Evergreen Keystone
Growth and
Income Funds
1997 Annual Report
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EVERGREEN KEYSTONE
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TABLE OF CONTENTS
Letter to Shareholders............................... 1
Evergreen Growth and Income Fund
Fund at a Glance................................... 2
Management Report.................................. 4
Evergreen Income and Growth Fund
Fund at a Glance................................... 6
Management Report.................................. 8
Evergreen Small Cap Equity Income Fund
Fund at a Glance................................... 10
Management Report.................................. 12
Evergreen Utility Fund
Fund at a Glance................................... 14
Management Report.................................. 16
Evergreen Value Fund
Fund at a Glance................................... 18
Management Report.................................. 20
Keystone Fund for Total Return
Fund at a Glance................................... 22
Management Report.................................. 24
Financial Highlights
Evergreen Growth and Income Fund................... 26
Evergreen Income and Growth Fund................... 29
Evergreen Small Cap Equity
Income Fund..................................... 32
Evergreen Utility Fund............................. 34
Evergreen Value Fund............................... 36
Keystone Fund for Total Return..................... 39
Schedule of Investments
Evergreen Growth and Income Fund................... 42
Evergreen Income and Growth Fund................... 46
Evergreen Small Cap Equity
Income Fund..................................... 51
Evergreen Utility Fund............................. 54
Evergreen Value Fund............................... 56
Keystone Fund for Total Return..................... 58
Statements of Assets and Liabilities................. 61
Statements of Operations............................. 62
Statements of Changes in Net Assets.................. 64
Combined Notes to Financial Statements............... 67
Independent Auditors' Report-- KPMG Peat Marwick
LLP................................................ 79
Report of Independent Accountants
Price Waterhouse LLP............................... 80
Federal Income Tax Status of Distributions........... 81
ABOUT EVERGREEN KEYSTONE
Since 1971, the Evergreen Funds have been providing investors with a proven,
value-driven approach to equity investment management. For over 60 years of
changing economic conditions, Keystone has taken pride in helping investors meet
their financial goals through a broad range of financial products and services.
Combined, Evergreen Keystone offers over 70 funds designed to meet a broad range
of objectives, including fixed-income, balanced, growth and income, and
aggressive growth. Assets under management total more than $30 billion.
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EVERGREEN KEYSTONE
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LETTER TO SHAREHOLDERS
September 1997
[Photo of William M. Ennis appears here]
WILLIAM M. ENNIS
Dear Shareholders:
Investors in equity-oriented mutual funds had a lot to be happy about in the
returns from the 12 months that ended on July 31.
As the Evergreen Keystone Fund reports on the following pages indicate, many of
the funds that emphasize investments in common stocks had an extraordinary year.
Some funds delivered total returns of more than 40%, and even extremely
conservative, income-oriented strategies produced returns exceeding 20%.
It is easy to see how the diversity of returns from these funds could invite
questions about why some funds appeared to do "better" than others. The answer
is not simple. While we have grouped six funds together under the general
category of "Growth and Income," each of these funds is managed very
differently, with different attitudes about growth, income, and protection of
investors' principal.
The 12 months from July 31, 1996 to July 31, 1997 were an especially rewarding
time for the biggest of the large capitalization stocks. Funds that emphasized
these stocks tended to excel in this environment. Funds that emphasized either
smaller capitalization stocks or income-oriented stocks tended to do less well.
More generally, funds that emphasized growth tended to have higher returns than
funds that emphasized income or protection of principal.
We should keep these returns in perspective. Over a full market cycle, different
strategies tend to do better at different times. No one strategy is perfect for
all conditions. This is why we offer a number of different strategies with
similar growth and income objectives. It also is why many financial advisers
recommend a combination of funds with different strategies so investors will
have a more diversified portfolio.
In evaluating fund performance, investors should consider the specific objective
of each fund, how much risk it is willing to take, and how well a fund's own
objective lines up with their personal objective. They also should consider that
a fund that trails in one type of market might be a leader in the next market.
This is why we at Evergreen Keystone believe it is important that mutual fund
investors periodically review their portfolios with their professional
investment advisers.
In the following pages, Evergreen Keystone investment professionals will give
you more detailed information about the investment environment and the
strategies they use. You will notice that this annual report is a departure from
past reports. It represents the effort of Evergreen Keystone Funds to provide
thoughtful reports and to present them in a format that is attractive and makes
information easily accessible. To accomplish this change, we have adjusted some
fiscal years of funds, and we have grouped together funds with similar
investment objectives. We are very interested in hearing your thoughts on this
new format, and we welcome your suggestions.
On another note, I am delighted to inform you that Evergreen Keystone has
successfully integrated all service functions under one roof. This means you now
have full exchange privileges between Evergreen and Keystone America Funds. You
also have the benefits of the top-flight service that earned Evergreen Keystone
the 1996 Dalbar Quality Tested Service Seal, the highest award for mutual fund
service presented by Dalbar, an independent mutual fund survey and rating firm.
Thank you for investing with Evergreen Keystone Funds!
Sincerely,
/s/ William M. Ennis
WILLIAM M. ENNIS
MANAGING DIRECTOR
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EVERGREEN
GROWTH AND INCOME FUND
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FUND-AT-A-GLANCE
As of July 31, 1997
ONE-YEAR PERFORMANCE CLASS A CLASS B CLASS C CLASS Y
One year w/o sales
charge 40.38 % 39.32 % 39.25 % 40.66 %
One year with sales
charge 33.71 % 34.32 % 38.25 % 40.66 %
One year dividends per
share $0.134 -- -- $0.191
One year cap gains per
share $0.345 $0.345 $0.345 $0.345
AVERAGE
ANNUAL RETURNS CLASS A CLASS B CLASS C CLASS Y
Three years N/A N/A N/A 26.41 %
Five years N/A N/A N/A 20.43 %
Ten years N/A N/A N/A 15.06 %
Since Inception* 28.25 % 29.00 % 29.80 % 15.59 %
CUMULATIVE RETURNS CLASS A CLASS B CLASS C CLASS Y
Seven months w/o sales
charge 21.33 % 20.82 % 20.82 % 21.52 %
Three years N/A N/A N/A 101.98 %
Five years N/A N/A N/A 153.30 %
Ten years N/A N/A N/A 306.73 %
Since Inception* 89.91 % 92.79 % 95.89 % 378.40 %
[Graph appears here]
* CLASSES A, B & C BEGAN 1/3/95; CLASS Y BEGAN 10/15/86.
PLOT POINTS
CLASS A: CPI: S&P 500: LG&IFA:
- ------- ----- ------ -------
9,525 10,000 10,000 10,000
9,663 10,040 10,259 10,157
11,754 10,187 12,417 12,061
12,969 10,314 14,202 13,504
13,489 10,488 14,472 13,643
16,155 10,629 17,964 16,532
18,939 10,719 22,013 19,665
PORTFOLIO MANAGEMENT
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<S> <C>
An investment team headed by Portfolio Managers
Stephen A. Lieber and Gary Buesser manages the
[2 photos appear Fund. Mr. Lieber is Chairman and Co-Chief
here - Stephen A. Lieber Executive Officer of Evergreen Asset Management
and Gary Buesser] Corp. The founder of Evergreen, Mr. Lieber has
more than 40 years' experience in investment
management. He has been a guest lecturer at the
Investment Banking Association Annual Wharton
School Seminars, the New School for Social
School of Commerce. He is a member of the New
York Society of Security Analysts and the
Association for Investment Management and
Research. He also serves as Portfolio Manager of
several other funds, including the Evergreen Fund
and the Evergreen Foundation Fund. Mr. Buesser
joined Evergreen Asset Management in 1996
following a 10-year career at Cowan Asset
Management, where he was co-manager of a $1.5
billion private investment fund. Earlier in his
investment career, he was employed by E.F. Hutton
and Shearson Lehman Bros. He also is associate
portfolio manager of the Evergreen Foundation
Fund.
