EVERGREEN INVESTMENT TRUST, N-30D, 1996-09-11

EVERGREEN INVESTMENT TRUST
N-30D, 1996-09-11

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EVERGREEN ASSET MANAGEMENT
2500 WESTCHESTER AVENUE
PURCHASE, N.Y. 10577

September 11, 1996

Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C.

Attention: File Room

Re: EVERGREEEN INVESTMENT TRUST
File No. 811-4154

EVERGREEN GROWTH & INCOME FUND
File No. 811-4715

EVERGREEN AMERICAN RETIREMENT FUND
File No. 811-5434

Commissionioners:

Please be advised that the final Annual Report for the above referenced
Trusts which include Evergreen Growth and Income Fund, Evergreen Small Cap
Equity Income Fund, Evergreen Utility Fund, and Evergreen Value Fund were
submitted to your office on September 11, 1996, via electronic transmission
(Edgar).

Any questions or comments about this documemt should be directed to the
undersigned at (914) 641-2206.

Very Truly Yours,

/s/ James P. Wallin
James P. Wallin
Vice President and
Assistant General Counsel

<PAGE>

EVERGREEN
GROWTH AND INCOME
FUNDS

(Photos of a skyline, building, power lines and another building appear here)

SEMIANNUAL
REPORT
JUNE 30, 1996

(Evergreen Funds tree logo)

<PAGE>
EVERGREEN GROWTH AND INCOME FUNDS
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
Economic Overview......................................................... 1
</TABLE>

<TABLE>
<C> <S> <C>
(Photo of skyline) GROWTH & INCOME A Report From Your Portfolio Manager...................................... 3
FUND Statement of Investments.................................................. 5
Statement of Assets and Liabilities....................................... 9
Statement of Operations................................................... 10
Statement of Changes in Net Assets........................................ 11
Financial Highlights...................................................... 12

(Photo of building) SMALL CAP EQUITY A Report From Your Portfolio Manager...................................... 14
INCOME FUND Statement of Investments.................................................. 16
Statement of Assets and Liabilities....................................... 18
Statement of Operations................................................... 19
Statement of Changes in Net Assets........................................ 20
Financial Highlights...................................................... 21

(Photo of power lines) UTILITY A Report From Your Portfolio Manager...................................... 23
FUND Statement of Investments.................................................. 24
Statement of Assets and Liabilities....................................... 26
Statement of Operations................................................... 27
Statement of Changes in Net Assets........................................ 28
Financial Highlights...................................................... 29

(Photo of building) VALUE A Report From Your Portfolio Managers..................................... 31
FUND Statement of Investments.................................................. 32
Statement of Assets and Liabilities....................................... 34
Statement of Operations................................................... 35
Statement of Changes in Net Assets........................................ 36
Financial Highlights...................................................... 37
Combined Notes to Financial Statements.................................... 40
Trustees and Officers.........................................Inside Back Cover
</TABLE>

<PAGE>
EVERGREEN GROWTH AND INCOME FUNDS
ECONOMIC OVERVIEW
BY EVERGREEN ASSET MANAGEMENT CHAIRMAN
STEPHEN A. LIEBER
Throughout the first half of 1996, there has been an (Photo of Stephen
increasing and unusually intense investment markets A. Lieber)
preoccupation with the risk of inflation. Such concern
is, at first glance, remarkable considering that the
inflation rate, as measured by
the Producer Price Index and the Consumer Price Index, remained approximately
constant through the entire six months, and still is 2.8% on the Consumer Price
Index. Further, inflation at this approximate rate has been relatively constant
for over five years. However, a most widely held economic view is that the
economy cannot enjoy significant growth within a stable, low inflation
environment. Thus, each sign of growth, and particularly of employment and wage
strength, is viewed as a trend which implies a resurgence of inflation. This
broad apprehension is not merely the anxiety of a society which has, in the past
decades, seen the erosion of financial assets caused by inflation; it is also a
reaction to recent economic forecasts which under-estimated the economy's growth
rate.
The recently published semi-annual survey of over 50 business economists by
Blue Chip Economic Indicators published by Capitol Publication in Alexandria,
Virginia, contrasts economic trends at mid-year with expectations six months
before. At the beginning of the year, most of these "blue chip" economists
anticipated a slowing of the economy with increased unemployment. The opposite
happened. Economic growth accelerated to an expected 4.2% for the June quarter,
and official unemployment statistics show that unemployment has gone from 5.6%
to 5.4%. Many influential economists expect that, as the economy approaches full
employment, a wage price spiral will ensue which will touch off inflation. The
fear of such a spiral has strongly impacted the financial markets. Consequently,
the real rate of return (the rate of return on long-term U.S. Treasury
obligations, net of the inflation rate) has risen from 3%, to a recent peak of
4.3%. Rising real returns have also accounted for a sizable strengthening of the
dollar, as compared with other currencies, up 11% on the yen and 7% on the
German mark and 9% on the pound sterling.
The jump in interest rates tended to accelerate a flight of domestic savings
into equities for growth, as the bond alternative seemed threatened by inflation
and, thus, bond prices were in a declining trend. A flood of savings into the
equity markets, stimulated by the increasing prevalence of 401K retirement plans
using mutual funds, also increased the divergence between the trajectories of
stock prices and bond prices. Several sectors of the stock market, particularly
in technology enterprises, moved to levels of valuation seldom seen and, most
infrequently, if ever, sustained. With this massive increase of public savings
participation in the stock market, it became increasingly argued that the
"wealth effect" in the rising stock market was stimulating consumer purchases
beyond expected levels, and might itself be a source of accelerating growth and,
ultimately, inflation.
In the midst of widespread debate about the impact and durability of growth
trends, press discussion began to question the theory that low unemployment
rates trigger inflation.
Recently, this questioning has been advanced to explain why the Federal
Reserve did not raise interest rates at mid-year, despite the strength of the
economy. It promises to be the subject of much public debate. But, there will
also be much debate over the sustainability of economic growth through the
balance of the year. There is now some doubt that consumer spending will be
sustained, given the fact that credit card losses have been increasing since
December. Credit card issuers, who are suffering from an extraordinary loss
rate, will have to cut back too easy credit in the interests of their own
prudent financial management. Consumer buying strength was also supported by tax
refunds in the second quarter. There will be no recurrence of this flow of funds
for the balance of the year. It is also noted that if the "wealth effect" played
a role, then any sustained fall in the stock market is likely to reduce that
source of consumer spending.
1

<PAGE>
EVERGREEN GROWTH AND INCOME FUNDS
ECONOMIC OVERVIEW -- (CONTINUED)
On the external side, the strength of the dollar suggests both a reduction in
export competitiveness, and a decline in U.S. competitiveness against imports.
The Chairman of Chrysler Corporation has already publicly decried the rally of
the dollar, suggesting that it will increase imports and put pressure on the
pricing of domestic manufacturers. Former Federal Reserve Chairman, Paul Volker
has publicly stated that it is important that the dollar not rise further.
Finally, the fact that interest rates have risen over the first half of the year
suggests that they will be a slowing influence in the months ahead. Historical
studies indicate that it usually takes about six months for higher interest
rates to begin to dampen business and consumer borrowing. The sum of these
factors suggests that the recently improved growth rate of the economy may prove
unsustainable in the near-term.
The stock market, at this writing, has gone through its first broad scale
contraction since the beginning of the year. The major fall, to-date, was in the
shares of technology and, especially, computer related companies which
encountered a slowdown in domestic demand, together with a decline in European
demand. This caused a reappraisal of the values of many of the major companies
in the related industries. It has resulted in sizable declines, often 50% or
more, for the shares of smaller companies which had been boosted through widely
disseminated projections of extraordinarily high profits growth rates. This
setback may bring a reappraisal by individual investors and institutional
investors alike of the valuation structure of the stock market. We anticipate
that it will concentrate renewed focus on companies with well-established
franchises and well-supported growth programs, in contrast to newly competitive
and highly promotional businesses. Recognition that much of recent technological
leadership is turning into a hard fought, commodity-like competitive business,
should lead to an increasing number of mergers and combinations. With an
underlying high level of consumer income and extremely good corporate liquidity,
we expect few major corporate profits disappointments in the near-term.
Businesses which may have over-expanded in dreams of endless demand have, in
many cases, already been forced to cut back. Others, demand for whose parts or
services has been well sustained, but who are holding back on enlarged working
capital and capital investments, are already increasing their stock buy-back
programs. These factors of management restraint, high levels of liquidity,
conservative expansion planning, readiness for business combinations and
corporate buy-backs will, we believe, sustain an environment of opportunity for
equity investors in the months ahead.
The fixed income markets should benefit from these same factors. A slowed
growth trend should reduce the fear of inflation and, thus, the real return
premium over the inflation rate.
2

<PAGE>
EVERGREEN GROWTH & INCOME FUND
(Photo of skyline)

A REPORT FROM YOUR
PORTFOLIO MANAGER
EDMUND H. NICKLIN
American industry has seen a pickup in merger and (Photo of
acquisitions activity as companies increase their size to Edmund H.
leverage productivity-enhancing technological advances. This Nicklin)
trend of exploiting economies of scale by increasing the
revenue base drove returns in 1995 for Evergreen Growth and
Income Fund when eight portfolio companies were acquired.
Scale-related activity continued in first half 1996 with the
acquisition of two more portfolio companies. The most
important of these two acquisitions occurred in response to
the passage of the Telecommunications Act of 1996 which has caused
radio broadcasters to collectively adopt a corporate strategy of
"acquire or be acquired".
In addition to acquisition activity enhancing performance,
the vast majority of the portfolio's seventeen industry groups performed well
year-to-date. The total return for the Fund (Class Y, no-load shares) for the
six months ended June 30, 1996, was 12.3%*, outpacing the 9.9% total return of
the Standard and Poor's 500 Reinvested Index**. This performance helped the Fund
(Class Y, no-load shares) earn A rankings for its one, three, and five-year
total returns through June 30, 1996, from Lipper Analytical Services, Inc., as
reported in the July 5, 1996, issue of The Wall Street Journal***. The Fund's
Class A and Class B shares received B rankings by Lipper for the one-year period
ended June 30. The Fund was ranked in a category of growth and income funds, and
S&P 500 Index Funds. As of June 30, there were 601 funds in this category. The
six-month total returns at net asset value (NAV) for the Fund's Class A, Class
B, and Class C shares, were 12.1%, 11.7%, and 11.7%, respectively.
PORTFOLIO HIGHLIGHTS
The "value timing" strategy has been used to select Fund investments since its
inception nearly a decade ago. The discipline of identifying a catalyst for
change and quantifying undervaluation has led to consistent positive results
during this period. The Fund's portfolio holdings were grouped into seventeen
industry classifications as of June 30, 1996. Of these, sixteen produced
positive returns for the six-month period, with the best three -- business
equipment and services; energy; and publishing, broadcasting, and
entertainment -- each recording appreciation exceeding 20%. With an increase in
long-term interest rates of approximately 1.25 percentage points in the first
half, as measured by the 30-year U.S. Treasury bond, the poorest segment results
were recorded by interest sensitive industries -- banks and thrifts, finance and
insurance, and utilities.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
* CLASS A SHARES ARE SUBJECT TO A MAXIMUM 4.75% FRONT END SALES CHARGE, CLASS
B SHARES ARE SUBJECT TO A MAXIMUM 5% CONTINGENT DEFERRED SALES CHARGE, AND
CLASS C SHARES ARE SUBJECT TO A 1% CONTINGENT DEFERRED SALES CHARGE WITHIN
THE FIRST YEAR OF PURCHASE. SALES CHARGES ARE NOT REFLECTED IN THE FIGURES
ABOVE, AND IF REFLECTED, PERFORMANCE WOULD BE LOWER. PERFORMANCE FIGURES
INCLUDE REINVESTMENT OF INCOME DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE. INVESTORS' SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
** THE S&P 500 IS AN UNMANAGED INDEX OF COMMON STOCKS IN INDUSTRY,
TRANSPORTATION, FINANCE, AND PUBLIC UTILITIES, DENOTING GENERAL MARKET
PERFORMANCE AS MONITORED BY STANDARD & POOR'S CORP. AN INVESTMENT CAN NOT BE
MADE IN AN INDEX.
*** SOURCE: LIPPER ANALYTICAL SERVICES, INC., AN INDEPENDENT MUTUAL FUNDS
PERFORMANCE MONITOR. RANKINGS DO NOT INCLUDE ANY APPLICABLE SALES CHARGES.
IF INCLUDED, RANKINGS MAY BE DIFFERENT. THE FUND'S CLASS C SHARES WERE NOT
RANKED FOR THE ONE-YEAR PERIOD, AND CLASS A AND B SHARES WERE NOT RANKED FOR
THE THREE AND FIVE-YEAR PERIODS AS THOSE CLASSES DID NOT EXIST FOR THOSE
FULL TIME PERIODS.
3

<PAGE>
EVERGREEN GROWTH & INCOME FUND
(Photo of skyline)
A REPORT FROM YOUR
PORTFOLIO MANAGER -- (CONTINUED)
Healthcare products and services holdings have produced better-than-average
returns in recent years. Year-to-date results were mixed however, with HMOs,
long-term care companies and hospital companies producing only small gains or
small losses. Results for HMOs reflected new cost pressures, especially from
expansion into the Medicare market, while nursing homes and hospital companies
reacted to pressure on Medicaid rates and more competition for patients.
Pharmaceutical companies generally produced positive results as new products
were approved and pricing flexibility improved. Even within the industry groups
that produced sub-par performance, there were significant gains. TNP
Enterprises, a small electric utility serving portions of Texas and New Mexico,
appreciated more than 50%. With legislative gridlock in Washington, ensuring no
revision to Medicare reimbursement this year, Lincare Holdings, a supplier of
respiratory therapy to outpatients, also increased more than 50% year-to-date.
Radio broadcasting is the industry success story in first half 1996. In 1995,
four radio broadcasters were added to the Fund in anticipation of legislation
increasing ownership levels in individual radio markets. Such a change
dramatically improves the economics of the business. The Telecommunications Act
of 1996 was enacted into law in February 1996, launching aggressive acquisition
activity. Shortly after enactment, Jacor Communication's Inc. agreed to acquire
Citicasters Inc. for $29.50 per share, plus one-fifth of a Jacor Warrant.
Evergreen Growth and Income Fund's average cost of its Citicasters holding is
$14.30 per share. The numerous radio broadcaster acquisitions that followed
demonstrated the enhanced value of the Jacor/Citicasters combination with Jacor
appreciating more than 80% during the first six months of 1996. The new
strategic imperative for radio broadcasters is control of at least one format
within a market and if possible, to dominate revenue market share in that
market.
ECONOMIC OUTLOOK
Growth of the domestic economy during first half 1996 has been greater than
earlier anticipated. Economic growth in 1995 ended on a sluggish note which
continued into 1996. After a pause attributable to the difficult winter, growth
in gross domestic product (GDP) accelerated and finished first quarter 1996 at
2.2%, with growth in real final sales exceeding 3%. As growth accelerated during
the quarter, long-term interest rates increased nearly 100 basis points. Recent
statistics, including new home sales and auto production, suggest second quarter
GDP growth will exceed 4%. Large increases in payroll employment in the second
quarter and current low levels of unemployment have raised fears of wage
inflation. Accelerating economic growth in 1996 is being driven by increased
consumer spending which supports payroll employment growth. Consumer spending is
being supported by the incremental wealth generated by appreciation in financial
assets and higher levels of payroll employment. Other indicators of inflationary
pressure, such as commodity prices or the price of gold, are not at levels
indicative of an inflation problem. However, wage increases are sufficiently
important to economy-wide inflation measures that the linkage among incremental
wealth, consumer spending, and payroll employment growth must be broken in the
near future, allowing the economy to slow or a tightening of monetary policy by
the Federal Reserve is very likely before the end of the summer. Stronger
economic growth may support corporate earnings in the near-term, but a
tightening of monetary policy and the resultant increase in short-term interest
rates will put pressure on the equity markets. Individual security selection and
a reliable value discipline become even more important in this environment.
4

