<PAGE>
Annual Report
as of October 31, 2000
EVERGREEN SECTOR FUNDS
[SEAL]
[LOGO OF EVERGREEN FUNDS/SM/]
<PAGE>
Table of Contents
Letter to Shareholders ........................................................1
Evergreen Health Care Fund
Fund at a Glance ...........................................................2
Portfolio Manager Interview ................................................3
Evergreen Technology Fund
Fund at a Glance ...........................................................6
Portfolio Manager Interview ................................................7
Evergreen Utility Fund
Fund at a Glance ..........................................................10
Portfolio Manager Interview ...............................................11
Financial Highlights
Evergreen Health Care Fund ................................................13
Evergreen Technology Fund .................................................15
Evergreen Utility Fund ....................................................17
Schedule of Investments
Evergreen Health Care Fund ................................................19
Evergreen Technology Fund .................................................23
Evergreen Utility Fund ....................................................26
Combined Notes to Schedules of Investments ...................................29
Statements of Assets and Liabilities .........................................30
Statements of Operations .....................................................31
Statements of Changes in Net Assets ..........................................33
Combined Notes to Financial Statements .......................................35
Independent Auditors' Report .................................................42
Additional Information .......................................................43
--------------------------------------------------------------------------------
Evergreen Funds
--------------------------------------------------------------------------------
Evergreen Funds is one of the nation's fastest growing investment companies with
more than $80 billion in assets under management.
We offer over 80 mutual funds to choose among and acclaimed service and
operations capabilities, giving investors 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
----------------------
December 2000
[PHOTO]
William M. Ennis
President and CEO
Dear Evergreen Shareholders:
We are pleased to provide the Evergreen Sector Funds annual report, which covers
the fiscal periods ended October 31, 2000.
A Challenging Environment for Investors
During 2000, U.S. equity markets challenged investors with a series of turbulent
ups and downs and a constant rotation from one particular sector for a brief
period of time to another. The market favored the new economy then the old
economy, big caps then mid-caps, value then growth, dot coms then technology
equipment, creating significant uncertainties for investors.
Concerns about wage-driven inflation, higher interest rates, increasing oil
prices and the uncertainty over the presidential election also affected market
valuations and volatility. Although these factors have the potential to
meaningfully slow the economy, many leading indicators continue to demonstrate
strength. We believe that the U.S. economy will slow moderately, aided by the
Federal Reserve's focus on interest rates, and will ultimately create a soft
landing, which should create the launch pad for a continued expansion.
New Products and Services
Evergreen Funds is constantly striving to develop products and services to meet
the sophisticated demands of our investors. We are excited about the launch of
two new Sector Funds: Evergreen Health Care Fund and Evergreen Technology Fund,
which are discussed in this report.
The Value of Diversification
An environment like this year's offers many reasons for building a diversified
portfolio rather than trying to predict the market's movements. Diversification
provides exposure to many different opportunities while reducing the risk of any
single investment or strategy. We encourage you to talk to your financial
advisor to confirm that your investment portfolio is appropriately diversified
and structured to support your long-term investment objectives. Please visit us
online at www.evergreen-funds.com for more information about Evergreen Funds.
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
<PAGE>
EVERGREEN
Health Care Fund
Fund at a Glance as of October 31, 2000
"We believe the biotechnology industry still is at an early stage in its
development, with significant long-term opportunities for those who find
fundamentally sound companies."
Portfolio
Management
--------------------
[PHOTO]
Liu-Er Chen, CFA
Tenure: December 1999
--------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
--------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 10/31/2000.
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. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost. The
performance of each class may vary based on differences in loads and fees and
expenses paid by the shareholders investing in each class. Performance includes
the reinvestment of income dividends and capital gain distributions.
Performance results are extremely short-term, and may not provide an adequate
basis for evaluating a fund's performance potential over varying market
conditions or economic cycles. Unusual investment returns may be a result of a
fund's recent inception, existing market and economic conditions or the
increased potential of a small number of stocks affecting fund performance due
to the smaller asset size, which may be difficult to repeat. Most mutual funds
are intended to be long-term investments. The Fund incurs 12b-1 expenses of
0.25% for Class A and 1.00% for Classes B and C. Class Y does not pay a 12b-1
fee.
Class Y shares are only offered to persons who owned Class Y shares of an
Evergreen Fund on or before 12/31/1994; certain institutional investors; and
investment advisory clients of an investment advisor of an Evergreen Fund (or
the investment advisor's affiliates).
The Fund's investment objective is non-fundamental and may be changed without
the vote of the Fund's shareholders.
The health care sector in which the Fund invests is in a period of unusually
strong performance. This sector's performance may not be expected to continue.
--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/2/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Inception Date: 12/22/1999 Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Class Inception Date 12/22/1999 12/22/1999 12/22/1999 12/22/1999
Cumulative Returns
With sales charge 113.34% 117.37% 120.51% n/a
since portfolio inception
Without sales charge 124.01% 122.37% 122.51% 124.33%
since portfolio inception
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
Capital gain distributions per share $5.40 $5.40 $5.40 $5.40
since inception
</TABLE>
--------------------------------------------------------------------------------
LONG TERM GROWTH
--------------------------------------------------------------------------------
[GRAPH]
Healthcare S&P 500 S&P 1500 Super Consumer Price
Fund A Composite Composite Index - US
12/22/99 9,525 10,000 10,000 10,000
1/31/00 11,677 9,498 10,649 10,030
2/29/00 17,963 9,318 10,485 10,089
3/31/00 15,334 10,229 10,659 10,172
4/30/00 15,182 9,922 11,605 10,178
5/31/00 15,592 9,718 13,288 10,190
6/30/00 18,574 9,958 16,575 10,244
7/31/00 18,229 9,802 19,570 10,267
8/31/00 20,441 10,411 23,513 10,273
9/30/00 21,600 9,861 29,605 10,321
10/31/00 21,335 9,819 38,374 10,329
Comparison of a $10,000 investment in Evergreen Health Care Fund, Class A
shares/2/, versus a similar investment in Standard and Poor's 1500
Supercomposite Health Care Sector Index (S&P 1500-Healthcare), the Standard and
Poor's 500 Index (S&P 500) and the Consumer Price Index (CPI).
The S&P 1500-Healthcare and S&P 500 are unmanaged market indices which do not
include transaction costs associated with buying and selling securities or 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.
The exceptional performance of the Fund is due to participation in IPO's. There
is no assurance that this method will continue to have the same impact on the
Fund's performance returns.
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. Risks of international investing are magnified in
emerging or developing markets.
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.
All data is as of October 31, 2000 and is subject to change.
2
<PAGE>
EVERGREEN
Health Care Fund
Portfolio Manager Interview
How did the Fund perform?
The Fund performed exceptionally well. Since its inception on December 22, 1999
and through the end of the first fiscal year on October 31, 2000, Evergreen
Health Care Fund's Class A shares returned 124.01%, before the deduction of any
applicable sales charges. For the period from January 1 through October 31, the
Fund's Class A shares returned 113.75% while the median return of Health Care
Funds was 45.67%, according to Lipper Inc., an independent monitor of mutual
fund performance. The S&P 1500 Healthcare and S&P 500 returned 21.85% and 6.09%,
respectively for the same period.
Portfolio
Characteristics
------------------
(as of 10/31/2000)
Total Net Assets $40,262,754
Number of Holdings 134
What was the investment environment like during the period?
All segments of the health care industry benefited from a favorable market
environment.
Positive news stories and general investor enthusiasm about the potential
development of new disease-fighting drugs fueled the very strong performance
for biotechnology company stocks. Discoveries in genomics, which involves the
mapping of the human genetic code, as well as advances in the development of
antibodies to diseases, both contributed to the enthusiasm for biotechnology
stocks. While they rose sharply during the fiscal year, they also experienced
some short-term volatility.
The major pharmaceutical companies, after poor performance in 1999, staged a
strong comeback after the first quarter of 2000. Their records of consistent
earnings growth in all types of general economic environments made them
especially attractive, particularly as fears arose about how other industry
sectors might perform if economic growth were to slow dramatically.
Hospitals and HMO stocks, which had extremely poor performance for the previous
five years, benefited from stabilization of reimbursement formulas and the
positive effects of cost-cutting programs, development of new
information-technology tools to increase efficiency, and industry consolidation.
The only negative influence to health care stocks during the year was related to
politics. In a presidential election year, candidates talked about various
proposals to control the costs of prescription drugs, to limit the powers of
HMOs, and to expand the Medicare program to include prescription drug benefits
for the elderly. While no action was taken, the political controversies about
prescription costs and HMOs created some uncertainty about how any changes in
government programs would affect the earnings of health care companies.
Top 5 Industries
------------------------------------------
(as a percentage of 10/31/2000 net assets)
Pharmaceuticals 39.3%
Biotechnology 29.2%
Health Care Equipment & Supplies 11.2%
Health Care Providers & Services 7.4%
Chemicals 3.9%
3
<PAGE>
EVERGREEN
Health Care Fund
Portfolio Manager Interview
What strategy do you use in managing the Fund?
We intend to keep the Fund well diversified in the health care field, but employ
a rigorous discipline emphasizing both quantitative screening and fundamental
analysis in our bottom-up stock selection process. The quantitative screening
process incorporates value, growth and momentum characteristics in selecting
those stocks to evaluate further. The fundamental analysis includes evaluation
of such factors as a company's management, its products, its franchise, its
strategy and its implementation of strategy.
During the period, the biggest positions in the Fund's portfolio were the major
pharmaceutical companies with established franchises and proven records,
including Pfizer, American Home Products, Pharmacia, Aventis and Roche.
Among biotechnology and medical services companies, we concentrated on the best
opportunities among the small- and mid-cap sectors, but also maintained major
positions in established biotech companies such as Amgen and Genetech. We
believe if we do our homework, we can find promising opportunities among small-
and mid-cap companies.
We invest in both U.S. and foreign companies, although 89.2% of net assets were
invested in American companies at the end of the fiscal period.
What were some examples of investments with particularly strong performance?
Among biotechnology holdings, the Fund benefited from very strong performance by
OSI Pharmaceuticals, a small-cap company involved in research for drugs to treat
cancer and diabetes. We purchased the stock at $14 a share. Though volatile, the
stock finished the fiscal period with a stock price of $63.
In the medical services area, a very strong performer was Advanced Paradigm, a
pharmacy benefits manager which should be helped by the effort to improve
reimbursement formulas for prescription drug benefits. We originally invested in
the stock when it was selling at $13 per share. It finished the fiscal period
with a $36 price.
Top 10 Holdings
------------------------------------------
(as a percentage of 10/31/2000 net assets)
Pfizer, Inc. 4.1%
American Home Products Corp. 3.2%
Pharmacia Corp. 2.8%
Amgen, Inc. 2.4%
Aventis, ADR 2.3%
Genetech, Inc. 2.0%
Glaxo Wellcome Plc, ADR 2.0%
Merck & Co., Inc. 2.0%
Roche Hldg. AG 1.9%
Mylan Laboratories, Inc. 1.9%
4
<PAGE>
EVERGREEN
Health Care Fund
Portfolio Manager Interview
What is your outlook for health care stocks?
We have a very positive outlook for the sector. We believe the biotechnology
industry is still at an early stage in its development, with significant
long-term opportunities for those who find fundamentally sound companies. Many
of these stocks do fluctuate dramatically in the short run, but we believe we
can take advantage of this volatility to buy attractive companies when their
stocks suffer temporary price corrections.
We believe the entire health care industry should continue to benefit from a
favorable environment and strong industry dynamics.
Health care spending is growing much faster than the overall economy, fueled by
favorable demographic trends, notably the large, baby-boomer generation. Members
of this generation will require more health services and products as they age,
and they tend to have the income to pay for those services and products. At the
same time, society continues to have unmet health care needs that must be
addressed with the help of innovative science and technology. The threat of
emerging infectious diseases also underscores the need for the development of
new drugs.
We believe this is an industry with great long-term opportunities.
5
<PAGE>
EVERGREEN
Technology Fund
Fund at a Glance as of October 31, 2000
"We believe technology companies will tend to grow faster than the rest of the
economy, but are cautious about the maturing of the economic cycle and some of
the technology cycles."
Portfolio
Management
----------------------
[PHOTO]
John Rutledge
Tenure: December 1999
--------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
--------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 10/31/2000.
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. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost. The
performance of each class may vary based on differences in loads and fees and
expenses paid by the shareholders investing in each class. Performance includes
the reinvestment of income dividends and capital gain distributions.
Performance results are extremely short term, and may not provide an adequate
basis for evaluating a fund's performance potential over varying market
conditions or economic cycles. Unusual investment returns may be a result of a
fund's recent inception, existing market and economic conditions and the
increased potential of a small number of stocks affecting fund performance due
to the smaller asset size. Most mutual funds are intended to be long-term
investments. The Fund incurs 12b-1 expenses of 0.25% for Class A and 1.00% for
Classes B and C. Class Y does not pay a 12b-1 fee.