</TABLE>
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EVERGREEN
GROWTH AND INCOME FUND
[G&I logo appears here]
OBJECTIVE
Evergreen Growth and Income Fund seeks a return composed of capital appreciation
and current income.
STRATEGY
The Fund invests in common stocks, convertible preferred stocks and convertible
bonds of companies it believes the market has temporarily undervalued. It
considers such factors as the company's assets, cash flow and earnings
potential. The Fund selects securities that Fund management believes will rise
in value sooner than most observers anticipate. Among those securities it
frequently purchases are those of previously successful companies undergoing
financial downturns, which the Fund believes will be temporary. The Fund invests
in bonds and preferred stocks that are not convertible if Fund management
believes the potential return is equal to that expected from common stocks and
convertible securities.
[Graph appears here. Plot points are:]
LONG-TERM GROWTH
Initial Dividend
-------- --------
9,525 9,525
9,663 9,663
10,699 10,722
11,709 11,754
11,828 11,886
12,543 12,969
13,336 13,800
13,008 13,489
14,196 14,743
15,298 16,155
15,324 16,207
17,882 18,991
TOP 10 STOCK HOLDINGS JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
% OF
NET
COMPANY INDUSTRY ASSETS
1. Webster Financial Corp. Thrift 1.9
Institutions
2. Reading & Bates Corp. Energy 1.9
3. Computer Associates International Business Equip. & 1.8
Services
4. Atlas Air, Inc. Transportation 1.7
5. Circle International Group Business Equip. & 1.6
Services
6. Pittston Brink's Group Industrial 1.5
Specialty Products
& Services
7. Gaylord Entertainment Co. Leisure & Tourism 1.4
8. Burlington Northern Santa Fe Transportation 1.4
9. Jacor Communications, Inc. Publishing, 1.4
Broadcasting &
Entertainment
10. Reynolds & Reynolds Co. Business Equip. & 1.3
Services
TOP 10 INDUSTRY ALLOCATIONS JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
% OF
NET
INDUSTRY ASSETS
1. Business Equipment & Services 11.4
2. Healthcare Products & Services 11.2
3. Publishing, Broadcasting & Entertainment 7.2
4. Energy 7.0
5. Electrical Equipment & Services 5.7
6. Industrial Specialty Products & Services 5.4
7. Transportation 5.2
8. Banks 4.7
9. Chemical & Agricultural Products 3.6
10. Finance & Insurance 3.4
PORTFOLIO CHARACTERISTICS
Total Net Assets (all classes) $1.35 billion
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EVERGREEN
GROWTH AND INCOME FUND
[G&I logo appears here]
MANAGEMENT REPORT
September 1997
Dear Fellow Shareholders:
We are pleased to report on the Evergreen Growth and Income Fund for the fiscal
period that ended on July 31, 1997.
PERFORMANCE
We believe your Fund performed very well in an unusual environment,
characterized by periods of short-term volatility occurring within a remarkably
resilient, longer-term bull market. During the 12-month period, for example, the
total return on Class Y shares was 40.66%. During the seven months since the
previous fiscal year ended on December 31, 1996 (the fiscal year has been
changed so it now ends each July 31), the total return on Class Y Shares was
21.52%. A complete review of the performance of each class of shares can be
found on page 2.
The Fund's investment team maintained its discipline of searching for value
among growth companies, employing the "value timing strategy" of buying growth
stocks when the overall market is not paying a premium for growth. This
discipline has been used consistently since the Fund's inception in 1986 as the
Evergreen Value Timing Fund. A team of analysts and managers implements this
strategy by searching for new investment opportunities among growth stocks which
are temporarily out of favor because of either industry or company factors. We
believe this strategy is a comparatively low risk approach to growth stock
investing, and has resulted in a relatively consistent record of strong
performance. The Fund's Y share class, the oldest class, ranks in the top 10% of
all Growth and Income Funds (ninth of 127) for the past 10 years, according to
Lipper Analytical Services, Inc., an independent monitor of mutual fund
performance. Morningstar, an independent monitor of mutual fund performance, has
given the Fund's Y shares a four-star rating for its risk-adjusted performance
through July 31, 1997. The rating reflects historical, risk-adjusted
performance, and is based on comparisons of 2,040 equity funds, using
Morningstar's proprietary rating system. Funds that fall within the top 32.5% of
the Morningstar rating system receive four stars.
ENVIRONMENT
The seven months since the last fiscal year end constituted, in general, a
period of impressive performance in the overall stock market. An environment of
moderate economic growth, stable to declining interest rates, constrained
inflation and rising corporate profits contributed to a feeling of confidence in
the market. Within this seven-month period, we had one excellent opportunity to
buy growth stocks as very attractive valuations occurred in late March and early
April, when concern about a possible over-heating economy and the possibility of
rising interest rates caused stock prices to retreat temporarily.
PORTFOLIO HIGHLIGHTS
During the seven-month period, the strong returns of portfolio stocks in the
technology, healthcare and banking industries led the Fund's performance. For
the seven months between January 1 and July 31, 1997, the healthcare products
and services industry, which had an 11.2% allocation in the portfolio at the end
of the fiscal year, had an asset-weighted average return of 34.1%. The
electrical equipment and services industry, which had a 5.7% allocation in the
Fund on July 31, on an asset-weighted basis had an average return of 36.6%. On
the same asset-weighted basis, banks, which had a 4.7% portfolio weighting, had
an average return of 35.5%. As the accompanying table indicates, other sectors
which contributed to your Fund's performance included building, construction and
furnishings, consumer products, and finance and insurance.
INDUSTRIES LEADING PERFORMANCE
(Asset-weighted*, December 31, 1996-July 31, 1997)
INDUSTRY AVERAGE % GAIN
Thrifts 47.6%
Building, Construction & Furnishings 42.4
Electrical Equipment & Services 36.6
Banks 35.5
Healthcare Products & Services 34.1
Entertainment, Publishing, Broadcasting 28.4
Finance & Insurance 26.6
Transportation 25.4
Consumer Products & Services 24.8
* Asset-weighted returns are based on average returns of stocks in industries,
adjusted proportionate to the size of investment in the portfolio.
PERFORMANCE OF STOCKS
Basic to the strategy of the Evergreen Growth and Income Fund is the search for
good growth companies to buy when they are temporarily selling at less than
their intrinsic value, as determined by Evergreen's fundamental research and
analysis.
During the seven months that ended on July 31, the top performing company in the
portfolio was Applied Materials, Inc., which had a 155.4% return for the seven
months. This was followed by: Compuware Corp., with a 148.2% return; Unitrode
Corp., with a 105.2%
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EVERGREEN
GROWTH AND INCOME FUND
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return, and Warner-Lambert Co, with an 85.7% return. Completing the list of top
10 performing portfolio stocks were: Evergreen Media Corp., Class A, with a
83.6% return; Lam Research Corp., with a 76.3% return; State Street Corp., with
a 73.7% return; KLA-Tencor Corp., with a 70.4% return; Dallas Semiconductor
Corp., with a 69.7% return; and Schering-Plough Corp., with a 68.2% return.
