<PAGE>
Annual Report
as of December 31, 1999
Evergreen
America's Utility Fund
[MUTUAL FUND SERVICE AWARD SEAL]
[GRAPHIC]
[LOGO OF EVERGREEN FUNDS]
<PAGE>
Table of Contents
Letter to Shareholders .................................................... 1
Fund at a Glance .......................................................... 2
Portfolio Manager Interview ............................................... 3
Financial Highlights ...................................................... 5
Schedule of Investments ................................................... 6
Statement of Assets and Liabilities ....................................... 8
Statement of Operations ................................................... 9
Statements of Changes in Net Assets ....................................... 10
Notes to Financial Statements ............................................. 11
Independent Auditors' Report .............................................. 15
Other Information (Unaudited) ............................................. 16
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 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: 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
----------------------
January 2000
[PHOTO]
William M. Ennis
President and CEO
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen America's Utility Fund annual report,
which covers the one-year period ended December 31, 1999.
We would like to take the opportunity to welcome you to the Evergreen Funds
family. Evergreen Funds is one of the nation's fastest growing investment
companies with over $80 billion in assets under management. We are dedicated to
providing shareholders the highest quality service and excellence in investment
management.
In October 1999, shareholders of America's Utility Fund approved a merger with
Evergreen Utility Fund and that merger will take place in March, 2000. We
believe this merger will offer you many advantages, including expert portfolio
management, exchangeability among more than 70 Evergreen funds, and professional
and courteous shareholder service from our 1999 Dalbar Mutual Fund Service Award
winning service company.
Evergreen Utility Fund will continue to be managed by Doris Kelley-Watkins and
Matt Finn, who have also been managing America's Utility Fund since June 1999.
The team manages Evergreen Utility Fund for total return--a combination of price
appreciation and current income--which is consistent with the objective of
America's Utility Fund.
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 needs and general information about Evergreen
Funds.
We believe that sound investing is about taking steps to meet your long-term
financial needs and goals. Evergreen Funds offers a broad mix of stock, bond and
money market funds that should make it simple for you to choose the most
appropriate for your portfolio.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
1
<PAGE>
EVERGREEN
America's Utility Fund
Fund at a Glance as of December 31, 1999
"We plan to take advantage of the global telecommunications revolution because
we believe it offers growth potential very few other industries can match in the
current environment."
Portfolio Management
-------------------------------------------------------
[PHOTO] [PHOTO]
Doris Kelley-Watkins Matthew D. Finn, CFA
Tenure: June 1999 Tenure: June 1999
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE 1
- --------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 12/31/1999.
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 investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Index returns do not reflect
expenses, which have been deducted from the Fund's return.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS 2
- --------------------------------------------------------------------------------
Portfolio Inception Date: 5/5/1992
Average Annual Returns
1 year 5.81%
3 years 14.64%
5 years 16.02%
Since Portfolio Inception 11.59%
12 month income dividends per share $0.76
12 month capital gain distributions per share $2.37
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[GRAPH]
S & P 500 CPI S & P Utilities Utility Fund
5/31/92 10,000 10,000 10,000 10,000
12/31/92 10,157 10,673 10,855 11,141
12/31/93 10,437 11,749 11,822 12,627
12/31/94 10,716 11,904 10,284 10,973
12/31/95 10,988 16,378 13,878 14,517
12/31/96 11,353 20,138 13,620 15,309
12/31/97 11,546 26,857 16,154 18,884
12/31/98 11,732 34,531 17,785 21,797
12/31/99 12,054 41,801 16,452 21,424
Comparison of change in value of a $10,000 investment in Evergreen America's
Utility Fund, the Standard & Poor's Utility Index (S&P Utility), Standard &
Poor's 500 Index (S&P 500) and the Consumer Price Index (CPI).
The S&P Utility and the S&P 500 are unmanaged indices which do not include
transaction costs associated with buying and selling securities nor any
management fees. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
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 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.
2
<PAGE>
EVERGREEN
America's Utility Fund
Portfolio Manager Interview
How did the Fund perform?
For the twelve-month period ended December 31, 1999, Evergreen America's Utility
Fund had a total return of 5.81%. During the same twelve-month period, the
Standard & Poor's Utility Index and the Standard & Poor's 500 Index returned
- -8.88% and 21.04%, respectively. The median return of utility mutual funds was
15.82%, according to Lipper Inc., an independent monitor of mutual fund
performance.
