4.46% 4.97%+ 5.14% 5.70% 5.70%+
Portfolio turnover rate 124% 133% 72% 168% 138% 151%
(a) For the period from January 3, 1995 (commencement of class operations) to
January 31, 1995.
(b) For the six months ended July 31, 1997. The Fund changed its fiscal year
end from January 31 to July 31, effective July 31, 1997.
(c) For the ten months ended January 31, 1995. The Fund has changed its fiscal
year end from March 31 to January 31, effective January 31, 1995.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
35
<PAGE>
EVERGREEN
SMALL CAP VALUE FUND
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31 Year Ended December 31,
--------------------------- -------------------------
1999 1998 1997 (b) # 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS A
Net asset value,
beginning of period $ 15.75 $ 15.69 $13.10 $ 11.57 $ 9.64
------- ------- ------ ----------- -----------
Income from investment
operations
Net investment income 0.26 0.29 0.14 0.34 0.34
Net realized and
unrealized gains on
securities 0.04 0.24 2.59 2.13 2.45
------- ------- ------ ----------- -----------
Total from investment
operations 0.30 0.53 2.73 2.47 2.79
------- ------- ------ ----------- -----------
Distributions to
shareholders from
Net realized gains (0.18) (0.19) (0.01) (0.60) (0.49)
------- ------- ------ ----------- -----------
Net investment income (0.30) (0.28) (0.13) (0.34) (0.37)
Total distributions (0.48) (0.47) (0.14) (0.94) (0.86)
------- ------- ------ ----------- -----------
Net asset value, end of
period $ 15.57 $ 15.75 $15.69 $ 13.10 $ 11.57
------- ------- ------ ----------- -----------
Total return* 2.17% 3.24% 20.99% 22.00% 29.50%
Ratios and supplemental
data
Net assets, end of
period (thousands) $59,451 $54,142 $4,239 $ 336 $ 216
Ratios to average net
assets:
Expenses** 1.67% 1.68% 1.71%+ 1.75% 1.75%+
Net investment income 1.85% 1.95% 1.88%+ 3.08% 3.39%+
Portfolio turnover rate 54% 18% 13% 50% 48%
</TABLE>
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
----------------------------- -------------------------
1999 1998 1997 (b) # 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS B
Net asset value,
beginning of period $ 15.67 $ 15.64 $13.09 $ 11.57 $ 9.64
-------- -------- ------ ----------- -----------
Income from investment
operations
Net investment income 0.16 0.19 0.08 0.27 0.28
Net realized and
unrealized gains on
securities 0.02 0.22 2.57 2.11 2.43
-------- -------- ------ ----------- -----------
Total from investment
operations 0.18 0.41 2.65 2.38 2.71
-------- -------- ------ ----------- -----------
Distributions to
shareholders from
Net realized gains (0.18) (0.19) (0.01) (0.60) (0.49)
-------- -------- ------ ----------- -----------
Net investment income (0.19) (0.19) (0.09) (0.26) (0.29)
Total distributions (0.37) (0.38) (0.10) (0.86) (0.78)
-------- -------- ------ ----------- -----------
Net asset value, end of
period $ 15.48 $ 15.67 $15.64 $ 13.09 $ 11.57
-------- -------- ------ ----------- -----------
Total return* 1.35% 2.49% 20.37% 21.10% 28.70%
Ratios and supplemental
data
Net assets, end of
period (thousands) $110,809 $130,191 $9,462 $ 692 $ 266
Ratios to average net
assets:
Expenses** 2.42% 2.43% 2.46%+ 2.50% 2.50%+
Net investment income 1.15% 1.20% 1.12%+ 2.39% 2.67%+
Portfolio turnover rate 54% 18% 13% 50% 48%
</TABLE>
(a) For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
(b) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
36
<PAGE>
EVERGREEN
SMALL CAP VALUE FUND
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
--------------------------- -----------------------
1999 1998 1997 (b)# 1996 1995 (a)
<S> <C> <C> <C> <C> <C>
CLASS C
Net asset value,
beginning of period $ 15.66 $ 15.63 $13.09 $ 11.56 $ 9.74
------- ------- ------ ----------- -----------
Income from investment
operations
Net investment income 0.16 0.19 0.10 0.28 0.28
Net realized and
unrealized gains on
securities 0.01 0.22 2.54 2.10 2.33
------- ------- ------ ----------- -----------
Total from investment
operations 0.17 0.41 2.64 2.38 2.61
------- ------- ------ ----------- -----------
Distributions to
shareholders from
Net realized gains (0.18) (0.19) (0.01) (0.60) (0.49)
------- ------- ------ ----------- -----------
Net investment income (0.19) (0.19) (0.09) (0.25) (0.30)
Total distributions (0.37) (0.38) (0.10) (0.85) (0.79)
------- ------- ------ ----------- -----------
Net asset value, end of
period $ 15.46 $ 15.66 $15.63 $ 13.09 $ 11.56
------- ------- ------ ----------- -----------
Total return* 1.28% 2.49% 20.30% 21.10% 27.30%
Ratios and supplemental
data
Net assets, end of
period (thousands) $22,842 $26,197 $2,770 $ 56 $ 24
Ratios to average net
assets:
Expenses** 2.42% 2.43% 2.45%+ 2.50% 2.50%+
Net investment income 1.15% 1.20% 1.20%+ 2.33% 2.63%+
Portfolio turnover rate 54% 18% 13% 50% 48%
</TABLE>
<TABLE>
<CAPTION>
Year Ended December
Year Ended July 31, 31,
--------------------------- -----------------------
1999 1998 1997 (b)# 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS Y
Net asset value,
beginning of period $ 15.77 $ 15.71 $ 13.12 $11.58 $ 9.70 $10.15
------- ------- ------- ------ ------ ------
Income from investment
operations
Net investment income 0.33 0.34 0.19 0.38 0.38 0.34
Net realized and
unrealized gains or
losses on securities (0.02) 0.24 2.56 2.13 2.38 (0.41)
------- ------- ------- ------ ------ ------
Total from investment
operations 0.31 0.58 2.75 2.51 2.76 (0.07)
------- ------- ------- ------ ------ ------
Distributions to
shareholders from
Net realized gains (0.18) (0.19) (0.01) (0.60) (0.50) (0.05)
------- ------- ------- ------ ------ ------
Net investment income (0.33) (0.33) (0.15) (0.37) (0.38) (0.33)
Total distributions (0.51) (0.52) (0.16) (0.97) (0.88) (0.38)
------- ------- ------- ------ ------ ------
Net asset value, end of
period $ 15.57 $ 15.77 $ 15.71 $13.12 $11.58 $ 9.70
------- ------- ------- ------ ------ ------
Total return 2.31% 3.57% 21.09% 22.40% 29.10% (0.70%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $56,903 $96,556 $42,374 $8,592 $4,806 $3,613
Ratios to average net
assets:
Expenses** 1.42% 1.39% 1.39%+ 1.50% 1.50%+ 1.48%
Net investment income 2.19% 2.23% 2.39%+ 3.36% 3.56%+ 3.72%
Portfolio turnover rate 54% 18% 13% 50% 48% 9%
</TABLE>
(a) For the period from January 24, 1995 (commencement of class operations) to
December 31, 1995.
(b) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
# Net investment income is based on average shares outstanding during the
period.
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,
-------------------------- --------------------------
1999 1998 1997(b) 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Net asset value,
beginning of period $ 11.76 $ 11.45 $ 10.57 $ 10.80 $ 9.00 $ 10.00
-------- ------- ------- ------- -------- -------
Income from investment
operations
Net investment income 0.42 0.43 0.25 0.41 0.44 0.45
Net realized and
unrealized gains or
losses on securities 2.37 1.44 0.87 0.05 2.25 (1.01)
-------- ------- ------- ------- -------- -------
Total from investment
operations 2.79 1.87 1.12 0.46 2.69 (0.56)
-------- ------- ------- ------- -------- -------
Distributions to
shareholders from
Net investment income (0.42) (0.44) (0.24) (0.41) (0.44) (0.44)
Net realized gains (1.28) (1.12) 0 (0.28) (0.45) 0
-------- ------- ------- ------- -------- -------
Total distributions (1.70) (1.56) (0.24) (0.69) (0.89) (0.44)
-------- ------- ------- ------- -------- -------
Net asset value, end of
period $ 12.85 $ 11.76 $ 11.45 $ 10.57 $ 10.80 $ 9.00
-------- ------- ------- ------- -------- -------
Total return* 26.05% 17.30% 10.72% 4.40% 30.70% (5.60%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $108,411 $95,300 $91,638 $96,243 $107,872 $ 4,190
Ratios to average net
assets:
Expenses** 1.03% 0.99% 1.00%+ 0.87% 0.79% 0.53%+
Net investment income 3.60% 3.58% 3.85%+ 3.87% 4.51% 5.07%+
Portfolio turnover rate 46% 62% 50% 59% 88% 23%
<CAPTION>
Year Ended July 31, Year Ended December 31,
-------------------------- --------------------------
1999 1998 1997(b) 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Net asset value,
beginning of period $ 11.76 $ 11.46 $ 10.58 $ 10.81 $ 9.00 $ 10.00
-------- ------- ------- ------- -------- -------
Income from investment
operations
Net investment income 0.34 0.34 0.20 0.33 0.37 0.39
Net realized and
unrealized gains or
losses on securities 2.37 1.44 0.87 0.05 2.26 (1.01)
-------- ------- ------- ------- -------- -------
Total from investment
operations 2.71 1.78 1.07 0.38 2.63 (0.62)
-------- ------- ------- ------- -------- -------
Distributions to
shareholders from
Net investment income (0.33) (0.36) (0.19) (0.33) (0.37) (0.38)
Net realized gains (1.28) (1.12) 0 (0.28) (0.45) 0
-------- ------- ------- ------- -------- -------
Total distributions (1.61) (1.48) (0.19) (0.61) (0.82) (0.38)
-------- ------- ------- ------- -------- -------
Net asset value, end of
period $ 12.86 $ 11.76 $ 11.46 $ 10.58 $ 10.81 $ 9.00
-------- ------- ------- ------- -------- -------
Total return* 25.23% 16.31% 10.21% 3.60% 29.90% (6.20%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $ 54,839 $43,776 $36,738 $38,511 $ 35,662 $28,792
Ratios to average net
assets:
Expenses** 1.77% 1.74% 1.75%+ 1.62% 1.53% 1.27%+
Net investment income 2.85% 2.82% 3.10%+ 3.12% 3.78% 4.19%+
Portfolio turnover rate 46% 62% 50% 59% 88% 23%
</TABLE>
(a) For the period from January 4, 1994 (commencement of class operations) to
December 31, 1994.
(b) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
See Combined Notes to Financial Statements.
38
<PAGE>
EVERGREEN
UTILITY FUND
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended December
Year Ended July 31, 31,
------------------------ ------------------------
1999 1998 1997 (b) 1996 1995 1994 (a)
<S> <C> <C> <C> <C> <C> <C>
CLASS C
Net asset value, beginning
of period $11.76 $11.46 $10.58 $10.82 $ 9.01 $ 9.33
------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.34 0.34 0.20 0.33 0.37 0.12
Net realized and
unrealized gains or
losses on securities 2.37 1.44 0.87 0.04 2.26 (0.33)
------ ------ ------ ------ ------ ------
Total from investment
operations 2.71 1.78 1.07 0.37 2.63 (0.21)
------ ------ ------ ------ ------ ------
Distributions to
shareholders from
Net realized gains (1.28) (1.12) 0 (0.28) (0.45) 0
------ ------ ------ ------ ------ ------
Net investment income (0.33) (0.36) (0.19) (0.33) (0.37) (0.11)
Total distributions (1.61) (1.48) (0.19) (0.61) (0.82) (0.11)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $12.86 $11.76 $11.46 $10.58 $10.82 $ 9.01
------ ------ ------ ------ ------ ------
Total return* 25.23% 16.31% 10.21% 3.50% 29.80% (2.20%)
Ratios and supplemental
data
Net assets, end of period
(thousands) $ 879 $ 486 $ 379 $ 396 $ 246 $ 128
Ratios to average net
assets:
Expenses** 1.77% 1.74% 1.75%+ 1.63% 1.54% 1.94%+
Net investment income 2.74% 2.82% 3.10%+ 3.13% 3.76% 3.96%+
Portfolio turnover rate 46% 62% 50% 59% 88% 23%
<CAPTION>
Year Ended December
Year Ended July 31, 31,
------------------------ ------------------------
1999 1998 1997 (b) 1996 1995 1994 (c)
<S> <C> <C> <C> <C> <C> <C>
CLASS Y
Net asset value, beginning
of period $11.77 $11.46 $10.58 $10.82 $ 9.00 $ 9.51
------ ------ ------ ------ ------ ------
Net realized and
unrealized gains or
losses on securities 2.33 1.45 0.88 0.03 2.27 (0.50)
------ ------ ------ ------ ------ ------
Total from investment
operations 2.82 1.91 1.13 0.47 2.74 (0.13)
------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.49 0.46 0.25 0.44 0.47 0.37
Net realized gains (1.28) (1.12) 0 (0.28) (0.45) 0
------ ------ ------ ------ ------ ------
Total distributions (1.73) (1.60) (0.25) (0.71) (0.92) (0.38)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $12.86 $11.77 $11.46 $10.58 $10.82 $ 9.00
------ ------ ------ ------ ------ ------
Distributions to
shareholders from
Net investment income (0.45) (0.48) (0.25) (0.43) (0.47) (0.38)
Total return 26.35% 17.60% 10.85% 4.50% 31.30% (1.60%)
Ratios and supplemental
data
Net assets, end of period
(thousands) $2,123 $1,695 $1,627 $2,000 $7,791 $5,201
Ratios to average net
assets:
Expenses** 0.77% 0.74% 0.74%+ 0.61% 0.54% 0.40%+
Net investment income 3.92% 3.82% 4.06%+ 4.01% 4.76% 4.93%+
Portfolio turnover rate 46% 62% 50% 59% 88% 23%
</TABLE>
(a) For the period from September 2, 1994 (commencement of class operations) to
December 31, 1994.
(b) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
(c) For the period from February 28, 1994 (commencement of class operations) to
December 31, 1994.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
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,
---------------------------- ----------------------------
1999 1998 1997 (a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Net asset value,
beginning of period $ 22.23 $ 24.64 $ 20.57 $ 20.45 $ 16.62 $ 17.63
-------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.21 0.26 0.21 0.38 0.55 0.52
Net realized and
unrealized gains or
losses on securities 2.76 2.00 4.05 3.49 4.69 (0.20)
-------- -------- -------- -------- -------- --------
Total from investment
operations 2.97 2.26 4.26 3.87 5.24 0.32
-------- -------- -------- -------- -------- --------
Distributions to
shareholders from
Net realized gains (0.21) (0.29) (0.19) (0.41) (0.51) (0.51)
Net investment income (0.13) (4.38) 0 (3.34) (0.90) (0.82)
-------- -------- -------- -------- -------- --------
Total distributions (0.34) (4.67) (0.19) (3.75) (1.41) (1.33)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 24.86 $ 22.23 $ 24.64 $ 20.57 $ 20.45 $ 16.62
-------- -------- -------- -------- -------- --------
Total return* 13.48% 9.55% 20.78% 18.90% 31.80% 1.90%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 464 $ 476 $ 392 $ 328 $ 292 $ 189
Ratios to average net
assets:
Expenses** 1.00% 1.01% 0.92%+ 0.91% 0.90% 0.93%
Net investment income 0.93% 1.04% 1.66%+ 1.77% 2.78% 2.96%
Portfolio turnover rate 110% 69% 6% 91% 53% 70%
<CAPTION>
Year Ended July 31, Year Ended December 31,
---------------------------- ----------------------------
1999 1998 1997 (a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Net asset value,
beginning of period $ 22.20 $ 24.63 $ 20.58 $ 20.45 $ 16.62 $ 17.63
-------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.04 0.08 0.12 0.22 0.39 0.42
Net realized and
unrealized gains or
losses on securities 2.75 1.99 4.03 3.50 4.70 (0.20)
-------- -------- -------- -------- -------- --------
Total from investment
operations 2.79 2.07 4.15 3.72 5.09 0.22
-------- -------- -------- -------- -------- --------
Distributions to
shareholders from
Net investment income (0.05) (0.12) (0.10) (0.25) (0.36) (0.41)
Net realized gains (0.13) (4.38) 0 (3.34) (0.90) (0.82)
-------- -------- -------- -------- -------- --------
Total distributions (0.18) (4.50) (0.10) (3.59) (1.26) (1.23)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 24.81 $ 22.20 $ 24.63 $ 20.58 $ 20.45 $ 16.62
-------- -------- -------- -------- -------- --------
Total return* 12.65% 8.73% 20.23% 18.10% 30.90% 1.30%
Ratios and supplemental
data
Net assets, end of
period (thousands) $331,724 $326,459 $276,256 $197,411 $141,072 $104,297
Ratios to average net
assets:
Expenses** 1.75% 1.76% 1.67%+ 1.66% 1.65% 1.53%
Net investment income 0.18% 0.30% 0.92%+ 1.01% 2.04% 2.36%
Portfolio turnover rate 110% 69% 6% 91% 53% 70%
</TABLE>
(a) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
See Combined Notes to Financial Statements.
40
<PAGE>
EVERGREEN
VALUE FUND
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended December
Year Ended July 31, 31,
------------------------ ------------------------
1999 1998 1997 (b) 1996 1995 1994 (a)
<S> <C> <C> <C> <C> <C> <C>
CLASS C
Net asset value, beginning
of period $22.18 $24.61 $20.56 $20.44 $16.61 $18.28
------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.04 0.10 0.12 0.22 0.39 0.19
Net realized and
unrealized gains or
losses on securities 2.75 1.97 4.03 3.50 4.70 (0.81)
------ ------ ------ ------ ------ ------
Total from investment
operations 2.79 2.07 4.15 3.72 5.09 (0.62)
------ ------ ------ ------ ------ ------
Distributions to
shareholders from
Net investment income (0.05) (0.12) (0.10) (0.26) (0.36) (0.23)
Net realized gains (0.13) (4.38) 0 (3.34) (0.90) (0.82)
------ ------ ------ ------ ------ ------
Total distributions (0.18) (4.50) (0.10) (3.60) (1.26) (1.05)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $24.79 $22.18 $24.61 $20.56 $20.44 $16.61
------ ------ ------ ------ ------ ------
Total return* 12.66% 8.74% 20.25% 18.10% 30.90% (3.40%)
Ratios and supplemental
data
Net assets, end of period
(thousands) $4,635 $5,125 $2,507 $1,458 $ 811 $ 485
Ratios to average net
assets:
Expenses** 1.75% 1.76% 1.66%+ 1.67% 1.65% 1.68%+
Net investment income 0.18% 0.29% 0.94%+ 1.00% 2.03% 2.16%+
Portfolio turnover rate 110% 69% 6% 91% 53% 70%
<CAPTION>
Year Ended December
Year Ended July 31, 31,
------------------------ ------------------------
1999 1998 1997 (b) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS Y
Net asset value, beginning
of period $22.23 $24.64 $20.57 $20.45 $16.61 $17.63
------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.29 0.35 0.25 0.44 0.57 0.56
Net realized and
unrealized gains or
losses on securities 2.74 1.97 4.03 3.49 4.72 (0.20)
------ ------ ------ ------ ------ ------
Total from investment
operations 3.03 2.32 4.28 3.93 5.29 0.36
------ ------ ------ ------ ------ ------
Distributions to
shareholders from
Net investment income (0.26) (0.35) (0.21) (0.47) (0.55) (0.56)
Net realized gains (0.13) (4.38) 0.00 (3.34) (0.90) (0.82)
------ ------ ------ ------ ------ ------
Total distributions (0.39) (4.73) (0.21) (3.81) (1.45) (1.38)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $24.87 $22.23 $24.64 $20.57 $20.45 $16.61
------ ------ ------ ------ ------ ------
Total return 13.81% 9.79% 20.93% 19.20% 32.20% 2.10%
Ratios and supplemental
data
Net assets, end of period
(millions) $ 132 $ 183 $1,149 $ 996 $ 761 $ 507
Ratios to average net
assets:
Expenses** 0.75% 0.70% 0.67%+ 0.66% 0.65% 0.68%
Net investment income 1.20% 1.47% 1.91%+ 2.02% 3.02% 3.21%
Portfolio turnover rate 110% 69% 6% 91% 53% 70%
</TABLE>
(a) For the period from September 2, 1994 (commencement of class operations) to
December 31, 1994.
(b) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
fee credits.
+ Annualized.
See Combined Notes to Financial Statements.
41
<PAGE>
EVERGREEN
BLUE CHIP FUND
Schedule of Investments
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 95.9%
Aerospace & Defense - 0.8%
74,800 United Technologies Corp............................. $ 4,988,225
------------
Automotive Equipment & Manufacturing - 1.1%
160,000 Delphi Automotive Systems Corp....................... 2,880,000
85,000 Ford Motor Co........................................ 4,133,125
------------
7,013,125
------------
Banks - 3.0%
75,000 Bank One Corp........................................ 4,092,188
106,100 BankAmerica Corp..................................... 7,042,387
17 Chase Manhattan Corp................................. 1,307
170,000 Mellon Bank Corp..................................... 5,737,500
60,000 Wells Fargo Co....................................... 2,340,000
------------
19,213,382
------------
Business Equipment & Services - 1.0%
131,200 Xerox Corp........................................... 6,396,000
------------
Chemical & Agricultural Products - 2.9%
50,000 Du Pont (E. I.) De Nemours & Co...................... 3,603,125
216,300 Millennium Chemicals Inc............................. 5,083,050
52,500 Monsanto Co.......................................... 2,054,062
89,382 Rohm & Haas Co....................................... 3,809,908
185,000 Solutia, Inc......................................... 3,954,375
------------
18,504,520
------------
Communication Systems & Services - 3.9%
198,300 * Cisco Systems, Inc................................. 12,319,387
104,600 * Intermedia Communications, Inc.+................... 2,883,038
116,100 * MCI WorldCom, Inc.................................. 9,578,250
------------
24,780,675
------------
Consumer Products & Services - 1.2%
85,000 Procter & Gamble Co.................................. 7,692,500
------------
Diversified Companies - 3.4%
51,900 Allied Signal, Inc................................... 3,357,281
175,000 Raychem Corp......................................... 6,671,875
122,500 Tyco International Ltd............................... 11,966,719
------------
21,995,875
------------
Electrical Equipment & Services - 3.3%
193,300 General Electric Co.................................. 21,069,700
------------
Finance & Insurance - 7.5%
130,000 Allstate Corp. ...................................... 4,615,000
77,500 American International Group, Inc.................... 8,999,688
161,328 Associates First Capital Corp., Cl. A................ 6,180,879
200,500 Citigroup, Inc....................................... 8,934,781
70,000 Federal National Mortgage Assoc...................... 4,830,000
150,000 Franklin Resources, Inc.............................. 5,718,750
60,000 Hartford Financial Services Group, Inc............... 3,240,000
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Finance & Insurance - continued
100,800 Lehman Brothers Holdings, Inc........................ $ 5,418,000
------------
47,937,098
------------
Food & Beverage Products - 2.2%
49,500 Coca Cola Co......................................... 2,985,469
135,400 McDonald's Corp. .................................... 5,644,487
105,000 Seagram Co. Ltd...................................... 5,387,813
------------
14,017,769
------------
Healthcare Products & Services - 3.3%
110,000 * Biogen, Inc........................................ 7,569,375
50 Cardinal Health, Inc................................. 3,412
71,000 Johnson & Johnson.................................... 6,540,875
95,900 Medtronic, Inc....................................... 6,910,794
------------
21,024,456
------------
Industrial Specialty Products & Services - 1.9%
190,500 Ecolab, Inc.......................................... 8,120,063
86,600 * Microchip Technology, Inc.......................... 4,340,825
------------
12,460,888
------------
Information Services & Technology - 17.6%
55,800 * America Online, Inc. .............................. 5,307,975
175,000 * American Power Conversion Corp..................... 3,631,250
90,800 * Applied Materials, Inc............................. 6,531,925
41,600 * CMG Information Services, Inc.+.................... 3,835,000
121,800 * EMC Corp........................................... 7,376,513
37,500 * Gateway, Inc.+..................................... 2,857,031
100,000 Hewlett-Packard Co................................... 10,468,750
183,400 Intel Corp........................................... 12,654,600
114,500 International Business Machines Corp................. 14,391,219
261,200 * Microsoft Corp..................................... 22,414,225
104,700 * Oracle Systems Corp................................ 3,985,144
77,100 * Solectron Corp..................................... 4,968,131
132,900 * Sun Microsystems, Inc. ............................ 9,020,587
93,600 * Veritas Software Corp.............................. 5,253,300
------------
112,695,650
------------
Leisure & Tourism - 0.8%
135,000 * Premier Parks, Inc.+............................... 5,222,813
------------
Oil/Energy - 8.6%
105,600 Anadarko Petroleum Corp.............................. 4,032,600
208,800 Apache Corp.......................................... 8,860,950
124,100 Atlantic Richfield Co................................ 11,176,756
34,000 BP Amoco Plc......................................... 3,939,750
111,100 Exxon Corp........................................... 8,818,562
29,400 Mobil Corp........................................... 3,006,150
50,000 Royal Dutch Petroleum Co............................. 3,050,000
94,400 Texaco, Inc.......................................... 5,882,300
170,900 Unocal Corp.......................................... 6,782,594
------------
55,549,662
------------
</TABLE>
42
<PAGE>
EVERGREEN
BLUE CHIP FUND
Schedule of Investments(continued)
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Paper & Packaging - 0.8%
100,000 Bowater, Inc........................................ $ 4,975,000
------------
Pharmaceuticals - 5.8%
95,000 American Home Products Corp......................... 4,845,000
124,000 Bristol-Myers Squibb Co............................. 8,246,000
28,000 Lilly (Eli) & Co.................................... 1,837,500
84,500 Merck & Co., Inc.................................... 5,719,594
149,400 Pfizer, Inc......................................... 5,070,263
135,000 Pharmacia & Upjohn, Inc............................. 7,264,687
45,000 Schering-Plough Corp................................ 2,205,000
36,400 Warner-Lambert Co................................... 2,402,400
------------
37,590,444
------------
Printing, Publishing, Broadcasting & Entertainment -
4.8%
152,500 * CBS Corp.......................................... 6,700,469
105,800 * Clear Channel Communications, Inc................. 7,359,712
70,000 Time Warner, Inc.................................... 5,040,000
90,000 * Univision Communications, Inc. Cl. A+............. 6,232,500
126,000 * Viacom, Inc., Cl. B............................... 5,284,125
------------
30,616,806
------------
Retailing & Wholesale - 8.7%
90,800 * Costco Companies, Inc.+........................... 6,787,300
79,600 Dayton Hudson Corp.................................. 5,149,125
105,000 Federated Department Stores, Inc. .................. 5,387,813
97,000 Home Depot, Inc.+................................... 6,189,812
86,700 Lowe's Companies, Inc............................... 4,573,425
183,500 * Safeway, Inc...................................... 9,886,062
160,000 Tandy Corp.......................................... 8,210,000
230,000 Wal-Mart Stores, Inc................................ 9,717,500
------------
55,901,037
------------
Telecommunication Services & Equipment - 8.5%
80,700 * ADC Telecommunications, Inc....................... 3,591,150
60,900 * Allegiance Telecom, Inc........................... 3,064,031
119,100 * Ciena Corp........................................ 4,019,625
79,500 * Global Crossing Ltd............................... 3,299,250
68,200 * McLeod USA, Inc., Cl. A+.......................... 2,033,213
82,500 Motorola, Inc....................................... 7,528,125
74,200 Nokia Corp. ADR..................................... 6,311,637
38,500 * Qualcomm, Inc.+................................... 6,006,000
100,000 * Tellabs, Inc...................................... 6,156,250
160,600 * Time Warner Telecom, Inc.......................... 4,998,675
145,000 * Winstar Communications, Inc.+..................... 7,612,500
------------
54,620,456
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Telephone - 4.8%
75,000 Ameritech Corp..................................... $ 5,493,750
136,704 AT&T Corp. ........................................ 7,100,064
98,200 Bell Atlantic Corp................................. 6,260,250
140,600 BellSouth Corp..................................... 6,748,800
100,000 Sprint Corp........................................ 5,168,750
------------
30,771,614
------------
Total Common Stocks
(cost $496,079,869)............................... 615,037,695
------------
MONEY MARKET SHARES - 5.9%
37,702,000 Navigator Prime Portfolio
(cost $37,702,000) (b)............................ 37,702,000
------------
<CAPTION>
Principal
Amount
<C> <S> <C>
CONVERTIBLE DEBENTURES - 0.0%
Iron & Steel - 0.0%
$ 110,000 Compahnia Vale do Rio Doce de Navegacao SA 1.00%,
12/31/1999
(cost $0)......................................... 6
------------
SHORT-TERM INVESTMENTS - 3.0%
Repurchase Agreement - 3.0%
19,240,000 Evergreen Joint Repurchase Agreement, Investment in
a joint trading account, purchased 7/30/1999,
5.07%, maturing 8/2/1999, maturity value
$19,248,129
(cost $19,240,000) (a)............................ 19,240,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $553,021,869)........................ 104.8% 671,979,701
Other Assets and
Liabilities - net.......................... (4.8) (30,539,610)
----- ------------
Net Assets.................................. 100.0% $641,440,091
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at July
31, 1999.
(b) Represents investment in cash collateral received for securities on loan.
* Non-income producing security.
+ All or a portion of this security is on loan (See Note 8).
Summary of Abbreviations:
ADR American Depository Receipts
See Combined Notes to Financial Statements.
43
<PAGE>
EVERGREEN
EQUITY INCOME FUND
Schedule of Investments
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 94.3%
Automotive Equipment & Manufacturing - 2.6%
48,000 Ford Motor Co. ........................................ $ 2,334,000
25,000 General Motors Corp. .................................. 1,523,438
------------
3,857,438
------------
Banks - 15.0%
43,000 BankAmerica Corp. ..................................... 2,854,125
30,000 Charter One Financial, Inc. ........................... 776,250
25,000 Comerica, Inc. ........................................ 1,387,500
99,000 Compass Bancshares, Inc. .............................. 2,852,437
48,000 Fleet Financial Group, Inc. ........................... 1,944,000
50,000 Mercantile Bancorp, Inc. .............................. 2,725,000
150,000 North Fork Bancorp, Inc. .............................. 3,093,750
50,000 Peoples Heritage Financial Group, Inc.................. 903,125
54,000 PNC Bank Corp. ........................................ 2,855,250
80,000 US Bancorp, Inc. ...................................... 2,490,000
------------
21,881,437
------------
Business Equipment & Services - 2.0%
90,000 Dun & Bradstreet Corp.+................................ 2,857,500
------------
Chemical & Agricultural Products - 4.0%
21,000 Du Pont (E. I.) De Nemours & Co. ...................... 1,513,313
50,000 Hercules, Inc. ........................................ 1,743,750
60,000 Millennium Chemicals, Inc. ............................ 1,410,000
28,026 Rohm & Haas Co. ....................................... 1,194,608
------------
5,861,671
------------
Communication Systems & Services - 0.9%
50,000 * Newbridge Networks Corp. ............................ 1,328,125
------------
Diversified Companies - 3.5%
52,000 Tyco International Ltd. ............................... 5,079,750
------------
Electrical Equipment & Services - 2.5%
34,000 General Electric Co. .................................. 3,706,000
------------
Finance & Insurance - 11.2%
48,000 Citigroup, Inc. ....................................... 2,139,000
20,000 Federal National Mortgage Assoc. ...................... 1,380,000
120,000 Greenpoint Financial Corp. ............................ 3,885,000
42,000 HSB Group, Inc. ....................................... 1,708,875
20,000 Lehman Brothers Holdings, Inc. ........................ 1,075,000
40,000 Lincoln National Corp. ................................ 2,000,000
40,000 Nationwide Financial Services, Inc. Cl. A ............. 1,725,000
45,000 XL Capital Ltd. ....................................... 2,362,500
------------
16,275,375
------------
Food & Beverage Products - 3.4%
35,000 H.J. Heinz Co. ........................................ 1,649,375
90,000 Philip Morris Companies, Inc. ......................... 3,352,500
------------
5,001,875
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products & Services - 6.0%
20,000 American Home Products Corp. ......................... $ 1,020,000
20,000 Johnson & Johnson..................................... 1,842,500
42,400 Merck & Co., Inc...................................... 2,869,950
55,000 Pharmacia & Upjohn, Inc............................... 2,959,687
------------
8,692,137
------------
Information Services & Technology - 2.7%
31,600 International Business Machines Corp. ................ 3,971,725
------------
Metal Products & Services - 1.1%
25,000 Alcan Aluminum Ltd.................................... 753,125
55,000 Worthington Industries, Inc........................... 804,375
------------
1,557,500
------------
Oil/Energy - 10.4%
57,000 Anadarko Petroleum Corp. ............................. 2,176,688
30,000 Atlantic Richfield Co. ............................... 2,701,875
25,000 Mobil Corp. .......................................... 2,556,250
20,000 Reliant Energy, Inc. ................................. 548,750
45,000 Texaco, Inc. ......................................... 2,804,062
110,000 Unocal Corp. ......................................... 4,365,625
------------
15,153,250
------------
Paper & Packaging - 1.3%
65,000 Consolidated Papers, Inc.............................. 1,852,500
------------
Printing, Publishing, Broadcasting & Entertainment -
1.5%
50,000 * CBS Corp............................................ 2,196,875
------------
Real Estate - 5.3%
40,000 Boston Properties, Inc. REIT+......................... 1,370,000
70,000 Equity Office Properties Trust REIT................... 1,758,750
31,000 Equity Residential Properties Trust REIT.............. 1,280,687
45,000 First Industrial Realty Trust, Inc. REIT.............. 1,164,375
55,000 Prentiss Properties Trust REIT........................ 1,268,438
25,000 Spieker Properties, Inc. REIT......................... 956,250
------------
7,798,500
------------
Retailing & Wholesale - 3.2%
40,000 * Costco Companies, Inc............................... 2,990,000
60,000 * Staples, Inc........................................ 1,732,500
------------
4,722,500
------------
Transportation - 1.7%
45,000 Union Pacific Corp.................................... 2,444,063
------------
Utilities - Electric - 7.5%
42,000 Consolidated Edison, Inc. ............................ 1,827,000
50,000 DTE Energy Co. ....................................... 1,956,250
20,000 Duke Power Co. ....................................... 1,058,750
45,000 GPU, Inc. ............................................ 1,726,875
65,000 PacifiCorp ........................................... 1,186,250
</TABLE>
44
<PAGE>
EVERGREEN
EQUITY INCOME FUND
Schedule of Investments (continued)
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Electric - continued
74,000 Southern Co. ......................................... $ 1,956,375
60,000 Teco Energy, Inc.+.................................... 1,222,500
------------
10,934,000
------------
Utilities - Telephone - 8.5%
34,000 Ameritech Corp. ...................................... 2,490,500
27,000 AT&T Corp. ........................................... 1,402,313
55,000 Bell Atlantic Corp. .................................. 3,506,250
25,000 GTE Corp. ............................................ 1,842,187
55,000 U.S. West, Inc. ...................................... 3,152,187
------------
12,393,437
------------
Total Common Stocks
(cost $109,905,894).................................. 137,565,658
------------
CONVERTIBLE PREFERRED - 2.9%
Consumer Products & Services - 1.1%
30,000 Newell Financial Trust I
5.25% 12/01/2027..................................... 1,556,250
------------
Retailing & Wholesale - 1.8%
50,000 Kmart Financing I
7.75% 6/15/2016...................................... 2,718,750
------------
Total Convertible Preferred
(cost $4,110,665).................................... 4,275,000
------------
MONEY MARKET SHARES - 2.3%
3,379,400 Navigator Prime Portfolio
(Cost $3,379,400) (b)................................ 3,379,400
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 2.1%
Repurchase Agreement - 2.1%
$3,013,000 Evergreen Joint Repurchase Agreement, Investment in
a joint trading account, purchased 7/30/1999,
5.07%, maturing 8/2/1999, maturity value
$3,014,272 (cost $3,013,000) (a).................. $ 3,013,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments -
(cost $120,408,959)............................ 101.6% 148,233,058
Other Assets and
Liabilities - net.............................. (1.6) (2,369,028)
----- ------------
Net Assets...................................... 100.0% $145,864,030
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at July 31,
1999.
(b) Represents investment in cash collateral received for securities on loan.
* Non-income producing security.
+ All or a portion of this security is on loan (See Note 8).
Summary of Abbreviations:
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
45
<PAGE>
EVERGREEN
GROWTH AND INCOME FUND
Schedule of Investments
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 98.0%
Aerospace & Defense - 1.8%
237,600 Boeing Co............................................ $ 10,781,100
780,000 Bombardier, Inc., Cl. B.............................. 11,314,479
156,240 United Technologies Corp............................. 10,419,255
--------------
32,514,834
--------------
Automotive Equipment & Manufacturing - 1.7%
73,725 Autoliv, Inc......................................... 2,617,238
101,000 Borg-Warner Automotive, Inc.......................... 5,132,062
98,000 Ford Motor Co........................................ 4,765,250
260,400 Meritor Automotive, Inc.............................. 6,314,700
280,000 * Strattec Security Corp............................. 9,975,000
35,000 Toyota Motor Co...................................... 2,450,000
--------------
31,254,250
--------------
Banks - 10.6%
97,275 AmSouth Bancorp...................................... 2,225,166
135,800 Bank of New York Co., Inc............................ 5,016,112
80,284 Bank One Corp. ...................................... 4,380,496
53,125 BankAmerica Corp. ................................... 3,526,172
63,000 BankBoston Corp. .................................... 2,957,062
33,640 BB&T Corp............................................ 1,185,810
286,500 BSB Bancorp, Inc..................................... 7,789,219
29,500 Carolina First Corp.................................. 663,750
16,300 Centura Banks, Inc................................... 911,781
40,779 Charter One Financial, Inc........................... 1,055,157
13,520 Commerce Bancorp, Inc................................ 594,880
111,200 Cullen/Frost Bankers, Inc............................ 2,856,450
63,224 First American Corp. ................................ 2,655,408
236,250 First Security Corp. ................................ 5,980,078
106,850 First Virginia Banks, Inc. .......................... 5,122,122
274,428 Firstar Corp......................................... 7,152,280
23,600 FirstMerit Corp...................................... 647,525
102,000 Fleet Financial Group, Inc. ......................... 4,131,000
306,000 Hibernia Corp. Cl. A................................. 4,360,500
215,700 KeyCorp.............................................. 6,794,550
22,650 Keystone Financial, Inc.............................. 661,097
223,000 Marshall & Ilsley Corp. ............................. 14,411,375
670,300 Mellon Bank Corp..................................... 22,622,625
747,100 Pacific Century Financial Corp....................... 14,755,225
130,000 Peoples Heritage Financial
Group, Inc. ........................................ 2,348,125
29,500 PNC Bank Corp........................................ 1,559,813
228,600 SouthTrust Corp. .................................... 8,401,050
56,800 State Street Corp. .................................. 4,025,700
113,475 Summit Bancorp....................................... 4,198,575
51,920 Suntrust Banks, Inc.................................. 3,348,840
180,000 Susquehanna Bancshares, Inc. ........................ 3,228,750
228,300 US Bancorp, Inc...................................... 7,105,837
878,900 Webster Financial Corp. ............................. 23,180,987
218,200 Wells Fargo Co. ..................................... 8,509,800
62,000 Wilmington Trust Corp................................ 3,379,000
--------------
191,742,317
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Building, Construction & Furnishings - 2.6%
170,200 * Furniture Brands International, Inc................ $ 4,595,400
14,800 Hon Industries, Inc. ................................ 344,100
300,500 * Jacobs Engineering Group, Inc...................... 10,329,687
208,600 Lennar Corp.......................................... 4,080,738
226,000 * Lone Star Industries, Inc. ........................ 8,658,625
60,200 Southdown, Inc....................................... 3,551,800
182,500 * Toll Brothers, Inc................................. 3,878,125
343,200 * US Home Corp. ..................................... 11,797,500
--------------
47,235,975
--------------
Business Equipment & Services - 5.8%
478,400 ACNnielsen Corp...................................... 13,843,700
318,500 Air Express International Corp. ..................... 8,519,875
291,800 * Atlas Air, Inc..................................... 9,355,837
476,900 Circle International Group, Inc. .................... 11,445,600
133,000 * Computer Sciences Corp............................. 8,561,875
700,000 * Convergys Corp..................................... 13,650,000
133,000 Equifax, Inc......................................... 4,372,375
33,436 First Data Corp...................................... 1,657,172
141,000 Petroleum Helicopters, Inc. ......................... 1,938,750
604,100 Pittston Brink's Group............................... 16,423,969
311,600 Pittston Burlington Group............................ 3,116,000
405,800 * Policy Management Systems Corp..................... 12,478,350
--------------
105,363,503
--------------
Capital Goods - 0.2%
48,400 Caterpillar, Inc..................................... 2,837,450
--------------
Chemical & Agricultural Products - 3.6%
125,000 Air Products & Chemicals, Inc. ...................... 4,179,688
61,200 Albemarle Corp. ..................................... 1,097,775
190,900 Du Pont (E. I.) De Nemours & Co...................... 13,756,731
781,000 Engelhard Corp. ..................................... 17,426,062
95,000 Monsanto Co.......................................... 3,716,875
237,000 Pioneer Hi-Bred International, Inc. ................. 9,213,375
78,600 Praxair, Inc. ....................................... 3,625,425
296,800 Sigma-Aldrich Corp................................... 9,979,900
138,000 Solutia, Inc. ....................................... 2,949,750
--------------
65,945,581
--------------
Communication Systems & Services - 2.1%
594,120 * American Tower Systems Corp........................ 13,776,157
194,500 * Cisco Systems, Inc................................. 12,083,313
153,292 * MCI WorldCom, Inc. ................................ 12,646,590
--------------
38,506,060
--------------
Consumer Products & Services - 6.5%
157,400 Colgate-Palmolive Co................................. 7,771,625
163,800 Gucci Group.......................................... 12,008,588
52,700 Harley-Davidson, Inc................................. 2,918,263
42,000 Harman International Industries, Inc................. 1,848,000
635,000 Hasbro, Inc.......................................... 16,510,000
</TABLE>
46
<PAGE>
EVERGREEN
GROWTH AND INCOME FUND
Schedule of Investments(continued)
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Consumer Products & Services - continued
172,000 Lancaster Colony Corp................................ $ 5,729,750
446,400 Mattel, Inc.......................................... 10,490,400
291,400 Premark International, Inc. ......................... 11,036,775
502,800 Service Corp. International.......................... 7,981,950
303,800 Sony Corp. ADR....................................... 38,031,962
93,500 * Tommy Hilfiger Corp. .............................. 3,453,656
--------------
117,780,969
--------------
Diversified Companies - 1.3%
79,600 Allied Signal, Inc................................... 5,149,125
265,000 ITT Industries, Inc.................................. 9,904,375
96,400 Minnesota Mining & Manufacturing Co.................. 8,477,175
--------------
23,530,675
--------------
Electrical Equipment & Services - 3.0%
112,100 Applied Power, Inc. Cl. A............................ 3,194,850
200,200 Baldor Electric Co. ................................. 3,641,137
88,900 Belden, Inc.......................................... 2,211,388
215,400 Emerson Electric Co.................................. 12,856,687
131,000 General Electric Co.................................. 14,279,000
199,000 Motorola, Inc. ...................................... 18,158,750
18,648 Zilog, Inc........................................... 9,324
--------------
54,351,136
--------------
Electronic Equipment & Services - 2.6%
54,800 * Dupont Photomasks, Inc............................. 2,623,550
119,000 International Business Machines Corp................. 14,956,812
32,700 * Jabil Circuit, Inc................................. 1,375,444
146,200 * KLA-Tencor Corp.................................... 9,905,050
216,400 * Microsoft Corp..................................... 18,569,825
--------------
47,430,681
--------------
Finance & Insurance - 7.2%
62,000 AFLAC, Inc........................................... 2,875,250
268,125 Citigroup, Inc....................................... 11,948,320
276,000 Edwards (A.G.), Inc.................................. 7,624,500
295,000 Federal Home Loan Mortgage Corp...................... 16,925,625
310,000 Federal National Mortgage Assoc. .................... 21,390,000
42,750 First American Financial Corp........................ 710,719
387,840 Frontier Insurance Group, Inc........................ 5,696,400
181,500 Hartford Financial Services Group, Inc............... 9,801,000
173,432 Legg Mason, Inc...................................... 6,070,120
170,500 Lehman Brothers Holdings, Inc. ...................... 9,164,375
105,400 MBIA, Inc............................................ 6,034,150
20,000 Merrill Lynch & Co., Inc............................. 1,361,250
63,200 MGIC Investment Corp................................. 3,116,550
178,900 Price (T.) Rowe & Associates, Inc. .................. 6,261,500
85,000 Progressive Corp. Ohio............................... 10,858,750
27,450 Reinsurance Group Of America......................... 964,181
196,400 UnumProvident Corp. ................................. 10,163,700
--------------
130,966,390
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Food & Beverage Products - 0.7%
90,000 Bestfoods........................................... $ 4,387,500
254,200 Darden Restaurants, Inc. ........................... 5,544,738
90,000 Sara Lee Corp. ..................................... 1,980,000
---------------
11,912,238
---------------
Forest Products - 0.1%
103,000 Deltic Timber Corp.................................. 2,510,625
---------------
Healthcare Products & Services - 8.7%
235,000 Abbott Laboratories................................. 10,090,312
491,100 * Acuson Corp....................................... 8,563,556
28,000 * Alza Corp......................................... 1,361,500
203,100 American Home Products Corp......................... 10,358,100
55,900 Beckman Coulter, Inc................................ 2,686,694
78,500 Celera Genomics Group............................... 2,080,250
34,600 Dendrite International, Inc......................... 1,314,800
50,000 * Dura Pharmaceuticals, Inc......................... 521,875
192,300 * Elan Corp Plc, ADR................................ 5,588,719
162,800 * First Health Group Corp........................... 3,866,500
401,625 * Health Management Associates, Inc. Cl. A ......... 3,313,406
232,500 * HEALTHSOUTH Corp. ................................ 2,848,125
51,100 Johnson & Johnson................................... 4,707,588
63,000 Lilly (Eli) & Co.................................... 4,134,375
334,400 * Lincare Holdings, Inc. ........................... 10,032,000
330,000 McKesson HBOC, Inc. ................................ 10,250,625
241,700 PE Corp-PE Biosystems Group......................... 13,550,306
258,600 Pfizer, Inc. ....................................... 8,776,238
55,000 * Quorum Health Group, Inc. ........................ 553,438
362,000 Schering-Plough Corp................................ 17,738,000
269,500 Shared Medical System Corp.......................... 16,136,312
256,000 * Sybron International Corp. ....................... 7,632,000
162,000 Warner-Lambert Co. ................................. 10,692,000
---------------
156,796,719
---------------
Industrial Specialty Products & Services - 4.5%
392,300 AptarGroup, Inc..................................... 11,352,181
260,000 Bemis Co., Inc...................................... 9,620,000
61,800 Danaher Corp........................................ 3,526,463
316,600 Donaldson, Inc...................................... 7,855,637
227,200 Dover Corp.......................................... 8,974,400
138,000 Honeywell, Inc...................................... 16,534,125
71,800 Illinois Tool Works, Inc............................ 5,335,638
178,300 JLG Industries, Inc. ............................... 3,554,856
53,500 Parker Hannifin Corp................................ 2,524,531
8,600 Teleflex, Inc. ..................................... 433,225
592,800 * Unova, Inc........................................ 7,669,350
75,000 Vulcan Materials Co................................. 3,300,000
---------------
80,680,406
---------------
Information Services & Technology - 3.5%
183,800 * Adaptec, Inc...................................... 7,145,225
72,000 * Applied Materials, Inc............................ 5,179,500
</TABLE>
47
<PAGE>
EVERGREEN
GROWTH AND INCOME FUND
Schedule of Investments(continued)
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Information Services &
Technology - continued
232,200 Computer Associates International, Inc. ............. $ 10,652,175
433,000 * Compuware Corp. ................................... 12,015,750
54,000 Hewlett-Packard Co. ................................. 5,653,125
252,000 Intel Corp. ......................................... 17,388,000
304,500 * Network Associates, Inc. .......................... 5,328,750
--------------
63,362,525
--------------
Leisure & Tourism - 1.2%
113,800 Carnival, Corp., Cl. A............................... 5,284,588
536,400 Gaylord Entertainment Co............................. 16,427,250
--------------
21,711,838
--------------
Manufacturing - Distributing - 0.1%
103,800 Hussmann International, Inc.......................... 1,764,600
--------------
Oil/Energy - 4.0%
131,400 Atlantic Richfield Co................................ 11,834,212
287,000 Berry Petroleum Co. Cl. A............................ 4,071,813
16,800 BP Amoco Plc......................................... 1,946,700
87,500 Chevron Corp......................................... 7,984,375
159,000 * Houston Exploration Co............................. 3,189,938
232,955 Kerr-McGee Corp. .................................... 11,997,182
175,500 Murphy Oil Corp. .................................... 8,687,250
88,000 Phillips Petroleum Co................................ 4,515,500
20,000 Shell Transport & Trading Plc, ADR................... 966,250
531,400 Southwestern Energy Co............................... 4,417,263
141,800 Texaco, Inc.......................................... 8,835,912
127,000 Tosco Corp........................................... 3,349,625
--------------
71,796,020
--------------
Oil Field Services - 0.6%
103,400 * Atwood Oceanics, Inc. ............................. 3,095,538
72,740 Halliburton Co. ..................................... 3,355,132
60,714 Schlumberger Ltd..................................... 3,676,992
--------------
10,127,662
--------------
Paper & Packaging - 0.5%
84,500 Kimberly-Clark Corp. ................................ 5,154,500
67,340 * Sealed Air Corp.................................... 4,326,595
--------------
9,481,095
--------------
Printing, Publishing, Broadcasting &
Entertainment - 9.1%
84,000 AMFM, Inc............................................ 4,410,000
392,049 * Clear Channel Communications,Inc................... 27,271,909
99,610 Comcast Corp., Cl. A................................. 3,834,985
340,300 Disney (Walt) Co..................................... 9,400,788
256,700 * Emmis Broadcasting Corp. Cl. A..................... 13,444,662
458,600 * Fox Entertainment Group, Inc. ..................... 11,407,675
45,000 Knight-Ridder, Inc. ................................. 2,413,125
87,500 McGraw-Hill Companies, Inc. ......................... 4,451,563
634,600 New York Times Co. Cl. A............................. 24,947,712
43,000 Scripps (E.W.) Co. Cl. A............................. 2,236,000
391,000 TCA Cable TV, Inc.................................... 22,922,375
439,900 Time Warner, Inc..................................... 31,672,800
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Printing, Publishing, Broadcasting &
Entertainment - continued
4,000 Washington Post Co. Cl. B........................... $ 2,260,000
95,000 * Young Broadcasting, Inc. Cl. A.................... 5,035,000
---------------
165,708,594
---------------
Real Estate - 1.7%
175,000 Brandywine Realty Trust REIT........................ 3,281,250
16,500 CBL & Associates Properties, Inc. REIT.............. 414,563
372,314 Duke Weeks Reality Corp............................. 8,144,369
54,100 Entertainment Properties Trust REIT................. 933,225
158,000 Kilroy Realty Corp. REIT............................ 3,555,000
64,000 Kimco Realty Corp. REIT............................. 2,400,000
85,000 Liberty Property Trust REIT......................... 2,008,125
194,700 Mack-Cali Realty Corp. REIT......................... 5,451,600
70,900 Meditrust Co. REIT.................................. 771,037
74,700 Post Property, Inc. REIT............................ 2,988,000
5,000 Spieker Properties, Inc. REIT....................... 191,250
107,700 Sunstone Hotel Investors, Inc. REIT................. 982,762
---------------
31,121,181
---------------
Retailing & Wholesale - 1.6%
184,000 * Autozone, Inc..................................... 4,542,500
37,700 Home Depot, Inc..................................... 2,405,731
232,300 Lowe's Companies, Inc............................... 12,253,825
32,100 Rite Aid Corp....................................... 680,119
405,785 * Saks, Inc......................................... 9,333,055
10,000 Wal-Mart Stores, Inc. .............................. 422,500
---------------
29,637,730
---------------
Telecommunication Services &
Equipment - 2.4%
225,000 Centurytel, Inc..................................... 9,618,750
130,000 * MediaOne Group, Inc............................... 9,408,750
57,000 * Qwest Communications International, Inc. ......... 1,681,500
73,000 * Univision Communications, Inc. Cl. A.............. 5,055,250
80,000 Vodafone AirTouch Plc, ADR.......................... 16,840,000
---------------
42,604,250
---------------
Thrift Institutions - 0.0%
27,900 St. Paul Bancorp, Inc. ............................. 676,575
---------------
Transportation - 4.5%
533,000 Burlington Northern Santa Fe Corp................... 17,056,000
20,000 Comair Holdings, Inc. .............................. 488,750
545,200 Kansas City Southern Industries, Inc................ 30,122,300
341,625 Southwest Airlines Co............................... 6,320,062
77,000 * UAL Corp. ........................................ 4,884,688
399,200 Union Pacific Corp.................................. 21,681,550
---------------
80,553,350
---------------
Utilities - Electric - 1.9%
64,000 Commonwealth Energy System.......................... 2,792,000
281,800 Energy East Corp. .................................. 7,168,287
620,300 * Niagara Mohawk Holdings, Inc...................... 9,769,725
400,000 TNP Enterprises, Inc. .............................. 15,275,000
---------------
35,005,012
---------------
</TABLE>
48
<PAGE>
EVERGREEN
GROWTH AND INCOME FUND
Schedule of Investments(continued)
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Gas - 1.7%
218,800 Keyspan Corp......................................... $ 6,071,700
164,700 Northwest Natural Gas Co............................. 4,343,963
280,900 Piedmont Natural Gas Co., Inc........................ 9,568,156
249,200 Williams Companies, Inc.............................. 10,481,975
--------------
30,465,794
--------------
Utilities - Telephone - 2.2%
372,700 AT&T Corp. .......................................... 19,357,106
143,000 Cincinnati Bell, Inc................................. 3,038,750
175,000 GTE Corp. ........................................... 12,895,313
20,000 * Nextel Communications, Inc. Cl. A.................. 1,071,250
62,500 U.S. West, Inc....................................... 3,582,031
--------------
39,944,450
--------------
Total Common Stocks
(cost $1,282,486,646)............................... 1,775,320,485
--------------
PREFERRED STOCKS - 0.0%
Healthcare Products & Services - 0.0%
130,000 * Fresenius National Med Care, Inc. Ser. D........... 1,690
--------------
Total Preferred Stocks
(cost $22,740)...................................... 1,690
--------------
CONVERTIBLE PREFERRED - 0.4%
Aerospace & Defense - 0.1%
50,000 Loral Space & Communications
6.00%, 11/01/2006................................... 2,600,000
--------------
Paper & Packaging - 0.3%
78,375 * Sealed Air Corp.
