<PAGE>
Interim Report
as of April 30, 2000
Evergreen
Sector Funds
[LOGO OF EVERGREEN FUNDS]
<PAGE>
--------------------------------------------------------------------------------
Table of Contents
--------------------------------------------------------------------------------
Letter to Shareholders ..................................................... 1
Health Care Fund
Fund at a Glance ........................................................ 2
Portfolio Manager Interview ............................................. 3
Technology Fund
Fund at a Glance ........................................................ 5
Portfolio Manager Interview ............................................. 6
Financial Highlights
Health Care Fund ........................................................ 8
Technology Fund ......................................................... 10
Schedule of Investments
Health Care Fund ........................................................ 12
Technology Fund ......................................................... 14
Statements of Assets and Liabilities ....................................... 16
Statements of Operations ................................................... 17
Statements of Changes in Net Assets ........................................ 18
Combined Notes to
Financial Statements ....................................................... 19
--------------------------------------------------------------------------------
Evergreen Funds
--------------------------------------------------------------------------------
Evergreen Funds is one of the nation's fastest growing investment companies with
approximately $80 billion in assets under management.
With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This interim 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
June 2000
[PHOTO]
William M. Ennis
President and CEO
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Sector Funds interim report, which
covers the four-month period since the funds' inceptions through April 30, 2000.
U.S. Markets Experience Volatility
Since the inception of the Sector Funds in December 1999, the health care and
technology sectors have experienced significant ups and downs. By the end of
1999 and into early 2000, both sectors saw investors bidding up prices that
could not be sustained. The overvaluation of the sectors contributed to a
dramatic change in market sentiment, directing many investors to seek stocks
with more reasonable valuations.
By employing a combination of fundamental research and quantitative screening
for stocks in each sector, we seek companies whose earnings and valuations, in
our opinion, are reasonable and sustainable. While we believe there will be
short-term declines in the health care and technology sectors, we believe the
long-term growth prospects for these areas of the market could be excellent.
The Federal Reserve Board increased interest rates twice during the period
resulting in the highest Fed funds rate since May 1995. Normally, the tightening
of the money supply would curtail consumer spending, however, investors in
stocks and equity funds seemed to be ignoring the Fed's actions to insulate the
economy from the threat of inflation.
Despite the recent volatility, the threat of inflation and the Federal Reserve's
response to it, investors remain positive about the U.S. economy and the
long-term potential of the U.S. markets. At Evergreen, we believe the economy is
still fundamentally strong and that the Federal Reserve will continue to act
aggressively to contain inflation. We remain cautiously optimistic about
continued growth in the markets.
Website Enhancements
Please visit our enhanced website, evergreen-funds.com, for more information
about Evergreen Funds. The site offers an array of helpful information including
an investment education center, interactive calculators to assist your
investment planning and general information about Evergreen Funds.
We believe that sound investing is about taking steps to meet your long-term
financial needs and goals. We remind you to take advantage of your financial
advisor's expertise to develop and refine a financial plan that will enable you
to meet your objectives. Evergreen Funds offers a broad mix of stock, bond and
money market funds that should assist you in choosing the most appropriate for
your portfolio.
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 April 30, 2000
"While we believe there will be short-term declines in the health care sector,
we believe the long-term growth prospects for this area of the market could be
excellent."
Portfolio Management
------------------------
[PHOTO]
Liu-Er Chen,CFA
Tenure: December 1999
--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
--------------------------------------------------------------------------------
<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
-----------------------------------------------------------------------------------------
Since Portfolio Inception w/ 51.81% 53.80% 56.80% n/a
sales charge
-----------------------------------------------------------------------------------------
Since Portfolio Inception w/o 59.40% 58.80% 58.80% 59.40%
sales charge
-----------------------------------------------------------------------------------------
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
-----------------------------------------------------------------------------------------
</TABLE>
[GRAPH]
--------------------------------------------------------------------------------
LONG TERM GROWTH
--------------------------------------------------------------------------------
Class A S & P 500 S&P 1500 CPI
12/22/99 9,525 10,000 10,000 N/A
12/31/99 9,982 10,231 10,126 10,000
1/31/00 11,677 9,710 10,776 10,024
2/29/00 17,963 9,515 9,949 10,083
3/31/00 15,335 10,435 10,265 10,166
4/30/00 15,183 10,113 10,984 10,197
Comparison of a $10,000 investment in Evergreen Health Care Fund, Class A
shares1, versus a similar investment in Standard and Poor's 1500 Supercomposite
Health Care Sector Index (S&P 1500-Health Care), the Standard and Poor's 500
Index (S&P 500) and the Consumer Price Index (CPI).
The S&P 1500-Health Care 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.
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.
Funds that concentrate their investments in a single sector may face an
increased risk of price fluctuation over more diversified funds due to adverse
developments within that sector.
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.
The Fund's investment objective is non-fundamental and may be changed without
the vote of the Fund's shareholders.
1 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. Performance includes the reinvestment of income
dividends and capital gains 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.
2
<PAGE>
EVERGREEN
Health Care Fund
Porfolio Manager Interview
How did the Fund perform?
From the commencement of operations on December 22, 1999, the Class A shares of
the Evergreen Health Care Fund produced a return of 59.40% through April 30,
2000, unadjusted for any applicable sales charge. In comparison, the Lipper
Health Care/Biotechnology category average returned 19.36%, according to Lipper
Inc., an independent monitor of mutual fund performance. The S&P 500 and S&P
1500-Health Care Indices returned 1.13% and 9.84%, respectively for the same
period. These results are before the deduction of any applicable sales charges.
Portfolio
Characteristics
---------------
(as of 4/30/2000)
Total Net Assets $8,385,830
Number of Holdings 72
How do you manage the Fund?
We seek to achieve superior performance by allocating assets to sectors in which
the economic value is shifting and by choosing what we believe are winners in
each individual sector. Demographic and regulatory changes as well as
technological evolution tend to benefit companies in the various sectors
differently. Companies have delivered historically consistent high returns if
they have competent management, competitive franchises, high growth products and
evolving management processes. We manage the Fund by using a combination of
fundamental research and quantitative screening.
What factors influenced health care stocks during the period?
A number of unresolved national issues had an impact on the health care sector.
These included the national debate over whether or not Medicare should pay for
prescription drugs, proposed legislation called the "patients' bill of rights,"
which would allow patients to sue their HMO's, and the question of patient
rights for work being done in the human genome project. Despite the uncertainty
raised by these issues, health care stocks performed well because of the
defensiveness in the inflationary environment.
What types of stocks contributed most to performance?