Class Y shares are only offered to persons who owned Class Y shares of an
Evergreen Fund on or before 12/31/1994; certain institutional investors; and
investment advisory clients of an investment advisor of an Evergreen Fund (or
the investment advisor's affiliates).
--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/2/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Inception Date: 12/22/1999 Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Class Inception Date 12/22/1999 12/22/1999 12/22/1999 12/22/1999
Cumulative Returns
With sales charge -5.05% -5.95% -2.88% n/a
since portfolio inception
Without sales charge -0.30% -1.00% -0.90% 0.00%
since portfolio inception
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
</TABLE>
--------------------------------------------------------------------------------
LONG TERM GROWTH
--------------------------------------------------------------------------------
[GRAPH]
Technology S&P 500 S&P 1500 Consumer Price
Fund A Composite SuperComposite Index - US
22-Dec-99 9,525 10,000 10,000 10,000
31-Jan-00 9,648 9,498 9,297 10,030
29-Feb-00 11,991 9,318 9,890 10,089
31-Mar-00 12,447 10,229 11,248 10,172
30-Apr-00 12,056 9,922 11,673 10,178
31-May-00 10,551 9,718 10,910 10,190
30-Jun-00 11,751 9,958 11,304 10,244
31-Jul-00 11,189 9,802 11,157 10,267
31-Aug-00 13,018 10,411 12,281 10,273
30-Sep-00 10,742 9,861 11,137 10,321
31-Oct-00 9,495 9,819 9,542 10,329
Comparison of a $10,000 investment in Evergreen Technology Fund, Class A
shares/2/, versus a similar investment in the Standard and Poor's 1500
Supercomposite Technology Sector Index (S&P 1500-Technology), the Standard and
Poor's 500 Index (S&P 500) and the Consumer Price Index (CPI).
The S&P 1500-Technology and S&P 500 are unmanaged market indices which do not
include transaction costs associated with buying and selling securities or 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.
The Fund's investment objective is non-fundamental and may be changed without
the vote of the Fund's shareholders.
Performance of the Fund is due to participation in IPO's. There is no assurance
that this method will continue to have the same impact on the Fund's performance
returns.
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.
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.
All data is as of October 31, 2000 and is subject to change.
6
<PAGE>
EVERGREEN
Technology Fund
Portfolio Manager Interview
How did the Fund perform?
The Fund's Class A Shares returned -0.30% from its inception on December 22,
1999 through the end of the fiscal period on October 31, 2000, before the
deduction of any applicable sales charges. In comparison, the S&P 1500
Supercomposite Technology Sector Index returned -29.68% and the Standard &
Poor's 500 Index returned 6.09% for the same period. We attribute the Fund's
return to the exceptionally challenging investment environment for technology
stocks that occurred over the past six months. We believe the Fund's more
conservative valuation approach helped protect the Fund from steeper price
declines when technology stocks incurred a sharp correction.
Portfolio
Characteristics
------------------
(as of 10/31/2000)
Total Net Assets $14,323,562
Number of Holdings 80
Why was the environment so challenging?
Investors experienced a dramatic shift in psychology, causing technology stock
prices to fall sharply and become extremely volatile. In the first part of the
period, high-flying "New Economy" stocks continued their meteoric rise in price.
Leadership was narrow, and market sentiment was emotional and speculative.
Historical methods of prudent stock valuation were disregarded by many
investors, as valuations reached unprecedented levels. Many investors based
stock valuations on a company's future sales estimates, rather than future
earnings estimates. In fact, many of the most popular stocks were issued by
companies that had generated no earnings at all and were not expected to do so
until several years in the future. Having reached extreme levels--with highly
charged investor sentiment--the market was ripe for a potentially explosive
correction.
The correction began at the end of the year's first quarter. Concerns arose that
higher interest rates had begun to slow the economy, dampening the prospects of
future sales and earnings growth. The situation was compounded by the
government's antitrust suit against Microsoft. As these events occurred, caution
replaced the euphoric tone that had dominated market sentiment for the past
18-months; and technology stocks led by the former high-flyers endured
considerable volatility and a significant correction.
How did you manage the Fund during this time?
We continued with the Fund's long-term philosophy: investing only in stocks
whose companies we believe will generate earnings by December 2001, those that
are valued based on operating earnings estimates instead of sales estimates, and
those that are not selling at more than three times the relative price/earnings
ratio of the S&P 500, based on December 2001 earnings estimates. As of the end
of the period, the S&P 500 December 2001 P/E ratio stood at 22.3X. That
philosophy helped protect the Fund as prices fell. While nearly all technology
stocks were swept into the correction, the stocks that suffered the steepest
price declines were those whose valuations were just too extreme, even if the
underlying companies had strong fundamentals.
7
<PAGE>
EVERGREEN
Technology Fund
Portfolio Manager Interview
As of October 31, 2000, the Fund's heaviest weightings were in the following
industries: Semiconductor Equipment & Products--In addition to being the "fuel
oil" driving the technology industry, most companies are valued only marginally
higher than the S&P 500, and have in our opinion, the potential for sustainable
earnings growth of approximately 20% annually. We believe these companies can
generate substantial earnings growth over the next two years, despite the
historically cyclical nature of the business. As a result, we anticipate
investor recognition of their total return potential through rising stock
prices. Commercial Services & Supplies--These businesses provide "safe haven"
services such as payroll management--very defensive businesses--which is
attractive to us in light of the possibility of a further slowing in the
economy. In addition, many of these stocks are valued only 10%-30% higher than
the S&P 500; and in our opinion, the underlying companies can grow earnings at a
sustainable rate of 15%-30% annually. Software--The prices of some of these
stocks have fallen to attractive levels. We have begun to build a position in
Microsoft, for example, which has introduced a major new software package,
Windows 2000. We also are optimistic about a more lenient political climate
regarding Microsoft's antitrust suit. Computers & Peripherals--This is another
industry in which we are exercising caution. A combination of slower economic
growth and the maturing of the industry, itself, has caused the unit growth of
personal computers to fall from a 20-year annual rate of 18%-20%, to 11%-13% in
the past year. Communications Equipment--We are less optimistic about this
industry and have pared back holdings. Heavy competition between communications
service providers has resulted in lower profit expectations for these carriers.
As a result, some service providers have decreased expected capital spending
plans for additional communications equipment. The exception is spending for
optical transmission equipment, which remains strong.
Top 10 Holdings
------------------------------------------
(as a percentage of 10/31/2000 net assets)
Microsoft Corp. 5.8%
Automatic Data Processing, Inc. 4.1%
Micron Tech., Inc. 2.9%
Concord EFS, Inc. 2.9%
DST Sys., Inc. 2.6%
LSI Logic Corp. 2.3%
Altera Corp. 2.0%
Paychex, Inc. 2.0%
Compaq Computer Corp. 1.9%
Cypress Semiconductor Corp. 1.8%
Top 5 Industries
------------------------------------------
(as a percentage of 10/31/2000 net assets)
Semiconductor Equipment & Products 32.2%
Commercial Services and Supplies 16.5%
Software 11.1%
Computers & Peripherals 10.1%
Communications Equipment 9.9%
What is your outlook for technology stocks?
We are cautiously optimistic. We believe technology companies will tend to grow
faster than the rest of the economy, but are cautious about the maturing of the
economic cycle and some of the technology cycles. Historically, November through
January have been the best performing months for technology stocks; and August
through September, the worst. We are more cautious this year than in most,
however, heading into that period. In our opinion, many stocks are still
overvalued--those that we do not own--so we would not be surprised to see
continued volatility in the technology sector.
8
<PAGE>
EVERGREEN
Technology Fund
Portfolio Manager Interview
There are positive trends as well, though, in technology. The internet continues
to drive growth in the industry, with internet traffic doubling approximately
every six months. That is especially positive for communications companies, as
well as computer hardware companies. Spending on fiber optics to improve
communications also continues to be strong. We believe these positive trends can
provide significant opportunity for investors and prudent, realistic stock
valuation will be key factors in securing that opportunity. In this environment,
we intend to remain dedicated to our process of screening potential holdings by
using a company's performance in the recent past as one indicator in determining
future results; demanding reasonable valuations on earnings estimates and growth
rates--while looking for those companies where earnings revisions are positive;
and investing only in those stocks that we believe are attractively and
realistically valued.
9
<PAGE>
EVERGREEN
Utility Fund
Fund at a Glance as of October 31, 2000
"We kept the Fund well diversified, but with an emphasis on those areas which we
believe have the greatest growth potential."
Portfolio
Management
---------------------------
[PHOTO] [PHOTO]
Leslie B. Rich, CFA Doris Kelly-
Tenure: February 2000 Watkins
Tenure: February 1997
--------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
--------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 10/31/2000.
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. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost. The
performance of each class may vary based on differences in loads and fees and
expenses paid by the shareholders investing in each class. Performance includes
the reinvestment of income dividends and capital gain distributions.
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. The advisor is waiving a portion of
its advisory fee. Had the fee not been waived, the returns would have been
lower.
Class Y shares are only offered to persons who owned Class Y shares of an
Evergreen Fund on or before 12/31/1994; certain institutional investors; and
investment advisory clients of an investment advisor of an Evergreen Fund (or
the investment advisor's affiliates).
The Fund's investment objective is non-fundamental and may be changed without
the vote of the Fund's shareholders.
The telecommunication sector in which the Fund invests is in a period of
unusually strong performance. This sector's performance may not be expected to
continue.
--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/2/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Inception Date: 1/4/1994 Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Class Inception Date 1/4/1994 1/4/1994 9/2/1994 2/28/1994
Average Annual Returns *
3-month with sales charge 0.71% 0.56% 3.55% n/a
3-month w/o sales charge 5.76% 5.56% 5.55% 5.82%
1 year with sales charge 16.82% 16.78% 19.77% n/a
1 year w/o sales charge 22.67% 21.78% 21.77% 22.99%
5 years 17.62% 17.66% 17.86% 19.02%
Since Portfolio Inception 14.95% 14.93% 15.00% 16.04%
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
30-day SEC Yield 1.67% 1.03% 1.00% 1.99%
3-month income dividends
per share $0.08 $0.05 $0.05 $0.08
</TABLE>
*Adjusted for maximum applicable sales charge unless noted.
--------------------------------------------------------------------------------
LONG TERM GROWTH
--------------------------------------------------------------------------------
[GRAPH]
Utility S & P 500 Composite S & P Utility Consumer Price
Fund A Total Return Index Tr Index - US
1/4/94 9,525 10,000 10,000 10,000
10/31/94 9,180 10,361 9,287 10,254
10/31/95 10,941 13,101 12,007 10,542
10/31/96 11,890 16,258 13,184 10,857
10/31/97 14,048 21,478 14,489 11,084
10/31/98 16,585 26,201 18,349 11,248
10/31/99 21,086 32,929 18,734 11,536
10/31/00 25,864 34,935 25,703 11,923
Comparison of change in value of a $10,000 investment in Evergreen Utility Fund
Class A shares/2/, the Standard and Poor's Utility Index (S&P Utility), the
Standard and Poor's 500 Index (S&P 500) and the Consumer Price Index (CPI).
The S&P Utility and the S&P 500 are unmanaged market indices which do not
include transaction costs associated with buying and selling securities or 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.
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.
All data is as of October 31, 2000 and is subject to change.
10
<PAGE>
EVERGREEN
Utility Fund
Portfolio Manager Interview
How did the Fund perform?
Evergreen Utility Fund's Class A shares returned 22.67% during the twelve-month
period ended October 31, 2000, before the deduction of any applicable sales
charges. During the same period, the median return of Utility Funds was 15.47%,
according to Lipper Inc., an independent monitor of mutual fund performance. The
Standard & Poor's 500 Index returned 6.09% during the twelve-month period, while
the Standard & Poor's Utility Index returned 37.20%.
This is the Fund's first report since it changed its fiscal year to end on
October 31. The Fund's previous fiscal year ended on July 31. During the
three-month period since the end of the July 31, 2000 fiscal year, Evergreen
Utility Fund Class A shares returned 5.76%, before the deduction of any
applicable sales charges.
Portfolio
Characteristics
------------------
(as of 10/31/2000)
Total Net Assets $502,183,462
Number of Holdings 64
Beta* 0.54
P/E Ratio* 21.1x
*as of 9/30/2000
What was the investment environment like during the twelve-month period?
During most of the calendar year, interest rates rose, which usually is not
conducive to utility stocks. And yet, one subsector of the utility industry had
extremely good performance--the electric utilities.
Demand for electricity grew much faster than supply, while investors worried
about potential future shortages of natural gas, which often is used to generate
electric power. This growing imbalance between supply and demand was aggravated
by this summer's warmer than normal weather in many heavily populated areas,
including California and the Southwestern states, which increased electricity
consumption for cooling and other uses. Aware of the supply/demand dynamics,
investor interest in utility stocks increased. Shares of independent power
producers, energy merchant stocks and traditional electric utilities rose
sharply.