Clearly, not all portfolio holdings were winners during the period. The worst
performing stock in the portfolio for the seven months was Aspect
Telecommunications Corp., which lost 33.2%. This was followed by: 3Com
Corporation, which lost 25.3%; Fresenius National Medical Care Holdings, Inc.,
Preferred, Class D, which lost 24.8%; Reynolds & Reynolds Co., Class A, which
lost 22.1%; and Sensormatic Electronics Corp., which lost 18.2%.
While these stock holdings lost ground during the period, their losses tended to
be significantly smaller than the gains of the leading companies. This
demonstrates the value of diversification of risk. It also reflects the fact
that not all stocks perform well at the same time. We continue to believe in the
long-term value of the companies that did not fare well during the seven-month
period.
RECENT FUND PURCHASES
During the period, your Fund made a number of purchases of the stocks of
companies that we believe were attractive opportunities, but were experiencing
some short-term price weakness, which enhanced their relative value.
The largest purchase was of Reading & Bates Corp., a major offshore oil and
gas-drilling operator. We believe this company, which contracts its drilling
rigs for oil and gas exploration worldwide, has the potential to benefit from an
increase in demand for drilling equipment, particularly in the Gulf of Mexico.
At the close of the fiscal period, Reading & Bates was the Fund's second largest
holding. We believe a very recent acquisition to the Fund's portfolio,
Transocean Offshore, Inc., should benefit from the same trend.
The second largest acquisition was of Atlas Air, Inc., a major factor in the
relatively small industry of outsourced air transport operations. This company
leases its fleet of 17 Boeing 747s to larger air carriers for freight transport.
Your Fund purchased shares in February, after the stock showed weakness because
of company problems in controlling maintenance expenses of several older planes.
We believe these problems will recede as the company purchases newer, more
efficient aircraft. At the close of the period, Atlas Air was the fourth largest
holding.
Other major acquisitions were of stock of: Computer Associates International,
Inc., a major provider of computer mainframe software services for business
applications that the Fund purchased in December 1996; and Reynolds & Reynolds,
Co., a major producer of business forms. Reynolds & Reynolds is a long-term
holding in which we added to our position.
PORTFOLIO MANAGEMENT
At the close of the fiscal year, the portfolio management team of your Fund was
changed as Portfolio Manager Edmund H. Nicklin has decided to leave Evergreen
Asset Management. The team now will be headed by Stephen A. Lieber, the Chairman
and Founder of Evergreen Asset Management, and Gary Buesser, a veteran
investment manager who joined Evergreen in 1996 following a successful career as
an institutional manager.
In the future, the Evergreen Growth and Income Fund will be managed very much as
it has been in the past. The Fund is an outgrowth of Evergreen's "value timing
strategy," which has been used in portfolios since the 1970s. The fundamental
goal of this strategy is to buy growth on a value basis. We have sought to
select growth opportunities at times when the markets are not paying a premium
for the growth. This means that we buy issues during periods of either market
uncertainty, where values are under pressure, or at times in specific companies
and industries where the investment community is not attaching growth values to
opportunities and business franchises which, we think, have the potential to
develop important capital gains. As an organization, we have refined these
strategies over many years, teaching our securities analysts and portfolio
managers the approach, and having them all work together to build the power of
this investment idea.
The same Evergreen research team that has supported the management of your Fund
will continue in operation and shareholders can expect continuity in the
approach that has built an outstanding, long-term record.
We thank you for your investment in Evergreen Growth and Income Fund.
Sincerely,
/s/ Stephen A. Lieber
STEPHEN A. LIEBER
CHAIRMAN
Evergreen Asset Management Corp.
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EVERGREEN
INCOME AND GROWTH FUND
[I&G logo appears here]
FUND-AT-A-GLANCE
As of July 31, 1997
ONE-YEAR PERFORMANCE CLASS A CLASS B CLASS C CLASS Y
One year w/o sales
charge 28.34 % 27.40 % 27.37 % 28.70 %
One year with sales
charge 22.24 % 22.40 % 26.37 % 28.70 %
One year dividends per
share $1.05 $0.91 $0.91 $ 1.09
AVERAGE
ANNUAL RETURNS CLASS A CLASS B CLASS C CLASS Y
Three years N/A N/A N/A 16.58 %
Five years N/A N/A N/A 11.99 %
Ten years N/A N/A N/A 9.54 %
Since Inception* 17.65 % 18.13 % 19.00 % 14.58 %
CUMULATIVE RETURNS CLASS A CLASS B CLASS C CLASS Y
Six months w/o sales
charge 12.45 % 12.06 % 12.06 % 12.65 %
Three years N/A N/A N/A 58.43 %
Five years N/A N/A N/A 76.12 %
Ten years N/A N/A N/A 148.70 %
Since Inception* 52.04 % 53.66 % 56.59 % 1,215.46 %
* CLASSES A, B AND C BEGAN 1/3/95; CLASS Y BEGAN 8/31/78.
[Graph appears here]
PLOT POINTS
CLASS A: CPI: WILSHIRE 5000: LIFA: LEIFA:
- ------- ----- -------------- ------- -------
9,525 10,000 10,000 10,000 10,000
9,665 10,040 10,200 10,157 10,179
11,001 10,187 12,249 11,462 11,815
11,925 10,314 13,681 12,609 13,280
11,889 10,488 13,758 12,583 13,438
13,569 10,629 16,685 14,167 15,866
15,204 10,719 19,891 15,827 18,727
PORTFOLIO MANAGER
Nola Maddox Falcone, President of Evergreen Asset Management
[Photo of Corporation, has been Portfolio Manager of Evergreen Income
Nola Falcone and Growth Fund since its inception. Before joining Evergreen
will appear in 1974 as a Senior Portfolio Manager, Mrs. Falcone was an
here] investment analyst and a personal trust officer at Chase
Manhattan Bank. She is a member of the New York Society of
Security Analysts and the Association for Investment
Management and Research. Mrs. Falcone is a graduate of Duke
University and earned her M.B.A. from the Wharton Graduate
School of Business.
6
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EVERGREEN
INCOME AND GROWTH FUND
[I&G logo appears here]
OBJECTIVE
The Evergreen Income and Growth Fund seeks current income and long-term growth
of capital.
STRATEGY
The Fund emphasizes securities that pay regular dividends in a strategy which
seeks both to provide current income and to act as a buffer or protection
against market fluctuations. The Fund also seeks to protect investors' principal
by diversifying investments across a spectrum of industries and by investing in
different types of securities. The Fund invests in common stocks, convertible
preferred stocks, and convertible bonds.