<PAGE>
EVERGREEN GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS
(Photo of skyline)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 83.5%
BANKS -- 4.8%
40,000 Bank of New York Co., Inc. (The).... $ 2,050,000
80,300 BSB Bancorp, Inc.................... 2,087,800
101,250 Central Fidelity Banks, Inc......... 2,303,438
45,000 Cullen/Frost Bankers, Inc........... 1,248,750
105,000 First Security Corp................. 2,520,000
145,000 Hibernia Corp. Cl. A................ 1,576,875
64,500 Liberty Bancorp., Inc............... 2,289,750
83,700 Norwest Corp........................ 2,919,037
40,000 State Street Boston Corp............ 2,040,000
45,000 Summit Bancorp...................... 1,580,625
50,000 Susquehanna Bancshares, Inc......... 1,337,500
13,800 Wells Fargo & Co.................... 3,296,475
25,250,250
BUSINESS EQUIPMENT &
SERVICES -- 8.0%
190,300 Air Express International Corp...... 5,375,975
100,000* Compuware Corp...................... 3,950,000
133,000 Equifax Inc......................... 3,491,250
31,718 First Data Corp..................... 2,525,546
140,000 Harper Group, Inc. (The)............ 2,730,000
55,000* Landmark Graphics Corp.............. 1,058,750
10,000* MSC Industrial Direct Co., Inc...... 322,500
78,000* Oracle Systems Corp................. 3,076,125
202,500 Pittston Burlington Group........... 4,379,062
140,000* Platinum Technology................. 2,117,500
90,000* Policy Management Systems Corp...... 4,500,000
140,000 Reynolds & Reynolds Co. (The),
Cl. A............................... 7,455,000
50,000 Wackenhut Corp. (The) Cl. B......... 918,750
41,900,458
CHEMICAL & AGRICULTURAL
PRODUCTS -- 4.0%
56,500 Air Products & Chemicals, Inc....... 3,262,875
39,500 Du Pont (E. I.) De Nemours.......... 3,125,438
6,000 Great Lakes Chemical Corp........... 373,500
42,300 H.B. Fuller Co...................... 1,533,375
79,000 Pioneer Hi-Bred International,
Inc................................. 4,177,125
198,000 Praxair, Inc........................ 8,365,500
20,837,813
COMMUNICATION SYSTEM &
SERVICES -- 1.6%
135,000* AirTouch Communications............. 3,813,750
84,000* Aspect Telecommunications Corp...... 4,158,000
11,950* Associated Group, Inc. (The)
Cl. A............................... 361,488
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMUNICATION SYSTEM &
SERVICES -- CONTINUED
11,950* Associated Group, Inc. (The)
Cl. B............................... $ 357,006
8,690,244
CONSUMER PRODUCTS & SERVICES -- 6.8%
48,000 Campbell Soup Co.................... 3,384,000
90,000 Carnival Corp....................... 2,598,750
45,000 Colgate-Palmolive Co................ 3,813,750
45,000 CPC International, Inc.............. 3,240,000
205,000* Furniture Brands International,
Inc................................. 2,255,000
52,000 Gillette Co......................... 3,243,500
72,000 Harley-Davidson, Inc................ 2,961,000
85,000 Mattel, Inc......................... 2,433,125
50,000 Philip Morris Cos., Inc............. 5,200,000
100,000 Pittston Brink's Group.............. 2,912,500
105,000 UST Inc............................. 3,596,250
35,637,875
DIVERSIFIED COMPANIES -- 4.0%
35,100 General Electric Co................. 3,036,150
35,000* ITT Corp............................ 2,318,750
190,000 ITT Industries, Inc................. 4,773,750
90,000 Morton International, Inc........... 3,352,500
105,000 W. R. Grace & Co.................... 7,441,875
20,923,025
ELECTRICAL EQUIPMENT &
SERVICES -- 4.4%
57,000* 3Com Corp........................... 2,607,750
40,000* Adaptec, Inc........................ 1,895,000
42,000* Applied Materials, Inc.............. 1,281,000
100,000 AVX Corp............................ 1,850,000
94,000 Baldor Electric Co.................. 2,115,000
85,000 Belden Inc.......................... 2,550,000
15,000* Berg Electronics Corp............... 356,250
48,000* Cisco Systems, Inc.................. 2,718,000
36,000 Intel Corp.......................... 2,643,750
53,000* KLA Instruments Corp................ 1,232,250
29,300* Lam Research Corp................... 761,800
42,000* LSI Logic........................... 1,092,000
125,000 Sensormatic Electronics Corp........ 2,046,875
23,149,675
ENERGY -- 3.9%
25,000 Anadarko Petroleum Corp............. 1,450,000
32,000* Atwood Oceanics, Inc................ 1,432,000
45,000 Coastal Corp. (The)................. 1,878,750
160,200* Forcenergy, Inc..................... 3,023,775
</TABLE>
5

<PAGE>
EVERGREEN GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS -- (CONTINUED)
(Photo of skyline)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
ENERGY -- CONTINUED
25,000 Kerr-McGee Corp..................... $ 1,521,875
295,000 Oryx Energy Co...................... 4,793,750
116,600 Southwestern Energy Co.............. 1,646,975
33,893 Tosco Corp.......................... 1,703,123
58,000 Williams Cos., Inc. (The)........... 2,871,000
20,321,248
FINANCE & INSURANCE -- 5.6%
15,000 Associates First Capital Corp....... 564,375
85,000 Federal Home Loan Mortgage
Corp................................ 7,267,500
290,000 Federal National Mortgage Assn...... 9,715,000
10,000 Guaranty National Corp.............. 180,000
100,000 ITT Hartford Group, Inc............. 5,325,000
115,000 Lasalle Re Holdings, Ltd............ 2,587,500
10,000 National Re Corp.................... 377,500
106,000 Price (T.) Rowe & Associates, Inc... 3,259,500
29,276,375
HEALTHCARE PRODUCTS & SERVICES --
15.2%
110,000 Abbott Laboratories................. 4,785,000
65,000* Amgen, Inc.......................... 3,510,000
35,000 Caremark International, Inc......... 883,750
40,000* Elan Corp, plc...................... 2,285,000
30,000 HBO & Co............................ 2,032,500
178,500* Health Management Associates, Inc... 3,614,625
107,000* Health Systems International,
lnc................................. 2,902,375
55,000* HealthCare COMPARE Corp............. 2,681,250
103,000* HEALTHSOUTH Corp.................... 3,708,000
24,000 Johnson & Johnson................... 1,188,000
130,000* Laboratory Corp. of America
Holdings............................ 975,000
189,000* Lincare Holdings, Inc............... 7,418,250
128,000* Living Centers of America, Inc...... 4,400,000
25,000 Mallinckrodt Group Inc.............. 971,875
60,000 Manor Care, Inc..................... 2,362,500
34,500 McKesson Corp....................... 1,643,062
44,000* Medic Computer Systems, Inc......... 3,569,500
49,600 Pfizer, Inc......................... 3,540,200
113,000 Schering-Plough Corp................ 7,090,750
12,500 Shared Medical Systems Corp......... 803,125
25,000* Spacelabs Medical, Inc.............. 581,250
15,000 Sunrise Assisted Living, Inc........ 360,000
138,000* Sybron International Corp........... 3,450,000
120,000* Tenet Healthcare Corp............... 2,565,000
95,000* Vencor, Inc......................... 2,897,500
<CAPTION>
SHARES VALUE
<C> <S> <C>
HEALTHCARE PRODUCTS & SERVICES -- CONTINUED
34,000 Warner-Lambert Co................... $ 1,870,000
40,020* Wellpoint Health Networks Inc....... 1,250,625
210,000 West Co., Inc. (The)................ 6,300,000
79,639,137
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES -- 5.7%
104,000 AGCO Corp........................... 2,886,000
35,000 Borg-Warner Automotive, Inc......... 1,382,500
65,500 Danaher Corp........................ 2,849,250
51,000 Dover Corp.......................... 2,352,375
7,500 Eaton Corp.......................... 439,687
53,200 J & L Specialty Steel, Inc.......... 791,350
113,000* Lone Star Industries, Inc........... 3,799,625
33,500 Magna Group, Inc.................... 1,541,000
80,000 Medusa Corp......................... 2,480,000
55,000 Santa Fe Pacific Gold Corp.......... 776,875
137,500* Strattec Security Corp.............. 2,440,625
130,000 Sundstrand Corp..................... 4,761,250
15,000 Tecumseh Products Co. Cl. A......... 806,250
25,000 Vulcan Materials Co................. 1,484,375
22,500 York International Corp............. 1,164,375
29,955,537
PAPER & PACKAGING -- .4%
75,000 Westvaco Corp....................... 2,240,625
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- 9.3%
175,000 Citicasters Inc..................... 5,468,750
39,000 Disney Walt Co. (The)............... 2,452,125
28,000* Evergreen Media Corp. Cl. A......... 1,197,000
205,000* EZ Communications, Inc. Cl. A....... 4,868,750
52,500 Gaylord Entertainment Co. Cl. A..... 1,483,125
225,000* Jacor Communications, Inc........... 6,946,875
100,000* Katz Media Group, Inc............... 1,437,500
20,000 Knight-Ridder, Inc.................. 1,450,000
70,000* Lin Television Corp................. 2,520,000
15,000 McGraw-Hill Cos., Inc............... 686,250
43,000 Scripps (E.W.) Co. Cl. A............ 2,004,875
185,000 TCA Cable TV, Inc................... 5,596,250
70,000 Time Warner, Inc.................... 2,747,500
50,000* U S WEST Media Group................ 912,500
24,000* Viacom Inc. Cl. A................... 915,000
2,800 Washington Post Co. (The)........... 907,200
184,500* Young Broadcasting Inc. Cl. A....... 7,057,125
48,650,825
</TABLE>

<PAGE>
EVERGREEN GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS -- (CONTINUED)
(Photo of skyline)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
RETAILING & WHOLESALE -- .6%
30,000 Caldor Corp. (The)................. $ 78,750
55,000* Carson Pirie Scott & Co............ 1,471,250
12,500 Mercantile Stores Co., Inc......... 732,813
20,000 Sears, Roebuck & Co................ 972,500
3,255,313
THRIFT INSTITUTIONS -- 1.8%
126,500 Washington Mutual, Inc............. 3,779,188
205,000 Webster Financial Corp............. 5,740,000
9,519,188
TRANSPORTATION -- 2.5%
45,000 Burlington Northern Santa Fe....... 3,639,375
100,000 Kansas City Southern
Industries, Inc.................... 4,287,500
75,000 Union Pacific Corp................. 5,240,625
13,167,500
UTILITIES -- 4.9%
62,000 AT&T Corp.......................... 3,844,000
65,000 Century Telephone Enterprises,
Inc................................ 2,071,875
64,000 Commonwealth Energy System......... 1,648,000
5,000 Eastern Utilities Associates....... 98,125
70,000 Houston Industries, Inc............ 1,723,750
50,000 Illinova Corp...................... 1,437,500
108,000 MCI Communications Corp............ 2,767,500
17,208 SBC Communications, Inc............ 847,494
40,000 Texas Utilities Co................. 1,710,000
227,000 TNP Enterprises, Inc............... 6,441,125
45,000 Unicom Corp........................ 1,254,375
30,000* WorldCom, Inc...................... 1,661,250
25,504,994
TOTAL COMMON STOCKS
(COST $321,484,122)................ 437,920,082
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
CORPORATE BONDS -- .3%
ENERGY -- .1%
Columbia Gas Systems, Inc. (The)
$ 106,000 6.39%, 11/28/00.................... 103,887
101,000 6.61%, 11/28/02.................... 97,913
101,000 6.80%, 11/28/05.................... 96,863
101,000 7.05%, 11/28/07.................... 96,995
101,000 7.32%, 11/28/10.................... 96,834
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS -- CONTINUED
ENERGY -- CONTINUED
Columbia Gas
Systems, Inc. -- (continued)
$ 101,000 7.42%, 11/28/15.................... $ 95,014
101,000 7.62%, 11/28/25.................... 94,955
682,461
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- .2%
Time Warner, Inc.
206,000 6.46%, 8/15/96..................... 206,878
123,000 7.975%, 8/15/04.................... 123,018
247,000 8.11%, 8/15/06..................... 246,131
247,000 8.18%, 8/15/07..................... 246,100
92,000 Viacom Inc.
8.00%, 7/7/06...................... 85,100
907,227
TOTAL CORPORATE BONDS
(COST $1,595,465).................. 1,589,688
SHORT-TERM INVESTMENTS -- 15.5%
COMMERCIAL PAPER -- 12.4%
2,700,000 A.H. Robins Co. Inc.
5.41%, 8/23/96..................... 2,678,495
5,000,000 Abbott Laboratories
5.32%, 7/30/96..................... 4,978,572
5,000,000 Allianz Of America Finance Corp.
5.39%, 8/6/96...................... 4,973,050
American Home Products Corp.
4,900,000 5.36%, 7/16/96..................... 4,889,057
6,300,000 5.40%, 8/9/96...................... 6,263,145
BMW U.S. Capital Corp.
1,000,000 5.31%, 7/10/96..................... 998,672
6,700,000 5.40%, 8/14/96..................... 6,655,780
800,000 Eiger Capital Corp.
5.33%, 7/10/96..................... 798,934
Gannett Co., Inc.
6,000,000 5.30%, 7/8/96...................... 5,993,817
2,500,000 5.33%, 7/26/96..................... 2,490,746
1,700,000 Golden Managers Acceptance Corp.
5.35%, 7/17/96..................... 1,695,958
H.J. Heinz Co.
1,000,000 5.30%, 7/2/96...................... 999,853
7,200,000 5.35%, 7/22/96..................... 7,177,530
5,200,000 IES Utilities, Inc.
5.35%, 7/8/96...................... 5,194,591
1,100,000 Monsanto Co.
5.33%, 7/23/96..................... 1,096,417
</TABLE>

<PAGE>
EVERGREEN GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS -- (CONTINUED)
(Photo of skyline)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM INVESTMENTS -- CONTINUED
COMMERCIAL PAPER -- CONTINUED
$ 800,000 Sandoz Corp.
5.35%, 8/6/96...................... $ 795,720
4,200,000 Tampa Electric Co.
5.36%, 8/5/96...................... 4,178,113
1,200,000 University of Chicago
5.31%, 7/15/96..................... 1,197,522
1,800,000 Xerox Corp.
5.30%, 7/10/96..................... 1,797,615
64,853,587
GOVERNMENT AGENCY BONDS -- 3.1%
Federal Home Loan Mortgage Corp.
8,300,000 5.27%, 7/15/96..................... 8,282,990
8,000,000 5.29%, 7/31/96..................... 7,964,733
16,247,723
TOTAL SHORT-TERM INVESTMENTS
(COST $81,101,310)................. 81,101,310
</TABLE>

<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS --
(COST $404,180,897).... 99.3% 520,611,080
OTHER ASSETS AND
LIABILITIES -- NET..... .7 3,542,426
NET ASSETS................ 100.0% $524,153,506
</TABLE>

* Non-income producing securities
See accompanying notes to financial statements.
8

<PAGE>
EVERGREEN GROWTH & INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
(Photo of skyline)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $404,180,897)........................................................... $520,611,080
Receivable for investments sold............................................................................... 5,649,813
Receivable for Fund shares sold............................................................................... 448,728
Dividends and interest receivable............................................................................. 333,763
Prepaid expenses.............................................................................................. 43,262
Total assets............................................................................................ 527,086,646
LIABILITIES:
Due to custodian bank......................................................................................... 44,009
Payable for investments purchased............................................................................. 1,668,875
Payable for Fund shares repurchased........................................................................... 510,591
Accrued Advisory fee.......................................................................................... 421,936
Accrued expenses.............................................................................................. 192,632
Distribution fee payable...................................................................................... 95,097
Total liabilities....................................................................................... 2,933,140
NET ASSETS....................................................................................................... $524,153,506
NET ASSETS CONSIST OF:
Paid-in capital............................................................................................... $400,625,338
Distributions in excess of net investment income.............................................................. (36,288)
Accumulated net realized gain on investment transactions...................................................... 7,134,291
Net unrealized appreciation of investments.................................................................... 116,430,165
Net assets.............................................................................................. $524,153,506
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($47,395,217/2,276,015 shares of beneficial interest outstanding).............................. $ 20.82
Sales charge -- 4.75% of offering price....................................................................... 1.04
Maximum offering price.................................................................................. $ 21.86
Class B Shares ($116,550,413/5,615,887 shares of beneficial interest outstanding)............................. $ 20.75
Class C Shares ($4,424,414/213,182 shares of beneficial interest outstanding)................................. $ 20.75
Class Y Shares ($355,783,462/17,067,012 shares of beneficial interest outstanding)............................ $ 20.85
</TABLE>

