<PAGE>
EVERGREEN
NATURAL RESOURCES FUND
ANNUAL REPORT
OCTOBER 31, 1998
[LOGO OF EVERGREEN FUNDS APPEARS HERE]
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder Letter.......................................................... 1
An Interview With Your Portfolio Manager.................................... 2
Financial Highlights........................................................ 4
Schedule of Investments..................................................... 7
Statement of Assets and Liabilities......................................... 8
Statement of Operations..................................................... 9
Statement of Changes in Net Assets.......................................... 10
Notes to Financial Statements............................................... 11
Independent Auditor's Report................................................ 15
Other Information........................................................... 16
</TABLE>
- --------------------------------------------------------------------------------
E V E R G R E E N F U N D S
- --------------------------------------------------------------------------------
Evergreen Funds is one of the nation's fastest growing investment companies
with approximately $50 billion in assets under management.
With over 70 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies ex-
ecuted by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
<PAGE>
Evergreen Natural Resources Fund
Shareholder Letter
December 1998
- -------------------------------------------------------------------------------
DEAR SHAREHOLDERS:
We are pleased to provide you the Evergreen Natural Resources Fund's final
annual report covering the fiscal year ended October 31, 1998. As you know,
this Fund was liquidated effective December 4, 1998.
Given the overall performance of the fund category, the steadily decreasing
assets in the Fund, and the current market conditions, the Evergreen Board of
Trustees decided to close the Fund and encourage shareholders to exchange into
another Evergreen Fund.
We thank you for your past investment with the Evergreen Natural Resources
Fund and hope you have decided to exchange into another Evergreen Fund. Please
contact your financial representative or one of our service representatives at
800.343.2898, for more information on our funds.
/s/ William M. Ennis
William M. Ennis
Managing Director
Evergreen Funds
1
<PAGE>
Evergreen Natural Resources Fund
- -------------------------------------------------------------------------------
AN INTERVIEW WITH YOUR PORTFOLIO MANAGER
John Madden
HOW DID THE FUND PERFORM DURING THE TWELVE-MONTH PERIOD THAT ENDED OCTOBER 31,
1998?
The Fund's Class A shares declined 29.1%, unadjusted for sales charges,
substantially underperforming the S&P 500 Index which rose 22.0% and the
Morgan Stanley Capital International World Index which rose 15.3%. The decline
reflected poor demand in global markets for all types of natural resources in
the wake of economic problems overseas.
WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE PERIOD?
The overall investment environment for stocks was positive during the period.
Early in the Fund's fiscal year, the Dow Jones Industrial Average (DJIA)
traded in a narrow range. It surged to a new high by mid-summer as Asian
markets appeared to recover from their economic problems. Because of a variety
of political and economic reasons, the DJIA declined sharply in July and
August but rose again in September and October.
HOW DID THE MARKET'S VOLATILITY AFFECT NATURAL RESOURCES STOCKS?
Natural resources stocks followed a pattern similar to the stock market's, but
with a negative bias. Natural resources stocks declined sharply in the Fall of
1997 in reaction to economic problems overseas. They rallied modestly, along
with the DJIA in the Spring of 1998, and declined to historic lows by the end
of August. In September and October, natural resources stocks rallied. The
rally was not strong enough to overcome earlier declines, however.
Within the natural resources group, there were some interesting variances. In
the energy area, for example, all equities suffered from a decline in the
price of crude oil. Within the energy group, however, there were wide
variations. At the end of October 1998, prices of the major integrated oil
companies, protected by yields and some ability to control costs, were down
only modestly from October 1997 and, in some cases, were at or near their
highs. On the other hand, many service companies declined 50% or more during
the twelve-month period and have not recovered. This is true of even the most
respected firms. Schlumberger, one of the Fund's largest holdings and one of
the premier stocks in the service business declined 40% from a year ago, while
Exxon rose 17%.
HOW DID METALS STOCKS PERFORM DURING THE PERIOD?
The story in the metals area is much the same as in the energy sector. The
Standard & Poor's (S&P) Metals Index was at 260 a year ago. It declined to a
low of 128 at the end of August 1998, and recovered to 158 at the close of the
Fund's fiscal year. Even after this recovery, however, the Index was still at
a level not seen in a decade. In the metals area, performance varied widely.
While most base metals producers and steel producers performed poorly,
aluminum producers fared better. Alcoa, for example, rose during the twelve-
month period.
Commodity prices were the driving force behind the behavior of metals stocks.
Over the past several years, Asia (except Japan) was responsible for a major
portion of incremental commodity consumption. A reversal in commodity
consumption, together with a struggling Japanese economy, has had a dramatic
negative impact on commodity prices. On average, prices of major metals
declined 20% to 40% over the twelve-month period and have been cut in half
from their 1995 highs. Since reaching their highs in early 1997, oil prices
have performed similarly.
Volatility in commodity markets was matched by volatility in some of the
emerging stock markets where the Fund has invested from time to time. For
example, the Brazilian stock market rose 30% early in the Fund's fiscal year,
then declined 60% between April and September because of fears of a currency
devaluation. It has since recovered 60% on the strength of positive political
and International Monetary Fund (IMF) developments. Stock markets from Mexico
to Thailand made similar moves, in large measure because of the same
macroeconomic trends.