Electric utility stocks further benefited from the industry's continuing
transformation to a more competitive, less regulated business model. Business
diversification, encouraged by current industry change began to materialize into
earnings contributors for many electric companies and this further enhanced
stock performance.
While the stocks of independent power producers and traditional electric
utilities were rallying, telecommunications stocks suffered badly. Revenue,
earnings, or EBITDA (earnings before interest, taxes, depreciation and
amortization), growth rates of many telecommunications service companies began
to recede. For others with sizeable capital spending plans, credit availability
became a concern and uncertainty in a slowing economy for the group weighed
heavily upon the shares. Investors started to revalue telecommunications
stocks to reflect the market's concern for slower growth to come. A domino
effect occurred. As telecommunications service companies grew more slowly, they
began to reduce their capital spending, affecting the telecommunications
equipment companies. These problems occurred at the very time that intensive
price competition accelerated among service companies, especially those
providing wireless phone service. Service companies, some of which had not yet
achieved profitability, attempted to grow their revenues by aggressively pricing
their services and products. Similarly, long-distance phone service has come to
be viewed as a commodity product, for which businesses and consumers were not
willing to pay premium rates.
11
<PAGE>
EVERGREEN
Utility Fund
Portfolio Manager Interview
The increasing volatility in telecommunication stocks continued through the end
of the fiscal year, as investors made new calculations of the short-run and
long-run earnings growth potential of those companies.
Despite changing trends throughout the utility sectors, investors developed a
response to the prospect of a general slowdown in economic growth. That response
acted as a support for the share prices of both traditional electric utility
stocks and most companies in the business of electricity and gas supply. The
defensive character of these investments in times of market uncertainty has
become increasingly apparent. The group is delivering positive earnings and
predictable dividends. Among Telecommunications stocks, only the old regional
Bell operating companies appear to be of some interest to investors and we have
maintained a fund presence there.
Top 5 Industries
------------------------------------------
(as a percentage of 10/31/2000 net assets)
Electric Utilities 38.0%
Diversified Telecommunication Services 22.4%
Wireless Telecommunication Services 10.9%
Gas Utilities 10.8%
Communications Equipment 6.9%
What were your principal strategies during this period?
We have a long-term discipline of remaining well diversified within the utility
sectors while looking for stocks that can deliver total return: a product of
both dividend income and stock price appreciation. While the past few months
have been favorable to traditional electric utility stocks and unfavorable to
telecommunications stocks, we did not necessarily believe the most recent trends
would be permanent. We kept the Fund well diversified, but with an emphasis on
those areas which we believe have the greatest growth potential.
Many of the best performers for the Fund during the period were the independent
power producers that benefited from changes in the demand/supply relationships
and the deregulation trends. Companies such as Calpine, AES, Dynegy and SOE, the
latter a spin-off of the Southern Company, were among the top performers for the
Fund.
Top 10 Holdings
------------------------------------------
(as a percentage of 10/31/2000 net assets)
Verizon Communications 3.2%
BellSouth Corp. 3.1%
Qwest Communications Intl., Inc. 3.0%
Enron Corp. 3.0%
Dynegy, Inc. 3.0%
Consolidated Edison, Inc. 3.0%
ALLTEL Corp. 2.8%
SBC Communications 2.5%
Decs Trust VI - Metromedia Fiber 2.5%
Reliant Energy, Inc. 2.4%
What is your outlook for the utility industry?
We anticipate continued volatility, as the different subsectors within the
industry continue to restructure themselves to adapt to changes in their
environment.
Electric utilities, the last subsector to experience deregulation, should
continue to respond to the opportunities and challenges of competition.
We believe Telecommunications companies should continue to remake themselves and
adapt to changes in the economic outlook and to new technologies. To a great
extent, the expectations for the Telecommunications industry are based on
anticipated changes in technology that have not yet been introduced into the
marketplace. New wireless devices and developing network technologies should
have major impacts on the Telecommunications industry, which remains one of the
fastest growing areas in the economy, even after a slowing of growth in recent
months.
12
<PAGE>
EVERGREEN
Health Care Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
October 31, 2000 (a)
<S> <C>
CLASS A SHARES
Net asset value, beginning of period $ 10.00
-------
Income from investment operations
Net investment loss (0.03)
Net realized and unrealized gains on securities and
foreign currency related transactions 11.64
-------
Total from investment operations 11.61
-------
Distributions to shareholders from
Net realized gains (5.40)
-------
Net asset value, end of period $ 16.21
-------
Total return* 124.01%
Ratios and supplemental data
Net assets, end of period (thousands) $ 9,334
Ratios to average net assets
Expenses++ 1.75%+
Net investment loss (1.10%)+
Portfolio turnover rate 183%
<CAPTION>
Year Ended
October 31, 2000 (a)
<S> <C>
CLASS B SHARES
Net asset value, beginning of period $ 10.00
-------
Income from investment operations
Net investment loss (0.10)
Net realized and unrealized gains on securities and
foreign currency related transactions 11.56
-------
Total from investment operations 11.46
-------
Distributions to shareholders from
Net realized gains (5.40)
-------
Net asset value, end of period $ 16.06
-------
Total return* 122.37%
Ratios and supplemental data
Net assets, end of period (thousands) $24,534
Ratios to average net assets
Expenses++ 2.55%+
Net investment loss (1.78%)+
Portfolio turnover rate 183%
</TABLE>
(a) For the period from December 22, 1999 (commencement of class operations) to
October 31, 2000.
* Excluding applicable sales charges.
++ The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
+ Annualized.
See Combined Notes to Financial Statements.
13
<PAGE>
EVERGREEN
Health Care Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
October 31, 2000 (a)
<S> <C>
CLASS C SHARES
Net asset value, beginning of period $10.00
------
.........................................................................
Income from investment operations
.........................................................................
Net investment loss (0.04)
.........................................................................
Net realized and unrealized gains on securities and
foreign currency related transactions 11.51
------
.........................................................................
Total from investment operations 11.47
------
.........................................................................
Distributions to shareholders from
.........................................................................
Net realized gains (5.40)
------
.........................................................................
Net asset value, end of period $16.07
------
.........................................................................
Total return* 122.51%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period (thousands) $5,831
.........................................................................
Ratios to average net assets
Expenses++ 2.47%+
.........................................................................
Net investment loss (1.89%)+
.........................................................................
Portfolio turnover rate 183%
.........................................................................
<CAPTION>
Year Ended
October 31, 2000 (a)
<S> <C>
CLASS Y SHARES
Net asset value, beginning of period $10.00
------
.........................................................................
Income from investment operations
.........................................................................
Net investment loss (0.05)
.........................................................................
Net realized and unrealized gains on securities and
foreign currency related transactions 11.69
------
.........................................................................
Total from investment operations 11.64
------
.........................................................................
Distributions to shareholders from
.........................................................................
Net realized gains (5.40)
------
.........................................................................
Net asset value, end of period $16.24
------
.........................................................................
Total return 124.33%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period (thousands) $ 564
.........................................................................
Ratios to average net assets
Expenses++ 1.56%+
.........................................................................
Net investment loss (0.78%)+
.........................................................................
Portfolio turnover rate 183%
.........................................................................
</TABLE>
(a) For the period from December 22, 1999 (commencement of class operations) to
October 31, 2000.
* Excluding applicable sales charges.
++The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
+ Annualized.
See Combined Notes to Financial Statements.
14
<PAGE>
EVERGREEN
Technology Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
October 31, 2000 (a) #
<S> <C>
CLASS A SHARES
Net asset value, beginning of period $10.00
------
Income from investment operations
Net investment loss (0.10)
Net realized and unrealized gains on securities 0.07/+/
------
Total from investment operations (0.03)
------
Net asset value, end of period $ 9.97
------
Total return* (0.30%)
Ratios and supplemental data
Net assets, end of period (thousands) $4,645
Ratios to average net assets
Expenses++ 1.72%+
Net investment loss (1.19%)+
Portfolio turnover rate 185%
<CAPTION>
Year Ended
October 31, 2000 (a) #
<S> <C>
CLASS B SHARES
Net asset value, beginning of period $10.00
------
Income from investment operations
Net investment loss (0.19)
Net realized and unrealized gains on securities 0.09/+/
------
Total from investment operations (0.10)
------
Net asset value, end of period $ 9.90
------
Total return* (1.00%)
Ratios and supplemental data
Net assets, end of period (thousands) $7,664
Ratios to average net assets
Expenses++ 2.49%+
Net investment loss (1.96%)+
Portfolio turnover rate 185%
</TABLE>
(a) For the period from December 22, 1999 (commencement of class operations) to
October 31, 2000.
# Net investment income per share is based on average shares outstanding dur-
ing the period.
* Excluding applicable sales charges.
++ The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
/+/ The per share amount is not in accord with the net realized and unrealized
gains or losses for the period due to the timing of the sales of fund
shares and the amount of per share realized and unrealized gains or losses
at such time.
+ Annualized.
See Combined Notes to Financial Statements.
15
<PAGE>
EVERGREEN
Technology Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
October 31, 2000 (a) #
<S> <C>
CLASS C SHARES
Net asset value, beginning of period $10.00
------
Income from investment operations
Net investment loss (0.15)
Net realized and unrealized gains on securities 0.06/+/
------
Total from investment operations (0.09)
------
Net asset value, end of period $ 9.91
------
Total return* (0.90%)
Ratios and supplemental data
Net assets, end of period (thousands) $1,798
Ratios to average net assets
Expenses++ 2.47%+
Net investment loss (1.88%)+
Portfolio turnover rate 185%
<CAPTION>
Year Ended
October 31, 2000 (a) #
<S> <C>
CLASS Y SHARES
Net asset value, beginning of period $10.00
------
Income from investment operations
Net investment loss (0.10)
Net realized and unrealized gains on securities 0.10/+/
------
Total from investment operations 0.00
------
Net asset value, end of period $10.00
------
Total return 0.00%
Ratios and supplemental data
Net assets, end of period (thousands) $ 217
Ratios to average net assets
Expenses++ 1.49%+
Net investment loss (0.99%)+
Portfolio turnover rate 185%
</TABLE>
(a) For the period from December 22, 1999 (commencement of class operations) to
October 31, 2000.
# Net investment income per share is based on average shares outstanding dur-
ing the period.
* Excluding applicable sales charges.
++ The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
/+/ The per share amount is not in accord with the net realized and unrealized
gains or losses for the period due to the timing of sales of fund shares
and the amount of per share realized and unrealized gains or losses at such
time.
+ Annualized.
See Combined Notes to Financial Statements.
16
<PAGE>
EVERGREEN
Utility Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
Year Ended ------------------------------------- -------------------------
October 31, 2000 (a) 2000 1999 1998 1997 (b) 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 13.96 $ 12.85 $ 11.76 $ 11.45 $ 10.57 $ 10.80 $ 9.00
-------- -------- -------- ------- ------- ----------- ------------
Income from investment
operations
Net investment income 0.09 0.35 0.42 0.43 0.25 0.41 0.44
Net realized and
unrealized gains on
securities 0.72 2.29 2.37 1.44 0.87 0.05 2.25
-------- -------- -------- ------- ------- ----------- ------------
Total from investment
operations 0.81 2.64 2.79 1.87 1.12 0.46 2.69
-------- -------- -------- ------- ------- ----------- ------------
Distributions to
shareholders from
Net investment income (0.08) (0.35) (0.42) (0.44) (0.24) (0.41) (0.44)
Net realized gains 0 (1.18) (1.28) (1.12) 0 (0.28) (0.45)
-------- -------- -------- ------- ------- ----------- ------------
Total distributions (0.08) (1.53) (1.70) (1.56) (0.24) (0.69) (0.89)
-------- -------- -------- ------- ------- ----------- ------------
Net asset value, end of
period $ 14.69 $ 13.96 $ 12.85 $ 11.76 $ 11.45 $ 10.57 $ 10.80
-------- -------- -------- ------- ------- ----------- ------------
Total return* 5.76% 21.75% 26.05% 17.30% 10.72% 4.40% 30.70%
Ratios and supplemental
data
Net assets, end of
period (thousands) $327,067 $299,675 $108,411 $95,300 $91,638 $ 96,243 $ 107,872
Ratios to average net
assets
Expenses++ 1.09%+ 1.06% 1.03% 0.99% 1.00%+ 0.87% 0.79%
Net investment income 2.50%+ 2.41% 3.60% 3.58% 3.85%+ 3.87% 4.51%
Portfolio turnover rate 28% 66% 46% 62% 50% 59% 88%
<CAPTION>
Year Ended July 31, Year Ended December 31,
Year Ended ------------------------------------- -------------------------
October 31, 2000 (a) 2000 1999 1998 1997 (b) 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 13.97 $ 12.86 $ 11.76 $ 11.46 $ 10.58 $ 10.81 $ 9.00
-------- -------- -------- ------- ------- ----------- ------------
Income from investment
operations
Net investment income 0.06 0.24 0.34 0.34 0.20 0.33 0.37
Net realized and
unrealized gains on
securities 0.72 2.29 2.37 1.44 0.87 0.05 2.26
-------- -------- -------- ------- ------- ----------- ------------
Total from investment
operations 0.78 2.53 2.71 1.78 1.07 0.38 2.63
-------- -------- -------- ------- ------- ----------- ------------
Net investment income (0.05) (0.24) (0.33) (0.36) (0.19) (0.33) (0.37)
Net realized gains 0 (1.18) (1.28) (1.12) 0 (0.28) (0.45)
-------- -------- -------- ------- ------- ----------- ------------
Total distributions (0.05) (1.42) (1.61) (1.48) (0.19) (0.61) (0.82)
-------- -------- -------- ------- ------- ----------- ------------
Distributions to
shareholders from
Net asset value, end of
period $ 14.70 $ 13.97 $ 12.86 $ 11.76 $ 11.46 $ 10.58 $ 10.81
-------- -------- -------- ------- ------- ----------- ------------
Total return* 5.56% 20.79% 25.23% 16.31% 10.21% 3.60% 29.90%
Ratios and supplemental
data
Net assets, end of
period (thousands) $157,985 $110,460 $ 54,839 $43,776 $36,738 $ 38,511 $ 35,662
Ratios to average net
assets
Expenses++ 1.84%+ 1.80% 1.77% 1.74% 1.75%+ 1.62% 1.53%
Net investment income 1.71%+ 1.76% 2.85% 2.82% 3.10%+ 3.12% 3.78%
Portfolio turnover rate 28% 66% 46% 62% 50% 59% 88%
</TABLE>
(a) For the three months ended October 31, 2000. The Fund changed its fiscal
year end from July 31 to October 31, effective October 31, 2000.