Portfolio
Characteristics
---------------
Total Net Assets: $162,843,702
Number of Holdings 42
P/E Ratio 30.6x
Beta 0.40
What was the environment like for investing in utility stocks during the year?
It was quite difficult for traditional electric utility stocks and gas utility
stocks, but the telecommunications sector offered significant growth
opportunities.
Traditional electric and gas utility stocks are highly influenced by three
factors, all of which were negatives during 1999: 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 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.
While these conditions created a very unfavorable environment for electric and
gas utilities, telecommunications was a very different story. Other factors were
at work to create extraordinary growth opportunities and stock price
appreciation potential throughout the telecommunications industry. Technological
advances in communications and rising demand for communications services by both
business 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 operating companies and telecommunications equipment companies.
Top 5 Industries
----------------
(as a percentage of 12/31/1999 net assets)
Utilities-Electric 33.3%
Utilities-Telephone 27.7%
Communication Systems & Services 18.0%
Utilities-Gas 6.6%
Oil/Energy 4.0%
As a new portfolio management team that took responsibility for the Fund in late
June 1999, what have been your principal strategies?
It's important to understand that we manage for total return--a combination of
price appreciation and current income. That's how we have successfully managed
another fund, Evergreen Utility Fund, which will be acquiring Evergreen
America's Utility Fund in March 2000.
The America's Utility Fund had emphasized stocks of electric and gas utilities
that paid regular dividends and therefore provided above-average current income.
The twelve-month yield of 2.50% for the Fund compared
3
<PAGE>
EVERGREEN
America's Utility Fund
Portfolio Manager Interview
favorably with that of other funds within the utility fund classification, which
returned 1.76% for the same period, according to Lipper Inc. Since we took
responsibility of the Fund, we gradually lowered the emphasis on traditional gas
and electric utilities and raised the emphasis on telecommunications companies,
including service providers and equipment companies.
When we took over the Fund's management in late June, we started selling
electric utilities. We purchased both stocks and convertible securities in the
faster-growing telecommunications industry, positioning the Fund to take
advantage of the explosive growth in wire-based, wireless, and satellite
communications. We added names such as: AT&T, which is expanding from its
traditional long-distance base toward greater emphasis on all telecommunications
products and services; Qualcomm, a wireless equipment company; Frontier, a
wireless service operator; Sprint, a wireless and long-distance service
provider; Qwest, a long-distance operator; Media One Fibre, a fibre-optics
equipment company; and Loral, a satellite company. We also acquired stocks of
infrastructure companies like American Tower and Crown Castle, both of which
build and operate towers for wireless and satellite communications systems.
While we lowered our overall commitment to the electric industry, we did find
some growth opportunities, such as Calpine Corp, an independent power producer
that sells power to utilities and Consolidated Edison, the New York-based
utility whose stock was selling at a very attractive valuation in December. A
special situation that we found interesting was Niagara Mohawk, an electric
utility company in upstate New York that currently plans to sell its nuclear
power plants. We believe that when Niagara Mohawk completes its restructuring,
it could be an attractive company with high cash flows, low debt, healthy
earnings and dividend growth. Another attractive addition was Public Service
Enterprise Group, a company that is diversifying internationally even as it
remains the major electric utility provider of New Jersey.
Top 10 Holdings
---------------
(as a percentage of 12/31/1999 net assets)
Qualcomm Financial Trust I (5.75%, 3/01/2012) 6.4%
Sprint Corp. 4.1%
Enron Corp. 4.0%
SBC Communications, Inc. 3.9%
GTE Corp. 3.6%
Public Service Enterprise Group, Inc. 3.4%
Southern Co. 3.3%
Wisconsin Energy Corp. 2.9%
Loral Space & Communications
(6.00%, 11/01/2006) 2.9%
Telefonica de Espana SA de CV ADR 2.9%
What is your outlook?
Generally, 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 be flat. This would negatively affect electric and
gas utility stocks. Our investments in these companies will be selective, and
directed toward securities that may either provide above-average current income
for the portfolio or that may 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 because we believe it offers growth potential very
few other industries can match in the current environment.
Shareholders of America's Utility Fund have approved the merger with Evergreen
Utility Fund, scheduled to take place in March 2000. We believe the newly
combined Evergreen Utility Fund will be well positioned to take advantage of the
opportunities for total return among utility investments.