LONG-TERM GROWTH
[Graph appears here]
PLOT POINTS
Initial Dividend
-------- --------
9,525 9,525
9,665 9,665
10,056 10,203
10,683 11,001
10,588 11,045
11,276 11,925
11,337 12,135
10,962 11,889
11,578 12,709
12,198 13,569
11,790 13,264
13,390 15,204
TOP 10 HOLDINGS JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
% OF
NET
COMPANY INDUSTRY ASSETS
1. Long Island Lighting Electric Utilities 3.0
2. PP&L Resources, Inc. Electric Utilities 3.0
3. Wendy's Convertible Preferred Food & Beverage 2.5
Products
4. Public Service Enterprise Electric Utilities 2.4
5. AirTouch Communications Communications 2.3
Systems & Services
6. National Australia Bank, Ltd. Banks 2.0
7. Philippine Long Distance Tel Utilities 2.0
8. First Hawaiian Banks 1.9
9. Australia & New Zealand Banking Banks 1.8
10. Commonwealth Bank of Australia Banks 1.8
TOP 10 INDUSTRY ALLOCATIONS JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
% OF
NET
INDUSTRY ASSETS
1. Banks 18.9
2. Electric Utilities 15.4
3. Energy 8.3
4. Real Estate 6.3
5. Chemical & Agricultural Products 4.0
6. Finance & Insurance 3.9
7. Healthcare Products & Services 3.6
8. Food & Beverage Products 2.9
9. Transportation 2.6
10. Electrical Equipment & Service 2.5
PORTFOLIO CHARACTERISTICS
Total Net Assets (all classes) $956.5 million
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EVERGREEN
INCOME AND GROWTH FUND
[I&G logo appears here]
MANAGEMENT REPORT
September 1997
Dear Fellow Shareholders:
We are pleased to report on the Evergreen Income and Growth Fund for the fiscal
period that ended on July 31, 1997.
INCOME-FOCUSED STRATEGY
Evergreen Income and Growth Fund delivered strong performance during the past
year as it sought to provide a sizeable current income flow and competitive
growth. During the 12-month period that ended on July 31, for example, the
Fund's Y Shares had a total return of 28.70%, while paying a total of $1.09 per
share in quarterly dividend distributions. This performance put the Fund's Y
shares in the top quintile of the 53 funds in the Income Fund category of Lipper
Analytical Services, Inc., a leading independent monitor of mutual fund
performance. At the same time, the Fund's income distributions were in the top
quartile of the same Lipper category. A complete review of the perfomance of
each class of shares can be found on page 6.
The Fund achieved this performance by following the same, income-oriented
strategy that has been applied since the Fund began operations under its
original name of Evergreen Total Return Fund on August 31, 1978. We believe this
strategy has worked well, delivering an average annual return of 14.58% for the
Y share class, the oldest share class, since inception. This long-term record
has earned the Fund an "A" ranking for risk-adjusted performance over the past
10 years from the independent magazine "Mutual Fund Forecaster," as of June
1997. It has achieved this distinction by managing risk carefully. For example,
the Fund's beta on Y Shares has been a relatively low .7 since inception. Beta
is a measure of the risk of a fund's portfolio, illustrating the volatility of
the net asset value per share of a fund compared to the market as a whole, as
represented by the S&P 500 Index, which has a beta of 1.0. A beta of less than
one indicates that a fund's net asset value has fluctuated less than the stock
market, as measured by the S&P 500.
The Evergreen Income and Growth Fund is intended as an inflation-hedging
substitute for bond investing. It seeks its objective of current income by
focusing on the stock market's yield sector. The Fund seeks to provide growth by
investing in undervalued issues. We believe this strategy is appropriate for
conservative, or risk-averse investors, including shareholders with trusts,
retirees or those preparing to retire, and income-oriented investors who desire
inflation protection.
INVESTMENT THEMES
During the fiscal period, the Fund has emphasized five themes in pursuit of its
objective:
(Bullet) Stocks of companies that are potential merger and acquisition
candidates;
(Bullet) Stocks of companies that are restructuring;
(Bullet) The stocks of companies that are increasing their dividends;
(Bullet) Convertibles, including preferred stock and debt issues;
(Bullet) Foreign stocks that offer both income and price appreciation potential.
ASSET ALLOCATION JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
[Pie chart appears below with the following data]
U.S. Common Stocks 54.9%
Convertible Preferred Stocks 19.7%
Foreign Stocks 18.1%
Convertible Bonds 5.9%
Cash Equivalents 1.4%
PORTFOLIO ALLOCATIONS ARE SUBJECT TO CHANGE.
MERGERS AND ACQUISITIONS
Your Fund consistently has sought opportunities from the merger and acquisition
trend by searching for undervalued stocks in companies that are undergoing
consolidations. Since the Fund's inception, a total of 110 portfolio companies
have been involved in mergers and acquisitions. In 1997 alone, seven portfolio
companies have been involved in announced mergers or acquisitions, with two of
the seven transactions completed. We believe mergers and acquisitions will
continue to be a major trend in the marketplace. During the first seven months
of 1997, an average of 22 merger and acquisition transactions was completed each
week. Small regional banks have particularly benefited from the merger trend.
Jefferson Bancshares, one portfolio company, has had an acquisition offer by
Wachovia which we project would provide a gain for the portfolio of 177%, upon
completion, from its original purchase on September 5, 1991. Utilities, which
traditionally have been a major component of your Fund's strategy because of
their attractive yields, also are undergoing industry consolidation in a new era
of deregulation. The Fund's largest holding, Long Island Lighting, is the
beneficiary of a proposed merger with Brooklyn Union Gas. This transaction, if
completed, would provide a projected
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EVERGREEN
INCOME AND GROWTH FUND
[I&G logo appears here]
gain for the Fund of more than 25% since the original purchase in November,
1996.
RESTRUCTURING
Your Fund also has looked for opportunities among companies that are
restructuring themselves to refocus their attention on their most profitable
activities or to operate more efficiently. Restructuring companies in which the
Fund has invested include: Du Pont (E.I.) De Nemours & Co., the well known
chemical company that recently has appointed a new management team with stock
incentives; Rhone-Poulenc Rorer, Inc., a healthcare and pharmaceutical company;
and Consolidated Natural Gas, a traditional natural gas company which has been
successful in Gulf of Mexico exploration.
INCREASING DIVIDENDS
By emphasizing companies which are increasing their dividends, we are investing
in companies that are confident about their ability to generate earnings growth
to pay their dividends. Of the issues in the portfolio on July 31, 1997, 50% are
of companies that have increased their dividends within the past year.
CONVERTIBLES (PREFERRED AND DEBT ISSUES)
Investments in convertibles give the Fund the opportunity to buy growth
companies, whose stocks ordinarily do not pay significant dividends, and still
obtain some yield. At the close of the fiscal period, 19.7% of the portfolio was
invested in convertible preferred stock, and another 5.9% was invested in
convertible debentures. Three examples of this "buy growth with yield" strategy
were Fund investments in: Key Energy Group convertible debentures, which had a
44.5% return in the last six months of the fiscal period; convertible
subordinated notes of Photronics Inc., a manufacturer of photomasks used in the
production of integrated circuits; and convertible preferred shares of Wendy's,
the fast-food chain.
FOREIGN STOCKS
During the fiscal period, your Fund has increased its emphasis on foreign stocks
from 12.6% of net assets to 18.1%. We found some foreign companies that not only
offer very attractive yields, but also the prospects of substantial capital
appreciation because of relative undervaluation from the benefits of
restructuring or deregulation changes. Among the Fund's foreign holdings were
several Australian banking stocks, which benefited from both declines in
interest rates and the deregulation of banking in Australia. In addition, these
stocks paid very attractive dividends. Examples of Australian banking issues in
which the Fund has invested include National Australian Bank Ltd., Commonwealth
Installment Receipts, Australia & New Zealand Bank Group, Inc., and Westpac
Banking Corp. Ltd.
LEADING SECTORS
The banking, thrift, finance, insurance and health stocks led your Fund's total
return performance. Utility and convertible issues contributed to the yield
strategy, but held back performance on a total return basis. Utility stocks were
adversely affected by deregulation, while convertible issues lagged many of the
other indices in the market. During the past year, a momentum-driven stock
market has rewarded the strong growth issues without yields, but your Fund has
continued its long-term strategy of emphasizing the yield sector. We believe
this strategy should provide good downside protection in the event of a market
correction or slump in addition to strong income returns.