(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.
++ The ratio of expenses to average net assets excludes expense reductions and
includes fee waivers.
+ Annualized.
See Combined Notes to Financial Statements.
17
<PAGE>
EVERGREEN
Utility Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended December 31,
Year Ended -------------------------------- -----------------------
October 31, 2000 (a) 2000 1999 1998 1997 (b) 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 13.98 $12.86 $11.76 $11.46 $10.58 $ 10.82 $ 9.01
------- ------ ------ ------ ------ ----------- -----------
Income from investment
operations
Net investment income 0.06 0.24 0.34 0.34 0.20 0.33 0.37
Net realized and
unrealized gains on
securities 0.72 2.30 2.37 1.44 0.87 0.04 2.26
------- ------ ------ ------ ------ ----------- -----------
Total from investment
operations 0.78 2.54 2.71 1.78 1.07 0.37 2.63
------- ------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income (0.05) (0.24) (0.33) (0.36) (0.19) (0.33) (0.37)
Net realized gains 0 (1.18) (1.28) (1.12) 0 (0.28) (0.45)
------- ------ ------ ------ ------ ----------- -----------
Total distributions (0.05) (1.42) (1.61) (1.48) (0.19) (0.61) (0.82)
------- ------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $ 14.71 $13.98 $12.86 $11.76 $11.46 $ 10.58 $ 10.82
------- ------ ------ ------ ------ ----------- -----------
Total return* 5.55% 20.88% 25.23% 16.31% 10.21% 3.50% 29.80%
Ratios and supplemental
data
Net assets, end of
period (thousands) $14,497 $9,589 $ 879 $ 486 $ 379 $ 396 $ 246
Ratios to average net
assets
Expenses++ 1.84%+ 1.82% 1.77% 1.74% 1.75%+ 1.63% 1.54%
Net investment income 1.71%+ 1.77% 2.74% 2.82% 3.10%+ 3.13% 3.76%
Portfolio turnover rate 28% 66% 46% 62% 50% 59% 88%
<CAPTION>
Year Ended July 31, Year Ended December 31,
Year Ended -------------------------------- -----------------------
October 31, 2000 (a) 2000 1999 1998 1997 (b) 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Income from investment
operations
Net asset value,
beginning of period $ 13.96 $12.86 $11.77 $11.46 $10.58 $ 10.82 $ 9.00
------- ------ ------ ------ ------ ----------- -----------
Net investment income 0.10 0.38 0.49 0.46 0.25 0.44 0.47
Net realized and
unrealized gains on
securities 0.71 2.28 2.33 1.45 0.88 0.03 2.27
------- ------ ------ ------ ------ ----------- -----------
Total from investment
operations 0.81 2.66 2.82 1.91 1.13 0.47 2.74
------- ------ ------ ------ ------ ----------- -----------
Distributions to
shareholders from
Net investment income (0.08) (0.38) (0.45) (0.48) (0.25) (0.43) (0.47)
Net realized gains 0 (1.18) (1.28) (1.12) 0 (0.28) (0.45)
------- ------ ------ ------ ------ ----------- -----------
Total distributions (0.08) (1.56) (1.73) (1.60) (0.25) (0.71) (0.92)
------- ------ ------ ------ ------ ----------- -----------
Net asset value, end of
period $ 14.69 $13.96 $12.86 $11.77 $11.46 $ 10.58 $ 10.82
------- ------ ------ ------ ------ ----------- -----------
Total return 5.82% 21.98% 26.35% 17.60% 10.85% 4.50% 31.30%
Ratios and supplemental
data
Net assets, end of
period (thousands) $ 2,634 $2,630 $2,123 $1,695 $1,627 $ 2,000 $ 7,791
Ratios to average net
assets
Expenses++ 0.84%+ 0.79% 0.77% 0.74% 0.74%+ 0.61% 0.54%
Net investment income 2.76%+ 2.78% 3.92% 3.82% 4.06%+ 4.01% 4.76%
Portfolio turnover rate 28% 66% 46% 62% 50% 59% 88%
</TABLE>
(a) For the three months ended October 31, 2000. The Fund changed its fiscal
year end from July 31 to October 31, effective October 31, 2000.
(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.
++ The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
+ Annualized.
See Combined Notes to Financial Statements.
18
<PAGE>
EVERGREEN
Health Care Fund
Schedule of Investments
October 31, 2000
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 95.1%
CONSUMER STAPLES - 1.0%
Food & Drug Retailing - 0.7%
CVS Corp. ........................................... 5,000 $ 264,687
------------
Food Products - 0.3%
NBTY, Inc. .......................................... 20,000 130,000
------------
FINANCIALS - 1.2%
Insurance - 1.2%
CIGNA Corp. ......................................... 4,000 487,800
------------
HEALTH CARE - 88.0%
Biotechnology - 29.2%
Abgenix, Inc. ....................................... 1,500 118,313
Aclara Biosciences, Inc. ............................ 5,000 89,375
Alexion Pharmaceuticals, Inc. ....................... 1,400 144,725
Alkermes, Inc. ...................................... 5,500 203,844
Amgen, Inc. ......................................... 17,000 984,937
Applied Molecular Evolution.......................... 8,500 184,875
Avant Immunotherapeutics, Inc. ...................... 10,000 84,375
Axys Pharmaceutical, Inc. ........................... 10,000 55,000
Biochem Pharmaceuticals, Inc. *...................... 5,000 123,750
Biocryst Pharmaceuticals, Inc. *..................... 20,000 182,500
Biogen, Inc. ........................................ 800 48,150
Celera Genomics Group................................ 6,500 438,750
Cell Genesys, Inc. .................................. 3,000 69,188
Celltech Group Plc, Class F *........................ 5,000 99,390
Chiron Corp. ........................................ 1,500 64,969
Compugen Ltd. ....................................... 10,100 90,900
COR Therapeutics, Inc. .............................. 4,000 226,000
Corixa Corp. *....................................... 9,000 400,500
Epix Med, Inc. ...................................... 6,000 63,375
Genentech, Inc. ..................................... 10,000 825,000
Genomic Solutions, Inc. ............................. 10,000 140,000
Genzyme Corp. ....................................... 1,200 85,200
Genzyme Transgenics Corp. ........................... 7,500 160,781
Gilead Sciences, Inc. ............................... 1,500 129,000
Human Genome Sciences, Inc. *........................ 5,000 441,953
Hyseq, Inc. ......................................... 3,000 87,188
IDEC Pharmaceuticals Corp. .......................... 500 98,063
Ilex Oncology, Inc. *................................ 21,100 764,875
Immunex Corp. *...................................... 7,000 297,938
Immunomedics, Inc. .................................. 13,500 312,187
Invitrogen Corp. .................................... 3,000 228,188
Lexicon Genetics, Inc. .............................. 6,000 121,500
Maxygen, Inc. ....................................... 3,500 140,875
Medarex, Inc. ....................................... 1,200 73,350
</TABLE>
19
<PAGE>
EVERGREEN
Health Care Fund
Schedule of Investments (continued)
October 31, 2000
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
HEALTH CARE - continued
Biotechnology - continued
MedImmune, Inc. ..................................... 6,500 $ 424,937
Millennium Pharmaceuticals, Inc. *................... 2,000 145,125
Myriad Genetics, Inc. *.............................. 3,000 360,000
Nanogen, Inc. ....................................... 3,000 46,500
ONYX Pharmaceuticals, Inc. .......................... 22,500 337,500
Orchid Biosciences, Inc. ............................ 8,500 173,719
Osi Pharmaceuticals, Inc. ........................... 4,000 288,000
Progenics Pharmaceuticals, Inc. *.................... 12,500 307,812
Protein Design Labs, Inc. ........................... 3,000 405,234
QLT Phototherapeutics, Inc. ......................... 3,000 149,203
Sangstat Med Corp. .................................. 36,500 365,000
Scios, Inc. *........................................ 37,000 529,562
Tanox, Inc. ......................................... 7,000 260,750
Transkaryotic Therapies, Inc. *...................... 8,000 298,000
Tularik, Inc. ....................................... 3,000 95,250
------------
11,765,606
------------
Electronic Equipment & Instruments - 0.9%
Novoste Corp. *...................................... 13,500 340,875
------------
Health Care Equipment & Supplies - 11.2%
ArQule, Inc. ........................................ 6,000 138,750
ArthroCare Corp. *................................... 12,500 283,594
Aurora Bioscience Corp. ............................. 4,000 243,750
Becton Dickinson & Co. .............................. 7,000 234,500
Bioject Med Technologies, Inc. ...................... 5,000 30,000
Boston Scientific Corp. ............................. 23,000 366,562
C.R. Bard, Inc. ..................................... 4,000 167,500
Cyberonics, Inc. *................................... 16,600 385,950
Disetronic Hldg. AG.................................. 207 179,755
Fresenius Medical Care AG, ADR....................... 5,700 151,763
Guidant Corp *....................................... 2,000 105,875
Igen Intl. .......................................... 11,500 286,062
Inhale Therapeutic Sys. ............................. 5,000 248,750
Mentor Corp. ........................................ 14,000 246,750
Minimed, Inc. ...................................... 3,000 218,813
Molecular Devices Corp. ............................. 2,000 136,750
Nexmed, Inc. ........................................ 25,500 423,937
PE Corp-PE BioSystems Group.......................... 2,000 234,000
Penwest Pharmaceuticals Co. ......................... 25,000 262,500
Possis Med, Inc. .................................... 20,000 113,750
Sonosite, Inc. ...................................... 5,000 63,750
------------
4,523,061
------------
</TABLE>
20
<PAGE>
EVERGREEN
Health Care Fund
Schedule of Investments (continued)
October 31, 2000
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
HEALTH CARE - continued
Health Care Providers & Services - 7.4%
Advance Paradigm, Inc. *............................. 8,500 $ 415,437
Aetna, Inc. ......................................... 7,500 433,594
Ameripath, Inc. ..................................... 6,500 116,594
Bergen Brunswig Corp. ............................... 10,000 90,625
Express Scripts, Inc., Class A....................... 2,000 134,375
McKesson HBOC, Inc. ................................. 3,000 84,188
MDS, Inc. ........................................... 6,000 118,232
Pharmacopeia, Inc. .................................. 12,500 228,125
Quest Diagnostics, Inc. *............................ 4,000 385,000
Quintiles TransNational Corp. ....................... 26,500 369,344
Regeneron Pharmaceuticals, Inc. *.................... 13,000 347,750
Synavant, Inc. ...................................... 150 684
UnitedHealth Group, Inc. ............................ 50 5,469
Wellpoint Health Networks, Inc., Class A............. 2,250 263,109
------------
2,992,526
------------
Pharmaceuticals - 39.3%
Abbott Laboratories.................................. 6,600 348,562
Altana AG............................................ 800 96,347
American Home Products Corp. ........................ 20,300 1,289,050
Astrazeneca Plc, ADR................................. 6,000 286,125
Barr Laboratories, Inc. ............................. 10,000 631,250
Bristol-Myers Squibb Co. ............................ 10,500 639,844
Celgene Corp. ....................................... 5,000 321,875
Cell Therapeutics, Inc. ............................. 8,000 535,125
Chugai Pharmaceutical Co., Ltd. ..................... 9,000 152,756
Dura Pharmaceuticals, Inc. *......................... 3,000 103,313
Eisai Co. ........................................... 5,000 153,966
Elan Corp. Plc, ADR *................................ 2,000 103,875
Eli Lilly & Co. ..................................... 6,000 536,250
FH Faulding & Co., Ltd. ............................. 38,500 203,556
Glaxo Wellcome Plc, ADR.............................. 14,028 816,254
H Lundbeck A/S....................................... 700 48,133
IVAX Corp. .......................................... 6,500 282,750
Johnson & Johnson.................................... 5,200 479,050
King Pharmaceuticals, Inc. .......................... 7,950 356,259
Ligand Pharmaceuticals, Inc. ........................ 15,000 223,125
Merck & Co., Inc. ................................... 8,830 794,148
Merck KGaA........................................... 8,000 304,138
Mylan Laboratories, Inc. ............................ 27,400 767,200
Novartis AG.......................................... 15,000 575,625
Pfizer, Inc. ........................................ 37,950 1,638,966
Pharmacia Corp. ..................................... 20,735 1,140,425
Pharming Group NV.................................... 7,500 81,784
</TABLE>
21
<PAGE>
EVERGREEN
Health Care Fund
Schedule of Investments (continued)
October 31, 2000
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
HEALTH CARE - continued
Pharmaceuticals - continued
Praecis Pharmaceuticals,
Inc....................... 6,500 $ 164,938
Roche Hldg. AG............. 85 776,424
Roche Hldg. Ltd., ADR...... 2,200 200,902
Schering AG................ 2,400 134,418
Serono SA, ADR............. 10,000 226,250
Taro Pharmaceutical Inds.,
Ltd. *.................... 12,500 303,125
Teva Pharmaceutical Inds.,
Ltd., ADR................. 2,000 118,250
Titan Pharmaceuticals,
Inc. ..................... 13,000 547,040
UCB SA..................... 5,000 178,206
Viropharma, Inc. .......... 7,000 163,625
Yamanouchi Pharmaceutical
Co., Ltd. ................ 2,000 90,547
------------
15,813,476
------------
INFORMATION TECHNOLOGY - 1.0%
Computers & Peripherals -
0.5%
Inamed Corp. .............. 7,100 198,800
------------
Electronic Equipment &
Instruments - 0.5%
Caliper Technologies
Corp. .................... 3,500 197,312
------------
Internet Software &
Services - 0.0%
Ventro Corp. .............. 5,000 24,063
------------
MATERIALS - 3.9%
Chemicals - 3.9%
Akzo Nobel NV.............. 7,742 352,473
Aventis, ADR............... 13,000 936,812
Millipore Corp............. 3,000 157,500
Pall Corp.................. 5,000 107,813
------------
1,554,598
------------
Total Common Stocks (cost
$35,315,428)............ 38,292,804
------------
<CAPTION>
<S> <C> <C>
SHORT-TERM INVESTMENTS -
30.9%
MUTUAL FUND SHARES - 30.9%
Evergreen Select Money
Market Fund o............. 1,282,727 1,282,727
Navigator Prime Portfolio
p ........................ 11,156,520 11,156,520
------------
Total Short-Term
Investments (cost
$12,439,247)............ 12,439,247
------------
Total Investments - (cost $47,754,675) -
126.0%.................................. 50,732,051
Other Assets and Liabilities - (26.0%).... (10,469,297)
------------
Net Assets - 100.0%....................... $ 40,262,754
============
</TABLE>
See Combined Notes to Schedules of Investments.