WHAT WAS YOUR INVESTMENT STRATEGY?
In this difficult area of the market, we maintained our investment strategy of
seeking quality companies that we believe are undervalued. We increased the
Fund's cash position and reduced exposure to emerging markets. Also, we
reduced holdings in infrastructure companies. The Fund has gradually become a
North American-oriented fund, with an emphasis on energy and metals.
Some of our investment decisions were more satisfactory than others. We
purchased several precious metals stocks that performed well, such as
Stillwater Mining, and we maintained holdings in two European oil companies,
Total and Elf Aquitaine, which were rewarding for the Fund. Alcoa, as
mentioned earlier, was one of the better performing major metals producers. On
the other hand, exposure to the energy service area was a major factor in the
Fund's underperformance.
International investing involves increased risk and volatility.
2
<PAGE>
Evergreen Natural Resources Fund
- --------------------------------------------------------------------------------
FUND AT A GLANCE AS OF
OCTOBER 31, 1998
PERFORMANCE AND RETURNS*
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Inception Date 10/7/94 10/7/94 10/7/94
.........................................................................
AVERAGE ANNUAL RETURNS
.........................................................................
1 year with sales charge -32.42% -32.78% -30.38%
.........................................................................
1 year w/o sales charge -29.05% -29.68% -29.76%
.........................................................................
3 years -4.63% -4.68% -3.86%
.........................................................................
Since Inception -3.93% -3.93% -3.53%
.........................................................................
Maximum Sales Charge 4.75% 5.00% 1.00%
Front End CDSC CDSC
.........................................................................
12-MONTH INCOME DISTRIBUTIONS
PER SHARE $0.13 $0.13 $0.13
.........................................................................
12-MONTH CAPITAL GAIN DISTRIBUTIONS PER SHARE $1.25 $1.25 $1.25
.........................................................................
</TABLE>
* Adjusted for maximum sales charge.
[LINE GRAPH APPEARS HERE]
LONG TERM GROWTH
CPI MSCIWI Class A S&P 500
10/31/94 $10,000 $10,000 $ 9,525 $10,000
4/30/95 10,160 10,482 9,003 11,047
10/31/95 10,281 11,003 9,306 12,644
4/30/96 10,446 12,503 10,694 14,384
10/31/96 10,589 12,855 10,931 15,690
4/30/97 10,716 13,857 11,425 18,000
10/31/97 10,809 15,073 11,957 20,729
4/30/98 10,870 17,948 11,588 25,391
10/31/98 10,957 17,437 8,477 25,287
Comparison of a $10,000 investment in Evergreen Natural Resources Fund Class A,
versus a similar investment in the Morgan Stanley Capital International World
Index (MSCIWI), the S&P 500 Index (S&P 500), and the Consumer Price Index
(CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses paid by the
shareholders investing in each class. The investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than original cost. The MSCIWI and the S&P 500 are unmanaged indices and do
not include transaction costs associated with buying and selling securities or
any management fees. The CPI is a commonly used measure of inflation and does
not represent an investment return. It is not possible to invest directly in an
index.
3
<PAGE>
Evergreen Natural Resources Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, MARCH 31,
---------------- --------------------------
CLASS A SHARES 1998# 1997** 1997 1996 1995*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING OF
PERIOD..................... $12.58 $ 12.11 $ 10.74 $ 9.02 $10.00
------ ------- ------- ------- ------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income or
loss...................... (0.02) 0.03 (0.04) (0.04) 0(a)
Net realized and unrealized
gain or loss on securities
and foreign currency
related transactions...... (3.28) 0.44 1.41 1.76 (0.98)
------ ------- ------- ------- ------
Total from investment
operations................. (3.30) 0.47 1.37 1.72 (0.98)
------ ------- ------- ------- ------
LESS DISTRIBUTIONS
From net investment income.. (0.13) 0 0 0 0
From net realized gain on
securities and foreign
currency related
transactions............... (1.25) 0 0 0 0
------ ------- ------- ------- ------
Total distributions......... (1.38) 0 0 0 0
------ ------- ------- ------- ------
NET ASSET VALUE END OF
PERIOD..................... $ 7.90 $ 12.58 $ 12.11 $ 10.74 $ 9.02
------ ------- ------- ------- ------
Total return+............... (29.05%) 3.88% 12.76% 19.07% (9.80%)
RATIOS/SUPPLEMENTAL DATA
Net assets end of period
(thousands)................ $1,672 $ 3,890 $ 4,462 $ 4,574 $4,890
Ratios to average net
assets:
Total expenses............. 2.64% 2.01%++ 2.40% 2.38% 2.77%++
Total expenses, after fee
credits................... 2.62% 2.01%++ 2.39% 2.37% N/A
Net investment income
(loss).................... (0.17%) 0.02%++ (0.45%) (0.41%) (0.07%)++
Portfolio turnover rate..... 35% 13% 39% 40% 13%
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
Net Investment income is based on average shares outstanding during the
# period.
For the period from October 7, 1994 (commencement of operations) to March
* 31, 1995.