OUTLOOK
We maintain a generally positive outlook for the stock market. We believe the
market's extraordinary rally is liquidity-driven, propelled in part by strong
inflows into equity mutual funds. In July 1997, for example, an estimated $23
billion was invested in stock mutual funds, the second highest total of the year
in what is normally a slow month for cash flows to mutual funds.
Healthy economic growth, low inflation, and strong corporate profits have
supported the equity rally, which has helped to attract these assets. In fact,
62% of U.S. Companies surveyed by the Wall Street Journal reported
stronger-than-expected profits for the second quarter of 1997.
A NOTE OF CAUTION
While we are optimistic, we do approach the future with a degree of caution,
primarily because of the possibility that high levels of employment potentially
could trigger increased inflation. As our team of 17 equity analysts/portfolio
managers meets with company executives, we are hearing increasing reports that
companies are straining to find all the employees they need, and that they often
are paying more than they planned to attract new employees.
Given this outlook, we believe it is particularly appropriate to remain with the
defensive strategy that has been the hallmark of your Fund and to continue to
manage the Fund to seek current income and protection of investors' principal.
Thank you for your investment in Evergreen Income and Growth Fund.
Sincerely,
/s/ Nola M. Falcone
NOLA MADDOX FALCONE
PRESIDENT
Evergreen Asset Management Corp.
9
<PAGE>
EVERGREEN
SMALL CAP EQUITY INCOME FUND
[Small Cap Equity Income Fund logo appears here]
FUND-AT-A-GLANCE
As of July 31, 1997
ONE-YEAR PERFORMANCE CLASS A CLASS B CLASS C CLASS Y
One year w/o sales
charge 42.86 % 41.69 % 40.71 % 43.24 %
One year with sales
charge 36.08 % 36.69 % 41.71 % 43.24 %
One year dividends per
share $0.308 $0.228 $0.216 $0.339
One year cap gains per
share $0.513 $0.513 $0.513 $0.513
AVERAGE
ANNUAL RETURNS CLASS A CLASS B CLASS C CLASS Y
Three years N/A N/A N/A 24.71 %
Since Inception* 26.18 % 26.83 % 27.76 % 18.98 %
CUMULATIVE RETURNS CLASS A CLASS B CLASS C CLASS Y
Seven months w/o sales
charge 20.99 % 20.37 % 20.30 % 21.09 %
Three years N/A N/A N/A 93.96 %
Since Inception* 82.13 % 84.56 % 85.43 % 94.79 %
* CLASSES A & B BEGAN 1/3/95; CLASS C BEGAN 1/24/95;
CLASS Y BEGAN 10/1/93.
[Graph appears here. Plot points are as follows:]
PLOT POINTS
CLASS A: CPI: NASDAQ: RUSSELL 2000:
- -------- -------- -------- ----------
9,525 10,000 10,000 10,000
9,564 10,040 10,043 9,874
10,915 10,187 13,316 12,100
12,292 10,314 14,095 12,831
12,669 10,488 14,372 12,942
15,280 10,629 16,567 15,269
18,213 10,719 19,181 17,266
PORTFOLIO MANAGER
Nola Maddox Falcone, President of Evergreen Asset Management
[Photo of Corporation, has been Portfolio Manager of Evergreen Small Cap
Nola Falcone Equity Income Fund since its inception. Before joining
appears here] Evergreen in 1974 as a Senior Portfolio Manager, Mrs. Falcone
was an investment analyst and a personal trust officer at
Chase Manhattan Bank. She is a member of the New York Society
of Security Analysts and the Association for Investment
Management and Research. Mrs. Falcone is a graduate of Duke
University and earned her M.B.A. from the Wharton Graduate
School of Business. She is assisted in the management of the
Fund by Eric K. Cinnamond.
10
<PAGE>
EVERGREEN
SMALL CAP EQUITY INCOME FUND
[Small Cap Equity Income Fund logo appears here]
OBJECTIVE
Evergreen Small Cap Equity Income Fund seeks a total return consisting of
current income and growth of capital.
STRATEGY
The Fund seeks to invest in small growth companies that have higher than average
yields. The companies in the portfolio typically have market capitalizations of
less than $500 million. In seeking its objective, the Fund seeks to invest in
entrepreneurial businesses that may grow faster than the economy as a whole
because they offer niche products or unique services. The Fund looks for
companies whose cash flows allow them both to reinvest profits for growth and to
pay dividends.
LONG-TERM GROWTH
[Graph appears here]
PLOT POINTS
Initial Dividend
-------- --------
9,525 9,525
9,564 9,564
10,016 10,164
10,674 10,915
11,234 11,592
11,391 12,292
11,626 12,732
11,479 12,669
12,481 13,868
13,139 15,280
13,060 15,275
15,407 18,213
TOP 10 HOLDINGS JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
% OF
NET
COMPANY INDUSTRY ASSETS
1. Hvide Marine Convertible Transportation 3.2
Preferred
2. Hardinge Brothers Inc. Diversified 3.1
Machinery
3. Gorman Rupp Industrial 2.8
Specialty Products
& Services
4. Oneida, Ltd. Consumer Products & 2.6
Services
5. Photronics Convertible Electrical Equip. & 2.2
Preferred Services
6. Matthews International Corp. Diversified 2.2
Companies
7. Penn Virginia Corp. Energy 2.1
8. Curtiss Wright Corp. Aerospace & Defense 1.9
9. Worthington Industries, Inc. Industrial 1.8
Specialty Products
& Services
10. La-Z-Boy Chair Co. Building, 1.8
Construction &
Furnishings
TOP 10 INDUSTRY ALLOCATIONS JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
% OF
NET
INDUSTRY ASSETS
1. Banks 12.6
2. Industrial Specialty Products & Services 12.0
3. Gas Utilities 6.5
4. Real Estate 6.3
5. Energy 5.7
6. Thrift Institutions 5.2
7. Food & Beverage Products 4.8
8. Electrical Equipment & Services 4.4
9. Finance & Insurance 4.3
10. Consumer Products & Services 3.8
PORTFOLIO CHARACTERISTICS
Total Net Assets (all classes) $58.8 million
Average market capitalization $249 million
11
<PAGE>
EVERGREEN
SMALL CAP EQUITY INCOME FUND
[Small Cap Equity Income Fund logo appears here]
MANAGEMENT REPORT
September 1997
Dear Fellow Shareholders:
We are pleased to report on the Evergreen Small Cap Equity Income Fund for the
fiscal period that ended on July 31, 1997.
PERFORMANCE
The Evergreen Small Cap Equity Income Fund delivered extremely strong
performance during the past fiscal year as it continued to apply its
value-oriented discipline. This discipline emphasizes investments in
entrepreneurial companies that have the financial health to generate both growth
and investment income. For the one-year period, Class Y share class had a total
return of 43.24%. A complete review of the performance of each class of shares
can be found on page 10.
Your Fund's consistent strategy, which has been followed since the Fund's
inception with Class Y Shares on October 1, 1993, has resulted in performance
which has been recognized for its attractive returns on a risk-adjusted basis.
Morningstar, an independent monitor of mutual fund performance, has given the
Fund's Class Y Shares a five-star rating, the highest rating, for its risk-
adjusted performance through July 31, 1997. The rating reflects historical,
risk-adjusted performance, and is based on comparisons of 2,040 equity funds,
using Morningstar's proprietary rating system. Funds that fall within the top
10% of the Morningstar rating system receive five stars. In addition, Barron's
ranked the fund #19 of all mutual funds on a risk-adjusted basis, based on
performance over the past three and five years, in its July 21, 1997 issue.