4
<PAGE>
EVERGREEN
America's Utility Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $31.12 $29.03 $25.07 $24.72 $19.50
------ ------ ------ ------ ------
Income from investment operations
Net investment income 0.66 0.76 0.92 0.98 0.96
Net realized and unrealized gains or
losses on securities 0.94 3.65 4.79 0.33 5.22
------ ------ ------ ------ ------
Total from investment operations 1.60 4.41 5.71 1.31 6.18
------ ------ ------ ------ ------
Distributions to shareholders from
Net investment income (0.76) (0.76) (0.96) (0.96) (0.96)
Net realized gains (2.37) (1.56) (0.79) 0 0
------ ------ ------ ------ ------
Total distributions (3.13) (2.32) (1.75) (0.96) (0.96)
------ ------ ------ ------ ------
Net asset value, end of period $29.59 $31.12 $29.03 $25.07 $24.72
------ ------ ------ ------ ------
Total return 5.81% 15.47% 23.31% 5.46% 32.30%
Ratios and supplemental data
Net assets, end of period (millions) $ 163 $ 168 $ 157 $ 144 $ 163
Ratios to average net assets
Expenses* 1.51% 1.31% 1.21% 1.27% 1.21%
Net investment income 2.21% 2.71% 3.46% 3.90% 4.40%
Portfolio turnover rate 67% 11% 26% 24% 28%
</TABLE>
* The ratio of expenses to average net assets excludes expense reductions.
See Notes to Financial Statements.
5
<PAGE>
EVERGREEN
America's Utility Fund
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 73.3%
Communication Systems & Services - 7.2%
20,000 * American Tower Systems Corp., Cl. A................ $ 611,250
70,000 Crown Castle International Corp. .................... 2,248,750
92,000 Decs Trust VI--Metromedia Fiber...................... 4,278,000
24,000 * Qwest Communications International, Inc. .......... 1,032,000
160,000 Teleglobe, Inc ...................................... 3,630,000
------------
11,800,000
------------
Independent Power Producers - 1.6%
40,000 * Calpine Corp. ..................................... 2,560,000
------------
Energy - 4.0%
148,000 Enron Corp. ......................................... 6,567,500
------------
Utilities - Electric - 31.2%
54,000 Consolidated Edison, Inc. ........................... 1,863,000
78,800 Duke Energy Corp. ................................... 3,949,850
77,000 Eastern Utilities Assoc. ............................ 2,334,063
67,000 FPL Group, Inc. ..................................... 2,868,437
330,500 * Niagara Mohawk Holdings, Inc. ..................... 4,606,344
107,700 PP&L Resources, Inc. ................................ 2,463,637
158,900 Public Service Co. of New Mexico..................... 2,582,125
160,000 Public Service Enterprise Group, Inc. ............... 5,570,000
120,000 Reliant Energy, Inc. ................................ 2,745,000
77,700 Scana Corp. ......................................... 2,088,188
155,380 * Scottish Power PLC, ADR............................ 4,350,640
231,500 Southern Co. ........................................ 5,440,250
104,600 Teco Energy, Inc. ................................... 1,941,638
91,000 Texas Utilities Co. ................................. 3,236,187
244,950 Wisconsin Energy Corp. .............................. 4,715,287
------------
50,754,646
------------
Utilities - Gas - 6.6%
30,000 Consolidated Natural Gas Co. ........................ 1,948,125
93,000 Keyspan Corp. ....................................... 2,156,438
70,900 MDU Resources Group, Inc. ........................... 1,418,000
81,000 Peoples Energy Corp. ................................ 2,713,500
142,710 Sempra Energy........................................ 2,479,586
------------
10,715,649
------------
Utilities - Telephone - 22.7%
87,900 AT&T Corp. .......................................... 4,460,925
74,400 BellSouth Corp. ..................................... 3,482,850
84,000 GTE Corp. ........................................... 5,927,250
128,836 SBC Communications, Inc. ............................ 6,280,755
99,200 Sprint Corp. ........................................ 6,677,400
24,800 * Sprint Corp. (PCS Group) Ser. 1.................... 2,542,000
59,036 Telefonica de Espana SA de CV, ADR................... 4,652,775
59,500 Vodafone AirTouch PLC, ADR........................... 2,945,250
------------
36,969,205
------------
Total Common Stocks
(cost $99,761,161).................................. 119,367,000
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONVERTIBLE PREFERRED - 20.0%
Communication Systems & Services - 10.8%
84,200 Decs Trust V--Crown Castle
7.25%, 8/15/2002................................... $ 2,420,750
75,000 Loral Space & Communications, 6.00%, 11/01/2006..... 4,668,750
10,600 Qualcomm Financial Trust I,
5.75%, 3/01/2012................................... 10,433,050
------------
17,522,550
------------
Independent Power Producers - 2.1%
52,020 Calpine Capital Trust
5.75%, 11/01/2004.................................. 3,381,300
------------
Utilities - Electric - 2.1%
154,800 Utilicorp United, Inc.