See accompanying notes to financial statements.
9

<PAGE>
EVERGREEN GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
(Photo of skyline)
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $1,967)......................................... $ 3,101,948
Interest....................................................................................... 1,267,689
Total investment income.................................................................. 4,369,637
EXPENSES:
Advisory fee................................................................................... $2,093,337
Distribution fee -- Class A Shares............................................................. 39,803
Distribution fee -- Class B Shares............................................................. 289,178
Shareholder services fee -- Class B Shares..................................................... 96,190
Distribution fee -- Class C Shares............................................................. 11,308
Shareholder services fee -- Class C Shares..................................................... 3,769
Transfer agent fee............................................................................. 112,032
Registration and filing fees................................................................... 79,760
Custodian fee.................................................................................. 59,841
Professional fees.............................................................................. 24,170
Reports and notices to shareholders............................................................ 8,681
Trustees' fees and expenses.................................................................... 5,961
Insurance...................................................................................... 1,900
Miscellaneous.................................................................................. 8,205
2,834,135
Less: Expense reimbursement.................................................................... (5,000)
Net expenses............................................................................. 2,829,135
Net investment income............................................................................. 1,540,502
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment transactions................................................... 7,132,869
Net change in unrealized appreciation of investments........................................... 41,740,036
Net gain on investments........................................................................... 48,872,905
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............................................. $50,413,407
</TABLE>

See accompanying notes to financial statements.
10

<PAGE>
EVERGREEN GROWTH & INCOME FUND
(Photo of skyline)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
JUNE 30, 1996 ENDED
(UNAUDITED) DECEMBER 31, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................................................. $ 1,540,502 $ 1,291,809
Net realized gain on investment transactions.......................................... 7,132,869 5,206,584
Net change in unrealized appreciation of investments and foreign currencies........... 41,740,036 28,342,991
Net increase in net assets resulting from operations.................................. 50,413,407 34,841,384
DISTRIBUTIONS TO SHAREHOLDERS:
FROM NET INVESTMENT INCOME:
Class A Shares........................................................................ (122,429) (93,250)
Class B Shares........................................................................ (64,044) (104,385)
Class C Shares........................................................................ (2,657) (5,584)
Class Y Shares........................................................................ (1,351,372) (1,088,590)
Total distributions from net investment income.................................. (1,540,502) (1,291,809)
IN EXCESS OF NET INVESTMENT INCOME:
Class A Shares........................................................................ (2,884) (518)
Class B Shares........................................................................ (1,509) (580)
Class C Shares........................................................................ (63) (31)
Class Y Shares........................................................................ (31,832) (6,050)
Total distributions in excess of net investment income.......................... (36,288) (7,179)
FROM NET REALIZED GAIN ON INVESTMENTS:
Class A Shares........................................................................ -- (468,664)
Class B Shares........................................................................ -- (1,156,785)
Class C Shares........................................................................ -- (48,338)
Class Y Shares........................................................................ -- (3,524,196)
Total distributions from net realized gain on investments....................... -- (5,197,983)
Total distributions to shareholders............................................. (1,576,790) (6,496,971)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold............................................................. 221,420,518 131,253,002
Proceeds from acquisition of FFB Lexicon Capital Appreciation Fund.................... 159,432,723 --
Proceeds from reinvestment of distributions........................................... 1,373,759 5,712,264
Payment for shares redeemed........................................................... (114,770,584) (30,906,224)
Net increase resulting from Fund share transactions............................. 267,456,416 106,059,042
Net increase in net assets...................................................... 316,293,033 134,403,455
NET ASSETS:
Beginning of period................................................................... 207,860,473 73,457,018
End of period (including distributions in excess of net investment income of $36,288
and $0, respectively)............................................................... $ 524,153,506 $ 207,860,473
</TABLE>

See accompanying notes to financial statements.
11

<PAGE>
EVERGREEN GROWTH & INCOME FUND --
CLASS A, B AND C SHARES
(Photo of skyline)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
CLASS A SHARES CLASS B SHARES SHARES
SIX MONTHS JANUARY 3, SIX MONTHS JANUARY 3, SIX MONTHS
ENDED 1995* ENDED 1995* ENDED
JUNE 30, THROUGH JUNE 30, THROUGH JUNE 30,
1996 DECEMBER 31, 1996 DECEMBER 31, 1996
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.............. $18.63 $14.48 $18.59 $14.48 $18.58
Income from investment operations:
Net investment income (loss)..................... .06 .13 .00(a) .05 (.01)
Net realized and unrealized gain on
investments..................................... 2.19 4.64 2.17 4.61 2.19
Total from investment operations............... 2.25 4.77 2.17 4.66 2.18
Less distributions to shareholders from:
Net investment income............................ (.06) (.14) (.01) (.07) (.01)
Net realized gain on investments................. -- (.48) -- (.48) --
Total distributions............................. (.06) (.62) (.01) (.55) (.01)
Net asset value, end of period.................... $20.82 $18.63 $20.75 $18.59 $20.75
TOTAL RETURN+..................................... 12.1% 33.0% 11.7% 32.2% 11.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions).......... $47 $19 $117 $46 $4
Ratios to average net assets:
Expenses......................................... 1.40%++ 1.55%++# 2.15%++ 2.24%++# 2.15%++
Net investment income (loss)..................... .72%++ .99%++# (.04%)++ .30%++# (.06%)++
Portfolio turnover rate........................... 13% 17% 13% 17% 13%
Average commission rate paid per share............ $.0566 N/A $.0566 N/A $.0566
<CAPTION>

JANUARY 3,
1995*
THROUGH
DECEMBER 31,
1995
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period.............. $14.48
Income from investment operations:
Net investment income (loss)..................... .06
Net realized and unrealized gain on
investments..................................... 4.60
Total from investment operations............... 4.66
Less distributions to shareholders from:
Net investment income............................ (.08)
Net realized gain on investments................. (.48)
Total distributions............................. (.56)
Net asset value, end of period.................... $18.58
TOTAL RETURN+..................................... 32.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions).......... $2
Ratios to average net assets:
Expenses......................................... 2.15%
Net investment income (loss)..................... .35%++#
Portfolio turnover rate........................... 17%
Average commission rate paid per share............ N/A
</TABLE>

(a) Less than one cent per share.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of operating expenses and net investment income (loss) to average net assets,
exclusive of any applicable state expense limitations, would have been the
following:
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
JANUARY 3, JANUARY 3,
1995* 1995*
THROUGH THROUGH
DECEMBER 31, DECEMBER 31,
1995 1995
<S> <C> <C>
Expenses................................................................................ 1.64% 2.26%
Net investment income (loss)............................................................ .90% .28%
<CAPTION>
CLASS C
SHARES
JANUARY 3,
1995*
THROUGH
DECEMBER 31,
1995
<S> <C>
Expenses................................................................................ 4.94%
Net investment income (loss)............................................................ (2.44%)
</TABLE>

See accompanying notes to financial statements.
12

<PAGE>
EVERGREEN GROWTH & INCOME FUND --
CLASS Y SHARES
(Photo of skyline)
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS Y SHARES
SIX MONTHS
ENDED
JUNE 30, 1996 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........................... $18.64 $14.52 $15.41 $14.18 $12.99
Income from investment operations:
Net investment income......................................... .09 .18 .14 .14 .15
Net realized and unrealized gain on investments............... 2.20 4.59 .12 1.91 1.65
Total from investment operations............................ 2.29 4.77 .26 2.05 1.80
Less distributions to shareholders from:
Net investment income......................................... (.08) (.17) (.14) (.14) (.15)
Net realized gain on investments.............................. -- (.48) (1.01) (.68) (.46)
Total distributions.......................................... (.08) (.65) (1.15) (.82) (.61)
Net asset value, end of period................................. $20.85 $18.64 $14.52 $15.41 $14.18
TOTAL RETURN+.................................................. 12.3% 32.9% 1.7% 14.4% 13.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)....................... $356 $141 $73 $77 $64
Ratios to average net assets:
Expenses...................................................... 1.14%++ 1.27% 1.33% 1.26% 1.33%
Net investment income......................................... .94%++ 1.11% .96% .99% 1.18%
Portfolio turnover rate........................................ 13% 17% 29% 28% 30%
Average commission rate paid per share......................... $.0566 N/A N/A N/A N/A
<CAPTION>

1991
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period........................... $10.72
Income from investment operations:
Net investment income......................................... .19
Net realized and unrealized gain on investments............... 2.58
Total from investment operations............................ 2.77
Less distributions to shareholders from:
Net investment income......................................... (.19)
Net realized gain on investments.............................. (.31)
Total distributions.......................................... (.50)
Net asset value, end of period................................. $12.99
TOTAL RETURN+.................................................. 25.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)....................... $48
Ratios to average net assets:
Expenses...................................................... 1.41%
Net investment income......................................... 1.55%
Portfolio turnover rate........................................ 23%
Average commission rate paid per share......................... N/A
</TABLE>

+ Total return is calculated for the periods indicated and is not annualized.
++ Annualized.
See accompanying notes to financial statements.
13

<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
(Photo of building)
A REPORT FROM YOUR
PORTFOLIO MANAGER
NOLA M. FALCONE
Evergreen Small Cap Equity Income Fund ended the first half (Photo of
of its 1996 fiscal year on June 30, 1996, with a total return of Nola M.
8.0% (Class Y, no load shares)*. The total returns at net asset Falcone)
value (NAV) for the Fund's Class A shares, Class B shares and
Class C shares for that six-month period were 7.8%, 7.5%, and
7.4%, respectively. The Fund's investment objective is to
achieve a return consisting of current income and capital
appreciation. The Fund seeks growth by investing in small
entrepreneurial companies and aims to reduce risk by utilizing
convertible bonds, preferred stocks, and common stocks yielding
more than the S&P 500 Reinvested Index**.
The Fund's beta of .77 at June 30, demonstrates that
investing in yield issues helps to reduce volatility. Beta is a measure of the
market risk of a fund's portfolio, illustrating the volatility of the net asset
per share of a mutual fund as compared with the market as a whole (as measured
by S&P 500 Reinvested Index which is assigned a beta of one). A beta of less
than one indicates that a fund would fluctuate less than the market and greater
than one indicates it would fluctuate more than the market.
PORTFOLIO PERFORMANCE
The healthcare sector led performance in the six-month period, with large
gains in ADAC Laboratories, 87.6% and Kinetic Concepts, Inc., 29.1%. Two groups
tied for the next strongest performance. Electric utilities, which benefited
from the very strong performance of TNP Enterprises, Inc., 50.7%, and the
industrial commercial goods and services group which benefited from the purchase
of Goulds Pumps, Inc., and Woodward Governor Co. Specialty companies that
enhanced performance included Monarch Cement Co., 29.4% and Russ Berrie & Co.,
Inc., 54.8%. Financial stocks also helped the performance. On the negative side,
the business equipment and services group and some of our gas distributors had a
weak performance. Our real estate issues lagged the overall market average.
PORTFOLIO STRATEGY
During the past six months, we have bought a number of small gas distribution
companies. These companies could provide synergistic benefits if acquired by
electric utilities in their geographic area. This consolidation trend has
already started in several states. The most noted acquisition being that of
Enserch Corp. by Texas Utilities Co. Issues purchased included Atrion Corp.,
located in Alabama; Chesapeake Utilities Corp., located in Delaware, Maryland,
and Florida; Energen Corp., located in Alabama; NUI Corp., located in New
Jersey; Public Service Co. of North Carolina, Inc.; Southwest Gas Corp., located
in Nevada, Arizona, and Eastern California; and United Cities Gas Corp., located
in Tennessee. In all cases, we looked for low stock prices relative to past
valuation measures of recent takeovers.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
* CLASS A SHARES ARE SUBJECT TO A MAXIMUM 4.75% FRONT END SALES CHARGE,
CLASS B SHARES ARE SUBJECT TO A MAXIMUM 5% CONTINGENT DEFERRED SALES
CHARGE, AND CLASS C SHARES ARE SUBJECT TO A 1% CONTINGENT DEFERRED SALES
CHARGE WITHIN THE FIRST YEAR OF PURCHASE. SALES CHARGES ARE NOT REFLECTED
IN THE FUND'S PERFORMANCE FIGURES ABOVE AND IF REFLECTED, PERFORMANCE
WOULD BE LOWER. PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE. INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
** THE S&P 500 IS AN UNMANAGED INDEX OF COMMON STOCKS IN INDUSTRY,
TRANSPORTATION, FINANCE, AND PUBLIC UTILITIES, DENOTING GENERAL MARKET
PERFORMANCE AS MONITORED BY STANDARD & POOR'S CORP. AN INVESTMENT CAN NOT
BE MADE IN AN INDEX.
14

<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
(Photo of building)
Another focus for us has been a concentration on issues that should begin to
benefit from recent restructuring efforts. These include the previously
mentioned, Goulds Pumps, Inc. where new management is undertaking a major
restructuring which should lift margins and boost revenue and earnings growth.
Another, Woodward Governor Co., which designs and manufactures controls and
accessories for aerospace and industrial companies, should benefit from recent
restructuring and from an improved order pattern in the aerospace industry.
Other restructuring companies include Lance, Inc. which is not only focusing on
improving margins but also has developed a strong Board of Directors, new
computer information systems and improved product development process.
Piccadilly Cafeterias, Inc., has been revamping and improving the design and
management of their cafeterias with very good results on sales and profits.
Mergers and acquisitions candidates in consolidating industries continue to be
of interest to us. We recently added ABC Bancorp of Moultrie, Georgia because we
felt it was undervalued not only on a takeover basis but also on an operating
basis. The stock has appreciated 23.6% since our purchase in May. We purchased
Hudson Chartered Bancorp, Inc. headquartered in Hudson Valley, New York and
added to our positions in CB Bancshares, Inc. and Citizens Bancorp.
Among convertibles we purchased two special situations. Key Energy Corp., Inc.
7% Convertible Debentures due 7/01/03 which is in the rapidly growing oil
service industry. We found the management strong, and the value of the
convertible appropriate for the strong growth outlook. Regency Health Services,
Inc. Convertible Debentures 6-1/2% due 7/15/03 should benefit from the
demographics of the increased aging population's demand for nursing home space.
Strict regulations, particularly in California, have limited the expansion of
nursing homes in the recent past. All of these lead to a favorable demand/supply
relationship as we go forward, and the industry also faces the possibility of
mergers and acquisitions.
A number of issues were sold when we judged them fully reflecting the outlook
for growth. A partial position of Shared Medical Systems, Inc., was sold for a
gain of 145.9% (holding period of two years, two months) and a partial position
of American Business Products, Inc. was sold for a gain of 110.0% (holding
period of one year, seven months). We sold our entire position of Lindberg Corp.
for a gain of 110.5% (holding period of two years, eight months), Roanoke
Electric Steel Corp. for a gain of 64.5% (holding period of two years, six
months), and Vermont Financial Services Corp. for a gain of 59.5% (holding
period of two years, three months). Partial sales were made to take a 59.1% gain
in Deposit Guaranty Corp. (holding period of one year, eight months) and a 56.4%
gain in BancorpSouth, Inc. (holding period of one year, eight months). There
were seven other stocks sold for gains in this period and seven other issues
sold for losses when we felt that the outlook for the stock did not hold strong
near-term promise for capital appreciation. The net result of our purchases and
sales was a positive realized gain.
OUTLOOK
The economy appears to be strong as we have seen increases in employment
numbers and wage rates and an improvement in manufacturing orders. The
overhanging concern currently though is whether the Federal Reserve will tighten
in August given the strength in the economy. We believe the jury is still out on
this issue since reported inflation numbers as measured by producer price
indexes and consumer price indexes are still at reasonable levels. Chairman
Greenspan of the Federal Reserve, recently said inflation is "quiescent", and
there are a number of reasons to expect demand to moderate and economic activity
to settle back toward a more sustainable pace. Among factors that could cool off
the economy are the recent increase in long-term interest rates, the surging
strength of the dollar, any slowing of spending by consumers and business.
The stock market has been extremely volatile in the month of July as concerns
about the Federal Reserve and a slowing of orders in many technology businesses
caused the many portfolio managers to rethink their commitment to very high P/E
ratio stocks. Our focus has been to maintain a strong research effort on
undervalued stocks which provide a yield higher than the S&P 500. We believe
both of these factors will serve to provide a defensive bent to the portfolio
while still providing capital appreciation possibilities.
15