** For the seven month period ended October 31, 1997. The Fund changed its
fiscal year end from March 31 to October 31, effective October 31, 1997.
(a) Amount is less than one cent per share.
See Notes to Financial Statements.
4
<PAGE>
Evergreen Natural Resources Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, MARCH 31,
---------------- --------------------------
CLASS B SHARES 1998# 1997** 1997 1996 1995*
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING
OF PERIOD................. $12.31 $ 11.89 $ 10.62 $ 8.99 $10.00
------ ------- ------- ------- ------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income or
loss..................... (0.12) (0.07) (0.14) (0.13) (0.03)
Net realized and
unrealized gain or loss
on securities and foreign
currency related
transactions............. (3.17) 0.49 1.41 1.76 (0.98)
------ ------- ------- ------- ------
Total from investment
operations................ (3.29) 0.42 1.27 1.63 (1.01)
------ ------- ------- ------- ------
LESS DISTRIBUTIONS
From net investment
income.................... (0.13) 0 0 0 0
From net realized gain on
securities and foreign
currency related
transactions.............. (1.25) 0 0 0 0
------ ------- ------- ------- ------
Total distributions........ (1.38) 0 0 0 0
------ ------- ------- ------- ------
NET ASSET VALUE END OF
PERIOD.................... $ 7.64 $ 12.31 $ 11.89 $ 10.62 $ 8.99
------ ------- ------- ------- ------
Total return+.............. (29.68%) 3.53% 11.96% 18.13% (10.10%)
RATIOS/SUPPLEMENTAL DATA
Net assets end of period
(thousands)............... $4,616 $15,333 $17,208 $15,161 $4,688
Ratios to average net
assets:
Total expenses............ 3.51% 2.79%++ 3.16% 3.13% 3.55%++
Total expenses, after fee
credits.................. 3.49% 2.78%++ 3.15% 3.12% N/A
Net investment income
(loss)................... (1.30%) (0.77%)++ (1.22%) (1.16%) (0.80%)++
Portfolio turnover rate.... 35% 13% 39% 40% 13%
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
Net Investment income is based on average shares outstanding during the
# period.
For the period from October 7, 1994 (commencement of operations) to March
* 31, 1995.
** For the seven month period ended October 31, 1997. The Fund changed its
fiscal year end from March 31 to October 31, effective October 31, 1997.
See Notes to Financial Statements.
5
<PAGE>
Evergreen Natural Resources Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, MARCH 31,
--------------- ------------------------
CLASS C SHARES 1998# 1997** 1997 1996 1995*
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING OF
PERIOD....................... $12.31 $11.89 $10.62 $ 8.99 $10.00
------ ------ ------ ------ ------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS
Net investment income or
loss........................ (0.13) (0.13) (0.10) (0.10) (0.03)
Net realized and unrealized
gain or loss on securities
and foreign currency related
transactions................ (3.17) 0.55 1.37 1.73 (0.98)
------ ------ ------ ------ ------
Total from investment
operations................... (3.30) 0.42 1.27 1.63 (1.01)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income.... (0.13) 0 0 0 0
From net realized gain on
securities and foreign
currency related
transactions................. (1.25) 0 0 0 0
------ ------ ------ ------ ------
Total distributions........... (1.38) 0 0 0 0
------ ------ ------ ------ ------
NET ASSET VALUE END OF
PERIOD....................... $ 7.63 $12.31 $11.89 $10.62 $ 8.99
------ ------ ------ ------ ------
Total return+................. (29.76%) 3.53% 11.96% 18.13% (10.10%)
RATIOS/SUPPLEMENTAL DATA
Net assets end of period
(thousands).................. $ 630 $2,716 $4,567 $2,023 $1,393
Ratios to average net assets:
Total expenses............... 3.57% 2.79%++ 3.13% 3.13% 3.51%++
Total expenses, after fee
credits..................... 3.55% 2.79%++ 3.12% 3.12% N/A
Net investment income
(loss)...................... (1.39%) (0.80%)++ (1.27%) (1.16%) (0.93%)++
Portfolio turnover rate....... 35% 13% 39% 40% 13%
</TABLE>
+ Excluding applicable sales charges.
++ Annualized.
Net Investment income is based on average shares outstanding during the
# period.
For the period from October 7, 1994 (commencement of operations) to March
* 31, 1995.
** For the seven month period ended October 31, 1997. The Fund changed its
fiscal year end from March 31 to October 31, effective October 31, 1997.
See Notes to Financial Statements.