9.75%, 11/16/2002.................................. 3,502,350
------------
Utilities - Telephone - 5.0%
80,600 MediaOne Group, Inc. PIES
7.0%, 11/2/2000.................................... 3,868,800
60,500 Qwest Trends Trust,
5.75%, 144A........................................ 4,272,812
------------
8,141,612
------------
Total Convertible Preferred
(cost $21,497,822)................................. 32,547,812
------------
SHORT-TERM INVESTMENTS - 13.0%
Money Market Shares - 8.0%
12,971,391 Navigator Prime Portfolio (b)....................... 12,971,391
------------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
Repurchase Agreement - 5.0%
$8,193,000 State Street Bank & Trust Co., 3.25%, dated
12/31/1999, maturing 1/3/2000, maturity
value $8,195,219 (c)............................... 8,193,000
------------
Total Short-Term Investments
(cost $21,164,391)................................. 21,164,391
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments - (cost $142,423,374)..... 106.3% 173,079,203
Other Assets and Liabilities - net........... (6.3) (10,235,501)
----- ------------
Net Assets................................... 100.0% $162,843,702
===== ============
</TABLE>
6
<PAGE>
EVERGREEN
America's Utlility Fund
Schedule of Investments(continued)
December 31, 1999
(a) All or a portion of this security is on loan.
(b) Represents investment in cash collateral received for securities on loan.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at
December 31, 1999.
* Non-income producing security.
Summary of Abbreviations:
ADR American Depository Receipt
PIES Premium Income Exchangeable Securities
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 guidelines established by the Board of
Trustees.
See Notes to Financial Statements.
7
<PAGE>
EVERGREEN
America's Utility Fund
Statement of Assets and Liabilities
December 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Assets
Identified cost of securities.................................... $142,423,374
Net unrealized gains on securities............................... 30,655,829
- --------------------------------------------------------------------------------
Market value of securities....................................... 173,079,203
Cash............................................................. 190
Receivable for securities sold................................... 4,609,846
Receivable for Fund shares sold.................................. 36,743
Dividends and interest receivable................................ 259,418
Prepaid expenses and other assets................................ 232,170
- --------------------------------------------------------------------------------
Total assets.................................................... 178,217,570
- --------------------------------------------------------------------------------
Liabilities
Payable for securities purchased................................. 2,270,697
Payable for Fund shares redeemed................................. 25,424
Payable for securities on loan................................... 12,971,391
Advisory fee payable............................................. 36,096
Distribution Plan expenses payable............................... 3,235
Due to other related parties..................................... 55,539
Foreign taxes payable............................................ 699
Accrued expenses and other liabilities........................... 10,787
- --------------------------------------------------------------------------------
Total liabilities............................................... 15,373,868
- --------------------------------------------------------------------------------
Net assets....................................................... $162,843,702
- --------------------------------------------------------------------------------
Net assets represented by
Paid-in capital.................................................. $123,503,294
Undistributed net investment income.............................. 0
Accumulated net realized gains or losses on securities........... 8,684,579
Net unrealized gains on securities............................... 30,655,829
- --------------------------------------------------------------------------------
Total net assets................................................. $162,843,702
- --------------------------------------------------------------------------------
Shares outstanding............................................... 5,502,580
- --------------------------------------------------------------------------------
Net asset value per share........................................ $ 29.59
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
EVERGREEN
America's Utility Fund
Statement of Operations
Year ended December 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
<S> <C>
Investment income
Dividends (net of foreign withholding taxes of $21,786)......... $ 5,253,845
Interest........................................................ 673,403
- ---------------------------------------------------------------------------------
Total investment income......................................... 5,927,248
- ---------------------------------------------------------------------------------
Expenses
Advisory fee.................................................... 408,445
Distribution Plan expenses...................................... 400,539
Administrative services fees.................................... 633,067
Transfer agent fee.............................................. 840,334
Trustees' fees and expenses..................................... 5,257
Printing and postage expenses................................... 66,130
Custodian fee................................................... 31,148
Registration and filing fees.................................... 19,205
Professional fees............................................... 15,661
Other........................................................... 3,282
- ---------------------------------------------------------------------------------
Total expenses................................................. 2,423,068
Less: Expense reductions....................................... (2,990)
- ---------------------------------------------------------------------------------
Net expenses................................................... 2,420,078