<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
STATEMENT OF INVESTMENTS
(Photo of building)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 68.6%
AUTOMOTIVE EQUIPMENT &
MANUFACTURING -- .4%
3,000 Simpson Industries, Inc................ $ 27,750
BANKS -- 18.0%
3,000 ABC Bancorp............................ 55,500
3,000 BancorpSouth, Inc...................... 64,500
8,000 CB Bancshares, Inc..................... 249,000
2,500 Citizens Banking Corp.................. 73,125
1,000 Deposit Guaranty Corp.................. 44,000
2,000 First Midwest Bancorp, Inc............. 56,000
8,861 Hudson Chartered Bancorp, Inc.......... 190,512
1,575 Interchange Financial Services Corp.... 31,303
3,000 Mahaska Investment Co.................. 46,125
2,000 One Valley Bancorp of
West Virginia, Inc..................... 69,000
1,800 State Financial Services Corp.......... 31,275
4,000 Susquehanna Bancshares, Inc............ 107,000
10,000 West Coast Bancorp, Inc................ 160,000
1,177,340
BUILDING, CONSTRUCTION &
FURNISHINGS -- 1.2%
5,300 Monarch Cement Co...................... 80,494
BUSINESS EQUIPMENT & SERVICES -- 3.4%
3,400 American Business Products, Inc........ 74,375
2,000 American List Corp..................... 53,000
7,500 Computer Language Research, Inc........ 93,750
221,125
CONSUMER PRODUCTS & SERVICES -- 1.8%
11,100 Piccadilly Cafeterias, Inc............. 116,550
ELECTRICAL EQUIPMENT & SERVICES -- .9%
8,100 Research, Inc.......................... 56,700
ENERGY -- 2.4%
1,500 Berry Petroleum Co. Cl. A.............. 17,063
5,000 Enron Global Power & Pipelines L.L.C... 121,250
600 Penn Virginia Corp..................... 21,000
159,313
FINANCE & INSURANCE -- 3.8%
5,000 GCR Holdings, Ltd...................... 132,500
5,000 Lasalle Re Holdings, Ltd............... 112,500
245,000
<CAPTION>
SHARES VALUE
<C> <S> <C>
FOOD & BEVERAGE PRODUCTS -- 1.8%
7,000 Lance, Inc............................. $ 115,500
HEALTHCARE PRODUCTS & SERVICES -- 6.5%
7,500 ADAC Laboratories...................... 170,625
12,000 Kinetic Concepts, Inc.................. 186,000
1,000 Shared Medical Systems Corp............ 64,250
420,875
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES -- 8.9%
2,000 Gilbert Associates, Inc. Cl. A......... 25,500
7,500 Goulds Pumps, Inc...................... 192,187
2,000 Petrolite Corp......................... 62,875
5,000 Quanex Corp............................ 118,125
2,000 Woodward Governor Co................... 182,500
581,187
REAL ESTATE -- 4.6%
891 Bradley Real Estate, Inc............... 12,919
2,000 CBL & Associates Properties, Inc....... 44,750
2,500 Chelsea GCA Realty, Inc................ 79,375
2,000 Columbus Realty Trust.................. 38,750
2,000 Gables Residential Trust............... 47,000
1,000 Kranzco Realty Trust................... 14,125
2,500 Sovran Self Storage, Inc............... 66,250
303,169
RETAILING & WHOLESALE -- 1.9%
6,800 Russ Berrie & Co., Inc................. 124,950
THRIFT INSTITUTIONS -- .7%
2,000 People's Savings Financial Corp........ 44,750
UTILITIES -- ELECTRIC -- 3.3%
7,500 TNP Enterprises, Inc................... 212,812
UTILITIES -- GAS -- 9.0%
3,000 Atrion Corp............................ 76,500
7,100 Chesapeake Utilities Corp.............. 113,600
4,000 Energen Corp........................... 88,500
2,400 NUI Corp............................... 42,900
6,000 Public Service Company of North
Carolina, Inc.......................... 102,000
</TABLE>

<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
STATEMENT OF INVESTMENTS -- (CONTINUED)
(Photo of building)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UTILITIES -- GAS -- CONTINUED
6,000 Southwest Gas Corp..................... $ 96,000
2,000 United Cities Gas Co................... 30,250
2,000 Washington Energy Co................... 39,500
589,250
TOTAL COMMON STOCKS
(COST $3,733,125)...................... 4,476,765
CONVERTIBLE PREFERRED STOCKS -- 7.6%
BUILDING, CONSTRUCTION &
FURNISHINGS -- .4%
500 Southdown, Inc.
$2.875, Series D....................... 22,188
ENERGY -- 2.5%
4,000 Callon Petroleum Co.
8.50%, Series A........................ 127,000
1,400 Chieftain International Funding Corp.
$1.8125................................ 37,975
164,975
FINANCE & INSURANCE -- 1.8%
2,000 Integon Corp.
$3.875................................. 115,500
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- 2.9%
4,000 AMC Entertainment, Inc.
$1.75.................................. 190,500
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $398,264)........................ 493,163
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
CONVERTIBLE DEBENTURES -- 19.0%
BANKS -- .9%
$ 50,000 First State Bank Corp.
7.00%, 11/1/03......................... 60,750
BUILDING, CONSTRUCTION &
FURNISHINGS -- 1.0%
60,000 Medusa Corp.
6.00%, 11/15/03........................ 62,400
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CONVERTIBLE DEBENTURES -- CONTINUED
CONSUMER PRODUCTS & SERVICES -- 1.9%
$130,000 Max & Erma's Restaurants, Inc.
8.00%, 9/1/04.......................... $ 126,750
ENERGY -- 7.7%
500,000 Key Energy Group, Inc.
7.00%, 7/1/03.......................... 500,000
FINANCE & INSURANCE -- 1.7%
100,000 Trenwick Group, Inc.
6.00%, 12/15/99........................ 109,125
HEALTHCARE PRODUCTS & SERVICES -- 3.8%
140,000 Maxxim Medical, Inc.
6.75%, 3/1/03.......................... 151,375
100,000 Regency Health Services, Inc.
6.50%, 7/15/03......................... 99,000
250,375
RETAILING & WHOLESALE -- 2.0%
50,000 Baker (J.), Inc.
7.00%, 6/1/02.......................... 41,250
90,000 Proffitt's, Inc.
4.75%, 11/1/03......................... 87,750
129,000
TOTAL CONVERTIBLE DEBENTURES
(COST $1,226,975)...................... 1,238,400
SHORT-TERM INVESTMENTS -- 3.0%
GOVERNMENT AGENCY BONDS -- 3.0%
200,000 Federal Home Loan Mortgage Corp. 5.29%,
7/31/96................................ 199,118
TOTAL SHORT-TERM INVESTMENTS
(COST $199,118)........................ 199,118
</TABLE>

<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS --
(COST $5,557,482)........ 98.2% 6,407,446
OTHER ASSETS AND
LIABILITIES -- NET........ 1.8 120,421
NET ASSETS --................ 100.0% $6,527,867
</TABLE>

See accompanying notes to financial statements.
17

<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
(Photo of building)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $5,557,482)................................................................ $6,407,446
Cash............................................................................................................. 28,582
Receivable for investments sold.................................................................................. 545,069
Dividends and interest receivable................................................................................ 32,209
Receivable from Adviser.......................................................................................... 22,973
Unamortized organization expenses................................................................................ 14,099
Receivable for Fund shares sold.................................................................................. 3,322
Prepaid expenses................................................................................................. 53,723
Total assets............................................................................................... 7,107,423
LIABILITIES:
Payable for investments purchased................................................................................ 500,000
Accrued expenses................................................................................................. 78,862
Distribution fee payable......................................................................................... 694
Total liabilities.......................................................................................... 579,556
NET ASSETS.......................................................................................................... $6,527,867
NET ASSETS CONSIST OF:
Paid-in capital.................................................................................................. $5,502,835
Undistributed net investment income.............................................................................. 1,225
Accumulated net realized gain on investment transactions......................................................... 173,843
Net unrealized appreciation of investments....................................................................... 849,964
Net assets................................................................................................. $6,527,867
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($314,530/25,775 shares of beneficial interest outstanding)....................................... $12.20
Sales charge -- 4.75% of offering price.......................................................................... .61
Maximum offering price........................................................................................ $12.81
Class B Shares ($411,408/33,729 shares of beneficial interest outstanding)....................................... $12.20
Class C Shares ($38,594/3,168 shares of beneficial interest outstanding)......................................... $12.18
Class Y Shares ($5,763,335/471,836 shares of beneficial interest outstanding).................................... $12.21
</TABLE>

See accompanying notes to financial statements.
18

<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
STATEMENT OF OPERATIONS
(Photo of building)
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................................................................ $104,933
Interest............................................................................................. 38,182
Total investment income........................................................................... 143,115
EXPENSES:
Advisory fee......................................................................................... $ 29,232
Distribution fee -- Class A Shares................................................................... 316
Distribution fee -- Class B Shares................................................................... 1,292
Shareholder services fee -- Class B Shares........................................................... 431
Distribution fee -- Class C Shares................................................................... 109
Shareholder services fee -- Class C Shares........................................................... 36
Registration and filing fees......................................................................... 16,102
Custodian fee........................................................................................ 36,364
Transfer agent fee................................................................................... 28,324
Professional fees.................................................................................... 12,832
Reports and notices to shareholders.................................................................. 6,516
Trustees' fees and expenses.......................................................................... 3,587
Insurance expense.................................................................................... 3,197
Amortization of organization expense................................................................. 3,181
Miscellaneous........................................................................................ 6,843
Total expenses.................................................................................... 148,362
Less: Fee waivers and expense reimbursements......................................................... (102,330)
Net expenses...................................................................................... 46,032
Net investment income................................................................................... 97,083
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment transactions......................................................... 185,386
Net change in unrealized appreciation of investments................................................. 178,577
Net gain on investments................................................................................. 363,963
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................................... $461,046
</TABLE>

See accompanying notes to financial statements.
19

<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
(Photo of building)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income......................................................................... $ 97,083 $ 159,722
Net realized gain on investment transactions.................................................. 185,386 232,995
Net change in unrealized appreciation of investments.......................................... 178,577 786,111
Net increase in net assets resulting from operations....................................... 461,046 1,178,828
DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME:
Class A Shares................................................................................ (4,153) (5,089)
Class B Shares................................................................................ (4,264) (4,875)
Class C Shares................................................................................ (365) (421)
Class Y Shares................................................................................ (87,076) (155,906)
Total distributions to shareholders from net investment income............................. (95,858) (166,291)
NET REALIZED GAIN ON INVESTMENTS:
Class A Shares................................................................................ (1,914) (8,583)
Class B Shares................................................................................ (2,630) (10,427)
Class C Shares................................................................................ (194) (900)
Class Y Shares................................................................................ (39,227) (196,151)
Total distributions to shareholders from net realized gain on investments.................. (43,965) (216,061)
Total distributions to shareholders........................................................ (139,823) (382,352)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold..................................................................... 1,264,978 1,451,437
Proceeds from reinvestment of distributions................................................... 114,497 315,637
Payment for shares redeemed................................................................... (485,047) (864,156)
Net increase resulting from Fund share transactions........................................ 894,428 902,918
Net increase in net assets.............................................................. 1,215,651 1,699,394
NET ASSETS:
Beginning of period........................................................................... 5,312,216 3,612,822
End of period (including undistributed net investment income of $1,225 and $0,
respectively)............................................................................... $ 6,527,867 $5,312,216
</TABLE>

See accompanying notes to financial statements.
20

<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
(Photo of building)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
CLASS A SHARES CLASS B SHARES SHARES
SIX MONTHS JANUARY 3, SIX MONTHS JANUARY 3, SIX MONTHS
ENDED 1995* ENDED 1995* ENDED
JUNE 30, THROUGH JUNE 30, THROUGH JUNE 30,
1996 DECEMBER 31, 1996 DECEMBER 31, 1996
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........ $11.57 $9.64 $11.57 $9.64 $11.56
Income from investment operations:
Net investment income..................... .17 .34 .13 .28 .13
Net realized and unrealized gain on
investments............................. .73 2.45 .73 2.43 .72
Total from investment operations........ .90 2.79 .86 2.71 .85
Less distributions to shareholders:
From net investment income................ (.18) (.37) (.14) (.29) (.14)
From net realized gains on investments.... (.09) (.49) (.09) (.49) (.09)
Total distributions..................... (.27) (.86) (.23) (.78) (.23)
Net asset value, end of period.............. $12.20 $11.57 $12.20 $11.57 $12.18
TOTAL RETURN+............................... 7.8% 29.5% 7.5% 28.7% 7.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)... $315 $216 $411 $266 $39
Ratios to average net assets#:
Expenses++................................ 1.75% 1.75% 2.50% 2.50% 2.50%
Net investment income++................... 3.16% 3.39% 2.41% 2.67% 2.46%
Portfolio turnover rate..................... 27% 48% 27% 48% 27%
Average commission rate paid per share...... $.0638 N/A $.0638 N/A $.0638
<CAPTION>

JANUARY 24,
1995*
THROUGH
DECEMBER 31,
1995
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period........ $9.74
Income from investment operations:
Net investment income..................... .28
Net realized and unrealized gain on
investments............................. 2.33
Total from investment operations........ 2.61
Less distributions to shareholders:
From net investment income................ (.30)
From net realized gains on investments.... (.49)
Total distributions..................... (.79)
Net asset value, end of period.............. $11.56
TOTAL RETURN+............................... 27.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)... $24
Ratios to average net assets#:
Expenses++................................ 2.50%
Net investment income++................... 2.63%
Portfolio turnover rate..................... 48%
Average commission rate paid per share...... N/A
</TABLE>

* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income (loss) to average net assets, exclusive
of any applicable state expense limitations, would have been the following:
<TABLE>
<CAPTION>
CLASS C
CLASS A SHARES CLASS B SHARES SHARES
SIX MONTHS JANUARY 3, SIX MONTHS JANUARY 3, SIX MONTHS
ENDED 1995* ENDED 1995* ENDED
JUNE 30, THROUGH JUNE 30, THROUGH JUNE 30,
1996 DECEMBER 31, 1996 DECEMBER 31, 1996
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Expenses............................... 5.25% 24.45% 6.00% 20.90% 6.01%
Net investment income (loss)........... (.34%) (19.30%) (1.09%) (15.72%) (1.05%)
<CAPTION>

JANUARY 24,
1995*
THROUGH
DECEMBER 31,
1995
<S> <C>
Expenses............................... 187.29%
Net investment income (loss)........... (182.16%)
</TABLE>

See accompanying notes to financial statements.
21

<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
CLASS Y SHARES
(Photo of building)
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED YEAR ENDED
1996 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1995 1994
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.................................... $11.58 $9.70 $10.15
Income (loss) from investment operations:
Net investment income................................................. .20 .38 .34
Net realized and unrealized gain (loss) on investments................ .71 2.38 (.41)
Total from investment operations.................................... .91 2.76 (.07)
Less distributions to shareholders:
From net investment income............................................ (.19) (.38) (.33)
From net realized gains on investments................................ (.09) (.50) (.05)
Total distributions................................................. (.28) (.88) (.38)
Net asset value, end of period.......................................... $12.21 $11.58 $9.70
TOTAL RETURN+........................................................... 8.0% 29.1% (.7%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................... $ 5,763 $4,806 $3,613
Ratios to average net assets#:
Expenses.............................................................. 1.50%++ 1.50% 1.48%
Net investment income................................................. 3.39%++ 3.56% 3.72%
Portfolio turnover rate................................................. 27% 48% 9%
Average commission rate paid per share.................................. $.0638 N/A N/A
<CAPTION>
OCTOBER 1,
1993*
THROUGH
DECEMBER 31,
1993
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period.................................... $10.00
Income (loss) from investment operations:
Net investment income................................................. .10
Net realized and unrealized gain (loss) on investments................ .15
Total from investment operations.................................... .25
Less distributions to shareholders:
From net investment income............................................ (.10)
From net realized gains on investments................................ --
Total distributions................................................. (.10)
Net asset value, end of period.......................................... $10.15
TOTAL RETURN+........................................................... 2.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................... $2,236
Ratios to average net assets#:
Expenses.............................................................. 0%++
Net investment income................................................. 4.07%++
Portfolio turnover rate................................................. 15%
Average commission rate paid per share.................................. N/A
</TABLE>