22
<PAGE>
EVERGREEN
Technology Fund
Schedule of Investments
October 31, 2000
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 89.1%
INDUSTRIALS - 17.0%
Commercial Services & Supplies - 16.5%
Automatic Data Processing, Inc. ...................... 9,000 $ 587,812
Concord EFS, Inc. .................................... 10,000 413,125
DST Sys., Inc. *...................................... 6,000 369,750
Excelon Corp. ........................................ 17,300 140,563
First Data Corp. ..................................... 5,000 250,625
Fiserv, Inc. *........................................ 2,000 104,875
Manhattan Associates, Inc. ........................... 3,300 211,252
Paychex, Inc. ........................................ 5,000 283,437
------------
2,361,439
------------
Industrial Conglomerates - 0.5%
Coorstek, Inc. ....................................... 2,400 70,200
------------
INFORMATION TECHNOLOGY - 71.5%
Communications Equipment - 9.9%
CIENA Corp. *......................................... 1,000 105,125
Cisco Sys., Inc. *.................................... 2,000 107,750
Comverse Tech., Inc. ................................. 2,000 223,500
Corning, Inc. ........................................ 2,000 153,000
Extreme Networks, Inc. ............................... 1,000 82,938
Infospace, Inc. ...................................... 3,900 78,488
Ixia.................................................. 1,500 35,156
Motorola, Inc. ....................................... 4,000 99,750
Nokia Corp., ADR...................................... 3,000 128,250
Nortel Networks Corp. ................................ 3,000 136,500
Scientific Atlanta, Inc. ............................. 3,000 205,312
Tollgrade Communications, Inc. *...................... 700 67,025
------------
1,422,794
------------
Computers & Peripherals - 10.1%
Compaq Computer Corp. ................................ 9,000 273,690
Dell Computer Corp. *................................. 6,000 177,000
EMC Corp. *........................................... 1,000 89,062
Gateway, Inc. ........................................ 2,000 103,220
Hewlett-Packard Co. .................................. 2,000 92,875
InFocus Corp. ........................................ 3,900 172,331
Intl. Business Machines Corp. ........................ 1,000 98,500
Lexmark Intl. Group, Inc., Class A *.................. 4,000 164,000
NVIDIA Corp. ......................................... 3,000 186,422
Read Rite Corp. ...................................... 4,200 31,238
Sun Microsystems, Inc. ............................... 500 55,438
------------
1,443,776
------------
</TABLE>
23
<PAGE>
EVERGREEN
Technology Fund
Schedule of Investments (continued)
October 31, 2000
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
INFORMATION TECHNOLOGY - continued
Electronic Equipment & Instruments - 6.1%
Conductus, Inc. ...................................... 9,500 $ 88,469
Flextronics Intl., Ltd. .............................. 4,000 152,000
JDS Uniphase Corp. ................................... 1,000 81,437
Sanmina Corp. ........................................ 1,500 171,469
SCI Sys., Inc. *...................................... 3,000 129,000
Solectron Corp. ...................................... 3,000 132,000
Three-Five Sys., Inc. *............................... 3,600 124,200
------------
878,575
------------
Internet Software & Services - 1.5%
About.Com, Inc. ...................................... 1,440 34,560
Art Technology Group, Inc. *.......................... 2,400 150,600
Marchfirst, Inc. ..................................... 4,700 27,319
------------
212,479
------------
Semiconductor Equipment & Products - 32.2%
Altera Corp. ......................................... 7,000 286,562
Analog Devices, Inc. ................................. 2,000 130,000
Applied Materials, Inc. .............................. 2,000 106,250
Applied Micro Circuits Corp. *........................ 1,000 76,438
Atmel Corp. .......................................... 9,000 134,438
Broadcom Corp. ....................................... 300 66,713
Cirrus Logic, Inc. ................................... 6,000 258,750
Cypress Semiconductor Corp. *......................... 7,000 262,062
Integrated Device Technology.......................... 4,000 225,250
Intel Corp. .......................................... 3,000 135,000
Intersil Holding Corp. ............................... 3,400 162,987
Intl. Rectifier Corp. ................................ 3,000 133,875
Jabil Circuit, Inc. *................................. 3,000 171,187
KLA-Tencor Corp. ..................................... 4,000 135,250
Lam Research Corp. *.................................. 9,000 174,375
Linear Technology Corp. .............................. 2,000 129,125
LSI Logic Corp. ...................................... 10,000 328,750
Maxim Integrated Products, Inc. ...................... 2,000 132,625
Microchip Tech., Inc. *............................... 7,575 239,559
Micron Tech., Inc. ................................... 12,000 417,000
Novellus Sys., Inc. .................................. 3,000 122,813
Photon Dynamics, Inc. *............................... 1,100 39,600
PMC-Sierra, Inc. *.................................... 500 84,750
Teradyne, Inc. ....................................... 5,000 156,250
Texas Instruments, Inc. .............................. 2,000 98,125
Varian Semiconductor Equipment, Inc. ................. 5,000 115,000
</TABLE>
24
<PAGE>
EVERGREEN
Technology Fund
Schedule of Investments (continued)
October 31, 2000
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
INFORMATION TECHNOLOGY - continued
Semiconductor Equipment & Products - continued
Vitesse Semiconductor Corp. *......................... 2,000 $ 139,875
Xilinx, Inc. ......................................... 2,000 144,875
------------
4,607,484
------------
Software - 11.1%
Adobe Sys., Inc. ..................................... 2,000 152,125
Caminus Corp. ........................................ 3,600 113,400
FileNet Corp. *....................................... 6,000 159,000
Microsoft Corp. *..................................... 12,000 826,500
Peregrine Sys., Inc. *................................ 6,150 147,600
Precise Software Solutions, Ltd. ..................... 3,500 80,062
Rational Software Corp. *............................. 2,000 119,375
------------
1,598,062
------------
Specialty Retail - 0.6%
ADC Telecommunications, Inc. ......................... 4,000 85,500
------------
TELECOMMUNICATION SERVICES - 0.6%
Diversified Telecommunication Services - 0.6%
Efficient Networks, Inc. ............................. 2,100 88,102
------------
Total Common Stocks (cost $13,388,791).............. 12,768,411
------------
<CAPTION>
<S> <C> <C>
SHORT-TERM INVESTMENTS - 32.1%
MUTUAL FUND SHARES - 32.1%
Evergreen Select Money Market Fund o.................. 814,273 814,273
Navigator Prime Portfolio p .......................... 3,783,302 3,783,302
------------
Total Short-Term Investments (cost $4,597,575)...... 4,597,575
------------
Total Investments - (cost $17,986,366) - 121.2%................... 17,365,986
Other Assets and Liabilities - (21.2%)............................ (3,042,424)
------------
Net Assets - 100.0%............................................... $ 14,323,562
============
</TABLE>
See Combined Notes to Schedules of Investments.