6
<PAGE>
Evergreen Natural Resources Fund
- --------------------------------------------------------------------------------
Schedule of Investments
October 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
COMMON STOCKS--77.1%
AUSTRALIA--3.6%
OIL/ENERGY--3.6%
46,800 Woodside Petroleum........................................ $ 247,487
----------
CANADA--19.3%
GOLD MINING--2.5%
10,000 *Getchell Gold Corp. ..................................... 175,000
----------
METALS & MINING--11.4%
19,700 Alcan Aluminum Ltd. ...................................... 494,735
20,000 Noranda, Inc. ............................................ 295,528
----------
790,263
----------
OIL/ENERGY--5.4%
25,100 Canadian Occidental Petroleum Ltd. ....................... 374,141
----------
Total Canada.............................................. 1,339,404
----------
FRANCE--9.1%
OIL/ENERGY--9.1%
2,500 Societe Nationale Elf Aquitaine SA........................ 289,332
2,944 Total SA, Cl. B........................................... 339,658
----------
Total France.............................................. 628,990
----------
UNITED KINGDOM--9.1%
METALS & MINING--9.1%
100,000 Billiton Plc.............................................. 245,197
31,539 Rio Tinto Plc............................................. 382,968
----------
Total United Kingdom...................................... 628,165
----------
</TABLE>
* Non-income producing security.
(a) Less than one-tenth of one percent.
(b) Security is being fair valued in accordance with procedures established by
the Board of Trustees.
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
UNITED STATES--36.0%
GOLD MINING--2.6%
15,000 Homestake Mining Co. ................................... $ 178,125
----------
HEALTHCARE PRODUCTS & SERVICES--2.8%
4,000 American Home Products Corp. ........................... 195,000
----------
METALS & MINING--4.7%
10,000 *Stillwater Mining Co. ................................. 323,750
----------
METAL PRODUCTS & SERVICES--9.2%
8,000 Aluminum Co. of America................................. 634,000
----------
OIL FIELD SERVICES --16.7%
6,000 *BJ Services Co., Inc. ................................. 122,625
17,000 Diamond Offshore Drilling, Inc. ........................ 521,687
9,800 Schlumberger Ltd. ...................................... 514,500
----------
1,158,812
----------
Total United States..................................... 2,489,687
----------
TOTAL COMMON STOCKS
(COST--$4,679,936)..................................... 5,333,733
----------
PRINCIPLE
AMOUNT
---------
CONVERTIBLE DEBENTURES--0.0%(a)
BRAZIL--0.0%(a)
IRON & STEEL--0.0%(a)
23,588 *Compania Vale do Rio Doce Navegacao SA(b)
(Cost--$0)............................................. 2
----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS--(COST $4,679,936)............... 77.1% 5,333,735
OTHER ASSETS AND LIABILITIES--NET.................. 22.9 1,583,684
----- ----------
NET ASSETS......................................... 100.0% $6,917,419
===== ==========
</TABLE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward Foreign Currency Exchange Contracts to Sell:
<TABLE>
<CAPTION>
EXCHANGE U.S. VALUE AT IN EXCHANGE UNREALIZED
DATE CONTRACTS TO DELIVER OCTOBER 31, 1998 FOR U.S. $ DEPRECIATION
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/8/99 267,825 Australian Dollar $167,699 $156,000 $11,699
=======
</TABLE>
See Combined Notes to Financial Statements.
7
<PAGE>
Evergreen Natural Resources Fund
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
October 31, 1998
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments at value (identified cost--$4,679,936)................ $5,333,735
Foreign currency at value (identified cost--$7,000)............... 6,970
Cash.............................................................. 1,732,903
Dividends receivable.............................................. 11,660
Receivable for Fund shares sold................................... 17
Prepaid expenses and other assets................................. 18,321
- --------------------------------------------------------------------------------
Total assets...................................................... 7,103,606
- --------------------------------------------------------------------------------
LIABILITIES
Payable for Fund shares repurchased............................... 135,011
Payable for foreign currency sold................................. 24,401
Unrealized depreciation on open forward foreign currency exchange
contracts........................................................ 11,699
Advisory fee payable.............................................. 6,533
Distribution Plan expenses payable................................ 3,167
Due to other related parties...................................... 102
Accrued expenses and other liabilities............................ 5,274
- --------------------------------------------------------------------------------
Total liabilities................................................. 186,187
- --------------------------------------------------------------------------------
NET ASSETS......................................................... $6,917,419
- --------------------------------------------------------------------------------
NET ASSETS REPRESENTED BY
Paid-in capital................................................... $7,067,071
Undistributed net investment income............................... 57,742
Accumulated undistributed net realized loss on securities and
foreign currency related transactions............................ (849,900)
Net unrealized gains on securities and foreign currency related
transactions..................................................... 642,506
- --------------------------------------------------------------------------------
Total net assets.................................................. $6,917,419
- --------------------------------------------------------------------------------
NET ASSETS CONSISTS OF
Class A........................................................... $1,671,762
Class B........................................................... 4,615,662
Class C........................................................... 629,995
- --------------------------------------------------------------------------------
$6,917,419
- --------------------------------------------------------------------------------
SHARES OUTSTANDING
Class A........................................................... 211,649
Class B........................................................... 604,491
Class C........................................................... 82,583
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
Class A........................................................... $ 7.90
- --------------------------------------------------------------------------------
Class A--Offering price (based on sales charge of 4.75%) $ 8.29
- --------------------------------------------------------------------------------
Class B........................................................... $ 7.64
- --------------------------------------------------------------------------------
Class C........................................................... $ 7.63
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Evergreen Natural Resources Fund