* Commencement of operations.
+ Total return is calculated for the periods indicated and is not annualized.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income (loss) to average net assets, exclusive
of any applicable state expense limitations, would have been the following:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED YEAR ENDED
1996 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1995 1994
<S> <C> <C> <C>
Expenses............................................................ 5.00% 4.34% 4.68%
Net investment income (loss)........................................ (.11%) .72% .53%
<CAPTION>
OCTOBER 1,
1993*
THROUGH
DECEMBER 31,
1993
<S> <C>
Expenses............................................................ 4.39%
Net investment income (loss)........................................ (.33%)
</TABLE>

See accompanying notes to financial statements.
22

<PAGE>
EVERGREEN UTILITY FUND
(Photo of power lines)
A REPORT FROM YOUR
PORTFOLIO MANAGER
PAUL DILELLA
The first half of 1996 saw interest rates continue their first quarter climb.
The 30-year U.S. Treasury Bond yielded 5.95% at 1995 year-end, 6.67% on March
29, 1996, and 6.90% on June 28. This dramatic move left interest rate-sensitive
utility investors with little to cheer about. As a result of this rate move, the
S&P Utility Index* as well as the Dow Jones Utility Index* had negative returns
for the first half of 1996. The total return for Evergreen Utility Fund (Class Y
shares) for the six months ended June 30, 1996, was 2.3%**, as compared with
3.5% for Lipper Utility Funds average of the 87 utility funds tracked by Lipper
Analytical Services during that time***. The total returns at NAV for the Fund's
Class B and Class C shares during that time were 1.8%, and 1.7%, respectively.
Telecommunication stocks continued to represent the Fund's largest sector,
accounting for 41.8% of the Fund's net assets on June 30, 1996. The above
average returns, relative to the S&P 500 Reinvested Index+ of Sprint, Telefonica
de Espana++, and U.S. Long Distance Company were not enough to offset the below
average returns of Midcom Communications and DSC Communications Corp. and the
rest of the weakness in the telecommunications area. However, the rapid advances
in the telecommunication and cellular technology, coupled with deregulation,
offer investors excellent long-term growth potential in the telecommunication
stocks.
Electric utilities were adversely affected by the bond market for the first
half of 1996. Nonetheless, the electric utility area of the Fund demonstrated
relative outperformance of both the S&P Utility and Dow Jones indexes. Interest
rates, restructuring, deregulation, competition, nuclear safety, and cost
concerns, all weighed heavily on the group. Despite a very good month of June
for the electric utilities, they are still valued at a significant discount to
the general stock market. This undervaluation, plus the traditional defensive
characteristics of the sector, may well to result in relative outperformance in
the second half of 1996.
The non-utility area of Evergreen Utility Fund was ineffective in reversing
the negative effects of interest rates in the first half of 1996. Of particular
disappointment were the performances of Factory Stores of America and Hanson,
PLC, while the performance of General Growth Properties provided very strong
relative outperformance.
Evergreen Utility Fund will continue to seek high current income and moderate
capital appreciation through mostly securities of utility companies. As the
demand for power and telecommunications grow, we believe utility stocks should
grow too. By searching for utility stocks with the best growth potential, and
diversifying to spread investment risk, Evergreen Utility Fund will seek to
produce attractive dividends, capital growth, and will attempt to outpace
inflation regardless of the economic climate.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
* UNMANAGED INDEXES OF SELECTED SECURITIES
** PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDEND AND CAPITAL
GAIN DISTRIBUTIONS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE.
INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
CLASS A SHARES ARE SUBJECT TO A MAXIMUM 4.75% FRONT END SALES CHARGE,
CLASS B SHARES ARE SUBJECT TO A MAXIMUM 5% CONTINGENT DEFERRED SALES
CHARGE, AND CLASS C SHARES ARE SUBJECT TO A 1% CONTINGENT DEFERRED SALES
CHARGE WITHIN THE FIRST YEAR OF PURCHASE. SALES CHARGES ARE NOT REFLECTED
IN FIGURES ABOVE, AND IF REFLECTED, PERFORMANCE WOULD BE LOWER.
*** LIPPER ANALYTICAL SERVICES, INC., IS AN INDEPENDENT MUTUAL FUNDS
PERFORMANCE MONITOR.
+ THE S&P 500 REINVESTED INDEX IS AN UNMANAGED INDEX OF COMMON STOCKS IN
INDUSTRY, TRANSPORTATION, FINANCE, AND PUBLIC UTILITIES, DENOTING GENERAL
MARKET PERFORMANCE AS MONITORED BY STANDARD & POOR'S CORP.
++ INTERNATIONAL INVESTING MAY INVOLVE CERTAIN ADDITIONAL RISKS SUCH AS
CURRENCY FLUCTUATIONS, ECONOMIC AND POLITICAL INSTABILITY, AND
DIFFERENCES IN ACCOUNTING STANDARDS.
23

<PAGE>
EVERGREEN UTILITY FUND
STATEMENT OF INVESTMENTS
(Photo of power lines)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 93.8%
BASIC INDUSTRY -- .5%
50,000 Hanson Plc, ADR................... $ 712,500
ENERGY -- 1.6%
50,000 Williams Cos., Inc. (The)......... 2,475,000
REAL ESTATE -- 5.3%
120,000 Chelsea GCA Realty, Inc........... 3,810,000
35,000 Equity Residential Properties
Trust............................. 1,150,625
40,000 Factory Stores of America, Inc.... 365,000
100,000 General Growth Properties, Inc.... 2,412,500
11,600 Healthcare Realty Trust, Inc...... 275,500
8,013,625
UTILITIES -- ELECTRIC -- 38.0%
5,000* 360 Communications Co............. 120,000
82,000 American Electric Power Co.,
Inc............................... 3,495,250
125,000 Central & South West Corp......... 3,625,000
120,500 CINergy Corp...................... 3,856,000
50,000 Duke Power Co..................... 2,562,500
255,000 Edison International.............. 4,494,375
120,000 Entergy Corp...................... 3,405,000
157,000 FPL Group, Inc.................... 7,222,000
111,300 General Public Utilities Corp..... 3,923,325
150,000 Houston Industries, Inc........... 3,693,750
120,000 Illinova Corp..................... 3,450,000
48,000 NIPSCO Industries, Inc............ 1,932,000
140,000 PECO Energy Co.................... 3,640,000
60,000 Public Service Co. of Colorado.... 2,205,000
80,000 Public Service Enterprise Group,
Inc............................... 2,190,000
20,000 Shandong Huaneng Power Development
Co., Ltd. ADR..................... 165,000
35,000 Texas Utilities Co................ 1,496,250
160,000 Unicom Corp....................... 4,460,000
60,000 UtiliCorp United, Inc............. 1,657,500
57,592,950
<CAPTION>
SHARES VALUE
<C> <S> <C>
UTILITIES -- GAS -- 6.7%
120,000 MCN Corp.......................... $ 2,925,000
63,100 New Jersey Resources Corp......... 1,814,125
105,000 NICOR Inc......................... 2,979,375
80,000 Western Resources, Inc............ 2,390,000
10,108,500
UTILITIES -- TELEPHONE -- 41.7%
80,000* AirTouch Communications........... 2,260,000
110,000 ALLTEL Corp....................... 3,382,500
79,800 Ameritech Corp.................... 4,738,125
100,000 AT & T Corp....................... 6,200,000
47,000 Bell Atlantic Corp................ 2,996,250
90,000 BellSouth Corp.................... 3,813,750
125,000* DSC Communications Corp........... 3,765,625
175,000 Frontier Corp..................... 5,359,375
166,700 GTE Corp.......................... 7,459,825
81,825 Hong Kong Telecommunications, Ltd.
ADR............................... 1,472,850
40,800 Lucent Technologies............... 1,545,300
200,000 MCI Communications Corp........... 5,125,000
167,900* MIDCOM Communications, Inc........ 2,413,562
50,000 NYNEX Corp........................ 2,375,000
40,000 SBC Communications, Inc........... 1,970,000
60,000 Sprint Corp....................... 2,520,000
37,000 Telefonica de Espana SA de CV
ADR............................... 2,039,625
26,000* U.S. Long Distance Corp........... 923,000
90,000 U.S. West, Inc.................... 2,868,750
63,228,537
TOTAL COMMON STOCKS
(COST $123,274,530)............... 142,131,112
</TABLE>

<PAGE>
EVERGREEN UTILITY FUND
STATEMENT OF INVESTMENTS -- (CONTINUED)
(Photo of power lines)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CONVERTIBLE BONDS -- 1.6%
UTILITIES -- TELEPHONE -- 1.6%
$ 24,000 Compania de Inversiones en
Telecomunicaciones SA, PRIDES
(exchangeable for ADS's of
Telefonica de Argentina SA)........ $ 1,416,000
30,100 Nacional Financiera, SNC, PRIDES
(exchangeable for ADS's of
Telefonos de Mexico, SA de CV)..... 1,015,875
TOTAL CONVERTIBLE BONDS
(COST $2,725,733).................. 2,431,875
CORPORATE BONDS -- 2.6%
UTILITIES -- ELECTRIC -- 2.0%
1,000,000 Duke Power Co.
7.00%, 9/1/05...................... 978,836
1,000,000 Norsk Hydro AS
7.75%, 6/15/23..................... 1,006,715
1,000,000 Virginia Electric & Power Co.
7.57%, 12/9/02..................... 1,017,827
3,003,378
UTILITIES -- TELEPHONE -- .6%
1,000,000 Pacific Telephone & Telegraph Co.
7.25%, 2/1/08...................... 971,490
TOTAL CORPORATE BONDS
(COST $3,802,643).................. 3,974,868

<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
REPURCHASE AGREEMENT -- 1.7%
$2,545,000 Donaldson, Lufkin & Jenrette
Securities Corp. 5.40% dated
6/28/96, due 7/1/96 --
collateralized by $2,536,000 U.S.
Treasury Notes, 6.125%, due
7/31/96; value, including accrued
interest -- $2,660,947
(COST $2,545,000).................. $ 2,545,000
</TABLE>

<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS --
(COST $132,347,906).... 99.7% 151,082,855
OTHER ASSETS AND
LIABILITIES -- NET...... .3 471,218
NET ASSETS --.............. 100.0% $151,554,073
</TABLE>

* Non-income producing securities.
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
ADS-American Depository Shares
PRIDES -- Provisionally Redeemable Income Debt
Exchangeable for Stock
See accompanying notes to financial statements.
25

<PAGE>
EVERGREEN UTILITY FUND
STATEMENT OF ASSETS AND LIABILITIES
(Photo of power lines)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $132,347,906)........................................................... $151,082,855
Cash.......................................................................................................... 814
Dividends and interest receivable............................................................................. 616,479
Receivable for Fund shares sold............................................................................... 108,428
Prepaid expenses.............................................................................................. 22,070
Total assets............................................................................................... 151,830,646
LIABILITIES:
Payable for Fund shares repurchased........................................................................... 98,958
Distribution fee payable...................................................................................... 113,182
Accrued expenses.............................................................................................. 37,468
Accrued Advisory fee.......................................................................................... 26,965
Total liabilities.......................................................................................... 276,573
NET ASSETS....................................................................................................... $151,554,073
NET ASSETS CONSIST OF:
Paid-in capital............................................................................................... $129,602,806
Undistributed net investment income........................................................................... 43,230
Accumulated net realized gain on investment transactions...................................................... 3,173,088
Net unrealized appreciation of investments.................................................................... 18,734,949
Net assets................................................................................................. $151,554,073
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($104,205,404/9,620,474 shares of beneficial interest outstanding)................................ $ 10.83
Sales charge -- 4.75% of offering price.......................................................................... .54
Maximum offering price........................................................................................ $ 11.37
Class B Shares ($39,194,130/3,614,905 shares of beneficial interest outstanding)................................. $ 10.84
Class C Shares ($433,817/40,015 shares of beneficial interest outstanding)....................................... $ 10.84
Class Y Shares ($7,720,722/711,687 shares of beneficial interest outstanding).................................... $ 10.85
</TABLE>

See accompanying notes to financial statements.
26

<PAGE>
EVERGREEN UTILITY FUND
STATEMENT OF OPERATIONS
(Photo of power lines)
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $16,259).......................................... $ 3,150,353
Interest......................................................................................... 234,405
Total investment income....................................................................... 3,384,758
EXPENSES:
Advisory fee..................................................................................... $ 374,859
Administrative personnel and service fees........................................................ 37,426
Distribution fee -- Class A Shares............................................................... 130,521
Distribution fee -- Class B Shares............................................................... 140,816
Shareholder services fee -- Class B Shares....................................................... 46,938
Distribution fee -- Class C Shares............................................................... 1,290
Shareholder services fee -- Class C Shares....................................................... 430
Transfer agent fee............................................................................... 75,238
Custodian fee.................................................................................... 60,411
Reports and notices to shareholders.............................................................. 47,932
Registration and filing fees..................................................................... 38,086
Professional fees................................................................................ 13,195
Insurance expense................................................................................ 1,499
Trustees' fees and expenses...................................................................... 1,483
Miscellaneous.................................................................................... 17,288
Total expenses................................................................................ 987,412
Less: Fee waivers and expense reimbursements..................................................... (219,613)
Net expenses.................................................................................. 767,799
Net investment income............................................................................... 2,616,959
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions..................................................... 3,127,009
Net change in unrealized appreciation of investments............................................. (2,751,817)
Net gain on investments............................................................................. 375,192
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ 2,992,151
</TABLE>

See accompanying notes to financial statements.
27

<PAGE>
EVERGREEN UTILITY FUND
(Photo of power lines)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1996 DECEMBER 31,
(UNAUDITED) 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income..................................................................... $ 2,616,959 $ 3,889,362
Net realized gain on investments.......................................................... 3,127,009 6,197,705
Net change in unrealized appreciation (depreciation) of
investments............................................................................ (2,751,817) 17,561,515
Net increase in net assets resulting from operations................................... 2,992,151 27,648,582
DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME:
Class A Shares......................................................................... (1,939,860) (2,358,231)
Class B Shares......................................................................... (546,648) (1,177,734)
Class C Shares......................................................................... (4,970) (6,275)
Class Y Shares......................................................................... (150,341) (298,965)
Total distributions to shareholders from net investment
income........................................................................... (2,641,819) (3,841,205)
NET REALIZED GAIN ON INVESTMENTS:
Class A Shares......................................................................... -- (4,315,104)
Class B Shares......................................................................... -- (1,416,839)
Class C Shares......................................................................... -- (9,717)
Class Y Shares......................................................................... -- (316,309)
Total distributions to shareholders from net realized gain on investments........... -- (6,057,969)
Total distributions to shareholders................................................. (2,641,819) (9,899,174)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold................................................................. 8,528,510 8,809,765
Proceeds from shares issued from the acquisition of ABT
Utility Income Fund, Inc............................................................... -- 99,162,259
Proceeds from reinvestment of distributions............................................... 2,014,599 7,723,699
Payment for shares redeemed............................................................... (10,910,083) (20,186,142)
Net increase (decrease) from Fund share transactions................................... (366,974) 95,509,581
Net increase (decrease) in net assets............................................... (16,642) 113,258,989
NET ASSETS:
Beginning of period....................................................................... 151,570,715 38,311,726
End of period (including undistributed net investment income of $43,230 and $68,090,
respectively)........................................................................... $151,554,073 $151,570,715
</TABLE>

See accompanying notes to financial statements.
28

<PAGE>
EVERGREEN UTILITY FUND -- CLASS A AND B SHARES
(Photo of power lines)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
SIX MONTHS JANUARY 4, SIX MONTHS
ENDED YEAR 1994* ENDED YEAR
JUNE 30, ENDED THROUGH JUNE 30, ENDED
1996 DECEMBER 31, DECEMBER 31, 1996 DECEMBER 31,
(UNAUDITED) 1995 1994 (UNAUDITED) 1995
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period...................... $10.80 $9.00 $10.00 $10.81 $9.00
Income (loss) from investment operations:
Net investment income................................... .19 .44 .45 .15 .37
Net realized and unrealized gain (loss) on
investments........................................... .04 2.25 (1.01) .04 2.26
Total from investment operations...................... .23 2.69 (.56) .19 2.63
Less distributions to shareholders:
From net investment income.............................. (.20) (.44) (.44) (.16) (.37)
From net realized gain on investments................... -- (.45) -- -- (.45)
Total distributions................................... (.20) (.89) (.44) (.16) (.82)
Net asset value, end of period............................ $10.83 $10.80 $9.00 $10.84 $10.81
TOTAL RETURN+............................................. 2.2% 30.7% (5.6%) 1.8% 29.9%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................. $104,205 $107,872 $4,190 $39,194 $35,662
Ratios to average net assets:
Expenses**.............................................. .85%++ .79% .53%++ 1.60%++ 1.53%
Net investment income**................................. 3.67%++ 4.51% 5.07%++ 2.91%++ 3.78%
Portfolio turnover rate................................... 26% 88% 23% 26% 88%
Average commission rate paid per share.................... $.0619 N/A N/A $.0619 N/A
<CAPTION>