For the first two months of the period, biotechnology stocks, which accounted
for about 20% of portfolio assets, produced the strongest gains. Investors began
bidding up prices on biotechnology stocks during the second half of 1999 and the
momentum in these stocks continued during the early weeks of 2000. When it
appeared that the high prices of biotechnology shares could not be sustained, we
took profits in the sector and began to focus on the safe havens of blue-chip
pharmaceuticals and medical product companies. Such stocks helped sustain the
Fund's performance during the latter part of the period.
3
<PAGE>
EVERGREEN
Health Care Fund
Portfolio Manager Interview
Top 10 Holdings
---------------
(as a percentage of 4/30/2000 net assets)
Lilly (Eli) & Co. 6.9%
Bristol-Myers Squibb Co. 5.2%
Aventis 4.7%
Merck & Co., Inc. 4.4%
Pfizer, Inc. 4.1%
Schering-Plough Corp. 3.7%
Pharmacia Corp. 3.1%
Glaxo Wellcome Plc, ADR 3.0%
Roche Holdings, Ltd. 2.7%
Medarex, Inc. 2.6%
How will rising interest rates affect health care stocks?
Historically, higher interest rates and slower economic growth have had
relatively little impact on the performance of health care stocks. Health care
products and services tend to be in high demand no matter what the interest rate
or economic environment is like.
Why are health care stocks good long-term investments?
Long-term demographic trends favor health care stocks. As the population ages
and lives longer, there will be greater need for health care products and
services. Currently, health care spending is about 14% of gross domestic
product. In 1998, Americans spent $1.1 trillion on health care and this amount
is expected to grow to $2.2 trillion by 2008.
Thirty percent of health care spending is for administrative costs. As a result,
there is a big role for information technology to play in reducing these costs
and increasing profitability.
The "wealth effect" figures prominently in the health care sector of the market.
Being healthy is important to quality of life, and the more money people have
the more they are willing to spend on maintaining good health. Over the next 10
years, biotechnology may be the most exciting area for investment. Genomics and
antibody technologies are revolutionizing the development of drugs that will
treat many of the most serious diseases. While we believe there will be
short-term declines in the health care sector, we believe the long-term growth
prospects for this area of the market could be excellent.
4
<PAGE>
EVERGREEN
Technology Fund
Fund at a Glance as of April 30, 2000
"We believe over the long term technology stocks will continue to perform better
than the overall market."
Portfolio
Management
--------------
John Rutledge
Tenure: December 1999
--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
--------------------------------------------------------------------------------
<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
-----------------------------------------------------------------------------------------
Since Portfolio Inception w/ 20.57% 21.20% 24.20% n/a
sales charge
-----------------------------------------------------------------------------------------
Since Portfolio Inception w/o 26.60% 26.20% 26.20% 26.70%
sales charge
-----------------------------------------------------------------------------------------
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
-----------------------------------------------------------------------------------------
</TABLE>
[GRAPH]
--------------------------------------------------------------------------------
LONG TERM GROWTH
--------------------------------------------------------------------------------
Class A S & P 500 S&P 1500 CPI
12/22/99 9,525 10,000 10,000 N/A
12/31/99 9,839 10,231 10,231 10,000
1/31/00 9,648 9,710 9,511 10,024
2/29/00 11,991 9,515 10,881 10,083
3/31/00 12,448 10,435 11,632 10,166
4/30/00 12,057 10,113 10,614 10,197
Comparison of a $10,000 investment in Evergreen Technology Fund, Class A
shares1, 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.
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 sector may face an
increased risk of price fluctuation over more diversified funds due to adverse
developments within that sector.
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.
The Fund's investment objective is non-fundamental and may be changed without
the vote of the Fund's shareholders.
1 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. Performance includes the reinvestment of income
dividends and capital gains distributions.
All data is as of April 30, 2000 and subject to change.
The Technology sector is in an atypical period, during which the sector has been
performing unusually well. This performance may not be expected to continue.
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.
5
<PAGE>
EVERGREEN
Technology Fund
Portfolio Manager Interview
How did the Fund perform?
From the commencement of operations on December 22, 1999 through April 30, 2000,
the Fund's Class A Shares returned 26.60%, unadjusted for any applicable sales
charge. Despite extreme volatility in the technology sector of the market, the
Fund produced an excellent return. In comparison, the S&P 1500-Technology and
S&P 500 Indices returned 6.14% and 1.13%, respectively for the same period.
Returns are before the deduction of any applicable sales charges.
Portfolio
Characteristics
---------------
(as of 4/30/2000)
Total Net Assets $7,018,359
Number of Holdings 61
What was the investment environment like for technology stocks during the
period?
During the period, there were two distinct investment environments. At the end
of 1999, technology stocks were the most sought after securities in the market.
The market was driven by momentum, and investors purchased technology shares
without regard to valuations. In early March, however, investors grew concerned
that the high prices of technology stocks were unsustainable, and market
sentiment changed dramatically. Investors returned to a more traditional
approach to valuing stocks--one for which there is a correlation between a
company's stock price and its potential for earnings growth.
How do you manage the Fund?
We maintain a steadfast conviction that company earnings and valuations matter.
As a result, we purchase stocks that have a relative price/earnings ratio (P/E)
of no more than three times the projected 2001 P/E ratio of the S&P 500. When
adding stocks to the portfolio, we look first at sectors where we believe there
is opportunity for growth at reasonable valuations. Then we purchase what we
refer to as "tier-one quality" companies in those sectors. Many of these
companies have become household names. They are the biggest and most mature
companies in the technology area.
What specific areas of the technology sector contributed to the Fund's return?
The Fund's semiconductor holdings, which accounted for 38% of net assets, were
the biggest contributor to performance. Semiconductors are the raw material in
most of the electronic products we use every day. The continuous improvement of
semiconductors has lowered the cost of electronic products. Users of technology
receive 25% more power or efficiency for their dollars every year because of the
continuing progress of miniaturizing electronic devices. In the semiconductor
area of the market, Intel, LSI Logic and Micron Technology were among the
companies that helped performance.
6
<PAGE>
EVERGREEN
Technology Fund
Portfolio Manager Interview
Top 10 Holdings
---------------
(as a percentage of 4/30/2000 net assets)
Micron Technology, Inc. 6.0%
Intel Corp. 5.4%
Cisco Systems. Inc. 4.0%
Hewlett-Packard Co. 3.8%
Cypress Semiconductor Corp. 3.7%
Lexmark Intl. Group, Inc., Class. A 3.4%
Nokia Corp., ADR 3.2%
International Business Machines Corp. 3.2%
Teradyne, Inc. 3.1%
EMC Corp. 3.0%
Where else did you find opportunity?