$2.00, 04/01/2018, Ser. A........................... 4,820,062
--------------
Total Convertible Preferred
(cost $4,817,590)................................... 7,420,062
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - 0.2%
Healthcare Products & Services - 0.1%
$ 2,000,000 Carematrix
6.25%, 8/15/2004................................ $ 1,337,500
--------------
Information Services &
Technology - 0.1%
7,000,000 Networks Associates Inc.
6.69%, 2/13/2018................................ 2,257,500
--------------
Total Convertible Debentures
(cost $3,888,078)............................... 3,595,000
--------------
SHORT-TERM INVESTMENTS - 1.1%
Repurchase Agreement - 1.1%
20,515,000 State Street Bank & Trust Co., purchased
7/30/1999, 5.00%, maturing 8/2/1999, maturity
value $20,523,548
(cost $20,515,000) (a).......................... 20,515,000
--------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Total Investments -
(cost $1,311,730,054).. 99.7% 1,806,852,237
Other Assets and
Liabilities - net...... 0.3 5,368,227
----- --------------
Net Assets.............. 100.0% $1,812,220,464
===== ==============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at Ju-
ly 31, 1999.
* Non-income producing security.
Summary of Abbreviations:
ADR American Depository Receipts
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
49
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
Schedule of Investments
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 65.7%
Automotive Equipment & Manufacturing - 2.7%
29,000 Arvin Industries, Inc. ........................... $ 1,083,875
24,940 Daimler Chrysler AG............................... 1,801,915
555,900 Dana Corp. ....................................... 23,208,825
19,300 Goodyear Tire & Rubber Co. ....................... 1,020,487
170,100 Simpson Industries, Inc. ......................... 2,041,200
--------------
29,156,302
--------------
Banks - 12.8%
119,000 Amcore Financial, Inc. ........................... 2,737,000
17,662 AmSouth Bancorp................................... 404,018
50,000 Associated Banc Corp. ............................ 1,990,625
40,000 BancorpSouth, Inc. ............................... 660,000
300,300 Bancwest Corp. ................................... 12,518,756
40,000 Bank of New York Co., Inc. ....................... 1,477,500
60,873 BB&T Corp. ....................................... 2,145,773
217,500 ++ CB Bancshares, Inc. ........................... 7,000,781
79,800 CCB Financial Corp. .............................. 4,079,775
86,500 Comerica, Inc. ................................... 4,800,750
93,000 Commerce Bancshares, Inc. ........................ 3,754,875
77,606 F&M National Corp. ............................... 2,454,290
108,100 First American Corp. ............................. 4,540,200
125,000 First Charter Corp. .............................. 2,843,750
47,761 First State Bancorp............................... 1,098,503
8,000 First Union Corp.**............................... 368,000
20,750 First Virginia Banks, Inc. ....................... 994,703
173,000 Hibernia Corp. Cl. A.............................. 2,465,250
33,000 Huntington Bancshares, Inc. ...................... 994,125
340,353 Interchange Financial Services Corp............... 6,551,795
200,000 KeyCorp........................................... 6,300,000
84,000 Keystone Financial, Inc. ......................... 2,451,750
13,271 M&T Bank Corp. ................................... 7,159,705
258,946 Mercantile Bancorp, Inc. ......................... 14,112,557
1,500,000 National Australia Bank Ltd. ..................... 22,908,012
121,168 Pacific Century Financial Corp. .................. 2,393,068
10,430 Peoples Heritage Financial
Group, Inc. ..................................... 188,392
16,000 Premier National Bancorp, Inc. ................... 304,000
201,230 Republic Security Financial Corp. ................ 1,949,416
76,754 Second Bancorp, Inc. ............................. 2,014,793
10,000 Summit Bancorp.................................... 370,000
10,000 Suntrust Banks, Inc. ............................. 645,000
115,375 Susquehanna Bancshares, Inc. ..................... 2,069,539
150,000 U.S. Bancorp...................................... 4,668,750
321,960 USBANCORP, Inc. .................................. 5,030,625
--------------
136,446,076
--------------
Building, Construction & Furnishings - 0.2%
10,000 Armstrong World Industries, Inc. ................. 550,000
17,530 Southdown, Inc. .................................. 1,034,270
--------------
1,584,270
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Business Equipment & Services - 0.3%
25,000 Dun & Bradstreet Corp. ........................... $ 793,750
257,800 Esselte AB........................................ 2,276,498
--------------
3,070,248
--------------
Capital Goods - 2.2%
1,539,900 New Holland NV.................................... 23,098,500
--------------
Chemical & Agricultural Products - 0.7%
100,000 Du Pont (E. I.) De Nemours & Co. ................. 7,206,250
--------------
Consumer Products & Services - 2.2%
48,300 CPI Corp. ........................................ 1,627,106
280,000 Industrie Natuzzi SpA ADR......................... 5,075,000
100,000 Lancaster Colony Corp. ........................... 3,331,250
80,000 Mattel, Inc. ..................................... 1,880,000
174,415 Newell Rubbermaid, Inc. .......................... 7,543,449
60,000 Service Corp. International....................... 952,500
115,000 Tupperware Corp. ................................. 2,716,875
--------------
23,126,180
--------------
Diversified Companies - 0.3%
113,400 Tomkins Plc, ADR.................................. 2,048,288
10,000 Tyco International Ltd. .......................... 976,875
--------------
3,025,163
--------------
Electrical Equipment & Services - 4.1%
100,000 Emerson Electric Co. ............................. 5,968,750
5,000 Hubbell, Inc. Cl. A............................... 196,875
286,656 Hubbell, Inc. Cl. B............................... 11,824,560
16,000 Motorola, Inc. ................................... 1,460,000
550,100 Thomas & Betts Corp. ............................. 24,892,025
--------------
44,342,210
--------------
Electronic Equipment & Services - 0.3%
150,000 Boston Acoustics, Inc. ........................... 2,775,000
--------------
Finance & Insurance - 2.2%
11,000 Dain Rauscher Corp. .............................. 585,063
31,900 Edwards (A.G.), Inc. ............................. 881,237
20,000 Hartford Financial Services
Group, Inc. ..................................... 1,080,000
49,000 LaSalle Re Holdings Ltd. ......................... 799,312
30,000 Lincoln National Corp. ........................... 1,500,000
135,100 Paine Webber Group, Inc. ......................... 5,404,000
104,500 Partnerre Ltd. ................................... 3,971,000
104,536 UnumProvident Corp. .............................. 5,409,738
79,000 XL Capital Ltd. .................................. 4,147,500
--------------
23,777,850
--------------
Food & Beverage Products - 0.1%
30,000 Conagra, Inc...................................... 766,875
--------------
</TABLE>
50
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
Schedule of Investments(continued)
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products & Services - 6.0%
190,000 American Home Products Corp. ..................... $ 9,690,000
210,000 Baxter International, Inc......................... 14,424,375
200,200 Beckman Coulter, Inc.............................. 9,622,112
146,800 Bristol-Myers Squibb Co........................... 9,762,200
40,000 * Elan Corp Plc, ADR.............................. 1,162,500
100,000 McKesson HBOC, Inc................................ 3,106,250
232,600 Shared Medical System Corp........................ 13,926,925
40,000 Warner-Lambert Co................................. 2,640,000
--------------
64,334,362
--------------
Industrial Specialty Products & Services - 0.3%
80,000 Federal Signal Corp............................... 1,715,000
10,000 Honeywell, Inc.................................... 1,198,125
--------------
2,913,125
--------------
Information Services & Technology - 0.3%
193,500 * Network Associates, Inc. ....................... 3,386,250
--------------
Leisure & Tourism - 0.0%
14,000 Gaylord Entertainment Co.......................... 428,750
--------------
Machinery - Diversified - 0.1%
82,650 Hardinge, Inc..................................... 1,363,725
--------------
Oil/Energy - 5.6%
23,000 Atlantic Richfield Co. ........................... 2,071,437
10,586 BP Amoco Plc...................................... 1,226,653
151,900 Equitable Resources, Inc.......................... 5,629,794
15,400 Exxon Corp........................................ 1,222,375
10,000 Mobil Corp. ...................................... 1,022,500
373,400 Murphy Oil Corp................................... 18,483,300
72,000 Texaco, Inc....................................... 4,486,500
608,200 Williams Companies, Inc. ......................... 25,582,412
--------------
59,724,971
--------------
Oil Field Services - 0.2%
110,344 * Nabors Industries Inc. ......................... 2,572,395
--------------
Printing, Publishing, Broadcasting & Entertainment - 0.3%
51,900 Bowne & Co., Inc.................................. 687,675
50,000 New York Times Co. Cl. A.......................... 1,965,625
--------------
2,653,300
--------------
Real Estate - 3.3%
10,000 Brandywine Realty Trust REIT...................... 187,500
23,800 Burnham Pacific Properties, Inc. REIT............. 300,475
124,900 Equity Residential Properties Trust REIT.......... 5,159,931
495,900 Gables Residential Trust REIT..................... 12,025,575
462,000 Kranzco Realty Trust REIT......................... 6,006,000
243,200 Meditrust Co. REIT................................ 2,644,800
235,700 Post Property, Inc. REIT.......................... 9,428,000
--------------
35,752,281
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Retailing & Wholesale - 0.7%
30,000 Longs Drug Stores Corp. ......................... $ 1,033,125
40,000 Lowe's Companies, Inc. .......................... 2,110,000
70,260 * Saks, Inc. .................................... 1,615,980
80,600 Talbots Inc. .................................... 2,836,113
--------------
7,595,218
--------------
Telecommunication Services & Equipment - 1.7%
86,645 Vodafone Airtouch Public Ltd., ADR............... 18,238,773
--------------
Textile & Apparel - 0.0%
10,000 V. F. Corp. ..................................... 395,000
--------------
Thrift Institutions - 0.3%
62,000 First Essex Bancorp, Inc. ....................... 1,023,000
122,000 ++ Jacksonville Bancorp, Inc. ................... 1,967,250
--------------
2,990,250
--------------
Transportation - 1.2%
237,000 Union Pacific Corp. ............................. 12,872,063
--------------
Utilities - Electric - 10.5%
300,000 Companhia Paranaense de Energia-Copel, Plc, ADR.. 2,043,750
410,200 Dominion Resources, Inc. ........................ 18,074,437
83,000 DTE Energy Co. .................................. 3,247,375
239,000 FPL Group, Inc. ................................. 12,891,062
215,524 LG&E Energy Corp. ............................... 4,660,707
230,000 MDU Resources Group, Inc. ....................... 5,606,250
300,000 * Niagara Mohawk Holdings, Inc. ................. 4,725,000
181,700 PP&L Resources, Inc. ............................ 5,257,944
40,000 Public Service Co. of New Mexico................. 797,500
620,000 Scana Corp. ..................................... 15,151,250
93,000 Sempra Energy.................................... 2,063,438
800,000 Southern Co. .................................... 21,150,000
150,200 TNP Enterprises, Inc. ........................... 5,735,762
448,400 Wisconsin Energy Corp. .......................... 11,238,025
--------------
112,642,500
--------------
Utilities - Gas - 3.4%
71,500 Chesapeake Utilities Corp. ...................... 1,313,812
21,800 NICOR, Inc. ..................................... 842,025
391,300 Peoples Energy Corp. ............................ 14,404,731
163,100 Piedmont Natural Gas Co., Inc. .................. 5,555,594
5,000 Semco Energy, Inc. .............................. 79,375
617,281 UGI Corp. ....................................... 14,660,424
--------------
36,855,961
--------------
Utilities - Telephone - 3.7%
29,655 AT&T Corp. ...................................... 1,540,206
50,000 Cincinnati Bell, Inc. ........................... 1,062,500
340,100 Frontier Corp. .................................. 18,854,294
250,000 GTE Corp. ....................................... 18,421,875
--------------
39,878,875
--------------
Total Common Stocks (cost $620,748,509).......... 702,972,723
--------------
</TABLE>
51
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
Schedule of Investments(continued)
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - 17.9%
Advertising & Related Services - 0.5%
295,000 Snyder Strypes Trust............................. $ 5,605,000
--------------
Aerospace & Defense - 0.9%
186,000 Loral Space & Communications 6.00%, 11/01/2006... 9,672,000
--------------
Banks - 0.9%
210,000 National Australia Bank, Ltd. 7.875%, Series
UNIT............................................ 5,932,500
116,200 WBK Trust 10.00%, STRYPES (exchangeable for
Westpac Banking Corp. Common Stock)............. 3,594,938
--------------
9,527,438
--------------
Chemical & Agricultural Products - 1.6%
15,000 Hercules Trust II 6.50%, 6/30/2029............... 14,887,500
80,200 Merrill Lynch & Co., Inc. 6.25%, Series IGL,
STRYPES (exchangeable for IMC Global, Inc.
common stock)................................... 1,684,200
--------------
16,571,700
--------------
Communication Systems & Services - 1.8%
380,000 Qwest Trends Trust 5.75%, 144A................... 19,239,400
--------------
Consumer Products & Services - 0.5%
100,000 Newell Financial Trust I
5.25% 12/01/2027 ............................... 5,325,000
--------------
Electrical Equipment & Services - 1.0%
205,000 Pioneer Standard Electronics, Inc. 6.75%,
3/31/2028 ...................................... 10,391,450
--------------
Finance & Insurance - 1.9%
20,000 American General Corp. $3.00, Series A, MIPS .... 1,950,000
13,000 American Heritage Life Investment Corp.
8.50%, PRIDES .................................. 1,081,437
270,000 Frontier Financing Trust 6.25%, TOPRS ........... 11,880,000
100,000 St. Paul Capital
6.00%, MIPS .................................... 5,887,500
--------------
20,798,937
--------------
Food & Beverage Products - 1.1%
200,000 Wendys Financing I 5.00%, Series A, TECONS....... 12,050,000
--------------
Healthcare Products & Services - 0.1%
30,000 McKesson Financing Trust 5.00%, 6/01/2027........ 1,507,500
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - continued
Metal Products & Services - 0.3%
100,000 Timet Capital Trust I 6.63%, 11/01/2026.......... $ 3,125,000
--------------
Oil/Energy - 0.4%
95,000 Callon Petroleum Co. 8.50%, Series A............. 2,612,500
48,000 Nuevo Energy Co. 5.75%, Series A, TECONS......... 1,488,000
--------------
4,100,500
--------------
Printing, Publishing, Broadcasting & Entertainment - 1.0%
92,000 Houston Industries, Inc. 7.00%, ACES
(exchangeable for Time Warner, Inc.
common stock)................................... 11,137,750
--------------
Retailing & Wholesale - 0.3%
7,500 CVS Automatic Common Exchange Security Trust,
6.00%, 5/15/2001, TRACES........................ 670,781
65,000 Merrill Lynch & Co., Inc. (exchangeable for
Dollar General Corp. common stock)
8.50%, 5/15/2001................................ 2,693,438
--------------
3,364,219
--------------
Telecommunication Services & Equipment - 2.8%
20,000 Nextel STRYPES Trust,
7.25%, 5/15/2000, Series NVTL................... 907,500
100,000 Nortel Inversora SA MEDS......................... 4,900,000
108,000 Qualcomm Financial Trust I 5.75%, 3/01/2012...... 23,760,000
--------------
29,567,500
--------------
Transportation - 1.5%
88,700 CNF Trust I 5.00%, Ser. A, TECONS (exchangeable
for CNF Transportation, Inc. common stock)...... 5,211,125
216,800 Union Pacific Capital Trust 4/01/2028............ 10,975,500
--------------
16,186,625
--------------
Utilities - Electric - 1.3%
45,000 BNDES Participacoes SA 7.25%, 2/15/2001.......... 765,000
238,600 Texas Utilities Co. 9.25%, PRIDES................ 12,899,312
--------------
13,664,312
--------------
Total Convertible Preferred (cost $179,488,343).. 191,834,331
--------------
</TABLE>
52
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
Schedule of Investments(continued)
July 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - 1.4%
Consumer Products & Services - 0.2%
$ 2,000,000 Action Performance Companies, Inc.
4.75%, 4/1/2005, 144A........................... $ 1,882,600
--------------
Electrical Equipment & Services - 0.3%
6,000,000 Solectron Corp. 4.00%, 1/27/2019, 144A........... 3,446,400
--------------
Healthcare Products & Services - 0.2%
2,000,000 Carematrix
6.25%, 8/15/2004................................ 1,337,500
2,000,000 Elan Finance Corp. Ltd. 3.25%, 12/14/2018........ 1,057,500
--------------
2,395,000
--------------
Information Services & Technology - 0.5%
5,000,000 Adaptec, Inc.
4.75%, 2/1/2004................................. 4,893,750
--------------
Telecommunication Services &
Equipment - 0.2%
2,500,000 Orbital Sciences Corp. 5.00%, 10/1/2002.......... 2,734,375
--------------
Total Convertible Debentures (cost $15,426,436).. 15,352,125
--------------
CORPORATE BONDS - 0.3%
Banks - 0.1%
1,000,000 NationsBank Corp. 6.50%, 8/15/2003............... 997,024
--------------
Finance & Insurance - 0.1%
1,000,000 American General Finance Corp. 7.13%, 12/1/1999.. 1,005,067
--------------
Telecommunication Services & Equipment - 0.1%
1,000,000 GTE Southwest, Inc. 5.82%, 12/1/1999, Ser. A..... 999,701
--------------
Total Corporate Bonds (cost $3,011,969).......... 3,001,792
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 4.8%
Government Agency Notes & Bonds - 4.6%
2,000,000 Federal Farm Credit Bank 5.75%, 12/7/2028........ 1,709,172
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - continued
Government Agency Notes & Bonds - continued
Federal Home Loan Bank
$ 2,000,000 5.375%, 10/6/2003.............................. $ 1,917,512
2,000,000 6.532%, 12/28/2007............................. 1,925,432
Federal Home Loan Mortgage Corp.
2,000,000 6.54%, 12/10/2007.............................. 1,935,468
2,000,000 6.54%, 3/19/2008............................... 1,924,854
2,000,000 7.59%, 9/19/2006............................... 2,022,748
2,000,000 7.87%, 8/8/2011................................ 2,009,946
Federal National Mortgage Association
5,000,000 5.65%, 2/22/2028............................... 4,221,495
1,850,000 6.00%, 1/14/2005............................... 1,785,035
4,000,000 6.08%, 9/1/2028................................ 3,587,048
2,215,000 6.10%, 1/26/2005............................... 2,138,764
3,000,000 6.16%, 1/23/2008............................... 2,835,831
2,000,000 6.24%, 1/14/2008............................... 1,895,136
3,000,000 6.32%, 3/3/2008................................ 2,862,696
1,000,000 6.41%, 3/8/2006................................ 978,818
5,000,000 6.42%, 2/12/2008............................... 4,765,225
2,000,000 6.46%, 1/1/2008................................ 1,915,828
4,000,000 6.52%, 3/5/2008................................ 3,820,776
2,355,000 6.88%, 9/24/2012............................... 2,311,951
3,000,000 7.28%, 5/23/2007............................... 2,965,647
--------------
49,529,382
--------------
Treasury Notes & Bonds - 0.2%
1,500,000 U.S. Treasury Bonds 7.13%, 2/15/2023............ 1,642,500
--------------
Total U.S. Government & Agency Obligations
(cost $53,879,642)............................. 51,171,882
--------------
SHORT-TERM INVESTMENTS - 9.5%
Repurchase Agreement - 9.5%
101,556,000 State Street Bank & Trust Co., purchased
7/30/1999, 5.00%, maturing 8/2/1999, maturity
value $101,598,315 (cost $101,556,000) (a) .... 101,556,000
--------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $974,110,899).. 99.6% 1,065,888,853
Other Assets and
Liabilities - net... 0.4 4,770,669
----- --------------
Net Assets........... 100.0% $1,070,659,522
===== ==============
</TABLE>
* Non-income producing security.
** At July 31, 1999 the Fund owned 8,000 shares of common stock of First Union
Corp. at a cost of $106,108. During the year ended July 31, 1999 the Fund
earned $14,240 in dividend income from this investment. These shares were
acquired by the Fund through a merger with another investment company sub-
advised by Lieber & Company. The previous holder acquired these shares prior
to the acquisition of the advisor and Lieber & Company by First Union.
++ 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 $6,707,438 and $1,320,000, respectively, in the
issue at July 31, 1999. The Fund earned $51,375 and $61,000 of income, re-
spectively, from this investment during the period ending July 31, 1999.
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at July 31,
1999.
144A Security that may be resold to "qualified institutional buyers" under
Rule 144A of the Securities Act of 1933. This security has been deter-
mined to be liquid under guidelines established by the Board of Trustees.
Summary of Abbreviations:
ACES Automatically Convertible Equity Securities
REIT Real Estate Investment Trust
ADR American Depository Receipts STRYPES Structured Yield Product Ex-
changeable for Stock
MEDS Mandatorially Exchangeable Debt Securities
MIPS Monthly Income Preferred Shares TECONS Term Convertible Shares
TOPRS Trust Originated Preferred Secu-
rities
PRIDES Preferred Redeemable Increased Dividend Equity Securities
TRACES Trust Automatic Common Exchange
Securities
See Combined Notes to Financial Statements.
53
<PAGE>
EVERGREEN
SMALL CAP VALUE FUND
Schedule of Investments
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 88.2%
Aerospace & Defense - 3.1%
211,800 Curtiss Wright Corp. ................................. $ 7,849,837
------------
Automotive Equipment & Manufacturing - 0.6%
8,200 Arvin Industries, Inc. ............................... 306,475
103,200 Simpson Industries, Inc. ............................. 1,238,400
------------
1,544,875
------------
Banks - 10.6%
121,250 ABC Bancorp........................................... 1,667,187
20,000 Bank of Essex......................................... 320,000
61,700 Britton & Koontz Capital Corp......................... 1,241,713
28,800 BSB Bancorp, Inc. .................................... 783,000
5,250 Carrollton Bancorp.................................... 97,125
31,280 Centura Banks, Inc. .................................. 1,749,725
34,177 Commercial Bankshares, Inc............................ 751,894
8,200 Community Bancshares, Inc............................. 196,800
60,000 Cowlitz Bancorp....................................... 375,000
157,186 First Oak Brook Bancshares, Inc. Cl. A................ 3,143,720
95,552 First State Bancorp................................... 2,197,696
221,900 Granite State Bankshares, Inc......................... 5,325,600
32,000 Independent Bankshares, Inc........................... 394,000
15,000 James River Bankshares, Inc. ......................... 228,750
65,500 Mid-State Bancshares.................................. 2,366,187
30,000 New England Community Bancorp, Inc. .................. 819,375
4,000 Northern States Financial Corp........................ 93,750
40,000 Pacific Bank, N.A..................................... 800,000
9,100 Premier National Bancorp, Inc. ....................... 172,900
90,000 Prosperity Bancshares, Inc. .......................... 1,485,000
15,400 * Republic Bancshares, Inc. .......................... 246,400
24,000 South Alabama Bancorp, Inc............................ 336,000
60,000 Southside Bancshares Corp. ........................... 660,000
11,250 Susquehanna Bancshares, Inc. ......................... 201,797
23,200 Union Bankshares Corp................................. 394,400
30,000 West Coast Bancorp, Inc. ............................. 502,500
------------
26,550,519
------------
Building, Construction & Furnishings - 5.7%
57,400 American Woodmark Corp. .............................. 1,887,025
97,500 Apogee Enterprises, Inc............................... 962,813
99,500 Craftmade International, Inc. ........................ 1,243,750
150,000 D.R. Horton, Inc. .................................... 2,437,500
119,100 Industrie Natuzzi SpA ADR............................. 2,158,687
210,500 Standard Pacific Corp................................. 2,723,344
65,100 TJ International, Inc. ............................... 2,018,100
42,413 * Toll Brothers, Inc.................................. 901,276
------------
14,332,495
------------
Business Equipment & Services - 1.1%
60,000 * Zebra Technologies Corp. Cl. A...................... 2,816,250
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Communication Systems & Services - 0.9%
90,000 * Orbital Sciences Corp. ............................. $ 2,306,250
------------
Consumer Products & Services - 9.1%
310,600 CPI Corp. ............................................ 10,463,337
93,500 General Housewares Corp. ............................. 1,916,750
110,000 Lancaster Colony Corp................................. 3,664,375
80,500 Polaris Industries, Inc............................... 3,169,688
78,000 Stewart Enterprises, Inc. Cl. A....................... 970,125
328,600 York Group, Inc. ..................................... 2,423,425
------------
22,607,700
------------
Electrical Equipment & Services - 5.4%
100,000 Applied Power, Inc. Cl. A............................. 2,850,000
292,800 Helix Technology Corp................................. 7,832,400
154,500 * Kent Electronics Corp............................... 2,684,437
------------
13,366,837
------------
Electronic Equipment & Services - 1.7%
84,700 Boston Acoustics, Inc. ............................... 1,566,950
67,100 * Hadco Corp. ........................................ 2,679,806
------------
4,246,756
------------
Finance & Insurance - 1.5%
45,000 Enhance Financial Services Group, Inc. ............... 933,750
164,900 Morgan Keegan, Inc. .................................. 2,865,138
------------
3,798,888
------------
Food & Beverage Products - 5.2%
117,920 Bridgford Foods Corp. ................................ 1,267,640
310,400 International Multifoods Corp. ....................... 7,255,600
142,000 Michael Foods, Inc. .................................. 3,292,625
15,000 Smucker (J. M.) Co. .................................. 315,938
35,000 Smucker (J. M.) Co. Cl. A............................. 846,562
------------
12,978,365
------------
Healthcare Products & Services - 5.8%
60,000 Alpharma, Inc. ....................................... 2,227,500
122,300 AmeriSource Health Corp. ............................. 3,424,400
103,600 * ArthroCare Corp. ................................... 2,952,600
143,400 * Carematrix Corp. ................................... 1,559,475
95,000 Jones Pharma, Inc. ................................... 4,123,594
18,700 Kewaunee Scientific Corp. ............................ 195,181
------------
14,482,750
------------
Industrial Specialty Products & Services - 2.5%
50,000 Badger Meter, Inc. ................................... 1,900,000
55,771 Danaher Corp. ........................................ 3,182,433
43,100 Instron Corp. ........................................ 915,875
18,700 Met-Pro Corp. ........................................ 234,919
2,750 Superior Telecom, Inc. ............................... 77,515
------------
6,310,742
------------
</TABLE>
54
<PAGE>
EVERGREEN
SMALL CAP VALUE FUND
Schedule of Investments(continued)
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Information Services & Technology - 1.0%
60,000 * Axent Technologies, Inc. .......................... $ 840,000
91,400 Timberline Software Corp. ........................... 1,548,088
------------
2,388,088
------------
Machinery - Diversified - 1.1%
171,550 Hardinge, Inc. ...................................... 2,830,575
------------
Metal Products & Services - 0.6%
109,400 Titanium Metals Corp. ............................... 1,429,038
------------
Oil/Energy - 6.0%
201,900 Berry Petroleum Co. Cl. A ........................... 2,864,456
235,500 Cabot Oil & Gas Corp. Cl. A.......................... 4,253,719
155,600 Penn Virginia Corp. ................................. 3,267,600
100,909 Pennzoil-Quaker State Co. ........................... 1,494,715
370,000 Southwestern Energy Co. ............................. 3,075,625
------------
14,956,115
------------
Oil Field Services - 0.8%
126,200 Lufkin Industries, Inc. ............................. 2,082,300
------------
Paper & Packaging - 0.8%
154,050 Tuscarora, Inc. ..................................... 1,983,394
------------
Printing, Publishing, Broadcasting & Entertainment -
1.6%
41,300 Banta Corp. ......................................... 1,017,013
216,300 Bowne & Co., Inc. ................................... 2,865,975
------------
3,882,988
------------
Real Estate - 3.9%
227,200 Eastgroup Properties, Inc. REIT...................... 4,231,600
25,000 Innkeepers USA Trust REIT............................ 221,875
121,000 Mission West Properties, Inc. REIT................... 975,562
75,000 Parkway Properties, Inc. REIT........................ 2,493,750
100,000 RFS Hotel Investors, Inc. REIT....................... 1,262,500
50,000 Sunstone Hotel Investors, Inc. REIT.................. 456,250
------------
9,641,537
------------
Retailing & Wholesale - 2.2%
10,500 Deb Shops, Inc. ..................................... 221,813
87,150 Ethan Allen Interiors, Inc. ......................... 2,767,012
200,000 Pier 1 Imports, Inc. ................................ 1,875,000
50,000 * Sonic Automotive, Inc. ............................ 656,250
------------
5,520,075
------------
Telecommunication Services & Equipment - 4.5%
250,000 Communications Systems, Inc. ........................ 3,625,000
349,695 Hickory Tech Corp. .................................. 3,671,797
15,000 * ITC DeltaCom, Inc. ................................ 395,625
95,000 Scientific Atlanta, Inc. ............................ 3,467,500
------------
11,159,922
------------
Thrift Institutions - 4.9%
39,500 Abington Bancorp, Inc. .............................. 533,250
21,000 Bancorp Connecticut, Inc. ........................... 351,750
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Thrift Institutions - continued
228,394 Community Savings Bankshares, Inc. ................. $ 2,969,122
16,800 * Golden St. Bancorp, Inc. ......................... 371,700
50,000 Harbor Florida Bancshares, Inc. .................... 640,625
312,900 Horizon Financial Corp. ............................ 3,833,025
38,000 Jacksonville Bancorp, Inc. ......................... 612,750
79,200 Metrowest Bank...................................... 534,600
100,000 St. Paul Bancorp, Inc. ............................. 2,425,000
------------
12,271,822
------------
Utilities - Electric - 1.3%
135,000 MDU Resources Group, Inc. .......................... 3,290,625
------------
Utilities - Gas - 6.1%
38,100 Chesapeake Utilities Corp. ......................... 700,088
15,000 Connecticut Energy Corp. ........................... 573,750
20,000 CTG Resources, Inc. ................................ 733,750
64,800 Delta Natural Gas Co., Inc. ........................ 1,150,200
36,600 Public Service Co. of North Carolina, Inc. ......... 1,095,713
450,100 Semco Energy, Inc. ................................. 7,145,337
85,500 UGI Corp. .......................................... 2,030,625
45,800 Yankee Energy System, Inc. ......................... 1,840,587
------------
15,270,050
------------
Other Securities - 0.2%............................. 495,656
------------
Total Common Stocks (cost $214,186,608)............. 220,394,449
------------
CONVERTIBLE PREFERRED - 1.1%
Electrical Equipment & Services - 0.8%
40,000 Pioneer Standard Electronics, Inc.
6.75%, 3/31/2028................................... 2,027,600
------------
Oil/Energy - 0.3%
26,000 Callon Petroleum Co. 8.50%, Series A................ 715,000
------------
Total Convertible Preferred (cost $2,920,875)....... 2,742,600
------------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - 9.5%
Banks - 0.5%
$1,350,000 Surety Capital Corp. 9.00%, 3/31/2008............... 1,350,000
------------
Business Equipment & Services - 0.5%
1,250,000 Interim Services, Inc. 4.50%, 6/1/2005.............. 1,101,563
200,000 Personnel Group Of America, Inc. 5.75%, 7/1/2004.... 165,750
------------
1,267,313
------------
Consumer Products & Services - 1.5%
4,000,000 Action Performance Companies, Inc. 4.75%, 4/1/2005,
144A............................................... 3,765,200
------------
</TABLE>
55
<PAGE>
EVERGREEN
SMALL CAP VALUE FUND
Schedule of Investments(continued)
July 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - continued
Healthcare Products & Services - 4.6%
5,000,000 Alpharma, Inc. 5.75%, 4/1/2005, 144A.................. $ 7,081,500
6,600,000 Carematrix
6.25%, 8/15/2004..................................... 4,413,750
------------
11,495,250
------------
Telecommunication Services & Equipment - 2.4%
3,000,000 Antec Corp.
4.50%, 5/15/2003..................................... 5,332,500
600,000 Orbital Sciences Corp. 5.00%, 10/1/2002............... 656,250
------------
5,988,750
------------
Total Convertible Debentures (cost $21,180,175)....... 23,866,513
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments - (cost $238,287,658)....... 98.8% 247,003,562
Other Assets and Liabilities - net............. 1.2 3,002,472
----- ------------
Net Assets..................................... 100.0% $250,006,034
===== ============
</TABLE>
* Non-income producing security.
144A Security that may be resold to "qualified institutional buyers" un-
der Rule 144A of the Securities Act of 1933. This security has 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
See Combined Notes to Financial Statements.
56
<PAGE>
EVERGREEN
UTILITY FUND
Schedule of Investments
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 75.2%
Communication Systems & Services - 0.9%
18,200 * MCI WorldCom, Inc. ................................. $ 1,501,500
------------
Oil/Energy - 3.6%
70,000 Enron Corp. .......................................... 5,963,125
------------
Telecommunication Services & Equipment - 3.4%
46,600 * Time Warner Telecom, Inc. .......................... 1,450,425
20,150 Vodafone AirTouch Public Plc, ADR..................... 4,241,575
------------
5,692,000
------------
Utilities - Electric - 38.2%
125,000 Alliant Corp. ........................................ 3,609,375
31,100 * Calpine Corp. ...................................... 2,338,331
100,000 Central Hudson Gas & Electric Corp. .................. 4,187,500
896,700 Companhia Paranaense de Energia-Copel, Plc, ADR....... 6,108,769
70,000 Duke Power Co. ....................................... 3,705,625
160,000 Energy East Corp. .................................... 4,070,000
187,000 MDU Resources Group, Inc. ............................ 4,558,125
331,400 * Niagara Mohawk Holdings, Inc. ...................... 5,219,550
268,500 PacifiCorp............................................ 4,900,125
150,000 PP&L Resources, Inc. ................................. 4,340,625
200,000 Public Service Co. of New Mexico...................... 3,987,500
100,000 Public Service Enterprise Group, Inc. ................ 4,031,250
64,100 Reliant Energy, Inc. ................................. 1,758,744
175,000 Sempra Energy......................................... 3,882,812
129,200 Southern Co. ......................................... 3,415,725
135,000 Wisconsin Energy Corp. ............................... 3,383,438
------------
63,497,494
------------
Utilities - Gas - 10.5%
48,200 Keyspan Corp. ........................................ 1,337,550
134,000 NUI Corp. ............................................ 3,576,125
120,000 Peoples Energy Corp. ................................. 4,417,500
51,100 Piedmont Natural Gas Co., Inc. ....................... 1,740,594
95,300 Semco Energy, Inc. ................................... 1,512,887
206,000 UGI Corp. ............................................ 4,892,500
------------
17,477,156
------------
Utilities - Telephone - 18.6%
75,000 AT&T Corp. ........................................... 3,895,313
110,000 BellSouth Corp. ...................................... 5,280,000
100,000 Frontier Corp. ....................................... 5,543,750
70,000 GTE Corp. ............................................ 5,158,125
110,000 * Nextel Communications, Inc. Cl. A................... 5,891,875
100,000 Sprint Corp. ......................................... 5,168,750
------------
30,937,813
------------
Total Common Stocks (cost $97,506,987)................ 125,069,088
------------
</TABLE>
* Non-income producing security.
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - 21.5%
Aerospace & Defense - 2.2%
70,000 Loral Space & Communications 6.00%, 11/01/2006....... $ 3,640,000
------------
Printing, Publishing, Broadcasting & Entertainment -
2.3%
31,700 Houston Industries, Inc. 7.00%, ACES (exchangeable
for Time Warner, Inc. common stock)................. 3,837,681
------------
Telecommunication Services & Equipment - 7.0%
53,000 Qualcomm Financial Trust I 5.75%, 3/01/2012.......... 11,660,000
------------
Utilities - Electric - 6.9%
42,700 AES Trust I 5.375%, Series A, TECONS................. 3,640,175
235,000 BNDES Participacoes S.A. 7.25%, DECS................. 3,995,000
70,000 Texas Utilities Co.
9.25%, PRIDES....................................... 3,784,375
------------
11,419,550
------------
Utilities - Telephone - 3.1%
60,000 Sprint Corp. 8.25%, DECS (exchangeable for Southern
N.E. Telephone common stock)........................ 5,227,500
------------
Total Convertible Preferred (cost $23,339,216)....... 35,784,731
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - 2.4%
Information Services & Technology - 2.4%
$4,000,000 Adaptec, Inc.
4.75%, 2/1/2004 (cost $3,530,000)................... 3,915,000
------------
SHORT-TERM INVESTMENTS - 0.7%
Government Agency Notes & Bonds - 0.7%
1,137,000 Federal Agricultural Mortgage Corp. Discount Notes
4.97%, 8/2/1999 (cost $1,136,843)................... 1,136,843
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments - (cost $125,513,046)...... 99.8% 165,905,662
Other Assets and Liabilities - net............ 0.2 345,825
----- ------------
Net Assets.................................... 100.0% $166,251,487
===== ============
</TABLE>
Summary of Abbreviations:
ACES Automatically Convertible Equity Securities
ADR American Depository Receipts
DECS Dividend Enhanced Convertible Stock
PRIDES Preferred Redeemable Increased Dividend Equity Securities
TECONS Term Convertible Shares
See Combined Notes to Financial Statements.
57
<PAGE>
EVERGREEN
VALUE FUND
Schedule of Investments
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 97.5%
Automotive Equipment & Manufacturing - 2.1%
342,223 Delphi Automotive Systems Corp. .................... $ 6,160,014
115,200 Ford Motor Co. ..................................... 5,601,600
131,950 General Motors Corp. ............................... 8,040,703
------------
19,802,317
------------
Banks - 13.1%
366,300 Bank One Corp. ..................................... 19,986,244
392,000 BankAmerica Corp. .................................. 26,019,000
85,600 BankBoston Corp. ................................... 4,017,850
263,300 Chase Manhattan Corp. .............................. 20,241,187
84,100 Comerica, Inc. ..................................... 4,667,550
373,050 Compass Bancshares, Inc. ........................... 10,748,503
228,900 National City Corp. ................................ 6,809,775
185,700 SouthTrust Corp. ................................... 6,824,475
748,750 Sovereign Bancorp, Inc. ............................ 9,031,797
341,300 Wells Fargo Co. .................................... 13,310,700
------------
121,657,081
------------
Business Equipment & Services - 1.1%
326,850 Dun & Bradstreet Corp. ............................. 10,377,488
------------
Chemical & Agricultural Products - 2.5%
173,600 Du Pont (E. I.) De Nemours & Co. ................... 12,510,050
200,400 Millennium Chemicals Inc. .......................... 4,709,400
136,759 Rohm & Haas Co. .................................... 5,829,370
------------
23,048,820
------------
Communication Systems & Services - 2.1%
20,000 Lucent Technologies, Inc. .......................... 1,301,250
108,750 * MCI WorldCom, Inc. ............................... 8,971,875
341,700 * Newbridge Networks Corp. ......................... 9,076,406
------------
19,349,531
------------
Consumer Products & Services - 3.4%
16,800 Procter & Gamble Co. ............................... 1,520,400
824,200 * Tommy Hilfiger Corp. ............................. 30,443,888
------------
31,964,288
------------
Diversified Companies - 5.0%
81,150 Allied Signal, Inc. ................................ 5,249,390
69,700 Minnesota Mining & Manufacturing Co. ............... 6,129,244
333,050 Raychem Corp. ...................................... 12,697,531
228,500 Tyco International Ltd. ............................ 22,321,594
------------
46,397,759
------------
Electrical Equipment & Services - 3.3%
145,100 General Electric Co. ............................... 15,815,900
158,600 Motorola, Inc. ..................................... 14,472,250
------------
30,288,150
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Finance & Insurance - 13.1%
235,100 Allstate Corp. ..................................... $ 8,346,050
114,500 American International Group, Inc. ................. 13,296,312
203,800 Associates First Capital Corp., Cl. A............... 7,808,087
528,675 Citigroup, Inc. .................................... 23,559,080
32,600 Federal Home Loan Mortgage Corp. ................... 1,870,425
171,000 Federal National Mortgage Assoc..................... 11,799,000
259,800 Hartford Financial Services Group, Inc. ............ 14,029,200
374,100 Household International, Inc. ...................... 16,062,919
5,200 Lincoln National Corp. ............................. 260,000
118,200 Morgan Stanley, Dean Witter & Co. .................. 10,652,775
163,400 Price (T.) Rowe & Associates, Inc. ................. 5,719,000
168,700 XL Capital Ltd. .................................... 8,856,750
------------
122,259,598
------------
Food & Beverage Products - 1.5%
256,158 Albertsons, Inc. ................................... 12,727,851
23,700 Coca Cola Co. ...................................... 1,429,406
------------
14,157,257
------------
Healthcare Products & Services - 2.4%
415,200 Pharmacia & Upjohn, Inc. ........................... 22,342,950
------------
Industrial Specialty Products & Services - 1.4%
105,400 Honeywell, Inc. .................................... 12,628,238
------------
Information Services & Technology - 8.3%
513,000 * American Power Conversion Corp. .................. 10,644,750
232,400 * Cambridge Technology Partners..................... 3,979,850
157,350 * Gateway, Inc. .................................... 11,988,103
219,400 Hewlett-Packard Co. ................................ 22,968,437
82,800 Intel Corp. ........................................ 5,713,200
107,700 International Business Machines Corp. .............. 13,536,544
196,200 * Keane, Inc. ...................................... 4,524,862
262,900 * Mastech Corp. .................................... 4,436,438
------------
77,792,184
------------
Iron & Steel - 0.6%
245,100 AK Steel Holding Corp. ............................. 5,530,069
------------
Metal Products & Services - 0.7%
216,900 Alcan Aluminum Ltd. ................................ 6,534,113
------------
Oil/Energy - 10.9%
303,600 Apache Corp. ....................................... 12,884,025
123,450 Atlantic Richfield Co. ............................. 11,118,216
9,900 Chevron Corp. ...................................... 903,375
330,400 Exxon Corp. ........................................ 26,225,500
110,800 Mobil Corp. ........................................ 11,329,300
444,800 Reliant Energy, Inc. ............................... 12,204,200
49,300 Royal Dutch Petroleum Co. .......................... 3,007,300
381,400 Texaco, Inc. ....................................... 23,765,987
------------
101,437,903
------------
</TABLE>
58
<PAGE>
EVERGREEN
VALUE FUND
Schedule of Investments(continued)
July 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Paper & Packaging - 1.9%
643,250 Abitibi Consolidated, Inc. ........................ $ 7,236,563
458,518 * Smurfit Container Corp. ......................... 10,259,340
------------
17,495,903
------------
Pharmaceuticals - 1.2%
371,100 ICN Pharmaceuticals, Inc. ......................... 11,411,325
------------
Printing, Publishing, Broadcasting &
Entertainment - 1.0%
163,100 * CBS Corp. ....................................... 7,166,206
33,000 Disney (Walt) Co. ................................. 911,625
37,000 * Viacom, Inc., Cl. B.............................. 1,551,688
------------
9,629,519
------------
Retailing & Wholesale - 4.0%
561,000 * Federated Department Stores, Inc. ............... 28,786,312
162,400 Tandy Corp. ....................................... 8,333,150
------------
37,119,462
------------
Telecommunication Services & Equipment - 2.1%
116,250 * MediaOne Group, Inc. ............................ 8,413,594
165,650 * Univision Communications, Inc. Cl. A............. 11,471,262
------------
19,884,856
------------
Transportation - 3.4%
277,500 Burlington Northern Santa Fe Corp.................. 8,880,000
238,000 CNF Transportation, Inc. .......................... 10,115,000
227,900 Union Pacific Corp. ............................... 12,377,819
------------
31,372,819
------------
Utilities - Electric - 2.7%
269,100 CMS Energy Corp. .................................. 10,057,612
80,300 Duke Power Co. .................................... 4,250,881
72,400 FPL Group, Inc. ................................... 3,905,075
62,900 GPU, Inc. ......................................... 2,413,788
182,000 Southern Co. ...................................... 4,811,625
------------
25,438,981
------------
Utilities - Gas - 1.6%
389,700 NICOR, Inc. ....................................... 15,052,163
------------
Utilities - Telephone - 8.1%
173,750 Ameritech Corp. ................................... 12,727,188
334,411 AT&T Corp. ........................................ 17,368,471
164,500 Bell Atlantic Corp. ............................... 10,486,875
65,400 BellSouth Corp. ................................... 3,139,200
237,200 GTE Corp. ......................................... 17,478,675
249,000 SBC Communications, Inc. .......................... 14,239,687
------------
75,440,096
------------
Total Common Stocks (cost $703,022,931)............ 908,412,870
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 2.5%
Repurchase Agreement - 2.5%
$23,499,000 Paine Webber Repurchase Agreement, purchased
7/30/1999, 5.07%, maturing 8/2/1999, maturity
value $23,508,928 (cost $23,499,000) (a)......... $ 23,499,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments - (cost $726,521,931)..... 100.0% 931,911,870
Other Assets and Liabilities - net........... 0.0 131,430
----- ------------
Net Assets................................... 100.0% $932,043,300
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at July 31,
1999.
* Non-income producing security.
See Combined Notes to Financial Statements.
59
<PAGE>
EVERGREEN
Growth and Income Funds
Statements of Assets and Liabilities
July 31, 1999
<TABLE>
<CAPTION>
Growth Income
Equity and and Small Cap
Blue Chip Income Income Growth Value Utility Value
Fund Fund Fund Fund Fund Fund Fund
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Identified cost of
securities............ $553,021,869 $120,408,959 $1,311,730,054 $ 974,110,899 $238,287,658 $125,513,046 $726,521,931
Net unrealized gains on
securities............ 118,957,832 27,824,099 495,122,183 91,777,954 8,715,904 40,392,616 205,389,939
----------------------------------------------------------------------------------------------------------------------------
Market value of
securities............ 671,979,701 148,233,058 1,806,852,237 1,065,888,853 247,003,562 165,905,662 931,911,870
Cash................... 175 670 2,227 989,612 935 1,241 207
Receivable for
securities sold....... 14,172,403 1,314,018 28,959,642 21,447,634 4,242,711 0 0
Receivable for Fund
shares sold........... 2,769,206 50,318 4,442,279 52,549 418,268 65,699 303,373
Dividends and interest
receivable............ 356,856 312,249 1,481,255 2,602,068 606,477 528,112 1,694,984
Prepaid expenses and
other assets.......... 178,965 79,331 47,522 28,200 47,579 24,937 43,098
----------------------------------------------------------------------------------------------------------------------------
Total assets.......... 689,457,306 149,989,644 1,841,785,162 1,091,008,916 252,319,532 166,525,651 933,953,532
----------------------------------------------------------------------------------------------------------------------------
Liabilities
Payable for securities
purchased............. 9,193,298 325,449 21,257,822 18,228,135 1,132,944 0 0
Payable for Fund shares
redeemed.............. 589,243 238,815 6,288,450 985,009 567,748 67,223 1,019,576
Payable for securities
on loan............... 37,702,000 3,379,400 0 0 0 0 0
Demand note payable.... 0 0 0 0 256,000 0 0
Advisory fee payable... 305,958 81,290 1,431,515 883,617 220,996 71,294 413,539
Distribution Plan
expenses payable...... 159,686 74,683 372,345 71,301 73,279 40,604 209,908
Due to other related
parties............... 0 0 0 0 0 3,298 19,157
Accrued expenses and
other liabilities..... 67,030 25,977 214,566 181,332 62,531 91,745 248,052
----------------------------------------------------------------------------------------------------------------------------
Total liabilities..... 48,017,215 4,125,614 29,564,698 20,349,394 2,313,498 274,164 1,910,232
----------------------------------------------------------------------------------------------------------------------------
Net assets............. $641,440,091 $145,864,030 $1,812,220,464 $1,070,659,522 $250,006,034 $166,251,487 $932,043,300
----------------------------------------------------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital........ $486,229,963 $ 97,671,804 $1,309,827,535 $ 960,412,031 $265,099,265 $119,102,993 $625,377,422
Undistributed
(overdistributed) net
investment income..... (14,545) 416,456 (55,326) 1,979,953 (11,613) (52,336) 70,300
Accumulated net
realized gains or
losses on securities
and foreign currency
related transactions.. 36,266,841 19,951,671 7,326,496 16,489,594 (23,797,522) 6,808,214 101,205,639
Net unrealized gains on
securities and foreign
currency related
transactions.......... 118,957,832 27,824,099 495,121,759 91,777,944 8,715,904 40,392,616 205,389,939
----------------------------------------------------------------------------------------------------------------------------
Total net assets....... $641,440,091 $145,864,030 $1,812,220,464 $1,070,659,522 $250,006,034 $166,251,487 $932,043,300
----------------------------------------------------------------------------------------------------------------------------
Net assets consists of
Class A................ $382,499,067 $ 50,213,031 $ 250,231,873 $ 35,713,592 $ 59,451,162 $108,410,505 $463,951,741
Class B................ 255,182,482 78,048,613 891,190,695 185,177,214 110,809,138 54,839,112 331,723,681
Class C................ 2,969,397 16,951,602 36,528,749 2,502,360 22,842,478 878,668 4,635,125
Class Y................ 789,145 650,784 634,269,147 847,266,356 56,903,256 2,123,202 131,732,753
----------------------------------------------------------------------------------------------------------------------------
Total net assets....... $641,440,091 $145,864,030 $1,812,220,464 $1,070,659,522 $250,006,034 $166,251,487 $932,043,300
----------------------------------------------------------------------------------------------------------------------------
Shares outstanding
Class A................ 11,632,072 2,488,965 8,466,218 1,582,162 3,819,118 8,435,019 18,661,243
Class B................ 7,841,482 3,890,815 30,588,148 8,273,187 7,158,242 4,265,948 13,372,134
Class C................ 91,005 844,081 1,253,612 111,795 1,477,150 68,324 186,994
Class Y................ 24,193 32,352 21,390,083 37,516,674 3,653,589 165,161 5,297,625
----------------------------------------------------------------------------------------------------------------------------
Net asset value per
share
Class A................ $ 32.88 $ 20.17 $ 29.56 $ 22.57 $ 15.57 $ 12.85 $ 24.86
----------------------------------------------------------------------------------------------------------------------------
Class A--Offering price
(based on sales charge
of 4.75%)............. $ 34.52 $ 21.18 $ 31.03 $ 23.70 $ 16.35 $ 13.49 $ 26.10
----------------------------------------------------------------------------------------------------------------------------
Class B................ $ 32.54 $ 20.06 $ 29.14 $ 22.38 $ 15.48 $ 12.86 $ 24.81
----------------------------------------------------------------------------------------------------------------------------
Class C................ $ 32.63 $ 20.08 $ 29.14 $ 22.38 $ 15.46 $ 12.86 $ 24.79
----------------------------------------------------------------------------------------------------------------------------
Class Y................ $ 32.62 $ 20.12 $ 29.65 $ 22.58 $ 15.57 $ 12.86 $ 24.87
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
60
<PAGE>
EVERGREEN
Growth and Income Funds
Statements of Operations
Year Ended July 31, 1999
<TABLE>
<CAPTION>
Growth Income
Equity and and Small Cap
Blue Chip Income Income Growth Value Utility Value
Fund Fund Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (net of
foreign withholding
taxes of $46,022, $16,
$54,515, $870,216, $0,
$46,235 and $148,729
respectively).......... $ 4,722,057 $ 3,747,227 $25,381,863 $48,476,128 $ 7,522,522 $ 6,555,653 $ 16,297,198
Interest................ 1,774,574 713,992 9,034,014 2,457,087 2,325,521 338,159 1,892,638
-----------------------------------------------------------------------------------------------------------------------
Total investment
income................. 6,496,631 4,461,219 34,415,877 50,933,215 9,848,043 6,893,812 18,189,836
-----------------------------------------------------------------------------------------------------------------------
Expenses
Advisory fee............ 2,858,644 983,976 17,519,113 8,634,036 2,765,667 745,510 4,710,657
Distribution Plan
expenses............... 2,427,382 1,195,267 10,500,768 551,604 1,575,597 728,002 4,445,323
Administrative services
fees................... 70,063 25,962 0 0 0 38,111 241,139
Transfer agent fee...... 1,292,079 313,604 4,708,386 1,548,294 926,290 258,624 1,703,705
Trustees' fees and
expenses............... 9,418 2,573 39,379 16,895 5,604 2,972 18,800
Printing and postage
expenses............... 37,746 25,807 263,976 42,426 48,966 6,416 44,340
Custodian fee........... 143,810 43,949 546,186 257,376 89,582 40,800 260,422
Registration and filing
fees................... 52,225 31,941 93,004 50,096 40,815 44,299 52,152
Professional fees....... 23,873 18,685 43,206 24,213 18,345 17,842 25,252
Other................... 7,723 4,028 48,092 36,942 31,775 3,518 31,597
-----------------------------------------------------------------------------------------------------------------------
Total expenses......... 6,922,963 2,645,792 33,762,110 11,161,882 5,502,641 1,886,094 11,533,387
Less: Fee credits....... (20,715) (7,002) (86,188) (56,615) (29,582) (8,298) (39,780)
-----------------------------------------------------------------------------------------------------------------------
Net expenses........... 6,902,248 2,638,790 33,675,922 11,105,267 5,473,059 1,877,796 11,493,607
-----------------------------------------------------------------------------------------------------------------------
Net investment income
or (loss)............. (405,617) 1,822,429 739,955 39,827,948 4,374,984 5,016,016 6,696,229
-----------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions
Net realized gains or
losses on:
Securities............. 37,712,909 23,440,204 9,259,355 35,499,606 (23,967,030) 6,752,256 118,989,239
Foreign currency
related transactions.. 0 0 0 (307,874) 0 0 0
-----------------------------------------------------------------------------------------------------------------------
Net realized gains or
losses on securities
and foreign currency
related transactions.. 37,712,909 23,440,204 9,259,355 35,191,732 (23,967,030) 6,752,256 118,989,239
-----------------------------------------------------------------------------------------------------------------------
Net change in
unrealized gains or
losses on securities
and foreign currency
related transactions.. 33,829,162 (14,578,770) 65,034,177 23,905,207 19,057,835 23,219,707 (10,264,625)
-----------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions.. 71,542,071 8,861,434 74,293,532 59,096,939 (4,909,195) 29,971,963 108,724,614
-----------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ $71,136,454 $10,683,863 $75,033,487 $98,924,887 $ (534,211) $34,987,979 $115,420,843
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
61
<PAGE>
EVERGREEN
Growth and Income Funds
Statements of Changes in Net Assets
Year Ended July 31, 1999
<TABLE>
<CAPTION>
Equity Growth and Income and Small Cap
Blue Chip Income Income Growth Value Utility Value
Fund Fund Fund Fund Fund Fund Fund
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operations
Net investment
income.......... $ (405,617) $ 1,822,429 $ 739,955 $ 39,827,948 $ 4,374,984 $ 5,016,016 $ 6,696,229
Net realized
gains or losses
on securities
and foreign
currency related
transactions.... 37,712,909 23,440,204 9,259,355 35,191,732 (23,967,030) 6,752,256 118,989,239
Net change in
unrealized gains
or losses on
securities and
foreign currency
related
transactions.... 33,829,162 (14,578,770) 65,034,177 23,905,207 19,057,835 23,219,707 (10,264,625)
----------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
operations..... 71,136,454 10,683,863 75,033,487 98,924,887 (534,211) 34,987,979 115,420,843
----------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders
from
Net investment
income
Class A......... (302,117) (740,343) (618,275) (590,960) (1,241,862) (3,518,061) (4,093,423)
Class B......... 0 (652,879) 0 (1,904,614) (1,599,604) (1,359,833) (679,263)
Class C......... 0 (138,191) 0 (40,664) (319,899) (16,980) (9,129)
Class Y......... 0 (5,052) (2,594,824) (38,238,097) (1,709,875) (101,181) (1,708,800)
Net realized
gains
Class A......... (22,171,083) (6,542,911) (8,009,500) (1,297,466) (792,880) (10,191,078) (2,706,113)
Class B......... (10,585,999) (12,308,775) (27,000,584) (4,982,320) (1,601,327) (4,842,643) (1,893,542)
Class C......... (50,576) (2,556,957) (1,332,807) (108,434) (315,684) (52,067) (26,406)
Class Y......... 0 (19,678) (20,777,901) (79,113,403) (998,252) (304,419) (926,882)
----------------------------------------------------------------------------------------------------------------------------
Total
distributions
to
shareholders... (33,109,775) (22,964,786) (60,333,891) (126,275,958) (8,579,383) (20,386,262) (12,043,558)
----------------------------------------------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from
shares sold..... 414,184,932 30,188,056 386,163,830 30,217,265 205,428,609 17,451,359 66,555,976
Payment for
shares
redeemed........ (243,648,933) (72,875,118) (792,989,619) (182,203,597) (260,520,742) (24,384,302) (239,124,718)
Net asset value
of shares issued
in reinvestment
of
distributions... 29,469,348 21,454,983 57,025,779 114,061,954 7,125,678 17,326,400 10,412,391
Net asset value
of shares issued
in acquisition.. 0 0 0 185,281,144 0 0 0
----------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
capital share
transactions... 200,005,347 (21,232,079) (349,800,010) 147,356,766 (47,966,455) 10,393,457 (162,156,351)
----------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in
net assets.... 238,032,026 (33,513,002) (335,100,414) 120,005,695 (57,080,049) 24,995,174 (58,779,066)
----------------------------------------------------------------------------------------------------------------------------
Net assets
Beginning of
year............ 403,408,065 179,377,032 2,147,320,878 950,653,827 307,086,083 141,256,313 990,822,366
----------------------------------------------------------------------------------------------------------------------------
End of year..... $ 641,440,091 $145,864,030 $1,812,220,464 $1,070,659,522 $ 250,006,034 $166,251,487 $ 932,043,300
----------------------------------------------------------------------------------------------------------------------------
Undistributed
(overdistributed)
net investment
income.......... $ (14,545) $ 416,456 $ (55,326) $ 1,979,953 $ (11,613) $ (52,336) $ 70,300
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
62
<PAGE>
EVERGREEN
Growth and Income Funds
Statements of Changes in Net Assets
Year Ended July 31, 1998
<TABLE>
<CAPTION>
Equity Growth and Income and Small Cap
Blue Chip Income Income Growth Value Utility Value
Fund(a) Fund Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operations
Net investment
income............ $ 679,874 $ 822,896 $ 6,817,383 $ 43,781,531 $ 3,555,813 $ 4,733,754 $ 15,139,414
Net realized gains
on securities and
foreign currency
related
transactions...... 45,182,166 21,844,245 89,769,570 88,075,454 4,125,256 16,449,359 382,225,398
Net change in
unrealized gains
or losses on
securities and
foreign currency
related
transactions...... 18,537,520 (1,065,798) 54,312,938 (54,214,289) (17,882,408) 197,673 (290,896,507)
-----------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from operations.. 64,399,560 21,601,343 150,899,891 77,642,696 (10,201,339) 21,380,786 106,468,305
-----------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment
income............