JANUARY 4,
1994*
THROUGH
DECEMBER 31,
1994
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period...................... $10.00
Income (loss) from investment operations:
Net investment income................................... .39
Net realized and unrealized gain (loss) on
investments........................................... (1.01)
Total from investment operations...................... (.62)
Less distributions to shareholders:
From net investment income.............................. (.38)
From net realized gain on investments................... --
Total distributions................................... (.38)
Net asset value, end of period............................ $9.00
TOTAL RETURN+............................................. (6.2%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................. $28,792
Ratios to average net assets:
Expenses**.............................................. 1.27%++
Net investment income**................................. 4.19%++
Portfolio turnover rate................................... 23%
Average commission rate paid per share.................... N/A
</TABLE>

* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
SIX MONTHS JANUARY 4, SIX MONTHS
ENDED YEAR 1994* ENDED YEAR
JUNE 30, ENDED THROUGH JUNE 30, ENDED
1996 DECEMBER 31, DECEMBER 31, 1996 DECEMBER 31,
(UNAUDITED) 1995 1994 (UNAUDITED) 1995
<S> <C> <C> <C> <C> <C>
Expenses................................................. 1.14% 1.18% 1.43% 1.89% 1.93%
Net investment income.................................... 3.38% 4.12% 4.17% 2.62% 3.37%
<CAPTION>

JANUARY 4,
1994*
THROUGH
DECEMBER 31,
1994
<S> <C>
Expenses................................................. 2.11%
Net investment income.................................... 3.35%
</TABLE>

See accompanying notes to financial statements.
29

<PAGE>
EVERGREEN UTILITY FUND -- CLASS C AND Y
(Photo of power lines)
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS C SHARES CLASS Y SHARES
SIX MONTHS SEPTEMBER 2, SIX MONTHS
ENDED YEAR 1994* ENDED YEAR
JUNE 30, ENDED THROUGH JUNE 30, ENDED
1996 DECEMBER 31, DECEMBER 31, 1996 DECEMBER 31,
(UNAUDITED) 1995 1994 (UNAUDITED) 1995
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period....................... $10.82 $9.01 $9.33 $10.82 $9.00
Income (loss) from investment operations:
Net investment income.................................... .15 .37 .12 .21 .47
Net realized and unrealized gain (loss) on investments... .03 2.26 (.33) .03 2.27
Total from investment operations....................... .18 2.63 (.21) .24 2.74
Less distributions to shareholders:
From net investment income............................... (.16) (.37) (.11) (.21) (.47)
In excess of net investment income....................... -- -- -- -- --
From net realized gain on investments.................... -- (.45) -- -- (.45)
Total distributions.................................... (.16) (.82) (.11) (.21) (.92)
Net asset value, end of period............................. $10.84 $10.82 $9.01 $10.85 $10.82
TOTAL RETURN+.............................................. 1.7% 29.8% (2.2%) 2.3% 31.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................. $434 $246 $128 $7,721 $7,791
Ratios to average net assets:
Expenses**............................................... 1.60%++ 1.54% 1.94%++ .60%++ .54%
Net investment income**.................................. 2.92%++ 3.76% 3.96%++ 3.91%++ 4.76%
Portfolio turnover rate.................................... 26% 88% 23% 26% 88%
Average commission rate paid per share..................... $.0619 N/A N/A $.0619 N/A
<CAPTION>

FEBRUARY 28,
1994*
THROUGH
DECEMBER 31,
1994
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period....................... $9.51
Income (loss) from investment operations:
Net investment income.................................... .37
Net realized and unrealized gain (loss) on investments... (.50)
Total from investment operations....................... (.13)
Less distributions to shareholders:
From net investment income............................... (.37)
In excess of net investment income....................... (.01)
From net realized gain on investments.................... --
Total distributions.................................... (.38)
Net asset value, end of period............................. $9.00
TOTAL RETURN+.............................................. (1.6%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................. $5,201
Ratios to average net assets:
Expenses**............................................... .40%++
Net investment income**.................................. 4.93%++
Portfolio turnover rate.................................... 23%
Average commission rate paid per share..................... N/A
</TABLE>

* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets, exclusive of any
applicable state expense limitations, would have been the following:
<TABLE>
<CAPTION>
CLASS C SHARES CLASS Y SHARES
SIX MONTHS SEPTEMBER 2, SIX MONTHS
ENDED YEAR 1994* ENDED YEAR
JUNE 30, ENDED THROUGH JUNE 30, ENDED
1996 DECEMBER 31, DECEMBER 31, 1996 DECEMBER 31,
(UNAUDITED) 1995 1994 (UNAUDITED) 1995
<S> <C> <C> <C> <C> <C>
Expenses.................................................. 1.89% 1.93% 2.78% .89% .93%
Net investment income..................................... 2.63% 3.37% 3.12% 3.61% 4.37%
<CAPTION>

FEBRUARY 28,
1994*
THROUGH
DECEMBER 31,
1994
<S> <C>
Expenses.................................................. 1.24%
Net investment income..................................... 4.09%
</TABLE>

See accompanying notes to financial statements.
30

<PAGE>
EVERGREEN VALUE FUND
(Photo of building)
A REPORT FROM YOUR
PORTFOLIO MANAGERS
DAVID FRANCIS
J. DONALD RAINES
We are pleased to bring you the Semiannual Report for (Photos of
Evergreen Value Fund. Equity prices moved up in the first half David Francis
of 1996, continuing the very powerful advance that occurred in and
1995. The progress in stocks year-to-date has been J. Donald
particularly impressive in that it was accomplished despite a Raines)
rather substantial rise in interest rates. Fixed income yields
have increased due to a turn in expectations for the economy.
As we entered this year, economic forecasters were calling for
continued slow growth and low inflation. A few were even
discussing the possibility of a recession. Toward the end of
the first quarter, prospects for the economy began to improve
as job creation and incomes moved up from the tepid pace of 1995.
This has resulted in an improvement in retail sales and higher
production rates as inventory levels had been reduced in prior
periods to unacceptably low levels.
The revised outlook calls for a rebound in activity for a
few quarters as inventories are rebuilt and the benefits of
the newly created jobs work through the system, but it is
unlikely that a sustained economic boom is in the offing. Our
position today is that the economy is likely to experience a
few quarters of above-trend growth followed by a return to
moderation. That being said, there are a number of risks to
the outlook related to the tightness in the labor markets,
high capacity utilization of production facilities, a modest
but not insignificant inflation risk, and deteriorating credit
quality on the part of borrowers, particularly in the consumer
credit sector.

Portfolio performance was volatile over the period with good results in the
first quarter and sub-par results in the second quarter. We had positioned the
portfolio early in the year for a rebound in activity by increasing exposure to
the more economically sensitive sectors of the market. Purchases included such
companies as Alcoa in the aluminum industry, Case Corp., a farm equipment
manufacturer, Ford Motor Company, and Intel Corp in the technology sector. We
also added to our position in energy stocks with the purchase of Kerr-McGee,
Mobil, and Ultramar. We have an objective of increasing exposure to domestic
producers, refineries, and the natural gas industry as we feel these stocks
offer the better valuations. We reduced exposure to the multinational oil
companies, a group that we sense are expensive relative to other companies in
the energy group, with the sales of Exxon and Chevron. These strategies were a
positive factor in the first quarter as the outlook for the economy improved. In
the second quarter, there was a rather dramatic reversal in the performance
leadership in the market with those types of stocks that were strong in the
first quarter exhibiting unusual weakness in the second quarter. Stocks that
possess the characteristics we favor -low P/E, above average yields, better
quality- tended to have below average performance. We feel that the below market
performance of the portfolio was overdone and that we are properly positioned in
the current market environment. An element of defensiveness is appropriate given
the relatively high levels of uncertainty that exists today and the slowdown in
corporate profit growth that has become apparent.
31

<PAGE>
EVERGREEN VALUE FUND
STATEMENT OF INVESTMENTS
(Photo of building)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 95.9%
AEROSPACE & DEFENSE -- 4.6%
336,800 Boeing Co........................ $ 29,343,700
281,000 United Technologies Corp......... 32,315,000
61,658,700
AUTOMOTIVE EQUIPMENT &
MANUFACTURING -- 1.4%
579,300 Ford Motor Co.................... 18,754,838
BANKS -- 12.4%
500,000 Bank of Boston Corp.............. 24,750,000
380,000 Bankers Trust New York Corp...... 28,072,500
410,000 Boatmen's Bancshares, Inc........ 16,451,250
811,800 Central Fidelity Banks, Inc...... 18,468,450
50,300 Chase Manhattan Corp............. 3,552,438
57,900 Citicorp CCI..................... 4,783,987
658,700 First Chicago NBD Corp........... 25,771,637
675,400 First Tennessee National Corp.... 20,684,125
510,000 National City Corp............... 17,913,750
125,000 SouthTrust Corp.................. 3,515,625
47,630 Summit Bancorp................... 1,673,004
10,950 Wells Fargo & Co................. 2,615,681
168,252,447
BUSINESS EQUIPMENT &
SERVICES -- 2.0%
275,000 International Business Machines
Corp............................. 27,225,000
CHEMICAL & AGRICULTURAL
PRODUCTS -- 4.1%
328,800 Dow Chemical Co. (The)........... 24,988,800
59,000 Rohm & Haas Co................... 3,702,250
628,200 Union Carbide Corp............... 24,970,950
83,600 Universal Corp................... 2,215,400
55,877,400
CONSUMER PRODUCTS &
SERVICES -- 5.1%
804,400 American Brands, Inc............. 36,499,650
5,500 Colgate-Palmolive Co............. 466,125
50,000 Eastman Kodak Co................. 3,887,500
7,000 Gillette Co...................... 436,625
271,300 Philip Morris Cos., Inc.......... 28,215,200
69,505,100
DIVERSIFIED COMPANIES -- 6.0%
326,000 General Electric Co.............. 28,199,000
139,800 * ITT Corp......................... 9,261,750
639,800 ITT Industries, Inc.............. 16,074,975
<CAPTION>
SHARES VALUE
<C> <S> <C>
DIVERSIFIED COMPANIES -- CONTINUED
522,200 Raytheon Co...................... $ 26,958,575
80,494,300
ELECTRICAL EQUIPMENT &
SERVICES -- 3.8%
635,400 * Applied Materials, Inc........... 19,379,700
190,400 Intel Corp....................... 13,982,500
360,600 Varian Associates, Inc........... 18,661,050
52,023,250
ENERGY -- 17.4%
270,000 Atlantic Richfield Co............ 31,995,000
1,027,500 Cabot Corp....................... 25,173,750
375,000 Kerr-McGee Corp.................. 22,828,125
285,000 Mobil Corp....................... 31,955,625
637,500 Sonat Inc........................ 28,687,500
338,000 Texaco, Inc...................... 28,349,750
505,500 Tosco Corp....................... 25,401,375
550,000 Ultramar Corp.................... 15,950,000
500,000 Union Pacific Resources
Group, Inc....................... 13,375,000
360,000 Unocal Corp...................... 12,150,000
235,866,125
FINANCE & INSURANCE -- 5.3%
608,175 Allstate Corp. (The)............. 27,747,984
26,100 American Financial Group......... 786,263
500,000 American General Corp............ 18,187,500
139,800 ITT Hartford Group, Inc.......... 7,444,350
55,300 Providian Corp................... 2,370,988
92,050 Salomon Inc...................... 4,050,200
409,300 * Travelers/Aetna Property Casualty
Cl. A............................ 11,613,887
72,201,172
FOOD & BEVERAGE PRODUCTS -- 1.9%
290,650 American Stores Co............... 11,989,313
250,000 General Mills, Inc............... 13,625,000
25,614,313
FOOD RETAILING &
DISTRIBUTION -- 1.3%
1,602,475 * Shoney's Inc..................... 17,426,916
HEALTHCARE PRODUCTS &
SERVICES -- 10.1%
320,600 Bristol-Myers Squibb Co.......... 28,854,000
7,000 Merck & Co., Inc................. 452,375
911,000 * OrNda Healthcorp................. 21,864,000
350,000 Schering-Plough Corp............. 21,962,500
</TABLE>
32

<PAGE>
EVERGREEN VALUE FUND
STATEMENT OF INVESTMENTS -- (CONTINUED)
(Photo of building)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
HEALTHCARE PRODUCTS &
SERVICES -- CONTINUED
1,200,000 * Tenet Healthcare Corp............ $ 25,650,000
758,400 * Value Health, Inc................ 17,917,200
360,000 Warner-Lambert Co................ 19,800,000
136,500,075
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES -- 4.4%
444,200 Aluminum Co. of America.......... 25,485,975
560,000 Tenneco, Inc..................... 28,630,000
100,000 * Varity Corp...................... 4,812,500
58,928,475
INFORMATION SERVICES &
TECHNOLOGY -- .3%
147,000 Comdisco, Inc.................... 3,913,875
MANUFACTURING & DISTRIBUTING --
3.4%
138,800 Briggs & Stratton Corp........... 5,708,150
302,250 Case Corp........................ 14,508,000
101,300 Philips Electronics NV........... 3,304,913
292,550 Stanley Works.................... 8,703,362
760,500 * Teradyne, Inc.................... 13,118,625
45,343,050
PUBLISHING, BROADCASTING &
ENTERTAINMENT -- .8%
600,000 * ADT Ltd.......................... 11,325,000
TRANSPORTATION -- 3.3%
172,000 Burlington Northern Santa Fe..... 13,910,500
200,000 Norfolk Southern Corp............ 16,950,000
187,900 Union Pacific Corp............... 13,129,512
43,990,012
UTILITIES -- 8.3%
15,000 Florida Progress Corp............ 521,250
224,500 FPL Group, Inc................... 10,327,000
432,300 Frontier Corp.................... 13,239,188
550,000 GTE Corp......................... 24,612,500
142,400 Houston Industries, Inc.......... 3,506,600
238,700 Illinova Corp.................... 6,862,625
1,215,700 NICOR Inc........................ 34,495,487
<CAPTION>
SHARES VALUE
<C> <S> <C>
UTILITIES -- CONTINUED
148,800 PacifiCorp....................... $ 3,310,800
50,000 PECO Energy Co................... 1,300,000
484,100 Unicom Corp...................... 13,494,287
111,669,737
TOTAL COMMON STOCKS
(COST $1,153,733,401)............ 1,296,569,785
CONVERTIBLE PREFERRED STOCKS -- 1.5%
MANUFACTURING &
DISTRIBUTING -- .9%
98,200 Case Corp........................ 11,636,700
ENERGY -- .6%
150,000 Unocal Corp...................... 8,493,750
TOTAL CONVERTIBLE PREFERRED
STOCKS
(COST $21,127,515)............... 20,130,450
TOTAL LONG-TERM INVESTMENTS
(COST $1,174,860,916)............ 1,316,700,235
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C> <C>
REPURCHASE AGREEMENT -- 1.3%
$17,729,000 Donaldson, Lufkin & Jenrette
Securities Corp.,
5.40%, dated 6/28/96, due
7/1/96 -- collateralized by
$17,045,000 U.S. Treasury
Notes, 8.625%, 8/15/97; value
including accrued interest --
$18,636,054
(COST $17,729,000)............. 17,729,000
TOTAL INVESTMENTS --
(COST
$1,192,589,916)......... 98.7% 1,334,429,235
OTHER ASSETS AND
LIABILITIES -- NET...... 1.3 17,254,318
NET ASSETS --........... 100.0% $1,351,683,553
</TABLE>

* Non-income producing securities
See accompanying notes to financial statements.
33