At 17% of assets, communication companies accounted for the second largest
portion of portfolio assets. Nokia and Ericsson, manufacturers of wireless
communications products, are just two of the companies that benefited
performance. We also had a relatively large position in computer companies. IBM,
Hewlett Packard and Sun Microsystems are some of the computer companies we hold.
Do you invest overseas?
More than 90% of the Fund is U.S.-based. Occasionally, we uncover an opportunity
to invest in an outstanding overseas company, such as Nokia, which is based in
Finland. The overseas companies we favor follow acceptable accounting principles
and usually have a major U.S. presence in their operations and investor
relations.
Top Countries
-------------
(as a percentage of 4/30/2000 net assets)
United States 93.9%
Finland 3.2%
Canada 1.6%
Sweden 1.3%
Will rising interest rates affect technology stocks?
Historically, neither rising interest rates nor a slowing economy have had a
significant negative impact on technology companies. Because businesses rely on
technology to give them a competitive edge, they tend to invest in new products
regardless of the economic environment. As a result, technology shares have done
well during periods of rising interest rates. Having said that, a new factor
must be considered in the technology equation--the consumer. Over the past few
years, consumer electronics purchases have become a bigger part of the
technology market. A slower economy could lead to a decline in consumer spending
which could dampen the profits and share prices of technology companies.
Therefore, should interest rates rise, there is slightly more risk in the
technology sector than there has been in the past.
What is your outlook?
We believe that over the long term, technology stocks will continue to perform
better than the overall market. We expect valuation to play a more important
role in the technology area of the market. As a result, higher P/E stocks are
likely to be very vulnerable to market downturns. Technology is becoming an
increasingly important part of everyone's life and a bigger share of the overall
economy. By adapting to changing market conditions and by selecting good
companies with reasonable P/E ratios, the Fund has the potential to produce
strong returns over the long term.
7
<PAGE>
EVERGREEN
Health Care Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period Ended
April 30, 2000 (a)
(Unaudited)
<S> <C>
CLASS A 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 5.99
------
Total from investment operations 5.94
------
Distributions to shareholders from
Net investment income 0
------
Net asset value, end of period $15.94
------
Total return* 59.40%
Ratios and supplemental data
Net assets, end of period (thousands) $ 533
Ratios to average net assets
Expenses 1.59%+
Net investment loss (0.80%)+
Portfolio turnover rate 102%
</TABLE>
<TABLE>
<CAPTION>
Period Ended
April 30, 2000 (a)
(Unaudited)
<S> <C>
CLASS B SHARES
Net asset value, beginning of period $10.00
------
Income from investment operations
Net investment loss (0.08)
Net realized and unrealized gains on securities 5.96
------
Total from investment operations 5.88
------
Distributions to shareholders from
Net investment income 0
------
Net asset value, end of period $15.88
------
Total return* 58.80%
Ratios and supplemental data
Net assets, end of period (thousands) $7,464
Ratios to average net assets
Expenses 2.34%+
Net investment loss (1.48%)+
Portfolio turnover rate 102%
</TABLE>
(a) For the period from December 22, 1999 (commencement of class operations) to
April 30, 2000.
* Excluding applicable sales charges.
+ Annualized.
See Combined Notes to Financial Statements.
8
<PAGE>
EVERGREEN
Health Care Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period Ended
April 30, 2000 (a)
(Unaudited)
<S> <C>
CLASS C SHARES
Net asset value, beginning of period $10.00
------
Income from investment operations
Net investment loss (0.08)
Net realized and unrealized gains on securities 5.96
------
Total from investment operations 5.88
------
Distributions to shareholders from
Net investment income 0
------
Net asset value, end of period $15.88
------
Total return* 58.80%
Ratios and supplemental data
Net assets, end of period (thousands) $ 159
Ratios to average net assets
Expenses 2.34%+
Net investment loss (1.48%)+
Portfolio turnover rate 102%
</TABLE>
<TABLE>
<CAPTION>
Period Ended
April 30, 2000 (a)
(Unaudited)
<S> <C>
CLASS Y 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 5.97
------
Total from investment operations 5.94
------
Distributions to shareholders from
Net investment income 0
------
Net asset value, end of period $15.94
------
Total return 59.40%
Ratios and supplemental data
Net assets, end of period (thousands) $ 230
Ratios to average net assets
Expenses 1.34%+
Net investment loss (0.49%)+
Portfolio turnover rate 102%
</TABLE>
(a) For the period from December 22, 1999 (commencement of class operations) to
April 30, 2000.
* Excluding applicable sales charges.
+ Annualized.
See Combined Notes to Financial Statements.
9
<PAGE>
EVERGREEN
Technology Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period Ended
April 30, 2000 (a) #
(Unaudited)
<S> <C>
CLASS A SHARES
Net asset value, beginning of period $10.00
------
Income from investment operations
Net investment loss (0.06)
Net realized and unrealized gains on securities 2.72
------
Total from investment operations 2.66
------
Distributions to shareholders from
Net investment income 0
------
Net asset value, end of period $12.66
------
Total return* 26.60%
Ratios and supplemental data
Net assets, end of period (thousands) $ 756
Ratios to average net assets
Expenses 1.65%+
Net investment loss (1.24%)+
Portfolio turnover rate 89%
</TABLE>
<TABLE>
<CAPTION>
Period Ended
April 30, 2000 (a) #
(Unaudited)
<S> <C>
CLASS B SHARES
Net asset value, beginning of period $10.00
------
Income from investment operations
Net investment loss (0.08)
Net realized and unrealized gains on securities 2.70
------
Total from investment operations 2.62
------
Distributions to shareholders from
Net investment income 0
------
Net asset value, end of period $12.62
------
Total return* 26.20%
Ratios and supplemental data
Net assets, end of period (thousands) $5,955
Ratios to average net assets
Expenses 2.40%+
Net investment loss (1.83%)+
Portfolio turnover rate 89%
</TABLE>
(a) For the period from December 22, 1999 (commencement of class operations) to
April 30, 2000.
* Excluding applicable sales charges.
+ Annualized.