- --------------------------------------------------------------------------------
Statement of Operations
Year Ended October 31, 1998
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of
$14,353)........................................... $ 257,652
Interest............................................ 43,544
- --------------------------------------------------------------------------------
TOTAL INCOME......................................... 301,196
- --------------------------------------------------------------------------------
EXPENSES
Advisory fee........................................ $ 134,155
Distribution Plan expenses.......................... 111,848
Transfer agent fees................................. 47,523
Administrative service fees......................... 2,066
Trustees' fees and expenses......................... 295
Registration fees................................... 64,402
Professional fees................................... 21,986
Printing............................................ 20,344
Custodian fees...................................... 16,927
Organization expense................................ 12,621
Other............................................... 13,784
- --------------------------------------------------------------------------------
Total expenses...................................... 445,951
Less: Fee credits................................... (2,653)
- --------------------------------------------------------------------------------
Net expenses........................................ 443,298
- --------------------------------------------------------------------------------
Net investment loss................................. (142,102)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS OR LOSSES ON
SECURITIES AND FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gains or losses on:
Securities.......................................... (849,890)
Foreign currency related transactions............... 250,263
- --------------------------------------------------------------------------------
Net realized gains or losses on securities and
foreign currency related transactions.............. (599,627)
- --------------------------------------------------------------------------------
Net change in unrealized gains or losses on
securities and foreign currency related
transactions....................................... (3,680,093)
- --------------------------------------------------------------------------------
Net realized and unrealized gains or losses on
securities and foreign currency related
transactions....................................... (4,279,720)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS......................................... $(4,421,822)
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Evergreen Natural Resources Fund
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------- YEAR ENDED
1998 1997* MARCH 31, 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net investment loss................ $ (142,102) $ (102,070) $ (261,955)
Net realized gains or losses on
securities and foreign currency
related transactions.............. (599,627) 2,079,956 1,096,497
Net change in unrealized gains or
losses on securities and foreign
currency related transactions..... (3,680,093) (835,993) 1,919,418
- -------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations.. (4,421,822) 1,141,893 2,753,960
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A............................ (39,137) 0 0
Class B............................ (156,372) 0 0
Class C............................ (27,065) 0 0
Net realized gains on securities
Class A............................ (376,317) 0 0
Class B............................ (1,503,573) 0 0
Class C............................ (260,243) 0 0
- -------------------------------------------------------------------------------
Total distributions to
shareholders...................... (2,362,707) 0 0
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold.......... 29,985,047 1,626,365 9,241,182
Payment for shares redeemed........ (40,381,618) (7,066,862) (7,515,475)
Net asset value of shares issued in
reinvestment of distributions..... 2,160,001 0 0
- -------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from capital
share transactions................ (8,236,570) (5,440,497) 1,725,707
- -------------------------------------------------------------------------------
Total increase (decrease) in net
assets............................ (15,021,099) (4,298,604) 4,479,667
NET ASSETS
Beginning of year.................. 21,938,518 26,237,122 21,757,455
- -------------------------------------------------------------------------------
End of year........................ $ 6,917,419 $21,938,518 $26,237,122
- -------------------------------------------------------------------------------
Undistributed net investment
income............................ $ 57,742 $ 174,638 $ (33,055)
- -------------------------------------------------------------------------------
</TABLE>
* For the seven month period ended October 31, 1997. The Fund changed its
fiscal year end from March 31 to October 31, effective October 31, 1997.
See Notes to Financial Statements.
10
<PAGE>
Evergreen Natural Resources Fund
- -------------------------------------------------------------------------------
Notes to Financial Statements
1. ORGANIZATION
The Evergreen Natural Resources Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified,
open-end management investment company. The Fund is a series of the Evergreen
International Trust, a Delaware business trust organized on September 17,
1997.
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a maximum front-end sales charge of 4.75%. Class B and Class C shares are
sold without a front end sales charge, but pay a higher ongoing distribution
fee than Class A. Class B shares are sold subject to a contingent deferred
sales charge that is payable upon redemption and decreases depending on how
long the shares have been held. Class B shares purchased after January 1, 1997
will automatically convert to Class A shares after seven years. Class B shares
purchased prior to January 1, 1997 retain their existing conversion rights.
Class C shares are sold subject to a contingent deferred sales charge payable
on shares redeemed within one year after the month of purchase.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles,
which require management to make estimates and assumptions that affect amounts
reported herein. Actual results could differ from these estimates.
A. Valuation of Securities--The Fund values securities traded on an
established securities exchange or included on the NASDAQ National Market
System ("NMS") at the last reported sales price on the exchange where
primarily traded. The Fund values securities traded on an exchange or NMS for
which there has been no sale and other securities traded in the over-the-
counter market at the mean between the last reported bid and asked price.
Securities for which valuations are not available from an independent pricing
service, including restricted securities, are valued at fair value as
determined in good faith according to procedures established by the Board of
Trustees. Short-term investments with remaining maturities of 60 days or less
are carried at amortized cost, which approximates market value.