<PAGE>
EVERGREEN VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
(Photo of building)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $1,192,589,916)....................................................... $1,334,429,235
Receivable for investments sold............................................................................. 60,715,202
Receivable for Fund shares sold............................................................................. 3,907,830
Dividends and interest receivable........................................................................... 2,964,254
Prepaid expenses............................................................................................ 24,227
Total assets.......................................................................................... 1,402,040,748
LIABILITIES:
Payable for investments purchased........................................................................... 45,123,561
Payable for Fund shares repurchased......................................................................... 3,624,753
Accrued expenses............................................................................................ 761,808
Accrued Advisory fee........................................................................................ 564,855
Distribution fee payable.................................................................................... 282,218
Total liabilities..................................................................................... 50,357,195
NET ASSETS..................................................................................................... $1,351,683,553
NET ASSETS CONSIST OF:
Paid-in capital............................................................................................. $1,068,928,462
Undistributed net investment income......................................................................... 56,290
Accumulated net realized gain on investment transactions.................................................... 140,859,482
Net unrealized appreciation of investments.................................................................. 141,839,319
Net assets............................................................................................... $1,351,683,553
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($303,597,679/14,257,348 shares of beneficial interest outstanding).......................... $ 21.29
Sales charge -- 4.75% of offering price..................................................................... 1.06
Maximum offering price................................................................................ $ 22.35
Class B Shares ($166,518,513/7,819,072 shares of beneficial interest outstanding)........................... $ 21.30
Class C Shares ($1,251,825/58,823 shares of beneficial interest outstanding)................................ $ 21.28
Class Y Shares ($880,315,536/41,344,431 shares of beneficial interest outstanding).......................... $ 21.29
</TABLE>

See accompanying notes to financial statements.
34

<PAGE>
EVERGREEN VALUE FUND
STATEMENT OF OPERATIONS
(Photo of building)
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $23,070)...................................... $ 17,296,920
Interest..................................................................................... 1,565,445
Total investment income................................................................ 18,862,365
EXPENSES:
Advisory fee................................................................................. $3,323,842
Administrative personnel and service fee..................................................... 333,784
Distribution fee -- Class A Shares........................................................... 377,476
Distribution fee -- Class B Shares........................................................... 581,742
Shareholder services fee -- Class B Shares................................................... 193,914
Distribution fee -- Class C Shares........................................................... 3,687
Shareholder services fee -- Class C Shares................................................... 1,229
Transfer agent fee........................................................................... 233,009
Custodian fee................................................................................ 140,813
Registration and filing fees................................................................. 16,069
Professional fees............................................................................ 11,047
Reports and notices to shareholders.......................................................... 11,269
Insurance.................................................................................... 8,727
Trustees' fees and expenses.................................................................. 8,760
Miscellaneous................................................................................ 5,627
Total expenses......................................................................... 5,250,995
Net investment income........................................................................... 13,611,370
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions................................................. 141,901,070
Net decrease in unrealized appreciation of investments....................................... (85,411,704)
Net gain on investments......................................................................... 56,489,366
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................ $ 70,100,736
</TABLE>

See accompanying notes to financial statements.
35

<PAGE>
EVERGREEN VALUE FUND
(Photo of building)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
JUNE 30, 1996 ENDED
(UNAUDITED) DECEMBER 31, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................................... $ 13,611,370 $ 29,177,545
Net realized gain on investment transactions........................................ 141,901,070 50,649,714
Net change in unrealized appreciation of
investments...................................................................... (85,411,704) 196,633,111
Net increase in net assets resulting from operations............................. 70,100,736 276,460,370
DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME:
Class A Shares...................................................................... (3,383,408) (6,221,428)
Class B Shares...................................................................... (1,213,211) (2,281,745)
Class C Shares...................................................................... (8,884) (12,030)
Class Y Shares...................................................................... (10,893,437) (19,218,021)
Total distributions from net investment income................................... (15,498,940) (27,733,224)
NET REALIZED GAIN ON INVESTMENTS:
Class A Shares...................................................................... (70,923) (12,319,599)
Class B Shares...................................................................... (38,942) (5,935,694)
Class C Shares...................................................................... (293) (33,758)
Class Y Shares...................................................................... (206,433) (32,229,160)
Total distributions from net realized gain on investments........................ (316,591) (50,518,211)
Total distributions to shareholders........................................... (15,815,531) (78,251,435)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold........................................................... 171,955,517 309,533,208
Proceeds from acquisition of ABT Growth and Income Trust............................ -- 63,356,435
Proceeds from acquisition of FFB Lexicon Select Value Fund.......................... 95,883,824 --
Proceeds from acquisition of FFB Equity Fund........................................ 14,077,973 --
Proceeds from reinvestment of distributions......................................... 12,621,894 66,652,380
Payments for shares redeemed........................................................ (192,191,134) (243,317,457)
Net increase resulting from Fund share transactions.............................. 102,348,074 196,224,566
Net increase in net assets....................................................... 156,633,279 394,433,501
NET ASSETS:
Beginning of period................................................................. 1,195,050,274 800,616,773
End of period (including undistributed net investment income of $56,290 and
$1,943,860, respectively)......................................................... $1,351,683,553 $ 1,195,050,274
</TABLE>

See accompanying notes to financial statements.
36

<PAGE>

EVERGREEN VALUE FUND -- CLASS A SHARES
(Photo of building)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1996 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........................ $20.45 $16.62 $17.63 $17.11 $17.08 $14.61
Income from investment operations:
Net investment income..................................... .21 .55 .52 .47 .44 .46
Net realized and unrealized gain (loss) on investments.... .88 4.69 (.20) 1.10 .89 3.17
Total from investment operations........................ 1.09 5.24 .32 1.57 1.33 3.63
Less distributions to shareholders from:
Net investment income..................................... (.24 ) (.51) (.51) (.47) (.43) (.43)
Net realized gain on investments.......................... (.01 ) (.90) (.82) (.58) (.87) (.73)
Total distributions..................................... (.25 ) (1.41) (1.33) (1.05) (1.30) (1.16)
Net asset value, end of period.............................. $21.29 $20.45 $16.62 $17.63 $17.11 $17.08
TOTAL RETURN+............................................... 5.3% 31.8% 1.9% 9.3% 8.0% 25.1%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)..................... $304 $292 $189 $190 $169 $136
Ratios to average net assets:
Expenses.................................................. 87% ++ .90% .93% .99% 1.01%* .96%*
Net investment income..................................... 1.96% ++ 2.78% 2.96% 2.63% 2.37%* 2.78%*
Portfolio turnover rate..................................... 50% 53% 70% 46% 56% 69%
Average commission rate paid per share...................... $ .0604 N/A N/A N/A N/A N/A
<CAPTION>
</TABLE>

+ Total return is calculated on net value per share for the periods indicated
and is not annualized. Initial sales charge is not reflected.
++ Annualized.
* Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992 1991
<S> <C> <C>
Expenses............................................................................. 1.02% 1.05%
Net investment income................................................................ 2.36% 2.69%
</TABLE>

See accompanying notes to financial statements.
37

<PAGE>
EVERGREEN VALUE FUND -- CLASS B AND C SHARES
(photo of building)
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
FEBRUARY 2,
SIX MONTHS 1993* SIX MONTHS
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, DECEMBER 31, JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995 1994 1993 (UNAUDITED) 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period....................... $20.45 $16.62 $17.63 $17.24 $20.44 $16.61
Income (loss) from investment
operations:
Net investment income........ .12 .39 .42 .35 .12 .39
Net realized and unrealized
gain (loss) on
investments................ .91 4.70 (.20) 1.01 .94 4.70
Total from investment
operations............... 1.03 5.09 .22 1.36 1.06 5.09
Less distributions to
shareholders from:
Net investment income........ (.17 ) (.36) (.41) (.35 ) (.21 ) (.36 )
Net realized gain on
investments................ (.01 ) (.90) (.82) (.58 ) (.01 ) (.90 )
Distributions in excess of
net investment income...... -- -- -- (.04 ) -- --
Total distributions........ (.18 ) (1.26) (1.23) (.97 ) (.22 ) (1.26 )
Net asset value, end of
period..................... $21.30 $20.45 $16.62 $17.63 $21.28 $20.44
TOTAL RETURN+.................. 5.0% 30.9% 1.3% 8.0% 5.0% 30.9%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted).............. $166,519 $141,072 $104,297 $59,953 $1,252 $811
Ratios to average net assets:
Expenses..................... 1.62% ++ 1.65% 1.53% 1.48% ++ 1.62% ++ 1.65%
Net investment income........ 1.21% ++ 2.04% 2.36% 2.09% ++ 1.21% ++ 2.03%
Portfolio turnover rate........ 50% 53% 70% 46% 50% 53%
Average commission rate paid
per share.................... $ .0604 N/A N/A N/A $ .0604 N/A
<CAPTION>

SEPTEMBER 2,
1994*
THROUGH
DECEMBER 31,
1994
PER SHARE DATA:
Net asset value, beginning of
period....................... $18.28
Income (loss) from investment
operations:
Net investment income........ .19
Net realized and unrealized
gain (loss) on
investments................ (.81 )
Total from investment
operations............... (.62 )
Less distributions to
shareholders from:
Net investment income........ (.19 )
Net realized gain on
investments................ (.82 )
Distributions in excess of
net investment income...... (.04 )
Total distributions........ (1.05 )
Net asset value, end of
period..................... $16.61
TOTAL RETURN+.................. (3.41% )
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted).............. $485
Ratios to average net assets:
Expenses..................... 1.68% ++
Net investment income........ 2.16% ++
Portfolio turnover rate........ 70%
Average commission rate paid
per share.................... N/A
<CAPTION>
</TABLE>

* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charges are not
reflected.
++ Annualized.
See accompanying notes to financial statements.
38

<PAGE>
EVERGREEN VALUE FUND -- CLASS Y SHARES
(Photo of building)
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1996 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................. $20.45 $16.61 $17.63 $17.11 $17.08
Income from investment operations:
Net investment income.............................. .23 .57 .56 .52 .49
Net realized and unrealized gain (loss)
on investments................................... .89 4.72 (.20) 1.12 .90
Total from investment operations................. 1.12 5.29 .36 1.64 1.39
Less distributions to shareholders from:
Net investment income.............................. (.27 ) (.55) (.56) (.52) (.49)
Net realized gains................................. (.01 ) (.90) (.82) (.58) (.87)
Distributions in excess of net investment income... -- -- -- (.02) --
Total distributions.............................. (.28 ) (1.45) (1.38) (1.12) (1.36)
Net asset value, end of period..................... $21.29 $20.45 $16.61 $17.63 $17.11
TOTAL RETURN+........................................ 5.5% 32.2% 2.1% 9.7% 8.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions).............. $880 $761 $507 $463 $326
Ratios to average net assets:
Expenses........................................... .62% ++ .65% .68% .65% .68%**
Net investment income.............................. 2.23% ++ 3.02% 3.21% 2.98% 2.90%**
Portfolio turnover rate.............................. 50% 53% 70% 46% 56%
Average commission rate paid per share............... $.0604 N/A N/A N/A N/A
<CAPTION>
JANUARY 3,
THROUGH
DECEMBER 31,
1991
PER SHARE DATA:
Net asset value, beginning of period................. $14.28
Income from investment operations:
Net investment income.............................. .47
Net realized and unrealized gain (loss)
on investments................................... 3.53
Total from investment operations................. 4.00
Less distributions to shareholders from:
Net investment income.............................. (.47 )
Net realized gains................................. (.73 )
Distributions in excess of net investment income... --
Total distributions.............................. (1.20 )
Net asset value, end of period..................... $17.08
TOTAL RETURN+........................................ 25.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions).............. $271
Ratios to average net assets:
Expenses........................................... .69% ++**
Net investment income.............................. 3.04% ++**
Portfolio turnover rate.............................. 69%
Average commission rate paid per share............... N/A
<CAPTION>
1991*
</TABLE>

* Commencement of class operations.
+ Total return is calculated for the periods indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
<TABLE>
<CAPTION>
JANUARY 3, 1991*
YEAR ENDED THROUGH
DECEMBER 31, 1992 DECEMBER 31, 1991
<S> <C> <C>
Expenses............................................................. .69% .77%
Net investment income................................................ 2.89% 2.96%
</TABLE>

See accompanying notes to financial statements.
39

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION AND NATURE OF OPERATIONS
The Evergreen Growth and Income Funds (the "Funds") are separate open-end
management investment companies registered under the Investment Company Act of
1940, as amended (the "Act"). The Evergreen Growth and Income Funds included
herein consist of Evergreen Growth & Income Fund ("Growth & Income"), Evergreen
Small Cap Equity Income Fund ("Small Cap"), Evergreen Utility Fund ("Utility")
and Evergreen Value Fund ("Value").
Growth & Income's investment objective is to achieve a return composed of
capital appreciation and current income by investing in the securities of
companies which are undervalued in the marketplace. Small Cap's investment
objective is to achieve a return consisting of current income and capital
appreciation in the value of its shares. Utility's investment objective is to
achieve a return consisting of high current income and moderate capital
appreciation by investing in diversified portfolio of equity and debt securities
of utility companies. Value's investment objective is long-term capital
appreciation with current income as a secondary objective.
NOTE 2 -- ACQUISITION INFORMATION
Effective January 1, 1996, First Fidelity Bancorporation ("First Fidelity")
merged with First Union National Bank of North Carolina ("First Union").
Effective on the close of business on January 19, 1996, Growth & Income acquired
substantially all of the net assets of FFB Lexicon Capital Appreciation Fund, an
open-end investment company registered under the Act valued at $159,432,723. The
net assets were exchanged through a non-taxable exchange for 8,631,861 Class Y
shares of Growth & Income valued at $18.47 per share. The acquired net assets
consisted primarily of portfolio securities with unrealized appreciation of
$31,537,903. The aggregate net assets of Growth & Income after the acquisition
were $375,936,243.
Effective on the close of business on January 19, 1996, Value acquired
substantially all of the net assets of FFB Lexicon Select Value Fund and FFB
Equity Fund open-end investment companies registered under the Act valued at
$95,883,824 and $14,077,973, respectively. The net assets of these Funds were
exchanged through a non-taxable exchange for 4,720,676 and 692,924 Class Y
shares of Value valued at $20.31 per share. The acquired net assets consisted
primarily of portfolio securities with unrealized appreciation of $12,858,729
and $2,218,691, respectively. The aggregate net assets of Value after the
acquisitions were $1,310,431,335.
In addition, on June 30, 1995, Value acquired substantially all of the net
assets of ABT Growth and Income Trust, an open-end investment company registered
under the Act valued at $63,356,435. The net assets were exchanged through a
non-taxable exchange for 3,289,535 of its Class A Shares of Value valued at
$19.26 per share. The acquired net assets consisted primarily of portfolio
securities with unrealized appreciation of $10,278,721. The aggregate net assets
of Value after the acquisition were $935,777,632.
On June 30, 1995, Utility acquired substantially all of the net assets of
ABT Utility Income Fund, Inc., an open-end investment company registered under
the Act valued at $99,162,259. The net assets were exchanged through a
non-taxable exchange for 10,160,068 Class A shares of Utility valued at $9.76
per share. The acquired net assets consisted primarily of portfolio securities
with unrealized appreciation of $6,321,522. The aggregate net assets of Utility
after the acquisition were $140,913,190.
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. These policies are
in conformity with generally accepted accounting principles.
SECURITY VALUATIONS -- Investments in securities traded on a national
securities exchange or included on the NASDAQ National Market System ("NMS") are
valued at the last reported sales price. Securities traded on an exchange or NMS
for which there has been no sale and securities traded in the over-the-counter
market are valued at the mean between the last reported bid and asked price.
Unlisted securities for which market quotations are not readily available are
valued at a price
40