- ---------------------------------------------------------------------------------
Net investment income........................................... 3,507,170
- ---------------------------------------------------------------------------------
Net realized and unrealized gains or losses on securities
Net realized gains on securities................................ 20,311,638
Net change in unrealized losses on securities................... (15,130,294)
- ---------------------------------------------------------------------------------
Net realized and unrealized gains on securities................. 5,181,344
- ---------------------------------------------------------------------------------
Net increase in net assets resulting from operations............ $ 8,688,514
- ---------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
EVERGREEN
America's Utility Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income............................ $ 3,507,170 $ 4,252,792
Net realized gains on securities................. 20,311,638 7,218,482
Net change in unrealized gains or losses on
securities...................................... (15,130,294) 11,651,258
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations..................................... 8,688,514 23,122,532
- -------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income............................ (4,057,241) (4,247,374)
Net realized gains............................... (12,233,318) (7,764,700)
- -------------------------------------------------------------------------------
Total distributions to shareholders............. (16,290,559) (12,012,074)
- -------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold........................ 7,436,483 10,490,427
Payment for shares redeemed...................... (20,549,431) (21,767,705)
Net asset value of shares issued in reinvestment
of distributions................................ 15,330,168 11,341,961
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
capital share transactions..................... 2,217,220 64,683
- -------------------------------------------------------------------------------
Total increase (decrease) in net assets........ (5,384,825) 11,175,141
Net assets
Beginning of period.............................. 168,228,527 157,053,386
- -------------------------------------------------------------------------------
End of period.................................... $162,843,702 $168,228,527
- -------------------------------------------------------------------------------
Undistributed net investment income.............. $ 0 $ 5,418
- -------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
Evergreen America's Utility Fund (the "Fund"), formerly America's Utility Fund,
Inc., is a diversified series of Evergreen Equity Trust (the "Trust"), a Dela-
ware 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 Fund was originally organized as a Mary-
land corporation. On February 14, 1992 (initial investment date), the Fund sold
500,000 shares of common stock to Dominion Resources, Inc. for $10,000,000. The
Fund commenced sales to the public on May 5, 1992.
The Fund's investment objective is to seek current income and moderate capital
growth by investing primarily in securities issued by utility companies. The
Fund's investments in utility companies may include equity securities (common
and preferred stocks) and debt securities.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Fund in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles, which require
management to make estimates and assumptions that effect amounts reported here-
in. 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 the security is primarily traded. Securities traded on an exchange or NMS
and other securities traded in the over-the-counter market for which there has
been no sale are valued at the mean between the last reported bid and asked
price.
Corporate bonds are valued at prices provided by an independent pricing serv-
ice. In determining a price for normal institutional-size transactions, the
pricing service uses methods based on market transactions for comparable secu-
rities and analysis of various relationships between similar securities, which
are generally recognized by institutional traders. Securities for which valua-
tions 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 for short-term investment are valued at net asset val-
ue. Short-term securities with remaining maturities of 60 days or less are car-
ried at amortized cost, which approximates market value.
B. Repurchase Agreements
The Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. 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 counterpart. The Fund monitors the adequacy of the collateral
daily and will require the seller to provide additional collateral in the event
the market value of the securities pledged falls below the carrying value of
the repurchased agreement, including accrued interest. The Fund will only enter
into repurchase agreements with banks and other financial institutions, which
are deemed by the investment advisor to be creditworthy pursuant to guidelines
established by the Board of Trustees.
C. Securities Lending
In order to generate income and offset expenses, the Fund may lend portfolio
securities to brokers, dealers and other financial organizations. The Fund's
investment advisor will monitor the creditworthiness of such
11
<PAGE>
Notes to Financial Statements (continued)
borrowers. Loans of securities may not exceed 33 1/3% of the Fund's total as-
sets 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 inter-
est. 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 the Fund any income
accruing thereon, and the Fund may invest any cash collateral received in port-
folio securities, thereby increasing its return. The Fund will have the right
to call any such loan and obtain 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 the Fund and its invest-
ors. A Fund may pay fees in connection with such loans.
D. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums. Dividend income is recorded on the
ex- dividend date or in the case of some foreign securities, on the date there-
after when the Fund is made aware of the dividend. Income and capital gains on
some foreign securities may be subject to foreign taxes, which are accrued as
applicable.