Class A........... (572,879) (457,652) (1,133,476) (582,857) (585,054) (3,623,474) (4,928,756)
Class B........... (753,205) (258,225) 0 (1,826,984) (875,495) (1,224,827) (1,461,990)
Class C........... (10) (55,586) 0 (40,251) (178,326) (12,408) (15,608)
Class Y........... 0 (895) (5,146,565) (41,136,147) (1,701,966) (71,410) (11,332,854)
Net realized gains
Class A........... 0 (3,551,251) (7,164,362) (827,257) (213,842) (8,654,842) (79,220,878)
Class B........... (51,043,219) (7,082,118) (23,729,561) (3,160,159) (507,582) (3,545,873) (55,199,824)
Class C........... 0 (1,542,452) (1,087,731) (63,045) (100,773) (34,234) (713,832)
Class Y........... 0 (3,495) (23,937,007) (58,431,404) (758,969) (166,884) (82,980,185)
-----------------------------------------------------------------------------------------------------------------------------
Total
distributions to
shareholders..... (52,369,313) (12,951,674) (62,198,702) (106,068,104) (4,922,007) (17,333,952) (235,853,927)
-----------------------------------------------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from
shares sold....... 114,811,777 40,160,932 982,241,448 36,821,129 324,098,172 27,354,893 209,984,754
Payment for shares
redeemed.......... (99,812,547) (44,846,695) (402,984,465) (109,733,628) (64,094,835) (24,559,873) (1,216,417,479)
Net asset value of
shares issued in
reinvestment of
distributions..... 45,932,435 12,075,357 54,748,017 95,522,782 3,360,906 4,031,786 202,246,215
Net asset value of
shares issued in
acquisition....... 17,510,672 0 75,922,310 0 0 0 104,172,578
-----------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from capital
share
transactions..... 78,442,337 7,389,594 709,927,310 22,610,283 263,364,243 6,826,806 (700,013,932)
-----------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in
net assets...... 90,472,584 16,039,263 798,628,499 (5,815,125) 248,240,897 10,873,640 (829,399,554)
Net assets
Beginning of
period............ 312,935,481 163,337,769 1,348,692,379 956,468,952 58,845,186 130,382,673 1,820,221,920
-----------------------------------------------------------------------------------------------------------------------------
End of period...... $403,408,065 $179,377,032 $2,147,320,878 $ 950,653,827 $307,086,083 $141,256,313 $ 990,822,366
-----------------------------------------------------------------------------------------------------------------------------
Undistributed
(overdistributed)
net investment
income............ $ (14,966) $ 430,969 $ 360,888 $ 13,459,757 $ 173,362 $ (7,868) $ (82,792)
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the eleven months 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.
63
<PAGE>
EVERGREEN
Growth and Income Funds
Statement of Changes in Net Assets
Year Ended August 31, 1997
<TABLE>
<CAPTION>
Blue Chip
Fund
-------------------------------------------------------------------------------
<S> <C>
Operations
Net investment income........................................... $ 1,381,103
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 increase in net assets resulting from operations........... 79,121,391
-------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class B........................................................ (2,021,947)
From net realized gain
Class B........................................................ (30,039,258)
-------------------------------------------------------------------------------
Total distributions to shareholders............................ (32,061,205)
-------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold....................................... 103,353,377
Payment for shares redeemed..................................... (89,890,447)
Net asset value of shares issued in reinvestment of
distributions.................................................. 27,593,101
-------------------------------------------------------------------------------
Net increase in net assets resulting from capital share
transactions.................................................. 41,056,031
-------------------------------------------------------------------------------
Total increase in net assets.................................. 88,116,217
Net assets
Beginning of period............................................. 224,819,264
-------------------------------------------------------------------------------
End of period................................................... $312,935,481
-------------------------------------------------------------------------------
Undistributed net investment income............................. $ 16,188
</TABLE>
-------------------------------------------------------------------------------
See Combined Notes to Financial Statements.
64
<PAGE>
Combined Notes to Financial Statements
1. ORGANIZATION
The Evergreen Growth and Income Funds consist of Evergreen Blue Chip Fund
("Blue Chip Fund"), Evergreen Equity Income Fund ("Equity Income Fund") (for-
merly Evergreen Fund for Total Return), Evergreen Growth and Income Fund
("Growth and Income Fund"), Evergreen Income and Growth Fund ("Income and
Growth Fund"), Evergreen Small Cap Value Fund ("Small Cap Value Fund") (for-
merly Evergreen Small Cap Equity Income Fund), Evergreen Utility Fund ("Utility
Fund") and Evergreen Value Fund ("Value Fund"), (collectively, the "Funds").
Each 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 under the Investment Company Act
of 1940, as amended (the "1940 Act").
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 B shares purchased after January 1,
1997 will automatically convert to Class A shares after seven years. Class B
shares purchased prior to January 1, 1997 retain their existing conversion
rights. 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 institutional investors or Class Y shareholders of record of certain
other funds managed 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 fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
Securities traded on a national securities exchange or included on the Nasdaq
National Market System ("NMS") 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 and other secu-
rities traded in the over-the-counter market for which there has been no sale
are valued at the mean between the last reported bid and asked price. Corporate
bonds, U.S. government obligations, mortgage and other asset-backed securities
and other fixed-income securities are valued at prices provided by an indepen-
dent pricing service. In determining a price for normal institutional-size
transactions, the pricing service uses methods based on market transactions for
comparable securities and analysis of various relationships between similar se-
curities which are generally recognized by institutional traders. Securities
for which valuations are not readily available from an independent pricing
service (including restricted securities) are valued at fair value as deter-
mined in good faith according to procedures established by the Board of Trust-
ees. Short-term investments with remaining maturities of 60 days or less are
carried at amortized cost, which approximates market value.
B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. Each 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. 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 es-
tablished by the Board of Trustees.
65
<PAGE>
Combined Notes to Financial Statements(continued)
Pursuant to an exemptive order issued by the Securities and Exchange Commission
Blue Chip Fund and Equity Income Fund, along with certain other funds managed
by Evergreen Investment Management Company ("EIMC"), 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. 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 investment securities, other assets and liabilities at the
daily rate of exchange; purchases and sales of investment securities and income
and expenses at the rate of exchange prevailing on the respective dates of such
transactions. Net unrealized foreign exchange gains or losses resulting from
changes in foreign currency exchange rates are a component of net unrealized
gains or losses on securities and foreign currency related transactions. Net
realized foreign currency gains or losses on foreign currency related transac-
tions include foreign currency gains and losses between trade date and settle-
ment date on investment securities transactions, foreign currency related
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Funds and the amounts actually received. The por-
tion of foreign currency gains or losses related to fluctuations in exchange
rates between the initial purchase trade date and subsequent sale trade date is
included in realized gains or losses on securities.
D. 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
Funds bear 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
Statements of Assets and Liabilities.
E. Securities Lending
In order to generate income and to offset expenses, the Funds may lend portfo-
lio securities to brokers, dealers and other financial organizations. The
Fund's investment advisor will monitor the creditworthiness of such borrowers.
Loans of securities may not exceed 33 1/3% of a Fund's total assets and will be
collateralized by cash, letters of credit or U.S. Government securities that
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities, including accrued interest. The Fund
monitors the adequacy of the collateral daily and will require the borrower to
provide additional collateral in the event the value of the collateral falls
below 100% of the market value of the securities on loan. While such securities
are on loan, the borrower will pay a Fund any income accruing thereon, and the
Fund may invest any cash collateral received in portfolio securities, thereby
increasing its return. A Fund will have the right to call any such loan and ob-
tain the securities loaned at any time on five days' notice. Any gain or loss
in the market price of the loaned securities, which occurs during the term of
the loan, would affect a Fund and its investors. A Fund may pay fees in connec-
tion with such loans.
F. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums. Dividend income is recorded on the
ex-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 and capital
gains realized on some foreign securities may be subject to foreign withholding
taxes, which are accrued as applicable.
66
<PAGE>
Combined Notes to Financial Statements(continued)
G. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated invest-
ment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable in-
come and net capital gains, if any, to their shareholders. The Funds also in-
tend to avoid any excise tax liability by making the required distributions un-
der the Code. Accordingly, no provision for federal taxes is required. To the
extent that realized capital gains can be offset by capital loss carryforwards,
it is each Fund's policy not to distribute such gains.
H. Distributions
Distributions from net investment income for the Funds, except for the Utility
Fund, are declared and paid quarterly. Distributions from net investment income
for Utility Fund are declared and paid monthly. Distributions from net realized
capital gains, if any, are paid at least annually. Distributions to sharehold-
ers 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 significant 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, net realized foreign
currency gains or losses, certain realized losses on securities re-purchased
and for Value Fund, distributions made in connections with shareholder redemp-
tions.
I. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are pro-rated 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 for Small Cap Value Fund are amortized over a five-year
period on a straight-line basis. In the event any of the initial shares of the
Fund are redeemed by any holder during the five-year amortization period, re-
demption proceeds will be reduced by any unamortized organization expenses in
the same proportion as the number of initial shares being redeemed bears to the
number of initial shares outstanding at the time of the redemption. As of July
31, 1999 all organization expenses for Small Cap Value Fund have been fully am-
ortized.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
EIMC serves as the investment advisor for Blue Chip Fund and Equity Income
Fund. In return for providing investment advisory services to Blue Chip Fund
and Equity Income Fund, the Funds pay EIMC an advisory fee that is calculated
daily and paid monthly. The advisory fee for Blue Chip Fund is determined by
applying percentage rates, starting at 0.70% and declining to 0.35% per annum
as net assets increase, to the average daily net assets of the Fund. The advi-
sory fee for Equity Income Fund is calculated at an annual rate of 1.50% of Eq-
uity Income Fund's gross investment income plus an amount determined by apply-
ing percentage rates, starting at 0.60% and declining to 0.30% per annum as net
assets increase, to the average daily net assets of the Fund.
67
<PAGE>
Combined Notes to Financial Statements(continued)
Evergreen Asset Management Corp. ("EAMC"), a wholly-owned subsidiary of First
Union, serves as the investment advisor to Growth and Income Fund, Income and
Growth Fund and Small Cap Value Fund and is paid an advisory fee that is calcu-
lated daily and paid monthly based on the Fund's average daily net assets, 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>
Lieber & Company, an affiliate of First Union, provides investment sub-advisory
services to Growth and Income Fund, Income and Growth Fund and Small Cap Value
Fund and also provides brokerage services with respect to substantially all se-
curity transactions of the Funds effected on the New York or American Stock Ex-
changes. For the year ended July 31, 1999, Growth and Income Fund, Income and
Growth Fund and Small Cap Value Fund incurred broker commissions of $2,145,290,
$1,734,853, and $322,591, respectively, with Lieber & Company. Lieber & Company
is reimbursed by EAMC for providing investment sub-advisory services at no ad-
ditional expense to the Funds.
Evergreen Investment Management ("EIM"), formerly Capital Management Group, a
division of First Union National Bank ("FUNB"), serves as the investment advi-
sor to Utility Fund and Value Fund and is paid an advisory fee that is calcu-
lated daily and paid monthly at an annual rate of 0.50% of the Fund's average
daily net assets.
Evergreen Investment Services ("EIS"), a subsidiary of First Union, is the ad-
ministrator and The BISYS Group, Inc. ("BISYS") is the sub-administrator to the
Funds. As administrator, EIS provides the Funds with facilities, equipment and
personnel. As sub-administrator to the Funds, BISYS provides the officers of
the Funds. Officers of the Funds and affiliated Trustees receive no compensa-
tion directly from the Funds.
The administrator and sub-administrator for Utility Fund and Value Fund are en-
titled to an annual fee based on the average daily net assets of the funds ad-
ministered by EIS for which First Union or its investment advisory subsidiaries
are also the investment advisors. The administration fee is calculated by ap-
plying percentage rates, which start at 0.05% and decline to 0.01% per annum as
net assets increase, to the average daily net assets of the Fund. The sub-ad-
ministration fee is calculated by applying percentage rates, which start at
0.01% and decline to 0.004% per annum as net assets increase, to the average
daily net assets of the Fund.
For the year ended July 31, 1999, Blue Chip Fund and Equity Income Fund reim-
bursed EIMC for certain accounting and administrative expenses amounting to
$70,063 and $25,962, respectively. For Growth and Income Fund, Income and
Growth Fund and Small Cap Value Fund, the administration and sub-administration
fee is paid by the investment advisor and is not a Fund expense. For the year
ended July 31, 1999, Utility Fund and Value Fund paid or accrued to EIS and
BISYS the following amounts for administrative and sub-administrative services:
<TABLE>
<CAPTION>
Administration Sub-administration
Fee Fee
------------------------------
<S> <C> <C>
Utility Fund.................. $ 30,350 $ 7,761
Value Fund.................... 192,070 49,069
</TABLE>
Evergreen Service Company ("ESC"), an indirect, wholly-owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the
Funds.
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly-owned subsidiary of BISYS, serves
as principal underwriter to the Funds.
Each Fund has adopted Distribution Plans, as allowed by Rule 12b-1 of the 1940
Act, for each class of shares, except Class 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
68
<PAGE>
Combined Notes to Financial Statements(continued)
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, cur-
rently 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 av-
erage daily net assets of each class. Distribution Plan expenses are calculated
daily and paid at least quarterly.
During the year ended July 31, 1999, amounts paid or accrued to EDI pursuant to
each Fund's Class A, Class B and Class C Distribution Plans were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
-------------------------------
<S> <C> <C> <C>
Blue Chip Fund.................. $ 774,362 $1,637,741 $ 15,279
Equity Income Fund.............. 127,494 882,105 185,668
Growth and Income Fund.......... 676,478 9,384,697 439,593
Income and Growth Fund.......... 34,283 506,538 10,783
Small Cap Value Fund............ 149,687 1,185,976 239,934
Utility Fund.................... 245,543 476,331 6,128
Value Fund...................... 1,154,951 3,244,968 45,404
</TABLE>
With respect to Class B and Class C shares, the principal underwriter may pay
distribution fees greater than the allowable annual amounts each Fund is per-
mitted to pay under the Distribution Plans.
Each of the Distribution Plans may be terminated at any time by vote of the In-
dependent Trustees or by vote of a majority of the outstanding voting shares of
the respective class.
5. REORGANIZATION OF EVERGREEN VALUE FUND
On January 21, 1998, Value Fund, Class Y shares, 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 Fund, Class Y shares. In turn, the
assets were transferred to Evergreen Select Diversified Value Fund Class I
shares, an institutional balanced 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 Value 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 Value Fund and are not re-
quired to be distributed for federal income tax purposes.
6. ACQUISITIONS
Effective on the close of business on February 27, 1998, Blue Chip Fund ac-
quired substantially all of the assets and assumed certain liabilities of
Blanchard Growth & Income Fund, an open-end management investment company reg-
istered under the 1940 Act, in a tax-free exchange of Class A shares of Blue
Chip Fund.
Effective on the close of business on February 27, 1998, Growth and Income Fund
acquired substantially all of the assets and assumed certain liabilities of
Virtus Style Manager Fund, an open-end management investment company registered
under the 1940 Act, in an exchange of Class Y shares of Growth and Income.
Effective on the close of business on February 27, 1998, Value Fund acquired
substantially all of the assets and assumed certain liabilities of Virtus Style
Manager; Large Cap Fund, an open-end management investment company registered
under the 1940 Act, in an exchange of Class A and Class Y shares of Value Fund.
Effective July 31, 1999, Income and Growth Fund acquired substantially all of
the assets and assumed certain liabilities of Evergreen American Retirement
Fund, an open-end management investment company registered under the 1940 Act
in an exchange of Class A, Class B, Class C and Class Y shares of Income and
Growth Fund.
69
<PAGE>
Combined Notes to Financial Statements(continued)
These conversions and acquisitions were accomplished by a tax-free exchange of
the respective shares of each Fund. The value of net assets acquired, number of
shares issued, unrealized appreciation acquired and the aggregate net assets of
each Fund immediately after the acquisition were as follows:
<TABLE>
<CAPTION>
Value of Net Number of Unrealized Net Assets
Acquiring Fund Acquired Fund Assets Acquired Shares Issued Appreciation After Acquisition
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Blue Chip Fund.......... Blanchard Growth & Income Fund $ 17,510,672 596,231 $ 5,643,636 $ 365,442,145
Growth and Income Fund.. Virtus Style Manager Fund 75,922,310 2,555,807 10,049,313 1,945,327,504
Value Fund.............. Virtus Style Manager; Large Cap Fund 104,172,578 4,034,510 28,824,982 1,097,437,360
Income and Growth Fund.. Evergreen American Retirement Fund 185,281,144 8,258,910 20,212,515 1,070,659,522
</TABLE>
7. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class A, Class B, Class C and Class Y. Transactions in shares of
the Funds were as follows:
Blue Chip Fund
<TABLE>
<CAPTION>
Year Ended July 31,
----------------------------------------------------
1999 1998 (a)
------------------------- -------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 7,069,269 $ 215,936,462 812,276 $ 24,596,278
Automatic conversion of
Class B shares to Class
A shares............... 0 0 9,140,449 250,374,069
Shares redeemed......... (5,479,684) (162,273,843) (1,203,287) (36,027,532)
Shares issued in
reinvestment of
distributions.......... 682,121 19,382,250 14,697 447,340
Shares issued in
acquisition of
Blanchard Growth &
Income Fund............ 0 0 596,231 17,510,672
------------------------------------------------------------------------------
Net increase............ 2,271,706 73,044,869 9,360,366 256,900,827
------------------------------------------------------------------------------
Class B
Shares sold............. 6,218,762 192,571,481 3,020,854 89,396,767
Automatic conversion of
Class B shares to Class
A shares............... 0 0 (9,140,449) (250,374,069)
Shares redeemed......... (2,617,336) (78,544,225) (2,178,914) (63,756,605)
Shares issued in
reinvestment of
distributions.......... 355,147 10,036,524 1,678,649 45,485,085
------------------------------------------------------------------------------
Net increase
(decrease)............. 3,956,573 124,063,780 (6,619,860) (179,248,822)
------------------------------------------------------------------------------
Class C
Shares sold............. 157,200 4,882,919 26,608 818,732
Shares redeemed......... (93,639) (2,830,715) (949) (28,410)
Shares issued in
reinvestment of
distributions.......... 1,785 50,574 0 10
------------------------------------------------------------------------------
Net increase............ 65,346 2,102,778 25,659 790,332
------------------------------------------------------------------------------
Class Y (b)
Shares sold............. 24,198 794,070 0 0
Shares redeemed......... (5) (150) 0 0
------------------------------------------------------------------------------
Net increase............ 24,193 793,920 0 0
------------------------------------------------------------------------------
Net increase............ $ 200,005,347 $ 78,442,337
</TABLE>
-------------------------------------------------------------------------------
(a) For the eleven months ended July 31, 1998. The Fund changed its fiscal year
end from August 31 to July 31, effective July 31, 1998.
(b) For the period from April 30, 1999 (commencement of class operations) to
July 31, 1999.
70
<PAGE>
Combined Notes to Financial Statements(continued)
Equity Income Fund
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------------------------
1999 1998
------------------------ ------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 377,792 $ 7,479,412 405,327 $ 8,477,778
Automatic conversion of
Class B shares to Class A
shares................... 66,574 1,275,463 0 0
Shares redeemed........... (751,644) (14,848,362) (476,275) (9,979,937)
Shares issued in
reinvestment of
distributions............ 363,322 6,893,908 192,513 3,761,047
------------------------------------------------------------------------------
Net increase.............. 56,044 800,421 121,565 2,258,888
------------------------------------------------------------------------------
Class B
Shares sold............... 906,121 18,055,614 1,312,799 27,194,052
Automatic conversion of
Class B shares to Class A
shares................... (66,948) (1,275,463) 0 0
Shares redeemed........... (2,490,795) (48,904,031) (1,328,176) (27,515,826)
Shares issued in
reinvestment of
distributions............ 637,607 12,007,710 348,818 6,752,535
------------------------------------------------------------------------------
Net increase (decrease)... (1,014,015) (20,116,170) 333,441 6,430,761
------------------------------------------------------------------------------
Class C
Shares sold............... 191,619 3,838,714 212,115 4,372,780
Shares redeemed........... (447,839) (8,832,781) (349,166) (7,245,174)
Shares issued in
reinvestment of
distributions............ 134,147 2,529,177 80,168 1,557,317
------------------------------------------------------------------------------
Net decrease.............. (122,073) (2,464,890) (56,883) (1,315,077)
------------------------------------------------------------------------------
Class Y
Shares sold............... 40,395 814,316 5,560 116,322
Shares redeemed........... (14,451) (289,944) (5,138) (105,758)
Shares issued in
reinvestment of
distributions............ 1,271 24,188 228 4,458
------------------------------------------------------------------------------
Net increase.............. 27,215 548,560 650 15,022
------------------------------------------------------------------------------
Net increase (decrease)... $(21,232,079) $ 7,389,594
</TABLE>
-------------------------------------------------------------------------------
Growth and Income Fund
<TABLE>
<CAPTION>
Year Ended July 31,
----------------------------------------------------
1999 1998
------------------------- -------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 6,356,759 $ 181,231,854 7,300,804 $ 214,673,895
Automatic conversion of
Class B shares to Class
A shares............... 71,639 2,052,789 0 0
Shares redeemed......... (8,431,174) (239,858,978) (3,520,816) (103,702,934)
Shares issued in
reinvestment of
distributions.......... 300,493 8,412,371 287,118 8,071,240
------------------------------------------------------------------------------
Net increase
(decrease)............. (1,702,283) (48,161,964) 4,067,106 119,042,201
------------------------------------------------------------------------------
Class B
Shares sold............. 4,273,030 116,938,483 16,476,196 481,475,327
Automatic conversion of
Class B shares to Class
A shares............... (72,390) (2,052,789) 0 0
Shares redeemed......... (9,163,377) (254,977,395) (2,725,060) (79,579,083)
Shares issued in
reinvestment of
distributions.......... 945,090 26,226,276 837,176 23,198,143
------------------------------------------------------------------------------
Net increase
(decrease)............. (4,017,647) (113,865,425) 14,588,312 425,094,387
------------------------------------------------------------------------------
Class C
Shares sold............. 414,303 11,348,877 1,131,563 32,986,181
Shares redeemed......... (942,556) (26,271,690) (317,773) (9,241,480)
Shares issued in
reinvestment of
distributions.......... 45,443 1,261,465 38,010 1,053,643
------------------------------------------------------------------------------
Net increase
(decrease)............. (482,810) (13,661,348) 851,800 24,798,344
------------------------------------------------------------------------------
Class Y
Shares sold............. 2,753,486 76,644,616 8,658,868 253,053,137
Shares redeemed......... (9,565,395) (271,881,556) (7,135,642) (210,408,060)
Shares issued in
reinvestment of
distributions.......... 753,230 21,125,667 797,581 22,424,991
Shares issued in
acquisition of Virtus
Style Manager Fund..... 0 0 2,555,807 75,922,310
------------------------------------------------------------------------------
Net increase
(decrease)............. (6,058,679) (174,111,273) 4,876,614 140,992,378
------------------------------------------------------------------------------
Net increase
(decrease)............. $(349,800,010) $ 709,927,310
</TABLE>
-------------------------------------------------------------------------------
71
<PAGE>
Combined Notes to Financial Statements(continued)
Income and Growth Fund
<TABLE>
<CAPTION>
Year Ended July 31,
---------------------------------------------------
1999 1998
------------------------- ------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold.............. 546,531 $ 12,209,031 204,121 $ 4,959,183
Shares redeemed.......... (692,292) (15,388,197) (112,612) (2,739,976)
Shares issued in
reinvestment of
distributions........... 84,216 1,766,406 56,318 1,325,926
Shares issued in
acquisition of Evergreen
American Retirement
Fund.................... 996,586 22,495,315 0 0
------------------------------------------------------------------------------
Net increase............. 935,041 21,082,555 147,827 3,545,133
------------------------------------------------------------------------------
Class B
Shares sold.............. 267,996 5,756,610 633,299 15,295,755
Shares redeemed.......... (684,457) (14,490,566) (310,711) (7,455,874)
Shares issued in
reinvestment of
distributions........... 307,396 6,393,524 198,183 4,626,554
Shares issued in
acquisition of Evergreen
American Retirement
Fund.................... 6,014,738 134,624,702 0 0
------------------------------------------------------------------------------
Net increase............. 5,905,673 132,284,270 520,771 12,466,435
------------------------------------------------------------------------------
Class C
Shares sold.............. 8,976 194,095 27,805 674,067
Shares redeemed.......... (24,103) (510,097) (16,763) (402,792)
Shares issued in
reinvestment of
distributions........... 6,072 126,280 3,708 86,620
Shares issued in
acquisition of Evergreen
American Retirement
Fund.................... 66,207 1,481,914 0 0
------------------------------------------------------------------------------
Net increase............. 57,152 1,292,192 14,750 357,895
------------------------------------------------------------------------------
Class Y
Shares sold.............. 568,224 12,057,529 641,797 15,892,124
Shares redeemed.......... (7,163,498) (151,814,737) (4,066,667) (99,134,986)
Shares issued in
reinvestment of
distributions........... 5,039,388 105,775,744 3,795,361 89,483,682
Shares issued in
acquisition of Evergreen
American Retirement
Fund.................... 1,181,379 26,679,213 0 0
------------------------------------------------------------------------------
Net increase (decrease).. (374,507) (7,302,251) 370,491 6,240,820
------------------------------------------------------------------------------
Net increase............. $ 147,356,766 $ 22,610,283
</TABLE>
-------------------------------------------------------------------------------
Small Cap Value Fund
<TABLE>
<CAPTION>
Year Ended July 31,
---------------------------------------------------
1999 1998
------------------------- ------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold.............. 10,088,863 $ 146,506,778 4,328,382 $ 72,341,164
Automatic conversion of
Class B shares to Class
A shares................ 122,150 1,811,086 0 0
Shares redeemed.......... (9,965,619) (143,998,401) (1,207,491) (20,046,565)
Shares issued in
reinvestment of
distributions........... 136,847 1,949,647 45,725 753,748
------------------------------------------------------------------------------
Net increase............. 382,241 6,269,110 3,166,616 53,048,347
------------------------------------------------------------------------------
Class B
Shares sold.............. 2,288,743 33,166,258 8,426,642 140,304,860
Automatic conversion of
Class B shares to Class
A shares................ (122,803) (1,811,086) 0 0
Shares redeemed.......... (3,528,826) (50,084,066) (803,676) (13,366,175)
Shares issued in
reinvestment of
distributions........... 213,282 3,057,499 79,883 1,323,369
------------------------------------------------------------------------------
Net increase (decrease).. (1,149,604) (15,671,395) 7,702,849 128,262,054
------------------------------------------------------------------------------
Class C
Shares sold.............. 709,408 10,225,143 1,760,785 29,361,569
Shares redeemed.......... (947,075) (13,384,026) (281,072) (4,699,621)
Shares issued in
reinvestment of
distributions........... 41,741 597,766 16,111 266,637
------------------------------------------------------------------------------
Net increase (decrease).. (195,926) (2,561,117) 1,495,824 24,928,585
------------------------------------------------------------------------------
Class Y
Shares sold.............. 1,069,945 15,530,430 4,923,790 82,090,579
Shares redeemed.......... (3,645,558) (53,054,249) (1,558,339) (25,982,474)
Shares issued in
reinvestment of
distributions........... 105,065 1,520,766 61,107 1,017,152
------------------------------------------------------------------------------
Net increase (decrease).. (2,470,548) (36,003,053) 3,426,558 57,125,257
------------------------------------------------------------------------------
Net increase (decrease).. $ (47,966,455) $263,364,243
</TABLE>
-------------------------------------------------------------------------------
72
<PAGE>
Combined Notes to Financial Statements(continued)
Utility Fund
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------------------------
1999 1998
------------------------ ------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 429,844 $ 5,133,429 1,266,778 $ 14,554,038
Automatic Conversion of
Class B Shares to Class A
Shares................... 11,373 126,409 0 0
Shares redeemed........... (1,117,587) (13,062,066) (1,407,032) (16,718,124)
Shares issued in
reinvestment of
distributions............ 1,006,678 11,457,282 243,720 2,889,027
------------------------------------------------------------------------------
Net increase.............. 330,308 3,655,054 103,466 724,941
------------------------------------------------------------------------------
Class B
Shares sold............... 704,486 8,209,032 974,483 11,445,917
Automatic Conversion of
Class B Shares to Class A
Shares................... (11,366) (126,409) 0 0
Shares redeemed........... (650,786) (7,545,094) (551,773) (6,555,500)
Shares issued in
reinvestment of
distributions............ 502,546 5,718,575 93,247 1,107,337
------------------------------------------------------------------------------
Net increase.............. 544,880 6,256,104 515,957 5,997,754
------------------------------------------------------------------------------
Class C
Shares sold............... 162,138 1,808,980 13,355 157,299
Shares redeemed........... (140,732) (1,555,150) (6,139) (72,067)
Shares issued in
reinvestment of
distributions............ 5,627 64,145 980 11,662
------------------------------------------------------------------------------
Net increase.............. 27,033 317,975 8,196 96,894
------------------------------------------------------------------------------
Class Y
Shares sold............... 182,271 2,173,509 100,754 1,197,639
Shares redeemed........... (168,716) (2,095,583) (100,753) (1,214,182)
Shares issued in
reinvestment of
distributions............ 7,586 86,398 2,014 23,760
------------------------------------------------------------------------------
Net increase.............. 21,141 164,324 2,015 7,217
------------------------------------------------------------------------------
Net increase.............. $ 10,393,457 $ 6,826,806
</TABLE>
-------------------------------------------------------------------------------
Value Fund
<TABLE>
<CAPTION>
Year Ended July 31,
-------------------------------------------------------
1999 1998
------------------------- ----------------------------
Shares Amount Shares Amount
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 1,304,364 $ 30,874,288 1,587,252 $ 40,192,765
Shares redeemed......... (4,351,247) (100,747,544) (2,758,581) (68,967,117)
Shares issued in
reinvestment of
distributions.......... 285,275 6,540,493 3,563,487 81,070,016
Shares issued in the
acquisition of Virtus
Style Manager; Large
Cap Fund............... 0 0 3,109,878 80,290,504
--------------------------------------------------------------------------------
Net increase
(decrease)............. (2,761,608) (63,332,763) 5,502,036 132,586,168
--------------------------------------------------------------------------------
Class B
Shares sold............. 1,041,242 24,036,781 2,346,146 58,297,020
Shares redeemed......... (2,488,104) (57,458,861) (1,290,986) (31,809,835)
Shares issued in
reinvestment of
distributions.......... 111,928 2,520,116 2,433,973 55,281,719
--------------------------------------------------------------------------------
Net increase
(decrease)............. (1,334,934) (30,901,964) 3,489,133 81,768,904
--------------------------------------------------------------------------------
Class C
Shares sold............. 70,058 1,628,040 170,261 4,223,998
Shares redeemed......... (115,631) (2,643,004) (72,103) (1,793,135)
Shares issued in
reinvestment of
distributions.......... 1,529 34,419 31,015 701,653
--------------------------------------------------------------------------------
Net increase
(decrease)............. (44,044) (980,545) 129,173 3,132,516
--------------------------------------------------------------------------------
Class Y
Shares sold............. 444,392 10,016,867 4,385,718 107,270,971
Shares redeemed......... (3,438,601) (78,275,309) (46,491,232) (1,113,847,392)
Shares issued in
reinvestment of
distributions.......... 57,625 1,317,363 2,771,230 65,192,827
Shares issued in the
acquisition of Virtus
Style Manager; Large
Cap Fund............... 0 0 924,632 23,882,074
--------------------------------------------------------------------------------
Net decrease............ (2,936,584) (66,941,079) (38,409,652) (917,501,520)
--------------------------------------------------------------------------------
Net decrease............ $(162,156,351) $ (700,013,932)
</TABLE>
-------------------------------------------------------------------------------
73
<PAGE>
Combined Notes to Financial Statements(continued)
8. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the year ended July 31, 1999:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
-------------------------------
<S> <C> <C>
Blue Chip Fund.................... $ 691,092,760 $ 496,578,942
Equity Income Fund................ 154,162,061 179,433,699
Growth and Income Fund............ 708,144,201 764,675,175
Income and Growth Fund............ 1,064,329,029 1,287,369,213
Small Cap Value Fund.............. 145,907,884 186,120,686
Utility Fund...................... 66,983,335 72,352,761
Value Fund........................ 987,445,108 1,086,666,293
</TABLE>
During the year ended July 31, 1999 Blue Chip Fund and Equity Income Fund
loaned securities to certain brokers who paid the Funds a negotiated lenders'
fee. These fees are included in interest income. At July 31, 1999, the value of
the securities on loan from Blue Chip Fund and Equity Income Fund were
$37,178,200 and $3,284,650, respectively and the value of collateral was
$37,702,000 and $3,379,400, respectively.
On July 31, 1999, the composition of unrealized appreciation and depreciation
of securities based on the aggregate cost of securities for federal income tax
purposes was as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Tax Unrealized Unrealized Appreciation
Cost Appreciation Depreciation (Depreciation)
----------------------------------------------------
<S> <C> <C> <C> <C>
Blue Chip
Fund.......... $ 553,635,767 $126,758,348 $ 8,414,414 $118,343,934
Equity Income
Fund.......... 120,383,433 29,723,219 1,873,594 27,849,625
Growth and
Income Fund... 1,312,954,916 534,160,665 40,263,344 493,897,321
Income and
Growth Fund... 977,437,971 140,962,118 52,511,236 88,450,882
Small Cap Value
Fund.......... 238,331,718 33,218,438 24,546,594 8,671,844
Utility Fund... 125,513,045 46,070,105 5,677,488 40,392,617
Value Fund..... 726,528,589 214,678,014 9,294,733 205,383,281
</TABLE>
As of July 31, 1999, Income and Growth Fund and Small Cap Value Fund had capi-
tal loss carryovers for federal income tax purposes of $102,000 expiring July
31, 2005 and $1,083,259 expiring July 31, 2007, respectively.
Income and Growth Fund's capital loss carryforward was created as a result of
the July 31, 1999 acquisition of substantially all of the assets and assumption
of certain liabilities of Evergreen American Retirement Fund. In accordance
with income tax regulations, certain Income and Growth Fund gains may not be
used to offset this capital loss carryforward. In addition to capital loss car-
ryovers, capital losses incurred after October 31 within a fund's fiscal year
end are deemed to arise on the first business day of the fund's following fis-
cal year. For the fiscal year ended July 31, 1999, Small Cap Value Fund has in-
curred and elected to defer $22,670,202 of capital loss.
9. EXPENSE OFFSET ARRANGEMENTS
The Funds have entered into expense offset arrangements with ESC and their cus-
todian whereby credits realized as a result of uninvested cash balances were
used to reduce a portion of each Fund's related expenses. The assets deposited
with ESC and the custodian under these expense offset arrangements could have
been invested in income-producing assets. The amount of fee credits received by
each Fund and the impact on each Fund's expense ratio represented as a percent-
age of its average daily net assets were as follows:
<TABLE>
<CAPTION>
Total Fee % of Average
Credits Received Daily Net Assets
-------------------------------
<S> <C> <C>
Blue Chip Fund................ $20,715 0.00%
Equity Income Fund............ 7,002 0.00%
Growth and Income Fund........ 86,188 0.00%
Income and Growth Fund........ 56,615 0.01%
Small Cap Value Fund.......... 29,582 0.01%
Utility Fund.................. 8,298 0.01%
Value Fund.................... 39,780 0.00%
</TABLE>
74
<PAGE>
Combined Notes to Financial Statements(continued)
10. DEFERRED TRUSTEES' FEES
Each Independent Trustee of each 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 Funds. 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.
11. 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 Markets Group of First Union was paid a one-time arrangement fee of
$27,500. State Street serves as administrative agent for the Banks, and as ad-
ministrative 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 were unaffected. This
agreement terminated on July 27, 1999.
On July 27, 1999, all of the Evergreen Funds and a group of banks (the "Lend-
ers") entered into credit agreement. Under this agreement, the Lenders provide
an unsecured revolving credit commitment in the aggregate amount of $1.050 bil-
lion. The credit facility is allocated, under the terms of the financing agree-
ment, among the Lenders. The credit facility is accessed by the Funds for tem-
porary or emergency purposes to fund the redemption of their shares or as gen-
eral working capital as permitted by each Fund's borrowing restrictions.
Borrowings under this facility bear interest at 0.75% per annum above the Fed-
eral Funds rate (1.50% per annum above the Federal Funds rate during the period
from and including December 1, 1999 through and including January 31, 2000). A
commitment fee of 0.10% per annum is incurred on the average daily unused por-
tion of the revolving credit commitment. The commitment fee is allocated to all
funds. For its assistance in arranging this financing agreement, First Union
Capital Markets Corp. was paid a one-time arrangement fee of $250,000. State
Street serves as paying agent for the funds, and as paying agent is entitled to
a fee of $20,000 per annum which is allocated to all of the funds.
During the year ended July 31, 1999, the Small Cap Value Fund had average
borrowings outstanding of $256,000 at a rate of 5.94%.
12. CONCENTRATION OF CREDIT RISK
Utility Fund invests a substantial portion of its assets in issuers in the
utilities industry. Therefore, it may be more affected by economic and politi-
cal developments in that industry than would be a comparable general equity
fund.
75
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders
Evergreen Equity Trust
We have audited the accompanying statements of assets and liabilities, includ-
ing the schedules of investments of the Evergreen Blue Chip Fund, Evergreen Eq-
uity Income Fund (formerly, Evergreen Fund for Total Return), Evergreen Growth
and Income Fund, Evergreen Income and Growth Fund, Evergreen Small Cap Value
Fund (formerly, Evergreen Small Cap Equity Fund), Evergreen Utility Fund, and
Evergreen Value Fund, portfolios of the Evergreen Equity Trust, as of July 31,
1999, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the years or periods in the two
year period then ended, except the Evergreen Income and Growth Fund for the
year ended July 31, 1998, see below, and financial highlights for each of the
years or periods as described on pages 28 to 41. These financial statements and
financial highlights are the responsibility of the Funds' management. Our re-
sponsibility is to express an opinion on these financial statements and finan-
cial highlights based on our audits. For the Evergreen Income and Growth Fund,
the statement of changes in net assets for the year ended July 31, 1998 and fi-
nancial highlights for each of the years or periods ended prior to the year
ended July 31, 1999 were audited by other auditors, whose report dated Septem-
ber 15, 1998, expressed an unqualified opinion on that financial statement and
financial highlights.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform our audits to obtain
reasonable assurance about whether the financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1999 by correspondence with the custodian and brokers. An audit also in-
cludes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presenta-
tion. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ever-
green Equity Trust as of July 31, 1999, the results of their operations,
changes in their net assets and financial highlights for each of the years or
periods described above in conformity with generally accepted accounting prin-
ciples.
/s/ KPMG LLP
Boston, Massachusetts
September 3, 1999
76
<PAGE>
Additional Information (Unaudited)
YEAR 2000
Like other investment companies, the Funds could be adversely affected if the
computer systems used by the Funds' investment advisors and the Funds' other
service providers are not able to perform their intended functions effectively
after 1999 because of the inability of computer software to distinguish the
year 2000 from the year 1900. The Funds' investment advisors are taking steps
to address this potential year 2000 problem with respect to the computer sys-
tems that they use and to obtain satisfactory assurances that comparable steps
are being taken by the Funds' other major service providers. At this time, how-
ever, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Funds from this problem.
DISTRIBUTIONS TO SHAREHOLDERS
During the period from August 1, 1999 to September 3, 1999, the Utility Fund
declared the following distributions from net investment income:
<TABLE>
<CAPTION>
Record Date Payable Date Class A Class B Class C Class Y
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8/30/1999 8/31/1999 $0.031 $0.023 $0.023 $0.034
</TABLE>
These distributions are not reflected in these financial statements.
FEDERAL TAX STATUS OF DISTRIBUTIONS
Pursuant to section 852 of the Internal Revenue Code, the Funds have
designated the following amounts as long-term capital gain distribu-
tions for the fiscal year ended July 31, 1999.
<TABLE>
<CAPTION>
Distribution Per Share
--------------------
<S> <C> <C>
Blue Chip Fund........................... $25,231,833 $1.833
Equity Income Fund....................... 19,688,984 2.513
Growth and Income Fund................... 43,791,535 0.596
Income and Growth Fund................... 48,834,304 1.223
Small Cap Value Fund..................... 2,069,527 0.100
Utility Fund............................. 15,390,207 1.277
Value Fund............................... 5,552,942 0.132
</TABLE>
For corporate shareholders, the following percentages of ordinary in-
come dividends paid during the fiscal year ended July 31, 1999 quali-
fied for the dividends and received deductions.
<TABLE>
<S> <C>
Blue Chip Fund........................................... 23.65%
Equity Income Fund....................................... 83.22%
Growth and Income Fund................................... 52.35%
Income and Growth Fund................................... 51.37%
Small Cap Value Fund..................................... 94.36%
Utility Fund............................................. 100.00%
Value Fund............................................... 100.00%
</TABLE>
77
<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
Connecticut Municipal Bond Fund
Florida Municipal Bond Fund
Florida High Income Municipal Bond Fund
Georgia Municipal Bond Fund
Maryland Municipal Bond Fund
New Jersey 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 Bond Fund
U.S. Government Fund
Diversified Bond Fund
Strategic Income Fund
High Yield Bond Fund
Balanced
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
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
91150 543691 09/99
---------------
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[LOGO OF EVERGREEN APPEARS HERE] PAID
PERMIT NO. 19
HUDSON, MA
200 Berkeley Street ---------------
Boston, MA 02116
<PAGE>
Semiannual Report
as of January 31, 2000
EVERGREEN GROWTH AND INCOME FUNDS
[LOGO OF MUTUAL
[LOGO OF EVERGREEN FUNDS] FUND SERVICE AWARD]
<PAGE>
Table of Contents
Letter to Shareholders .................................................... 1
Evergreen Blue Chip Fund
Fund at a Glance ........................................................ 2
Portfolio Manager Interview ............................................. 3
Evergreen Equity Income Fund
Fund at a Glance ........................................................ 6
Portfolio Manager Interview ............................................. 7
Evergreen Growth and Income Fund
Fund at a Glance ........................................................ 10
Portfolio Manager Interview ............................................. 11
Evergreen Income and Growth Fund
Fund at a Glance ........................................................ 14
Portfolio Manager Interview ............................................. 15
Evergreen Small Cap Value Fund
Fund at a Glance ........................................................ 18
Portfolio Manager Interview ............................................. 19
Evergreen Utility Fund
Fund at a Glance ........................................................ 21
Portfolio Manager Interview ............................................. 22
Evergreen Value Fund
Fund at a Glance ........................................................ 24
Portfolio Manager Interview ............................................. 25
Financial Highlights
Evergreen Blue Chip Fund ................................................ 27
Evergreen Equity Income Fund ............................................ 29
Evergreen Growth and Income Fund ........................................ 31
Evergreen Income and Growth Fund ........................................ 33
Evergreen Small Cap Value Fund .......................................... 35
Evergreen Utility Fund .................................................. 37
Evergreen Value Fund .................................................... 39
Schedule of Investments
Evergreen Blue Chip Fund ................................................ 41
Evergreen Equity Income Fund ............................................ 43
Evergreen Growth and Income Fund ........................................ 45
Evergreen Income and Growth Fund ........................................ 49
Evergreen Small Cap Value Fund .......................................... 53
Evergreen Utility Fund .................................................. 55
Evergreen Value Fund .................................................... 57
Statements of Assets and Liabilities ...................................... 59
Statements of Operations .................................................. 60
Statements of Changes in Net Assets ....................................... 61
Combined Notes to Financial Statements .................................... 63
Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies with
approximately $80 billion in assets under management.
With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This semiannual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
Mutual Funds: ARE NOT FDIC INSURED May lose value . Not bank guaranteed
Evergreen Distributor,Inc.
Evergreen Funds(SM) is a service mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
March 2000
[PHOTO]
William M. Ennis
President and CEO
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Growth and Income Funds semiannual
report, which covers the six-month period ended January 31, 2000.
Uncertainty Over Interest Rates Influences the Markets
The stock market's dramatic movement during the past year has occurred despite
continuing concerns about rising interest rates and a Federal Reserve Bank
policy that appears focused on containing the high rate of economic expansion.
It is this combination of stretched valuations and rising interest rates that
has us entering the new year with a tone of caution and greater focus on risk
management in portfolio structuring.
By the third quarter of 1999, rising interest rates dampened performance of
stocks across the board. Investors' inflation fears and continued doubts about
the ability of U.S. companies to sustain significant growth in earnings prompted
a late year sell-off. The Federal Reserve Bank's "tightening bias" leads many to
anticipate further interest rate increases in order to stem even the slightest
inflationary pressure.
Despite the anxiety over interest rates, many experts agree that the economy is
still fundamentally strong, and we remain cautiously optimistic about the
prospects for continued growth in the markets.
Website Enhancements
Please visit our enhanced website, evergreen-funds.com, for more information
about Evergreen Funds. The site offers an array of helpful information including
1999 tax information, an investment education center, interactive calculators to
assist your investment planning and general information about Evergreen Funds.
We believe that sound investing is about taking steps to meet your long-term
financial needs and goals. We remind you to take advantage of your financial
advisor's expertise to develop and refine a financial plan that will enable you
to meet your objectives. Evergreen Funds offers a broad mix of stock, bond and
money market funds that should assist you in choosing the most appropriate for
your portfolio.
We would like to thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ Bill Ennis
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
1
<PAGE>
EVERGREEN
Blue Chip Fund
Fund at a Glance as of January 31, 2000
"In an environment where performance leadership can shift or rotate rapidly from
one industry to another, you can't afford to rest with a static portfolio."
Portfolio Management
------------------------
[PHOTO]
Judith A. Warners
Tenure: January 1995
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE 1
-------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 1/31/2000.
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: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses 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.
Historical performance shown for Classes A, C, and Y prior to their inception is
based on the performance of Class B, the original class offered. These
historical returns for Classes A and Y have been adjusted to eliminate the
effect of the higher 12b-1 fees applicable to Class B. These fees are 0.25% for
Class A and 1.00% for Classes B and C. Class Y does not pay a 12b-1 fee. If
these fees had not been eliminated, returns would have been lower.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS 2
-------------------------------------------------------------------------------
Portfolio Inception Date: 9/11/1935 Class A Class B Class C Class Y
Class Inception Date 1/20/1998 9/11/1935 1/22/1998 4/30/1999
Average Annual Returns*
6 months with sales charge 7.10% 7.01% 10.01% n/a
6 months w/o sales charge 12.44% 12.01% 12.01% 12.58%
1 year with sales charge 11.59% 11.26% 14.28% n/a
1 year w/o sales charge 17.14% 16.26% 16.28% 17.42%
3 years 19.76% 20.27% 20.89% 21.99%
5 years 23.70% 23.97% 24.02% 25.20%
10 years 15.23% 14.96% 14.86% 16.07%
Since Portfolio Inception 9.41% 9.28% 9.24% 9.55%
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
6-month capital gain distributions
per share $2.40 $2.40 $2.40 $2.40
* Adjusted for maximum applicable sales charges unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Class B S & P 500 CPI
1/31/90 10,000 10,000 10,000
1/91 10,595 10,839 10,565
1/92 12,770 13,299 10,840
1/93 13,190 14,706 11,193
1/94 14,829 16,600 11,476
1/95 13,672 16,688 11,797
1/96 18,439 23,140 12,119
1/97 22,777 29,236 12,488
1/98 28,244 37,103 12,684
1/99 34,668 49,169 12,896
1/00 40,305 54,246 13,237
Comparison of a $10,000 investment in Evergreen Blue Chip Fund, Class B
shares 2, versus a similar investment in the Standard & Poor's 500 Index (S&P
500) and the Consumer Price Index (CPI).
The S&P 500 is an unmanaged market index which does not include transaction
costs associated with buying and selling securities nor any mutual fund
expenses. The CPI is a commonly used measure of inflation and does not represent
an investment return. It is not possible to invest directly in an index.
Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.
2
<PAGE>
EVERGREEN
Blue Chip Fund
Portfolio Manager Interview
How did the Fund perform?
For the six-month period ended January 31, 2000, the Fund's Class B shares
returned 12.01%. This compared favorably to the Fund's benchmark, the Standard &
Poor's 500 Index, which returned 5.59%. For the same six-month period, the
average return of large-cap core stock funds was 8.28%, according to Lipper
Inc., an independent monitor of mutual fund performance. Fund returns are before
the deduction of any applicable sales charges.
Fund performance was helped by good stock selection, especially among
technology, retail and media companies.
Portfolio
Characteristics
---------------
(as of 1/31/2000 unless noted)
Total Net Assets $855,685,933
Number of Holdings 106
Beta* 0.95
P/E Ratio* 33.6x
*As of 12/31/1999
What factors affected performance during the six months?