Since the Fund's inception, the Fund's Class Y Shares have had a relatively low
beta of .73, while delivering average annual returns of 18.98%. Beta is a
measure of the market risk of a fund's portfolio, illustrating the volatility of
the net asset value per share of a fund compared by the market as a whole, as
represented by the S&P 500 Index, which has a beta of 1. A beta of less than one
indicates that a fund has fluctuated less than the stock market, as measured by
the S&P 500.
The Fund's holdings in banks, finance, insurance, thrift institutions and
consumer products aided performance. Convertibles and holdings in the utilities
industry supported the Fund's income strategy, although they held back
performance on a total return basis.
AN EMPHASIS ON VALUE
Your Fund adheres to a value-oriented style in seeking growth from buying small,
entrepreneurial companies that have the financial strength and stability to pay
dividends. The emphasis is on fundamental company analysis and stock selection.
This style, in addition to seeking growth, is intended to provide defensive
protection in
ASSET ALLOCATION JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
[Pie chart appears below with the following data:]
Common Stocks 75.3%
Convertible Bonds 11.2%
Convertible Preferred Stocks 7.5%
Cash 6.0%
PORTFOLIO ALLOCATIONS ARE SUBJECT TO CHANGE
down markets by emphasizing securities of small companies that we believe are
undervalued relative to stock market price/earnings average multiples, asset
values or takeover multiples. We also look for companies that have a history of
dividend increases. In buying securities that offer yield with growth, your Fund
also looks for opportunities among convertible preferred stock and convertible
debentures, which together accounted for 18.7% of the portfolio at the close of
the fiscal period.
In our search for attractive values, we try to find companies that, in our
analysis, have intrinsic value exceeding that recognized by their stock prices.
In doing so, we also look for companies that have a potential catalyst that can
spark their stock performance. Among the potential catalysts that can influence
stock performance are restructurings, management changes or industry
consolidation. We often look for "value timing" opportunities. By this, we mean,
investments in the stocks of companies that we believe may be temporarily
depressed, perhaps because of one disappointing earnings announcement or some
other temporary factor. If we believe the underlying fundamentals of the company
are favorable, we may buy the stock as a "value timing" play.
INVESTMENT THEMES
During the fiscal period, the Fund has emphasized five investment themes:
(Bullet) The stocks of attractively valued companies that are in consolidating
industries and therefore may be merger and acquisition candidates;
(Bullet) Deeply undervalued stocks;
(Bullet) Securities of companies that are restructuring;
(Bullet) Energy companies; and
(Bullet) Technology companies.
12
<PAGE>
EVERGREEN
SMALL CAP EQUITY INCOME FUND
[Small Cap Equity Income Fund logo appears here]
MERGERS AND ACQUISITIONS
Since the Fund began investment operations, it has looked for value in
industries that are undergoing consolidation and in which merger and
acquisitions are occurring. We believe mergers and acquisitions are now a major
trend in the economy. For example, in the first seven months of 1997, an average
of 22 mergers or acquisitions was completed each week. During the fiscal period,
we have been alert for opportunities in consolidating industries, including
regional banks, gas utilities, and industrial pump and process control
companies.
Banking and thrifts comprise your Fund's largest industry sector, representing
approximately 16.4% of the Fund's net assets. Since the Fund began investment
operations in 1993, three banks in the portfolio have been acquired and a bank
and a thrift are pending acquisitions. In June, Liberty Bancorp was taken over
by Bank One, realizing for your Fund a gain of 23% on its Liberty Bancorp
holding since the stock was acquired in December 1996. Recently another
portfolio company, People's Savings Financial Corp., has been the subject of an
acquisition proposal from Webster Financial Corp. Year-to-date, the stock of
People's Savings had risen 54.4% in 1997.
We also have witnessed a strong movement toward consolidation in the industrial
pump and process control industries. Among portfolio companies, Gould's Pumps
has been acquired for a gain of 56.1% and BW/IP Holdings Inc. has merged with
Durco International to form Flowserve Corp.
UNDERVALUED STOCKS
Our proprietary research by Evergreen analysts often finds companies whose
stocks are extremely undervalued and yet represent growth opportunities. One
example is the Fund's investment in Matthews International Corporation, whose
stock has gained 35.8% in 1997 through July 31. This company, which manufactures
memorial plaques for the funeral industry, has had a strong earnings record and
currently has a stock buyback program.
RESTRUCTURINGS
Frequently, we look for companies that are improving their business through
restructuring. One excellent example in the portfolio is Oneida Limited, which
recently has sold its underperforming wire subsidiary to concentrate on its
profitable and well known flatware business, in which it manufactures and
distributes knives, forks and other tableware. Another portfolio company that
has benefited from restructuring is Piccadilly Cafeterias, Inc., which installed
a new management team and improved margins and operating earnings in its
restaurant and food service business considerably during the past year.
ENERGY COMPANIES
The strong growth trend of oil and gas exploration has created demand for
support products or services. In fact, the largest holding at the end of the
fiscal period, Hvide Marine, exemplifies the opportunities presented in this
sector. This company operates boats that service the offshore oil rigs in the
Gulf of Mexico. We have participated in the growth of this company's business
through our purchase of convertible preferred stock. Another major holding is
Penn Virginia, which is a stock selling as a discount to our asset value
calculations. This company holds 1.1 million shares of Norfolk Southern common
stock and significant coal and gas reserves.
TECHNOLOGY COMPANIES
Your Fund has participated in opportunities in electronics and technology. This
sector has had a key role in the improving productivity of American industry.
Among major holdings are Photronics Inc., convertible subordinate notes.
Photronics manufactures photomasks used in the integrated circuit or electronic
manufacturing process. Another is Curtiss Wright Corporation, which produces
aircraft components for the aerospace industry, which is growing strongly.
OUTLOOK
We maintain a generally positive outlook for the stock market. We believe the
market's extraordinary rally is liquidity-driven, propelled in part by strong
inflows into equity mutual funds. In July 1997, for example, an estimated $23
billion was invested in stock mutual funds, the second highest total of the year
in what is normally a slow month for cash flows to mutual funds. Healthy
economic growth, low inflation and strong corporate profits have supported the
equity rally.
TEAM APPROACH
Your Fund's management team continues to rely heavily on the independent
research and investment ideas of Evergreen Asset Management's team of 17 equity
analysts/portfolio managers. The investment ideas generated by this team are
critically important in the stock selection discipline of your Fund, which
emphasizes "bottoms up" company research in our search for investment value. One
of these analysts, Eric K. Cinnamond, also plays an important role in working
with the portfolio manager in managing the overall portfolio.
Thank you for your investment in Evergreen Small Cap Equity Income Fund.
Sincerely,
/s/ Nola M. Falcone
NOLA MADDOX FALCONE
PRESIDENT
Evergreen Asset Management Corp.