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES -- continued
quoted by one or more brokers. Debt securities (other than short term
obligations) are valued on the basis of valuations provided by a pricing
service. Securities for which market quotations are not readily available are
valued at their respective fair value as determined in good faith by the
Trustees. Short-term investments are valued at amortized cost, which
approximates market value.
SECURITY TRANSACTIONS -- Security transactions are accounted for on the
date purchased or sold. Net realized gains or losses are determined on the
identified cost basis.
INVESTMENT INCOME AND EXPENSES -- Dividend income is recorded on the
ex-dividend date. Interest income and expenses are accrued daily.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the Federal Reserve Bank and are designated as being held
on each Fund's behalf by its custodian under a book-entry system. Each Fund
monitors the adequacy of the collateral on a daily basis, and can 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
adviser to be creditworthy pursuant to guidelines established by the Trustees.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are distributed monthly for Utility and quarterly for Growth & Income, Small Cap
and Value. Distributions from net realized capital gains on investments, if any,
will be distributed at least annually. Income and capital gain distributions are
determined in accordance with income tax regulations which may differ from
amounts available under generally accepted accounting principles. To the extent
these differences are permanent in nature, such amounts are reclassified within
the components of net assets.
INCOME TAXES -- It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable net income and net realized capital
gains to its shareholders. Accordingly, no provisions for Federal income or
excise taxes are necessary. 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.
Capital losses incurred after October 31 within a fund's fiscal year are
deemed to arise on the first business day of the following fiscal year for tax
purposes. In its prior fiscal year, Small Cap incurred had elected to defer such
capital losses of $11,493 to the current fiscal year.
ALLOCATION OF EXPENSES -- Expenses specifically identifiable to a class of
shares are charged to that class. Expenses common to a Trust as a whole are
allocated to the funds in that Trust. Investment income, net of expenses (other
than class specific expenses) and realized and unrealized gains and losses are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
UNAMORTIZED ORGANIZATION EXPENSES -- The expenses of Small Cap incurred in
connection with its organization are being deferred and amortized over a period
of benefit not to exceed five years from the date it commenced operations.
USE OF ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
41

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AGREEMENTS -- First Union is entitled to an annual fee
of .50 of 1% of Utility's and Value's average daily net assets pursuant to each
Fund's investment advisory agreement. First Union voluntarily waived $219,613 of
its fee for the six-month period ended June 30, 1996.
Pursuant to an agreement with Growth & Income's and Small Cap's investment
adviser, Evergreen Asset Management Corp. ("Evergreen Asset"), a wholly owned
subsidiary of First Union, Evergreen Asset is entitled to an annual fee based on
each of Growth & Income's and Small Cap's average daily net assets,
respectively, in accordance with the following schedule:
<TABLE>
<S> <C>
First $750 million 1.00%
Next $250 million 0.90%
Over $1 billion 0.80%
</TABLE>

Evergreen Asset has agreed to reimburse Small Cap to the extent that the
Fund's operating expenses (including the investment advisory fee and
amortization of organizational expenses but excluding interest, taxes, brokerage
commissions, 12b-1 distribution and shareholder services fees and extraordinary
expenses) exceed 1.50% of its average daily net assets until the Fund's net
assets reach $15 million. Evergreen Asset waived all of its advisory fee
aggregating $29,232 for the six-month period ended June 30, 1996, and reimbursed
other expenses amounting to $73,098. Additionally, for Growth & Income,
Evergreen Asset voluntarily waived $5,000 of its advisory fee. Evergreen Asset
can modify or terminate voluntary waivers at any time.
Lieber & Company, an affiliate of First Union, is the investment
sub-adviser to Growth & Income and Small Cap and also provides brokerage
services with respect to substantially all security transactions of these Funds
effected on the New York or American Stock Exchanges. For transactions executed
during the six-month period ended June 30, 1996, Growth & Income and Small Cap
incurred brokerage commissions of $219,497 and $6,004, respectively, with Lieber
& Company. Lieber & Company is reimbursed by Evergreen Asset, at no additional
expense to the Funds, for its cost of providing investment advisory services.
ADMINISTRATION AGREEMENT -- Evergreen Asset furnishes Growth & Income and
Small Cap with administrative services as part of their advisory agreements and
accordingly, these Funds do not pay a separate administration fee. Furman Selz
LLC ("Furman Selz") is each of the Fund's sub-administrator. As
sub-administrator, Furman Selz provides the officers of the Funds. For Growth &
Income and Small Cap, Furman Selz' fee is paid by Evergreen Asset and is not a
fund expense.
Evergreen Asset is also Utility's and Value's administrator and Furman Selz
is sub-administrator. Evergreen Asset's and Furman Selz' fees for Utility and
Value are based on the average daily net assets of all of the funds administered
by Evergreen Asset for which either First Union or Evergreen Asset is also the
investment adviser. These fees are calculated at the following annual rates:
<TABLE>
<CAPTION>
ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<C> <S>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% in excess of $30 billion
</TABLE>
42

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES -- continued
<TABLE>
<CAPTION>
SUB-ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
0.0100% on the first $7 billion
<C> <S>
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% in excess of $25 billion
</TABLE>

At June 30, 1996, assets for which Evergreen Asset was the administrator
for which either Evergreen Asset or First Union was investment adviser totalled
approximately $15.2 billion.
PLANS OF DISTRIBUTION -- The Funds have adopted for their Class A Shares,
Class B Shares, and Class C Shares, Distribution Plans (the "Plans") pursuant to
Rule 12b-1 under the Act (see note 5). Under the terms of the Plans, the Funds
may incur distribution-related and shareholder servicing expenses which may not
exceed an annual fee of .75 of 1% for Class A and an annual fee of 1% for Class
B and Class C Shares. For each of the Funds, the payments for Class A were
voluntarily limited to .25 of 1% of average daily net assets. Rule 12b-1 fees
are accrued daily and paid monthly.
In connection with their Plans, Growth & Income and Small Cap have entered
into distribution agreements with Evergreen Funds Distributor, Inc. ("EFD"), a
subsidiary of Furman Selz, whereby Growth & Income and Small Cap will compensate
EFD for its services at a rate which may not exceed an annual fee of .25 of 1%
of its Class A Shares average daily net assets and an annual fee of 1% of Class
B and Class C Share's average daily net assets. A portion of the payments for
Class B and C Shares, up to .25 of 1% may constitute a shareholder services fee.
EFD has entered into a Shareholder Services Agreement with First Union Brokerage
("FUBS"), an affiliate of First Union, whereby they will compensate FUBS for
certain services provided to shareholders and /or maintenance of shareholder
accounts relating to each of the Funds' Class B and Class C Shares.
In connection with their Plans, Utility and Value have entered into a
distribution agreement with EFD whereby they will compensate EFD for its
services at a rate which may not exceed an annual fee of .25 of 1% of Class A
average daily net assets and an annual fee of .75 of 1% of Class B and Class C
average daily net assets for certain services provided to Class B and C
shareholders. Utility and Value have entered into a Shareholder Services
Agreement with FUBS whereby they will compensate up to an annual fee of .25 of
1% of Class B and C average net assets for certain services provided to
shareholders.
SALES CHARGES -- EFD has advised the Funds that it has retained the
following amounts from front-end sales charges resulting from sales of Class A
Shares during the six-month period ended June 30, 1996:
<TABLE>
<CAPTION>
FRONT-END
SALES
CHARGES
<S> <C> <C>
Growth & Income $ 63,834
Small Cap 91
Utility 5,644
Value 32,824
</TABLE>

ORGANIZATIONAL EXPENSES -- Organizational expenses for Utility were
initially borne by the Fund's prior administrator. Utility agreed to reimburse
such expenses during the five-year period following its commencement of
operations. As a result of a change in the administration agreement, First Union
purchased the remaining unreimbursed organizational expenses from the prior
administrator. As of, and for the six-month period ending June 30, 1996, Utility
paid and has a remaining liability of $9,635 and $23,398, respectively.
43

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST
The Funds have an unlimited number of $0.0001 par value shares of
beneficial interest authorized. The shares are divided into classes which are
designated Class Y, Class A, Class B, and Class C shares. Class A shares are
sold with a front-end sales charge of up to 4.75%. Class B shares are sold with
a contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares seven years after the date of purchase. Class C shares
are sold with a contingent deferred sales charge of 1% during the first year
after the date of purchase. Class Y shares are sold without a sales charge and
are available only to investment advisory clients of 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. The classes have identical voting, dividend, liquidation and other rights,
except that Class A, Class B and Class C shares bear distribution expenses (see
Note 4) and have exclusive voting rights with respect to their distribution
plans.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED*
(UNAUDITED) DECEMBER 31, 1995
GROWTH & INCOME SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold..................................................... 1,736,896 $34,925,267 1,049,648 $ 17,981,665
Shares issued on reinvestment of distributions.................. 5,951 121,736 29,563 545,083
Shares redeemed................................................. (486,761) (9,870,314) (59,282) (1,048,468)
Net increase.................................................... 1,256,086 25,176,689 1,019,929 17,478,280
CLASS B
Shares sold..................................................... 3,390,332 67,521,075 2,516,682 43,094,733
Shares issued on reinvestment of distributions.................. 3,088 63,559 66,937 1,234,636
Shares redeemed................................................. (263,844) (5,250,289) (97,308) (1,763,506)
Net increase.................................................... 3,129,576 62,334,345 2,486,311 42,565,863
CLASS C
Shares sold..................................................... 118,139 2,364,980 106,185 1,808,328
Shares issued on reinvestment of distributions.................. 121 2,426 2,716 50,033
Shares redeemed................................................. (8,584) (170,269) (5,395) (96,507)
Net increase.................................................... 109,676 2,197,137 103,506 1,761,854
CLASS Y
Shares sold..................................................... 5,967,299 116,609,196 3,937,086 68,368,276
Shares issued in acquisition of FFB Lexicon Capital Appreciation
Fund.......................................................... 8,631,861 159,432,723 -- --
Shares issued on reinvestment of distributions.................. 58,153 1,186,038 211,697 3,882,512
Shares redeemed................................................. (5,138,415) (99,479,712) (1,658,100) (27,997,743)
Net increase.................................................... 9,518,898 177,748,245 2,490,683 44,253,045
Total net increase resulting from Fund share
transactions.................................................. 14,014,236 $267,456,416 6,100,429 $106,059,042
</TABLE>

* The Fund share activity for Class A, Class B and Class C shares reflect the
period from January 3, 1995 (commencement of class operations) through
December 31, 1995.
44

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995*
SMALL CAP SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold....................................................................... 12,440 $ 147,464 20,272 $ 210,173
Shares issued on reinvestment of distributions.................................... 504 6,004 1,218 13,667
Shares redeemed................................................................... (5,870) (69,414) (2,789) (30,712)
Net increase...................................................................... 7,074 84,054 18,701 193,128
CLASS B
Shares sold....................................................................... 10,392 122,019 24,055 248,049
Shares issued on reinvestment of distributions.................................... 558 6,647 1,305 14,752
Shares redeemed................................................................... (198) (2,350) (2,383) (26,158)
Net increase...................................................................... 10,752 126,316 22,977 236,643
CLASS C
Shares sold....................................................................... 1,083 12,741 1,928 19,533
Shares issued on reinvestment of distributions.................................... 41 485 116 1,317
Net increase...................................................................... 1,124 13,226 2,044 20,850
CLASS Y
Shares sold....................................................................... 82,966 982,751 93,274 973,677
Shares issued on reinvestment of distributions.................................... 8,501 101,361 25,655 285,901
Shares redeemed................................................................... (34,841) (413,280) (76,033) (807,281)
Net increase...................................................................... 56,626 670,832 42,896 452,297
Total net increase resulting from Fund share transactions......................... 75,576 $ 894,428 86,618 $ 902,918
</TABLE>

* For Class A and Class B shares, the Fund share transaction activity reflects
the period January 3, 1995, (commencement of class operations) through
December 31, 1995. For Class C shares, the Fund share transaction activity
reflects the period January 24, 1995, (commencement of class operations)
through December 31, 1995.
45

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
UTILITY SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold............................................................. 178,927 $1,916,453 190,219 $ 1,885,138
Shares issued in acquisition of ABT Utility
Income Fund, Inc...................................................... -- -- 10,160,068 99,162,259
Shares issued on reinvestment of distributions.......................... 141,166 1,498,089 505,736 5,335,896
Shares redeemed......................................................... (687,817) (7,321,624) (1,333,516) (13,551,249)
Net increase (decrease)................................................. (367,724) (3,907,082) 9,522,507 92,832,044
CLASS B
Shares sold............................................................. 540,256 5,818,061 506,602 4,989,454
Shares issued on reinvestment of distributions.......................... 45,868 487,199 222,027 2,287,981
Shares redeemed......................................................... (270,800) (2,871,850) (626,919) (6,110,450)
Net increase............................................................ 315,324 3,433,410 101,710 1,166,985
CLASS C
Shares sold............................................................. 18,162 194,124 10,650 109,078
Shares issued on reinvestment of distributions.......................... 446 4,723 1,497 15,571
Shares redeemed......................................................... (1,325) (13,911) (3,614) (37,152)
Net increase............................................................ 17,283 184,936 8,533 87,497
CLASS Y
Shares sold............................................................. 56,246 599,872 184,329 1,826,095
Shares issued on reinvestment of distributions.......................... 2,309 24,588 8,025 84,251
Shares redeemed......................................................... (67,187) (702,698) (49,697) (487,291)
Net increase (decrease)................................................. (8,632) (78,238) 142,657 1,423,055
Total net increase (decrease) resulting from Fund share transactions.... (43,749) $ (366,974) 9,775,407 $95,509,581
</TABLE>

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
VALUE SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold..................................................... 697,604 $ 14,871,521 628,945 $ 12,018,651
Shares issued in acquisition of ABT Growth and Income Trust..... -- -- 3,289,535 63,356,435
Shares issued on reinvestment of distributions.................. 153,528 3,297,182 883,572 17,771,730
Shares redeemed................................................. (892,280) (18,999,673) (1,863,758) (35,747,673)
Net increase (decrease)......................................... (41,148) (830,970) 2,938,294 57,399,143
CLASS B
Shares sold..................................................... 1,246,650 26,646,073 951,887 18,428,845
Shares issued on reinvestment of distributions.................. 56,285 1,209,128 394,396 7,933,916
Shares redeemed................................................. (380,583) (8,140,594) (723,565) (13,658,563)
Net increase.................................................... 922,352 19,714,607 622,718 12,704,198
CLASS C
Shares sold..................................................... 28,936 616,050 15,721 307,770
Shares issued on reinvestment of distributions.................. 424 9,110 2,274 45,762
Shares redeemed................................................. (10,207) (210,847) (7,532) (149,074)
Net increase.................................................... 19,153 414,313 10,463 204,458
CLASS Y
Shares sold..................................................... 6,090,530 129,821,873 14,762,272 278,777,942
Shares issued in acquisition of FFB Lexicon Select Value Fund... 4,720,676 95,883,824 -- --
Shares issued in acquisition of FFB Equity Fund................. 692,924 14,077,973 -- --
Shares issued on reinvestment of distributions.................. 377,245 8,106,474 2,044,972 40,900,972
Shares redeemed................................................. (7,739,024) (164,840,020) (10,121,343) (193,762,147)
Net increase.................................................... 4,142,351 83,050,124 6,685,901 125,916,767
Total net increase resulting from Fund share transactions....... 5,042,708 $ 102,348,074 10,257,376 $ 196,224,566
</TABLE>

NOTE 6 -- INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of investments, excluding
short-term securities for the six-month period ended June 30, 1996 were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Growth & Income..................... $ 86,678,092 $ 48,405,156
Small Cap........................... 2,604,675 1,465,790
Utility............................. 39,167,460 38,182,943
Value............................... 730,368,352 641,846,792
</TABLE>

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
NOTE 6 -- INVESTMENT TRANSACTIONS -- continued
On June 30, 1996, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost of investments
for federal tax purposes was as follows:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION NET TAX COST
<S> <C> <C> <C> <C>
Growth & Income....... $122,893,747 $ 6,463,582 $116,430,165 $ 404,180,897
Small Cap............. 951,316 101,352 849,964 5,557,482
Utility............... 21,305,285 2,570,336 18,734,949 132,347,906
Value................. 170,324,978 (29,370,923) 140,954,055 1,193,475,180
</TABLE>

<PAGE>
TRUSTEES AND OFFICERS
TRUSTEES:
Laurence B. Ashkin*
Foster Bam*
James S. Howell, Chairman
Robert J. Jeffries*+
Gerald M. McDonnell
Thomas L. McVerry
William W. Pettit
Russell A. Salton, III M.D.
Michael S. Scofield
OFFICERS:
John J. Pileggi
President and Treasurer
Joan V. Fiore
Secretary
Sheryl Hirschfeld
Assistant Secretary
Donald E. Brostrom
Assistant Treasurer
Stephen W. St. Clair
Assistant Treasurer
* Trustees for Growth & Income and Small Cap only.
+ Trustee Emeritus

<PAGE>

This brochure 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 Funds Distributor, Inc.
43882 Evergreen(SM) is a Service Mark of Evergreen Asset Management 539222
Corp. Copyright 1996, Evergreen Asset Management Corp. 8/96