After a severe market slump during September and October 1999, the stock market
came roaring back during November and December. This rally was led by technology
companies, which began with large-cap companies, then spread to smaller-cap
companies, especially those involved in the internet, telecommunications, and
biotechnology. A major announcement in December about breakthroughs in
biotechnology research involving genomics, which may have potential in cancer
therapies, was a catalyst for biotechnology stocks. This continued rally in
technology stocks came despite a backdrop of generally rising interest rates.
The Federal Reserve Board, seeking to discourage inflationary pressures and slow
economic growth, raised short-term interest rates three times in 1999, twice in
the second half of the year. Stock selection was extremely important in this
environment, as investors focused on a relatively narrow band of stocks that
offered the potential of above-average growth in revenues and earnings. Stocks
in some sectors, particularly in financial services and cyclical industries,
slumped as interest rates rose. But the extremely strong performance of
technology stocks drove the overall market indices higher and higher, especially
the NASDAQ Index, which is most heavily influenced by technology and
telecommunications.
Top 10 Holdings
---------------
(as a percentage of 1/31/2000 net assets)
Microsoft Corp. 4.3%
General Electric Co. 3.7%
Intel Corp. 2.9%
Exxon Mobil Corp. 2.2%
Cisco Systems, Inc. 2.1%
Wal-Mart Stores, Inc. 2.0%
International Business Machines Corp. 1.9%
Citigroup, Inc. 1.7%
American International Group, Inc. 1.5%
AT&T Corp. 1.5%
What strategies did you employ during the period?
In an environment where performance leadership can shift or rotate rapidly from
one industry to another, you can't afford to rest with a static portfolio. We
tried to be on top of emerging trends and open to new performance leadership by
companies which we believe to have the potential for earnings acceleration. At
the same time, we also had to be alert for signs of any earnings
disappointments, as the market tends to punish companies that don't live up to
expectations.
3
<PAGE>
EVERGREEN
Blue Chip Fund
Portfolio Manager Interview
We kept a healthy representation in technology, which accounted for about 25% of
net assets on January 31, 2000. At the same time, we were careful not to
overweight technology after the big stock price run-ups in the fall and early
winter. We felt too heavy a weighting in technology could increase the risk
unduly. The key in technology was in stock selection--picking companies with
earnings acceleration rather than over-weighting.
At the same time, we under-weighted financial services companies and traditional
healthcare companies. We de-emphasized financial services companies because they
tend to do poorly in a rising interest rate environment. Moreover, there were
signs that merger and acquisition activity was slowing.
We de-emphasized traditional healthcare companies, such as pharmaceuticals,
because of their relatively high stock prices. Additionally, we were concerned
about the quantity of new products entering the marketplace, the number of
patents of existing products due to expire, and the uncertainty about government
regulation and reimbursement policies. The de-emphasis on pharmaceuticals did
not extend to the biotechnology area, where we made a number of investments in
December, following the announcement about genomics developments. We also added
medical equipment and service companies which were positive performers.
Top 5 Industries
----------------
(as a percentage of 1/31/2000 net assets)
Information Services & Technology 24.7%
Healthcare Products & Services 7.2%
Printing, Publishing, Broadcasting & Entertainment 6.8%
Utilities--Telephone 6.3%
Oil/Energy 5.6%
What were some of the investments that contributed to performance?
Technology investments were major contributors to performance, including: CMGI,
which invests in internet companies; Veritas Software, which provides data
storage software for companies engaged in business on the internet; Teradyne,
which provides equipment used in the manufacture of semiconductors; Nokia, a
telecommunications equipment leader; and Cisco Systems and Sun Microsystems, two
leaders in providing infrastructure for the internet.
Immunex, a biotechnology company that we added to the portfolio late in the
period, helped performance. Medtronics was another healthcare-related investment
that supported performance.
While we de-emphasized financial services, three market leaders that we
held--Citigroup, Chase Manhattan and American Express--all performed well. Two
other major holdings that performed very well were General Electric and
Wal-Mart.
There were disappointments, however. One was Tyco International, whose stock
price slumped after questions arose about its accounting practices, and
Honeywell, which fell after its acquisition of Allied-Signal disappointed
investors.
4
<PAGE>
EVERGREEN
Blue Chip Fund
Portfolio Manager Interview
What is your outlook?
We expect continued change in the groups of stocks leading the market, and we
expect continued volatility in the overall market. The risks of this volatility
are heightened by the fact that market leadership has narrowed to relatively few
stocks. At the same time, traditional issues such as rising interest rates and
high stock valuations are causes for concern.
Having expressed those concerns, we are very impressed with the investment
potential of companies involved in building the infrastructure for the internet
and developing a global telecommunications system. We also think that the
America Online-Time Warner proposed merger might reflect an emerging trend for
combining those companies involved in the news media with those involved in
content production.
Healthcare, particularly in biotechnology, also offers some attractive
opportunities.
In this environment, we will maintain our focus on market leadership, but we
will look for opportunities among emerging companies--the new blue chips--as
well as traditional industry leaders. Our focus is on companies that can
dominate their niches, that have quality management, and that have demonstrated
an ability to accelerate their revenues.
5
<PAGE>
EVERGREEN
Equity Income Fund
Fund at a Glance as of January 31, 2000
"Despite short-term trends, we continue to believe the stock market ultimately
will reward investments in companies with financial strength, favorable market
positions, sound management, and high or rising dividend yields."
Portfolio Management
------------------------
[PHOTO]
Harlan R. Sonderling,
CPA, CFA
Tenure:June 1998
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE 1
-------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 1/31/2000.
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: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses 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.
Historical performance shown for Classes B, C, and Y prior to their inception is
based on the performance of Class A, the original class offered. These
historical returns for Classes B, C, and Y have not been adjusted to reflect the
effect of each Class' 12b-1 fees. These fees are 0.25% for Class A and 1.00% for
Classes B and C. Class Y does not pay a 12b-1 fee. If these fees had been
reflected, returns for Classes B and C would have been lower while returns for
Class Y would have been higher.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS 2
-------------------------------------------------------------------------------
Portfolio Inception Date: 4/14/1987 Class A Class B Class C Class Y
Class Inception Date 4/14/1987 2/1/1993 2/1/1993 1/13/1997
Average Annual Returns*
6 months with sales charge -11.54% -11.37% -9.04% n/a
6 months w/o sales charge -7.11% -7.49% -7.49% -7.00%
1 year with sales charge -6.57% -6.75% -4.31% n/a
1 year w/o sales charge -1.92% -2.67% -2.68% -1.67%
3 years 8.01% 8.20% 8.93% 9.93%
5 years 16.66% 16.63% 16.86% 17.89%
10 years 12.22% 12.14% 12.14% 12.80%
Since Portfolio Inception 11.28% 11.23% 11.23% 11.74%
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
6-month income dividends
per share $0.19 $0.12 $0.12 $0.21
6-month capital gain distributions
per share $2.99 $2.99 $2.99 $2.99
* Adjusted for maximum applicable sales charge unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Lehman Brothers
Class A Aggregate S & P 500 CPI
1/31/90 9,528 10,000 10,000 10,000
1/91 10,180 11,163 10,839 10,565
1/92 12,061 12,617 13,299 10,840
1/93 13,291 14,002 14,706 11,193
1/94 15,242 15,281 16,600 11,476
1/95 13,962 14,928 16,688 11,797
1/96 18,507 17,457 23,140 12,119
1/97 23,937 18,027 29,236 12,488
1/98 28,659 19,960 37,103 12,684
1/99 32,281 21,570 49,169 12,896
1/00 31,662 21,170 52,246 13,237
Comparison of a $10,000 investment in Evergreen Equity Income Fund, Class A
shares 2, versus a similar investment in the Standard & Poor's 500 Index (S&P
500) the Lehman Brothers Aggregate Index (LBAI) and the Consumer Price Index
(CPI).
The S&P 500 and the LBAI are unmanaged market indices which do not include
transaction costs associated with buying and selling securities nor any mutual
fund expenses. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
Returns reflect expense limits previously in effect, without which returns would
have been lower.
Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.
Funds that invest in high yield, lower-rated bonds may contain more risks due to
the increased possibility of default.
6
<PAGE>
EVERGREEN
Equity Income Fund
Portfolio Manager Interview
How did the Fund perform?
For the six-month period ended January 31, 2000, the Fund's Class A shares had a
total return of -7.11%. During the same period, the median total return of
equity income funds was -6.90%, according to Lipper Inc., an independent monitor
of mutual fund performance, while the Standard & Poor's 500 Index returned
5.59%. Fund returns are before the deduction of any applicable sales charges.
The returns were realized during an extremely difficult period for investment
strategies, such as the Fund's, that emphasize stocks with lower than average
price/earnings ratios and with higher dividend yields. Investors favored stocks
of companies highly priced by traditional measures, particularly in the
technology industry, many of which had little or no earnings and no dividends.
Portfolio
Characteristics
---------------
(as of 1/31/2000 unless noted)
Total Net Assets $106,678,817
Number of Holdings 69
Beta* 0.75
P/E Ratio* 14.3x
*As of 12/31/1999
What was the investment environment like during the six-month period?
Concerns about rising interest rates and whether the fast-growing domestic
economy might be overheating dominated the backdrop for value- and
income-oriented stock investors during the six months.
Higher interest rates negatively affected performance of stocks in financial
services, capital goods and utilities. The rate increases also affected regional
phone companies, whose earnings growth rates also were slowed by the emergence
of new competition in the fast-growing telecommunications area.
Healthcare industry stocks, which had enjoyed strong performance for several
years, slumped as investors worried about the regulatory environment and
potential changes in federal reimbursement policies. Energy industry stocks also
lagged as oil price increases moderated and earnings of energy-related companies
failed to meet expectations. Anti-trust concerns about some proposed oil
industry mergers also hurt the performance of energy stocks.
What were your principal strategies in this challenging environment?
We reduced our emphasis on financial services stocks, and within the sector,
focused on higher quality companies with histories of low credit losses and on
companies that are more heavily reliant on fee-based sources of income. Within
the financial services sector, we maintained a position of about 5% of net
assets in real estate investment trusts (REITs) because of their strong
fundamentals, reasonable valuations and rising dividends.
7
<PAGE>
EVERGREEN
EQUITY INCOME FUND
Portfolio Manager Interview
In the energy sector, we sought out values among domestic refining companies,
which we believe are likely to benefit from moderating oil prices. Among
electric utility stocks, we looked for higher quality utilities with
conservative financial structures operating in relatively favorable regulatory
environments. We reduced the Fund's exposure to basic materials stocks, and
continued to de-emphasize capital goods stocks.
One of the significant changes we made during the six-month period was to invest
about 5% of net assets in long-term U.S. Treasury securities, to take advantage
of pricing disparities in the government bond market that made the prices of
these securities very attractive. We found Treasuries attractive because of
their high yields and our confidence that the U.S. Federal Reserve Board
eventually would contain inflationary pressures.
Top 5 Industries
----------------
(as a percentage of 1/31/2000 net assets)
Banks 11.1%
Utilities--Telephone 11.0%
Finance & Insurance 10.3%
Oil/Energy 9.6%
Healthcare Products & Services 8.7%
What were some of the areas that helped performance?
While capital goods stocks in general lagged during the period, General
Electric, a major fund position, turned in excellent performance, based on
acceleration of its earnings growth, a sharply higher stock dividend yield, and
continued market leadership in its diversified business units. As a group, REITs
did very well during the six months, following a period when they had
underperformed because of investor concerns about possible overbuilding in the
commercial real estate market.
The Fund had a very successful investment in a convertible security issued by
McLeod USA, a local telephone company in the Mountain States. As the company's
operating results improved, the convertible stock rose in line with the
underlying common stock. U.S. West, a regional telephone carrier that has
received an acquisition offer from Qwest Communications, also performed very
well.
The Fund's investment in General Motors also was successful, helped by investor
enthusiasm for Hughes Electronics, a GM subsidiary. Other investments that
helped performance included Citigroup, a leading financial services company, and
Merck, the Fund's largest healthcare industry holding.
8
<PAGE>
EVERGREEN
Equity Income Fund
Portfolio Manager Interview
Disappointments included investments in Bank of America, which lagged because of
investor concerns about the sustainability of its earnings following its merger
with NationsBank, and Greenpoint Financial, whose stock value was hurt because
of concerns about the credit quality of its portfolio of manufactured housing
loans.
Top 10 Holdings
---------------
(as a percentage of 1/31/2000 net assets)
U.S. Treasury Bonds, 7.25%, 8/15/2022 6.0%
Bell Atlantic Corp. 3.2%
Merck & Co., Inc. 3.1%
Exxon Mobil Corp. 3.1%
General Electric Co. 2.8%
Atlantic Richfield Co. 2.6%
Firstar Corp. 2.3%
International Business Machines Corp. 2.3%
General Motors Corp. 2.3%
Ford Motor Co. 2.2%
What is your outlook?
We believe that rising interest rate pressures may peak in the second quarter of
2000 and that economic growth should start to slow. Once this occurs, the
favorable stock valuations of companies in industries such as financial services
and communications should propel stronger performance. The energy and healthcare
industries also offer potential investment opportunities because of their
reasonable valuations and attractive dividend yields.
Despite short-term trends, we continue to believe the stock market ultimately
will reward investments in companies with financial strength, favorable market
positions, sound management, and high or rising dividend yields. We intend to
maintain our investment discipline and focus on these types of companies for
their long-term attractiveness and potential.
9
<PAGE>
EVERGREEN
Growth and Income Fund
Fund at a Glance as of January 31, 2000
"We believe media and broadcasting companies will continue to prosper because of
heavy advertising, especially in an election year."
Portfolio
Management
--------------
[PHOTO] [PHOTO]
Irene D. O'Neill, Phillip M. Foreman,
CFA CFP, CFA
Tenure: September 1999 Tenure: September 1999
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE 1
-------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 1/31/2000.
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: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses 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.
Historical performance shown for Classes A, B, and C prior to their inception is
based on the performance of Class Y, the original class offered. These
historical returns for Classes A, B, and C have not been adjusted to reflect the
effect of each Class' 12b-1 fees. These fees are 0.25% for Class A and 1.00% for
Classes B and C. Class Y does not pay a 12b-1 fee. If these fees had been
reflected, returns would have been lower.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS 2
-------------------------------------------------------------------------------
Portfolio Inception Date: 10/15/1986 Class A Class B Class C Class Y
Class Inception Date 1/3/1995 1/3/1995 1/3/1995 10/15/1986
Average Annual Returns*
6 month with sales charge -0.19% -0.61% 2.39% n/a
6 month w/o sales charge 4.77% 4.39% 4.39% 4.92%
1 year with sales charge 3.72% 3.10% 6.06% n/a
1 year w/o sales charge 8.90% 8.10% 8.06% 9.18%
3 years 10.79% 10.96% 11.77% 12.90%
5 years 17.86% 17.94% 18.17% 19.30%
10 years 14.56% 14.71% 14.71% 15.27%
Since Portfolio Inception 13.70% 13.81% 13.81% 14.23%
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
6-month capital gain distributions
per share $0.60 $0.60 $0.60 $0.60
* Adjusted for maximum applicable sales charge unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Class A CPI S & P 400
1/31/90 9,521 10,000 10,000
1/91 10,099 10,565 11,183
1/92 12,309 10,840 15,832
1/93 14,026 11,193 17,628
1/94 16,257 11,476 20,296
1/95 16,317 11,797 19,301
1/96 21,901 12,119 25,385
1/97 27,281 12,488 30,944
1/98 34,104 12,684 38,625
1/99 35,766 12,896 45,071
1/00 38,948 13,237 52,263
Comparison of a $10,000 investment in Evergreen Growth and Income Fund, Class A
shares 2, versus a similar investment in the Standard and Poor's 400 Mid-Cap
Index (S&P 400) and the Consumer Price Index (CPI).
The S&P 400 is an unmanaged market index which does not include transaction
costs associated with buying and selling securities nor any mutual fund
expenses. The CPI is a commonly used measure of inflation and does not represent
an investment return. It is not possible to invest directly in an index.
Returns reflect expense limits previously in effect, without which returns would
have have been lower.
Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.
Funds that invest in high yield, lower rated bonds may contain more risks due to
the increased possibility of default.
10
<PAGE>
EVERGREEN
Growth and Income Fund
Portfolio Manager Interview
How did the Fund perform?
For the six-month period ended January 31, 2000, the Fund's Class A shares had a
total return of 4.77%. During the same six-month period, the average return of
multi-cap value funds was -5.04%, according to Lipper Inc., an independent
monitor of mutual fund performance, while the Standard & Poor's Midcap 400 Index
returned 6.59%. Fund returns are before the deduction of any applicable sales
charges.
Portfolio
Characteristics
---------------
(as of 1/31/2000 unless noted)
Total Net Assets $1,616,687,589
Number of Holdings 210
Beta* 0.82
P/E Ratio* 46.2x
*As of 12/31/1999
What factors affected performance?
The Fund's performance was helped by our overweighted position in the stocks of
media and broadcasting companies and our increased emphasis on technology.
However, we lost ground in January, the final month of the period, primarily
because biotechnology companies had a spectacular rally, rising more than 20%.
Not many biotechnology companies met our investment criteria, therefore we
didn't enjoy the benefits of that surge in biotechnology.
Our strategy is to buy what we believe are good, profitable businesses that are
on sale. We look for companies with competitive advantages, that have barriers
to entry, and that are selling at a 40% or more discount to their private market
value--the price another corporation is likely to pay to acquire the business.
We believe our strategy will result in a portfolio of companies that are better
than the average company and we believe we will likely outperform the benchmarks
over time.
It was a difficult environment for investing in most stocks. In fact, 55% of all
stocks actually declined in value during 1999. However, the technology sector
was so strong that a major share of investment results was determined by the
extent to which you were invested in technology and biotechnology. Those two
segments drove the markets and the performance of the indices.
Media and broadcasting stocks did relatively well, and we were over-weighted in
media, which helped performance. During the year, we progressively raised our
emphasis on technology. We started 1999 with less than 3% of net assets invested
in technology stocks and raised the portfolio exposure to this industry to about
12% of net assets by the half-year mark. Then, we were able to find a number of
attractive technology companies that were on sale, and we were able to lift our
weighting in the industry, allowing us to participate in the strong fourth
quarter rally in technology stocks. By the end of 1999, we had about 14% of net
assets in technology, although that was still an under-weight position relative
to the S&P Midcap 400 Index.
The Fund's heavy investments in financial services companies held back
performance. Even though we reduced the emphasis by more than half from the 33%
weighting at the beginning of 1999, we still were overweighted versus the
indices and we were hurt during a very difficult period for financial services
stocks.
11
<PAGE>
EVERGREEN
Growth and Income Fund
Portfolio Manager Interview
Top 5 Industries
----------------
(as a percentage of 1/31/2000 net assets)
Information Services & Technology 13.5%
Printing, Publishing, Broadcasting & Entertainment 12.2%
Healthcare Products & Services 8.4%
Finance & Insurance 6.8%
Banks 6.6%
What were some of the investments that contributed to performance?
The larger positions in the Fund tended to do very well. Sony, for example, had
extremely good performance, aided by the recovery in the Japanese market and the
worldwide recognition of Sony's leadership in digital media. In addition, Sony's
stock price received a boost from a corporate re-structuring program and the
performance of internet subsidiaries.
The New York Times Company was another large position that did very well. The
stock benefited from political and electronic commerce advertising as well as by
the decision to spin out its internet-related businesses.
The strong advertising market in general helped media and broadcasting
companies, which comprised about 9% of net assets at the end of the period.
Among the performance leaders were Emmis Radio and Clear Channel Communications.
The investment in Univision, the leading source of Spanish-language programming
for cable television, also supported performance. Univision was helped by the
growing interest of mainstream advertisers to target the nation's
Spanish-speaking population.
Investments in the business equipment and services industry helped the Fund's
returns significantly. Leading performers included Seagate Technology and
Computer Sciences. While we were under-weighted in biotechnology, PE Biosystems,
which manufactures equipment for the biotechnology industry, was an excellent
performer.
Although financial services investments held back performance, Kansas City
Southern, a diversified corporation owning mutual fund companies as well as a
railroad, was a good contributor.
Among the disappointments was the toy and game company Hasbro. While it met its
earnings expectations, its stock price fell during a general slump in the toy
industry.
Top 10 Holdings
---------------
(as a percentage of 1/31/2000 net assets)
Motorola, Inc. 2.3%
Kansas City Southern Industries, Inc. 2.2%
Sony Corp., ADR 2.0%
Clear Channel Communications, Inc. 1.9%
New York Times Co., Cl. A 1.8%
Microsoft Corp. 1.8%
American Tower Systems Corp., Cl. A 1.8%
Seagate Technology 1.8%
Disney (Walt) Co. 1.8%
PE Corp--PE Biosystems Group 1.8%
12
<PAGE>
EVERGREEN
Growth and Income Fund
Portfolio Manager Interview
What is your outlook?
We are extremely positive about the investment opportunities we see. We believe
media and broadcasting companies will continue to prosper because of heavy
advertising, especially in an election year. While the financial services sector
has not performed well in 1999, we intend to emphasize those companies relying
on fee-based businesses rather than on lending, which is vulnerable to rising
interest rates. We expect to continue to add to our position in the technology
industry, although we intend to do so opportunistically, investing after
corrections to take advantage of temporarily low prices. We also expect to
de-emphasize retail and consumer durables companies, as we believe the Federal
Reserve's hikes in short-term interest rates eventually will slow consumer
spending.
We will continue to take a long-term view of investment opportunities, as we
consider ourselves investors not traders. The mid-cap stock market still offers
substantial value, especially when compared to the large-cap market, and we are
finding many good companies whose stocks are trading at discounts of 40% or more
to their private market value.
13
<PAGE>
EVERGREEN
Income and Growth Fund
Fund at a Glance as of January 31, 2000
"With the expectation of additional increases in interest rates, we expect we
will continue to de-emphasize stocks in those sectors vulnerable to interest
rate changes and seek to identify areas which we believe are offering superior
growth prospects."
Portfolio
Management
--------------
[PHOTO] [PHOTO]
Irene D. O'Neill, Phillip M. Foreman,
CFA CFP, CFA
Tenure: December 1997 Tenure: September 1999
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE 1
-------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 1/31/2000.
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: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses 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.
Historical performance shown for Classes A, B, and C prior to their inception is
based on the performance of Class Y, the original class offered. These
historical returns for Classes A, B, and C have not been adjusted to reflect the
effect of each Class' 12b-1 fees. These fees are 0.25% for Class A and 1.00% for
Classes B and C. Class Y does not pay a 12b-1 fee. If these fees had been
reflected, returns would have been lower.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS 2
-------------------------------------------------------------------------------
Portfolio Inception Date: 8/31/1978 Class A Class B Class C Class Y
Class Inception Date 1/3/1995 1/3/1995 1/3/1995 8/31/1978
Average Annual Returns*
6 month with sales charge -3.78% -4.20% -1.29% n/a
6 month w/o sales charge 1.03% 0.64% 0.64% 1.16%
1 year with sales charge 8.03% 7.60% 10.60% n/a
1 year w/o sales charge 13.43% 12.60% 12.60% 13.71%
3 years 9.41% 9.57% 10.39% 11.50%
5 years 12.96% 12.97% 13.22% 14.33%
10 years 10.12% 10.26% 10.25% 10.80%
Since Portfolio Inception 13.56% 13.62% 13.62% 13.88%
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
6-month income dividends
per share $0.51 $0.43 $0.43 $0.54
6-month capital gain distributions
per share $0.40 $0.40 $0.40 $0.40
* Adjusted for maximum applicable sales charge unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Class A CPI Wilshire 5000
1/31/90 9,526 10,000 10,000
1/91 9,489 10,565 10,617
1/92 11,536 10,840 13,561
1/93 12,856 11,193 14,989
1/94 14,355 11,476 16,997
1/95 13,596 11,797 16,823
1/96 16,776 12,119 23,071
1/97 19,088 12,488 28,694
1/98 23,149 12,684 35,952
1/99 23,140 12,896 45,758
1/00 26,247 13,237 52,382
Comparison of a $10,000 investment in Evergreen Income and Growth Fund, Class A
shares 2, versus a similar investment in the Wilshire 5000 Index (Wilshire 5000)
and the Consumer Price Index (CPI).
The Wilshire 5000 is an unmanaged market index which does not include
transaction costs associated with buying and selling securities nor any mutual
fund expenses. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
Returns reflect expense limits previously in effect, without which returns would
have been lower.
Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.
14
<PAGE>
EVERGREEN
Income and Growth Fund
Portfolio Manager Interview
How did the Fund perform?
For the six-month period ended January 31, 2000, the Fund's Class A shares had a
total return of 1.03%. During the same six-month period, the Lipper Income Fund
Average had a return of 0.55%, according to Lipper Inc., an independent monitor
of mutual fund performance, while the Wilshire 5000 Index returned 8.54%. Fund
returns are before the deduction of any applicable sales charges.
Portfolio
Characteristics
---------------
(as of 1/31/2000 unless noted)
Total Net Assets $999,372,837
Number of Holdings 161
Beta* 0.67
P/E Ratio* 33.7x
*As of 12/31/1999
What factors affected the Fund's performance?
The stock market reflected investors' perceptions that there are now two
different universes of common stocks. The first universe is made up of companies
that are growing quickly because their fortunes are tied to the "new" economy,
with businesses based on the internet, technology and telecommunications. The
second universe is made up of companies that are growing more slowly because
they are tied to the "old" economy. Old economy stocks include just about
anything not heavily involved in technology, telecom or the internet. However,
this is the universe of companies that generate earnings and cash flow to
support dividend payments on their common stocks.
Not surprisingly, it was a difficult period for investing in stocks that
generate a high level of current income, as the performance leaders tended to be
growth stocks with little or no income.
The current environment of rising interest rates also had an effect on the
Fund's performance and the strategies we employed. Higher rates negatively
affected investment results in industry groups that were most vulnerable to the
possibility of an economic slowdown. These included auto parts suppliers,
consumer goods producers and electrical equipment manufacturers. Financial
services and utilities that are interest-rate sensitive were also affected.
Offsetting the difficult performance of the value stocks in the Fund were strong
gains from investments in the convertible securities of telecommunications,
technology and independent power companies, where the greatest growth was
occurring. For example, the best performing security in the Fund was the
convertible preferred of Qualcomm, the digital wireless communications company.
15
<PAGE>
EVERGREEN
Income and Growth Fund
Portfolio Manager Interview
What were your principal strategies in this difficult environment for
income-oriented equity investing?
During the period we sought to reposition the Fund to take advantage of
opportunities in companies with strong growth prospects. We reduced our emphasis
on traditional value stocks in industries that were out of favor and redeployed
the proceeds into convertible securities, both preferred stocks and debentures,
of companies in the fastest growing segments of the economy. As a result, we cut
our weightings in the banking and automotive sectors, as well as in industrial
and insurance companies. During the six months, for example, the Fund's
investments in common stocks of regional banking companies declined from 12.8%
of net assets to 7.7%.
At the same time, we increased our investments in convertible securities, which
rose from 19.3% of net assets to 35% during the six months. We focused
principally on convertible preferred and debentures issued by telecommunications
and technology companies and independent power producers. Companies in these
fast-growing industries typically do not pay dividends to holders of common
stock, but they do issue convertible securities as a way to get capital to
finance their growth. Investing in the convertible securities allowed the Fund
to gain both current income and to participate in the dynamic growth prospects
of these sectors.
Top 5 Industries
----------------
(as a percentage of 1/31/2000 net assets)
Utilities--Electric 18.9%
Banks 8.7%
Telecommunication Services & Equipment 8.4%
Healthcare Products & Services 6.7%
Communication Systems & Services 5.6%
How did this strategy work in the telecommunications industry?
We wanted to tap into the exploding growth rate in telecommunications services
by investing in companies involved in the build-out of the infrastructure that
supports rapidly expanding data transmission and internet usage and providers of
wireless communications services.
Infrastructure-related investments included convertible securities in Qwest
Trends, which is building a long-distance fiber optic network in the U.S., Level
3 Communications, which is building a global fiber optic communications network,
and American Tower, which owns and operates towers that are a necessity for
wireless communications providers. We also invested in the convertible preferred
of Metromedia Fiber Network, which is installing fiber optic communications
systems in major cities to serve primarily business customers. All of these
companies are growing quickly as demand for their services accelerates.
We also maintained investments in AT&T, the diversified company involved in
long-distance, wireless and cable television service, and The Williams
Companies, an energy company that is developing a major telecom network.
What investments did you make in technology?
In expanding our emphasis on technology, we tried to find the convertible
securities of companies with leadership positions in markets that were growing
faster than the overall economy. We purchased convertible securities of a number
of companies that are involved in the internet. They included Exodus
Communications, a leader in operating websites for businesses. Exodus currently
operates half of the 50 most popular sites on the internet. We also invested in
USinternetworking, a leader in providing software over
16
<PAGE>
EVERGREEN
Income and Growth Fund
Portfolio Manager Interview
the internet for small- and medium-sized businesses, and 12 Technologies, which
provides software for business-to-business applications over the internet. Other
internet-related investments included Mail common, which operates e-mail
services, and Excite At Home Corporation, which provides internet access over
cable lines and has investments in other media operations.
Why have you also focused on independent power producers?
This is the fastest-growing area within the electric utility industry. These
independent companies are able to build efficient, low-cost power plants in
areas where power is needed. Because they are not regulated by the states or the
federal government, the independent power producers don't face constraints, such
as limits on the rates of return they can earn, that regulated electric
utilities traditionally faced. As a result, they can grow more quickly than
utilities.
Two companies in which we invested, through convertible securities, were Calpine
and AES Corporation. Calpine is primarily focused in the U.S. and has been
successful building low-cost generating units. That cost advantage has resulted
in superior profit margins for the company. AES has a global strategy, building
plants around the world, including many developing nations, where the need for
new power sources is greatest. As a result, both companies are rapidly growing
their revenues and earnings.
Top 10 Holdings
---------------
(as a percentage of 1/31/2000 net assets)
Qualcomm Financial Trust I, 5.75%,
3/01/2012, convertible preferred 3.9%
Qwest Trends Trust 5.75%, convertible preferred 2.5%
Duke Power Co. 2.3%
The Williams Companies, Inc. 2.3%
CNH Global NV 2.1%
Southern Co. 2.0%
Decs Trust VI,-Metromedia Fiber
6.25%, 11/15/2002, convertible preferred 2.0%
American Tower Corp, 6.25%,
10/15/2009, convertible debenture 2.0%
Level 3 Communications, Inc., 6.00%,
09/15/2009, convertible debenture 1.9%
Utilicorp United, Inc. 1.9%
What is your outlook?
We are cautious. We think the Federal Reserve Board may raise short-term rates
even further in its effort to reduce the pace of economic growth. With the
expectation of additional increases in interest rates, we expect we will
continue to de-emphasize stocks in those sectors vulnerable to interest rate
changes and seek to identify areas which we believe are offering superior growth
prospects. Until the environment changes substantially, we expect to continue
holding a healthy portion of the portfolio in convertible securities of
companies in high growth industries. As in the past, the Fund will continue to
focus on investments that provide income and the potential for capital growth.
17
<PAGE>
EVERGREEN
Small Cap Value Fund
Fund at a Glance as of January 31, 2000
"The acceleration of stock buybacks and merger and acquisition activity in the
small-cap sector could provide a catalyst for the small-cap sector this year."
Portfolio
Management
--------------
[PHOTO] [PHOTO]
Jordan Alexander, Edwin D.Miska
CFA
Tenure:January 1999 Tenure:September 1996
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE 1
-------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 1/31/2000.
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: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses 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.
Historical performance shown for Classes A, B, and C prior to their inception is
based on the performance of Class Y, the original class offered. These
historical returns for Classes A, B, and C have not been adjusted to reflect the
effect of each Class' 12b-1 fees. These fees are 0.25% for Class A and 1.00% for
Classes B and C. Class Y does not pay a 12b-1 fee. If these fees had been
reflected, returns would have been lower.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS 2
-------------------------------------------------------------------------------
Portfolio Inception Date: 10/1/1993 Class A Class B Class C Class Y
Class Inception Date 1/3/1995 1/3/1995 1/24/1991 0/1/1993
Average Annual Returns*
6 month with sales charge -12.75% -13.22% -10.50% n/a
6 month w/o sales charge -8.38% -8.66% -8.67% -8.19%
1 year with sales charge -6.19% -7.06% -4.22% n/a
1 year w/o sales charge -1.51% -2.20% -2.27% -1.24%
3 years 2.92% 2.91% 3.80% 4.87%
5 years 11.73% 11.73% 11.95% 13.09%
Since Portfolio Inception 9.54% 9.73% 9.70% 10.62%
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
6-month income dividends
per share $0.04 $0.01 $0.01 $0.05
* Adjusted for maximum applicable sales charge unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Class A CPI Russell 2000 Value Russell 2000
10/31/93 9,526 10,000 10,000 10,000
1/94 9,932 10,034 10,390 10,318
1/95 9,688 10,316 9,829 9,699
1/96 12,452 10,597 12,503 12,593
1/97 15,478 10,920 15,306 14,979
1/98 19,551 11,091 19,491 17,686
1/99 17,991 11,277 18,149 17,745
1/00 17,720 11,574 17,816 20,893
Comparison of a $10,000 investment in Evergreen Small Cap Value Fund, Class A
shares 2, versus a similar investment in the Russell 2000 Index (Russell 2000)
the Russell 2000 Value (Russell 2000 Value) and the Consumer Price Index (CPI).
The Russell 2000 and the Russell 2000 Value are unmanaged market indices which
do not include transaction costs associated with buying and selling securities
nor any mutual fund expenses. The CPI is a commonly used measure of inflation
and does not represent an investment return. It is not possible to invest
directly in an index.
Returns reflect expense limits previously in effect, without which returns would
have been lower.
Smaller capitalization stock investing may offer the potential for greater long
term results, however it is also generally associated with greater price
volatility due to the higher risk of failure.
Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuation.
18
<PAGE>
EVERGREEN
Small Cap Value Fund
Portfolio Manager Interview
How did the Fund perform?
For the six-month period ended January 31, 2000, the Fund's Class A shares had a
total return of -8.38%. During the same six-month period, the Russell 2000 Value
Index, the Fund's benchmark, returned -6.64%. Fund returns are before the
deduction of any applicable sales charges.
Portfolio
Characteristics
---------------
(as of 1/31/2000 unless noted)
Total Net Assets $178,367,671
Number of Holdings 81
Beta* 0.48
P/E Ratio* 27.4x
*As of 12/31/1999
What factors affected the performance during the six-month period?
The performance of the Fund during the period was held back by an over-weighted
position in the consumer sector, which has been under pressure due to interest
rate concerns and expectations of a slowdown in consumer spending. In addition,
the Fund maintained its long-term emphasis on value style investing. During the
period, the performance of the small-cap market was narrowly focused on the
technology and healthcare sectors, which favored growth and momentum style
investing. The best performing issues in the Russell 2000 were primarily of
companies in the biotechnology and technology sectors that have not reached
profitability and/or have limited operating history. To address the Fund's
performance, we have been restructuring the portfolio to include additional
issues in the technology and healthcare sectors while maintaining our value
discipline and have been reducing the Fund's exposure to consumer cyclical
stocks.
Top 5 Industries
----------------
(as a percentage of 1/31/2000 net assets)
Consumer Products & Services 14.6%
Banks 12.5%
Building, Construction & Furnishings 9.7%
Retailing & Wholesale 9.0%
Healthcare Products & Services 8.7%
What were some of the investments that supported performance during the period?
The portfolio restructuring resulted in some significant successes. Two of the
Fund's best-performing issues during the period were SBS Technologies and CSG
Systems, which were new names added to the portfolio in recent months. The two
issues were each up more than 50% during the period. SBS Technologies designs
custom-embedded computer products for the aerospace, computer, and
telecommunications industries. The company's strong performance was propelled by
several new design developments for the fast-growing telecommunications
industry. CSG Systems provides customer care and billing systems for the
communications market. The company, which maintains its proprietary software
system, has benefited from the trend within the cable television industry to
outsource billing and customer service operations.
Some of the best performance was realized in existing positions in the
technology and healthcare sectors. In technology, investments that helped the
Fund's performance included Scientific Atlanta, rising 118.5% during the period,
and Helix Technology, up 83.6%. Helix Technology manufactures vacuum pumps and
instrumentation components for semiconductor equipment manufacturers, such as
Applied Materials. The company has benefited from the introduction of new
products and a strong recovery in the semiconductor
19
<PAGE>
EVERGREEN
Small Cap Value Fund
Portfolio Manager Interview
capital equipment market. Scientific Atlanta, which manufactures cable TV
set-top boxes and transmission equipment, is benefiting from the upgrading of
the cable TV industry for the introduction of broadband services. We believe the
company has the potential to realize solid earnings growth over the next twelve
months as the cable industry introduces two-way digital services, such as
internet and video-on-demand services using Scientific Atlanta's set-top boxes.
In healthcare, leading performers included ArthroCare Corp., which rose 228.8%
during the period, and Jones Pharma, up 99.6%. ArthroCare has developed several
new products for the arthroscopy market and has excellent potential to expand
its business as it applies its proprietary technology to areas such as spinal
and cosmetic surgery. Jones Pharma is a specialty pharmaceutical company that
focuses on critical care and thyroid disorders. The company is seeing
accelerated earnings growth fueled by solid prescription growth in several areas
as well as an improved competitive position for a key product.
While investments in the technology and healthcare sectors helped performance,
the heavy weighting in the consumer cyclical and financial sectors contributed
to the Fund's under-performance during the period. We have significantly reduced
our emphasis in both sectors, although we expect strong consumer spending to
generate solid earnings growth and improved performance for many of the consumer
names remaining in the portfolio.
Top 10 Holdings
---------------
(as a percentage of 1/31/2000 net assets)
Scientific Atlanta, Inc. 2.6%
Alpharma, Inc., 5.75%, 04/01/2005 2.5%
Granite State Bankshares, Inc. 2.5%
Michael Foods, Inc. 2.4%
ArthroCare Corp. 2.4%
Whole Foods Market, Inc. 2.3%
AmeriSource Health Corp., Cl. A 2.2%
SBS Technologies, Inc. 2.2%
Guess?, Inc. 2.1%
Lancaster Colony Corp. 2.0%
What is your outlook?
We are very positive about the potential for strong small-cap stock performance.
The valuation of the Russell 2000 Index, a measure of small-cap stock
performance, relative to the S&P 500, a measure of large-cap performance,
remains at a very attractive level. In the past, the small-cap sector posted
dramatic gains following similar periods of underperformance. For example,
small-caps more than doubled in 1975-76 and were up over 65% in 1990-91 after
declining about 20% in the preceding year. The acceleration of stock buybacks
and merger and acquisition activity in the small-cap sector could provide a
catalyst for the small-cap sector this year. Favorable small-cap performance has
generally coincided with periods of strong cyclical growth, lower relative cost
of capital, and a more profitable business environment. Despite concerns about
the cost of capital for small-cap companies relative to larger companies, we
believe the overall economic outlook for earnings growth and profitability
supports a favorable trend.
20
<PAGE>
EVERGREEN
Utility Fund
Fund at a Glance as of January 31, 2000
"Technological advances in communications and rising demand for communications
services by both businesses and consumers created enormous growth
opportunities."
Portfolio
Management
[PHOTO] [PHOTO]
Matthew D. Finn, CFA Doris Kelley-Watkins
Tenure: May 1999 Tenure: February 1997
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE 1
-------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 1/31/2000.
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.
1Source: 2000 Morningstar, Inc.
2Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses 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.
Historical performance shown for Classes C and Y prior to their inception is
based on the performance of Class A, one of the original classes offered along
with Class B. These historical returns for Classes C and Y have not been
adjusted to reflect the effect of each Class' 12b-1 fees. These fees are 0.25%
for Class A and 1.00% for Classes B and C. Class Y does not pay a 12b-1 fee. If
these fees had been reflected, returns for Class C would have been lower while
returns for Class Y would have been higher.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS 2
-------------------------------------------------------------------------------
Portfolio Inception Date: 1/4/1994 Class A Class B Class C Class Y
Class Inception Date 1/4/1994 1/4/1994 9/2/1994 2/28/1994
Average Annual Returns*
6 month with sales charge 15.64% 15.85% 18.94% n/a
6 month w/o sales charge 21.40% 20.85% 20.94% 21.53%
1 year with sales charge 38.53% 39.35% 42.45% n/a
1 year w/o sales charge 45.40% 44.35% 44.45% 45.87%
3 years 22.69% 23.08% 23.76% 25.00%
5 years 19.88% 19.94% 20.14% 21.34%
Since Portfolio Inception 15.81% 15.89% 15.97% 17.02%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
6-month income dividends
per share $0.17 $0.12 $0.12 $0.19
6-month capital gain distributions
per share $1.18 $1.18 $1.18 $1.18
*Adjusted for maximum applicable sales charge unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Period End Class A CPI S&P 500 S&P Utilities
1-31-94 9,523 10,000 10,000 10,000
1-95 9,344 10,280 10,053 9,333
1-96 11,936 10,561 13,940 11,845
1-97 12,530 10,882 17,612 11,551
1-98 15,490 11,053 22,351 12,671
1-99 16,682 11,238 29,620 13,876
1-00 24,299 11,535 32,679 14,099
Comparison of change in value of a $10,000 investment in Evergreen Utility Fund
Class A shares2, 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).
The S&P Utilities and the S&P 500 are unmanaged market indices which do not
include transaction costs associated with buying and selling securities nor any
mutual fund expenses. The CPI is a commonly used measure of inflation and does
not represent an investment return. It is not possible to invest directly in an
index.
Returns reflect expense limits previously in effect, without which returns would
have been lower.
Funds that concentrate their investments in a single industry may face increased
risk of price fluctuation over more diversified funds due to adverse
developments within that industry.
Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.
21
<PAGE>
EVERGREEN
Utility Fund
Portfolio Manager Interview
How did the Fund perform?
For the six-month period ended January 31, 2000, the Fund's Class A shares had a
total return of 21.40%. During the same period, the average return of utility
mutual funds was 9.50%, according to Lipper Inc., an independent monitor of
mutual fund performance, while the Standard & Poor's Utilities Index returned
0.90%. Fund returns are before the deduction of any applicable sales charges.
Portfolio
Characteristics
---------------
(as of 1/31/2000 unless noted)
Total Net Assets $203,108,344
Number of Holdings 49
Beta* 0.54
P/E Ratio* 20.8x
* As of 12/31/1999
What was the investment environment like during the six-month period?
Throughout the six-month period, we witnessed a continuation of the dominant
trends that had been in place for more than a year: telecommunications stocks
offered significant growth opportunities while traditional utility stocks tended
to lose value.
Traditional electric and gas utility stocks are highly influenced by three
factors, all of which had a negative impact during the period: interest rates;
earnings growth; and weather. Interest rates rose significantly, adversely
affecting interest-sensitive stocks such as utilities. At the same time,
electric and gas utilities, most of which remained highly regulated, had very
little earnings growth. Finally, a pattern of relatively mild weather in both
the summer and winter held back demand for energy for either air conditioning or
heating, and limited the revenue growth of these types of utilities.
Telecommunications presented a very different story. Technological advances in
communications and rising demand for communications services by both businesses
and consumers created enormous growth opportunities. While the best investment
results were realized from wireless service providers, the beneficiaries of
these trends ranged throughout the industry and also included regional Bell
operating companies and telecommunications equipment companies.
Top 5 Industries
----------------
(as a percentage of 1/31/2000 net assets)
Utilities--Electric 31.9%
Utilities--Telephone 22.2%
Communication Systems & Services 11.8%
Telecommunication Services & Equipment 7.8%
Utilities--Gas 7.2%
What strategies did you pursue in this environment?
We manage for total return--a combination of price appreciation and current
income. During the six-month period, we continued to emphasize the
telecommunications sector, which we had built up earlier in 1999. On January 31,
2000 approximately 47% of the Fund's net assets were invested in
telecommunications-related common stocks or convertible securities.
Within telecommunications, we invested throughout the industry, including
wireless service providers, long-distance companies, regional Bell operating
companies, competitive local exchange companies, long-haul fiber optic
companies, wireless infrastructure and telecommunications equipment companies.
We invested in convertible securities as well as in common stock because of the
superior income the
22
<PAGE>
EVERGREEN
Utility Fund
Portfolio Manager Interview
convertibles offer. This tactic allows us to invest in a high-growth area where
many of the stocks do not pay dividends, and yet still receive current income.
One of the largest positions in the Fund, for example, was the 5.75% convertible
preferred stock of Qualcomm, a leading wireless equipment company. We also
invested in the 6.25% convertible bond of American Tower, a wireless
infrastructure company that builds and operates towers for wireless antennas,
and the 6% convertible security of Level Three, a telecommunications networking
company.
Among other telecommunications companies in the top 10 holdings were: Nextel
Communications, a national wireless service provider; Sprint, the national
long-distance and wireless communications company; AT&T, which is expanding from
its traditional long-distance base toward greater emphasis on all
telecommunications products and services; BellSouth, a regional Bell operating
company; and GTE, a diversified telecommunications company.
Two of the Fund's ten largest holdings were outside telecommunications. The Fund
had major investments in Enron, a diversified energy company that was the Fund's
largest position, and Scottish Power, which the Fund held after Scottish Power
acquired Pacific Corp., a domestic electric utility. Scottish Power was the
Fund's tenth largest position.
When we looked at independent power producers, we searched for companies with
catalysts to propel future earnings growth. AES and Calpine, both independent
power companies, were among the better performing investments.
Top 10 Holdings
---------------
(as a percentage of 1/31/2000 net assets)
Enron Corp. 4.6%
Nextel Communications, Inc., Cl A 4.6%
Level 3 Communications, Inc.
6.00%, 9/15/2009, convertible debenture 3.3%
Qualcomm Financial Trust I, 5.75%,
3/01/2012, convertible preferred 3.2%
Sprint Corp. 3.2%
Decs Trust VI--Metromedia Fiber
6.25%,11/15/2002, convertible preferred 3.1%
AT&T Corp. 2.7%
BellSouth Corp. 2.6%
GTE Corp. 2.5%
Scottish Power Plc, ADR 2.5%
What is the outlook for investing in utilities?
Generally, we believe the outlook is much more favorable for telecommunications
stocks than it is for electric utility stocks. We suspect that interest rates
either will continue to move upward or to be flat. This would negatively affect
electric and gas utility stocks. Our investments in these companies will be
selective, and directed toward securities that either can provide above-average
current income for the portfolio or that have a catalyst that can spark earnings
growth and/or price appreciation.
We expect to continue to look toward telecommunications industry stocks for
their price appreciation potential. We plan to take advantage of the global
telecommunications revolution that offers growth potential very few other
industries can match.
23
<PAGE>
EVERGREEN
Value Fund
Fund at a Glance as of January 31, 2000
"We believe that if and when investors start paying more attention to stock
valuations, there are some very strong underpinnings for a sustained rally in
value-oriented stocks."
Portfolio
Management
----------
[PHOTO]
Matthew D. Finn, CFA
Tenure: March 1998
-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE 1
-------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 1/31/2000.
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: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses 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.
Historical performance shown for Classes B, C, and Y prior to their inception is
based on the performance of Class A, the original class offered. These
historical returns for Classes B, C, and Y have not been adjusted to reflect the
effect of each Class' 12b-1 fees. These fees are 0.25% for Class A and 1.00% for
Classes B and C. Class Y does not pay a 12b-1 fee. If these fees had been
reflected, returns for Classes B and C would have been lower while returns for
Class Y would have been higher.
-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS 2
-------------------------------------------------------------------------------
Portfolio Inception Date: 4/12/1985 Class A Class B Class C Class Y
Class Inception Date 4/12/1985 2/2/1993 9/2/1994 1/3/1991
Average Annual Returns*
6 month with sales charge -11.76% -11.72% -9.31% n/a
6 month w/o sales charge -7.36% -7.70% -7.71% -7.24%
1 year with sales charge -7.50% -7.78% -5.26% n/a
1 year w/o sales charge -2.87% -3.58% -3.58% -2.62%
3 years 7.93% 8.10% 8.89% 9.97%
5 years 15.21% 15.27% 15.51% 16.63%
10 years 12.27% 12.29% 12.38% 13.10%
Since Portfolio Inception 12.96% 12.96% 13.03% 13.52%
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
6-month income distribution
per share $0.09 $0.01 $0.01 $0.12
6-month capital gain distributions
per share $3.11 $3.11 $3.11 $3.11
* Adjusted for maximum applicable sales charge unless noted.
-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------
[GRAPH]
Russell
Period End Class A CPI S & P 500 1000 Value
1/31/90 9,525 10,000 10,000 10,000
1/91 10,052 10,565 10,839 10,244
1/92 11,907 10,840 13,299 12,233
1/93 13,092 11,193 14,706 14,305
1/94 14,691 11,476 16,600 17,042
1/95 14,901 11,797 16,688 16,589
1/96 19,660 12,119 23,140 22,960
1/97 24,065 12,488 29,236 28,397
1/98 28,304 12,684 37,103 36,098
1/99 32,700 12,896 49,169 42,678
1/00 31,760 13,237 54,246 43,972
Comparison of a $10,000 investment in Evergreen Value Fund, Class A shares 2,
versus a similar investment in the Standard & Poor's 500 Index (S&P 500), the
Russell 1000 Value Index (Russell 1000 Value ) and the Consumer Price Index
(CPI).
The S&P 500 and the Russell 1000 Value are unmanaged market indices which do not
include transaction costs associated with buying and selling securities nor any
mutual fund expenses. The CPI is a commonly used measure of inflation and does
not represent an investment return. It is not possible to invest directly in an
index.
Returns reflect expense limits previously in effect, without which returns would
have been lower.
Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.
24
<PAGE>
EVERGREEN
Value Fund
Portfolio Manager Interview
How did the Fund perform?
For the six-month period ended January 31, 2000, the Fund's Class A shares had a
total return of -7.36%. During the same period, the Fund's benchmarks, Standard
& Poor's 500 and the Russell 1000 Value had returns of 5.59% and -5.22%,
respectively. The median return of multi-cap value funds was -6.04%, according
to Lipper Inc., an independent monitor of mutual fund performance. Fund returns
are before the deduction of any applicable sales charges.
Portfolio
Characteristics
---------------
(as of 1/31/2000 unless noted)
Total Net Assets $754,145,013
Number of Holdings 86
Beta* 0.86
P/E Ratio* 15.8x
*As of 12/31/1999
What was the investment environment like during the six-month period?
Value strategies lagged growth strategies during the six-month period, as the
sectors that value investors typically emphasize--such as financial services and
cyclical industries--lagged the performance gained from growth areas such as
technology.
Interest rates were an important factor. Shortly before the period began, the
U.S. Federal Reserve Board began raising short-term interest rates. The Federal
Reserve Board subsequently raised rates twice more during the period to slow
economic growth and avert inflation. Bond market investors, however, did not
appear to be as concerned about potential inflation as did the Federal Reserve
Board. As a result, longer-term rates did not rise as sharply as short-term
rates, and at times the yield curve inverted, that is, some longer term rates
were lower than some rates of shorter-term securities. This inversion of the
yield curve sometimes happens when the Federal Reserve Board acts very
aggressively to head off inflation. Financial services stocks--many of which
depend on the "spread" between short-term and long-term rates-were particularly
hard hit in this environment of rising short-term rates. Other cyclical
industries that are sensitive to movements in the business cycle such as basic
materials and retailing were also adversely affected.
Particularly during November and December 1999, investors appeared to favor
stable companies and technology companies, particularly the so-called "dot-com"
stocks of companies involved in commerce on the internet. The Fund, which
emphasizes stocks of reasonable valuations, did not own very many "dot-com"
stocks, which were very highly priced.
Top 5 Industries
----------------
(as a percentage of 1/31/2000 net assets)
Finance & Insurance 14.5%
Oil / Energy 9.9%
Healthcare Products & Services 9.3%
Utilities--Telephone 8.3%
Information Services & Technology 8.0%
What strategies did you pursue in this environment?
We reduced our holdings in the interest-rate-sensitive financial services and
cyclical industries. At the end of the period, financial services stocks
comprised about 22% of net assets, compared to a 29% representation in the
Russell 1000 Value Index. Within financial services, we looked for companies
that had some type of earnings growth, either from their distinct businesses or
from cost-cutting programs. With some exceptions,
25
<PAGE>
EVERGREEN
Value Fund
Portfolio Manager Interview
we downplayed bank stocks. When we did invest in banks, we focused on companies
such as Fleet Bank or Union Bank of California that were undergoing
restructuring programs. We also favored large, money-center institutions such as
Citigroup and Chase Manhattan that had global franchises and businesses that
participated in capital markets activity. We also sought out growth in stocks
such as Fannie Mae, involved in mortgages, and AMBAC, involved in municipal bond
insurance.
Among cyclical stocks, we reduced our investments in basic materials, such as
aluminum and paper companies.
We increased our emphasis on healthcare industry stocks, where we saw attractive
stock valuations and fundamentally strong, growing businesses. We added
pharmaceutical companies, hospital companies and healthcare services. Although
healthcare stocks did not enjoy strong performance in 1999, we saw attractive
value and the potential for strong, long-term performance. Among the companies
in which we invested were Merck and American Home Products, two leading
pharmaceutical companies; Health Management Associates, a hospital management
company; and Quest Diagnostics, which is involved in medical testing. One major
holding, Pharmacia & Upjohn, had somewhat disappointing performance during the
period because of controversy over its acquisition of Monsanto. We believe,
however, that Pharmacia & Upjohn has very strong long-term potential.
Our technology holdings tended to be long-term industry leaders such as Intel,
Motorola, Hewlett-Packard and IBM, all of which performed well. We also added
some mid-cap names such as Symantec, a software company that rebounded well,
Varian, a semi-conductor company, and Keane Inc., another software company.
Top 10 Holdings
---------------
(as a percentage of 1/31/2000 net assets)
Exxon Mobile Corp. 5.3%
UnionBancal Corp. 2.8%
AMBAC Financial Group, Inc. 2.3%
GTE Corp. 2.3%
Federal National Mortgage Assoc. 2.1%
General Electric Co. 2.0%
American Power Conversion Corp. 1.9%
FleetBoston Financial Corp. 1.9%
BellSouth Corp. 1.7%
Citigroup, Inc. 1.7%
What is your outlook?