# Net investment loss is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
10
<PAGE>
EVERGREEN
Technology Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period Ended
April 30, 2000 (a) #
(Unaudited)
<S> <C>
CLASS C SHARES
Net asset value, beginning of period $10.00
------
Income from investment operations
Net investment loss (0.08)
Net realized and unrealized gains on securities 2.70
------
Total from investment operations 2.62
------
Distributions to shareholders from
Net investment income 0
------
Net asset value, end of period $12.62
------
Total return* 26.20%
Ratios and supplemental data
Net assets, end of period (thousands) $ 134
Ratios to average net assets
Expenses 2.41%+
Net investment loss (1.83%)+
Portfolio turnover rate 89%
</TABLE>
<TABLE>
<CAPTION>
Period Ended
April 30, 2000 (a) #
(Unaudited)
<S> <C>
CLASS Y 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 2.71
------
Total from investment operations 2.67
------
Distributions to shareholders from
Net investment income 0
------
Net asset value, end of period $12.67
------
Total return 26.70%
Ratios and supplemental data
Net assets, end of period (thousands) $ 174
Ratios to average net assets
Expenses 1.41%+
Net investment loss (0.88%)+
Portfolio turnover rate 89%
</TABLE>
(a) For the period from December 22, 1999 (commencement of class operations) to
April 30, 2000.
* Excluding applicable sales charges.
+ Annualized.
# Net investment loss is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
11
<PAGE>
EVERGREEN
Health Care Fund
Schedule of Investments
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 92.1%
Biotechnology - 22.3%
1,000 Abgenix, Inc.++........................................ $ 89,563
150 Affymetrix, Inc.++..................................... 20,259
1,500 * Amgen, Inc.++........................................ 84,000
2,500 * Biochem Pharmaceuticals, Inc. ....................... 57,500
800 * Biogen, Inc. ........................................ 47,050
500 Celera Genomics Group ................................. 41,250
6,800 Cell Genesys, Inc.++................................... 127,075
5,000 * Celltech Group Plc, Class F.......................... 82,518
500 COR Therapeutics, Inc.++............................... 38,094
2,000 CuraGen Corp.++........................................ 53,250
1,000 Genetech, Inc.++....................................... 117,000
1,200 Genzyme Corp.++........................................ 58,575
8,000 * Genzyme Transgenics Corp. ........................... 132,500
500 * Human Genome Sciences, Inc.++........................ 38,281
2,000 Hyseq, Inc. ........................................... 56,375
1,000 Idec Pharmaceuticals Corp.++........................... 64,000
2,000 * Ilex Oncology, Inc.++................................ 48,000
1,200 * Immunex Corp. ....................................... 47,250
300 Incyte Pharmaceuticals, Inc.++......................... 23,100
5,000 Intermune Pharmaceuticals Inc. ........................ 86,250
4,100 Medarex, Inc. ......................................... 217,300
680 * Millennium Pharmaceuticals, Inc.++................... 53,975
500 * Myriad Genetics, Inc. ............................... 32,188
9,500 Osi Pharmaceuticals Inc. .............................. 130,031
900 Protein Design Labs, Inc. ............................. 91,350
1,000 * Transkaryotic Therapies, Inc. ....................... 29,938
----------
1,866,672
----------
Chemicals - 4.7%
7,000 Aventis................................................ 393,750
----------
Energy Equipment & Services - 0.7%
11 Disetronic Holding AG.................................. 63,466
----------
Food & Drug Retailing - 0.8%
1,500 CVS Corp.++............................................ 65,250
----------
Health Care Equipment &
Supplies - 7.4%
3,000 Aradigm Corp. ......................................... 48,188
2,100 Becton Dickinson & Co. ................................ 53,812
1,400 Biomet, Inc. .......................................... 49,962
3,000 * Boston Scientific Corp.++............................ 79,500
2,000 C.R. Bard, Inc. ....................................... 87,125
3,900 Gliatech++............................................. 59,475
800 * Guidant Corp. ....................................... 45,900
3,000 Oxford Asymmetry I..................................... 19,524
277 Oxford GlycoSciences Plc............................... 7,032
26,000 Ppl Therapeutics....................................... 65,984
100 Straumann Holding...................................... 107,622
----------
624,124
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Health Care Providers &
Services - 5.9%
800 * Express Scripts, Inc. Class A++...................... $ 28,600
800 Healtheon Corp.++...................................... 16,850
3,000 McKesson HBOC, Inc.++.................................. 50,625
3,600 Nobel Biocare.......................................... 96,364
5,000 * Pharmaceutical Product Development, Inc. ............ 84,063
2,700 * Quintiles Transnational Corp.++...................... 38,644
850 United Healthcare Corp.++.............................. 56,684
1,650 * Wellpoint Health Networks, Inc.,
Class A++............................................. 121,687
----------
493,517
----------
Insurance - 1.7%
1,800 CIGNA Corp. ........................................... 143,550
----------
Personal Products - 0.4%
1,500 Carter Wallace, Inc. .................................. 33,375
----------
Pharmaceuticals - 48.2%
3,600 Abbott Laboratories.................................... 138,375
800 Altana AG.............................................. 57,819
3,300 American Home Products Corp. .......................... 185,419
8,352 Bristol-Myers Squibb Co................................ 437,958
5,000 Chugai Pharmaceutical Co., Ltd. ....................... 96,283
4,028 Glaxo Wellcome Plc, ADR++.............................. 253,009
700 H Lundbeck A/S......................................... 31,184
3,000 IVAX Corp.++ .......................................... 82,125
1,200 Johnson & Johnson...................................... 99,000
7,500 Lilly (Eli) & Co.++ ................................... 579,844
5,330 Merck & Co., Inc. ..................................... 370,435
3,500 Microcide Pharmaceuticals, Inc. ....................... 34,781
2,400 Mylan Laboratories, Inc.++ ............................ 68,100
8,100 Pfizer, Inc.++ ........................................ 341,212
5,235 Pharmacia Corp.++ ..................................... 261,423
2,500 Pharming Group NV Easdaq............................... 40,796
2,200 Roche Holdings Ltd++ .................................. 230,296
400 Schering AG............................................ 56,546
7,600 Schering-Plough Corp. ................................. 306,375
1,330 Teva Pharmaceutical Industries, Ltd., ADR++............ 58,520
1,800 Warner-Lambert Co. .................................... 204,862
2,000 Yamanouchi Pharmaceutical Co., Ltd. ................... 105,726
----------
4,040,088
----------
Total Common Stocks
(cost $7,265,042)..................................... 7,723,792
----------
</TABLE>
12
<PAGE>
EVERGREEN
Health Care Fund
Schedule of Investments(continued)
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. TREASURY OBLIGATIONS - 1.1%
$ 91,117 U.S Treasury Bonds,
6.50-12.50%,
8/15/2014-11/15/2026++............................... $ 91,117
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 23.8%
1,991,775 Navigator Prime Portfolio++++ (cost $1,991,775)........ $1,991,775
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 8.3%
$ 695,000 State Street Bank & Trust Co.,
5.76%, dated 4/28/2000, due 5/1/2000, maturity value
$695,334 (cost $695,000)(a)......................... $ 695,000
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $10,042,934)........................... 125.2% 10,501,684
Other Assets and
Liabilities - net............................ (25.2) (2,115,854)
----- -----------
Net Assets.................................... 100.0% $ 8,385,830
===== ===========
</TABLE>
(a) The repurchase agreement is fully collateralized by 720,000 FHLB, 6.50%
01/28/2004, value including accrued interest $720,390.