E. Federal Taxes
The Fund has qualified and intends to continue to qualify as a regulated in-
vestment company under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Fund will not incur any federal income tax liability to the
extent it distributes all of its net investment company taxable income and net
capital gains, if any, to its shareholders. The Fund also intends to avoid any
excise tax liability by making the required distributions under the Code. Ac-
cordingly, no provision for federal taxes is required. To the extent that real-
ized capital gains can be offset by capital loss carryforwards, it is the
Fund's policy not to distribute such gains.
F. Distributions
Distributions from net investment income are declared and paid quarterly. Dis-
tributions from net realized capital gains, if any, are paid annually. Distri-
butions to shareholders are recorded at the close of business on the ex-divi-
dend date. Income and capital gains distributions to shareholders are deter-
mined in accordance with income tax regulations, which may differ from gener-
ally accepted accounting principles.
3. CAPITAL SHARE TRANSACTIONS
The Fund has an unlimited number of shares of beneficial interest with a par
value of $0.001 authorized. Transactions in shares of the Fund were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
------------------------
<S> <C> <C>
Shares sold............................. 248,075 350,374
Shares redeemed......................... (688,188) (724,206)
Shares issued in reinvestment of
distributions.......................... 537,438 369,078
----------- -----------
Net increase (decrease)................. 97,325 (4,754)
=========== ===========
</TABLE>
4. SECURITIES TRANSACTIONS
For the year ended December 31, 1999, cost of purchases and proceeds from sales
of investment securities (excluding short-term securities) were $102,007,580
and $117,003,448, respectively.
During the year ended December 31, 1999, the Fund loaned securities to certain
brokers who paid the Fund a negotiated lenders' fee. These fees are included in
interest income. At December 31, 1999, the value of securities on loan was
$12,519,201 and the value of collateral, including accrued interest, was
$12,971,391. During the year ended December 31, 1999, the Fund earned $28,680
in income from securities lending.
12
<PAGE>
Notes to Financial Statements (continued)
On December 31, the aggregate cost of investment securities for federal income
tax purposes was $142,423,374. Net unrealized appreciation aggregated to
$30,655,829, of which $37,817,919 related to appreciated securities and
$7,162,090 related to depreciated securities.
5. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
Mentor Investment Advisors, LLC ("Mentor Advisors"), a subsidiary of First
Union Corporation ("First Union"), is the investment adviser for the Fund. In
return for providing investment management services to the Fund, the Fund pays
Mentor a management fee that is computed daily and paid monthly. The investment
advisory fee is computed by applying percentage rates starting at 0.75% and de-
clining to 0.10% per annum as net assets increase, to the average daily net as-
sets of the Fund.
Effective June 21, 1999, Evergreen Investment Services ("EIS"), an indirect
wholly owned subsidiary of First Union, became the Administrator to the Fund.
As Administrator, EIS provides the Fund with facilities, equipment and person-
nel. Prior to June 21, 1999, Mentor Investment Group LLC ("Mentor"), a subsidi-
ary of First Union, provided administrative services to the Fund. The Fund paid
EIS and Mentor a fee at the annual rate of 0.65% of the Fund's average daily
net assets, less the amount of management fee paid to Mentor Advisors.
Evergreen Service Company ("ESC"), an indirect, wholly owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the Fund.
Prior to September 13, 1999, State Street Bank & Trust Company provided share-
holder support services. For the period from September 13, 1999 to December 31,
1999, the Fund paid ESC fees of $316,743 for its services.
Officers of the Fund and affiliated Trustees receive no compensation directly
from the Fund.
6. DISTRIBUTION PLAN
Effective October 18, 1999 Evergreen Distributor, Inc. ("EDI"), a wholly owned
subsidiary of The BISYS Group, Inc. ("BISYS"), became the principal underwriter
to the Fund.
The Fund has adopted a Distribution Plan for its shares, as allowed by Rule
12b-1 of the 1940 Act. A Distribution plan permits a Fund to reimburse its
principal underwriter for costs related to selling shares of the Fund and for
various other services. The Fund currently pays a distribution fee equal to
0.25% of its average daily net assets. Distribution Plan expenses are calcu-
lated daily and paid at least quarterly.
The Distribution Plan may be terminated at any time by vote of the Independent
Trustees or by vote of a majority of the outstanding voting shares.