Long-term, we are very bullish, although we may have to wait for an end of the
market's infatuation with high-priced technology stocks. We think recent market
activity has created some very attractive values in selected sectors, such as
financial services, where we believe there are many very good companies whose
stocks are trading at excellent values. Healthcare and utility industry stocks
also offer some interesting values.
We believe that if and when investors start paying more attention to stock
valuations, there are some very strong underpinnings for a sustained rally in
value-oriented stocks. One of the important factors that will affect the market,
however, is the Federal Reserve Board and whether it can successfully engineer a
"soft landing" in the economy.
26
<PAGE>
EVERGREEN
Blue Chip Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31,
January 31, 2000 # ----------------------
(Unaudited) 1999 1998 (a)
<S> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of
period $32.88 $ 30.42 $ 27.39
------ --------- ---------
Income from investment operations
Net investment income (loss) (0.02) 0.05 0.08
Net realized and unrealized gains
on securities 4.09 4.82 3.01
------ --------- ---------
Total from investment operations 4.07 4.87 3.09
------ --------- ---------
Distributions to shareholders from
Net investment income 0 (0.03) (0.06)
Net realized gains (2.40) (2.38) 0
------ --------- ---------
Total distributions (2.40) (2.41) (0.06)
------ --------- ---------
Net asset value, end of period $34.55 $ 32.88 $ 30.42
------ --------- ---------
Total return* 12.44% 17.29% 11.29%
Ratios and supplemental data
Net assets, end of period
(millions) $ 466 $ 382 $ 285
Ratios to average net assets
Expenses** 1.17%+ 1.20% 1.20%+
Net investment income (loss) (0.09%)+ 0.19% 0.49%+
Portfolio turnover rate 66% 111% 112%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended August 31,
January 31, 2000 # ----------------------- -------------------------
(Unaudited) 1999 1998 (b) 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $32.54 $ 30.35 $ 29.79 $ 25.05 $ 22.98 $ 23.21
------ --------- --------- ------- ------- -------
Income from investment
operations
Net investment income
(loss) (0.14) (0.05) (0.12) 0.15 0.12 0.25
Net realized and
unrealized gains on
securities 4.03 4.62 5.72 7.97 3.69 2.66
------ --------- --------- ------- ------- -------
Total from investment
operations 3.89 4.57 5.60 8.12 3.81 2.91
------ --------- --------- ------- ------- -------
Distributions to
shareholders from
Net investment income 0 0 (0.08) (0.20) (0.76) (0.36)
Net realized gains (2.40) (2.38) (4.96) (3.18) (0.98) (2.78)
------ --------- --------- ------- ------- -------
Total distributions (2.40) (2.38) (5.04) (3.38) (1.74) (3.14)
------ --------- --------- ------- ------- -------
Net asset value, end of
period $34.03 $ 32.54 $ 30.35 $ 29.79 $ 25.05 $ 22.98
------ --------- --------- ------- ------- -------
Total return* 12.01% 16.26% 20.89% 34.76% 17.31% 13.87%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 376 $ 255 $ 118 $ 313 $ 225 $ 199
Ratios to average net
assets
Expenses** 1.92%+ 1.95% 1.68%+ 1.57% 1.85% 1.75%
Net investment income
(loss) (0.85%)+ (0.60%) (0.02%)+ 0.55% 0.52% 1.09%
Portfolio turnover rate 66% 111% 112% 109% 139% 115%
</TABLE>
(a) For the period from January 20, 1998 (commencement of class operations) to
July 31, 1998.
(b) For the eleven months ended July 31, 1998. The Fund changed its fiscal
year end from August 31 to July 31, effective July 31, 1998.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
27
<PAGE>
EVERGREEN
Blue Chip Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July
Six Months Ended 31,
January 31, 2000 # -----------------
(Unaudited) 1999 1998 (a)
<S> <C> <C> <C>
CLASS C SHARES
Net asset value, beginning of period $32.63 $30.40 $27.70
------ ------ ------
Income from investment operations
Net investment income (loss) (0.14) (0.11) 0
Net realized and unrealized gains on
securities 4.04 4.72 2.72
------ ------ ------
Total from investment operations 3.90 4.61 2.72
------ ------ ------
Distributions to shareholders from
Net investment income 0 0 (0.02)
Net realized gains (2.40) (2.38) 0
------ ------ ------
Total distributions (2.40) (2.38) (0.02)
------ ------ ------
Net asset value, end of period $34.13 $32.63 $30.40
------ ------ ------
Total return* 12.01% 16.37% 9.80%
Ratios and supplemental data
Net assets, end of period (thousands) $7,035 $2,969 $ 780
Ratios to average net assets
Expenses** 1.93%+ 1.95% 2.02%+
Net investment loss (0.87%)+ (0.67%) (0.27%)+
Portfolio turnover rate 66% 111% 112%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
January 31, 2000 # Period Ended
(Unaudited) July 31, 1999 (b)
<S> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $32.62 $32.30
------ ------
Income from investment operations
Net investment income 0.01 0
Net realized and unrealized gains on
securities 4.07 0.32
------ ------
Total from investment operations 4.08 0.32
------ ------
Distributions to shareholders from
Net realized gains (2.40) 0
------ ------
Total distributions (2.40) 0
------ ------
Net asset value, end of period $34.30 $32.62
------ ------
Total return 12.58% 0.99%
Ratios and supplemental data
Net assets, end of period (thousands) $6,646 $ 789
Ratios to average net assets
Expenses** 0.94%+ 0.95%+
Net investment income 0.08%+ 0.08%+
Portfolio turnover rate 66% 111%
</TABLE>
(a) For the period from January 22, 1998 (commencement of class operations) to
July 31, 1998.
(b) For the period from April 30, 1999 (commencement of class operations) to
July 31, 1999.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
28
<PAGE>
EVERGREEN
Equity Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended November 30,
January 31, 2000 --------------------------- ------------------------
(Unaudited) 1999 # 1998 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 20.17 $ 21.65 $ 20.69 $ 17.33 $ 13.83 $ 11.75
------- ------- -------- ------- ----------- -----------
Income from investment
operations
Net investment income 0.15 0.33 0.21 0.18 0.26 0.25
Net realized and
unrealized gains or
losses on securities (1.43) 1.22 2.46 3.34 3.83 2.80
------- ------- -------- ------- ----------- -----------
Total from investment
operations (1.28) 1.55 2.67 3.52 4.09 3.05
------- ------- -------- ------- ----------- -----------
Distributions to
shareholders from
Net investment income (0.19) (0.29) (0.19) (0.16) (0.26) (0.32)
Net realized gains (2.99) (2.74) (1.52) 0 (0.33) (0.65)
------- ------- -------- ------- ----------- -----------
Total distributions (3.18) (3.03) (1.71) (0.16) (0.59) (0.97)
------- ------- -------- ------- ----------- -----------
Net asset value, end of
period $ 15.71 $ 20.17 $ 21.65 $ 20.69 $ 17.33 $ 13.83
------- ------- -------- ------- ----------- -----------
Total return* (7.11%) 8.20% 13.85% 20.40% 29.83% 26.57%
Ratios and supplemental
data
Net assets, end of
period (thousands) $38,680 $50,213 $ 52,667 $47,812 $ 40,487 $ 27,037
Ratios to average net
assets
Expenses** 1.20%+ 1.17% 1.21% 1.24%+ 1.41% 1.69%
Net investment income 1.66%+ 1.68% 1.01% 1.46%+ 1.66% 1.94%
Portfolio turnover rate 34% 106% 66% 41% 41% 77%
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended November 30,
January 31, 2000 --------------------------- ------------------------
(Unaudited) 1999 # 1998 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 20.06 $ 21.56 $ 20.63 $ 17.31 $ 13.84 $ 11.77
------- ------- -------- ------- ----------- -----------
Income from investment
operations
Net investment income 0.08 0.18 0.06 0.09 0.15 0.15
Net realized and
unrealized gains or
losses on securities (1.43) 1.21 2.45 3.31 3.80 2.82
------- ------- -------- ------- ----------- -----------
Total from investment
operations (1.35) 1.39 2.51 3.40 3.95 2.97
------- ------- -------- ------- ----------- -----------
Distributions to
shareholders from
Net investment income (0.12) (0.15) (0.06) (0.08) (0.15) (0.25)
Net realized gains (2.99) (2.74) (1.52) 0 (0.33) (0.65)
------- ------- -------- ------- ----------- -----------
Total distributions (3.11) (2.89) (1.58) (0.08) (0.48) (0.90)
------- ------- -------- ------- ----------- -----------
Net asset value, end of
period $ 15.60 $ 20.06 $ 21.56 $ 20.63 $ 17.31 $ 13.84
------- ------- -------- ------- ----------- -----------
Total return* (7.49%) 7.39% 13.01% 19.68% 28.73% 25.59%
Ratios and supplemental
data
Net assets, end of
period (thousands) $55,956 $78,049 $105,748 $94,309 $ 43,526 $ 20,605
Ratios to average net
assets
Expenses** 1.95%+ 1.93% 1.97% 2.02%+ 2.18% 2.47%
Net investment income 0.91%+ 0.91% 0.25% 0.58%+ 0.88% 1.06%
Portfolio turnover rate 34% 106% 66% 41% 41% 77%
</TABLE>
(a) For the eight months ended July 31, 1997. The Fund changed its fiscal year
end from November 30 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
29
<PAGE>
EVERGREEN
Equity Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended November 30,
January 31, 2000 -------------------------- -----------------------
(Unaudited) 1999 # 1998 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 20.08 $ 21.58 $ 20.65 $ 17.32 $ 13.85 $ 11.78
------- ------- ------- ------- ------------ -----------
Income from investment
operations
Net investment income 0.08 0.18 0.05 0.09 0.14 0.16
Net realized and
unrealized gains or
losses on securities (1.43) 1.21 2.46 3.32 3.81 2.81
------- ------- ------- ------- ------------ -----------
Total from investment
operations (1.35) 1.39 2.51 3.41 3.95 2.97
------- ------- ------- ------- ------------ -----------
Distributions to
shareholders from
Net investment income (0.12) (0.15) (0.06) (0.08) (0.15) (0.25)
Net realized gains (2.99) (2.74) (1.52) 0 (0.33) (0.65)
------- ------- ------- ------- ------------ -----------
Total distributions (3.11) (2.89) (1.58) (0.08) (0.48) (0.90)
------- ------- ------- ------- ------------ -----------
Net asset value, end of
period $ 15.62 $ 20.08 $ 21.58 $ 20.65 $ 17.32 $ 13.85
------- ------- ------- ------- ------------ -----------
Total return* (7.49%) 7.38% 12.99% 19.73% 28.71% 25.57%
Ratios and supplemental
data
Net assets, end of
period (thousands) $11,938 $16,952 $20,851 $21,125 $ 14,562 $ 9,503
Ratios to average net
assets
Expenses** 1.95%+ 1.93% 1.97% 2.01%+ 2.17% 2.47%
Net investment income 0.91%+ 0.91% 0.25% 0.66%+ 0.89% 1.16%
Portfolio turnover rate 34% 106% 66% 41% 41% 77%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31,
January 31, 2000 ------------------------
(Unaudited) 1999 # 1998 1997 (b)
<S> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning of
period $20.12 $21.61 $20.62 $17.74
------ ------ ------ ------
Income from investment operations
Net investment income 0.24 0.37 0.24 0.18
Net realized and unrealized gains
or losses on securities (1.50) 1.22 2.51 2.86
------ ------ ------ ------
Total from investment operations (1.26) 1.59 2.75 3.04
------ ------ ------ ------
Distributions to shareholders
Net investment income (0.21) (0.34) (0.24) (0.16)
Net realized gains (2.99) (2.74) (1.52) 0
------ ------ ------ ------
Total distributions (3.20) (3.08) (1.76) (0.16)
------ ------ ------ ------
Net asset value, end of period $15.66 $20.12 $21.61 $20.62
------ ------ ------ ------
Total return (7.00%) 8.44% 14.29% 17.22%
Ratios and supplemental data
Net assets, end of period
(thousands) $ 105 $ 651 $ 111 $ 93
Ratios to average net assets
Expenses** 0.93%+ 0.87% 0.93% 1.34%+
Net investment income 1.88%+ 1.98% 1.31% 0.79%+
Portfolio turnover rate 34% 106% 66% 41%
</TABLE>
(a) For the eight months ended July 31, 1997. The Fund changed its fiscal year
end from November 30 to July 31, effective July 31, 1997.
(b) For the period from January 13, 1997 (commencement of class operations) to
July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
30
<PAGE>
EVERGREEN
Growth and Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 -------------------------- -----------------------
(Unaudited) 1999 1998 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $29.56 $29.14 $27.26 $22.53 $ 18.63 $ 14.48
------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income
(loss) (0.03) 0.10 0.16 0.08 0.12 0.13
Net realized and
unrealized gains on
securities 1.43 1.16 2.86 4.72 4.26 4.64
------ ------ ------ ------ ----------- -----------
Total from investment
operations 1.40 1.26 3.02 4.80 4.38 4.77
------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income 0 (0.06) (0.13) (0.07) (0.13) (0.14)
Net realized gains (0.60) (0.78) (1.01) 0 (0.35) (0.48)
------ ------ ------ ------ ----------- -----------
Total distributions (0.60) (0.84) (1.14) (0.07) (0.48) (0.62)
------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $30.36 $29.56 $29.14 $27.26 $ 22.53 $ 18.63
------ ------ ------ ------ ----------- -----------
Total return* 4.77% 4.48% 11.26% 21.33% 23.50% 33.00%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 234 $ 250 $ 296 $ 166 $ 85 $ 19
Ratios to average net
assets
Expenses** 1.46%+ 1.43% 1.46% 1.47%+ 1.41% 1.55%+
Net investment income
(loss) (0.25%)+ 0.33% 0.61% 0.57%+ 0.70% 0.99%+
Portfolio turnover rate 33% 39% 20% 6% 14% 17%
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 -------------------------- -----------------------
(Unaudited) 1999 1998 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $29.14 $28.88 $27.10 $22.43 $ 18.59 $ 14.48
------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income
(loss) (0.18) (0.14) (0.02) (0.02) 0 0.05
Net realized and
unrealized gains on
securities 1.45 1.18 2.81 4.69 4.20 4.61
------ ------ ------ ------ ----------- -----------
Total from investment
operations 1.27 1.04 2.79 4.67 4.20 4.66
------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income 0 0 0 0 (0.01) (0.07)
Net realized gains (0.60) (0.78) (1.01) 0 (0.35) (0.48)
------ ------ ------ ------ ----------- -----------
Total distributions (0.60) (0.78) (1.01) 0 (0.36) (0.55)
------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $29.81 $29.14 $28.88 $27.10 $ 22.43 $ 18.59
------ ------ ------ ------ ----------- -----------
Total return* 4.39% 3.73% 10.44% 20.82% 22.60% 32.20%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 799 $ 891 $1,000 $ 542 $ 245 $ 46
Ratios to average net
assets
Expenses** 2.21%+ 2.18% 2.21% 2.25%+ 2.17% 2.24%+
Net investment income
(loss) (1.01%)+ (0.43%) (0.14%) (0.19%)+ (0.06%) 0.30%+
Portfolio turnover rate 33% 39% 20% 6% 14% 17%
</TABLE>
(a) For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
(b) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
31
<PAGE>
EVERGREEN
Growth and Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 -------------------------- -----------------------
(Unaudited) 1999 1998 1997 (b) 1996 1995 (a)
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $29.14 $28.89 $27.10 $22.43 $ 18.58 $ 14.48
------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income
(loss) (0.20) (0.16) (0.02) (0.02) 0 0.06
Net realized and
unrealized gains on
securities 1.47 1.19 2.82 4.69 4.21 4.60
------ ------ ------ ------ ----------- -----------
Total from investment
operations 1.27 1.03 2.80 4.67 4.21 4.66
------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income 0 0 0 0 (0.01) (0.08)
Net realized gains (0.60) (0.78) (1.01) 0 (0.35) (0.48)
------ ------ ------ ------ ----------- -----------
Total distributions (0.60) (0.78) (1.01) 0 (0.36) (0.56)
------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $29.81 $29.14 $28.89 $27.10 $ 22.43 $ 18.58
------ ------ ------ ------ ----------- -----------
Total return* 4.39% 3.69% 10.47% 20.82% 22.60% 32.20%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 30 $ 37 $ 50 $ 24 $ 10 $ 20
Ratios to average net
assets
Expenses** 2.21%+ 2.18% 2.21% 2.25%+ 2.17% 2.15%+
Net investment income
(loss) (1.00%)+ (0.42%) (0.13%) (0.19%)+ (0.06%) 0.35%+
Portfolio turnover rate 33% 39% 20% 6% 14% 17%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 ------------------------ -----------------------
(Unaudited) 1999 1998 1997 (b) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $29.65 $29.19 $27.29 $22.55 $ 18.64 $ 14.52
------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income 0.03 0.19 0.24 0.11 0.18 0.18
Net realized and
unrealized gains on
securities 1.42 1.15 2.87 4.73 4.25 4.59
------ ------ ------ ------ ----------- -----------
Total from investment
operations 1.45 1.34 3.11 4.84 4.43 4.77
------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income 0 (0.10) (0.20) (0.10) (0.17) (0.17)
Net realized gains (0.60) (0.78) (1.01) 0 (0.35) (0.48)
------ ------ ------ ------ ----------- -----------
Total distributions (0.60) (0.88) (1.21) (0.10) (0.52) (0.65)
------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $30.50 $29.65 $29.19 $27.29 $ 22.55 $ 18.64
------ ------ ------ ------ ----------- -----------
Total return 4.92% 4.75% 11.56% 21.52% 23.80% 32.90%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 553 $ 634 $ 801 $ 616 $ 442 $ 141
Ratios to average net
assets
Expenses** 1.21%+ 1.18% 1.20% 1.21%+ 1.16% 1.27%
Net investment income 0.00%+ 0.57% 0.86% 0.82%+ 0.93% 1.11%
Portfolio turnover rate 33% 39% 20% 6% 14% 17%
</TABLE>
(a) For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
(b) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
32
<PAGE>
EVERGREEN
Income and Growth Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Six Months Ended Year Ended July 31, January 31,
January 31, 2000 ----------------------------- ----------------
(Unaudited) 1999 # 1998 1997 (a) # 1997 1996
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 22.57 $ 23.19 $ 23.94 $ 21.79 $ 20.15 $ 17.28
-------- -------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.37 0.94 1.05 0.52 1.02 1.01
Net realized and
unrealized gains or
losses on securities (0.16) 1.50 0.81 2.15 1.67 2.94
-------- -------- ------- ------- ------- -------
Total from investment
operations 0.21 2.44 1.86 2.67 2.69 3.95
-------- -------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.51) (0.93) (1.02) (0.52) (1.05) (1.08)
Net realized gains (0.40) (2.13) (1.59) 0 0 0
-------- -------- ------- ------- ------- -------
Total distributions (0.91) (3.06) (2.61) (0.52) (1.05) (1.08)
-------- -------- ------- ------- ------- -------
Net asset value, end of
period $ 21.87 $ 22.57 $ 23.19 $ 23.94 $ 21.79 $ 20.15
-------- -------- ------- ------- ------- -------
Total return* 1.03% 12.14% 7.93% 12.45% 13.80% 23.40%
Ratios and supplemental
data
Net assets, end of
period (thousands) $ 36,138 $ 35,714 $15,005 $11,955 $ 9,678 $ 4,412
Ratios to average net
assets
Expenses** 1.49%+ 1.46% 1.50% 1.45%+ 1.44% 1.36%
Net investment income 3.14%+ 4.39% 4.20% 4.69%+ 4.93% 5.39%
Portfolio turnover rate 44% 124% 133% 72% 168% 138%
<CAPTION>
Year Ended
Six Months Ended Year Ended July 31, January 31,
January 31, 2000 ----------------------------- ----------------
(Unaudited) 1999 # 1998 1997 (a) # 1997 1996
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 22.38 $ 23.04 $ 23.81 $ 21.69 $ 20.08 $ 17.28
Income from investment
operations
Net investment income 0.24 0.76 0.86 0.43 0.89 0.91
-------- -------- ------- ------- ------- -------
Net realized and
unrealized gains or
losses on securities (0.11) 1.51 0.81 2.15 1.64 2.87
-------- -------- ------- ------- ------- -------
Total from investment
operations 0.13 2.27 1.67 2.58 2.53 3.78
-------- -------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.43) (0.80) (0.85) (0.46) (0.92) (0.98)
Net realized gains (0.40) (2.13) (1.59) 0 0 0
-------- -------- ------- ------- ------- -------
Total distributions (0.83) (2.93) (2.44) (0.46) (0.92) (0.98)
-------- -------- ------- ------- ------- -------
Net asset value, end of
period $ 21.68 $ 22.38 $ 23.04 $ 23.81 $ 21.69 $ 20.08
-------- -------- ------- ------- ------- -------
Total return* 0.64% 11.34% 7.13% 12.06% 13.00% 22.40%
Ratios and supplemental
data
Net assets, end of
period (thousands) $157,782 $185,177 $54,544 $43,977 $35,323 $14,750
Ratios to average net
assets
Expenses** 2.23%+ 2.21% 2.25% 2.20%+ 2.19% 2.11%
Net investment income 2.38%+ 3.61% 3.46% 3.94%+ 4.17% 4.69%
Portfolio turnover rate 44% 124% 133% 72% 168% 138%
</TABLE>
(a) For the six months ended July 31, 1997. The Fund changed its fiscal year
end from January 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
33
<PAGE>
EVERGREEN
Income and Growth Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended January 31,
January 31, 2000 ------------------------- ---------------------
(Unaudited) 1999 # 1998 1997 (a) # 1997 1996
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $22.38 $23.04 $23.81 $21.69 $ 20.08 $ 17.27
------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income 0.25 0.76 0.87 0.44 0.87 0.90
Net realized and
unrealized gains or
losses on securities (0.12) 1.51 0.80 2.14 1.66 2.89
------ ------ ------ ------ ----------- -----------
Total from investment
operations 0.13 2.27 1.67 2.58 2.53 3.79
------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income (0.43) (0.80) (0.85) (0.46) (0.92) (0.98)
Net realized gains (0.40) (2.13) (1.59) 0 0 0
------ ------ ------ ------ ----------- -----------
Total distributions (0.83) (2.93) (2.44) (0.46) (0.92) (0.98)
------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $21.68 $22.38 $23.04 $23.81 $ 21.69 $ 20.08
------ ------ ------ ------ ----------- -----------
Total return* 0.64% 11.34% 7.13% 12.06% 12.90% 22.40%
Ratios and supplemental
data
Net assets, end of
period (thousands) $2,326 $2,502 $1,259 $ 950 $ 982 $ 523
Ratios to average net
assets
Expenses** 2.24%+ 2.21% 2.25% 2.20%+ 2.19% 2.11%
Net investment income 2.37%+ 3.60% 3.48% 4.06%+ 4.15% 4.67%
Portfolio turnover rate 44% 124% 133% 72% 168% 138%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended January 31,
January 31, 2000 ------------------------- ---------------------
(Unaudited) 1999 # 1998 1997 (a) # 1997 1996
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $22.58 $23.22 $23.98 $21.81 $ 20.16 $ 17.28
------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income 0.37 0.99 1.02 0.55 1.08 1.10
Net realized and
unrealized gains or
losses on securities (0.14) 1.52 0.89 2.16 1.66 2.87
------ ------ ------ ------ ----------- -----------
Total from investment
operations 0.23 2.51 1.91 2.71 2.74 3.97
------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income (0.54) (1.02) (1.08) (0.54) (1.09) (1.09)
Net realized gains (0.40) (2.13) (1.59) 0 0 0
------ ------ ------ ------ ----------- -----------
Total distributions (0.94) (3.15) (2.67) (0.54) (1.09) (1.09)
------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $21.88 $22.58 $23.22 $23.98 $ 21.81 $ 20.16
------ ------ ------ ------ ----------- -----------
Total return 1.16% 12.46% 8.16% 12.65% 14.10% 23.50%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 803 $ 847 $ 880 $ 900 $ 858 $ 914
Ratios to average net
assets
Expenses** 1.23%+ 1.21% 1.25% 1.20%+ 1.18% 1.19%
Net investment income 3.36%+ 4.61% 4.46% 4.97%+ 5.14% 5.70%
Portfolio turnover rate 44% 124% 133% 72% 168% 138%
</TABLE>
(a) For the six months ended July 31, 1997. The Fund changed its fiscal year
end from January 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
34
<PAGE>
EVERGREEN
Small Cap Value Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 ----------------------------- -------------------------
(Unaudited) 1999 1998 1997 (b) # 1996 1995 (a)
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 15.57 $ 15.75 $ 15.69 $13.10 $ 11.57 $ 9.64
------- -------- -------- ------ ----------- -----------
Income from investment
operations
Net investment income 0.05 0.26 0.29 0.14 0.34 0.34
Net realized and
unrealized gains or
losses on securities (1.35) 0.04 0.24 2.59 2.13 2.45
------- -------- -------- ------ ----------- -----------
Total from investment
operations (1.30) 0.30 0.53 2.73 2.47 2.79
------- -------- -------- ------ ----------- -----------
Distributions to
shareholders from
Net investment income (0.04) (0.30) (0.28) (0.13) (0.34) (0.37)
Net realized gains 0 (0.18) (0.19) (0.01) (0.60) (0.49)
------- -------- -------- ------ ----------- -----------
Total distributions (0.04) (0.48) (0.47) (0.14) (0.94) (0.86)
------- -------- -------- ------ ----------- -----------
Net asset value, end of
period $ 14.23 $ 15.57 $ 15.75 $15.69 $ 13.10 $ 11.57
------- -------- -------- ------ ----------- -----------
Total return* (8.38%) 2.17% 3.24% 20.99% 22.00% 29.50%
Ratios and supplemental
data
Net assets, end of
period (thousands) $46,790 $ 59,451 $ 54,142 $4,239 $ 336 $ 216
Ratios to average net
assets
Expenses** 1.69%+ 1.67% 1.68% 1.71%+ 1.75% 1.75%+
Net investment income 0.65%+ 1.85% 1.95% 1.88%+ 3.08% 3.39%+
Portfolio turnover rate 39% 54% 18% 13% 50% 48%
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 ----------------------------- -------------------------
(Unaudited) 1999 1998 1997 (b) # 1996 1995 (a)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 15.48 $ 15.67 $ 15.64 $13.09 $ 11.57 $ 9.64
------- -------- -------- ------ ----------- -----------
Income from investment
operations
Net investment income
(loss) (0.01) 0.16 0.19 0.08 0.27 0.28
Net realized and
unrealized gains or
losses on securities (1.33) 0.02 0.22 2.57 2.11 2.43
------- -------- -------- ------ ----------- -----------
Total from investment
operations (1.34) 0.18 0.41 2.65 2.38 2.71
------- -------- -------- ------ ----------- -----------
Distributions to
shareholders from
Net investment income (0.01) (0.19) (0.19) (0.09) (0.26) (0.29)
Net realized gains 0 (0.18) (0.19) (0.01) (0.60) (0.49)
------- -------- -------- ------ ----------- -----------
Total distributions (0.01) (0.37) (0.38) (0.10) (0.86) (0.78)
------- -------- -------- ------ ----------- -----------
Net asset value, end of
period $ 14.13 $ 15.48 $ 15.67 $15.64 $ 13.09 $ 11.57
------- -------- -------- ------ ----------- -----------
Total return* (8.66%) 1.35% 2.49% 20.37% 21.10% 28.70%
Ratios and supplemental
data
Net assets, end of
period (thousands) $80,534 $110,809 $130,191 $9,462 $ 692 $ 266
Ratios to average net
assets
Expenses** 2.44%+ 2.42% 2.43% 2.46%+ 2.50% 2.50%+
Net investment income
(loss) (0.09%)+ 1.15% 1.20% 1.12%+ 2.39% 2.67%+
Portfolio turnover rate 39% 54% 18% 13% 50% 48%
</TABLE>
(a) For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
(b) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
35
<PAGE>
EVERGREEN
Small Cap Value Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 ---------------------------- -----------------------
(Unaudited) 1999 1998 1997 (b) # 1996 1995 (a)
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 15.46 $ 15.66 $ 15.63 $ 13.09 $ 11.56 $ 9.74
------- ------- ------- ------- ----------- -----------
Income from investment
operations
Net investment income
(loss) (0.01) 0.16 0.19 0.10 0.28 0.28
Net realized and
unrealized gains or
losses on securities (1.33) 0.01 0.22 2.54 2.10 2.33
------- ------- ------- ------- ----------- -----------
Total from investment
operations (1.34) 0.17 0.41 2.64 2.38 2.61
------- ------- ------- ------- ----------- -----------
Distributions to
shareholders from
Net investment income (0.01) (0.19) (0.19) (0.09) (0.25) (0.30)
Net realized gains 0 (0.18) (0.19) (0.01) (0.60) (0.49)
------- ------- ------- ------- ----------- -----------
Total distributions (0.01) (0.37) (0.38) (0.10) (0.85) (0.79)
------- ------- ------- ------- ----------- -----------
Net asset value, end of
period $ 14.11 $ 15.46 $ 15.66 $ 15.63 $ 13.09 $ 11.56
------- ------- ------- ------- ----------- -----------
Total return* (8.67%) 1.28% 2.49% 20.30% 21.10% 27.30%
Ratios and supplemental
data
Net assets, end of
period (thousands) $15,309 $22,842 $26,197 $ 2,770 $ 56 $ 24
Ratios to average net
assets
Expenses** 2.44%+ 2.42% 2.43% 2.45%+ 2.50% 2.50%+
Net investment income
(loss) (0.07%)+ 1.15% 1.20% 1.20%+ 2.33% 2.63%+
Portfolio turnover rate 39% 54% 18% 13% 50% 48%
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 ---------------------------- -----------------------
(Unaudited) 1999 1998 1997 (b) # 1996 1995
CLASS Y SHARES
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 15.57 $ 15.77 $ 15.71 $ 13.12 $ 11.58 $ 9.70
------- ------- ------- ------- ----------- -----------
Income from investment
operations
Net investment income 0.09 0.33 0.34 0.19 0.38 0.38
Net realized and
unrealized gains or
losses on securities (1.36) (0.02) 0.24 2.56 2.13 2.38
------- ------- ------- ------- ----------- -----------
Total from investment
operations (1.27) 0.31 0.58 2.75 2.51 2.76
------- ------- ------- ------- ----------- -----------
Distributions to
shareholders from
Net investment income (0.05) (0.33) (0.33) (0.15) (0.37) (0.38)
Net realized gains 0 (0.18) (0.19) (0.01) (0.60) (0.50)
------- ------- ------- ------- ----------- -----------
Total distributions (0.05) (0.51) (0.52) (0.16) (0.97) (0.88)
------- ------- ------- ------- ----------- -----------
Net asset value, end of
period $ 14.25 $ 15.57 $ 15.77 $ 15.71 $ 13.12 $ 11.58
------- ------- ------- ------- ----------- -----------
Total return (8.19%) 2.31% 3.57% 21.09% 22.40% 29.10%
Ratios and supplemental
data
Net assets, end of
period (thousands) $35,735 $56,903 $96,556 $42,374 $ 8,592 $ 4,806
Ratios to average net
assets
Expenses** 1.44%+ 1.42% 1.39% 1.39%+ 1.50% 1.50%
Net investment income 0.93%+ 2.19% 2.23% 2.39%+ 3.36% 3.56%
Portfolio turnover rate 39% 54% 18% 13% 50% 48%
</TABLE>
(a) For the period from January 24, 1995 (commencement of class operations) to
December 31, 1995.
(b) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
36
<PAGE>
EVERGREEN
Utility Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Six Months Ended Year Ended July 31, December 31,
January 31, 2000 --------------------------- -----------------
(Unaudited) 1999 1998 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 12.85 $ 11.76 $ 11.45 $ 10.57 $ 10.80 $ 9.00
-------- -------- ------- ------- ------- --------
Income from investment
operations
Net investment income 0.16 0.42 0.43 0.25 0.41 0.44
Net realized and
unrealized gains on
securities 2.43 2.37 1.44 0.87 0.05 2.25
-------- -------- ------- ------- ------- --------
Total from investment
operations 2.59 2.79 1.87 1.12 0.46 2.69
-------- -------- ------- ------- ------- --------
Distributions to
shareholders from
Net investment income (0.17) (0.42) (0.44) (0.24) (0.41) (0.44)
Net realized gains (1.18) (1.28) (1.12) 0 (0.28) (0.45)
-------- -------- ------- ------- ------- --------
Total distributions (1.35) (1.70) (1.56) (0.24) (0.69) (0.89)
-------- -------- ------- ------- ------- --------
Net asset value, end of
period $ 14.09 $ 12.85 $ 11.76 $ 11.45 $ 10.57 $ 10.80
-------- -------- ------- ------- ------- --------
Total return* 21.40% 26.05% 17.30% 10.72% 4.40% 30.70%
Ratios and supplemental
data
Net assets, end of
period (thousands) $135,061 $108,411 $95,300 $91,638 $96,243 $107,872
Ratios to average net
assets
Expenses** 1.01%+ 1.03% 0.99% 1.00%+ 0.87% 0.79%
Net investment income 2.44%+ 3.60% 3.58% 3.85%+ 3.87% 4.51%
Portfolio turnover rate 25% 46% 62% 50% 59% 88%
<CAPTION>
Year Ended
Six Months Ended Year Ended July 31, December 31,
January 31, 2000 --------------------------- -----------------
(Unaudited) 1999 1998 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 12.86 $ 11.76 $ 11.46 $ 10.58 $ 10.81 $ 9.00
-------- -------- ------- ------- ------- --------
Income from investment
operations
Net investment income 0.11 0.34 0.34 0.20 0.33 0.37
Net realized and
unrealized gains on
securities 2.42 2.37 1.44 0.87 0.05 2.26
-------- -------- ------- ------- ------- --------
Total from investment
operations 2.53 2.71 1.78 1.07 0.38 2.63
-------- -------- ------- ------- ------- --------
Distributions to
shareholders from
Net investment income (0.12) (0.33) (0.36) (0.19) (0.33) (0.37)
Net realized gains (1.18) (1.28) (1.12) 0 (0.28) (0.45)
-------- -------- ------- ------- ------- --------
Total distributions (1.30) (1.61) (1.48) (0.19) (0.61) (0.82)
-------- -------- ------- ------- ------- --------
Net asset value, end of
period $ 14.09 $ 12.86 $ 11.76 $ 11.46 $ 10.58 $ 10.81
-------- -------- ------- ------- ------- --------
Total return* 20.85% 25.23% 16.31% 10.21% 3.60% 29.90%
Ratios and supplemental
data
Net assets, end of
period (thousands) $ 62,996 $ 54,839 $43,776 $36,738 $38,511 $ 35,662
Ratios to average net
assets
Expenses** 1.76%+ 1.77% 1.74% 1.75%+ 1.62% 1.53%
Net investment income 1.69%+ 2.85% 2.82% 3.10%+ 3.12% 3.78%
Portfolio turnover rate 25% 46% 62% 50% 59% 88%
</TABLE>
(a) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
37
<PAGE>
EVERGREEN
Utility Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 ------------------------ -----------------------
(Unaudited) 1999 1998 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $12.86 $11.76 $11.46 $10.58 $ 10.82 $ 9.01
------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income 0.12 0.34 0.34 0.20 0.33 0.37
Net realized and
unrealized gains on
securities 2.42 2.37 1.44 0.87 0.04 2.26
------ ------ ------ ------ ----------- -----------
Total from investment
operations 2.54 2.71 1.78 1.07 0.37 2.63
------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income (0.12) (0.33) (0.36) (0.19) (0.33) (0.37)
Net realized gains (1.18) (1.28) (1.12) 0 (0.28) (0.45)
------ ------ ------ ------ ----------- -----------
Total distributions (1.30) (1.61) (1.48) (0.19) (0.61) (0.82)
------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $14.10 $12.86 $11.76 $11.46 $ 10.58 $ 10.82
------ ------ ------ ------ ----------- -----------
Total return* 20.94% 25.23% 16.31% 10.21% 3.50% 29.80%
Ratios and supplemental
data
Net assets, end of
period (thousands) $2,828 $ 879 $ 486 $ 379 $ 396 $ 246
Ratios to average net
assets
Expenses** 1.76%+ 1.77% 1.74% 1.75%+ 1.63% 1.54%
Net investment income 1.71%+ 2.74% 2.82% 3.10%+ 3.13% 3.76%
Portfolio turnover rate 25% 46% 62% 50% 59% 88%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 ------------------------ -----------------------
(Unaudited) 1999 1998 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $12.86 $11.77 $11.46 $10.58 $ 10.82 $ 9.00
------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income 0.18 0.49 0.46 0.25 0.44 0.47
Net realized and
unrealized gains on
securities 2.43 2.33 1.45 0.88 0.03 2.27
------ ------ ------ ------ ----------- -----------
Total from investment
operations 2.61 2.82 1.91 1.13 0.47 2.74
------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income (0.19) (0.45) (0.48) (0.25) (0.43) (0.47)
Net realized gains (1.18) (1.28) (1.12) 0 (0.28) (0.45)
------ ------ ------ ------ ----------- -----------
Total distributions (1.37) (1.73) (1.60) (0.25) (0.71) (0.92)
------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $14.10 $12.86 $11.77 $11.46 $ 10.58 $ 10.82
------ ------ ------ ------ ----------- -----------
Total return 21.53% 26.35% 17.60% 10.85% 4.50% 31.30%
Ratios and supplemental
data
Net assets, end of
period (thousands) $2,223 $2,123 $1,695 $1,627 $ 2,000 $ 7,791
Ratios to average net
assets
Expenses** 0.76%+ 0.77% 0.74% 0.74%+ 0.61% 0.54%
Net investment income 2.70%+ 3.92% 3.82% 4.06%+ 4.01% 4.76%
Portfolio turnover rate 25% 46% 62% 50% 59% 88%
</TABLE>
(a) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
38
<PAGE>
EVERGREEN
Value Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 ------------------------ -----------------------
(Unaudited) 1999 1998 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $24.86 $22.23 $24.64 $20.57 $ 20.45 $ 16.62
------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income 0.09 0.21 0.26 0.21 0.38 0.55
Net realized and
unrealized gains or
losses on securities (1.74) 2.76 2.00 4.05 3.49 4.69
------ ------ ------ ------ ----------- -----------
Total from investment
operations (1.65) 2.97 2.26 4.26 3.87 5.24
------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income (0.09) (0.21) (0.29) (0.19) (0.41) (0.51)
Net realized gains (3.11) (0.13) (4.38) 0 (3.34) (0.90)
------ ------ ------ ------ ----------- -----------
Total distributions (3.20) (0.34) (4.67) (0.19) (3.75) (1.41)
------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $20.01 $24.86 $22.23 $24.64 $ 20.57 $ 20.45
------ ------ ------ ------ ----------- -----------
Total return* (7.36%) 13.48% 9.55% 20.78% 18.90% 31.80%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 425 $ 464 $ 476 $ 392 $ 328 $ 292
Ratios to average net
assets
Expenses** 1.03%+ 1.00% 1.01% 0.92%+ 0.91% 0.90%
Net investment income 0.80%+ 0.93% 1.04% 1.66%+ 1.77% 2.78%
Portfolio turnover rate 46% 110% 69% 6% 91% 53%
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 ------------------------ -----------------------
(Unaudited) 1999 1998 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $24.81 $22.20 $24.63 $20.58 $ 20.45 $ 16.62
------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income 0.01 0.04 0.08 0.12 0.22 0.39
Net realized and
unrealized gains or
losses on securities (1.74) 2.75 1.99 4.03 3.50 4.70
------ ------ ------ ------ ----------- -----------
Total from investment
operations (1.73) 2.79 2.07 4.15 3.72 5.09
------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income (0.01) (0.05) (0.12) (0.10) (0.25) (0.36)
Net realized gains (3.11) (0.13) (4.38) 0 (3.34) (0.90)
------ ------ ------ ------ ----------- -----------
Total distributions (3.12) (0.18) (4.50) (0.10) (3.59) (1.26)
------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $19.96 $24.81 $22.20 $24.63 $ 20.58 $ 20.45
------ ------ ------ ------ ----------- -----------
Total return* (7.70%) 12.65% 8.73% 20.23% 18.10% 30.90%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 237 $ 332 $ 326 $ 276 $ 197 $ 141
Ratios to average net
assets
Expenses** 1.78%+ 1.75% 1.76% 1.67%+ 1.66% 1.65%
Net investment income 0.06%+ 0.18% 0.30% 0.92%+ 1.01% 2.04%
Portfolio turnover rate 46% 110% 69% 6% 91% 53%
</TABLE>
(a) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
39
<PAGE>
EVERGREEN
Value Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 ------------------------ -----------------------
(Unaudited) 1999 1998 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $24.79 $22.18 $24.61 $20.56 $ 20.44 $ 16.61
------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income 0.01 0.04 0.10 0.12 0.22 0.39
Net realized and
unrealized gains or
losses on securities (1.74) 2.75 1.97 4.03 3.50 4.70
------ ------ ------ ------ ----------- -----------
Total from investment
operations (1.73) 2.79 2.07 4.15 3.72 5.09
------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income (0.01) (0.05) (0.12) (0.10) (0.26) (0.36)
From net realized gains (3.11) (0.13) (4.38) 0 (3.34) (0.90)
------ ------ ------ ------ ----------- -----------
Total distributions (3.12) (0.18) (4.50) (0.10) (3.60) (1.26)
------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $19.94 $24.79 $22.18 $24.61 $ 20.56 $ 20.44
------ ------ ------ ------ ----------- -----------
Total return* (7.71%) 12.66% 8.74% 20.25% 18.10% 30.90%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 4 $ 5 $ 5 $ 3 $ 1 $ 1
Ratios to average net
assets
Expenses** 1.78%+ 1.75% 1.76% 1.66%+ 1.67% 1.65%
Net investment income 0.06%+ 0.18% 0.29% 0.94%+ 1.00% 2.03%
Portfolio turnover rate 46% 110% 69% 6% 91% 53%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31, Year Ended December 31,
January 31, 2000 ------------------------ -----------------------
(Unaudited) 1999 1998 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $24.87 $22.23 $24.64 $20.57 $ 20.45 $ 16.61
------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income 0.13 0.29 0.35 0.25 0.44 0.57
Net realized and
unrealized gains or
losses on securities (1.75) 2.74 1.97 4.03 3.49 4.72
------ ------ ------ ------ ----------- -----------
Total from investment
operations (1.62) 3.03 2.32 4.28 3.93 5.29
------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income (0.12) (0.26) (0.35) (0.21) (0.47) (0.55)
Net realized gains (3.11) (0.13) (4.38) 0.00 (3.34) (0.90)
------ ------ ------ ------ ----------- -----------
Total distributions (3.23) (0.39) (4.73) (0.21) (3.81) (1.45)
------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $20.02 $24.87 $22.23 $24.64 $ 20.57 $ 20.45
------ ------ ------ ------ ----------- -----------
Total return (7.24%) 13.81% 9.79% 20.93% 19.20% 32.20%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 88 $ 132 $ 183 $1,149 $ 996 $ 761
Ratios to average net
assets
Expenses** 0.77%+ 0.75% 0.70% 0.67%+ 0.66% 0.65%
Net investment income 1.07%+ 1.20% 1.47% 1.91%+ 2.02% 3.02%
Portfolio turnover rate 46% 110% 69% 6% 91% 53%
</TABLE>
(a) For the seven months ended July 31, 1997. The Fund changed its fiscal year
end from December 31 to July 31, effective July 31, 1997.
* Excluding applicable sales charges.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
40
<PAGE>
EVERGREEN
Blue Chip Fund
Schedule of Investments
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 93.6%
Automotive Equipment & Manufacturing - 1.2%
66,300 Ford Motor Co....................................... $ 3,298,425
88,400 General Motors Corp................................. 7,110,675
------------
10,409,100
------------
Banks - 2.0%
80,801 Chase Manhattan Corp................................ 6,499,430
207,600 Mellon Financial Corp............................... 7,123,275
79,100 Wells Fargo Co...................................... 3,164,000
------------
16,786,705
------------
Capital Goods - 0.9%
167,700 Deere & Co.......................................... 7,326,394
------------
Chemical & Agricultural
Products - 0.7%
149,700 Rohm & Haas Co...................................... 6,324,825
------------
Communication Systems & Services - 3.9%
160,600 *Cisco Systems, Inc................................. 17,585,700
75,900 Lucent Technologies, Inc............................ 4,193,475
149,200 *MCI WorldCom, Inc.................................. 6,853,875
92,500 *Tellabs, Inc....................................... 4,995,000
------------
33,628,050
------------
Consumer Products &
Services - 2.2%
123,600 Procter & Gamble Co................................. 12,468,150
115,000 Whirlpool Corp...................................... 6,698,750
------------
19,166,900
------------
Electrical Equipment &
Services - 5.5%
118,300 *Cypress Semiconductor Corp......................... 3,963,050
74,900 Emerson Electric Co................................. 4,124,181
238,100 General Electric Co................................. 31,756,588
104,600 *Solectron Corp..................................... 7,596,575
------------
47,440,394
------------
Electronic Equipment &
Services - 1.1%
143,800 *Teradyne, Inc...................................... 9,311,050
------------
Finance & Insurance - 5.3%
43,900 American Express Co................................. 7,235,269
126,275 American International Group, Inc................... 13,148,384
260,700 Citigroup, Inc. .................................... 14,973,956
56,300 Lehman Brothers Holdings, Inc....................... 4,025,450
97,200 Morgan Stanley, Dean Witter & Co. .................. 6,439,500
------------
45,822,559
------------
Food & Beverage Products - 3.7%
104,100 Anheuser Busch Companies, Inc....................... 7,026,750
101,600 Coca Cola Co........................................ 5,835,650
157,000 McDonald's Corp..................................... 5,838,438
178,200 Pepsico, Inc........................................ 6,081,075
116,100 Seagram Co., Ltd.................................... 6,741,056
------------
31,522,969
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products &
Services - 7.2%
61,300 *Amgen, Inc......................................... $ 3,904,044
57,100 *Biogen, Inc........................................ 4,924,875
456,100 *Health Management Associates, Inc., Cl. A ......... 6,356,893
36,700 Immunex Corp. (b)................................... 4,798,525
84,800 Johnson & Johnson................................... 7,298,100
46,000 MedImmune, Inc...................................... 6,716,000
260,100 Medtronic, Inc...................................... 11,899,575
18,100 PE Corp-PE Biosystems Group......................... 2,710,475
96,800 United Healthcare Corp.............................. 5,130,400
118,000 *Wellpoint Health Networks, Inc., Cl. A............. 8,024,000
------------
61,762,887
------------
Information Services & Technology - 24.7%
158,400 *America Online, Inc................................ 9,018,900
200,500 *American Power Conversion Corp..................... 5,532,547
90,800 *Applied Materials, Inc............................. 12,462,300
29,000 *CMGI, Inc. (b)..................................... 3,264,313
47,300 Computer Associates International, Inc.............. 3,248,919
87,800 *Dell Computer Corp................................. 3,374,812
162,000 Electronic Data Systems Corp........................ 10,955,250
70,900 *EMC Corp........................................... 7,550,850
75,000 *Gateway, Inc....................................... 4,589,062
75,400 Hewlett-Packard Co. ................................ 8,162,050
254,400 Intel Corp.......................................... 25,169,700
148,800 International Business Machines Corp................ 16,693,500
53,400 *Lexmark International Group, Inc., Cl. A........... 5,032,950
68,100 *LSI Logic.......................................... 5,567,175
69,300 *Microchip Technology, Inc.......................... 4,357,237
62,300 *Micron Technology, Inc............................. 3,874,281
374,200 *Microsoft Corp..................................... 36,624,825
112,000 *Oracle Systems Corp................................ 5,594,750
52,400 *Sanmina Corp. (b).................................. 5,567,500
102,876 SAP AG, ADR (b)..................................... 6,706,229
39,600 *Sapient Corp....................................... 3,499,650
133,900 *Sun Microsystems, Inc.............................. 10,519,519
95,600 *Synopsys, Inc...................................... 4,415,525
43,000 *Veritas Software Corp. ............................ 6,272,625
9,800 *Yahoo!, Inc. (b)................................... 3,156,213
------------
211,210,682
------------
Metal Products & Services - 0.5%
57,400 Alcoa, Inc.......................................... 4,000,063
------------
</TABLE>
41
<PAGE>
EVERGREEN
Blue Chip Fund
Schedule of Investments(continued)
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Oil/Energy - 5.6%
124,100 Atlantic Richfield Co.............................. $ 9,555,700
68,000 BP Amoco Plc, ADR (b).............................. 3,655,000
110,600 Conoco, Inc., Cl. A (b)............................ 2,578,363
21 Conoco, Inc., Cl. B................................ 495
225,084 Exxon Mobil Corp................................... 18,794,514
50,000 Royal Dutch Petroleum Co........................... 2,753,125
277,800 Sunoco, Inc........................................ 6,406,762
85,400 Texaco, Inc........................................ 4,515,525
------------
48,259,484
------------
Paper & Packaging - 0.8%
125,300 Bowater, Inc....................................... 6,476,444
------------
Pharmaceuticals - 5.6%
149,400 American Home Products Corp........................ 7,031,137
71,100 Bristol-Myers Squibb Co............................ 4,692,600
155,400 Merck & Co., Inc................................... 12,247,462
21,400 *Millennium Pharmaceuticals, Inc................... 4,011,163
78,400 Monsanto Co........................................ 2,768,500
64,900 Pharmacia & Upjohn, Inc............................ 3,050,300
77,000 Schering-Plough Corp............................... 3,388,000
109,300 Warner-Lambert Co.................................. 10,376,669
------------
47,565,831
------------
Printing, Publishing, Broadcasting &
Entertainment - 6.8%
152,500 *CBS Corp.......................................... 8,892,656
115,400 *Clear Channel Communications, Inc................. 9,967,675
201,900 Disney (Walt) Co................................... 7,331,494
192,600 Martha Stewart Living Omnimedia, Inc. (b).......... 4,333,500
151,000 Time Warner, Inc................................... 12,070,562
66,100 *Univision Communications, Inc., Cl. A (b)......... 7,080,963
153,200 *Viacom, Inc., Cl. B............................... 8,483,450
------------
58,160,300
------------
Retailing & Wholesale - 4.1%
65,000 *Best Buy Co., Inc. ............................... 3,103,750
106,450 Home Depot, Inc.................................... 6,027,731
170,300 *Staples, Inc...................................... 4,055,269
76,800 Target Corp........................................ 5,073,600
305,700 Wal-Mart Stores, Inc............................... 16,737,075
------------
34,997,425
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Telecommunication Services & Equipment - 5.0%
35,500 *Allegiance Telecom, Inc........................... $ 3,740,812
129,300 *Global Crossing, Ltd.............................. 6,561,975
81,100 Motorola, Inc...................................... 11,090,425
49,500 Nokia Corp., ADR................................... 9,058,500
71,900 Omnipoint Corp..................................... 7,374,244
65,500 *Winstar Communications, Inc. (b).................. 4,638,219
------------
42,464,175
------------
Transportation - 0.5%
73,600 United Parcel Service, Inc., Cl. B................. 4,379,200
------------
Utilities - Telephone - 6.3%
248,104 AT&T Corp.......................................... 13,087,486
143,400 AT&T Corp.--Liberty Media Group, Cl. A............. 7,331,325
174,200 Bell Atlantic Corp................................. 10,789,512
140,600 BellSouth Corp..................................... 6,616,987
151,500 SBC Communications, Inc............................ 6,533,438
145,700 Sprint Corp........................................ 9,424,969
------------
53,783,717
------------
Total Common Stocks (cost $642,724,033)............ 800,799,154
------------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 11.9%
Money Market Portfolio - 4.6%
$39,697,528 Navigator Prime Portfolio (cost $39,697,528) (c)... 39,697,528
------------
Repurchase Agreement - 7.2%
61,786,000 Evergreen Joint Repurchase Agreement 5.72%,
purchased 1/31/2000, maturing 2/1/2000, maturity
value $61,795,817 (cost $61,786,000) (a).......... 61,786,000
------------
Total Short-Term Investments (cost $101,483,528)... 101,483,528
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -(cost $744,207,561)...... 105.5% 902,282,682
Other Assets and Liabilities - net.......... (5.5) (46,596,749)
----- ------------
Net Assets.................................. 100.0% $855,685,933
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at January
31, 2000.
(b) All or a portion of this security is on loan.
(c) Represents investment of cash collateral received for securities on loan.
* Non-income producing security.
Summary of Abbreviations
ADR American Depository Receipt
See Combined Notes to Financial Statements.