25
<PAGE>
EVERGREEN
Utility Fund
Schedule of Investments
October 31, 2000
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - 68.5%
INDUSTRIALS - 1.7%
Construction & Engineering - 1.7%
Quanta Svcs., Inc. ................................... 275,000 $ 8,542,188
------------
INFORMATION TECHNOLOGY - 2.0%
Communications Equipment - 1.3%
QUALCOMM, Inc. ....................................... 103,778 6,756,921
------------
Computers & Peripherals - 0.7%
Palm, Inc. ........................................... 62,294 3,336,622
------------
TELECOMMUNICATION SERVICES - 26.9%
Diversified Telecommunication Services - 19.0%
ALLTEL Corp. ......................................... 221,900 14,298,681
AT&T Corp. ........................................... 75,900 1,759,931
BellSouth Corp. ...................................... 326,400 15,769,200
Global Crossing, Ltd. ................................ 213,000 5,032,125
Qwest Communications Intl., Inc. ..................... 309,338 15,041,560
SBC Communications, Inc. ............................. 220,261 12,706,307
Telefonica de Espana SA de CV, ADR.................... 59,036 3,420,398
Time Warner Telecom, Inc., Class A.................... 97,800 5,831,325
Verizon Communications................................ 277,880 16,064,938
Xo Communications, Inc. .............................. 171,500 5,785,445
------------
95,709,910
------------
Wireless Telecommunications Services - 7.9%
Crown Castle Intl. Corp. ............................. 300,000 9,093,750
Leap Wireless Intl., Inc. ............................ 156,127 7,767,318
Nextel Communications, Inc., Class A.................. 269,500 10,358,906
Sprint Corp. (PCS Group), Ser. 1...................... 198,600 7,571,625
Vodafone Group Plc, ADR............................... 110,250 4,692,516
------------
39,484,115
------------
UTILITIES - 37.9%
Electric Utilities - 27.5%
American Elec. Power Co., Inc. ....................... 178,000 7,387,000
Companhia Paranaense de Energia-Copel, Plc, ADR....... 160,000 1,450,000
Consolidated Edison, Inc. ............................ 422,000 14,849,125
Dominion Resources, Inc. ............................. 125,000 7,351,562
Dynegy, Inc. ......................................... 323,000 14,958,937
El Paso Energy Partners LP............................ 1,100 28,463
FPL Group, Inc. ...................................... 67,000 4,422,000
Niagara Mohawk Holdings, Inc. ........................ 458,500 7,336,000
Nisource, Inc. ....................................... 401,000 9,999,937
NRG Energy, Inc. ..................................... 216,000 5,616,000
PPL Corp. ............................................ 117,700 4,847,769
Public Service Enterprise Group, Inc. ................ 265,200 11,005,800
Reliant Energy, Inc. ................................. 290,000 11,980,625
Scottish Power Plc, ADR *............................. 219,110 6,614,383
Sierra Pacific Resources.............................. 272,800 4,688,750
</TABLE>
26
<PAGE>
EVERGREEN
Utility Fund
Schedule of Investments (continued)
October 31, 2000
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS - continued
UTILITIES - continued
Electric Utilities - continued
Southern Co. ......................................... 177,000 $ 5,199,375
TECO Energy, Inc. .................................... 202,300 5,639,113
TXU Corp. ............................................ 198,200 7,345,788
UtiliCorp United, Inc. ............................... 225,600 5,992,500
Wisconsin Energy Corp. ............................... 58,050 1,092,066
------------
137,805,193
------------
Energy Equipment & Services - 1.0%
Capstone Turbine Corp. ............................... 92,000 5,106,000
------------
Gas Utilities - 9.4%
Coastal Corp. ........................................ 34,800 2,625,225
El Paso Energy Corp. ................................. 127,300 7,980,119
Enron Corp. .......................................... 182,600 14,984,612
MDU Resources Group, Inc. ............................ 57,400 1,678,950
Peoples Energy Corp. ................................. 288,800 9,927,500
Sempra Energy......................................... 483,913 10,010,950
------------
47,207,356
------------
Total Common Stocks (cost $279,943,591)............. 343,948,305
------------
CONVERTIBLE PREFERRED STOCKS - 19.5%
ENERGY - 1.9%
Energy Equipment & Services - 1.9%
Southern Energy, Inc., 6.25%, 10/01/2030.............. 158,700 9,650,944
------------
INFORMATION TECHNOLOGY - 4.5%
Communications Equipment - 4.5%
Crown Castle, DECS Trust V 7.25%, 08/15/2002.......... 334,200 10,213,988
Metromedia Fiber, DECS Trust VI 6.25%, 11/15/2002..... 341,000 12,553,062
------------
22,767,050
------------
TELECOMMUNICATION SERVICES - 2.1%
Diversified Telecommunication Services - 0.3%
Qwest Trends Trust, 5.75%, 11/17/2003 144A............ 16,000 1,284,000
------------
Wireless Telecommunications Services - 1.8%
MediaOne Group, Inc., PIES, 7.00% 11/15/2002.......... 222,300 9,211,556
------------
UTILITIES - 11.0%
Electric Utilities - 9.6%
AES Trust III, 6.75%, 10/15/2029...................... 40,000 3,560,000
Calpine Capital Trust, 5.75%, 11/01/2004.............. 46,040 6,422,580
Calpine Capital Trust III, 5.00%, 08/01/2005 144A..... 186,000 10,230,000
CMS Energy Corp., 8.75%, 07/01/2002................... 258,900 8,187,712
Nisource, Inc., PIES 7.75%, 02/19/2003................ 72,000 3,469,500
TXU Corp., PRIDES 9.25%, 08/16/2002................... 140,800 6,195,200
Utilicorp United, Inc., 9.75%, 11/16/2002............. 337,000 9,815,125
------------
47,880,117
------------
</TABLE>
27
<PAGE>
EVERGREEN
Utility Fund
Schedule of Investments (continued)
October 31, 2000
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS - continued
UTILITIES - continued
Gas Utilities - 1.4%
Coastal Corp., PRIDES 6.625%, 08/16/2002...... 165,000 $ 7,095,000
------------
Total Convertible Preferred Stocks (cost
$87,349,186)............................... 97,888,667
------------
PREFERRED STOCKS - 1.1%
UTILITIES - 1.1%
Electric Utilities - 1.1%
Alliant Energy Resources, Inc., 7.25%,
02/15/2030 144A, (cost $5,673,400)........... 82,100 5,367,288
------------
<CAPTION>
Principal Amount
<S> <C> <C>
CONVERTIBLE DEBENTURES - 2.0%
INFORMATION TECHNOLOGY - 1.0%
Communications Equipment - 1.0%
American Tower Corp., 6.25%, 10/15/2009....... $ 2,800,000 5,092,500
------------
TELECOMMUNICATION SERVICES - 1.0%
Diversified Telecommunication Services - 1.0%
Level 3 Communications, Inc., 6.00%,
09/15/2009................................... 5,300,000 4,948,875
------------
Total Convertible Debentures (cost
$11,014,380)............................... 10,041,375
------------
CORPORATE BONDS - 3.3%
TELECOMMUNICATION SERVICES - 3.3%
Diversified Telecommunication Services - 2.1%
Pinnacle Holdings, Inc., 5.50%, 09/15/2007.... 18,050,000 10,311,062
------------
Wireless Telecommunications Services - 1.2%
Nextel Communications, Inc., 5.25%, 01/15/2010
144A......................................... 7,550,000 6,285,375
------------
Total Corporate Bonds (cost $20,504,587).... 16,596,437
------------
U.S. TREASURY OBLIGATIONS pp - 0.0%
U.S. Treasury Bond, 6.25%, 8/15/2023.......... 23,762 24,501
U.S. Treasury Note, 5.875%, 11/30/2001........ 5,395 5,371
U.S. Treasury Note, 7.50%, 11/15/2001......... 9,688 9,800
------------
Total U.S. Treasury Obligations (cost
$39,672)................................... 39,672
------------
<CAPTION>
Shares
<S> <C> <C>
SHORT-TERM INVESTMENTS - 18.2%
MUTUAL FUND SHARES - 18.2%
Evergreen Select Money Market Fund o.......... 35,721,293 35,721,293
Navigator Prime Portfolio p .................. 55,660,103 55,660,103
------------
Total Short-Term Investments (cost
$91,381,396)............................... 91,381,396
------------
Total Investments - (cost $495,906,212) - 112.6%................. 565,263,140
Other Assets and Liabilities - (12.6%)........................... (63,079,678)
------------
Net Assets - 100.0%.............................................. $502,183,462
============
</TABLE>
See Combined Notes to Schedules of Investments.
28
<PAGE>
EVERGREEN
Sector Funds
Combined Notes to Schedules of Investments
October 31, 2000
144A Security that may be sold to qualified institutional buyers under Rule
144A of the Securities Act of 1933, as amended. This security has been
determined to be liquid under guidelines established by the Board of
Trustees.
* Non-income producing security.
p Represents investment of cash collateral received for securities on loan.
pp Represents non-cash collateral received for securities on loan.
o The advisor of the Fund and the advisor of the money market fund are each
a division of First Union.
Summary of Abbreviations:
ADR American Depository Receipt
DECS Dividend Enhanced Convertible Stock
PIES Premium Income Exchangeable Security
PRIDES Preferred Redeemable Increased Dividend Equity Security
See Combined Notes to Financial Statements.
29
<PAGE>
EVERGREEN
Sector Funds
Statements of Assets and Liabilities
October 31, 2000
<TABLE>
<CAPTION>
Health Care Technology
Fund Fund Utility Fund
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Identified cost of securities........... $47,754,675 $17,986,366 $495,906,212
Net unrealized gains or losses on
securities............................. 2,977,376 (620,380) 69,356,928
--------------------------------------------------------------------------------
Market value of securities.............. 50,732,051 17,365,986 565,263,140
Cash.................................... 19,551 0 0
Receivable for securities sold.......... 411,241 1,031,459 11,396,547
Receivable for Fund shares sold......... 1,403,531 452,683 2,437,006
Dividends and interest receivable....... 16,502 5,310 1,436,804
Prepaid expenses and other assets....... 58,319 65,724 37,530
--------------------------------------------------------------------------------
Total assets........................... 52,641,195 18,921,162 580,571,027
--------------------------------------------------------------------------------
Liabilities
Distributions payable................... 0 0 75,158
Payable for securities purchased........ 1,202,454 790,492 22,034,845
Payable for Fund shares redeemed........ 4,099 16,057 336,971
Payable for securities on loan.......... 11,156,520 3,783,302 55,699,775
Advisory fee payable.................... 993 347 91,222
Distribution Plan expenses payable...... 848 270 6,780
Due to other related parties............ 59 30 1,342
Accrued expenses and other liabilities.. 13,468 7,102 141,472
--------------------------------------------------------------------------------
Total liabilities...................... 12,378,441 4,597,600 78,387,565
--------------------------------------------------------------------------------
Net assets............................... $40,262,754 $14,323,562 $502,183,462
--------------------------------------------------------------------------------
Net assets represented by
Paid-in capital......................... $35,127,155 $16,143,661 $395,776,260
Undistributed (overdistributed) net
investment income (loss)............... 0 0 542,113
Accumulated net realized gains or losses
on securities and foreign currency
related transactions................... 2,158,257 (1,199,719) 36,508,161
Net unrealized gains or losses on
securities............................. 2,977,342 (620,380) 69,356,928
--------------------------------------------------------------------------------
Total net assets......................... $40,262,754 $14,323,562 $502,183,462
--------------------------------------------------------------------------------
Net assets consists of
Class A................................. $ 9,334,450 $ 4,644,386 $327,067,143
Class B................................. 24,533,525 7,664,372 157,984,813
Class C................................. 5,830,560 1,797,487 14,497,288
Class Y................................. 564,219 217,317 2,634,218
--------------------------------------------------------------------------------
Total net assets......................... $40,262,754 $14,323,562 $502,183,462
--------------------------------------------------------------------------------
Shares outstanding
Class A................................. 575,827 465,667 22,261,557
Class B................................. 1,527,172 773,829 10,747,491
Class C................................. 362,909 181,422 985,379
Class Y................................. 34,741 21,728 179,290
--------------------------------------------------------------------------------
Net asset value per share
Class A................................. $ 16.21 $ 9.97 $ 14.69
--------------------------------------------------------------------------------
Class A--Offering price (based on sales
charge of 4.75%)....................... $ 17.02 $ 10.47 $ 15.42
--------------------------------------------------------------------------------
Class B................................. $ 16.06 $ 9.90 $ 14.70
--------------------------------------------------------------------------------
Class C................................. $ 16.07 $ 9.91 $ 14.71
--------------------------------------------------------------------------------
Class Y................................. $ 16.24 $ 10.00 $ 14.69
--------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
30
<PAGE>
EVERGREEN
Sector Funds
Statements of Operations
Year Ended October 31, 2000
<TABLE>
<CAPTION>
Health Care Technology Utility
Fund (a) Fund (a) Fund (b)
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Dividends (net of foreign withholding
taxes of $2,175, $166 and $9,567,
respectively).......................... $ 65,493 $ 6,982 $ 3,588,504
Interest................................ 14,540 27,905 573,888
Securities lending income............... 5,635 1,225 41,131
---------------------------------------------------------------------------------
Total investment income.................. 85,668 36,112 4,203,523
---------------------------------------------------------------------------------
Expenses
Advisory fee............................ 110,292 65,405 499,539
Distribution Plan expenses.............. 102,035 58,640 575,441
Administrative services fees............ 11,610 6,885 118,938
Transfer agent fee...................... 9,500 5,852 393,287
Trustees' fees and expenses............. 225 148 2,424
Printing and postage expenses........... 6,970 3,412 10,656
Custodian fee........................... 3,647 1,219 48,407
Registration and filing fees............ 15,317 5,221 26,547
Professional fees....................... 12,422 8,234 11,427
Organization expenses................... 5,781 5,600 0
Other................................... 2,747 146 9,060
---------------------------------------------------------------------------------
Total expenses......................... 280,546 160,762 1,695,726
Less: Expense reductions............... (650) (431) (21,928)
Fee waivers...................... 0 0 (123,067)
---------------------------------------------------------------------------------
Net expenses........................... 279,896 160,331 1,550,731
---------------------------------------------------------------------------------
Net investment income (loss)............ (194,228) (124,219) 2,652,792
---------------------------------------------------------------------------------
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions
Net realized gains or losses on:
Securities.............................. 5,351,517 (1,199,719) 22,220,006
Foreign currency related transactions... (1,699) 0 0
---------------------------------------------------------------------------------
Net realized gains or losses on
securities and foreign currency related
transactions........................... 5,349,818 (1,199,719) 22,220,006
---------------------------------------------------------------------------------
Net change in unrealized gains or losses
on securities and foreign currency
related transactions................... 2,977,342 (620,380) (456,975)
---------------------------------------------------------------------------------
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions.......... 8,327,160 (1,820,099) 21,763,031
---------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations.............. $8,132,932 $(1,944,318) $24,415,823
---------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 22, 1999 (commencement of operations) to
October 31, 2000.
(b) For the three months ended October 31, 2000. The Fund changed its fiscal
year end from July 31 to October 31, effective October 31, 2000.
See Combined Notes to Financial Statements.