13
<PAGE>
EVERGREEN
UTILITY FUND
[Utility fund logo appears here]
FUND-AT-A-GLANCE
As of July 31, 1997
ONE-YEAR PERFORMANCE CLASS A CLASS B CLASS C CLASS Y
One year w/o sales
charge 21.33 % 20.42 % 20.42 % 21.45 %
One year with sales
charge 15.56 % 15.42 % 19.42 % 21.45 %
One year dividends per
share $0.419 $0.340 $0.340 $0.443
One year cap gains per
share $0.278 $0.278 $0.278 $0.278
AVERAGE
ANNUAL RETURNS CLASS A CLASS B CLASS C CLASS Y
Three years 12.23 % 12.43 % N/A 14.32 %
Since Inception* 8.95 % 9.00 % 13.55 % 12.58 %
CUMULATIVE RETURNS** CLASS A CLASS B CLASS C CLASS Y
Seven months w/o sales
charge 10.72 % 10.21 % 10.21 % 10.85 %
Three years 41.37 % 42.11 % N/A 49.39 %
Since Inception* 35.87 % 36.11 % 44.84 % 50.06 %
* CLASSES A & B BEGAN 1/4/94; CLASS C BEGAN 9/2/94;
CLASS Y BEGAN 2/28/94.
[Graph appears here]
PLOT POINTS
CLASS A: CPI S&P 500 S&P UTILITIES:
- ------- ----- ------ --------------
9,525 10,000 10,000 10,000
9,554 10,027 10,340 10,063
9,154 10,178 9,979 9,455
9,380 10,308 10,394 9,894
10,180 10,460 12,580 10,812
11,979 10,590 14,389 13,210
11,198 10,768 14,662 12,204
12,574 10,913 18,201 13,509
13,587 11,006 22,303 14,058
PORTFOLIO MANAGEMENT
<TABLE>
<S> <C>
Paul A. DiLella and Doris A. Kelley-Watkins are
Co-Managers of the Evergreen Utility Fund. Mr.
[Photos of Paul A. DiLella has more than 15 years of investment
DiLella and Doris research experience, and also is responsible for
A. Kelley-Watkins research and analysis of electric utility and
appear here] natural gas distribution companies. Ms.
Kelley-Watkins has more than 20 years' experience
in analysis of the utility industry. She also
serves as an analyst for the utility and
telecommunication sectors. Co-Manager of the Fund
previously was a Utility Industry Specialist at
Merrill Lynch's Research Department.
</TABLE>
14
<PAGE>
EVERGREEN
UTILITY FUND
[Utility fund logo appears here]
OBJECTIVE
The Evergreen Utility Fund seeks a return consisting of high current income and
moderate capital appreciation.
STRATEGY
The Fund invests at least 65% of assets in the stocks and bonds of utility
companies that derive at least 50% of their revenue from the gas, electric and
telecommunications industries. When selecting utility company stocks, Fund
management considers the company's earnings and dividend potential in the
context of current developments in that company's industry. The Fund may invest
the remainder of its assets in the common stocks of companies not primarily
involved in utility, or in U.S. government bonds, foreign securities, American
Depository Receipts and the securities of other investment companies.
LONG-TERM GROWTH
[Graph appears here]
PLOT POINTS
Initial Dividend
-------- --------
9,525 9,525
9,515 9,554
8,915 9,062
8,896 9,154
8,820 9,181
8,906 9,380
9,068 9,661
9,449 10,180
9,935 10,942
10,449 11,979
9,982 11,551
9,592 11,198
10,087 11,888
10,287 13,587
TOP 10 STOCK HOLDINGS JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
% OF
NET
COMPANY ASSETS
1. Duke Energy Corp. 3.5
2. Nokia Corp. 3.3
3. Public Service Co. of Colorado 3.2
4. Enron Corp. 3.1
5. Ford Motor Co. 3.1
6. AirTouch Communications, Inc. 3.0
7. NICOR Inc. 2.9
8. U.S. West Communications Group, Inc. 2.9
9. MCN Financing III 2.9
10. FPL Group, Inc. 2.9
INDUSTRY ALLOCATIONS JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
% OF
NET
INDUSTRY ASSETS
1. Electric Utilities 49.9
2. Telephone Utilities 24.8
3. Gas Utilities 8.6
4. Oil 4.3
5. Telecommunications Service & Equipment 3.3
6. Natural Gas 3.2
7. Automotive Equipment & Manufacturing 3.1
8. Publishing, Broadcasting & Entertainment 2.5
PORTFOLIO CHARACTERISTICS
Total Net Assets (all classes) $130.4 million
15
<PAGE>
EVERGREEN
UTILITY FUND
[Utility fund logo appears here]
MANAGEMENT REPORT
September 1997
Dear Shareholders:
We are pleased to report to you on the Evergreen Utility Fund for the fiscal
period that ended July 31, 1997.
PERFORMANCE
The Evergreen Utility Fund, aided by a strong performance by the overall stock
market, returned a strong 21.45% for Class Y Shares during the twelve-month
period ending July 31. For the seven-month period since the last fiscal year
ended on December 31, 1996, the Fund's Class Y Shares had a return of 10.85%.
The Fund kept pace with the performance of the utility sector, but
underperformed the extraordinary returns of the broad market. A complete review
of the performance of each class of shares can be found on page 14.
INVESTMENT ENVIRONMENT
The fiscal period ending July 31 witnessed a strong economy that provided the
backdrop for an extremely positive environment for equity investors. The
combination of solid economic growth with very little inflationary pressure
allowed interest rates to remain relatively low, supplying investors with extra
fuel to power the bull market in stocks. The only significant jolt the stock
market faced was during March, as rumors of a Federal Reserve-induced interest
rate hike circulated throughout the market, causing stocks to experience a
slight correction. Investors shrugged off any further inflationary fears
following the Federal Reserve Board's 0.25% increase in the Fed Funds rate on
March 25, and stocks resumed their powerful upward climb.
The environment within the utility sector has differed significantly from that
of the broad market. Whereas the S&P 500 Index returned an exceptional 52.14%
for the 12-month period, the S&P Utilities Index had a modest, but respectable
total return of 15.20%. Utility companies, traditionally, have been viewed as a
more stable and defensive equity holding. However, because the overall market
has provided exceptional gains over the past couple of years, traditional
utility investors have fled this sector in search of more attractive returns,
regardless of the perceived risk factor.
CHANGE WITHIN THE UTILITY INDUSTRY
One factor contributing to the utility sector's relative underperformance is the
uncertainty caused by the transformation and restructuring taking place within
the industry. Electric and utility companies are in the early stages of a
transition toward increased competition, less regulation and increased
volatility in their sales and share prices. Consolidation has permeated the
industry, resulting in a considerable increase in the number of mergers over the
past couple of years. We anticipate this trend may continue as utility companies
view mergers as an important defense as they seek to achieve economies of scale,
gain market share and diversify their source for earnings growth.
INVESTMENT STRATEGY
Identifying the potential pitfalls and current volatility in the utility sector
allows us to formulate an effective strategy in dealing with the industry's
transformation. We will continue to focus on the following strategies in an
effort to maximize shareholder's returns in the coming quarters.
1. Avoid the "minefields" within the industry. As we have mentioned,
electric utility companies are operating in a climate of uncertainty and
volatility as states attempt to manage the transition from monopoly
regulation to a competitive market. As managers of the Fund, it is our
primary duty to avoid those companies whose share prices will languish
within this environment. Our management style dictates careful analysis of
the industry's ongoing change and the regulatory and political impact on
shareholder interest.
16
<PAGE>
EVERGREEN
UTILITY FUND
[Utility fund logo appears here]
2. Identify attractive income opportunities. It is paramount to not only
invest in quality companies, but also to focus on increasing the Fund's
current yield. By maximizing the portfolio's income element, it will
ultimately improve the total return for shareholders.