Prior to October 18, 1999, Mentor Distributors, LLC ("Mentor Distributors") was
the principal underwriter. Prior to October 18, 1999, the Fund had adopted a
Shareholder Servicing Plan (the "Service Plan") with Mentor Distributors with
respect to its shares. Under the Service Plan, financial institutions entered
into shareholder service agreements with the Fund to provide administrative
support services to their customers who from time to time might have been own-
ers of record or beneficial owners of its shares. In return for providing these
support services, a financial institution might have received payments the Fund
at an annual rate of 0.25% of its average daily net assets beneficially owned
by the financial institution's customers for whom it was a holder of record or
with whom it had a servicing relationship.
7. CONCENTRATION OF RISK
The Fund invests a substantial portion of its assets in issuers in the utili-
ties industry, therefore, it may be more affected by economic and political de-
velopments in that industry than would be a comparable general equity fund.
8. EXPENSE REDUCTIONS
On September 13, 1999 and June 21, 1999, respectively, the Fund entered into
expense offset arrangements with ESC and its custodian whereby credits realized
as a result of uninvested cash balances were used to
13
<PAGE>
Notes to Financial Statements (continued)
reduce a portion of the Fund's related expenses. The assets deposited with ESC
and the custodian under these expense offset arrangements could have been in-
vested in income-producing assets.
9. DEFERRED TRUSTEES' FEES
Each Independent Trustee of the Fund may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts is based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Fund's Trustees' fees and
expenses. At the election of the Trustees, the deferral account will be paid
either in one lump sum or in quarterly installments for up to ten years 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.
14
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders
Evergreen Equity Trust
We have audited the accompanying statement of assets and liabilities of Ever-
green America's Utility Fund, formerly America's Utility Fund, Inc., including
the schedule of investments, as of December 31, 1999 and the related statement
of operations for the year then ended, the statements of changes in net assets
for each of the years in the two-year period then ended and financial high-
lights for each of the years in the five-year period then ended. These finan-
cial statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of De-
cember 31, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ever-
green America's Utility Fund, as of December 31, 1999, the results of its oper-
ations, changes in its net assets and financial highlights for each of the
years described above in conformity with generally accepted accounting princi-
ples.
/s/ KPMG LLP
Boston, MA
February 4, 2000
15
<PAGE>
Other Information (Unaudited)
REORGANIZATION
In March 2000 all of the net assets and certain liabilities of the Fund will be
acquired or assumed by the Evergreen Utility Fund, an open-end, management in-
vestment company, registered under 1940 Act, through a tax-free exchange of
shares. Shareholders of the Fund will become owners of that number of full and
fractional shares of Class A shares of Evergreen Utility Fund having an aggre-
gate net asset value equal to the aggregate net asset value of their shares of
the Fund immediately prior to the close of business on March 2000. Since both
the Fund and the Evergreen Utility Fund are similar funds and the Evergreen
Utility Fund will contribute the majority of the net assets and shareholders,
its basis of accounting for assets and liabilities and its operating results
for prior periods will be carried forward as the accounting survivor.
ACQUISITION OF EVEREN
On October 1, 1999, First Union acquired EVEREN Capital Corp. ("EVEREN"). As
part of this acquisition Mentor was combined with the Evergreen mutual funds
complex and the Fund converted from a Maryland Corporation to a series of a
Delaware business trust.
SPECIAL MEETING OF SHAREHOLDERS
A special meeting of the Fund's shareholders was held on October 15, 1999.
Shareholders of record on August 17, 1999 were entitled to notice of and to
vote at the meeting and any adjournments thereof. The record date shares out-
standing on August 17, 1999 were 5,277,798, of which 3,245,607 were voted and
represented at the meeting.