31
<PAGE>
EVERGREEN
Sector Funds
Statement of Operations
Year ended July 31, 2000
<TABLE>
<CAPTION>
Utility
Fund
--------------------------------------------------------------------------------
<S> <C>
Investment income
Dividends (net of foreign withholding taxes of $27,952).......... $ 8,030,460
Interest......................................................... 1,182,352
Securities lending income........................................ 14,991
--------------------------------------------------------------------------------
Total investment income........................................... 9,227,803
--------------------------------------------------------------------------------
Expenses
Advisory fee..................................................... 1,166,093
Distribution Plan expenses....................................... 1,209,387
Administrative services fees..................................... 208,003
Transfer agent fee............................................... 851,529
Custodian fee.................................................... 70,291
Other............................................................ 192,883
--------------------------------------------------------------------------------
Total expenses.................................................. 3,698,186
Less: Expense reductions........................................ (17,469)
Fee waivers............................................... (363,022)
--------------------------------------------------------------------------------
Net expenses.................................................... 3,317,695
--------------------------------------------------------------------------------
Net investment income............................................ 5,910,108
--------------------------------------------------------------------------------
Net realized and unrealized gains or losses on securities and
foreign currency related transactions
Net realized gains on:
Securities...................................................... 23,281,552
Foreign currency related transactions........................... 50
--------------------------------------------------------------------------------
Net realized gains on securities and foreign currency related
transactions.................................................... 23,281,602
--------------------------------------------------------------------------------
Net change in unrealized gains or losses on securities and
foreign currency related transactions........................... (4,060,888)
--------------------------------------------------------------------------------
Net realized and unrealized gains on securities and foreign
currency related transactions................................... 19,220,714
--------------------------------------------------------------------------------
Net increase in net assets resulting from operations............. $25,130,822
--------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
32
<PAGE>
EVERGREEN
Sector Funds
Statements of Changes in Net Assets
Year Ended October 31, 2000
<TABLE>
<CAPTION>
Health Care Technology Utility
Fund (a) Fund (a) Fund (b)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income (loss).......... $ (194,228) $ (124,219) $ 2,652,792
Net realized gains or losses on
securities and foreign currency
related transactions................. 5,349,818 (1,199,719) 22,220,006
Net change in unrealized gains or
losses on securities and foreign
currency related transactions........ 2,977,342 (620,380) (456,975)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations........... 8,132,932 (1,944,318) 24,415,823
--------------------------------------------------------------------------------
Distributions to shareholders
Net investment income
Class A.............................. 0 0 (1,661,962)
Class B.............................. 0 0 (459,875)
Class C.............................. 0 0 (41,657)
Class Y.............................. 0 0 (15,538)
Net realized gains....................
Class A.............................. (185,863) 0 0
Class B.............................. (2,538,000) 0 0
Class C.............................. (54,000) 0 0
Class Y.............................. (76,953) 0 0
--------------------------------------------------------------------------------
Total distributions to shareholders.. (2,854,816) 0 (2,179,032)
--------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold............. 34,348,445 16,907,698 69,490,961
Net asset value of shares issued in
reinvestment of distributions........ 2,854,816 0 1,934,729
Payment for shares redeemed........... (2,218,623) (639,818) (13,832,986)
--------------------------------------------------------------------------------
Net increase in net assets resulting
from capital share transactions..... 34,984,638 16,267,880 57,592,704
--------------------------------------------------------------------------------
Total increase in net assets......... 40,262,754 14,323,562 79,829,495
Net assets
Beginning of period................... 0 0 422,353,967
--------------------------------------------------------------------------------
End of period......................... $40,262,754 $14,323,562 $502,183,462
--------------------------------------------------------------------------------
Undistributed net investment income.... $ 0 $ 0 $ 542,113
--------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 22, 1999 (commencement of operations) to Octo-
ber 31, 2000.
(b) For the three months ended October 31, 2000. The Fund changed its fiscal
year end from July 31 to October 31, effective October 31, 2000.
See Combined Notes to Financial Statements.
33
<PAGE>
EVERGREEN
Sector Funds
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Utility Fund
--------------------------
Year Ended July 31,
--------------------------
2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income............................. $ 5,910,108 $ 5,016,016
Net realized gains on securities and foreign
currency related transactions.................... 23,281,602 6,752,256
Net change in unrealized gains or losses on
securities and foreign currency related
transactions..................................... (4,060,888) 23,219,707
--------------------------------------------------------------------------------
Net increase in net assets resulting from
operations....................................... 25,130,822 34,987,979
--------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class A........................................... (4,423,099) (3,518,061)
Class B........................................... (1,243,397) (1,359,833)
Class C........................................... (56,923) (16,980)
Class Y........................................... (66,050) (101,181)
Net realized gains................................
Class A........................................... (9,808,607) (10,191,078)
Class B........................................... (5,178,058) (4,842,643)
Class C........................................... (119,850) (52,067)
Class Y........................................... (187,129) (304,419)
--------------------------------------------------------------------------------
Total distributions to shareholders............... (21,083,113) (20,386,262)
--------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold......................... 110,944,245 17,451,359
Net asset value of shares issued in reinvestment
of distributions................................. 18,113,980 17,326,400
Payment for shares redeemed....................... (42,785,764) (24,384,302)
Net asset value of shares issued in acquisition... 165,782,310 0
--------------------------------------------------------------------------------
Net increase in net assets resulting from capital
share transactions............................... 252,054,771 10,393,457
--------------------------------------------------------------------------------
Total increase in net assets..................... 256,102,480 24,995,174
Net assets
Beginning of period............................... 166,251,487 141,256,313
--------------------------------------------------------------------------------
End of period..................................... $422,353,967 $166,251,487
--------------------------------------------------------------------------------
Undistributed (overdistributed) net investment
income............................................ $ 68,353 $ (52,336)
--------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
34
<PAGE>
Combined Notes to Financial Statements
1. ORGANIZATION
The Evergreen Sector Funds consist of Evergreen Health Care Fund ("Health Care
Fund"), Evergreen Technology Fund ("Technology Fund") and Evergreen Utility
Fund ("Utility Fund"), (collectively, the "Funds"). Health Care Fund and Tech-
nology Fund are non-diversified series and Utility 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 reg-
istered 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 front-end sales charge. Class B and Class C shares are sold
without a front-end sales charge, but pay a higher ongoing distribution fee
than Class A. Class B and Class C 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 Y shares are sold at net asset value
and are not subject to contingent deferred sales charges or distribution fees.
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 an established exchange are valued at the last sales price
on the exchange where the security is primarily traded. Securities traded for
which there has been no sale are valued at the mean between the bid and asked
price.
Corporate bonds, U.S. government obligations, mortgage and other asset-backed
securities and other fixed-income securities are valued at prices provided by
an independent pricing service. In determining a price for normal institution-
al-size transactions, the pricing service uses methods based on market transac-
tions for comparable securities and analysis of various relationships between
similar securities which are generally recognized by institutional traders. Se-
curities 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.
Securities for which valuations are not readily available (including restricted
securities) are valued at fair value as determined in good faith according to
procedures approved by the Board of Trustees.
Mutual fund shares held in a Fund are valued at the net asset value of each mu-
tual fund.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
B. Repurchase Agreements
Securities pledged as collateral for repurchase agreements are held in a segre-
gated account by the custodian on the Fund's behalf. Each Fund monitors the ad-
equacy of the collateral daily and will require the seller to provide addi-
tional collateral in the event the market value of the securities pledged falls
below the carrying value of the repurchase agreement, including accrued inter-
est. Each Fund will only enter into repurchase agreements with banks and other
financial institutions, which are deemed by the investment advisor to be
creditworthy pursuant to guidelines established by the Board of Trustees.
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
35
<PAGE>
Combined Notes to Financial Statements (continued)
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 for-
eign currency exchange rates is a component of net unrealized gains or losses
on securities and foreign currency related transactions. Net realized foreign
currency gain or loss on foreign currency related transactions includes foreign
currency gains and losses between trade date and settlement date on investment
securities transactions, gains and losses from foreign currency related trans-
actions and the difference between the amounts of interest and dividends re-
corded on the books of the Fund and the amount actually received. The portion
of foreign currency gains or losses related to fluctuations in exchange rates
between the initial purchase trade date and subsequent sale trade date is in-
cluded in realized gain or loss on securities.
D. Securities Lending
In order to generate income and to offset expenses, the Funds may lend portfo-
lio securities to brokers, dealers and other qualified financial organizations.
Loans of securities 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 ac-
crued interest. The Fund monitors the adequacy of the collateral daily and will
require the borrower provide additional collateral as necessary. While such se-
curities 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 obtain the securities loaned at any time on five days' notice. The Fund
bears the risk that the borrower may not provide additional collateral when re-
quired or return the securities when due.
E. 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 taxes,
which are accrued as applicable.
F. Federal Taxes
The Funds intend to comply with the provisions of the Internal Revenue Code ap-
plicable to regulated investment companies and to distribute all of their net
investment company taxable income and net capital gains, if any, to their
shareholders. Accordingly, no provision for federal income or excise tax is re-
quired.
G. Distributions
Distributions from net investment income for Health Care Fund and Technology
Fund are declared and paid annually. 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. 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. Distributions to shareholders are recorded
at the close of business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles. Reclassifications have been made to the Funds' components
of net assets to reflect income and gains available for distribution (or avail-
able capital loss carryovers, as applicable) under income tax regulations. The
primary permanent difference causing such reclassifications is due to net oper-
ating losses.
The Health Care Fund and Utility Fund also utilized earnings and profits dis-
tributed to shareholders on redemption of shares as a part of the dividends
paid deduction for income tax purposes.
H. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. Currently, class specific expenses are limited
to expenses incurred under the Distribution Plans for each class.
36
<PAGE>
Combined Notes to Financial Statements (continued)
I. Organization Expenses
Expenses relating to the organization of Health Care Fund and Technology Fund
have been reflected, in their entirety, in each Fund's operating results.
3. INVESTMENT ADVISORY AGREEMENTS AND OTHER AFFILIATED TRANSACTIONS
Evergreen Investment Management Company ("EIMC"), an indirect wholly owned sub-
sidiary of First Union National Bank ("FUNB") is the investment advisor for
Health Care Fund and Technology Fund. FUNB is a subsidiary of First Union Cor-
poration ("First Union"). In return for providing investment management servic-
es, each Fund pays EIMC a management fee that is computed and paid daily. The
management fee is computed daily at an annual rate of 0.95% of each Fund's av-
erage daily net assets.
FUNB is the investment advisor for Utility Fund and is paid a management fee
that is computed and paid daily at an annual rate of 0.42% of the Fund's aver-
age daily net assets. Prior to January 3, 2000, the management fee was computed
daily at an annual rate of 0.50% of the Fund's average daily net assets.
During the period ended October 31, 2000, the amount of investment advisory
fees waived for Utility Fund was $123,067 and the impact on the Fund's
annualized expense ratio represented as a percentage of its average net assets
was 0.10%.
Evergreen Investment Services ("EIS"), an indirect, wholly owned subsidiary of
FUNB, is the administrator to the Funds. As administrator, EIS provides the
Funds with facilities, equipment and personnel. For its services, the Funds pay
the administrator a fee at the annual rate of 0.10% of each Fund's average
daily net assets. The BISYS Group, Inc. ("BISYS") served as the sub-administra-
tor to the Utility Fund and was paid by the administrator out of its fees until
the sub-administration agreement with BISYS was terminated on April 30, 2000.
BISYS had also provided the officers of the Funds.
Prior to January 3, 2000, the administrator and sub-administrator for Utility
Fund was entitled to an annual fee based on the combined average daily net as-
sets of the funds administered by EIS for which First Union or its investment
advisory subsidiaries are also the investment advisors. The administration fee
was calculated by applying percentage rates, which started at 0.05% and de-
clined to 0.01% per annum as net assets increased, to the average daily net as-
sets of each Fund. The sub-administration fee was calculated by applying per-
centage 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.
Officers of the Funds and affiliated Trustees receive no direct compensation
from the Funds.
Evergreen Service Company ("ESC"), an indirect, wholly owned subsidiary of
FUNB, 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 Plan expenses". Under the Distribu-
tion Plans, each class incurs distribution fees at the following annual rates:
<TABLE>
<CAPTION>
Average Daily
Net Assets
-------------
<S> <C>
Class A............................................ 0.25%
Class B............................................ 1.00%
Class C............................................ 1.00%
</TABLE>
Of the above amounts, each share class may pay under its Distribution Plan a
maximum service fee of 0.25% of the average daily net assets of the class to
pay for shareholder service fees. Distribution Plan expenses are calculated and
paid daily.
37
<PAGE>
Combined Notes to Financial Statements(continued)
During the period ended October 31, 2000, amounts paid or accrued to EDI pursu-
ant to each Fund's Class A, Class B and Class C Distribution Plans were as fol-
lows:
<TABLE>
<CAPTION>
Class A Class B Class C
------------------------------
<S> <C> <C> <C>
Health Care Fund..................... $ 3,877 $ 90,124 $ 8,034
Technology Fund...................... 2,920 52,498 3,222
Utility Fund......................... 202,382 342,488 30,571
</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 on the close of business on March 10, 2000 Utility Fund acquired sub-
stantially all the assets and assumed certain liabilities of Evergreen Ameri-
ca's Utility Fund, an open-end management investment company registered under
the 1940 Act, in an exchange of shares. The net assets were exchanged through a
tax-free exchange for 11,152,446 Class A shares of Utility Fund. The acquired
net assets consisted primarily of portfolio securities with unrealized appreci-
ation of $33,482,175. The aggregate net assets of Utility Fund and Evergreen
America's Utility Fund immediately prior to the acquisition were $222,937,755
and $165,782,310, respectively. The aggregate net assets of Utility Fund imme-
diately after the acquisition were $388,720,065.