42
<PAGE>
EVERGREEN
Equity Income Fund
Schedule of Investments
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 87.8%
Automotive Equipment & Manufacturing - 4.5%
48,000 Ford Motor Co........................................ $ 2,388,000
30,000 General Motors Corp. ................................ 2,413,125
------------
4,801,125
------------
Banks - 11.1%
40,000 BankAmerica Corp. ................................... 1,937,500
10,000 Chase Manhattan Corp. ............................... 804,375
30,000 Compass Bancshares, Inc.............................. 594,375
104,550 Firstar Corp......................................... 2,496,131
63,000 FleetBoston Financial Corp........................... 1,980,563
20,000 Mercantile Bankshares Corp........................... 582,500
120,000 North Fork Bancorp, Inc.............................. 2,040,000
30,000 PNC Bank Corp........................................ 1,440,000
------------
11,875,444
------------
Business Equipment &
Services - 0.8%
35,000 Dun & Bradstreet Corp. .............................. 881,563
------------
Chemical & Agricultural
Products - 0.2%
5,000 Rohm & Haas Co. ..................................... 211,250
------------
Consumer Products &
Services - 0.9%
15,000 Eastman Kodak Co..................................... 928,125
------------
Electrical Equipment &
Services - 4.1%
26,000 Emerson Electric Co.................................. 1,431,625
22,000 General Electric Co.................................. 2,934,250
------------
4,365,875
------------
Finance & Insurance - 10.3%
21,000 AMBAC Financial Group, Inc........................... 1,027,688
28,000 Citigroup, Inc. ..................................... 1,608,250
23,000 Federal National Mortgage Assoc. .................... 1,378,562
115,000 Greenpoint Financial Corp............................ 2,278,437
32,300 *John Hancock Financial Services, Inc................ 557,175
10,000 Lehman Brothers Holdings, Inc. ...................... 715,000
40,000 Nationwide Financial Services, Inc., Cl. A........... 995,000
36,000 Travelers Property Casualty Corp., Cl. A............. 1,305,000
25,000 XL Capital Ltd., Cl. A............................... 1,128,125
------------
10,993,237
------------
Food & Beverage Products - 3.1%
14,000 Anheuser Busch Companies, Inc........................ 945,000
55,000 Conagra, Inc......................................... 1,175,625
43,000 Ralston Purina Co.................................... 1,206,688
------------
3,327,313
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Healthcare Products &
Services - 8.7%
15,000 * Alza Corp. ....................................... $ 535,313
30,000 American Home Products Corp......................... 1,411,875
20,000 Johnson & Johnson................................... 1,721,250
42,400 Merck & Co., Inc.................................... 3,341,650
49,000 Pharmacia & Upjohn, Inc............................. 2,303,000
------------
9,313,088
------------
Information Services & Technology - 2.3%
22,000 International Business Machines Corp................ 2,468,125
------------
Oil/Energy - 9.6%
36,000 Atlantic Richfield Co............................... 2,772,000
25,797 Conoco, Inc., Cl. B................................. 607,842
39,604 Exxon Mobil Corp.................................... 3,306,934
25,000 Sunoco, Inc......................................... 576,562
45,000 Texaco, Inc......................................... 2,379,375
25,000 Ultramar Diamond Shamrock Corp. .................... 546,875
------------
10,189,588
------------
Paper & Packaging - 3.3%
43,000 Consolidated Papers, Inc............................ 1,187,875
20,000 Kimberly-Clark Corp. ............................... 1,238,750
40,000 Westvaco Corp. ..................................... 1,097,500
------------
3,524,125
------------
Printing, Publishing, Broadcasting & Entertainment -
1.7%
30,000 * CBS Corp. ........................................ 1,749,375
------------
Real Estate - 5.1%
35,000 Boston Properties, Inc., REIT....................... 1,050,000
50,000 Equity Office Properties Trust REIT................. 1,278,125
26,000 Equity Residential Properties Trust REIT............ 1,079,000
41,000 First Industrial Realty Trust, Inc. REIT............ 1,101,875
25,000 Spieker Properties, Inc. REIT....................... 971,875
------------
5,480,875
------------
Retailing & Wholesale - 1.3%
11,000 * Costco Wholesale Corp............................. 538,313
33,000 * Staples, Inc...................................... 785,812
------------
1,324,125
------------
Transportation - 2.2%
40,000 Burlington Northern Santa Fe Corp................... 962,500
35,000 Union Pacific Corp. ................................ 1,400,000
------------
2,362,500
------------
</TABLE>
43
<PAGE>
EVERGREEN
Equity Income Fund
Schedule of Investments(continued)
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Electric - 7.6%
45,000 Constellation Energy Group, Inc..................... $ 1,355,625
50,000 DPL, Inc............................................ 959,375
23,000 Duke Power Co....................................... 1,328,250
50,000 LG&E Energy Corp.................................... 850,000
40,000 Northeast Utilities................................. 820,000
44,000 Southern Co. (b).................................... 1,127,500
40,000 Teco Energy, Inc. (b)............................... 785,000
25,000 Texas Utilities Co. ................................ 884,375
------------
8,110,125
------------
Utilities - Telephone - 11.0%
25,000 AT&T Corp. ......................................... 1,318,750
55,000 Bell Atlantic Corp.................................. 3,406,562
35,000 BellSouth Corp...................................... 1,647,187
15,000 GTE Corp. .......................................... 1,099,688
44,744 SBC Communications, Inc............................. 1,929,585
35,000 U.S. West, Inc...................................... 2,327,500
------------
11,729,272
------------
Total Common Stocks
(cost $81,281,401)................................. 93,635,130
------------
CONVERTIBLE PREFERRED - 2.4%
Communication Systems &
Services - 1.6%
3,000 McLeod USA, Inc., Cl. A............................. 1,725,609
------------
Printing, Publishing, Broadcasting & Entertainment -
0.8%
8,000 Pegasus Communications Corp......................... 820,000
------------
Total Convertible Preferred
(cost $1,550,000).................................. 2,545,609
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 6.0%
U.S. Treasury Bonds - 6.0%
$6,000,000 U.S. Treasury Bonds 7.25%, 8/15/2022 (cost
$6,389,192)........................................ $ 6,407,820
------------
SHORT-TERM INVESTMENTS - 3.8%
Money Market Portfolio - 1.1%
1,176,336 Navigator Prime Portfolio (cost $1,176,336) (c)..... 1,176,336
------------
Repurchase Agreement - 2.7%
2,866,000 Evergreen Joint Repurchase Agreement 5.72%,
purchased 1/31/2000, maturing 2/1/2000, maturity
value $2,866,456 (cost $2,866,000) (a)............. 2,866,000
------------
Total Short-Term Investments
(cost $4,042,336).................................. 4,042,336
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $93,262,929)........................... 100.0% 106,630,895
Other Assets and Liabilities - net............ 0.0 47,922
----- ------------
Net Assets.................................... 100.0% $106,678,817
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at Janu-
ary 31, 2000.
(b) All or a portion of this security is on loan.
(c) Represents investment of cash collateral received for securities on loan.
* Non-income producing security.
Summary of Abbreviations
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
44
<PAGE>
EVERGREEN
Growth and Income Fund
Schedule of Investments
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 97.6%
Aerospace & Defense - 3.4%
131,900 Boeing Co. .......................................... $ 5,844,819
580,000 Bombardier, Inc., Cl. B.............................. 11,707,888
131,300 Cordant Technologies, Inc. .......................... 4,341,106
245,650 Honeywell International, Inc. ....................... 11,791,200
951,500 Lockheed Martin Corp. ............................... 17,840,625
158,100 * Loral Space & Communications....................... 3,102,713
------------
54,628,351
------------
Automotive Equipment & Manufacturing - 0.7%
135,600 Toyota Motor Co. .................................... 11,831,100
------------
Banks - 6.6%
270,567 AmSouth Bancorp...................................... 4,718,012
119,000 Bank of New York Co., Inc. .......................... 4,834,375
250,000 BSB Bancorp, Inc. ................................... 4,796,875
88,758 Charter One Financial, Inc. ......................... 1,725,234
249,550 First Security Corp. ................................ 6,457,106
326,000 Hibernia Corp., Cl. A................................ 3,423,000
112,500 KeyCorp.............................................. 2,362,500
22,650 Keystone Financial, Inc. ............................ 414,778
43,000 Marshall & Ilsley Corp. ............................. 2,203,750
434,700 Mellon Financial Corp. .............................. 14,915,644
264,400 North Fork Bancorp, Inc. ............................ 4,494,800
700,000 Pacific Century Financial Corp. ..................... 12,031,250
152,000 Peoples Heritage Financial Group, Inc. .............. 2,232,500
228,600 SouthTrust Corp. .................................... 6,958,013
84,800 State Street Corp. .................................. 6,799,900
51,920 Suntrust Banks, Inc. ................................ 3,092,485
180,000 Susquehanna Bancshares, Inc. ........................ 2,621,250
247,900 U.S. Bancorp......................................... 5,500,281
620,200 Webster Financial Corp. ............................. 14,419,650
62,000 Wilmington Trust Corp. .............................. 3,096,125
------------
107,097,528
------------
Building, Construction & Furnishings - 1.0%
44,300 Deere & Co. ......................................... 1,935,356
15,100 * Furniture Brands International, Inc. .............. 256,700
23,500 Hon Industries, Inc. ................................ 452,375
168,200 * Jacobs Engineering Group, Inc. .................... 4,961,900
95,300 Southdown, Inc. ..................................... 4,770,956
181,100 * Toll Brothers, Inc. ............................... 3,078,700
------------
15,455,987
------------
Business Equipment &
Services - 5.3%
544,300 ACNielsen Corp. ..................................... 11,158,150
277,300 * Atlas Air, Inc. ................................... 7,348,450
18,500 Comdisco, Inc. ...................................... 617,438
172,500 * Computer Sciences Corp. ........................... 15,848,437
901,100 * Convergys Corp. ................................... 26,469,812
285,200 Equifax, Inc. ....................................... 6,131,800
38,436 First Data Corp. .................................... 1,885,766
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Business Equipment &
Services - continued
144,000 Petroleum Helicopters, Inc. ......................... $ 1,656,000
643,500 Pittston Brink's Group............................... 12,548,250
153,000 * Policy Management Systems Corp. ................... 2,419,313
------------
86,083,416
------------
Cable/Other Video
Distribution - 2.6%
559,800 Charter Communications, Inc. ........................ 9,936,450
143,410 Comcast Corp., Cl. A................................. 6,596,860
277,000 * Cox Communications, Inc., Cl. A.................... 13,521,062
153,000 * MediaOne Group, Inc. .............................. 12,163,500
------------
42,217,872
------------
Capital Goods - 0.1%
133,700 CNH Global NV........................................ 1,855,088
------------
Chemical & Agricultural
Products - 2.3%
125,000 Air Products & Chemicals, Inc. ...................... 3,703,125
82,400 Albemarle Corp. ..................................... 1,488,350
832,600 Engelhard Corp. ..................................... 13,269,562
435,300 IMC Global, Inc. .................................... 7,128,038
82,800 Praxair, Inc. ....................................... 3,358,575
259,400 Sigma-Aldrich Corp. ................................. 8,689,900
------------
37,637,550
------------
Communication Systems & Services - 4.5%
825,720 * American Tower Systems Corp., Cl. A................ 29,622,705
233,400 * Cisco Systems, Inc. ............................... 25,557,300
33,700 Lucent Technologies, Inc. ........................... 1,861,925
219,588 * MCI WorldCom, Inc. ................................ 10,087,324
230,800 Teleglobe, Inc. ..................................... 6,029,650
------------
73,158,904
------------
Consumer Products &
Services - 4.1%
166,900 Colgate-Palmolive Co. ............................... 9,888,825
54,700 Harley-Davidson, Inc. ............................... 3,839,256
671,700 Hasbro, Inc. ........................................ 10,075,500
172,000 Lancaster Colony Corp. .............................. 5,461,000
403,600 Mattel, Inc. ........................................ 4,212,575
9,700 Newell Rubbermaid, Inc. ............................. 291,000
124,700 Sony Corp., ADR...................................... 31,666,006
------------
65,434,162
------------
Diversified Companies - 0.4%
178,800 ITT Industries, Inc. ................................ 5,654,550
------------
Electrical Equipment &
Services - 1.5%
105,700 Applied Power, Inc., Cl. A........................... 2,946,388
161,600 Baldor Electric Co. ................................. 2,757,300
138,700 General Electric Co. ................................ 18,499,112
18,648 Zilog, Inc. ......................................... 9,324
------------
24,212,124
------------
</TABLE>
45
<PAGE>
EVERGREEN
Growth and Income Fund
Schedule of Investments(continued)
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Energy - 0.6%
464,300 Occidental Petroleum Corp. .......................... $ 9,227,962
------------
Finance & Insurance - 6.8%
22,000 American International Group, Inc. .................. 2,290,750
250,925 Citigroup, Inc. ..................................... 14,412,505
17,100 Edwards (A.G.), Inc. ................................ 566,438
290,300 Federal Home Loan
Mortgage Corp. ..................................... 14,569,431
80,800 Goldman Sachs Group, Inc. ........................... 7,403,300
160,500 Hartford Financial Services Group, Inc. ............. 6,119,062
173,432 Legg Mason, Inc. .................................... 6,395,305
167,200 Lehman Brothers Holdings, Inc. ...................... 11,954,800
87,900 MBIA, Inc. .......................................... 4,400,494
557,200 Neuberger Berman, Inc. .............................. 13,825,525
339,600 Price (T.) Rowe & Associates, Inc. .................. 13,201,950
100,800 Progressive Corp. Ohio............................... 6,274,800
288,900 UnumProvident Corp. ................................. 7,728,075
------------
109,142,435
------------
Food & Beverage Products - 0.0%
39,900 Darden Restaurants, Inc. ............................ 633,413
------------
Forest Products - 0.2%
113,000 Deltic Timber Corp. ................................. 2,542,500
------------
Healthcare Products &
Services - 8.4%
202,900 Abbott Laboratories.................................. 6,619,612
167,000 * Acuson Corp. ...................................... 2,254,500
38,000 * Alza Corp. ........................................ 1,356,125
122,800 American Home Products Corp. ........................ 5,779,275
5,100 Beckman Coulter, Inc. ............................... 266,794
14,000 * Biogen, Inc. ...................................... 1,207,500
45,000 * Dendrite International, Inc. ...................... 1,327,500
156,700 * Elan Corp. Plc, ADR................................ 4,710,794
276,525 * Health Management Associates, Inc., Cl. A ......... 3,854,067
675,200 IMS Health, Inc. .................................... 15,149,800
112,400 Johnson & Johnson.................................... 9,673,425
57,300 Lilly (Eli) & Co. ................................... 3,831,938
33,300 Medpartners, Inc. ................................... 239,344
147,700 Monsanto Co. ........................................ 5,215,656
189,100 PE Corp-PE Biosystems Group.......................... 28,317,725
172,800 Pfizer, Inc. ........................................ 6,285,600
221,500 Schering-Plough Corp. ............................... 9,746,000
93,500 Shared Medical System Corp. ......................... 4,137,375
276,000 * Sybron International Corp. ........................ 6,365,250
209,500 Warner-Lambert Co. .................................. 19,889,406
------------
136,227,686
------------
Industrial Specialty Products & Services - 3.4%
365,200 AptarGroup, Inc. .................................... 8,034,400
232,500 Bemis Co., Inc. ..................................... 7,338,281
7,400 Corning, Inc. ....................................... 1,141,450
59,000 Danaher Corp. ....................................... 2,544,375
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Industrial Specialty Products & Services - continued
539,300 Donaldson, Inc. ..................................... $ 11,123,063
227,200 Dover Corp. ......................................... 9,159,000
141,280 Illinois Tool Works, Inc. ........................... 8,264,880
33,200 Teleflex, Inc. ...................................... 1,054,100
592,800 * Unova, Inc. ....................................... 6,372,600
------------
55,032,149
------------
Information Services & Technology - 13.4%
18,000 * 3Com Corp. ........................................ 913,500
162,700 * Adaptec, Inc. ..................................... 8,521,412
92,000 Adobe Systems, Inc. ................................. 5,065,750
62,200 * Applied Materials, Inc. ........................... 8,536,950
28,000 * BMC Software, Inc. ................................ 1,060,500
580,300 * Cadence Design Systems, Inc. ...................... 11,968,687
34,000 * CMGI, Inc. ........................................ 3,827,125
353,300 * Compuware Corp. ................................... 7,485,544
160,500 * Dell Computer Corp. ............................... 6,169,219
17,100 Electronic Data Systems Corp. ....................... 1,156,388
127,200 * EMC Corp. ......................................... 13,546,800
45,300 Go2Net............................................... 3,646,650
250,700 Intel Corp. ......................................... 24,803,631
111,300 International Business
Machines Corp. ..................................... 12,486,469
32,700 * Jabil Circuit, Inc. ............................... 2,068,275
216,200 * KLA-Tencor Corp. .................................. 12,674,725
27,500 * Legato Systems, Inc. .............................. 692,656
110,000 Macromedia, Inc. .................................... 7,528,125
303,825 * Microsoft Corp. ................................... 29,736,872
58,800 * Netratings, Inc. .................................. 2,175,600
441,300 * Network Associates, Inc. .......................... 11,446,219
94,600 * Parametric Technology Corp. ....................... 2,027,987
724,100 * Seagate Technology................................. 29,009,256
7,000 SOFTBANK CORP. ...................................... 6,848,039
16,400 * Veritas Software Corp. ............................ 2,392,350
------------
215,788,729
------------
Leisure & Tourism - 1.3%
41,000 Carnival Corp., Cl. A................................ 1,847,562
697,280 Gaylord Entertainment Co. ........................... 19,436,680
------------
21,284,242
------------
Oil/Energy - 3.9%
115,900 Atlantic Richfield Co. .............................. 8,924,300
24,200 Berry Petroleum Co., Cl. A........................... 352,413
81,100 BP Amoco Plc, ADR.................................... 4,359,125
82,505 Conoco, Inc., Cl. B.................................. 1,944,024
55,000 Exxon Mobil Corp. ................................... 4,592,500
145,500 * Houston Exploration Co. ........................... 2,600,813
205,755 Kerr-McGee Corp. .................................... 11,393,683
130,200 Murphy Oil Corp. .................................... 7,470,225
551,000 Southwestern Energy Co. ............................. 3,133,812
60,000 Texaco, Inc. ........................................ 3,172,500
</TABLE>
46
<PAGE>
EVERGREEN
Growth and Income Fund
Schedule of Investments(continued)
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Oil/Energy - continued
230,800 The Williams Companies, Inc. ..................... $ 8,943,500
265,000 Tosco Corp. ...................................... 6,807,187
--------------
63,694,082
--------------
Oil Field Services - 0.2%
16,500 * Nabors Industries, Inc.......................... 488,812
30,014 Schlumberger, Ltd................................. 1,832,730
21,378 Transocean Sedco Forex, Inc. ..................... 680,088
--------------
3,001,630
--------------
Paper & Packaging - 0.9%
449,200 Asia Pulp & Paper Ltd., ADR....................... 3,312,850
115,500 Kimberly-Clark Corp............................... 7,153,781
59,140 * Sealed Air Corp. ............................... 3,319,233
--------------
13,785,864
--------------
Printing, Publishing, Broadcasting &
Entertainment - 12.2%
96,000 * AMFM, Inc. ..................................... 7,488,000
352,349 * Clear Channel Communications, Inc............... 30,434,145
798,500 Disney (Walt) Co. ................................ 28,995,531
259,300 * Emmis Broadcasting Corp., Cl. A................. 22,931,844
336,300 * Fox Entertainment Group, Inc.................... 7,903,050
45,000 Knight-Ridder, Inc................................ 2,399,063
607,800 Martha Stewart Living Omnimedia, Inc.............. 13,675,500
169,500 McGraw-Hill Companies, Inc........................ 9,502,594
651,000 New York Times Co., Cl. A......................... 29,742,562
39,300 Time Warner, Inc.................................. 3,141,544
87,800 * Univision Communications, Inc., Cl. A........... 9,405,575
240,600 * Viacom, Inc., Cl. A............................. 13,428,487
5,000 Washington Post Co., Cl. B........................ 2,750,000
342,000 * Young Broadcasting, Inc., Cl. A................. 15,197,625
--------------
196,995,520
--------------
Real Estate - 0.9%
351,514 Duke Weeks Realty Corp............................ 6,964,371
26,300 Kilroy Realty Corp. REIT.......................... 511,206
70,000 Kimco Realty Corp. REIT........................... 2,467,500
26,000 Liberty Property Trust REIT....................... 606,125
87,200 Post Property, Inc. REIT.......................... 3,346,300
--------------
13,895,502
--------------
Retailing & Wholesale - 0.3%
78,300 Intimate Brands, Inc. ............................ 2,368,575
208,885 * Saks, Inc. ..................................... 2,898,279
--------------
5,266,854
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Telecommunication Services & Equipment - 4.0%
62,500 Aironet Wireless Communication.................... $ 4,285,156
323,385 * Global Crossing, Ltd. .......................... 16,411,789
277,125 Motorola, Inc..................................... 37,896,844
33,100 Omnipoint Corp. .................................. 3,394,819
71,700 * Qwest Communications International, Inc......... 2,823,187
--------------
64,811,795
--------------
Transportation - 3.4%
161,900 Burlington Northern Santa Fe Corp. ............... 3,895,719
105,500 Expeditores International Washington, Inc......... 4,447,484
513,700 Kansas City Southern Industries, Inc.............. 35,541,619
311,525 Southwest Airlines Co............................. 4,964,930
159,900 Union Pacific Corp................................ 6,396,000
--------------
55,245,752
--------------
Utilities - Electric - 1.7%
141,100 Energy East Corp.................................. 3,183,569
666,900 * Niagara Mohawk Holdings, Inc.................... 8,377,931
400,000 TNP Enterprises, Inc.............................. 16,500,000
--------------
28,061,500
--------------
Utilities - Gas - 0.5%
280,900 Piedmont Natural Gas Co., Inc. ................... 8,005,650
--------------
Utilities - Telephone - 3.0%
327,400 AT&T Corp......................................... 17,270,350
14,000 AT&T Corp.-Liberty Media Group, Cl. A............. 715,750
206,100 Broadwing, Inc.................................... 7,831,800
225,000 Centurytel, Inc................................... 8,606,250
40,000 * Nextel Communications, Inc., Cl. A.............. 4,255,000
60,000 Sprint Corp. ..................................... 3,881,250
100,500 U.S. West, Inc. .................................. 6,683,250
--------------
49,243,650
--------------
Total Common Stocks
(cost $1,195,229,491)............................ 1,577,153,547
--------------
PREFERRED STOCKS - 0.0%
Healthcare Products &
Services - 0.0%
130,000 * Fresenius National Med Care, Inc., Ser. D (cost
$22,740)......................................... 1,430
--------------
CONVERTIBLE PREFERRED - 1.6%
Aerospace & Defense - 0.5%
150,000 Loral Space & Communications 6.00%, 11/01/2006.... 7,828,200
--------------
</TABLE>
47
<PAGE>
EVERGREEN
Growth and Income Fund
Schedule of Investments(continued)
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - continued
Consumer Products &
Services - 0.5%
647,600 Tribune Co. (exchangeable for Mattel, Inc. common
stock) 6.25%, 08/15/2001......................... $ 8,702,125
--------------
Paper & Packaging - 0.3%
78,375 * Sealed Air Corp. $2.00, 04/01/2018, Ser. A...... 4,173,469
--------------
Telecommunication Services & Equipment - 0.3%
18,800 Global Crossings Cv 7.00%, 12/31/2009, 144A....... 5,080,700
--------------
Total Convertible Preferred
(cost $24,858,249)............................... 25,784,494
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - 0.3%
Information Services & Technology - 0.1%
$7,000,000 Network Associates, Inc. 0.01%, 2/13/2018......... $ 2,502,500
--------------
Telecommunication Services & Equipment - 0.2%
1,900,000 American Tower Corp. 6.25%, 10/15/2009............ 3,139,750
--------------
Total Convertible Debentures
(cost $4,089,871) 5,642,250
--------------
SHORT-TERM INVESTMENTS - 0.4%
Repurchase Agreement - 0.4%
6,226,000 State Street Bank & Trust Co., 5.63%, purchased
1/31/2000, maturing 2/1/2000, maturity
value $6,226,974
(cost $6,226,000) (a)............................ 6,226,000
--------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $1,230,426,351)...................... 99.9% 1,614,807,721
Other Assets and Liabilities - net.......... 0.1 1,879,868
----- --------------
Net Assets.................................. 100.0% $1,616,687,589
===== ==============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices plus accrued interest at
January 31, 2000.
144A Securities that may be resold to "qualified institutional buyers" under
Rule 144A of the Securities Act of 1933. These securities have been de-
termined to be liquid under guidelines established by the Board of Trust-
ees.
* Non-income producing security.
Summary of Abbreviations
ADR American Depository Receipt
REIT Real Estate Investment Trust
See Combined Notes to Financial Statements.
48
<PAGE>
EVERGREEN
Income and Growth Fund
Schedule of Investments
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 56.2%
Aerospace & Defense - 0.6%
50,000 Cordant Technologies, Inc............................ $ 1,653,125
81,900 General Dynamics Corp................................ 3,859,538
------------
5,512,663
------------
Automotive Equipment & Manufacturing - 1.4%
555,900 Dana Corp............................................ 13,063,650
19,300 Goodyear Tire & Rubber Co............................ 458,375
------------
13,522,025
------------
Banks - 7.7%
221,500 Amcore Financial, Inc................................ 4,513,062
219,917 AmSouth Bancorp...................................... 3,834,803
135,000 Astoria Financial Corp............................... 3,931,875
250,600 Bancwest Corp........................................ 4,040,925
100,000 ++CB Bancshares, Inc................................. 2,825,000
98,700 CCB Financial Corp................................... 4,293,450
58,000 Charter One Financial, Inc........................... 1,127,375
86,500 Comerica, Inc........................................ 3,822,219
131,250 Commerce Bancshares, Inc............................. 4,040,039
125,000 First Charter Corp................................... 1,726,562
200,000 First Security Corp.................................. 5,175,000
141,000 First Tennessee National Corp........................ 3,683,625
8,000 First Union Corp. **................................. 268,500
173,000 Hibernia Corp., Cl. A................................ 1,816,500
287,353 Interchange Financial Services Corp.................. 4,885,001
148,000 KeyCorp.............................................. 3,108,000
84,000 Keystone Financial, Inc.............................. 1,538,250
260,000 North Fork Bancorp, Inc.............................. 4,420,000
121,168 Pacific Century Financial Corp....................... 2,082,575
310,430 Peoples Heritage Financial Group, Inc................ 4,559,441
335,730 Republic Security Financial Corp..................... 2,517,975
138,375 Susquehanna Bancshares, Inc. ........................ 2,015,086
150,000 U.S. Bancorp......................................... 3,328,125
321,960 USBANCORP, Inc....................................... 3,420,825
------------
76,974,213
------------
Business Equipment &
Services - 0.1%
25,000 Dun & Bradstreet Corp................................ 629,688
------------
Capital Goods - 2.2%
1,539,900 CNH Global NV........................................ 21,366,112
------------
Consumer Products &
Services - 1.5%
220,000 Industrie Natuzzi SpA, ADR........................... 2,447,500
100,000 Lancaster Colony Corp................................ 3,175,000
180,000 Mattel, Inc.......................................... 1,878,750
224,415 Newell Rubbermaid, Inc............................... 6,732,450
60,000 Service Corp. International.......................... 273,750
52,200 Tupperware Corp...................................... 851,512
------------
15,358,962
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Electrical Equipment &
Services - 2.5%
100,000 Emerson Electric Co.................................. $ 5,506,250
5,000 Hubbell, Inc., Cl. A................................. 121,875
286,656 Hubbell, Inc., Cl. B................................. 7,435,140
400,000 Thomas & Betts Corp.................................. 12,175,000
------------
25,238,265
------------
Finance & Insurance - 1.1%
20,000 Hartford Financial Services Group, Inc............... 762,500
30,000 Lincoln National Corp................................ 1,108,125
104,500 Partnerre Ltd........................................ 3,030,500
104,536 UnumProvident Corp................................... 2,796,338
79,000 XL Capital Ltd., Cl. A............................... 3,564,875
------------
11,262,338
------------
Healthcare Products &
Services - 6.6%
285,000 American Home Products Corp.......................... 13,412,812
210,000 Baxter International, Inc............................ 13,413,750
200,200 Beckman Coulter, Inc................................. 10,472,963
146,800 Bristol-Myers Squibb Co.............................. 9,688,800
50,000 Lilly (Eli) & Co..................................... 3,343,750
262,700 Shared Medical System Corp........................... 11,624,475
40,000 Warner-Lambert Co.................................... 3,797,500
------------
65,754,050
------------
Industrial Specialty Products & Services - 0.1%
80,000 Federal Signal Corp.................................. 1,255,000
------------
Information Services & Technology - 0.7%
193,500 * Network Associates, Inc............................ 5,018,906
50,000 * Seagate Technology................................. 2,003,125
1,000 * Sycamore Networks, Inc............................. 319,000
------------
7,341,031
------------
Leisure & Tourism - 0.3%
108,700 Gaylord Entertainment Co............................. 3,030,013
------------
Oil/Energy - 5.0%
23,000 Atlantic Richfield Co................................ 1,771,000
21,172 BP Amoco Plc, ADR.................................... 1,137,995
122,840 Conoco, Inc., Cl. B.................................. 2,894,417
314,400 Murphy Oil Corp...................................... 18,038,700
72,000 Texaco, Inc.......................................... 3,807,000
582,000 The Williams Companies, Inc.......................... 22,552,500
------------
50,201,612
------------
Oil Field Services - 0.3%
110,344 * Nabors Industries, Inc............................. 3,268,941
------------
Paper & Packaging - 0.2%
100,000 * Smurfit Container Corp............................. 1,981,250
------------
</TABLE>
49
<PAGE>
EVERGREEN
Income and Growth Fund
Schedule of Investments(continued)
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Printing, Publishing, Broadcasting &
Entertainment - 0.5%
10,000 Disney (Walt) Co................................... $ 363,125
40,000 Emmis Communications Corp.......................... 2,622,500
50,000 New York Times Co., Cl. A.......................... 2,284,375
------------
5,270,000
------------
Real Estate - 2.5%
124,900 Equity Residential Properties Trust REIT........... 5,183,350
495,900 Gables Residential Trust REIT...................... 10,754,831
235,700 Post Property, Inc. REIT........................... 9,044,988
------------
24,983,169
------------
Retailing & Wholesale - 0.1%
30,000 Longs Drug Stores Corp............................. 645,000
------------
Telecommunication Services & Equipment - 0.5%
100,000 * Global Crossing, Ltd............................. 5,075,000
------------
Textile & Apparel - 0.0%
10,000 V.F. Corp.......................................... 259,375
------------
Thrift Institutions - 0.4%
282,000 First Essex Bancorp, Inc........................... 3,965,625
------------
Transportation - 0.6%
137,000 Union Pacific Corp................................. 5,480,000
------------
Utilities - Electric - 15.9%
500,000 Central & South West Corp.......................... 10,093,750
400,000 Cinergy Corp....................................... 9,950,000
399,500 Duke Power Co...................................... 23,071,125
400,000 FirstEnergy Corp................................... 9,100,000
239,000 FPL Group, Inc..................................... 10,082,812
171,900 GPU, Inc........................................... 4,985,100
215,524 LG&E Energy Corp................................... 3,663,908
230,000 MDU Resources Group, Inc........................... 4,556,875
200,000 New Century Energies, Inc.......................... 5,787,500
181,700 PP&L Resources, Inc................................ 4,213,169
40,000 Public Service Co. of New Mexico................... 635,000
630,000 Scana Corp......................................... 17,128,125
543,000 Sempra Energy...................................... 10,079,438
800,000 Southern Co........................................ 20,500,000
280,000 Texas Utilities Co................................. 9,905,000
150,200 TNP Enterprises, Inc............................... 6,195,750
448,400 Wisconsin Energy Corp.............................. 8,855,900
------------
158,803,452
------------
Utilities - Gas - 2.6%
401,900 Keyspan Corp....................................... 9,419,531
391,300 Peoples Energy Corp................................ 12,228,125
163,100 Piedmont Natural Gas Co., Inc...................... 4,648,350
------------
26,296,006
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Telephone - 2.8%
149,655 AT&T Corp.......................................... $ 7,894,301
50,000 Broadwing, Inc..................................... 1,900,000
250,000 GTE Corp........................................... 18,328,125
------------
28,122,426
------------
Total Common Stocks
(cost $569,720,800)............................... 561,596,216
------------
CONVERTIBLE PREFERRED - 28.0%
Advertising & Related
Services - 1.0%
395,000 Snyder Strypes Trust............................... 9,529,375
------------
Aerospace & Defense - 1.5%
286,000 Loral Space & Communications 6.00%, 11/01/2006..... 14,925,768
------------
Banks - 0.9%
210,000 National Australia Bank, Ltd. 7.875%, Series UNIT.. 5,368,125
116,200 WBK Trust 10.00%, STRYPES (exchangeable for Westpac
Banking Corp. Common Stock)....................... 3,609,463
------------
8,977,588
------------
Chemical & Agricultural
Products - 0.9%
15,000 Hercules Trust II 6.50%, 6/30/2029................. 9,008,445
------------
Communication Systems & Services - 5.6%
218,700 MediaOne Group, Inc. PIES 7.0% 11/2/2000........... 11,263,050
330,000 Decs Trust VI--Metromedia Fiber.................... 19,965,000
380,000 Qwest Trends Trust
5.75%, 144A ...................................... 24,890,000
------------
56,118,050
------------
Consumer Products &
Services - 1.0%
100,000 Newell Financial Trust I 5.25% 12/01/2027.......... 3,937,500
460,000 Tribune Co. (exchangeable for Mattel, Inc. common
stock) 6.25%, 08/15/2001.......................... 6,181,250
------------
10,118,750
------------
Diversified Companies - 0.9%
400,000 Ingersoll Rand Co.
6.75%, PRIDES..................................... 9,275,000
------------
Electronic Equipment &
Services - 1.1%
205,000 Pioneer Standard Electronics, Inc. 6.75%,
3/31/2028......................................... 10,557,500
------------
Finance & Insurance - 0.7%
20,000 American General Corp. $3.00, Series A, MIPS....... 1,483,750
100,000 St. Paul Capital
6.00%, MIPS....................................... 5,500,000
------------
6,983,750
------------
</TABLE>
50
<PAGE>
EVERGREEN
Income and Growth Fund
Schedule of Investments(continued)
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - continued
Food & Beverage Products - 0.9%
200,000 Wendys Financing I
5.00%, Series A, TECONS........................... $ 9,000,000
------------
Healthcare Products &
Services - 0.1%
30,000 McKesson Financing Trust 5.00% 6/01/2027........... 1,091,250
------------
Independent Power
Producers - 2.2%
250,000 AES Trust III...................................... 16,265,625
75,960 Calpine Capital Trust.............................. 5,469,120
------------
21,734,745
------------
Oil/Energy - 0.3%
95,000 Callon Petroleum Co.
8.50%, Series A................................... 2,778,750
------------
Paper & Packaging - 0.1%
30,000 International Paper Capital Trust.................. 1,462,500
------------
Printing, Publishing, Broadcasting &
Entertainment - 1.2%
92,000 Houston Industries, Inc.
7.00%, ACES (exchangeable for Time Warner, Inc.
common stock)..................................... 12,259,000
------------
Retailing & Wholesale - 1.4%
114,800 CVS Automatic Common Exchange Security............. 7,390,250
195,000 Merrill Lynch & Co., Inc. (exchangeable for Dollar
General Corp. common stock) 8.50% 5/15/2001....... 6,690,937
------------
14,081,187
------------
Telecommunication Services & Equipment - 3.9%
55,000 Qualcomm Financial Trust I 5.75%, 3/01/2012........ 38,953,750
------------
Transportation - 1.3%
88,700 CNF Trust I
5.00%, Ser. A, TECONS (exchangeable for CNF
Transportation, Inc. common stock)................ 4,102,375
216,800 Union Pacific Capital Trust 4/1/28................. 8,617,800
------------
12,720,175
------------
Utilities - Electric - 3.0%
45,000 BNDES Participacoes S.A. 7.25%, 2/15/2001.......... 855,000
238,600 Texas Utilities Co.
9.25%, PRIDES..................................... 10,438,750
800,000 Utilicorp United, Inc. 9.75% 11/16/2002............ 18,550,000
------------
29,843,750
------------
Total Convertible Preferred
(cost $246,479,399)............................... 279,419,333
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - 7.0%
Advertising & Related
Services - 0.3%
$ 3,000,000 Young And Rubicam Inc. 3.00%, 1/15/2005............ $ 2,988,750
------------
Electronic Equipment &
Services - 0.2%
1,500,000 Lattice Semiconductor Corp. 4.75%, 11/1/2006....... 2,148,750
------------
Information Services & Technology - 1.4%
2,500,000 12 Technologies, Inc. 5.25%, 12/15/2006............ 3,550,000
4,000,000 Excite At Home
4.75%, 12/15/2006................................. 3,435,000
2,000,000 Rational Software Corp. 5.00%, 2/1/2007............ 2,000,000
3,000,000 Usinternetworking, Inc. 7.00%, 11/1/2004........... 5,598,750
------------
14,583,750
------------
Printing, Publishing, Broadcasting &
Entertainment - 1.1%
4,000,000 Exodus Communications, Inc. 4.75%, 7/15/2008....... 6,950,000
4,000,000 Mail Common, Inc. 7.00%, 2/15/2005................. 3,865,000
------------
10,815,000
------------
Telecommunication Services & Equipment - 4.0%
12,000,000 American Tower Corp. 6.25%, 10/15/2009............. 19,830,000
10,000,000 Level 3 Communications, Inc. 6.00%, 9/15/2009...... 19,100,000
1,175,000 Orbital Sciences Corp. 5.00%, 10/1/2002............ 998,750
------------
39,928,750
------------
Total Convertible Debentures (cost $46,869,750).... 70,465,000
------------
CORPORATE BONDS - 0.1%
Banks - 0.1%
1,000,000 NationsBank Corp.
6.50%, 8/15/2003
(cost $1,012,370)................................. 968,993
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 5.0%
Government Agency Notes & Bonds - 4.8%
2,000,000 Federal Farm Credit Bank 5.75%, 12/7/2028.......... 1,627,446
Federal Home Loan Bank:
2,000,000 5.375%, 10/6/2003.................................. 1,882,600
2,000,000 6.532%, 12/28/2007................................. 1,868,188
Federal Home Loan Mortgage Corp.:
2,000,000 6.54%, 12/10/2007.................................. 1,873,756
2,000,000 6.542%, 3/19/2008.................................. 1,865,026
2,000,000 7.585%, 9/19/2006.................................. 1,969,188
2,000,000 7.865%, 8/8/2011................................... 1,940,208
</TABLE>
51
<PAGE>
EVERGREEN
Income and Growth Fund
Schedule of Investments(continued)
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - continued
Government Agency Notes & Bonds - continued
Federal National Mortgage Association:
$ 5,000,000 5.65%, 2/22/2028.................................... $ 4,021,990
1,850,000 6.00%, 1/14/2005.................................... 1,751,282
4,000,000 6.08%, 9/1/2028..................................... 3,416,108
2,215,000 6.10%, 1/26/2005.................................... 2,103,413
3,000,000 6.16%, 1/23/2008.................................... 2,766,099
2,000,000 6.24%, 1/14/2008.................................... 1,848,920
3,000,000 6.32%, 3/3/2008..................................... 2,788,698
1,000,000 6.41%, 3/8/2006..................................... 957,613
5,000,000 6.42%, 2/12/2008.................................... 4,664,925
2,000,000 6.46%, 1/1/2008..................................... 1,869,434
4,000,000 6.52%, 3/5/2008..................................... 3,741,280
2,355,000 6.875%, 9/24/2012................................... 2,201,998
3,000,000 7.28%, 5/23/2007.................................... 2,904,489
------------
48,062,661
------------
U.S. Treasury Bonds - 0.2%
1,500,000 U.S. Treasury Bonds 7.125%, 2/15/2023............... 1,581,563
------------
Total U.S. Government & Agency Obligations
(cost $53,888,061)................................. 49,644,224
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 2.6%
Repurchase Agreement - 2.6%
$26,025,000 State Street Bank & Trust Co., 5.63%, purchased
1/31/2000, maturing 2/1/2000, maturity
value $26,029,070
(cost $26,025,000) (a)........................... $ 26,025,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $943,995,380)......................... 98.9% 988,118,766
Other Assets and Liabilities - net........... 1.1 11,254,071
----- ------------
Net Assets................................... 100.0% $999,372,837
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices plus accrued in-
terest at January 31, 2000.
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.
++ Investment in a non-controlled affiliate. The Fund owns over 5% of
the outstanding voting shares of CB Bancshares, Inc. The Fund has a
cost basis of $2,954,312 in the issue at January 31, 2000. The Fund
earned $25,725 of income from this investment during the six months
ended January 31, 2000.
** At January 31, 2000 the Fund owned 8,000 shares of common stock of
First Union Corp at a cost of $106,108. During the six months ended
January 31, 2000 the Fund earned $7,520 in dividend income from
this investment. These shares were acquired by the Fund through a
merger with another investment company sub-advised by Lieber & Com-
pany. The previous holder acquired these shares prior to the acqui-
sition of the advisor and Lieber & Company by First Union.
* Non-income producing security.
Summary of Abbreviations
ACES Automatically Convertible Equity Securities
ADR American Depository Receipts
MIPS Monthly Income Preferred Shares
PRIDES Preferred Redeemable Increased Dividend Equity Securities
REIT Real Estate Investment Trust
STRYPES Structured Yield Product Exchangeable for Stock
TECONS Term Convertible Shares
52
<PAGE>
EVERGREEN
Small Cap Value Fund
Schedule of Investments
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 92.5%
Automotive Equipment & Manufacturing - 1.1%
84,000 Arvin Industries, Inc. ............................... $ 1,947,750
------------
Banks - 12.5%
61,600 Britton & Koontz Capital Corp. ....................... 1,155,000
31,280 Centura Banks, Inc. .................................. 1,268,795
99,225 Charter One Financial, Inc. .......................... 1,928,686
35,885 Commercial Bankshares, Inc. .......................... 735,642
157,186 First Oak Brook Bancshares, Inc., Cl. A............... 2,573,921
143,328 First State Bancorp................................... 1,899,096
221,900 Granite State Bankshares, Inc. ....................... 4,382,525
69,500 Independent Bankshares, Inc. ......................... 899,156
65,500 Mid-State Bancshares.................................. 1,801,250
40,000 Pacific Bank, N.A..................................... 1,117,500
128,400 Peoples Heritage Financial Group, Inc. ............... 1,885,875
89,500 Prosperity Bancshares, Inc. .......................... 1,426,406
5,000 Southside Bancshares Corp. ........................... 43,125
83,000 West Coast Bancorp, Inc............................... 1,091,969
------------
22,208,946
------------
Building, Construction &
Furnishings - 9.7%
129,700 American Woodmark Corp. .............................. 2,310,281
254,900 Craftmade International, Inc.......................... 2,182,581
125,000 * Crossmann Communities, Inc.......................... 2,031,250
150,000 D.R. Horton, Inc...................................... 1,734,375
174,000 * Furniture Brands International, Inc. ............... 2,958,000
151,500 Industrie Natuzzi SpA, ADR............................ 1,685,438
190,200 Standard Pacific Corp. ............................... 1,771,237
121,200 * Stanley Furniture Co., Inc. ........................ 2,181,600
30,000 * Toll Brothers, Inc. ................................ 510,000
------------
17,364,762
------------
Business Equipment & Services - 2.8%
123,000 * Interim Services, Inc. ............................. 3,082,687
32,500 * Zebra Technologies Corp., Cl. A..................... 1,923,594
------------
5,006,281
------------
Consumer Products & Services - 14.6%
141,000 * Chattem, Inc. ...................................... 2,749,500
115,000 CPI Corp. ............................................ 2,565,938
90,000 * CSG Systems International, Inc. .................... 3,403,125
113,068 First Years, Inc. .................................... 961,078
120,000 * Fossil, Inc. ....................................... 2,332,500
163,400 * Guess?, Inc. ....................................... 3,829,687
110,000 Lancaster Colony Corp. ............................... 3,492,500
225,000 * Maxwell Shoe, Inc. Cl. A............................ 1,856,250
80,500 Polaris Industries, Inc. ............................. 2,606,187
78,000 Stewart Enterprises, Inc., Cl. A...................... 448,500
328,600 York Group, Inc. ..................................... 1,827,838
------------
26,073,103
------------
Electrical Equipment & Services - 3.2%
100,000 Applied Power, Inc., Cl. A............................ 2,787,500
60,700 Helix Technology Corp. ............................... 2,951,538
------------
5,739,038
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Electronic Equipment & Services - 1.5%
67,100 * Hadco Corp....................................... $ 2,667,225
------------
Finance & Insurance - 1.1%
134,900 Morgan Keegan, Inc................................. 1,972,913
------------
Food & Beverage Products - 4.4%
230,400 International Multifoods Corp. .................... 2,923,200
203,000 Michael Foods, Inc. ............................... 4,250,313
25,000 * The Hain Food Group, Inc......................... 618,750
------------
7,792,263
------------
Healthcare Products & Services - 8.7%
34,500 Alpharma, Inc., Cl. A.............................. 1,173,000
216,300 * AmeriSource Health Corp., Cl. A.................. 3,920,437
62,200 * ArthroCare Corp.................................. 4,237,375
40,000 Beckman Coulter, Inc............................... 2,092,500
45,000 Jones Pharma, Inc.................................. 2,612,813
66,500 * Sybron International Corp........................ 1,533,656
------------
15,569,781
------------
Industrial Specialty Products & Services - 2.5%
50,000 Badger Meter, Inc.................................. 1,537,500
81,600 Donaldson, Inc..................................... 1,683,000
42,000 * Meade Instruments Corp........................... 1,225,875
------------
4,446,375
------------
Information Services &
Technology - 2.2%
109,200 * SBS Technologies, Inc............................ 3,903,900
------------
Manufacturing - Distributing - 1.2%
113,000 LSI Industries, Inc................................ 2,147,000
------------
Oil/Energy - 3.5%
151,100 Berry Petroleum Co., Cl. A......................... 2,200,394
129,200 Cabot Oil & Gas Corp., Cl. A....................... 1,905,700
192,709 Pennzoil-Quaker State Co. ......................... 2,204,109
------------
6,310,203
------------
Printing, Publishing, Broadcasting &
Entertainment - 2.4%
248,400 Bowne & Co., Inc. ................................. 2,716,875
147,584 * Obie Media Corp.................................. 1,577,304
------------
4,294,179
------------
Retailing & Wholesale - 9.0%
93,200 * Ames Department Stores, Inc. .................... 1,945,550
90,000 * Papa John's International, Inc................... 2,238,750
350,000 Pier 1 Imports, Inc................................ 2,887,500
260,000 Ross Stores, Inc................................... 3,315,000
188,100 * Sonic Automotive, Inc............................ 1,446,019
90,000 * Whole Foods Market, Inc. ........................ 4,140,000
------------
15,972,819
------------
</TABLE>
53
<PAGE>
EVERGREEN
Small Cap Value Fund
Schedule of Investments(continued)
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Telecommunication Services & Equipment - 5.5%
142,000 Communications Systems, Inc. ......................... $ 1,783,875
244,695 Hickory Tech Corp. ................................... 3,364,556
60,000 Scientific Atlanta, Inc. ............................. 4,623,750
------------
9,772,181
------------
Thrift Institutions - 2.2%
21,000 Bancorp Connecticut, Inc.............................. 301,875
312,900 Horizon Financial Corp. .............................. 3,168,113
79,200 MetroWest Bank........................................ 455,400
------------
3,925,388
------------
Utilities - Electric - 1.3%
116,100 MDU Resources Group, Inc. ............................ 2,300,231
------------
Utilities - Gas - 3.1%
37,300 Chesapeake Utilities Corp. ........................... 678,394
15,000 Connecticut Energy Corp............................... 621,562
20,000 CTG Resources, Inc. .................................. 735,000
16,000 Delta Natural Gas Co., Inc............................ 246,000
36,600 Public Service Co. of North Carolina, Inc. ........... 1,194,075
45,800 Yankee Energy System, Inc. ........................... 2,020,925
------------
5,495,956
------------
Total Common Stocks
(cost $170,118,543).................................. 164,910,294
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - 0.6%
Business Equipment & Services - 0.6%
$1,250,000 Interim Services, Inc.
4.50%, 6/1/2005
(cost $1,250,000)............................... $ 1,112,500
------------
CORPORATE BONDS - 2.5%
Healthcare Products & Services - 2.5%
3,500,000 Alpharma, Inc.
5.75%, 4/1/2005
(cost $3,500,000)............................... 4,510,625
------------
SHORT-TERM INVESTMENTS - 1.8%
Repurchase Agreement - 1.8%
3,145,000 State Street Bank & Trust Co., 5.63%, purchased
1/31/2000, maturing 2/1/2000, maturity value
$3,145,492 (cost $3,145,000) (a)................ 3,145,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -(cost $178,013,543)......... 97.4% 173,678,419
Other Assets and Liabilities - net............. 2.6 4,689,252
----- ------------
Net Assets..................................... 100.0% $178,367,671
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at
January 31, 2000.
* Non-income producing security.
Summary of Abbreviations
ADR American Depository Receipt
See Combined Notes to Financial Statements.
54
<PAGE>
EVERGREEN
Utility Fund
Schedule of Investments
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 62.2%
Communication Systems & Services - 2.9%
20,000 * American Tower Systems Corp., Cl. A................. $ 717,500
19,681 * MCI WorldCom, Inc................................... 904,096
160,000 Teleglobe, Inc........................................ 4,180,000
------------
5,801,596
------------
Energy - 4.6%
140,000 Enron Corp............................................ 9,441,250
------------
Independent Power Producers - 2.2%
62,200 * Calpine Corp........................................ 4,548,375
------------
Telecommunication Services & Equipment - 1.4%
46,600 * Time Warner Telecom, Inc............................ 2,830,950
------------
Utilities - Electric - 26.5%
125,000 Alliant Corp.......................................... 3,726,562
86,000 CH Energy Group, Inc.................................. 2,666,000
510,000 Companhia Paranaense de Energia-Copel, Plc., ADR...... 4,111,875
54,000 Consolidated Edison, Inc.............................. 1,765,125
88,000 Duke Power Co......................................... 5,082,000
160,000 Energy East Corp...................................... 3,610,000
331,400 * Niagara Mohawk Holdings, Inc........................ 4,163,212
150,000 PP&L Resources, Inc................................... 3,478,125
200,000 Public Service Co. of New Mexico...................... 3,175,000
100,000 Public Service Enterprise Group, Inc.................. 3,437,500
164,100 Reliant Energy, Inc................................... 3,743,531
184,730 * Scottish Power Plc, ADR............................. 5,114,712
199,200 Southern Co........................................... 5,104,500
29,000 Texas Utilities Co.................................... 1,025,875
180,050 Wisconsin Energy Corp................................. 3,555,988
------------
53,760,005
------------
Utilities - Gas - 7.2%
187,000 MDU Resources Group, Inc.............................. 3,704,938
120,000 Peoples Energy Corp................................... 3,750,000
51,100 Piedmont Natural Gas Co., Inc......................... 1,456,350
95,300 Semco Energy, Inc..................................... 1,167,425
245,000 Sempra Energy......................................... 4,547,812
------------
14,626,525
------------
Utilities - Telephone - 17.4%
104,000 AT&T Corp............................................. 5,486,000
110,000 BellSouth Corp........................................ 5,176,875
70,000 GTE Corp.............................................. 5,131,875
87,250 * Nextel Communications, Inc., Cl. A.................. 9,281,219
100,000 Sprint Corp........................................... 6,468,750
15,000 U.S. West, Inc........................................ 997,500
50,750 Vodafone AirTouch Plc, ADR............................ 2,842,000
------------
35,384,219
------------
Total Common Stocks (cost $97,610,602)................ 126,392,920
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - 25.4%
Communication Systems & Services - 8.9%
60,000 Decs Trust V - Crown Castle 7.25%, 8/15/2002....... $ 1,657,500
103,000 Decs Trust VI - Metromedia Fiber 6.25%,
11/15/2002........................................ 6,231,500
70,000 Loral Space & Communications 6.00%, 11/01/2006..... 3,653,160
9,300 Qualcomm Financial Trust I, 5.75%, 3/1/2012........ 6,586,725
------------
18,128,885
------------
Independent Power Producers - 4.2%
42,700 AES Trust I, Ser. A, TECONS 5.375%, 3/31/2007...... 4,729,025
52,020 Calpine Capital Trust 5.75%, 11/01/2004............ 3,745,440
------------
8,474,465
------------
Printing, Publishing, Broadcasting & Entertainment - 2.1%
31,700 Houston Industries, Inc., ACES (exchangeable for
Time Warner, Inc. common stock) 7.00%, 7/1/2000 .. 4,224,025
------------
Utilities - Electric - 5.4%
235,000 BNDES Participacoes S.A. 7.25%, 2/15/2001.......... 4,465,000
70,000 Texas Utilities Co., PRIDES 9.25%, 8/16/2002....... 3,062,500
151,200 Utilicorp United, Inc. 9.75%, 11/16/2002........... 3,505,950
------------
11,033,450
------------
Utilities - Telephone - 4.8%
50,700 MediaOne Group, Inc., PIES 7.00%, 11/15/2002....... 2,611,050
48,000 Qwest Trends Trust 5.75%, 11/17/2003, 144A......... 3,150,000
60,000 Sprint Corp., DECS (exchangeable for Southern N.E.
Telephone common stock)
8.25%, 3/31/2000.................................. 3,960,000
------------
9,721,050
------------
Total Convertible Preferred (cost $37,224,608)..... 51,581,875
------------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CONVERTIBLE DEBENTURES - 6.4%
Telecommunication Services & Equipment - 6.4%
$ 3,800,000 American Tower Corp. 6.25%, 10/15/2009, 144A....... 6,279,500
3,520,000 Level 3 Communications, Inc. 6.00%, 9/15/2009...... 6,723,200
------------
Total Convertible Debentures (cost $8,320,600)..... 13,002,700
------------
</TABLE>
55
<PAGE>
EVERGREEN
Utility Fund
Schedule of Investments(continued)
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 6.0%
Repurchase Agreement - 6.0%
$12,207,000 State Street Bank & Trust Co., 5.63%, purchased
1/31/2000, maturing 2/1/2000, maturity value
$12,208,909 (cost $12,207,000) (a)............... $ 12,207,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments - (cost $155,362,810)..... 100.0% 203,184,495
Other Assets and Liabilities - net.......... 0 (76,151)
----- ------------
Net Assets.................................. 100.0% $203,108,344
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices plus accrued interest
at January 31, 2000.
144A Securities that may be resold to "qualified institutional buyers" under
Rule 144A of the Securities Act of 1933. These securities have been de-
termined to be liquid under guidelines established by the Board of
Trustees.
* Non-income producing security.
Summary of Abbreviations
ACES Adjustable Convertible Extendable Securities
ADR American Depository Receipt
DECS Dividend Enhanced Convertible Stock
PIES Premium Income Exchangeable Securities
PRIDES Preferred Redeemable Increased Dividend Equity Securities
TECONS Term Convertible Shares
See Combined Notes to Financial Statements.