B. Repurchase Agreements--The Fund may invest in repurchase agreements.
Securities pledged as collateral for repurchase agreements are held by the
custodian on the Fund's behalf. The Fund monitors the adequacy of the
collateral daily and will require the seller to provide additional collateral
in the event the market value of the securities pledged falls below the
carrying value of the repurchase agreement, including accrued interest. The
Fund will only enter into repurchase agreements with banks and other financial
institutions, which are deemed by the investment adviser to be creditworthy
pursuant to guidelines established by the Board of Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, certain Funds managed by Evergreen Investment Management Company
("EIMCO") (formerly, Keystone Investment Management Company), may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are fully collateralized by
U.S. Treasury and/or federal agency obligations.
C. Foreign Currency--The books and records of the Fund are maintained in
United States (U.S.) dollars. Foreign currency amounts are translated into
United States dollars as follows: market value of investments, other assets
and liabilities at the daily rate of exchange; purchases and sales of
investments, income and expenses at the rate of exchange prevailing on the
respective dates of such transactions. Net unrealized foreign exchange gains
or losses resulting from changes in foreign currency exchange rates is a
component of net unrealized gain or loss on securities and foreign currency
related transactions. Net realized foreign currency gains or losses resulting
from changes in exchange rates include foreign currency gains and losses
between trade date and settlement date on securities transactions, foreign
currency related transactions and the difference between the amounts of
interest and dividends recorded on the books of the Fund and the amounts that
are actually received are included in realized gain or loss on foreign
currency related transactions. 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 included in realized gains or losses on
securities.
D. Forward Foreign Currency Exchange Contracts--The Fund may enter into
forward foreign currency exchange contracts ("forward contracts") to settle
portfolio purchases and sales of securities denominated in a foreign currency
and to hedge certain foreign currency assets or liabilities. Forward contracts
are recorded at the forward rate and marked-to-market daily. Realized gains
and losses arising from such transactions are included in net realized gains
or losses on foreign currency related transactions. The Fund bears the risk of
an unfavorable change in the foreign currency exchange rate underlying the
forward contract and is subject to the credit risk that the other party will
not fulfill their obligations under the contract. Forward contracts involve
elements of market risk in excess of the amount reflected in the statement of
assets and liabilities.
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. Dividend income is recorded on the ex-dividend
date, or in the case of some foreign securities, on the date thereafter when
the Fund is made aware of the dividend. Foreign income may be subject to
foreign withholding taxes which are accrued as applicable. Capital gains
realized on some foreign securities may be subject to foreign taxes and are
accrued as applicable.
F. Federal Taxes--The Fund has qualified and intends to continue to qualify as
a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"). As such, the Fund will not incur any federal income tax
liability to the extent that it distributes all of its net investment company
taxable income and net capital gains, if any, to its shareholders. The Fund
also intends to avoid excise tax liability by making the required
distributions under the Code. Accordingly, no provision for federal taxes is
required. To the extent that realized capital gains can be offset by capital
loss carryforwards, it is the Fund's policy not to distribute such gains.
11
<PAGE>
Evergreen Natural Resources Fund
- -------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
G. Distributions--Distributions from net investment income and net realized
capital gains, if any, for the Fund are declared and paid at least annually.
Distributions to shareholders are recorded at the close of business on the ex-
dividend date. Certain distributions paid during previous years have been
reclassified to conform with current year presentation.
Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles. The significant differences between financial
statement amounts available for distributions and distributions made in
accordance with income tax regulations are primarily due to differing
treatment of foreign currency gains or losses.
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 relative net assets of each class. Currently, class specific
expenses are limited to expenses incurred under the Distribution Plans for
each class.
I. Organization Expenses--Organization expenses are amortized to operations
over a five-year period on a straight-line basis. In the event any of the
initial shares of the Funds are redeemed by any holder during the five-year
amortization period, redemption proceeds will be reduced by any unamortized
organization expenses in the same proportion as the number of initial shares
being redeemed bears to the number of initial shares outstanding at the time
of the redemption.
3. CAPITAL SHARE TRANSACTIONS
The Fund has an unlimited number of shares of beneficial interest with a par
value of $0.001 authorized. Shares of beneficial interest of the Fund are
currently divided into Class A, Class B and Class C. Transactions in shares of
the Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997* MARCH 31, 1997
------------------------ --------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold............. 2,373,657 $ 22,604,207 20,364 $ 257,582 99,899 $ 1,149,694
Shares redeemed......... (2,507,211) (24,029,309) (79,574) (1,059,272) (157,432) (1,830,659)
Shares reinvested....... 36,032 383,007 0 0 0 0
- -------------------------------------------------------------------------------------------------
Net decrease............ (97,522) (1,042,095) (59,210) (801,690) (57,533) (680,965)
- -------------------------------------------------------------------------------------------------
CLASS B
Shares sold............. 754,287 7,025,019 78,508 1,020,278 391,020 4,494,545
Shares redeemed......... (1,539,865) (14,393,072) (279,700) (3,612,501) (371,723) (4,250,880)
Shares reinvested....... 144,444 1,497,882 0 0 0 0
- -------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (641,134) (5,870,171) (201,192) (2,592,223) 19,297 243,665
- -------------------------------------------------------------------------------------------------
CLASS C
Shares sold............. 42,669 355,821 27,528 348,505 317,784 3,596,943
Shares redeemed......... (207,713) (1,959,237) (190,823) (2,395,089) (124,231) (1,433,936)
Shares reinvested....... 26,941 279,112 0 0 0 0
- -------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (138,103) (1,324,304) (163,295) (2,046,584) 193,553 2,163,007
- -------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
in
capital share
transactions........... $ (8,236,570) $(5,440,497) $ 1,725,707
- -------------------------------------------------------------------------------------------------
</TABLE>
* For the seven months ended October 31, 1997. The Fund changed its fiscal
year end from March 31 to October 31, effective October 31, 1997.
4. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were $4,362,335 and $15,487,135 for the year ended
October 31, 1998.
On October 31, 1998, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost of
investments for federal income tax purposes was as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED NET UNREALIZED
TAX COST APPRECIATION DEPRECIATION APPRECIATION
-------------------------------------------------------------------
<S> <C> <C> <C>
$4,679,936 $879,956 $226,157 $653,799
</TABLE>
At October 31, 1998, the Fund had $849,899 in capital loss carryforwards, all
of which will expire on October 31, 2006.
12
<PAGE>
Evergreen Natural Resources Fund
- -------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
5. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of The BISYS
Group Inc. ("BISYS"), serves as principal underwriter to the Fund.
The Fund has adopted Distribution Plans for each class of shares, as allowed
by Rule 12b-1 of the 1940 Act. Distribution Plans permit the Fund to reimburse
its principal underwriter for costs related to selling shares of the Fund and
for various other services. These costs, which consist primarily of
commissions and service fees to broker-dealers that sell shares of the Fund,
are paid by the fund through expenses called "Distribution Plan expenses".
Each class currently pays a service fee equal to an annual rate of 0.25% of
the average daily net asset value of the class. Class B and Class C also pay
distribution fees equal to an annual rate of 0.75% of the average daily net
assets of the class. Distribution Plan expenses are calculated daily and paid
monthly.
During the year ended October 31, 1998, amounts paid to EDI pursuant to the
Fund's Class A, Class B and Class C Distribution Plans were $7,349, $91,663
and $12,836, respectively.
With respect to Class B and Class C shares, the principal underwriter may pay
12b-1 fees greater than the allowable annual amounts the Fund is permitted to
pay. The Fund may compensate the principal underwriter for such excess amounts
in later years with annual interest at the prime rate plus 1.00%.
Each of the Distribution Plans may be terminated at any time by vote of the
Independent Trustees or by vote of a majority of the outstanding voting shares
of the respective class
Contingent deferred sales charges paid by redeeming shareholders are paid to
EDI or its predecessor.
6. INVESTMENT MANAGEMENT AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
The investment adviser for the Fund is EIMCO, a subsidiary of First Union
National Bank of North Carolina ("First Union"). In return for providing
investment advisory and administrative services to the Fund, EIMCO is entitled
to an annual fee of 1.00% of the Fund's average daily net assets.
EIMCO has entered into a Sub-Investment Advisory Agreement with Equitilink
International Management Limited ("EIML"), under which EIML provides EIMCO
with investment research and advice and may provide investment supervision or
furnish an investment program for certain assets of the Fund. For its
services, EIML receives from EIMCO a monthly fee equal to (1) 20% of EIMCO's
net fee for such month for services rendered in a non-discretionary capacity,
plus (2) 10% of EIMCO's net fee for such month on that portion of the Fund's
assets for which EIML provided services in a discretionary capacity.
Evergreen Investment Services ("EIS"), a subsidiary of First Union, and BISYS
provide administration and sub-administration services to the Fund at no
additional cost to the Fund. For the year ended October 31, 1998, the Fund
reimbursed EIMCO for certain administrative and accounting expenses amounting
to $2,066.
Evergreen Service Company ("ESC"), an indirect, wholly-owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the
Fund. The Fund has entered into an expense offset arrangement with ESC
relating to certain cash balances held at First Union for the benefit of the
Evergreen Funds.
Officers of the Fund and affiliated Trustees receive no compensation directly
from the Fund.
7. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an expense offset arrangement with its custodian.
The assets deposited with the custodian under this expense offset arrangement
could have been invested in income-producing assets.
8. DEFERRED TRUSTEES' FEES
Each Independent Trustee of the Fund may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances
are allocated to deferral accounts, which are included in the accrued expenses
for the Fund. The investment performance of the deferral accounts are based on
the investment performance of certain Evergreen Funds. Any gains earned or
losses incurred in the deferral accounts are reported in the Fund's Trustees'
fees and expenses. Trustees will be paid either in one lump sum or in
quarterly installments for up to ten years at their election, not earlier than
either the year in which the Trustee ceases to be a member of the Board of
Trustees or January 1, 2000.
9. FINANCING AGREEMENTS
On October 31, 1997, a temporary financing agreement between the participating
Evergreen Funds and First Union became effective. Under this agreement, First
Union provided a fully committed unsecured credit facility in the aggregate
amount of $300 million. Borrowings under this facility bore interest at 1.00%
per annum above the Federal Funds rate. State Street served as administrative
agent under this agreement, but received no compensation for its services.