During the special meeting the shareholders of the Fund voted the following:
1. To approve an Agreement and Plan of Conversion and Termination providing for
the conversion of the Fund into a corresponding series of Evergreen Delaware
business trust. The results were as follows:
<TABLE>
<CAPTION>
Shares Voted % Voted
------------ -------
<S> <C> <C>
FOR.......................................... 2,812,992 86.68%
AGAINST...................................... 315,951 9.73%
ABSTAIN...................................... 116,664 3.59%
--------- -------
TOTAL........................................ 3,245,607 100.00%
</TABLE>
2. To approve the proposed changes to the Fund's investment restrictions:
2A. Diversification
2B. Concentration
2C. Senior securities
2D. Borrowing
2E. Underwriting
2F. Real Estate
2G. Commodities
2I. To reclassify as non-fundamental certain fundamental restrictions that
are no longer required to be fundamental:
2I(i). Short sales
2I(ii). Margin purchases
2I(iii). Pledging
2I(iv). Restricted securities
2I(v). Unseasoned issuers
2I(vi). Illiquid securities
2I(vii). Officers' and directors' ownership of securities
16
<PAGE>
Other Information (Unaudited) (continued)
2I(viii). Control of management
2I(ix). Joint trading
2I(x). Other investment companies
The results were as follows:
<TABLE>
<CAPTION>
Shares Voted % Shares Voted % Shares Voted %
FOR Voted AGAINST Voted ABSTAIN Voted
------------ ------ ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
2A. .............. 2,791,447 86.01% 302,873 9.33% 151,287 4.66%
2B. .............. 2,794,299 86.09% 300,021 9.24% 151,287 4.66%
2C. .............. 2,782,756 85.74% 311,564 9.60% 151,287 4.66%
2D. .............. 2,793,286 86.06% 301,034 9.28% 151,287 4.66%
2E. .............. 2,790,935 85.99% 303,385 9.35% 151,287 4.66%
2F. .............. 2,780,198 85.66% 314,122 9.68% 151,287 4.66%
2G. .............. 2,781,272 85.69% 313,048 9.65% 151,287 4.66%
2I(i). ........... 2,784,297 85.79% 310,023 9.55% 151,287 4.66%
2I(ii). .......... 2,784,803 85.80% 309,517 9.54% 151,287 4.66%
2I(iii). ......... 2,783,411 85.76% 310,909 9.58% 151,287 4.66%
2I(iv). .......... 2,783,944 85.78% 310,376 9.56% 151,287 4.66%
2I(v). ........... 2,786,783 85.86% 307,537 9.48% 151,287 4.66%
2I(vi). .......... 2,786,327 85.85% 307,993 9.49% 151,287 4.66%
2I(vii). ......... 2,786,704 85.86% 307,616 9.48% 151,287 4.66%
2I(viii). ........ 2,786,166 85.84% 308,154 9.49% 151,287 4.66%
2I(ix). .......... 2,785,961 85.84% 308,359 9.50% 151,287 4.66%
2I(x). ........... 2,785,094 85.81% 309,226 9.53% 151,287 4.66%
</TABLE>
3. To approve an Agreement and Plan of Reorganization whereby Evergreen Utility
Fund, a series of the Evergreen Equity Trust, will, (i) acquire all the as-
sets of the Fund in exchange for shares of Evergreen Utility Fund; (ii) as-
sume the identified liabilities of the Fund. The Results were as follows:
<TABLE>
<CAPTION>
Shares Voted % Voted
------------ -------
<S> <C> <C>
FOR.......................................... 2,808,629 86.54%
AGAINST...................................... 317,105 9.77%
ABSTAIN...................................... 119,873 3.69%
--------- -------
TOTAL........................................ 3,245,607 100.00%
</TABLE>
4. To consider and vote upon such other matters as may properly come before
said meeting or any adjournments thereof. The results were as follows:
<TABLE>
<CAPTION>
Shares Voted % Voted
------------ -------
<S> <C> <C>
FOR.......................................... 2,815,452 86.74%
AGAINST...................................... 196,576 6.06%
ABSTAIN...................................... 233,579 7.20%
--------- -------
TOTAL........................................ 3,245,607 100.00%
</TABLE>
Federal Income Tax Information
Pursuant to section 852 of the Internal Revenue Code, the Fund has designated
$12,233,318 ($2.37 per share) as the long-term capital gain distribution for
the fiscal year ended December 31, 1999.
For corporate shareholders, 71.71% of ordinary income dividends paid during the
fiscal year ended December 31, 1999 qualified for the dividends received deduc-
tion.
17
<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
Quality Income Fund
High Income Fund
Balanced
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund
Capital 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
Strategic Growth Fund
Stock Selector Fund
Evergreen Fund
Masters Fund
Omega Fund
Small Company Growth Fund
Aggressive Growth Fund
Growth Fund
Capital Growth Fund
Select Special Equity Fund
Global International
Global Leaders Fund
International Growth Fund
Global Opportunities Fund
Precious Metals Fund
Emerging Markets Growth Fund
Latin America Fund
Perpetual Global Fund
Perpetual International Fund
Express Line
800.346.3858
Investor Services
800.343.2898
www.evergreen-funds.com
68405 552502 2/2000
-------------
[LOGO OF EVERGREEN FUNDS] BULK RATE
U.S. POSTAGE
200 Berkeley Street PAID
Boston,MA 02116 PERMIT NO. 19
HUDSON, MA
-------------