++ All or a portion of this security is on loan
++++ Represents investment in cash collateral received for securities on loan.
* Non-income producing security.
Summary of Abbreviations:
ADR American Depository Receipt
See Combined Notes to Financial Statements.
13
<PAGE>
EVERGREEN
Technology Fund
Schedule of Investments
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 98.7%
Commercial Services &
Supplies - 2.3%
1,400 * Amdocs Ltd. ......................................... $ 94,762
700 * Harbinger Corp. ..................................... 13,213
2,000 Xerox Corp. ........................................... 52,875
-----------
160,850
-----------
Communications Equipment - 16.7%
1,000 * ADC Telecommunications, Inc. ........................ 60,750
4,000 * Cisco Systems, Inc. ................................. 277,312
600 Corning, Inc. ......................................... 118,500
1,000 Ericsson LM Telephone Co.,
Class B, ADR.......................................... 88,438
1,000 Lucent Technologies, Inc.++............................ 62,188
1,000 Motorola, Inc. ........................................ 119,062
4,000 Nokia Corp., ADR++..................................... 227,500
1,000 Nortel Networks Corp.++................................ 113,250
1,600 * Tollgrade Communications, Inc. ...................... 105,600
-----------
1,172,600
-----------
Computers & Peripherals - 22.1%
500 * Apple Computer....................................... 62,031
100 Brooktrout, Inc. ...................................... 2,700
2,000 Compaq Computer Corp. ................................. 58,500
3,000 * Dell Computer Corp.++................................ 150,375
1,500 * EMC Corp. ........................................... 208,406
2,000 Hewlett-Packard Co. ................................... 270,000
3,400 * In Focus Systems, Inc. .............................. 101,788
2,000 International Business Machines Corp. ................. 223,250
2,000 * Lexmark International Group, Inc.,
Class A............................................... 236,000
1,000 * NVIDIA Corp. ........................................ 89,125
500 * Sun Microsystems, Inc. .............................. 45,969
1,800 Symbol Technologies, Inc. ............................. 100,350
-----------
1,548,494
-----------
Distributors - 3.2%
1,500 Arrow Electronics, Inc. ............................... 65,719
2,000 Avnet, Inc. ........................................... 157,250
-----------
222,969
-----------
Diversified Financials - 1.1%
3,600 SCG Holding Corp. ..................................... 78,975
-----------
Diversified Telecommunication Services - 1.9%
800 Clarent Corp. ......................................... 54,400
2,400 * Primus Telecommunications
Group, Inc.++......................................... 78,750
-----------
133,150
-----------
Electronic Equipment &
Instruments - 8.5%
2,600 * Conductus, Inc.++.................................... 41,600
1,000 Flextronics International Ltd.++....................... 70,250
1,400 * Kopin Corp. ......................................... 108,412
1,000 * Sanmina Corp.++...................................... 60,063
1,000 * SCI Systems, Inc.++.................................. 53,250
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Electronic Equipment & Instruments - continued
2,000 * Solectron Corp. ................................... $ 93,625
2,000 Vishay Intertechnology, Inc. ........................ 167,750
-----------
594,950
-----------
Internet Software & Services - 0.4%
600 * Spyglass, Inc. .................................... 31,800
-----------
Semiconductor Equipment & Products - 37.9%
1,000 * Altera Corp. ...................................... 102,250
1,300 * ANADIGICS, Inc. ................................... 97,825
1,000 * Applied Materials, Inc. ........................... 101,812
1,000 * Atmel Corp. ....................................... 48,938
1,000 Bookham Technology Plc............................... 52,000
5,000 * Cypress Semiconductor Corp. ....................... 259,687
2,000 Fairchild Semiconductor
International Corp.++............................... 95,000
4,000 Integrated Device Technology++....................... 192,250
3,000 Intel Corp. ......................................... 380,437
2,000 * International Rectifier Corp. ..................... 98,250
1,000 * Jabil Circuit, Inc.++.............................. 40,938
1,500 * Lam Research Corp.++............................... 68,812
3,000 Linear Technology Corp. ............................. 171,375
1,000 * LSI Logic Corp. ................................... 62,500
1,050 * Microchip Technology, Inc. ........................ 65,166
3,000 Micron Technology, Inc. ............................. 417,750
2,000 * National Semiconductor Corp. ...................... 121,500
1,000 * Novellus Systems, Inc. ............................ 66,688
2,000 * Teradyne, Inc. .................................... 220,000
-----------
2,663,178
-----------
Software - 3.7%
1,000 * Microsoft Corp. ................................... 69,750
1,000 * Oracle Systems Corp. .............................. 79,937
3,400 * Saga Systems, Inc. ................................ 63,325
1,000 * Sonic Foundry, Inc.++.............................. 44,750
-----------
257,762
-----------
Textiles & Apparel - 0.9%
5,300 * Unify Corp. ....................................... 63,600
-----------
Total Common Stocks
(cost $6,026,389)................................... $ 6,928,328
-----------
</TABLE>
14
<PAGE>
EVERGREEN
Technology Fund
Schedule of Investments(continued)
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 18.6%
1,306,509 Navigator Prime Portfolio - 18.6% (cost
$1,306,509)++++.................................... $ 1,306,509
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 0.1%
$ 8,000 State Street Bank & Trust Co.,
5.76%, purchased 4/28/2000, maturing 5/1/2000,
maturity value $8,004 (cost $8,000)#................ $ 8,000
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $7,340,898)........................... 117.4% 8,242,837
Other Assets and
Liabilities - net........................... (17.4) (1,224,478)
----- -----------
Net Assets................................... 100.0% $ 7,018,359
===== ===========
</TABLE>
++ All or a portion of this security is on loan
++++ Represents investment in cash collateral received for securities on loan.
# The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest.
* Non-income producing security.
Summary of Abbreviations:
ADR American Depository Receipt
See Combined Notes to Financial Statements.