56
<PAGE>
EVERGREEN
Value Fund
Schedule of Investments
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 91.5%
Aerospace & Defense - 0.9%
137,475 Honeywell International, Inc. ........................ $ 6,598,800
------------
Automotive Equipment & Manufacturing - 3.1%
405,873 Delphi Automotive Systems Corp. ...................... 7,026,676
116,200 Ford Motor Co. ....................................... 5,780,950
131,950 General Motors Corp. ................................. 10,613,728
------------
23,421,354
------------
Banks - 7.5%
112,650 Chase Manhattan Corp. ................................ 9,061,284
448,934 FleetBoston Financial Corp. .......................... 14,113,363
266,100 Golden West Financial Corp. .......................... 7,833,319
604,600 UnionBancal Corp. .................................... 21,501,087
94,350 Wells Fargo Co. ...................................... 3,774,000
------------
56,283,053
------------
Chemical & Agricultural Products - 1.1%
61,627 DuPont (E.I.) De Nemours & Co. ....................... 3,635,993
364,450 Solutia, Inc. ........................................ 5,011,188
------------
8,647,181
------------
Communication Systems & Services - 1.0%
163,950 * MCI WorldCom, Inc. ................................. 7,531,453
------------
Consumer Products & Services - 1.3%
16,800 Procter & Gamble Co. ................................. 1,694,700
133,800 Whirlpool Corp. ...................................... 7,793,850
------------
9,488,550
------------
Diversified Companies - 0.9%
69,700 Minnesota Mining & Manufacturing Co. ................. 6,525,663
------------
Electrical Equipment & Services - 3.1%
149,400 Emerson Electric Co. ................................. 8,226,338
115,800 General Electric Co. ................................. 15,444,825
------------
23,671,163
------------
Electronic Equipment & Services - 1.5%
237,600 Varian Semiconductor Equipment, Inc. ................. 11,493,900
------------
Finance & Insurance - 14.5%
363,750 AMBAC Financial Group, Inc. .......................... 17,801,016
82,325 American International Group, Inc. ................... 8,572,091
221,109 Citigroup, Inc. ...................................... 12,699,948
32,600 Federal Home Loan Mortgage Corp. ..................... 1,636,113
262,250 Federal National Mortgage Assoc. ..................... 15,718,609
191,800 Hartford Life, Inc., Cl. A............................ 7,803,862
206,850 Household International, Inc. ........................ 7,291,462
62,650 J.P. Morgan & Co., Inc. .............................. 7,694,203
228,700 * John Hancock Financial Services, Inc. .............. 3,945,075
73,600 Morgan Stanley, Dean Witter & Co. .................... 4,876,000
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Finance & Insurance - continued
249,900 Nationwide Financial Services, Inc., Cl. A............ $ 6,216,263
163,400 Price (T.) Rowe & Associates, Inc. ................... 6,352,175
247,000 Travelers Property Casualty Corp., Cl. A.............. 8,953,750
------------
109,560,567
------------
Food & Beverage Products - 1.3%
181,000 Conagra, Inc. ........................................ 3,868,875
243,000 Corn Products International, Inc. .................... 5,589,000
------------
9,457,875
------------
Healthcare Products & Services - 9.3%
213,450 American Home Products Corp. ......................... 10,045,491
127,800 Bristol-Myers Squibb Co. ............................. 8,434,800
754,350 * Health Management Associates, Inc., Cl. A........... 10,513,753
88,000 Johnson & Johnson..................................... 7,573,500
122,100 Merck & Co., Inc. .................................... 9,623,006
2,650 Monsanto Co. ......................................... 93,578
250,400 Pharmacia & Upjohn, Inc. ............................. 11,768,800
348,700 * Quest Diagnostics, Inc. ............................ 11,855,800
------------
69,908,728
------------
Information Services & Technology - 8.0%
513,000 * American Power Conversion Corp. .................... 14,155,594
78,650 Electronic Data Systems Corp. ........................ 5,318,706
95,550 Hewlett-Packard Co. .................................. 10,343,287
82,800 Intel Corp. .......................................... 8,192,025
54,300 International Business
Machines Corp. ...................................... 6,091,781
253,100 * Keane, Inc. ........................................ 6,833,700
35,800 * LSI Logic........................................... 2,926,650
32,500 * Micron Technology, Inc. ............................ 2,021,094
96,350 Symantec Corp. ....................................... 4,823,522
------------
60,706,359
------------
Oil/Energy - 9.9%
123,450 Atlantic Richfield Co. ............................... 9,505,650
9,900 Chevron Corp. ........................................ 827,269
151,670 Conoco, Inc., Cl. B................................... 3,573,724
476,672 Exxon Mobil Corp. .................................... 39,802,112
49,300 Royal Dutch Petroleum Co. ............................ 2,714,581
349,550 Sunoco, Inc. ......................................... 8,061,497
193,550 Texaco, Inc. ......................................... 10,233,956
------------
74,718,789
------------
Paper & Packaging - 2.5%
643,250 Abitibi Consolidated, Inc ............................ 7,960,219
39,300 Avery Dennison Corp. ................................. 2,662,575
131,500 Kimberly-Clark Corp. ................................. 8,144,781
------------
18,767,575
------------
</TABLE>
57
<PAGE>
EVERGREEN
Value Fund
Schedule of Investments(continued)
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Printing, Publishing, Broadcasting & Entertainment -
3.8%
130,900 AT&T Corp. - Liberty Media Group, Cl. A.............. $ 6,692,262
163,100 * CBS Corp. ......................................... 9,510,769
33,000 Disney (Walt) Co. ................................... 1,198,313
83,200 * Univision Communications, Inc., Cl. A.............. 8,912,800
37,000 * Viacom, Inc., Cl. B................................ 2,048,875
------------
28,363,019
------------
Retailing & Wholesale - 3.5%
209,600 * Federated Department Stores, Inc. ................. 8,724,600
221,800 Harcourt General, Inc. .............................. 8,872,000
705,100 * Tommy Hilfiger Corp. .............................. 8,505,269
------------
26,101,869
------------
Telecommunication Services & Equipment - 2.6%
116,250 * MediaOne Group, Inc. .............................. 9,241,875
53,000 Motorola, Inc. ...................................... 7,247,750
33,900 Omnipoint Corp. ..................................... 3,476,869
------------
19,966,494
------------
Transportation - 1.9%
134,200 Burlington Northern Santa Fe Corp. .................. 3,229,188
227,900 Union Pacific Corp. ................................. 9,116,000
34,900 United Parcel Service, Inc., Cl. B................... 2,076,550
------------
14,421,738
------------
Utilities - Electric - 4.6%
483,250 DPL, Inc. ........................................... 9,272,359
87,900 Duke Power Co. ...................................... 5,076,225
86,000 FPL Group, Inc. ..................................... 3,628,125
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Utilities - Electric - continued
62,900 GPU, Inc. ......................................... $ 1,824,100
444,800 Reliant Energy, Inc. .............................. 10,147,000
182,000 Southern Co. ...................................... 4,663,750
------------
34,611,559
------------
Utilities - Gas - 0.9%
194,700 NICOR, Inc. ....................................... 6,668,475
------------
Utilities - Telephone - 8.3%
188,911 AT&T Corp. ........................................ 9,965,055
164,500 Bell Atlantic Corp. ............................... 10,188,719
280,950 BellSouth Corp. ................................... 13,222,209
237,200 GTE Corp. ......................................... 17,389,725
281,105 SBC Communications, Inc. .......................... 12,122,653
------------
62,888,361
------------
Total Common Stocks
(cost $624,050,443)............................... 689,802,525
------------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 9.3%
Repurchase Agreement - 9.3%
$70,274,000 State Street Bank & Trust Co., 5.45%, purchased
1/31/2000, maturing 2/1/2000, maturity
value $70,284,639
(cost $70,274,000) (a)............................ 70,274,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $694,324,443)........................ 100.8% 760,076,525
Other Assets and
Liabilities - net.......................... (0.8) (5,931,512)
----- ------------
Net Assets.................................. 100.0% $754,145,013
===== ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at January
31, 2000.
* Non-income producing security.
See Combined Notes to Financial Statements.
58
<PAGE>
EVERGREEN
Growth and Income Funds
Statements of Assets and Liabilities
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Growth Income
Equity and and Small Cap
Blue Chip Income Income Growth Value Utility Value
Fund Fund Fund Fund Fund Fund Fund
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Identified cost of
securities........... $744,207,561 $ 93,262,929 $1,230,426,351 $ 943,995,380 $178,013,543 $155,362,810 $694,324,443
Net unrealized gains
or losses on
securities........... 158,075,121 13,367,966 384,381,370 44,123,386 (4,335,124) 47,821,685 65,752,082
----------------------------------------------------------------------------------------------------------------------------
Market value of
securities........... 902,282,682 106,630,895 1,614,807,721 988,118,766 173,678,419 203,184,495 760,076,525
Cash.................. 73 108 97,777 0 558 555 203
Receivable for
securities sold...... 0 1,787,464 14,417,732 24,887,708 5,199,190 0 1,022,310
Receivable for Fund
shares sold.......... 4,955,112 17,720 783,085 113,680 399,457 882,515 222,771
Dividends and interest
receivable........... 438,225 377,945 1,070,793 4,102,313 160,173 476,455 557,106
Prepaid expenses and
other assets......... 213,554 99,587 29,126 41,891 42,515 24,665 42,120
----------------------------------------------------------------------------------------------------------------------------
Total assets.......... 907,889,646 108,913,719 1,631,206,234 1,017,264,358 179,480,312 204,568,685 761,921,035
----------------------------------------------------------------------------------------------------------------------------
Liabilities
Payable for securities
purchased............ 10,738,385 549,100 7,711,003 15,011,608 0 0 3,887,900
Payable for Fund
shares redeemed...... 1,049,037 386,597 4,545,695 1,760,226 858,594 1,236,850 3,136,517
Payable for securities
on loan.............. 39,697,528 1,176,336 0 0 0 0 0
Advisory fee payable.. 303,514 47,592 1,072,460 703,581 134,911 65,659 258,544
Distribution Plan
expenses payable..... 233,070 57,395 353,053 64,148 58,090 49,498 173,466
Due to other related
parties.............. 67,995 13,085 133,400 80,710 14,990 15,684 61,228
Accrued expenses and
other liabilities.... 114,184 4,797 703,034 271,248 46,056 92,650 258,367
----------------------------------------------------------------------------------------------------------------------------
Total liabilities..... 52,203,713 2,234,902 14,518,645 17,891,521 1,112,641 1,460,341 7,776,022
----------------------------------------------------------------------------------------------------------------------------
Net assets............. $855,685,933 $106,678,817 $1,616,687,589 $ 999,372,837 $178,367,671 $203,108,344 $754,145,013
----------------------------------------------------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital....... $668,990,259 $ 89,415,809 $1,073,093,165 $ 922,043,629 $213,853,720 $138,500,856 $626,337,403
Undistributed
(overdistributed) net
investment income
(loss)............... (1,569,821) 119,977 (4,782,122) (5,895,327) (49,978) (231,696) (15,622)
Accumulated net
realized gains or
losses on securities
and foreign currency
related
transactions......... 30,190,374 3,775,065 163,995,131 39,135,705 (31,100,947) 17,017,499 62,071,150
Net unrealized gains
or losses on
securities and
foreign currency
related
transactions......... 158,075,121 13,367,966 384,381,415 44,088,830 (4,335,124) 47,821,685 65,752,082
----------------------------------------------------------------------------------------------------------------------------
Total net assets....... $855,685,933 $106,678,817 $1,616,687,589 $ 999,372,837 $178,367,671 $203,108,344 $754,145,013
----------------------------------------------------------------------------------------------------------------------------
Net assets consists of
Class A............... $466,351,088 $ 38,680,469 $ 234,443,436 $ 36,138,486 $ 46,790,059 $135,061,002 $424,656,161
Class B............... 375,654,147 55,955,938 798,754,010 157,782,029 80,533,539 62,995,691 237,398,598
Class C............... 7,035,052 11,937,502 30,270,122 2,325,530 15,308,912 2,828,321 3,853,383
Class Y............... 6,645,646 104,908 553,220,021 803,126,792 35,735,161 2,223,330 88,236,871
----------------------------------------------------------------------------------------------------------------------------
Total net assets....... $855,685,933 $106,678,817 $1,616,687,589 $ 999,372,837 $178,367,671 $203,108,344 $754,145,013
----------------------------------------------------------------------------------------------------------------------------
Shares outstanding
Class A............... 13,499,693 2,462,451 7,722,593 1,652,578 3,287,094 9,584,043 21,219,920
Class B............... 11,038,135 3,586,914 26,799,080 7,277,199 5,700,568 4,469,596 11,896,672
Class C............... 206,136 764,049 1,015,514 107,265 1,085,155 200,568 193,270
Class Y............... 193,766 6,699 18,138,366 36,708,037 2,507,726 157,732 4,407,928
----------------------------------------------------------------------------------------------------------------------------
Net asset value per
share
Class A............... $ 34.55 $ 15.71 $ 30.36 $ 21.87 $ 14.23 $ 14.09 $ 20.01
----------------------------------------------------------------------------------------------------------------------------
Class A--Offering
price (based on sales
charge of 4.75%)..... $ 36.27 $ 16.49 $ 31.87 $ 22.96 $ 14.94 $ 14.79 $ 21.01
----------------------------------------------------------------------------------------------------------------------------
Class B............... $ 34.03 $ 15.60 $ 29.81 $ 21.68 $ 14.13 $ 14.09 $ 19.96
----------------------------------------------------------------------------------------------------------------------------
Class C............... $ 34.13 $ 15.62 $ 29.81 $ 21.68 $ 14.11 $ 14.10 $ 19.94
----------------------------------------------------------------------------------------------------------------------------
Class Y............... $ 34.30 $ 15.66 $ 30.50 $ 21.88 $ 14.25 $ 14.10 $ 20.02
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
59
<PAGE>
EVERGREEN
Growth and Income Funds
Statements of Operations
Six Months Ended January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Growth Income
Equity and and Small Cap
Blue Chip Income Income Growth Value Utility Value
Fund Fund Fund Fund Fund Fund Fund
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (net of
foreign withholding
taxes of $17,445,
$2,768, $25,277,
$68,854, $0, $3,595
and $30,157,
respectively)......... $ 2,705,808 $ 1,594,636 $ 9,884,911 $ 19,502,656 $ 1,877,182 $ 2,652,971 $ 6,513,380
Interest............... 1,231,130 251,251 377,752 3,987,131 701,337 369,457 1,305,046
---------------------------------------------------------------------------------------------------------------------------
Total investment
income................ 3,936,938 1,845,887 10,262,663 23,489,787 2,578,519 3,022,428 7,818,426
---------------------------------------------------------------------------------------------------------------------------
Expenses
Advisory fee........... 1,968,897 402,635 7,576,607 4,895,683 1,082,160 426,778 2,096,811
Distribution Plan
expenses.............. 2,124,917 477,039 4,688,783 902,391 657,404 441,977 2,097,129
Administrative services
fees.................. 49,128 17,253 133,400 80,710 14,990 31,976 144,791
Transfer agent fee..... 985,006 138,318 2,058,760 975,039 383,022 132,397 810,798
Trustees' fees and
expenses.............. 7,375 1,552 17,258 10,157 1,940 1,722 8,249
Printing and postage
expenses.............. 52,128 10,640 129,319 90,381 20,319 15,540 77,387
Custodian fee.......... 89,600 19,201 208,952 126,186 31,359 21,566 110,443
Registration and filing
fees.................. 152,913 11,408 44,557 17,722 31,042 20,850 27,160
Professional fees...... 9,343 8,801 16,790 13,573 8,231 6,775 10,474
Other.................. 77,384 4,151 151,705 94,444 9,947 12,050 54,296
---------------------------------------------------------------------------------------------------------------------------
Total expenses......... 5,516,691 1,090,998 15,026,131 7,206,286 2,240,414 1,111,631 5,437,538
Less: Expense
reductions............ (24,477) (7,689) (36,672) (32,805) (9,930) (12,751) (43,140)
---------------------------------------------------------------------------------------------------------------------------
Net expenses.......... 5,492,214 1,083,309 14,989,459 7,173,481 2,230,484 1,098,880 5,394,398
---------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss)................ (1,555,276) 762,578 (4,726,796) 16,316,306 348,035 1,923,548 2,424,028
---------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions
Net realized gains or
losses on:
Securities............ 45,820,322 3,754,448 190,341,628 41,884,185 (7,303,425) 25,502,930 71,543,851
Foreign currency
related
transactions......... 0 0 4,088 (1,011,373) 0 0 787
---------------------------------------------------------------------------------------------------------------------------
Net realized gains or
losses on securities
and foreign currency
related transactions.. 45,820,322 3,754,448 190,345,716 40,872,812 (7,303,425) 25,502,930 71,544,638
---------------------------------------------------------------------------------------------------------------------------
Net change in
unrealized gains or
losses on securities
and foreign currency
related transactions.. 39,117,289 (14,456,133) (110,740,344) (47,689,114) (13,051,028) 7,429,069 (139,637,857)
---------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions.. 84,937,611 (10,701,685) 79,605,372 (6,816,302) (20,354,453) 32,931,999 (68,093,219)
---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ $83,382,335 $ (9,939,107) $ 74,878,576 $ 9,500,004 $(20,006,418) $34,855,547 $ (65,669,191)
</TABLE>
-------------------------------------------------------------------------------
See Combined Notes to Financial Statements.
60
<PAGE>
EVERGREEN
Growth and Income Fund
Statements of Changes in Net Assets
Six Months Ended January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Equity Growth and Income and Small Cap
Blue Chip Income Income Growth Value Utility Value
Fund Fund Fund Fund Fund Fund Fund
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operations
Net investment
income (loss)..... $ (1,555,276) $ 762,578 $ (4,726,796) $ 16,316,306 $ 348,035 $ 1,923,548 $ 2,424,028
Net realized gains
or losses on
securities and
foreign currency
related
transactions...... 45,820,322 3,754,448 190,345,716 40,872,812 (7,303,425) 25,502,930 71,544,638
Net change in
unrealized gains
or losses on
securities and
foreign currency
related
transactions...... 39,117,289 (14,456,133) (110,740,344) (47,689,114) (13,051,028) 7,429,069 (139,637,857)
----------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from operations.. 83,382,335 (9,939,107) 74,878,576 9,500,004 (20,006,418) 34,855,547 (65,669,191)
----------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment
income
Class A........... 0 (476,529) 0 (779,493) (139,162) (1,507,008) (1,741,658)
Class B........... 0 (473,320) 0 (3,339,416) (69,660) (552,410) (173,433)
Class C........... 0 (105,147) 0 (47,265) (14,239) (13,163) (2,358)
Class Y........... 0 (4,061) 0 (20,025,412) (163,339) (30,327) (592,501)
Net realized gains
Class A........... (28,109,711) (6,926,900) (4,598,084) (590,501) 0 (9,808,608) (55,282,863)
Class B........... (23,321,638) (10,526,881) (16,932,536) (3,030,140) 0 (5,178,058) (39,983,154)
Class C........... (288,874) (2,390,332) (628,619) (44,582) 0 (119,850) (563,611)
Class Y........... (176,566) (86,941) (11,517,842) (14,561,478) 0 (187,129) (14,849,499)
----------------------------------------------------------------------------------------------------------------------------
Total
distributions to
shareholders..... (51,896,789) (20,990,111) (33,677,081) (42,418,287) (386,400) (17,396,553) (113,189,077)
----------------------------------------------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from
shares sold....... 215,805,765 2,547,186 210,036,060 17,090,336 21,991,511 18,750,477 16,987,653
Payment for shares
redeemed.......... (80,374,128) (30,306,192) (478,726,518) (93,398,283) (73,499,366) (14,273,453) (124,748,533)
Net asset value of
shares issued in
reinvestment of
distributions..... 47,328,659 19,503,011 31,956,088 37,939,545 262,310 14,920,839 108,720,861
----------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from capital
share
transactions..... 182,760,296 (8,255,995) (236,734,370) (38,368,402) (51,245,545) 19,397,863 959,981
----------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in
net assets...... 214,245,842 (39,185,213) (195,532,875) (71,286,685) (71,638,363) 36,856,857 (177,898,287)
Net assets
Beginning of
period............ 641,440,091 145,864,030 1,812,220,464 1,070,659,522 250,006,034 166,251,487 932,043,300
----------------------------------------------------------------------------------------------------------------------------
End of period...... $855,685,933 $106,678,817 $1,616,687,589 $ 999,372,837 $178,367,671 $203,108,344 $ 754,145,013
----------------------------------------------------------------------------------------------------------------------------
Undistributed
(overdistributed)
net investment
income (loss)..... $ (1,569,821) $ 119,977 $ (4,782,122) $ (5,895,327) $ (49,978) $ (231,696) $ (15,622)
</TABLE>
-------------------------------------------------------------------------------
See Combined Notes to Financial Statements.
61
<PAGE>
EVERGREEN
Growth and Income Funds
Statements of Changes in Net Assets
Year Ended July 31, 1999
<TABLE>
<CAPTION>
Equity Growth and Income and Small Cap
Blue Chip Income Income Growth Value Utility Value
Fund Fund Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operations
Net investment
income (loss).... $ (405,617) $ 1,822,429 $ 739,955 $ 39,827,948 $ 4,374,984 $ 5,016,016 $ 6,696,229
Net realized gains
or losses on
securities and
foreign currency
related
transactions..... 37,712,909 23,440,204 9,259,355 35,191,732 (23,967,030) 6,752,256 118,989,239
Net change in
unrealized gains
or losses on
securities and
foreign currency
related
transactions..... 33,829,162 (14,578,770) 65,034,177 23,905,207 19,057,835 23,219,707 (10,264,625)
-----------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
operations...... 71,136,454 10,683,863 75,033,487 98,924,887 (534,211) 34,987,979 115,420,843
-----------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment
income
Class A.......... (302,117) (740,343) (618,275) (590,960) (1,241,862) (3,518,061) (4,093,423)
Class B.......... 0 (652,879) 0 (1,904,614) (1,599,604) (1,359,833) (679,263)
Class C.......... 0 (138,191) 0 (40,664) (319,899) (16,980) (9,129)
Class Y.......... 0 (5,052) (2,594,824) (38,238,097) (1,709,875) (101,181) (1,708,800)
Net realized gains
Class A.......... (22,171,083) (6,542,911) (8,009,500) (1,297,466) (792,880) (10,191,078) (2,706,113)
Class B.......... (10,585,999) (12,308,775) (27,000,584) (4,982,320) (1,601,327) (4,842,643) (1,893,542)
Class C.......... (50,576) (2,556,957) (1,332,807) (108,434) (315,684) (52,067) (26,406)
Class Y.......... 0 (19,678) (20,777,901) (79,113,403) (998,252) (304,419) (926,882)
-----------------------------------------------------------------------------------------------------------------------------
Total
distributions to
shareholders.... (33,109,775) (22,964,786) (60,333,891) (126,275,958) (8,579,383) (20,386,262) (12,043,558)
-----------------------------------------------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from
shares sold...... 414,184,932 30,188,056 386,163,830 30,217,265 205,428,609 17,451,359 66,555,976
Payment for shares
redeemed......... (243,648,933) (72,875,118) (792,989,619) (182,203,597) (260,520,742) (24,384,302) (239,124,718)
Net asset value of
shares issued in
reinvestment of
distributions.... 29,469,348 21,454,983 57,025,779 114,061,954 7,125,678 17,326,400 10,412,391
Net asset value of
shares issued in
acquisition...... 0 0 0 185,281,144 0 0 0
-----------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
capital share
transactions.... 200,005,347 (21,232,079) (349,800,010) 147,356,766 (47,966,455) 10,393,457 (162,156,351)
-----------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in
net assets..... 238,032,026 (33,513,002) (335,100,414) 120,005,695 (57,080,049) 24,995,174 (58,779,066)
Net assets
Beginning of
period........... 403,408,065 179,377,032 2,147,320,878 950,653,827 307,086,083 141,256,313 990,822,366
-----------------------------------------------------------------------------------------------------------------------------
End of period..... $ 641,440,091 $145,864,030 $1,812,220,464 $1,070,659,522 $ 250,006,034 $166,251,487 $ 932,043,300
-----------------------------------------------------------------------------------------------------------------------------
Undistributed
(overdistributed)
net investment
income........... $ (14,545) $ 416,456 $ (55,326) $ 1,979,953 $ (11,613) $ (52,336) $ 70,300
</TABLE>
-------------------------------------------------------------------------------
See Combined Notes to Financial Statements.
62
<PAGE>
Combined Notes to Financial Statements (Unaudited)
1. ORGANIZATION
The Evergreen Growth and Income Funds consist of Evergreen Blue Chip Fund
("Blue Chip Fund"), Evergreen Equity Income Fund ("Equity Income Fund"), Ever-
green Growth and Income Fund ("Growth and Income Fund"), Evergreen Income and
Growth Fund ("Income and Growth Fund"), Evergreen Small Cap Value Fund ("Small
Cap Value Fund"), Evergreen Utility Fund ("Utility Fund") and Evergreen Value
Fund ("Value Fund"), (collectively, the "Funds"). Each Fund is a diversified
series of Evergreen Equity Trust (the "Trust"), a Delaware business trust orga-
nized on September 18, 1997. The Trust is an open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act").
The Funds offer 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 B
shares purchased prior to January 1, 1997, follow the conversion rights at the
time the shares were purchased. Class C shares are sold subject to 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 sub-
ject 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 institutional investors or Class Y share-
holders of record of certain other funds managed by First Union and its affili-
ates as of December 30, 1994.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
Securities traded on a national securities exchange or included on the Nasdaq
National Market System ("NMS") 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. Corporate
bonds, U.S. government obligations, mortgage and other asset-backed securities
and other fixed-income securities are valued at prices provided by an indepen-
dent pricing service. In determining a price for normal institutional-size
transactions, the pricing service uses methods based on market transactions for
comparable securities and analysis of various relationships between similar se-
curities which are generally recognized by institutional traders. Securities
for which valuations are not available from an independent pricing service may
be valued by brokers which use prices provided by market makers or estimates of
market value obtained from yield data relating to investments or securities
with similar characteristics. Otherwise, securities for which valuations are
not readily available from an independent pricing service (including restricted
securities) are valued at fair value as determined in good faith according to
procedures established by the Board of Trustees. Mutual fund shares held as
Short-term investments are valued at net asset value. Short-term investments
with remaining maturities of 60 days or less are carried at amortized cost,
which approximates market value.
B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. Collateral for certain tri-party repurchase agreements is
held at the counterparty's custodian in a segregated account for the benefit of
the Fund and the counterparty. Each Fund monitors the adequacy of the collat-
eral daily and will require the seller to
63
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
provide additional collateral in the event the market value of the securities
pledged falls below the carrying value of the repurchase agreement, including
accrued interest. Each Fund will only enter into repurchase agreements with
banks and other financial institutions, which are deemed by the investment ad-
visor 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, the Blue Chip Fund and Equity Income Fund, along with certain other funds
managed by Evergreen Investment Management Company ("EIMC"), an indirect whol-
ly-owned subsidiary of First Union National Bank ("FUNB"), may transfer
uninvested cash balances into a joint trading account. These balances are in-
vested in one or more repurchase agreements that are fully collateralized by
U.S. Treasury and/or federal agency obligations.
C. Foreign Currency
The books and records of the Funds are maintained in United States (U.S.) dol-
lars. Foreign currency amounts are translated into U.S. dollars as follows:
market value of investments, other assets and liabilities at the daily rate of
exchange; purchases and sales of investments and income and expenses at the
rate of exchange prevailing on the respective dates of such transactions. Net
unrealized foreign exchange gains or losses resulting from changes in foreign
currency exchange rates is a component of net unrealized gains or losses on se-
curities and foreign currency related transactions. Net realized foreign cur-
rency gains or losses on foreign currency related transactions include foreign
currency gains and losses between trade date and settlement date on investment
securities transactions, foreign currency related transactions and the differ-
ence between the amounts of interest and dividends recorded on the books of the
Funds and the amount actually received. The portion of foreign currency gains
or losses related to fluctuations in exchange rates between the initial pur-
chase trade date and subsequent sale trade date is included in realized gains
or losses on securities.
D. 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
Funds bear 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
Statements of Assets and Liabilities.
E. Securities Lending
In order to generate income and to offset expenses, the Funds may lend portfo-
lio securities to brokers, dealers and other financial organizations. The
Fund's investment advisor will monitor the creditworthiness of such borrowers.
Loans of securities may not exceed 33 1/3% of a Fund's total assets and will be
collateralized by cash, letters of credit or U.S. Government securities that
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities, including accrued interest. The Fund
monitors the adequacy of the collateral daily and will require the borrower to
provide additional collateral in the event the value of the collateral falls
below 100% of the market value of the securities on loan. While such securities
are on loan, the borrower will pay a Fund any income accruing thereon, and the
Fund may invest any cash collateral received in portfolio securities, thereby
increasing its return. A Fund will have the right to call any such loan and ob-
tain the securities loaned at any time on five days' notice. Any gain or loss
in the market price of the loaned securities, which occurs during the term of
the loan, would affect a Fund and its investors. A Fund may pay fees in connec-
tion with such loans.
F. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums. Dividend income is recorded on the
ex-dividend date or in the case of some foreign securities, on the date there-
after when the Fund is made aware of
64
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
the dividend. Foreign income and capital gains realized on some foreign securi-
ties may be subject to foreign withholding taxes, which are accrued as applica-
ble.
G. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated invest-
ment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable in-
come and net capital gains, if any, to their shareholders. The Funds also in-
tend to avoid any excise tax liability by making the required distributions un-
der the Code. Accordingly, no provision for federal taxes is required. To the
extent that realized capital gains can be offset by capital loss carryforwards,
it is each Fund's policy not to distribute such gains.
H. Distributions
Distributions from net investment income for the Funds, except for the Utility
Fund, are declared and paid quarterly. Distributions from net investment income
for Utility Fund are declared and paid monthly. Distributions from net realized
capital gains, if any, are paid at least annually. Distributions to sharehold-
ers 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.
I. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are pro-rated among the classes based on the rela-
tive net assets of each class. Currently, class specific expenses are limited
to expenses incurred under the Distribution Plans for each class.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
EIMC is the investment advisor for Blue Chip Fund and Equity Income Fund. In
return for providing investment management services to Blue Chip Fund and Eq-
uity Income Fund, each Fund pays EIMC a management fee that is calculated daily
and paid monthly. The management fee for Blue Chip Fund is computed daily ap-
plying percentage rates starting at 0.61% and declining to 0.26% per annum as
net assets increase, to the average daily net assets of the Fund. The advisory
fee for Equity Income Fund is calculated at an annual rate of 1.50% of Equity
Income Fund's gross investment income plus an amount determined by applying
percentage rates, starting at 0.51% and declining to 0.21% per annum as net as-
sets increase, to the average daily net assets of the Fund.
Prior to January 3, 2000, the management fee for the Blue Chip Fund was com-
puted daily by applying percentage rates starting at 0.70% and declining to
0.35% per annum as net assets increase, to the average daily net assets of the
Fund. Prior to January 3, 2000, the management fee for the Equity Income Fund
was computed daily at an annual rate of 1.50% of the Fund'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 increase, to the average daily
net assets of the Fund.
Evergreen Asset Management Corp. ("EAMC"), an indirect wholly-owned subsidiary
of FUNB, is the investment advisor to Growth and Income Fund, Income and Growth
Fund and Small Cap Value Fund and is paid an advisory fee that is calculated
daily and paid monthly based on the Fund's average daily net assets, in accor-
dance with the following schedule:
<TABLE>
<S> <C>
First $750 million......................................... 0.90%
Next $250 million.......................................... 0.80%
Over $1 billion............................................ 0.70%
</TABLE>
Prior to January 3, 2000, the management fee paid to EAMC for these funds was
calculated daily based on the Fund's average daily net assets, 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>
65
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Lieber & Company, an affiliate of First Union, is the investment sub-advisor to
Growth and Income Fund, Income and Growth Fund and Small Cap Value Fund and
also provides brokerage services with respect to substantially all security
transactions of the Funds effected on the New York or American Stock Exchanges.
For the six months ended January 31, 2000, Growth and Income Fund, Income and
Growth Fund and Small Cap Value Fund incurred broker commissions of $1,114,171,
$334,402, and $146,531, respectively, with Lieber & Company. Lieber & Company
is reimbursed by EAMC for providing investment sub-advisory services at no ad-
ditional expense to the Funds.
Evergreen Investment Management ("EIM"), formerly Capital Management Group, a
division of FUNB, is the investment advisor to Utility Fund and Value Fund and
is paid an advisory fee that is calculated daily and paid monthly at an annual
rate of 0.42% of each Fund's average daily net assets. Prior to January 3,
2000, the advisory fee was calculated daily at an annual rate of 0.50% of each
Fund's average daily net assets.
Evergreen Investment Services ("EIS"), an indirect, wholly-owned subsidiary of
FUNB, is the administrator and The BISYS Group, Inc. ("BISYS") is the sub-ad-
ministrator to the Funds. As administrator, EIS provides the Funds with facili-
ties, equipment and personnel. As sub-administrator to the Funds, BISYS pro-
vides the officers of the Funds. Officers of the Funds and affiliated Trustees
receive no compensation directly from the Funds.
For its services, the Utility Fund and Value Fund pays the administrator and
sub-administrator a combined fee at the annual rate of 0.10% of each Fund's av-
erage daily net assets. Prior to January 3, 2000, the administrator and sub-ad-
ministrator for the Funds were entitled to an annual fee based on the average
daily net assets of the funds administered by EIS for which First Union or its
investment advisory subsidiaries are also the investment advisors. The adminis-
tration fee was calculated by applying percentage rates, which started at 0.05%
and declined to 0.01% per annum as net assets increased, to the average daily
net assets of each Fund. The sub-administration fee was calculated by applying
percentage rates, which started at 0.01% and declined to 0.004% per annum as
net assets increased, to the average daily net assets of each Fund.
For Blue Chip Fund, Equity Income Fund, Growth and Income Fund, Income and
Growth Fund and Small Cap Value Fund, the Funds pay the administrator a fee at
the annual rate of 0.10% of each Fund's average daily net assets. Prior to Jan-
uary 3, 2000, the administration and sub-administration fee for each Fund was
paid by the investment advisor and was not a Fund expense. However, prior to
January 3, 2000, the Blue Chip Fund and Equity Income Fund reimbursed EIMC for
providing certain administration and accounting expenses. The sub-administra-
tion fee continues to be paid by the investment advisor.
For the six months ended January 31, 2000, Utility Fund and Value Fund paid or
accrued to EIS and BISYS the following amounts for administrative and sub-ad-
ministrative services:
<TABLE>
<CAPTION>
Administration Sub-Administration
Fee Fee
---------------------------------
<S> <C> <C>
Utility Fund.................. $ 28,432 $ 3,544
Value Fund.................... $123,559 $21,232
</TABLE>
Evergreen Service Company ("ESC"), an indirect, wholly-owned subsidiary of
First Union, is the transfer and dividend disbursing agent for the Funds.
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly-owned subsidiary of BISYS, serves
as principal underwriter to the Funds.
Each Fund has adopted Distribution Plans, as allowed by Rule 12b-1 of the 1940
Act, for each class of shares, except Class 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
66
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Plan expenses". Under the Distribution Plans, Class A incurs distribution fees
equal to 0.25% of the average daily net asset of the class, all of which is
used to pay for shareholder service fees. Class B and Class C incur distribu-
tion fees equal to 1.00% of the average daily net assets of each class. Of this
amount, 0.25% of the distribution fees incurred is used to pay for shareholder
service fees and 0.75% is used to pay for distribution-related costs. Distribu-
tion Plan expenses are calculated daily and paid at least quarterly.
During the six months ended January 31, 2000, amounts paid or accrued to EDI
pursuant to each Fund's Class A, Class B and Class C Distribution Plans were as
follows:
<TABLE>
<CAPTION>
Class A Class B Class C
----------------------------
<S> <C> <C> <C>
Blue Chip Fund.................... $511,669 $1,592,261 $ 20,987
Equity Income Fund................ 56,806 344,507 75,726
Growth and Income Fund............ 295,939 4,229,761 163,083
Income and Growth Fund............ 42,522 847,672 12,197
Small Cap Value Fund.............. 67,227 492,000 98,177
Utility Fund...................... 142,034 293,388 6,555
Value Fund........................ 539,963 1,535,724 21,442
</TABLE>
With respect to Class B and Class C shares, the principal underwriter may pay
distribution fees greater than the allowable annual amounts each Fund is per-
mitted to pay under the Distribution Plans.
Each of the Distribution Plans may be terminated at any time by vote of the In-
dependent Trustees or by vote of a majority of the outstanding voting shares of
the respective class.
5. ACQUISITION
Effective the close of business on July 30, 1999, Income and Growth Fund ac-
quired substantially all of the net assets and assumed certain liabilities of
Evergreen American Retirement Fund, an open-end management investment company
registered under the 1940 Act in an exchange of Class A, Class B, Class C and
Class Y shares of Income and Growth Fund.
The acquisition was accomplished by a tax-free exchange of the respective
shares of the Income and Growth Fund. The value of net assets acquired, number
of shares issued, unrealized appreciation acquired and the aggregate net assets
of the Income and Growth Fund immediately after the acquisition were as fol-
lows:
<TABLE>
<CAPTION>
Value of Net Number of Unrealized Net Assets
Acquiring Fund Acquired Fund Assets Acquired Shares Issued Appreciation After Acquisition
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income and Growth Fund Evergreen American Retirement Fund $185,281,144 8,258,910 $20,212,515 $1,070,659,522
</TABLE>
67
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
6. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class A, Class B, Class C and Class Y. Transactions in shares of
the Funds were as follows:
Blue Chip Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
January 31, 2000 July 31, 1999
------------------------ -------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold.............. 1,760,588 $ 60,569,869 7,069,269 $ 215,936,462
Automatic conversion of
Class B shares to Class
A shares................ 824,791 29,782,827 0 0
Shares redeemed.......... (1,438,897) (48,981,812) (5,479,684) (162,273,843)
Shares issued in
reinvestment of
distributions........... 721,139 24,742,289 682,121 19,382,250
-----------------------------------------------------------------------------
Net increase............. 1,867,621 66,113,173 2,271,706 73,044,869
-----------------------------------------------------------------------------
Class B Shares
Shares sold.............. 4,292,024 144,905,117 6,218,762 192,571,481
Automatic conversion of
Class B shares to Class
A shares................ (836,985) (29,782,827) 0 0
Shares redeemed.......... (912,541) (30,402,682) (2,617,336) (78,544,225)
Shares issued in
reinvestment of
distributions........... 654,155 22,136,614 355,147 10,036,524
-----------------------------------------------------------------------------
Net increase............. 3,196,653 106,856,222 3,956,573 124,063,780
-----------------------------------------------------------------------------
Class C Shares
Shares sold.............. 124,860 4,293,375 157,200 4,882,919
Shares redeemed.......... (17,781) (607,978) (93,639) (2,830,715)
Shares issued in
reinvestment of
distributions........... 8,052 273,190 1,785 50,574
-----------------------------------------------------------------------------
Net increase............. 115,131 3,958,587 65,346 2,102,778
-----------------------------------------------------------------------------
Class Y Shares
Shares sold.............. 175,556 6,037,404 24,198 794,070
Shares redeemed.......... (11,170) (381,656) (5) (150)
Shares issued in
reinvestment of
distributions........... 5,187 176,566 0 0
-----------------------------------------------------------------------------
Net increase............. 169,573 5,832,314 24,193 793,920
-----------------------------------------------------------------------------
Net increase............. $182,760,296 $ 200,005,347
-----------------------------------------------------------------------------
</TABLE>
Equity Income Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
January 31, 2000 July 31, 1999
---------------------- ------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold................. 35,137 $ 635,761 377,792 $ 7,479,412
Automatic conversion of
Class B shares to Class A
shares..................... 46,560 750,880 66,574 1,275,463
Shares redeemed............. (522,642) (9,033,687) (751,644) (14,848,362)
Shares issued in
reinvestment of
distributions.............. 414,431 6,902,690 363,322 6,893,908
-----------------------------------------------------------------------------
Net increase (decrease)..... (26,514) (744,356) 56,044 800,421
-----------------------------------------------------------------------------
Class B Shares
Shares sold................. 90,745 1,640,675 906,121 18,055,614
Automatic conversion of
Class B shares to Class A
shares..................... (46,870) (750,880) (66,948) (1,275,463)
Shares redeemed............. (965,490) (16,831,733) (2,490,795) (48,904,031)
Shares issued in
reinvestment of
distributions.............. 617,714 10,199,356 637,607 12,007,710
-----------------------------------------------------------------------------
Net decrease................ (303,901) (5,742,582) (1,014,015) (20,116,170)
-----------------------------------------------------------------------------
Class C Shares
Shares sold................. 13,286 246,466 191,619 3,838,714
Shares redeemed............. (233,040) (3,904,828) (447,839) (8,832,781)
Shares issued in
reinvestment of
distributions.............. 139,722 2,310,975 134,147 2,529,177
-----------------------------------------------------------------------------
Net decrease................ (80,032) (1,347,387) (122,073) (2,464,890)
-----------------------------------------------------------------------------
Class Y Shares
Shares sold................. 1,246 24,284 40,395 814,316
Shares redeemed............. (32,310) (535,944) (14,451) (289,944)
Shares issued in
reinvestment of
distributions.............. 5,411 89,990 1,271 24,188
-----------------------------------------------------------------------------
Net increase (decrease)..... (25,653) (421,670) 27,215 548,560
-----------------------------------------------------------------------------
Net decrease................ $ (8,255,995) $(21,232,079)
-----------------------------------------------------------------------------
</TABLE>
68
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Growth and Income Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
January 31, 2000 July 31, 1999
------------------------- -------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold............. 5,479,766 $ 160,751,759 6,356,759 $ 181,231,854
Automatic conversion of
Class B shares to Class
A shares............... 433,825 13,890,270 71,639 2,052,789
Shares redeemed......... (6,804,026) (200,688,935) (8,431,174) (239,858,978)
Shares issued in
reinvestment of
distributions.......... 146,810 4,392,505 300,493 8,412,371
------------------------------------------------------------------------------
Net decrease............ (743,625) (21,654,401) (1,702,283) (48,161,964)
------------------------------------------------------------------------------
Class B Shares
Shares sold............. 492,860 14,377,772 4,273,030 116,938,483
Automatic conversion of
Class B shares to Class
A shares............... (441,724) (13,890,270) (72,390) (2,052,789)
Shares redeemed......... (4,384,642) (127,925,028) (9,163,377) (254,977,395)
Shares issued in
reinvestment of
distributions.......... 544,438 16,017,371 945,090 26,226,276
------------------------------------------------------------------------------
Net decrease............ (3,789,068) (111,420,155) (4,017,647) (113,865,425)
------------------------------------------------------------------------------
Class C Shares
Shares sold............. 120,231 3,542,868 414,303 11,348,877
Shares redeemed......... (374,897) (10,912,000) (942,556) (26,271,690)
Shares issued in
reinvestment of
distributions.......... 16,568 487,415 45,443 1,261,465
------------------------------------------------------------------------------
Net decrease............ (238,098) (6,881,717) (482,810) (13,661,348)
------------------------------------------------------------------------------
Class Y Shares
Shares sold............. 1,057,340 31,363,661 2,753,486 76,644,616
Shares redeemed......... (4,677,071) (139,200,555) (9,565,395) (271,881,556)
Shares issued in
reinvestment of
distributions.......... 368,014 11,058,797 753,230 21,125,667
------------------------------------------------------------------------------
Net decrease............ (3,251,717) (96,778,097) (6,058,679) (174,111,273)
------------------------------------------------------------------------------
Net decrease............ $(236,734,370) $(349,800,010)
------------------------------------------------------------------------------
Income and Growth Fund
<CAPTION>
Six Months Ended Year Ended
January 31, 2000 July 31, 1999
------------------------- -------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold............. 330,147 $ 7,175,991 546,531 $ 12,209,031
Automatic conversion of
Class B shares to Class
A shares............... 197,359 4,406,859 0 0
Shares redeemed......... (516,448) (11,305,899) (692,292) (15,388,197)
Shares issued in
reinvestment of
distributions.......... 59,358 1,280,617 84,216 1,766,406
Shares issued in
acquisition of
Evergreen American
Retirement Fund........ 0 0 996,586 22,495,315
------------------------------------------------------------------------------
Net increase............ 70,416 1,557,568 935,041 21,082,555
------------------------------------------------------------------------------
Class B Shares
Shares sold............. 131,591 2,842,094 267,996 5,756,610
Automatic conversion of
Class B shares to Class
A shares............... (199,004) (4,406,859) 0 0
Shares redeemed......... (1,209,468) (26,147,504) (684,457) (14,490,566)
Shares issued in
reinvestment of
distributions.......... 280,893 6,010,270 307,396 6,393,524
Shares issued in
acquisition of
Evergreen American
Retirement Fund........ 0 0 6,014,738 134,624,702
------------------------------------------------------------------------------
Net increase
(decrease)............. (995,988) (21,701,999) 5,905,673 132,284,270
------------------------------------------------------------------------------
Class C Shares
Shares sold............. 13,626 292,284 8,976 194,095
Shares redeemed......... (21,939) (470,793) (24,103) (510,097)
Shares issued in
reinvestment of
distributions.......... 3,783 80,960 6,072 126,280
Shares issued in
acquisition of
Evergreen American
Retirement Fund........ 0 0 66,207 1,481,914
------------------------------------------------------------------------------
Net increase
(decrease)............. (4,530) (97,549) 57,152 1,292,192
------------------------------------------------------------------------------
Class Y Shares
Shares sold............. 308,498 6,779,967 568,224 12,057,529
Shares redeemed......... (2,534,262) (55,474,087) (7,163,498) (151,814,737)
Shares issued in
reinvestment of
distributions.......... 1,417,127 30,567,698 5,039,388 105,775,744
Shares issued in
acquisition of
Evergreen American
Retirement Fund........ 0 0 1,181,379 26,679,213
------------------------------------------------------------------------------
Net decrease............ (808,637) (18,126,422) (374,507) (7,302,251)
------------------------------------------------------------------------------
Net increase
(decrease)............. $ (38,368,402) $ 147,356,766
------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Small Cap Value Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
January 31, 2000 July 31, 1999
------------------------ -------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold.............. 895,793 $ 13,241,326 10,088,863 $ 146,506,778
Automatic conversion of
Class B shares to Class
A shares................ 91,547 1,344,291 122,150 1,811,086
Shares redeemed.......... (1,528,359) (22,464,796) (9,965,619) (143,998,401)
Shares issued in
reinvestment of
distributions........... 8,995 134,298 136,847 1,949,647
------------------------------------------------------------------------------
Net increase (decrease).. (532,024) (7,744,881) 382,241 6,269,110
------------------------------------------------------------------------------
Class B Shares
Shares sold.............. 333,862 4,855,803 2,288,743 33,166,258
Automatic conversion of
Class B shares to Class
A shares................ (92,207) (1,344,291) (122,803) (1,811,086)
Shares redeemed.......... (1,703,717) (24,752,293) (3,528,826) (50,084,066)
Shares issued in
reinvestment of
distributions........... 4,388 65,209 213,282 3,057,499
------------------------------------------------------------------------------
Net decrease............. (1,457,674) (21,175,572) (1,149,604) (15,671,395)
------------------------------------------------------------------------------
Class C Shares
Shares sold.............. 101,914 1,473,968 709,408 10,225,143
Shares redeemed.......... (494,627) (7,139,999) (947,075) (13,384,026)
Shares issued in
reinvestment of
distributions........... 718 10,680 41,741 597,766
------------------------------------------------------------------------------
Net decrease............. (391,995) (5,655,351) (195,926) (2,561,117)
------------------------------------------------------------------------------
Class Y Shares
Shares sold.............. 163,477 2,420,414 1,069,945 15,530,430
Shares redeemed.......... (1,312,831) (19,142,278) (3,645,558) (53,054,249)
Shares issued in
reinvestment of
distributions........... 3,491 52,123 105,065 1,520,766
------------------------------------------------------------------------------
Net decrease............. (1,145,863) (16,669,741) (2,470,548) (36,003,053)
------------------------------------------------------------------------------
Net decrease............. $(51,245,545) $ (47,966,455)
------------------------------------------------------------------------------
</TABLE>
Utility Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
January 31, 2000 July 31, 1999
---------------------- ------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold................. 513,533 $ 7,021,131 429,844 $ 5,133,429
Automatic Conversion of
Class B Shares to Class A
Shares..................... 562,337 7,870,081 11,373 126,409
Shares redeemed............. (658,724) (8,745,435) (1,117,587) (13,062,066)
Shares issued in
reinvestment of
distributions.............. 731,878 9,366,057 1,006,678 11,457,282
-----------------------------------------------------------------------------
Net increase................ 1,149,024 15,511,834 330,308 3,655,054
-----------------------------------------------------------------------------
Class B Shares
Shares sold................. 690,155 9,191,137 704,486 8,209,032
Automatic Conversion of
Class B Shares to Class A
Shares..................... (562,470) (7,870,081) (11,366) (126,409)
Shares redeemed............. (336,183) (4,395,576) (650,786) (7,545,094)
Shares issued in
reinvestment of
distributions.............. 412,146 5,267,354 502,546 5,718,575
-----------------------------------------------------------------------------
Net increase................ 203,648 2,192,834 544,880 6,256,104
-----------------------------------------------------------------------------
Class C Shares
Shares sold................. 173,293 2,352,284 162,138 1,808,980
Shares redeemed............. (48,265) (651,835) (140,732) (1,555,150)
Shares issued in
reinvestment of
distributions.............. 7,216 92,368 5,627 64,145
-----------------------------------------------------------------------------
Net increase................ 132,244 1,792,817 27,033 317,975
-----------------------------------------------------------------------------
Class Y Shares
Shares sold................. 14,304 185,925 182,271 2,173,509
Shares redeemed............. (37,002) (480,607) (168,716) (2,095,583)
Shares issued in
reinvestment of
distributions.............. 15,269 195,060 7,586 86,398
-----------------------------------------------------------------------------
Net increase (decrease)..... (7,429) (99,622) 21,141 164,324
-----------------------------------------------------------------------------
Net increase................ $19,397,863 $ 10,393,457
-----------------------------------------------------------------------------
</TABLE>
70
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Value Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
January 31, 2000 July 31, 1999
------------------------ -------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold.............. 325,444 $ 7,376,306 1,304,364 $ 30,874,288
Automatic conversion of
Class B shares to Class
A shares................ 2,053,408 42,509,846 0 0
Shares redeemed.......... (2,368,513) (52,503,649) (4,351,247) (100,747,544)
Shares issued in
reinvestment of
distributions........... 2,548,338 54,267,906 285,275 6,540,493
------------------------------------------------------------------------------
Net increase (decrease).. 2,558,677 51,650,409 (2,761,608) (63,332,763)
------------------------------------------------------------------------------
Class B Shares
Shares sold.............. 310,668 7,161,991 1,041,242 24,036,781
Automatic conversion of
Class B shares to Class
A shares................ (2,058,648) (42,509,846) 0 0
Shares redeemed.......... (1,563,523) (34,610,920) (2,488,104) (57,458,861)
Shares issued in
reinvestment of
distributions........... 1,836,041 38,937,956 111,928 2,520,116
------------------------------------------------------------------------------
Net decrease............. (1,475,462) (31,020,819) (1,334,934) (30,901,964)
------------------------------------------------------------------------------
Class C Shares
Shares sold.............. 14,245 315,656 70,058 1,628,040
Shares redeemed.......... (33,686) (742,636) (115,631) (2,643,004)
Shares issued in
reinvestment of
distributions........... 25,717 544,882 1,529 34,419
------------------------------------------------------------------------------
Net increase (decrease).. 6,276 117,902 (44,044) (980,545)
------------------------------------------------------------------------------
Class Y Shares
Shares sold.............. 95,850 2,133,700 444,392 10,016,867
Shares redeemed.......... (1,688,436) (36,891,328) (3,438,601) (78,275,309)
Shares issued in
reinvestment of
distributions........... 702,889 14,970,117 57,625 1,317,363
------------------------------------------------------------------------------
Net decrease............. (889,697) (19,787,511) (2,936,584) (66,941,079)
------------------------------------------------------------------------------
Net increase (decrease).. $ 959,981 $(162,156,351)
------------------------------------------------------------------------------
</TABLE>
7. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the six months ended January 31,
2000:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
-------------------------------------
<S> <C> <C>
Blue Chip Fund............ $563,669,965 $462,846,122
Equity Income Fund
Non-U.S. Government...... 36,064,548 71,004,155
U.S. Government.......... 6,389,063 0
Growth and Income Fund.... 556,338,934 813,767,946
Income and Growth Fund.... 426,207,224 422,703,990
Small Cap Value Fund...... 81,374,386 137,534,879
Utility Fund.............. 42,191,660 48,911,556
Value Fund................ 366,947,014 517,462,440
</TABLE>
During the six months ended January 31, 2000 Blue Chip Fund and Equity Income
Fund loaned securities to certain brokers who paid the Funds a negotiated lend-
ers' fee. These fees are included in interest income. At January 31, 2000, the
value of the securities on loan from Blue Chip Fund and Equity Income Fund were
$38,830,390 and $1,116,485, respectively, and the value of collateral was
$39,697,528 and $1,176,336, respectively. During the six months ended January
31, 2000, the Blue Chip Fund and Equity Income Fund earned $4,991 and $108,348,
respectively, in income from securities lending.
71
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
As of July 31, 1999, Income and Growth Fund and Small Cap Value Fund had capi-
tal loss carryovers for federal income tax purposes of $102,000 expiring July
31, 2005 and $1,083,259 expiring July 31, 2007, respectively.
8. EXPENSE REDUCTIONS
The Funds have entered into expense offset arrangements with ESC and their cus-
todian whereby credits realized as a result of uninvested cash balances were
used to reduce a portion of each Fund's related expenses. The assets deposited
with ESC and the custodian under these expense offset arrangements could have
been invested in income-producing assets. The Funds have also entered into
brokerage/service arrangements with specific brokers who paid a portion of the
Fund's expenses. The amount of expense reductions received by each Fund and the
impact of the total expense reductions on each Fund's expense ratio represented
as a percentage of its average daily net assets were as follows:
<TABLE>
<CAPTION>
Expense Total
Offset Brokerage Expense % of Average
Arrangements Transactions Reductions Daily Net Assets
-----------------------------------------------------
<S> <C> <C> <C> <C>
Blue Chip Fund.. $22,308 $2,169 $24,477 0.00%
Equity Income
Fund........... 6,049 1,640 7,689 0.01%
Growth and
Income Fund.... 36,672 0 36,672 0.00%
Income and
Growth Fund.... 32,805 0 32,805 0.00%
Small Cap Value
Fund........... 9,207 723 9,930 0.01%
Utility Fund.... 12,751 0 12,751 0.01%
Value Fund...... 43,140 0 43,140 0.01%
</TABLE>
9. DEFERRED TRUSTEES' FEES
Each Independent Trustee of each 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 Funds. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Fund's Trustees' fees and
expenses. At the election of the Trustees, the deferral account will be paid in
one lump sum or in quarterly installments for up to ten years.