This agreement was terminated on December 22, 1997.
On December 22, 1997, a financing agreement among all of the Evergreen Funds,
State Street Bank and Trust ("State Street") and a group of banks
(collectively, the "Banks") became effective. Under this agreement, the Banks
provide an unsecured credit facility in the aggregate amount of $400 million
($275 million committed and $125 million uncommitted). The credit facility is
allocated, under the terms of the financing agreement, among the Banks. The
credit facility is to be accessed by the Funds for temporary or emergency
purposes only and is subject to
13
<PAGE>
Evergreen Natural Resources Fund
- -------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
each Fund's borrowing restrictions. Borrowings under this facility bear
interest at 0.50% per annum above the Federal Funds rate. A commitment fee of
0.065% per annum will be incurred on the unused portion of the committed
facility, which will be allocated to all Funds. For its assistance in
arranging this financing agreement, the Capital Market Group of First Union
was paid a one-time arrangement fee of $27,500. State Street serves as
administrative agent for the Banks, and as administrative agent is entitled to
a fee of $20,000 per annum which is allocated to all of the Funds.
During the year ended October 31, 1998, the Fund incurred total interest
charges of $6,780. The Fund had loans outstanding under this line of credit
for 39 days during the year. The average daily borrowings for the period was
$978,282 and the weighted average interest rate was 6.40%. The maximum loan
outstanding during the year ended October 31, 1998 was $2,031,000.
10. DISTRIBUTIONS TO SHAREHOLDERS
On December 1, 1998, the Fund declared distributions from ordinary income of
$0.057 per share for Class A, Class B and Class C shares, payable on December
3, 1998 to shareholders of record December 1, 1998. These distributions are
not reflected in the accompanying financial statements.
11. SUBSEQUENT EVENT
On September 25, 1998, the Evergreen Board of Trustees voted to liquidate the
Fund, effective December 4, 1998. In making this decision the Board evaluated
the Fund's investment performance, its long-term viability and current market
conditions. Shares of the Fund remaining outstanding at the close of business
on December 4, 1998 will be exchanged into the same class of shares in the
Evergreen Money Market Fund.
14
<PAGE>
Evergreen Natural Resources Fund
- -------------------------------------------------------------------------------
Independent Auditors' Report
The Trustees and Shareholders
Evergreen Natural Resources Fund
We have audited the accompanying statement of assets and liabilities of
Evergreen Natural Resources Fund, including the schedule of investments, as of
October 31, 1998, and the related statement of operations for the year ended
October 31, 1998, the statements of changes in net assets for the year ended
October 31, 1998, the seven-month period ended October 31, 1997 and the year
ended March 31, 1997 and the financial highlights for the year ended October
31, 1998, the seven-month period ended October 31, 1997, the two-year period
ended March 31, 1997 and the period from October 7, 1994 (Commencement of
Operations) to March 31, 1995. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial 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 and financial highlights. Our procedures included
confirmation of securities owned as of October 31, 1998 by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As more fully described in note 11 to the financial statements, the Evergreen
Board of Trustees approved a plan of liquidation on September 25, 1998, and
the Fund commenced liquidation shortly thereafter.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Evergreen Natural Resources Fund as of October 31, 1998, the results of its
operations for the year ended October 31, 1998, the changes in its net assets
for the year ended October 31, 1998, the seven-month period ended October 31,
1997 and the year ended March 31, 1997 and the financial highlights for each
of the years or periods specified in the first paragraph above in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
November 27, 1998
15
<PAGE>
Evergreen Natural Resources Fund
- -------------------------------------------------------------------------------
Additional Information (unaudited)
YEAR 2000
Like other investment companies, the Funds could be adversely affected if the
computer systems used by the Funds' investment Advisers and the Funds' other
service providers are not able to perform their intended functions effectively
after 1999 because of the inability of computer software to distinguish the
year 2000 from the year 1900. The Funds' investment Advisers are taking steps
to address this potential year 2000 problem with respect to the computer
systems that they use and to obtain satisfactory assurances that comparable
steps are being taken by the Funds' other major service providers. At this
time, however, there can be no assurance that these steps will be sufficient
to avoid any adverse impact on the Funds from this problem.
FEDERAL TAX STATUS OF DISTRIBUTIONS
Pursuant to section 852 of the Internal Revenue Code, the Fund has
designated $648,581 ($0.38 per share) as long-term 28% capital gain
distributions and $1,214,064 ($0.71 per share) as long-term 20% capital
gain distributions for the fiscal year ended October 31, 1998:
For corporate shareholders, 2.84% of the ordinary income dividends paid
during the year ended October 31, 1998 were eligible for the corporate
dividends received deduction.
Shareholders are advised to use information received on Form 1099 to
determine their taxable long-term capital gain distribution rather than
the per share amounts presented above.
16
<PAGE>
This 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.
NOT May lose value
FDIC
INSURED No bank guarantee
EVERGREEN DISTRIBUTORS, INC.
61535 NATRES 12/98