15
<PAGE>
EVERGREEN
Sector Funds
Statements of Assets and Liabilities
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Health Care Technology
Fund Fund
------------------------------------------------------------------------------
<S> <C> <C>
Assets
Identified cost of securities...................... $10,042,934 $7,340,898
Net unrealized gains on securities................. 458,750 901,939
------------------------------------------------------------------------------
Market value of securities......................... 10,501,684 8,242,837
Cash............................................... 64 927
Receivable for securities sold..................... 0 330,514
Receivable for Fund shares sold.................... 100 25
Dividends and interest receivable.................. 9,786 114
Prepaid expenses and other assets.................. 48,464 51,070
------------------------------------------------------------------------------
Total assets...................................... 10,560,098 8,625,487
------------------------------------------------------------------------------
Liabilities
Payable for securities purchased................... 81,956 289,044
Payable for Fund shares redeemed................... 50 0
Payable for securities on loan..................... 2,082,892 1,306,509
Advisory fee payable............................... 642 539
Distribution Plan expenses payable................. 625 507
Due to other related parties....................... 22 14
Accrued expenses and other liabilities............. 8,081 10,515
------------------------------------------------------------------------------
Total liabilities................................. 2,174,268 1,607,128
------------------------------------------------------------------------------
Net assets......................................... $ 8,385,830 $7,018,359
------------------------------------------------------------------------------
Net assets represented by
Paid-in capital.................................... $ 5,329,467 $5,615,518
Undistributed net investment loss.................. (39,102) (39,671)
Accumulated net realized gains on securities and
foreign currency related transactions............. 2,636,726 540,573
Net unrealized gains on securities and other
assets............................................ 458,739 901,939
------------------------------------------------------------------------------
Total net assets................................... $ 8,385,830 $7,018,359
------------------------------------------------------------------------------
Net assets consists of
Class A............................................ $ 533,174 $ 756,346
Class B............................................ 7,464,271 5,954,575
Class C............................................ 158,815 133,595
Class Y............................................ 229,570 173,843
------------------------------------------------------------------------------
Total net assets................................... $ 8,385,830 $7,018,359
------------------------------------------------------------------------------
Shares outstanding
Class A............................................ 33,458 59,749
Class B............................................ 470,000 471,664
Class C............................................ 10,000 10,582
Class Y............................................ 14,402 13,722
------------------------------------------------------------------------------
Net asset value per share
Class A............................................ $ 15.94 $ 12.66
------------------------------------------------------------------------------
Class A--Offering price (based on sales charge of
4.75%)............................................ $ 16.73 $ 13.29
------------------------------------------------------------------------------
Class B............................................ $ 15.88 $ 12.62
------------------------------------------------------------------------------
Class C............................................ $ 15.88 $ 12.62
------------------------------------------------------------------------------
Class Y............................................ $ 15.94 $ 12.67
------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
16
<PAGE>
EVERGREEN
Sector Funds
Statements of Operations
Period Ended April 30, 2000 (a) (Unaudited)
<TABLE>
<CAPTION>
Health Care Technology
Fund Fund
----------------------------------------------------------------------------------
<S> <C> <C>
Investment income
Dividends............................................. $ 15,875 $ 2,540
Interest.............................................. 7,220 9,332
Securities lending income............................. 1,035 702
----------------------------------------------------------------------------------
Total investment income................................ 24,130 12,574
----------------------------------------------------------------------------------
Expenses
Advisory fee.......................................... 26,422 21,448
Distribution Plan expenses............................ 25,907 20,535
Administrative services fees.......................... 2,781 2,258
Transfer agent fee.................................... 929 360
Trustees' fees and expenses........................... 12 8
Printing and postage expenses......................... 356 615
Custodian fee......................................... 354 178
Registration and filing fees.......................... 2,757 2,701
Professional fees..................................... 1,654 2,242
Organization expenses................................. 1,750 1,657
Other................................................. 310 243
----------------------------------------------------------------------------------
Total expenses....................................... 63,232 52,245
----------------------------------------------------------------------------------
Net investment loss................................... (39,102) (39,671)
----------------------------------------------------------------------------------
Net realized and unrealized gains or losses on
securities and foreign currency related transactions
Net realized gains or losses on:
Securities........................................... 2,638,602 540,573
Foreign currency related transactions................ (1,876) 0
----------------------------------------------------------------------------------
Net realized gains on securities and foreign currency
related transactions................................. 2,636,726 540,573
----------------------------------------------------------------------------------
Net change in unrealized gains on securities and
foreign currency related transactions................ 458,739 901,939
----------------------------------------------------------------------------------
Net realized and unrealized gains on securities and
foreign currency related transactions................ 3,095,465 1,442,512
----------------------------------------------------------------------------------
Net increase in net assets resulting from operations.. $3,056,363 $1,402,841
----------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 22, 1999 (commencement of operations) to
April 30, 2000.
See Combined Notes to Financial Statements.
17
<PAGE>
EVERGREEN
Sector Funds
Statements of Changes in Net Assets
Period Ended April 30, 2000 (a) (Unaudited)
<TABLE>
<CAPTION>
Health Care Technology
Fund Fund
---------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment loss................................... $ (39,102) $ (39,671)
Net realized gains on securities and foreign currency
related transactions................................. 2,636,726 540,573
Net change in unrealized gains on securities and
foreign currency related transactions................ 458,739 901,939
---------------------------------------------------------------------------------
Net increase in net assets resulting from
operations.......................................... 3,056,363 1,402,841
---------------------------------------------------------------------------------
Distributions to shareholders.......................... 0 0
---------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold............................. 5,421,406 5,673,039
Payment for shares redeemed........................... (91,939) (57,521)
Net asset value of shares issued in reinvestment of
distributions........................................ 0 0
---------------------------------------------------------------------------------
Net increase in net assets resulting from capital
share transactions.................................. 5,329,467 5,615,518
---------------------------------------------------------------------------------
Total increase in net assets........................ 8,385,830 7,018,359
Net assets
Beginning of period................................... 0 0
---------------------------------------------------------------------------------
End of period......................................... $8,385,830 $7,018,359
---------------------------------------------------------------------------------
Undistributed net investment loss...................... $ (39,102) $ (39,671)
---------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 22, 1999 (commencement of operations) to
April 30, 2000.
See Combined Notes to Financial Statements.
18
<PAGE>
Combined Notes to Financial Statements(Unaudited)
1. ORGANIZATION
The Evergreen Sector Funds consist of Evergreen Health Care Fund ("Health Care
Fund") and Evergreen Technology Fund ("Technology Fund"), (collectively, the
"Funds"). Each Fund is a non-diversified series of Evergreen Equity Trust (the
"Trust"), a Delaware business trust organized on September 18, 1997. The Trust
is an open-end management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act").