10. FINANCING AGREEMENTS
On July 27, 1999, certain Evergreen Funds and a group of banks (the "Lenders")
entered into a credit agreement. Under this agreement, the Lenders provide an
unsecured revolving credit commitment in the aggregate amount of $1.050 bil-
lion. The credit facility is allocated, under the terms of the financing agree-
ment, among the Lenders. The credit facility is accessed by the Funds for tem-
porary or emergency purposes to fund the redemption of their shares or as gen-
eral working capital as permitted by each Fund's borrowing restrictions.
Borrowings under this facility bear interest at 0.75% per annum above the Fed-
eral Funds rate (1.50% per annum above the Federal Funds rate during the period
from and including December 1, 1999 through and including January 31, 2000). A
commitment fee of 0.10% per annum is incurred on the average daily unused por-
tion of the revolving credit commitment. The commitment fee is allocated to all
Funds. For its assistance in arranging this financing agreement, First Union
Capital Markets Corp. was paid a one-time arrangement fee of $250,000. State
Street serves as paying agent for the funds, and as paying agent is entitled to
a fee of $20,000 per annum which is allocated to all of the Funds.
During the six months ended January 31, 2000, the Funds had no significant
borrowings under the agreements.
11. CONCENTRATION OF CREDIT RISK
Utility Fund invests a substantial portion of its assets in issuers in the
utilities industry. Therefore, it may be more affected by economic and politi-
cal developments in that industry than would be a comparable general equity
fund.
72
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
SUBSEQUENT EVENT
Effective February 1, 2000, the maximum deferred sales charge for Class C
shares is changed to 2.00%. Class C shareholders purchased on or after February
1, 2000 are subject to a 2.00% contingent deferred sales charge if such shares
are redeemed within one year after the month of purchase and a 1.00% contingent
deferred sales charge if such shares are redeemed within two years after the
month of purchase. Class C shares purchased prior to February 1, 2000 follow
the contingent deferred sales charge schedule at the time the shares were ini-
tially purchased.
DISTRIBUTIONS TO SHAREHOLDERS
The Utility Fund declared the following distribution from net investment in-
come:
<TABLE>
<CAPTION>
Record Date Payable Date Class A Class B Class C Class Y
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3/8/2000 3/10/2000 $0.028 $0.020 $0.020 $0.031
</TABLE>
These distributions are not reflected in the accompanying financial statements.
ADDITIONAL INFORMATION
Effective the close of business on March 10, 2000, Utility Fund acquired the
net assets and liabilities of Evergreen America's Utility Fund, an open-end
management investment company registered under the 1940 Act in exchange of
shares. The net assets were exchanged through a tax-free exchange for Class A
shares of Utility Fund. The acquired net assets consisted primarily of portfo-
lio securities with unrealized appreciation of $33,482,175. Aggregate net as-
sets of Utility Fund and Evergreen America's Utility Fund immediately before
the acquisition were $222,937,755 and $165,782,310, respectively. The aggregate
net assets of Utility Fund after the acquisition were $388,720,065.
73
<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
Connecticut Municipal Bond Fund
Florida Municipal Bond Fund
Florida High Income Municipal Bond Fund
Georgia Municipal Bond Fund
Maryland Municipal Bond Fund
New Jersey Municipal Bond Fund
North Carolina Municipal Bond Fund
Pennsylvania Municipal Bond Fund
South Carolina Municipal Bond Fund
Virginia Municipal Bond Fund
Tax-Free High Income Fund
Income
Capital Preservation and Income Fund
Short Intermediate Bond Fund
Intermediate Term Bond Fund
U.S. Government Fund
Quality Income Fund
Diversified Bond Fund
Strategic Income Fund
High Income Fund
High Yield Bond Fund
Balanced
Tax Strategic Foundation Fund
Foundation Fund
Capital Balanced Fund
Balanced 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
Select Equity Index Fund
Domestic Growth
Tax Strategic Equity Fund
Capital Growth Fund
Stock Selector Fund
Evergreen Fund
Strategic Growth Fund
Masters Fund
Omega Fund
Small Company Growth Fund
Growth Fund
Aggressive Growth Fund
Select Special Equity Fund
Global International
Global Leaders Fund
Perpetual Global Fund
International Growth Fund
Perpetual International 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
69761 540390 3/2000
---------------
PRSRT STD
[LOGO OF EVERGREEN FUNDS] U.S. POSTAGE
PAID
200 Berkeley Street HUDSON, MA
Boston, MA 02116 PERMIT NO. 19
---------------
<PAGE>
<PAGE>
Evergreen Income and Growth Fund
Pro Forma Combining
Schedule of Investments
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Income and Growth Fund Equity Income Fund Pro - Forma Combined
------------------------- ------------------------ --------------------------
Shares Market Value Shares Market Value Shares Market Value
------ ------------ ------ ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stocks 59.3%
Aerospace & Defense 0.5%
Cordant Technologies, Inc. 50,000 $1,653,125 50,000 $1,653,125
General Dynamics Corp. 81,900 3,859,538 81,900 3,859,538
------------ --------------
$5,512,663 $5,512,663
Automotive Equipment & Manufacturing 1.7%
Dana Corp. 555,900 13,063,650 555,900 13,063,650
Ford Motor Co. 48,000 $2,388,000 48,000 2,388,000
General Motors Corp. 30,000 2,413,125 30,000 2,413,125
Goodyear Tire & Rubber Co. 19,300 458,375 19,300 458,375
------------ ------------ --------------
13,522,025 4,801,125 18,323,150
Banks 8.0%
Amcore Financial, Inc. 221,500 4,513,062 221,500 4,513,062
AmSouth Bancorp 219,917 3,834,803 219,917 3,834,803
Astoria Financial Corp. 135,000 3,931,875 135,000 3,931,875
Bancwest Corp. 250,600 4,040,925 250,600 4,040,925
BankAmerica Corp. 40,000 1,937,500 40,000 1,937,500
/\ CB Bancshares, Inc. 100,000 2,825,000 100,000 2,825,000
CCB Financial Corp. 98,700 4,293,450 98,700 4,293,450
Charter One Financial, Inc. 58,000 1,127,375 58,000 1,127,375
Chase Manhattan Corp. 10,000 804,375 10,000 804,375
Comerica, Inc. 86,500 3,822,219 86,500 3,822,219
Commerce Bancshares, Inc. 131,250 4,040,039 131,250 4,040,039
Compass Bancshares, Inc. 30,000 594,375 30,000 594,375
First Charter Corp. 125,000 1,726,562 125,000 1,726,562
First Security Corp. 200,000 5,175,000 200,000 5,175,000
First Tennessee National Corp. 141,000 3,683,625 141,000 3,683,625
First Union Corp. ** 8,000 268,500 8,000 268,500
Firstar Corp. 104,550 2,496,131 104,550 2,496,131
FleetBoston Financial Corp. 63,000 1,980,563 63,000 1,980,563
Hibernia Corp., Cl. A 173,000 1,816,500 173,000 1,816,500
Interchange Financial Services Corp. 287,353 4,885,001 287,353 4,885,001
KeyCorp 148,000 3,108,000 148,000 3,108,000
Keystone Financial, Inc. 84,000 1,538,250 84,000 1,538,250
Mercantile Bankshares Corp. 20,000 582,500 20,000 582,500
North Fork Bancorp, Inc. 260,000 4,420,000 120,000 2,040,000 380,000 6,460,000
Pacific Century Financial Corp. 121,168 2,082,575 121,168 2,082,575
Peoples Heritage Financial Group, Inc. 310,430 4,559,441 310,430 4,559,441
PNC Bank Corp. 30,000 1,440,000 30,000 1,440,000
Republic Security Financial Corp. 335,730 2,517,975 335,730 2,517,975
Susquehanna Bancshares, Inc. 138,375 2,015,086 138,375 2,015,086
U.S. Bancorp 150,000 3,328,125 150,000 3,328,125
USBANCORP, Inc. 321,960 3,420,825 321,960 3,420,825
------------ ------------ --------------
76,974,213 11,875,444 88,849,657
Business Equipment & Services 0.1%
Dun & Bradstreet Corp. 25,000 629,688 35,000 881,563 60,000 1,511,251
------------ ------------ --------------
Capital Goods 1.9%
CNH Global NV 1,539,900 21,366,112 1,539,900 21,366,112
------------ --------------
Chemical & Agricultural Products 0.0%
Rohm & Haas Co. 5,000 211,250 5,000 211,250
------------ --------------
Consumer Products & Services 1.5%
Eastman Kodak Co. 15,000 928,125 15,000 928,125
Industrie Natuzzi SpA, ADR 220,000 2,447,500 220,000 2,447,500
Lancaster Colony Corp. 100,000 3,175,000 100,000 3,175,000
Mattel, Inc. 180,000 1,878,750 180,000 1,878,750
Newell Rubbermaid, Inc. 224,415 6,732,450 224,415 6,732,450
Service Corp. International 60,000 273,750 60,000 273,750
Tupperware Corp. 52,200 851,512 52,200 851,512
------------ ------------ --------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Income and Growth Fund Equity Income Fund Pro - Forma Combined
-------------------------- ---------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15,358,962 928,125 16,287,087
Electrical Equipment & Services 2.7%
Emerson Electric Co. 100,000 5,506,250 26,000 1,431,625 126,000 6,937,875
General Electric Co. 22,000 2,934,250 22,000 2,934,250
Hubbell, Inc., Cl. A 5,000 121,875 5,000 121,875
Hubbell, Inc., Cl. B 286,656 7,435,140 286,656 7,435,140
Thomas & Betts Corp. 400,000 12,175,000 400,000 12,175,000
------------ ------------ --------------
25,238,265 4,365,875 29,604,140
Finance & Insurance 2.0%
AMBAC Financial Group, Inc. 21,000 1,027,688 21,000 1,027,688
Citigroup, Inc. 28,000 1,608,250 28,000 1,608,250
Federal National Mortgage Assoc. 23,000 1,378,562 23,000 1,378,562
Greenpoint Financial Corp. 115,000 2,278,437 115,000 2,278,437
Hartford Financial Services Group, Inc 20,000 762,500 20,000 762,500
* John Hancock Financial Services, Inc. 32,300 557,175 32,300 557,175
Lehman Brothers Holdings, Inc. 10,000 715,000 10,000 715,000
Lincoln National Corp. 30,000 1,108,125 30,000 1,108,125
Nationwide Financial Services, Inc.,
Cl. A 40,000 995,000 40,000 995,000
Partnerre Ltd. 104,500 3,030,500 104,500 3,030,500
Travelers Property Casualty Corp.,
Cl. A 36,000 1,305,000 36,000 1,305,000
UnumProvident Corp. 104,536 2,796,338 104,536 2,796,338
XL Capital Ltd., Cl. A 79,000 3,564,875 25,000 1,128,125 104,000 4,693,000
------------ ------------ --------------
11,262,338 10,993,237 22,255,575
Food & Beverage Products 0.3%
Anheuser Busch Companies, Inc. 14,000 945,000 14,000 945,000
Conagra, Inc. 55,000 1,175,625 55,000 1,175,625
Ralston Purina Co. 43,000 1,206,688 43,000 1,206,688
------------ --------------
3,327,313 3,327,313
Healthcare Products & Services 6.8%
* Alza Corp. 15,000 535,313 15,000 535,313
American Home Products Corp. 285,000 13,412,812 30,000 1,411,875 315,000 14,824,687
Baxter International, Inc. 210,000 13,413,750 210,000 13,413,750
Beckman Coulter, Inc. 200,200 10,472,963 200,200 10,472,963
Bristol-Myers Squibb Co. 146,800 9,688,800 146,800 9,688,800
Johnson & Johnson 20,000 1,721,250 20,000 1,721,250
Lilly (Eli) & Co. 50,000 3,343,750 50,000 3,343,750
Merck & Co., Inc. 42,400 3,341,650 42,400 3,341,650
Pharmacia & Upjohn, Inc. 49,000 2,303,000 49,000 2,303,000
Shared Medical System Corp. 262,700 11,624,475 262,700 11,624,475
Warner-Lambert Co. 40,000 3,797,500 40,000 3,797,500
------------ ------------ --------------
65,754,050 9,313,088 75,067,138
Industrial Specialty Products & Services 0.1%
Federal Signal Corp. 80,000 1,255,000 80,000 1,255,000
------------ ------------ --------------
Information Services & Technology 0.9%
International Business Machines Corp. 22,000 2,468,125 22,000 2,468,125
Network Associates, Inc. 193,500 5,018,906 193,500 5,018,906
Seagate Technology 50,000 2,003,125 50,000 2,003,125
Sycamore Networks, Inc. 1,000 319,000 1,000 319,000
------------ ------------ --------------
7,341,031 2,468,125 9,809,156
Leisure & Tourism 0.3%
Gaylord Entertainment Co. 108,700 3,030,013 108,700 3,030,013
------------ ------------ --------------
Oil / Energy 5.5%
Atlantic Richfield Co. 23,000 1,771,000 36,000 2,772,000 59,000 4,543,000
BP Amoco Plc, ADR 21,172 1,137,995 21,172 1,137,995
Conoco, Inc., Cl. B 122,840 2,894,417 25,797 607,842 148,637 3,502,259
Exxon Mobil Corp. 39,604 3,306,934 39,604 3,306,934
Murphy Oil Corp. 314,400 18,038,700 314,400 18,038,700
Sunoco, Inc. 25,000 576,562 25,000 576,562
Texaco, Inc. 72,000 3,807,000 45,000 2,379,375 117,000 6,186,375
The Williams Companies, Inc. 582,000 22,552,500 582,000 22,552,500
Ultramar Diamond Shamrock Corp. 25,000 546,875 25,000 546,875
------------ ------------ --------------
50,201,612 10,189,588 60,391,200
Oil Field Services 0.3%
Nabors Industries, Inc. 110,344 3,268,941 110,344 3,268,941
------------ --------------
Paper & Packaging 0.5%
Consolidated Papers, Inc. 43,000 1,187,875 43,000 1,187,875
Kimberly-Clark Corp. 20,000 1,238,750 20,000 1,238,750
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Income and Growth Fund Equity Income Fund Pro - Forma Combined
-------------------------- ---------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Smurfit Container Corp. 100,000 1,981,250 100,000 1,981,250
Westvaco Corp. 40,000 1,097,500 40,000 1,097,500
------------ ------------ --------------
1,981,250 3,524,125 5,505,375
Printing, Publishing, Broadcasting &
Entertainment 0.6%
* CBS Corp. 30,000 1,749,375 30,000 1,749,375
Disney (Walt) Co. 10,000 363,125 10,000 363,125
Emmis Communications Corp. 40,000 2,622,500 40,000 2,622,500
New York Times Co., Cl. A 50,000 2,284,375 50,000 2,284,375
------------ ------------ --------------
5,270,000 1,749,375 7,019,375
Real Estate 2.8%
Boston Properties, Inc., REIT 35,000 1,050,000 35,000 1,050,000
Equity Office Properties Trust REIT 50,000 1,278,125 50,000 1,278,125
Equity Residential Properties Trust
REIT 124,900 5,183,350 26,000 1,079,000 150,900 6,262,350
First Industrial Realty Trust, Inc.
REIT 41,000 1,101,875 41,000 1,101,875
Gables Residential Trust REIT 495,900 10,754,831 495,900 10,754,831
Post Property, Inc. REIT 235,700 9,044,988 235,700 9,044,988
Spieker Properties, Inc. REIT 25,000 971,875 25,000 971,875
------------ ------------ --------------
24,983,169 5,480,875 30,464,044
Retailing & Wholesale 0.2%
* Costco Wholesale Corp. 11,000 538,313 11,000 538,313
Longs Drug Stores Corp. 30,000 645,000 30,000 645,000
* Staples, Inc. 33,000 785,812 33,000 785,812
------------ ------------ --------------
645,000 1,324,125 1,969,125
Telecommunication Services & Equipment 0.5%
Global Crossing, Ltd. 100,000 5,075,000 100,000 5,075,000
------------ --------------
Textile & Apparel 0.0%
V.F. Corp. 10,000 259,375 10,000 259,375
------------ --------------
Thrift Institutions 0.4%
First Essex Bancorp, Inc. 282,000 3,965,625 282,000 3,965,625
------------ --------------
Transportation 0.7%
Burlington Northern Santa Fe Corp. 40,000 962,500 40,000 962,500
Union Pacific Corp. 137,000 5,480,000 35,000 1,400,000 172,000 6,880,000
------------ ------------ --------------
5,480,000 2,362,500 7,842,500
Utilities - Electric 15.1%
Central & South West Corp. 500,000 10,093,750 500,000 10,093,750
Cinergy Corp. 400,000 9,950,000 400,000 9,950,000
Constellation Energy Group, Inc. 45,000 1,355,625 45,000 1,355,625
DPL, Inc. 50,000 959,375 50,000 959,375
Duke Power Co. 399,500 23,071,125 23,000 1,328,250 422,500 24,399,375
FirstEnergy Corp. 400,000 9,100,000 400,000 9,100,000
FPL Group, Inc. 239,000 10,082,812 239,000 10,082,812
GPU, Inc. 171,900 4,985,100 171,900 4,985,100
LG&E Energy Corp. 215,524 3,663,908 50,000 850,000 265,524 4,513,908
MDU Resources Group, Inc. 230,000 4,556,875 230,000 4,556,875
New Century Energies, Inc. 200,000 5,787,500 200,000 5,787,500
Northeast Utilities 40,000 820,000 40,000 820,000
PP&L Resources, Inc. 181,700 4,213,169 181,700 4,213,169
Public Service Co. of New Mexico 40,000 635,000 40,000 635,000
Scana Corp. 630,000 17,128,125 630,000 17,128,125
Sempra Energy 543,000 10,079,438 543,000 10,079,438
Southern Co. (b) 800,000 20,500,000 44,000 1,127,500 844,000 21,627,500
Teco Energy, Inc. (b) 40,000 785,000 40,000 785,000
Texas Utilities Co. 280,000 9,905,000 25,000 884,375 305,000 10,789,375
TNP Enterprises, Inc. 150,200 6,195,750 150,200 6,195,750
Wisconsin Energy Corp. 448,400 8,855,900 448,400 8,855,900
------------ ------------ --------------
158,803,452 8,110,125 166,913,577
Utilities - Gas 2.4%
Keyspan Corp. 401,900 9,419,531 401,900 9,419,531
Peoples Energy Corp. 391,300 12,228,125 391,300 12,228,125
Piedmont Natural Gas Co., Inc. 163,100 4,648,350 163,100 4,648,350
------------ --------------
26,296,006 26,296,006
Utilities - Telephone 3.6%
AT&T Corp. 149,655 7,894,301 25,000 1,318,750 174,655 9,213,051
Bell Atlantic Corp. 55,000 3,406,562 55,000 3,406,562
BellSouth Corp. 35,000 1,647,187 35,000 1,647,187
Broadwing, Inc. 50,000 1,900,000 50,000 1,900,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Income and Growth Fund Equity Income Fund Pro - Forma Combined
------------------------ ----------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
GTE Corp. 250,000 18,328,125 15,000 1,099,688 265,000 19,427,813
SBC Communications, Inc. 44,744 1,929,585 44,744 1,929,585
U.S. West, Inc. 35,000 2,327,500 35,000 2,327,500
------------ ------------ --------------
28,122,426 11,729,272 39,851,698
------------ ------------ --------------
Total Common Stocks 561,596,216 93,635,130 655,231,346
(pro forma combined cost $651,002,201) ------------ ------------ --------------
Convertible Preferred 25.5%
Advertising & Related Services 0.9%
Snyder Strypes Trust 395,000 9,529,375 395,000 9,529,375
------------ --------------
Aerospace & Defense 1.3%
Loral Space & Communications
6.00%, 11/01/2006 286,000 14,925,768 286,000 14,925,768
------------ --------------
Banks 0.8%
National Australia Bank, Ltd.
7.875%, Series UNIT 210,000 5,368,125 210,000 5,368,125
WBK Trust
10.00%, STRYPES 116,200 3,609,463 116,200 3,609,463
(exchangeable for Westpac Banking
Corp. common stock)
------------ --------------
8,977,588 8,977,588
Chemical & Agricultural Products 0.8%
Hercules Trust II
6.50%, 6/30/2029 15,000 9,008,445 15,000 9,008,445
------------ --------------
Communication Systems & Services 5.2%
McLeod USA, Inc., Cl. A 3,000 1,725,609 3,000 1,725,609
MediaOne Group, Inc. PIES
7.00% 11/2/2000 218,700 11,263,050 218,700 11,263,050
Metromedia Fiber Decs Trust VI 330,000 19,965,000 330,000 19,965,000
Qwest Trends Trust
5.75%, 144A 380,000 24,890,000 380,000 24,890,000
------------ ------------ --------------
56,118,050 1,725,609 57,843,659
Consumer Products & Services 0.9%
Newell Financial Trust I
5.25% 12/01/2027 100,000 3,937,500 100,000 3,937,500
Tribune Co. (exchangeable for Mattel,
Inc. common stock)
6.25%, 08/15/2001 460,000 6,181,250 460,000 6,181,250
------------ --------------
10,118,750 10,118,750
Diversified Companies 0.8%
Ingersoll Rand Co.
6.75%, PRIDES 400,000 9,275,000 400,000 9,275,000
------------ --------------
Electronic Equipment & Services 1.0%
Pioneer Standard Electronics, Inc.
6.75%, 3/31/2028 205,000 10,557,500 205,000 10,557,500
------------ --------------
Finance & Insurance 0.6%
American General Corp.
$3.00, Series A, MIPS 20,000 1,483,750 20,000 1,483,750
St. Paul Capital
6.00%, MIPS 100,000 5,500,000 100,000 5,500,000
------------ --------------
6,983,750 6,983,750
Food & Beverage Products 0.8%
Wendys Financing I
5.00%, Series A, TECONS 200,000 9,000,000 200,000 9,000,000
------------ --------------
Healthcare Products & Services 0.1%
McKesson Financing Trust
5.00%, 6/01/2027 30,000 1,091,250 30,000 1,091,250
------------ --------------
Independent Power Producers 2.0%
AES Trust III 250,000 16,265,625 250,000 16,265,625
Calpine Capital Trust 75,960 5,469,120 75,960 5,469,120
------------ --------------
21,734,745 21,734,745
Oil/Energy 0.3%
Callon Petroleum Co.
8.50%, Series A 95,000 2,778,750 95,000 2,778,750
------------ --------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Income and Growth Fund Equity Income Fund Pro - Forma Combined
------------------------ ----------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paper & Packaging 0.1%
International Paper Capital Trust 30,000 1,462,500 30,000 1,462,500
------------ --------------
Printing, Publishing, Broadcasting &
Entertainment 1.2%
Houston Industries, Inc.
7.00%, ACES (exchangeable for
Time Warner, Inc. common stock) 92,000 12,259,000 92,000 12,259,000
Pegasus Communications Corp. 8,000 820,000 8,000 820,000
------------ ------------ --------------
12,259,000 820,000 13,079,000
Retailing & Wholesale 1.3%
CVS Automatic Common Exchange Security 114,800 7,390,250 114,800 7,390,250
Merrill Lynch & Co., Inc.
(exchangeable for Dollar General
Corp. common stock) 8.50% 5/15/2002 195,000 6,690,937 195,000 6,690,937
------------ --------------
14,081,187 14,081,187
Telecommunication Services & Equipment 3.5%
Qualcomm Financial Trust I
5.75%, 3/01/2012 55,000 38,953,750 55,000 38,953,750
------------ --------------
Transportation 1.2%
CNF Trust I
5.00%, Ser. A, TECONS (exchangeable
for CNF Transportation, Inc. 88,700 4,102,375 88,700 4,102,375
common stock)
Union Pacific Capital Trust 216,800 8,617,800 216,800 8,617,800
4/1/2028 ------------ --------------
12,720,175 12,720,175
Utilities - Electric 2.7%
BNDES Participacoes S.A.
7.25%, 2/15/2001 45,000 855,000 45,000 855,000
Texas Utilities Co.
9.25%, PRIDES 238,600 10,438,750 238,600 10,438,750
Utilicorp United, Inc.
9.75% 11/16/2002 800,000 18,550,000 800,000 18,550,000
------------ --------------
29,843,750 29,843,750
------------ ------------ --------------
Total Convertible Preferred 279,419,333 2,545,609 281,964,942
(pro forma combined cost $248,029,399) ------------ ------------ --------------
Convertible Debentures 6.4%
Advertising & Related Services 0.3%
Young And Rubicam Inc. 3,000,000 2,988,750 3,000,000 2,988,750
3.00%, 1/15/2005 ------------ --------------
Electronic Equipment & Services 0.2%
Lattice Semiconductor Corp. 1,500,000 2,148,750 1,500,000 2,148,750
4.75%, 11/1/2006 ------------ --------------
Information Services & Technology 1.3%
12 Technologies, Inc. 2,500,000 3,550,000 2,500,000 3,550,000
5.25%, 12/15/2006
Excite At Home 4,000,000 3,435,000 4,000,000 3,435,000
4.75%, 12/15/2006
Rational Software Corp. 2,000,000 2,000,000 2,000,000 2,000,000
5.00%, 2/1/2007
Usinternetworking, Inc. 3,000,000 5,598,750 3,000,000 5,598,750
7.00%, 11/1/2004
------------ --------------
14,583,750 14,583,750
Printing, Publishing, Broadcasting &
Entertainment 1.0%
Exodus Communications, Inc. 4,000,000 6,950,000 4,000,000 6,950,000
4.75%, 7/15/2008
Mail Common, Inc. 4,000,000 3,865,000 4,000,000 3,865,000
7.00%, 2/15/2005
------------ --------------
10,815,000 10,815,000
Telecommunication Services & Equipment 3.6%
American Tower Corp. 12,000,000 19,830,000 12,000,000 19,830,000
6.25%, 10/15/2009
Level 3 Communications, Inc. 10,000,000 19,100,000 10,000,000 19,100,000
6.00%, 9/15/2009
Orbital Sciences Corp. 1,175,000 998,750 1,175,000 998,750
5.00%, 10/1/2002 ------------ --------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Income and Growth Fund Equity Income Fund Pro - Forma Combined
------------------------ ---------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
39,928,750 39,928,750
------------ --------------
Total Convertible Debentures 70,465,000 70,465,000
(pro forma combined cost $46,869,750) ------------ --------------
CORPORATE BONDS 0.1%
Banks 0.1%
NationsBank Corp. 1,000,000 968,993 1,000,000 968,993
6.50%, 8/15/2003
------------ --------------
Total Corporate Bonds 968,993 968,993
(pro forma combined cost $1,012,370) ------------ --------------
U.S. Government & Agency Obligations 5.1%
Government Agency Notes & Bonds 4.4%
Federal Farm Credit Bank 2,000,000 1,627,446 2,000,000 1,627,446
5.75%, 12/7/2028
Federal Home Loan Bank
5.375%, 10/6/2003 2,000,000 1,882,600 2,000,000 1,882,600
6.532%, 12/28/2007 2,000,000 1,868,188 2,000,000 1,868,188
------------ --------------
3,750,788 3,750,788
Federal Home Loan Mortgage Corp.
6.54%, 12/10/2007 2,000,000 1,873,756 2,000,000 1,873,756
6.542%, 3/19/2008 2,000,000 1,865,026 2,000,000 1,865,026
7.585%, 9/19/2006 2,000,000 1,969,188 2,000,000 1,969,188
7.865%, 8/8/2011 2,000,000 1,940,208 2,000,000 1,940,208
------------ --------------
7,648,178 7,648,178
Federal National Mortgage
Association
5.65%, 2/22/2028 5,000,000 4,021,990 5,000,000 4,021,990
6.00%, 1/14/2005 1,850,000 1,751,282 1,850,000 1,751,282
6.08%, 9/1/2028 4,000,000 3,416,108 4,000,000 3,416,108
6.10%, 1/26/2005 2,215,000 2,103,413 2,215,000 2,103,413
6.16%, 1/23/2008 3,000,000 2,766,099 3,000,000 2,766,099
6.24%, 1/14/2008 2,000,000 1,848,920 2,000,000 1,848,920
6.32%, 3/3/2008 3,000,000 2,788,698 3,000,000 2,788,698
6.41%, 3/8/2006 1,000,000 957,613 1,000,000 957,613
6.42%, 2/12/2008 5,000,000 4,664,925 5,000,000 4,664,925
6.46%, 1/1/2008 2,000,000 1,869,434 2,000,000 1,869,434
6.52%, 3/5/2008 4,000,000 3,741,280 4,000,000 3,741,280
6.875%, 9/24/2012 2,355,000 2,201,998 2,355,000 2,201,998
7.28%, 5/23/2007 3,000,000 2,904,489 3,000,000 2,904,489
------------ --------------
35,036,249 35,036,249
U.S. Treasury Bonds 0.7%
U.S. Treasury Bonds
7.125%, 2/15/2023 1,500,000 1,581,563 1,500,000 1,581,563
7.25%, 8/15/2022 6,000,000 6,407,820 6,000,000 6,407,820
------------ ------------ --------------
1,581,563 6,407,820 7,989,383
Total U.S. Government & Agency ------------ ------------ --------------
Obligations 49,644,224 6,407,820 56,052,044
(pro forma combined cost $60,277,253) ------------ ------------ --------------
Mutual Fund Shares 0.1%
Navigator Prime Portfolio (c) 1,176,336 1,176,336 1,176,336 1,176,336
------------ --------------
Total Mutual Fund Shares 1,176,336 1,176,336
(pro forma combined cost $1,176,336) ------------ --------------
Short-Term Investments 2.6%
Repurchase Agreements 2.6%
Evergreen Joint Repurchase Agreement 2,866,000 2,866,000 2,866,000 2,866,000
5.72%, 2/1/2000 (a)
State Street Repurchase Agreement
5.63%, 2/1/2000 (a) 26,025,000 26,025,000 26,025,000 26,025,000
------------ ------------ --------------
Total Short-Term Investments 26,025,000 2,866,000 28,891,000
(pro forma combined cost $28,891,000) ------------ ------------ --------------
------------ ------------ --------------
Total Investments 988,118,766 106,630,895 99.0% 1,094,749,661
------------ ------------ --------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Income and Growth Fund Equity Income Fund Pro - Forma Combined
------------------------ ----------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(pro forma combined cost $1,037,258,309)
Other Assets and Liabilities - net 11,254,071 47,922 1.0% 11,301,993
------------ ------------ --------------
Net Assets $999,372,837 $106,678,817 100.0% $1,106,051,654
============ ============ ===== ==============
</TABLE>
* Non-income producing security.
144A - Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended. These securities have been
determined to be liquid under the guidelines approved by the Board of
Trustees.
/\ - Investment in a non-controlled affiliate. The Income and Growth Fund owns
over 5% of the outstanding voting shares of CBBancshares, Inc. The
Fund has a cost basis of $2,954,312 in the issue as of January 31,
2000.
* - At January 31, 2000, the Income and Growth Fund owned 8,000 shares of
common stock of First Union Corp at a cost of $106,108. These shares
were acquired by the Fund through a merger with another investment
company sub-advised by Lieber & Company. The previous holder acquired
these shares prior to the acquisition of the adviser and Lieber &
Company by First Union.
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at January
31, 2000.
(b) All or a portion of this security is on loan.
(c) Represents investment of cash collateral received for securities on loan.
Summary of Abbreviations:
ACES - Automatically Convertible Equity Securities
ADR - American Depository Receipt
MIPS - Monthly Income Preferred Shares
PIES - Premium Income Exchangeable Securities
PRIDES - Preferred Redeemable Increased Dividend Equity Securities
REIT - Real Estate Investment Trust
STRYPES - Structured Yield Product Exchangeable for Stock
TECONS - Term Convertible Shares
See Notes to Pro Forma Combining Financial Statements
<PAGE>
Evergreen Income and Growth Fund
Pro Forma Combining
Statement of Assets and Liabilities
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Income and Growth Equity Income Pro Forma
Fund Fund Adjustments Combined
--------------- --------------- ------------- -------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Identified cost of securities $ 943,995,380 $ 93,262,929 $ 1,037,258,309
Net unrealized gains on securities 44,123,386 13,367,966 57,491,352
- ----------------------------------------------------------------------------------------------------------------------------
Market value of securities 988,118,766 106,630,895 1,094,749,661
Cash 0 108 108
Receivable for securities sold 24,887,708 1,787,464 26,675,172
Receivable for Fund shares sold 113,680 17,720 131,400
Dividends and interest receivable 4,102,313 377,945 4,480,258
Prepaid expenses and other assets 41,891 99,587 141,478
- ----------------------------------------------------------------------------------------------------------------------------
Total assets 1,017,264,358 108,913,719 1,126,178,077
- ----------------------------------------------------------------------------------------------------------------------------
Liabilities
Payable for securities purchased 15,011,608 549,100 15,560,708
Payable for Fund shares redeemed 1,760,226 386,597 2,146,823
Payable for securities on loan 0 1,176,336 1,176,336
Advisory fee payable 703,581 47,592 751,173
Distribution Plan expenses payable 64,148 57,395 121,543
Due to other related parties 80,710 13,085 93,795
Accrued expenses and other liabilities 271,248 4,797 276,045
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 17,891,521 2,234,902 20,126,423
- ----------------------------------------------------------------------------------------------------------------------------
Net assets $ 999,372,837 $ 106,678,817 $ 1,106,051,654
- ----------------------------------------------------------------------------------------------------------------------------
Net assets represented by
Paid-in capital $ 922,043,629 $ 89,415,809 1,011,459,438
Undistributed (overdistributed) net
investment income (5,895,327) 119,977 (5,775,350)
Accumulated net realized gains or losses
on securities and foreign currency
related transactions 39,135,705 3,775,065 42,910,770
Net unrealized gains on securities
and foreign currency related
transactions 44,088,830 13,367,966 57,456,796
- ----------------------------------------------------------------------------------------------------------------------------
Total net assets $ 999,372,837 $ 106,678,817 $ 1,106,051,654
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consists of
Class A $ 36,138,486 $ 38,680,469 74,818,955
Class B 157,782,029 55,955,938 213,737,967
Class C 2,325,530 11,937,502 14,263,032
Class Y 803,126,792 104,908 803,231,700
- ----------------------------------------------------------------------------------------------------------------------------
Total net assets $ 999,372,837 $ 106,678,817 $ 1,106,051,654
- ----------------------------------------------------------------------------------------------------------------------------
Shares outstanding
Class A 1,652,578 2,462,451 (693,628)(1) 3,421,401
Class B 7,277,199 3,586,914 (1,006,126)(1) 9,857,987
Class C 107,265 764,049 (213,431)(1) 657,883
Class Y 36,708,037 6,699 (1,904)(1) 36,712,832
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value per share
Class A $ 21.87 $ 15.71 $ 21.87
- ----------------------------------------------------------------------------------------------------------------------------
Class A - Offering price (based on
sales charge of 4.75%) $ 22.96 $ 16.49 $ 22.96
- ----------------------------------------------------------------------------------------------------------------------------
Class B $ 21.68 $ 15.60 $ 21.68
- ----------------------------------------------------------------------------------------------------------------------------
Class C $ 21.68 $ 15.62 $ 21.68
- ----------------------------------------------------------------------------------------------------------------------------
Class Y $ 21.88 $ 15.66 $ 21.88
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Adjustment represents change in shares outstanding as a result of merger
transaction.
See Notes to Pro Forma Combining Financial Statements.
<PAGE>
Evergreen Income and Growth Fund
Pro Forma Combining
Statement of Operations
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Income and Growth Equity Income Pro Forma Pro Forma
Fund Fund Adjustments Combined
---------------- -------------- --------------- -----------------
<S> <C> <C> <C> <C>
Investment income
Dividends (net of pro forma combined foreign $ 44,589,971 $ 3,660,459 $ - $ 48,250,430
withholding taxes of $870,232)
Interest 4,971,078 383,623 - 5,354,701
- -------------------------------------------------------------------------------------------------------------------------------
Total investment income 49,561,049 4,044,082 - 53,605,131
- -------------------------------------------------------------------------------------------------------------------------------
Expenses
Advisory fee 9,182,203 878,949 315,008 (1) 10,376,161
Distribution Plan expenses 1,175,772 1,043,945 - 2,219,717
Administrative services fees 80,710 29,864 - 110,574
Transfer agent fee 1,686,177 240,880 - 1,927,058
Trustees' fees and expenses 15,012 2,107 - 17,119
Printing and postage expenses 25,473 18,733 - 44,206
Custodian fee 260,068 41,207 - 301,275
Registration and filing fees 45,527 36,901 (36,901)(2) 45,527
Professional fees 25,139 16,835 (16,835)(3) 25,139
Other 71,364 - - 71,364
- -------------------------------------------------------------------------------------------------------------------------------
Total Expenses 12,567,446 2,309,422 261,272 15,138,140
Less: Fee credits (68,848) (14,691) - (83,539)
- -------------------------------------------------------------------------------------------------------------------------------
Net Expenses 12,498,598 2,294,731 261,272 15,054,601
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 37,062,451 1,749,351 (261,272) 38,550,530
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains or losses
on securities and foreign currency
related transactions
Net realized gains or losses on:
Securities 66,152,958 12,617,119 - 78,770,077
Foreign currency related transactions (1,128,823) - - (1,128,823)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gains or losses on securities
foreign currency related transactions 65,024,135 12,617,119 - 77,641,254
- -------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized gains or losses
on securities and foreign currency
related transactions 8,940,765 (16,232,377) - (7,291,612)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions 73,964,900 (3,615,258) - 70,349,642
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 111,027,351 $ (1,865,907) $ (261,272) $ 108,900,172
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Adjustment to reflect advisory fees for the combined fund based on the
advisory fee rates in place for the acquiring fund during the period.
(2) Adjustment to reflect the reduction in registration and filing fees of the
acquired fund.
(3) Adjustment to reflect the reduction in audit fees of the acquired fund.
See Notes to Pro Forma Combining Financial Statements.
<PAGE>
Evergreen Income and Growth Fund
Notes to Pro Forma Combining Financial Statements
January 31, 2000 (Unaudited)
1. Basis of Combination - The Pro Forma Combining Statement of Assets and
Liabilities, including the Pro Forma Combining Schedule of Investments and
the related Pro Forma Combining Statement of Operations ("Pro Forma
Statements"), reflect the accounts of Evergreen Income and Growth Fund
("Income and Growth Fund") and Evergreen Equity Income Fund ("Equity Income
Fund") at January 31, 2000 and for the respective periods then ended.
The Pro Forma Statements give effect to the proposed Agreement and Plan of
Reorganization (the "Reorganization") to be submitted to shareholders of
Equity Income Fund. The Reorganization provides for the acquisition of all
assets and the identified liabilities of Equity Income Fund by Income and
Growth Fund, in exchange for Class A, Class B, Class C and Class Y shares
of Income and Growth Fund. Thereafter, there will be a distribution of
Class A, Class B, Class C and Class Y shares of Income and Growth Fund to
the respective shareholders of Equity Income Fund in liquidation and
subsequent termination thereof. As a result of the Reorganization, the
shareholders of Equity Income Fund will become the owners of that number of
full and fractional Class A, Class B, Class C and Class Y shares of Income
and Growth Fund having an aggregate net asset value equal to the aggregate
net asset value of their shares of Equity Income Fund as of the close of
business immediately prior to the date that Equity Income Fund net assets
are exchanged for Class A, Class B, Class C and Class Y shares of Income
and Growth Fund.
The Pro Forma Statements reflect the expenses of each Fund in carrying out
its obligations under the Reorganization as though the merger occurred at
the beginning of the respective periods presented.
The information contained herein is based on the experience of each Fund
for the respective periods then ended and is designed to permit
shareholders of the consolidating mutual funds to evaluate the financial
effect of the proposed Reorganization. The expenses of Equity Income Fund
in connection with the Reorganization (including the cost of any proxy
soliciting agents) will be borne by First Union National Bank of North
Carolina. It is not anticipated that the securities of the combined
portfolio will be sold in significant amounts in order to comply with the
policies and investment practices of Income and Growth Fund.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Fund incorporated by reference in the
Statement of Additional Information.
2. Shares of Beneficial Interest - The Pro Forma net asset values per share
assume the issuance of Class A, Class B, Class C and Class Y shares of
Income and Growth Fund which would have been issued at January 31, 2000 in
connection with the proposed Reorganization. Shareholders of Equity Income
Fund would receive Class A, Class B, Class C and Class Y shares of Income
and Growth Fund based on conversion ratios determined on January 31, 2000.
The conversion ratios are calculated by dividing the net asset value of
Equity Income Fund by the net asset value per share of the respective class
of Income and Growth Fund.
3. Pro Forma Operations - The Pro Forma Combining Statement of Operations
assumes similar rates of gross investment income for the investments of
each Fund. Accordingly, the combined gross investment income is equal to
the sum of each Fund's gross investment income. Pro Forma operating
expenses include the actual expenses of the Funds adjusted to reflect the
expected expenses of the combined entity. The combined pro forma expenses
were calculated by determining the expense rates based on the combined
average assets of the two funds and applying those rates to the average
assets of the Income and Growth Fund for the twelve months ended January
31, 2000 and to the average net assets of the Equity Income Fund for the
twelve months ended January 31, 2000. The adjustments reflect those amounts
needed to adjust the combined expenses to these rates.
EVERGREEN EQUITY TRUST
PART C
OTHER INFORMATION
Item 15. Indemnification.
The response to this item is incorporated by reference to the sub- caption
"Liability and Indemnification of Trustees" under the caption "Information on
Shareholders' Rights" in Part A of this Registration Statement.
Item 16. Exhibits:
1. Declaration of Trust. Incorporated by reference to Evergreen Equity Trust's
Registration Statement on Form N-1A filed on October 8, 1997. Registration
No. 333-37453 ("Form N-1A Registration Statement")
2. Bylaws. Incorporated by reference to the Form N-1A Registration Statement.
3. Not applicable.
4. Agreement and Plan of Reorganization. Exhibit A to Prospectus contained in
Part A of this Registration Statement.
5. Declaration of Evergreen Equity Trust Articles II., III.6(c), IV.(3),
IV.(8), V., VI., VII., and VIII and ByLaws Articles II., III., and VIII.
6.(a)Investment Advisory Agreement between Evergreen Asset Management Corp. and
Evergreen Equity Trust. Incorporated by reference to Evergreen Equity
Trust's Post-Effective Amendment No. 4 filed on March 12, 1998.
Registration No. 333-36047.
6.(b)Sub-Advisory Agreement between Evergreen Asset Management Corp. and Lieber
& Company. Incorporated by reference to Evergreen Equity Trust's Post-
Effective Amendment No. 9 filed on October 1, 1998.
Registration No. 333-36047.
7.(a)Underwriting Agreement between Evergreen Distributor, Inc. and Evergreen
Equity Trust for Classes A, B, C and Y. Incorporated by reference to
Evergreen Equity Trust's Post-Effective Amendment No. 4 filed on March 12,
1998. Registration No. 333-36047.
7.(b)Specimen Copy of Dealer Agreement for Class A , Class B and Class C
shares used by Evergreen Distributor, Inc. Incorporated by reference
to the Form N-1A Registration Statement.
8. Form of Deferred Compensation Plan. Incorporated by reference to Evergreen
Equity Trust's Post-Effective Amendment No. 1 filed on November 10, 1997.
Registration No. 333-36047.
9. Agreement between State Street Bank and Trust Company and Evergreen Equity
Trust. Incorporated by reference to Evergreen Equity Trust's
Post-Effective Amendment No. 4 filed on March 12, 1998.
Registration No. 333-36047.
10. Rule 12b-1 Distribution Plans for Classes A, B and C. Incorporated by
reference to Evergreen Equity Trust's Post-Effective Amendment No. 4 filed
on March 12, 1998. Registration No. 333-36047.
11. Opinion and Consent of Sullivan & Worcester LLP. Filed herewith.
12. Tax Opinion and Consent of Sullivan & Worcester LLP. To be Filed by
Amendment.
13. Not applicable.
14. Consent of KPMG Peat Marwick LLP. Filed herewith.
15. Not applicable.
16. Powers of Attorney. Filed herewith.
17. Form of Proxy Card. Filed herewith.
Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus that is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by person who may be
deemed underwriters, in addition to the information called for by the other
items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a apart of an amendment to the
Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
Registration Statement for the securities offered therein, and the offering
of the securities at that time shall be deemed to be the initial bona fide
offering of them.
(3) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act the Trust has duly caused this Registration Statement to be signed
on its behalf by the undersigned, duly authorized, in the City of Boston, and
Commonwealth of Massachusetts, on the 11th day of April, 2000.
EVERGREEN EQUITY TRUST
By: /s/ William M. Ennis
----------------------
Name: William M. Ennis*
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 11th day of April, 2000.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/William M. Ennis /s/ Laurence B. Ashkin /s/ Charles A. Austin, III
- ---------------------------- ----------------------------- --------------------------------
William M. Ennis* Laurence B. Ashkin* Charles A. Austin III*
President Trustee Trustee
/s/ K. Dun Gifford /s/ Arnold H. Dreyfuss /s/ William Walt Pettit
- ---------------------------- ---------------------------- --------------------------------
K. Dun Gifford* Arnold H. Dreyfuss* William Walt Pettit*
Trustee Trustee Trustee
/s/Gerald M. McDonnell /s/ Thomas L. McVerry /s/ Michael S. Scofield
- ---------------------------- ----------------------------- --------------------------------
Gerald M. McDonell* Thomas L. McVerry* Michael S. Scofield*
Trustee Trustee Trustee
/s/ David M. Richardson /s/ Russell A. Salton, III MD /s/ Louis W. Moelchert, Jr.
- ---------------------------- ------------------------------ -------------------------------
David M. Richardson* Russell A. Salton, III MD* Louis W. Moelchert, Jr.*
Trustee Trustee Trustee
/s/ Richard J. Shima /s/ Richard K. Wagoner /s/ Leroy Keith, Jr.
- ---------------------------- ------------------------------ -------------------------------
Richard J. Shima* Richard K. Wagoner* Leroy Keith*
Trustee Trustee Trustee
/s/ Carol Kosel
- ----------------------------
Carol Kosel*
Treasurer (Principal Financial
and Accounting Officer)
*By: /s/ Beth K. Werths
- ----------------------------
Beth K. Werths
Attorney-in-Fact
</TABLE>
*Beth K. Werths, by signing her name hereto, does hereby sign this
document on behalf of each of the applicable above-named individuals pursuant to
powers of attorney duly executed by such persons.
INDEX TO EXHIBITS
EXHIBIT NO. EXHIBIT
11 Opinion and Consent of Sullivan & Worcester LLP
12 Consent of KPMG Peat Marwick LLP
16 Powers of attorney
17 Form of Proxy
SULLIVAN & WORCESTER LLP
1025 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
TELEPHONE: 202-775-8190
FACSIMILE: 202-293-2275
767 THIRD AVENUE ONE POST OFFICE SQUARE
NEW YORK, NEW YORK 10017 BOSTON, MASSACHUSETTS 02109
TELEPHONE: 212-486-8200 TELEPHONE: 617-338-2800
FACSIMILE: 212-758-2151 FACSIMILE: 617-338-2880
April 11, 2000
Evergreen Equity Trust
200 Berkeley Street
Boston, Massachusetts 02116
Ladies and Gentlemen:
We have been requested by the Evergreen Equity Trust, a Delaware
business trust with transferable shares (the "Trust") established under an
Agreement and Declaration of Trust dated September 18, 1997, as amended (the
"Declaration"), for our opinion with respect to certain matters relating to
Evergreen Income and Growth Fund (the "Acquiring Fund"), a series of the Trust.
We understand that the Trust is about to file a Registration Statement on Form
N-14 for the purpose of registering shares of the Trust under the Securities Act
of 1933, as amended (the "1933 Act"), in connection with the proposed
acquisition by the Acquiring Fund of all of the assets of Evergreen Equity
Income Fund (the "Acquired Fund"), a series of the Trust, in exchange solely for
shares of the Acquiring Fund and the assumption by the Acquiring Fund of the
identified liabilities of the Acquired Fund pursuant to an Agreement and Plan of
Reorganization, the form of which is included in the Form N-14 Registration
Statement (the "Plan").
We have, as counsel, participated in various business and other
proceedings relating to the Trust. We have examined copies, either certified or
otherwise proved to be genuine to our satisfaction, of the Trust's Declaration
and By-Laws, and other documents relating to its organization, operation, and
proposed operation, including the proposed Plan and we have made such other
investigations as, in our judgment, are necessary or appropriate to enable us to
render the opinion expressed below.
<PAGE>
Evergreen Fixed Income Trust
April 11, 2000
Page 2
We are admitted to the Bars of The Commonwealth of Massachusetts and
the District of Columbia and generally do not purport to be familiar with the
laws of the State of Delaware. To the extent that the conclusions based on the
laws of the State of Delaware are involved in the opinion set forth herein
below, we have relied, in rendering such opinions, upon our examination of
Chapter 38 of Title 12 of the Delaware Code Annotated, as amended, entitled
"Treatment of Delaware Business Trusts" (the "Delaware business trust law") and
on our knowledge of interpretation of analogous common law of The Commonwealth
of Massachusetts.
Based upon the foregoing, and assuming the approval by shareholders of
the Acquired Fund of certain matters scheduled for their consideration at a
meeting presently anticipated to be held on July 14, 2000, it is our opinion
that the shares of the Acquiring Fund currently being registered, when issued in
accordance with the Plan and the Trust's Declaration and By-Laws, will be
legally issued, fully paid and non-assessable by the Trust, subject to
compliance with the 1933 Act, the Investment Company Act of 1940, as amended and
applicable state laws regulating the offer and sale of securities.
We hereby consent to the filing of this opinion with and as a part of
the Registration Statement on Form N-14 and to the reference to our firm under
the caption "Legal Matters" in the Prospectus/Proxy Statement filed as part of
the Registration Statement. In giving such consent, we do not thereby admit that
we come within the category of persons whose consent is required under Section 7
of the 1933 Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/SULLIVAN & WORCESTER LLP
---------------------------
SULLIVAN & WORCESTER LLP
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Evergreen Equity Trust
We consent to the use of our report, dated September 3, 1999, for Evergreen
Income and Growth Fund and Evergreen Equity Income Fund each a portfolio of
Evergreen Equity Trust, incorporated herein by reference and to the references
to our firm under the caption "FINANCIAL STATEMENTS AND EXPERTS" in the
Prospectus/Proxy Statement.
/s/KPMG LLP
Boston, Massachusetts
April 10, 2000
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter a
Trustee and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
December 17, 1999.
Signature Title
/s/Richard Wagoner Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter a
Trustee and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
December 17, 1999.
Signature Title
/s/Arnold H. Dreyfuss Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter the
Treasurer and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
15, 2000.
Signature Title
/s/Carol A. Kosel Treasurer
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter the
President and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
15, 2000.
Signature Title
/s/William M. Ennis President
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter a
Trustee and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
December 17, 1999.
Signature Title
/s/Leroy Keith, Jr. Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Charles A. Austin III Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/K. Dun Gifford Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Laurence B. Ashkin Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/William W. Pettit Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Gerald M. McDonnell Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Thomas L. McVerry Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/David M. Richardson Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Richard J. Shima Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Michael S. Scofield Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Russell A. Salton, III M.D. Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter a
Trustee and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
December 17, 1999.
Signature Title
/s/Louis W. Moelchert, Jr. Trustee
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE TODAY!
Please detach at perforation before mailing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
EVERGREEN EQUITY INCOME FUND,
a series of Evergreen Equity Trust
PROXY FOR THE MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 14, 2000
The undersigned, revoking all Proxies heretofore given, hereby appoints
Maureen E. Towle, Sally E. Ganem, Catherine E. Foley and Beth K. Werths or any
of them as Proxies of the undersigned, with full power of substitution, to vote
on behalf of the undersigned all shares of Evergreen Equity Income Fund, a
series of Evergreen Equity Trust ("Equity Income Fund"), that the undersigned is
entitled to vote at the special meeting of shareholders of Social Principles to
be held at 2:00 p.m. on July 14, 2000 at the offices of the Evergreen Funds, 200
Berkeley Street, 26th Floor, Boston, Massachusetts 02116 and at any adjournments
thereof, as fully as the undersigned would be entitled to vote if personally
present.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS PROXY. If joint
owners, EITHER may sign this Proxy. When signing as attorney, executor,
administrator, trustee, guardian, or custodian for a minor, please give your
full title. When signing on behalf of a corporation or as a partner for a
partnership, please give the full corporate or partnership name and your title,
if any.
Date , 2000
----------------------------------------
----------------------------------------
Signature(s) and Title(s), if applicable
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF EVERGREEN
EQUITY TRUST. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO
THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSALS. THE SHARES REPRESENTED HEREBY
WILL BE VOTED AS INDICATED OR FOR THE PROPOSALS IF NO CHOICE IS INDICATED. THE
BOARD OF TRUSTEES OF EVERGREEN SELECT EQUITY TRUST RECOMMENDS A VOTE FOR THE
PROPOSALS. PLEASE MARK YOUR VOTE BELOW IN BLUE OR BLACK INK. DO NOT USE RED INK.
EXAMPLE: X
1. To approve an Agreement and Plan of Reorganization whereby Evergreen
Income and Growth Fund, a series of Evergreen Equity Trust, will
(i) acquire all of the assets of Equity Income Fund in exchange for shares of
Evergreen Income and Growth Fund; and (ii) assume the identified liabilities
of Equity Income Fund, as substantially described in the accompanying
Prospectus/Proxy Statement.
---- FOR ---- AGAINST ---- ABSTAIN
2. To consider and vote upon such other matters as may properly come before
said meeting or any adjournments thereof.
---- FOR ---- AGAINST ---- ABSTAIN