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:
Health Care Fund
<TABLE>
<CAPTION>
Year Ended
October 31, 2000 (a)
----------------------
Shares Amount
------------------------------------------------------------------------------
<S> <C> <C>
Class A
Shares sold........................................... 587,993 $ 8,821,900
Automatic conversion of Class B shares to Class A
shares............................................... 11 165
Shares issued in reinvestment of distributions........ 13,145 185,863
Shares redeemed....................................... (25,322) (388,829)
------------------------------------------------------------------------------
Net increase.......................................... 575,827 8,619,099
------------------------------------------------------------------------------
Class B
Shares sold........................................... 1,419,590 19,024,021
Shares issued in reinvestment of distributions........ 180,769 2,538,000
Automatic conversion of Class B shares to Class A
shares............................................... (11) (165)
Shares redeemed....................................... (73,176) (1,137,039)
------------------------------------------------------------------------------
Net increase.......................................... 1,527,172 20,424,817
------------------------------------------------------------------------------
Class C
Shares sold........................................... 376,098 5,689,393
Shares issued in reinvestment of distributions........ 3,846 54,000
Shares redeemed....................................... (17,035) (266,187)
------------------------------------------------------------------------------
Net increase.......................................... 362,909 5,477,206
------------------------------------------------------------------------------
Class Y
Shares sold........................................... 56,276 813,131
Shares issued in reinvestment of distributions........ 5,434 76,953
Shares redeemed....................................... (26,969) (426,568)
------------------------------------------------------------------------------
Net increase.......................................... 34,741 463,516
------------------------------------------------------------------------------
Net increase.......................................... $34,984,638
</TABLE>
--------------------------------------------------------------------------------
(a) For the period from December 22, 1999 (commencement of operations) to Oc-
tober 31, 2000.
38
<PAGE>
Combined Notes to Financial Statements (continued)
Technology Fund
<TABLE>
<CAPTION>
Year Ended
October 31, 2000
(a)
--------------------
Shares Amount
------------------------------------------------------------------------------
<S> <C> <C>
Class A
Shares sold............................................. 497,441 $ 6,009,451
Automatic conversion of Class B shares to Class A
shares................................................. 6 77
Shares redeemed......................................... (31,780) (356,196)
------------------------------------------------------------------------------
Net increase............................................ 465,667 5,653,332
------------------------------------------------------------------------------
Class B
Shares sold............................................. 777,647 8,361,162
Automatic conversion of Class B shares to Class A
shares................................................. (6) (77)
Shares redeemed......................................... (3,812) (43,572)
------------------------------------------------------------------------------
Net increase............................................ 773,829 8,317,513
------------------------------------------------------------------------------
Class C
Shares sold............................................. 194,075 2,210,686
Shares redeemed......................................... (12,653) (133,223)
------------------------------------------------------------------------------
Net increase............................................ 181,422 2,077,463
------------------------------------------------------------------------------
Class Y
Shares sold............................................. 31,858 326,399
Shares redeemed......................................... (10,130) (106,827)
------------------------------------------------------------------------------
Net increase............................................ 21,728 219,572
------------------------------------------------------------------------------
Net increase............................................ $16,267,880
------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 22, 1999 (commencement of operations) to Oc-
tober 31, 2000.
Utility Fund
<TABLE>
<CAPTION>
Year Ended July 31,
Year Ended --------------------------------------------------
October 31, 2000 (b) 2000 1999
---------------------- ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A
Shares sold............. 1,371,113 $20,107,904 2,133,626 $ 30,193,005 429,844 $ 5,133,429
Automatic conversion of
Class B shares to Class
A shares............... 65 971 562,558 7,873,019 11,373 126,409
Shares issued in
reinvestment of
distributions.......... 97,942 1,465,164 910,347 11,880,407 1,006,678 11,457,282
Shares redeemed......... (677,545) (9,843,351) (1,724,014) (24,026,429) (1,117,587) (13,062,066)
Shares issued in
acquisition of
Evergreen America's
Utility Fund........... 0 0 11,152,446 165,782,310 0 0
-----------------------------------------------------------------------------------------------------
Net increase............ 791,575 11,730,688 13,034,963 191,702,312 330,308 3,655,054
-----------------------------------------------------------------------------------------------------
Class B
Shares sold............. 3,012,025 44,168,924 4,946,770 69,726,181 704,486 8,209,032
Shares issued in
reinvestment of
distributions.......... 28,704 429,353 457,128 5,901,081 502,546 5,718,575
Automatic conversion of
Class B shares to Class
A shares............... (65) (971) (562,690) (7,873,019) (11,366) (126,409)
Shares redeemed......... (202,566) (2,964,450) (1,197,763) (16,519,375) (650,786) (7,545,094)
-----------------------------------------------------------------------------------------------------
Net increase............ 2,838,098 41,632,856 3,643,445 51,234,868 544,880 6,256,104
-----------------------------------------------------------------------------------------------------
Class C
Shares sold............. 328,181 4,799,482 692,664 9,816,862 162,138 1,808,980
Shares issued in
reinvestment of
distributions.......... 2,310 34,536 9,634 126,381 5,627 64,145
Shares redeemed......... (31,221) (463,945) (84,513) (1,168,749) (140,732) (1,555,150)
-----------------------------------------------------------------------------------------------------
Net increase............ 299,270 4,370,073 617,785 8,774,494 27,033 317,975
-----------------------------------------------------------------------------------------------------
Class Y
Shares sold............. 28,397 414,651 85,509 1,208,198 182,271 2,173,509
Shares issued in
reinvestment of
distributions.......... 379 5,676 16,052 206,110 7,586 86,398
Shares redeemed......... (37,940) (561,240) (78,268) (1,071,211) (168,716) (2,095,583)
-----------------------------------------------------------------------------------------------------
Net increase............ (9,164) (140,913) 23,293 343,097 21,141 164,324
-----------------------------------------------------------------------------------------------------
Net increase............ $57,592,704 $252,054,771 $ 10,393,457
-----------------------------------------------------------------------------------------------------
</TABLE>
(b) For the three months ended October 31, 2000. The Fund changed its fiscal
year end from July 31 to October 31, effective October 31, 2000.
39
<PAGE>
Combined Notes to Financial Statements (continued)
7. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the period ended October 31, 2000:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
-------------------------
<S> <C> <C>
Health Care Fund...................... $ 56,284,387 $ 26,318,777
Technology Fund....................... 28,993,468 14,404,958
Utility Fund.......................... 189,838,332 135,937,117
</TABLE>
Each Fund loaned securities during the period ended October 31, 2000 to certain
brokers. At October 31, 2000, the value of securities on loan and the value of
collateral (including accrued interest) and the amount of income earned from
securities lending were as follows:
<TABLE>
<CAPTION>
Value of Securities Value of Securities
on Loan Collateral Lending Income
----------------------------------------------
<S> <C> <C> <C>
Health Care
Fund........... $11,074,296 $11,156,520 $ 5,635
Technology
Fund........... 3,512,526 3,783,302 1,225
Utility Fund.... 50,407,154 55,699,775 41,131
</TABLE>
On October 31, 2000 the composition of unrealized appreciation and depreciation
on securities based on the aggregate cost of securities for federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation/
Tax Cost Appreciation Depreciation (Depreciation)
------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care
Fund........... $ 47,858,006 $ 4,810,617 $ (1,936,572) $ 2,874,045
Technology
Fund........... 18,365,537 708,634 (1,708,185) (999,551)
Utility Fund.... 495,994,455 85,336,043 (16,067,358) 69,268,685
</TABLE>
As of October 31, 2000, the Technology Fund had capital loss carryovers for
federal income tax purposes of $820,548 expiring October 31, 2008. The Health
Care Fund and Utility Fund had no capital loss carryovers as of October 31,
2000.
8. EXPENSE REDUCTIONS
Through expense offset arrangements with ESC and their custodian, a portion of
the fund expenses have been reduced. The amount of expense reductions received
by each Fund and the impact of the total expense reductions on each Fund's
annualized expense ratio represented as a percentage of its average net assets
were as follows:
<TABLE>
<CAPTION>
Total Expense % of Average
Reductions Net Assets
--------------------------
<S> <C> <C>
Health Care Fund..................... $ 650 0.00%
Technology Fund...................... 431 0.00%
Utility Fund......................... 21,928 0.02%
</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 Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Fund's Trustees' fees and
expenses. At the election of the Trustees, the deferral account will be paid
either in one lump sum or in quarterly installments for up to ten years.
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 provided an
unsecured revolving credit commitment in the aggregate
40
<PAGE>
Combined Notes to Financial Statements (continued)
amount of $1.050 billion. The credit facility was allocated, under the terms of
the financing agreement, among the Lenders. The credit facility was accessed by
the Funds for temporary or emergency purposes to fund the redemption of their
shares or for general working capital purposes as permitted by each Fund's bor-
rowing restrictions. Borrowings under this facility bore interest at 0.75% per
annum above the Federal Funds rate (1.50% per annum above the Federal Funds
rate during the period from and including December 1, 1999 through and includ-
ing January 31, 2000). A commitment fee of 0.10% per annum was incurred on the
average daily unused portion of the revolving credit commitment. The commitment
fee was 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 Bank and Trust Company ("State Street") served as
paying agent for the funds and as paying agent was entitled to a fee of $20,000
per annum which was allocated to all the funds.
On July 25, 2000, this agreement was renewed, amended and restated among cer-
tain Evergreen Funds and the Lenders. Under this renewed agreement, the Lenders
provide an unsecured revolving credit commitment in the aggregate amount of
$755 million. The credit facility is allocated, under the terms of the financ-
ing agreement, among the Lenders. The credit facility is accessed by the Funds
to temporarily finance the purchase or sale of securities for prompt delivery,
including funding redemption of their shares, as permitted by each Fund's bor-
rowing restrictions. Borrowings under this facility bear interest at 0.50% per
annum above the Federal Funds rate. A commitment fee of 0.10% per annum contin-
ues to be incurred on the average daily unused portion of the revolving credit
commitment and is allocated to all funds. For its assistance in renewing this
financing agreement, First Union Capital Markets Corp. was paid a one-time ar-
rangement fee of $150,000. State Street continues as paying agent for the funds
and receives a fee of $20,000 per annum which is allocated to all the funds.
During the periods ended October 31, 2000 the Funds had no significant
borrowings under these agreements.
11. CONCENTRATION OF RISK
Investment in a Fund that concentrates its investments in a single sector or
industry entails greater risks than an investment in a Fund that invests its
assets in numerous sectors or industries. The Fund may be vulnerable to any de-
velopment in its concentration sector or industry that may weaken the sector or
industry. As a result, the Fund's shares may fluctuate more widely in value
than those of a Fund investing in a number of different sectors or industries.
12. SUBSEQUENT EVENT
Effective November 1, 2000, the investment advisory contract for Utility Fund
was transferred from FUNB to EIMC. There were no changes in advisory fee rates.
13. SUBSEQUENT DISTRIBUTIONS TO SHAREHOLDERS
On November 24, 2000, the following capital gain distributions per share were
declared to shareholders of record on November 22, 2000 payable November 27,
2000:
<TABLE>
<CAPTION>
Short Term Long Term Total
---------------------------
<S> <C> <C> <C>
Health Care Fund................... $0.694 -- $0.694
Utility Fund....................... $0.135 $0.916 $1.051
</TABLE>
On November 30, 2000, Utility Fund declared the following income distribution
per share to shareholders of record on November 29, 2000 payable December 1,
2000:
<TABLE>
<S> <C>
Class A.................................................. $0.0252
Class B.................................................. $0.0173
Class C.................................................. $0.0173
Class Y.................................................. $0.0278
</TABLE>
These distributions are not reflected in the accompanying financial statements.
41
<PAGE>
Independent Auditors' Report
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 Health Care Fund, Evergreen
Technology Fund and Evergreen Utility Fund, portfolios of the Evergreen Equity
Trust, as of October 31, 2000, and the related statements of operations for
each of the periods in the year then ended, statements of changes in net assets
for each of the years or periods in the two-year period then ended, and the fi-
nancial highlights for each of the years or periods in the five-year period
then ended. These financial statements and financial highlights are the respon-
sibility of the Funds' 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 auditing standards generally ac-
cepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the finan-
cial statements and financial highlights 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 October 31, 2000 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 presentation. We believe that our audits provide a reason-
able basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
portfolios of Evergreen Equity Trust, referred to above, as of October 31,
2000, the results of their operations, changes in their net assets and finan-
cial highlights for each of the years or periods described above in conformity
with accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
Boston, Massachusetts
December 1, 2000
42
<PAGE>
Additional Information (unaudited)
FEDERAL TAX DISTRIBUTIONS
For corporate shareholders, 38.99% of ordinary income dividends paid during the
period ended October 31, 2000 for Utility Fund qualified for the dividends re-
ceived deduction.
43
<PAGE>
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Express Line
800.346.3858
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www.evergreen-funds.com
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