The Funds offer Class A, Class B, Class C and Class Y shares. Class A shares
are sold with a maximum front-end sales charge of 4.75%. Class B and Class C
shares are sold without a front-end sales charge, but pay a higher ongoing dis-
tribution fee than Class A. Class B shares are sold subject to a contingent de-
ferred sales charge that is payable upon redemption and decreases depending on
how long the shares have been held. Class B shares purchased after January 1,
1997 will automatically convert to Class A shares after seven years. Class B
shares purchased prior to January 1, 1997 follow the conversion rights at the
time the shares were initially purchased. Class C shares are sold subject to a
2.00% contingent deferred sales charge payable on shares redeemed within one
year after the month of purchase and a 1.00% contingent deferred sales charge
if such shares are redeemed within two years after the month of purchase. Class
C shares purchased prior to February 1, 2000 follow the contingent deferred
sales charge schedule at the time the shares were initially purchased. Class Y
shares are sold at net asset value and are not subject to contingent deferred
sales charges or distribution fees. Class Y shares are sold only to investment
advisory clients of First Union Corporation ("First Union") and its affiliates,
certain institutional investors or Class Y shareholders of record of certain
other funds managed by First Union and its affiliates as of December 30, 1994.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
Securities traded on an established exchange or national securities exchange or
included on the Nasdaq National Market System ("NMS") and other securities
traded in the over-the-counter market are valued at the last reported sales
price on the exchange where the security is primarily traded. Securities traded
on an exchange or NMS and other securities traded in the over-the-counter mar-
ket for which there has been no sale are valued at the mean between the last
reported bid and asked price. Securities for which market quotations are not
readily available, including restricted securities, are valued at fair value as
determined in good faith according to procedures approved by the Board of
Trustees.
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
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. Collateral for certain tri-party repurchase agreements is
held at the counterparty's custodian in a segregated account for the benefit of
the Fund and the counterparty. Each Fund monitors the adequacy of the collat-
eral daily and will require the seller to provide additional collateral in the
event the market value of the securities pledged falls below the carrying value
of the repurchase agreement, including accrued interest. Each Fund will only
enter into repurchase agreements with banks and other financial institutions,
which are deemed by the investment advisor to be creditworthy pursuant to
guidelines established by the Board of Trustees.
19
<PAGE>
Combined Notes to Financial Statements(Unaudited) (continued)
Pursuant to an exemptive order issued by the Securities and Exchange Commis-
sion, the Funds may transfer uninvested cash balances into a joint trading ac-
count. These balances are invested in one or more repurchase agreements that
are fully collateralized by U.S. Treasury and/or federal agency obligations.
C. Foreign Currency
The books and records of the Funds are maintained in United States (U.S.) dol-
lars. Foreign currency amounts are translated into U.S. dollars as follows:
market value of investments, other assets and liabilities at the daily rate of
exchange; purchases and sales of investments and income and expenses at the
rate of exchange prevailing on the respective dates of such transactions. Net
unrealized foreign exchange gains or losses resulting from changes in foreign
currency exchange rates is a component of net unrealized gains or losses on se-
curities and foreign currency related transactions. Net realized foreign cur-
rency gain or loss on foreign currency related transactions includes foreign
currency gains and losses between trade date and settlement date on investment
securities transactions, foreign currency related transactions and the differ-
ence between the amounts of interest and dividends recorded on the books of the
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 included in realized gain or loss
on securities.
D. Forward Foreign Currency Exchange Contracts
The Funds may enter into forward foreign currency exchange contracts ("forward
contracts") to settle portfolio purchases and sales of securities denominated
in a foreign currency and to hedge certain foreign currency assets or liabili-
ties. Forward contracts are recorded at the forward rate and marked-to-market
daily. Realized gains and losses arising from such transactions are included in
net realized gain or loss 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 con-
tracts involve elements of market risk in excess of the amount reflected in the
Statements of Assets and Liabilities.
E. Securities Lending
In order to generate income and to offset expenses, the Funds may lend portfo-
lio securities to brokers, dealers and other qualified financial organizations.
The Funds' investment advisor will monitor the creditworthiness of such borrow-
ers. Loans of securities may not exceed 33 1/3% of a Fund's total assets and
will be collateralized by cash, letters of credit or U.S. Government securities
that are maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities, including accrued interest. The
Fund monitors the adequacy of the collateral daily and will require the bor-
rower to provide additional collateral in the event the value of the collateral
falls below 100% of the market value of the securities on loan. While such 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. Any gain or
loss in the market price of the loaned securities, which occurs during the term
of the loan, would affect a Fund and its investors. A Fund may pay fees in con-
nection with such loans.
F. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums. Dividend income is recorded on the
ex-dividend date or in the case of some foreign securities, on the date
thereafter 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.
20
<PAGE>
Combined Notes to Financial Statements(Unaudited) (continued)
G. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated invest-
ment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable in-
come and net capital gains, if any, to their shareholders. The Funds also in-
tend to avoid any excise tax liability by making the required distributions un-
der the Code. Accordingly, no provision for federal taxes is required. To the
extent that realized capital gains can be offset by capital loss carryforwards,
it is each Fund's policy not to distribute such gains.
H. Distributions
Distributions from net investment income for the Funds are declared and paid
annually. Distributions from net realized capital gains, if any, are paid at
least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles.
I. 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.
J. Organization Expenses
Expenses relating to the organization of the Fund's have been reflected in each
Fund's operating results for the period ended April 30, 2000.
3. INVESTMENT ADVISORY AGREEMENT 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
the Funds. In return for providing investment management services, the Funds
pay EIMC a management fee that is computed and paid daily. The management fee
is computed daily at an annual rate 0.95% of each Fund's average daily net as-
sets.
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. Prior to March 15, 2000, The
BISYS Group, Inc. ("BISYS") served as the sub-administrator to the Funds and
provided the officers of the Funds. Officers of the Funds and affiliated Trust-
ees receive no compensation directly from the Funds.
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 administration fee is calcu-
lated by applying percentage rates, which start at 0.05% and decline to 0.01%
per annum as net assets increase, to the average daily net assets of each Fund.
The sub-administration fee was paid by the investment advisor until the sub-ad-
ministration agreement with BISYS was terminated on March 14, 2000. For the pe-
riod ended April 30, 2000, the Funds paid or accrued to EIS the following
amounts for administrative and sub-administrative.
<TABLE>
<CAPTION>
Administration Sub-administration
---------------------------------
<S> <C> <C>
Health Care Fund.............. $2,686 $95
Technology Fund............... 2,176 82
</TABLE>
Evergreen Service Company ("ESC"), an indirect, wholly owned subsidiary of
FUNB, is the transfer and dividend disbursing agent for the Funds.
21
<PAGE>
Combined Notes to Financial Statements(Unaudited) (continued)
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, Class A incurs distributions fees equal to 0.25% of the average
daily net asset of the class, all of which is used to pay for shareholder serv-
ice fees. Class B and Class C incur distribution fees equal to 1.00% of the av-
erage daily net assets of each class. Of this amount, 0.25% is used to pay for
shareholder service fees and 0.75% is used to pay for distribution-related
costs. Distribution Plan expenses are calculated and paid daily.
During the period ended April 30, 2000, amounts paid or accrued to EDI pursuant
to each Fund's Class A, Class B and Class C Distribution Plans were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
-----------------------
<S> <C> <C> <C>
Health Care Fund....................... $404 $24,971 $532
Technology Fund........................ 502 19,604 429
</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. 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:
Healthcare Fund
<TABLE>
<CAPTION>
Period Ended
April 30, 2000(a)
-------------------
Shares Amount
--------------------------------------------------------------------------------
<S> <C> <C>
Class A
Shares sold................................................ 39,540 $ 457,167
Shares issued in reinvestment of distributions............. 0 0
Shares redeemed............................................ (6,082) (86,730)
--------------------------------------------------------------------------------
Net increase............................................... 33,458 370,437
--------------------------------------------------------------------------------
Class B
Shares sold................................................ 470,000 4,700,000
Shares issued in reinvestment of distributions............. 0 0
Shares redeemed............................................ 0 0
--------------------------------------------------------------------------------
Net increase............................................... 470,000 4,700,000
--------------------------------------------------------------------------------
Class C
Shares sold................................................ 10,000 100,000
Shares issued in reinvestment of distributions............. 0 0
Shares redeemed............................................ 0 0
--------------------------------------------------------------------------------
Net increase............................................... 10,000 100,000
--------------------------------------------------------------------------------
Class Y
Shares sold................................................ 14,711 164,239
Shares issued in reinvestment of distributions............. 0 0
Shares redeemed............................................ (309) (5,209)
--------------------------------------------------------------------------------
Net increase............................................... 14,402 159,030
--------------------------------------------------------------------------------
Net increase............................................... $5,329,467
--------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 22, 1999 (commencement of operations) to
April 30, 2000.
22
<PAGE>
Combined Notes to Financial Statements(Unaudited) (continued)
Technology Fund
<TABLE>
<CAPTION>
Period Ended
April 30, 2000(a)
-------------------
Shares Amount
--------------------------------------------------------------------------------
<S> <C> <C>
Class A
Shares sold................................................ 64,574 $ 706,631
Shares issued in reinvestment of distributions............. 0 0
Shares redeemed............................................ (4,825) (57,233)
--------------------------------------------------------------------------------
Net increase............................................... 59,749 649,398
--------------------------------------------------------------------------------
Class B
Shares sold................................................ 471,664 4,720,118
Shares issued in reinvestment of distributions............. 0 0
Shares redeemed............................................ 0 0
--------------------------------------------------------------------------------
Net increase............................................... 471,664 4,720,118
--------------------------------------------------------------------------------
Class C
Shares sold................................................ 10,582 107,039
Shares issued in reinvestment of distributions............. 0 0
Shares redeemed............................................ 0 0
--------------------------------------------------------------------------------
Net increase............................................... 10,582 107,039
--------------------------------------------------------------------------------
Class Y
Shares sold................................................ 13,742 139,251
Shares issued in reinvestment of distributions............. 0 0
Shares redeemed............................................ (20) (288)
--------------------------------------------------------------------------------
Net increase............................................... 13,722 138,963
--------------------------------------------------------------------------------
Net increase............................................... $5,615,518
--------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 22, 1999 (commencement of operations) to
April 30, 2000.
6. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the period ended April 30, 2000:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
----------------------
<S> <C> <C>
Health Care Fund......................... $12,202,547 $7,576,107
Technology Fund.......................... 10,934,356 5,448,541
</TABLE>
Each Fund loaned securities during the period ended April 30, 2000 to certain
brokers who paid the Fund a negotiated lenders' fee. These fees are included in
interest income. For the Health Care Fund, the value of securities on loan and
the value of collateral (including accrued interest) amounted to $1,991,939 and
$2,082,892, respectively. For the Technology Fund, the value of securities on
loan and the value of collateral (including accrued interest) amounted to
$1,269,892 and $1,306,509, respectively. During the period ended April 30,
2000, the Funds earned $1,035 and $702, respectively in income from securities
lending.
7. EXPENSE REDUCTIONS
The Funds have entered into expense offset arrangements with ESC and their cus-
todian whereby credits realized as a result of uninvested cash balances were
used to reduce a portion of each Fund's related expenses. The assets deposited
with ESC and the custodian under these expense offset arrangements could have
been invested in income-producing assets. The Funds have also entered into
brokerage/service arrangements with specific brokers who paid a portion of the
Fund's expenses. During the period ended April 30, 2000, the Funds did not re-
ceive any expense reductions.
8. 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.
23
<PAGE>
Combined Notes to Financial Statements(Unaudited) (continued)
9. FINANCING AGREEMENT
On July 27, 1999, certain Evergreen Funds and a group of banks (the "Lenders")
entered into a credit agreement. Under this agreement, the Lenders provide an
unsecured revolving credit commitment in the aggregate amount of $1.050 bil-
lion. The credit facility is allocated, under the terms of the financing agree-
ment, among the Lenders. The credit facility is accessed by the Funds for tem-
porary or emergency purposes to fund the redemption of their shares or for gen-
eral working capital purposes as permitted by each Fund's borrowing restric-
tions. Borrowings under this facility bear 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 including January 31,
2000). A commitment fee of 0.10% per annum is incurred on the average daily un-
used portion of the revolving credit commitment. The commitment fee is allo-
cated to all funds. For its assistance in arranging this financing agreement,
First Union Capital Markets Corp. was paid a one-time arrangement fee of
$250,000. State Street serves as paying agent for the funds and as paying agent
is entitled to a fee of $20,000 per annum which is allocated to all the funds.
During the period ended April 30, 2000 the Funds did not borrow under this
agreement.
10. CONCENTRATION OF RISK
Investment in a Fund that concentrates its investments in a single sector or
industry entails greater risk than an investment in a Fund that invests its as-
sets 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.
24
<PAGE>
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