3. Carefully analyze the utility subsectors. Constant analysis of the
utility industry is vital to identify specific trends and opportunities
within the subsectors. Consistent with this strategy, we have slightly
decreased our exposure to the telephone sector. In addition, we have
increased our weighting in the electric utility area as our analysis
indicated an improved valuation for this subsector.
4. Diversify the portfolio through the addition of quality non-utility
companies. We recognize the fact that although the Fund represents an
investment in the utility sector, there are several opportunities outside
the industry that can be capitalized upon to enhance performance.
Consistent with this philosophy, holdings such as Dow Chemical, Computer
Associates, RJR Reynolds, Phillip Morris and the Ford Motor Company all
made a positive impact on returns throughout the fiscal year.
ACTIVE MANAGEMENT STYLE
Our objective is to manage the portfolio using a research-intensive, active
style of management. A primary example of the responsive management style is
illustrated by the Fund's current investments in Duke Energy Corporation and The
AES Corporation. Both of these holdings have provided solid returns, but there
are significant differences between these two utility companies. Duke Energy had
been a traditional, "all-American" utility company, which sold and distributed
electric energy. AES Corp., conversely, represents the "new breed" of energy
company. It is more diversified, offering customers not only electricity, but
also energy planning and consulting services.
The earlier contrast between the two companies illustrated the changes within
the industry as well as the type of management style that is necessary to
thrive. Today, electric utilities no longer offer only electric power.
Traditional utility companies can still offer strong returns, but a definite
change is taking place in the utility environment. In 1997 for example, Duke
Energy completed its merger with one of the country's leading natural gas
transmission companies, transforming itself into a diversified, global,
non-traditional energy company. As fund managers, it is important, therefore,
for us to identify the underlying trends and integrate an active, responsive
management style, which identifies companies that are best able to survive in
this era of change.
OUTLOOK
At this point, the utility sector's valuation relative to the overall market is
extremely attractive. In addition, we feel the stock market's historically high
valuation level increases the likelihood of a correction. If the market does
experience a correction, we feel the Evergreen Utility Fund is positioned to
benefit as investors shift their focus to defensive-oriented investment options
in an effort to escape the broad market decline. In addition, we will continue
to adhere to our current strategies, which provide investors a diversified, high
income portfolio with defensive characteristics.
Thank you for your investment in Evergreen Utility Fund.
Sincerely,
/s/ Paul A. DiLella
PAUL A. DILELLA
CO-PORTFOLIO MANAGER
/s/ Doris Kelley-Watkins
DORIS A. KELLEY-WATKINS
CO-PORTFOLIO MANAGER
17
<PAGE>
EVERGREEN
VALUE FUND
[Value Fund logo appears here]
FUND-AT-A-GLANCE
As of July 31, 1997
ONE-YEAR PERFORMANCE CLASS A CLASS B CLASS C CLASS Y
One year w/o sales
charge 42.44 % 41.20 % 41.24 % 42.58 %
One year with sales
charge 35.47 % 36.20 % 40.24 % 42.58 %
One year dividends per
share $0.356 $0.192 $0.191 $0.413
One year cap gains per
share $3.339 $3.339 $3.339 $3.339
AVERAGE
ANNUAL RETURNS CLASS A CLASS B CLASS C CLASS Y
Three years 21.60 % 22.04 % N/A 23.89 %
Five years 15.86 % N/A N/A 17.32
Ten years 12.37 % N/A N/A N/A
Since Inception* 14.42 % 16.82 % 22.25 % 17.96 %
CUMULATIVE RETURNS CLASS A CLASS B CLASS C CLASS Y
Seven months w/o sales
charge 20.78 % 20.23 % 20.25 % 20.93 %
Three years 79.80 % 81.76 % N/A 90.17 %
Five years 108.74 % N/A N/A 122.29 %
Ten years 221.12 % N/A N/A N/A
Since Inception* 425.19 % 101.19 % 79.59 % 196.62 %
* CLASS A BEGAN 4/12/85; CLASS B BEGAN 2/2/93;
CLASS C BEGAN 9/2/94; CLASS Y BEGAN 1/3/91.
[Graph appears here]
PLOT POINTS
CLASS A: CPI S&P 500
- ------- ----- ------
9,525 10,000 10,000
8,896 10,399 8,824
11,176 10,934 11,458
11,903 11,461 11,672
13,528 11,971 13,159
14,397 12,349 14,839
16,297 12,690 16,110
16,817 13,042 16,960
19,155 13,403 21,381
22,402 13,797 24,920
32,182 14,102 37,905
PORTFOLIO MANAGER
David C. Francis, C.F.A., Chief Investment Officer,
[Photo of Institutional, for First Union Capital Management Group, is
David C. Portfolio Management Team Leader for the Evergreen Value Fund.
Francis Mr. Francis is an investment professional with more than 17
appears here] years of equity analysis and management. He joined First Union
from Federated Investment Counseling, a division of Federated
Investors, Pittsburgh, where he managed equities for employee
benefit and tax-exempt separate accounts and mutual funds.
18
<PAGE>
EVERGREEN
VALUE FUND
[Value Fund logo appears here]
OBJECTIVE
Evergreen Value Fund seeks long-term capital appreciation, with current income
as a secondary objective.
STRATEGY
The Fund normally invests at least 75% of its assets in the stocks of U.S.
companies with prospects for earnings growth and dividends. These companies have
minimum capitalizations of $100 million. The Fund also may invest in foreign
securities, American Depository Receipts and investment quality bonds.
LONG-TERM GROWTH
[Graph appears here]
PLOT POINTS
Initial Dividend
-------- --------
9,525 9,525
8,143 8,497
9,965 11,222
9,760 11,884
10,498 13,239
10,851 14,653
10,870 15,827
11,000 17,012
12,246 20,452
12,655 22,579
15,270 32,112
TOP 10 STOCK HOLDINGS JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
% OF
NET
COMPANY INDUSTRY ASSETS
1. Nokia Corp. Telecommunication 3.0
Services & Equip.
2. Tyco International Limited Diversified 2.9
Companies
3. General Electric Co. Diversified 2.6
Companies
4. General Mills, Inc. Food & Beverage 2.4
Products
5. Bristol-Myers Squibb Co. Healthcare Products 2.4
& Services
6. Tosco Corp. Energy 2.3
7. CoreStates Financial Corp. Banks 2.3
8. Tenet Healthcare Corp. Healthcare Products 2.2
& Services
9. Philip Morris Companies Consumer Products & 2.2
Services
10. Williams Companies, Inc. Oil 2.1
TOP 10 INDUSTRY ALLOCATIONS JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
% OF
NET
INDUSTRY ASSETS
1. Banks 16.3
2. Diversified Companies 11.7
3. Energy 10.1
4. Utilities 7.7
5. Healthcare Products & Services 7.5
6. Oil 6.6
7. Food & Beverage Products 5.3
8. Electrical Equipment & Services 4.8
9. Transportation 3.4
10. Telecommunication Services & Equip. 3.0
PORTFOLIO CHARACTERISTICS
Total Net Assets (all classes) $1.82 billion
19
<PAGE>
EVERGREEN
VALUE FUND
[Value Fund logo appears here]
MANAGEMENT REPORT
September 1997
Dear Shareholders:
We are pleased to report to you on the Evergreen Value Fund for the fiscal
period that ended July 31, 1997.
PERFORMANCE
The Evergreen Value Fund provided strong performance during the period. For
example, the Fund's Class Y Shares had a total return of 42.58% for the 12
months that ended on July 31, a period characterized by a positive environment
for equities that particularly rewarded the large cap, blue-chip companies
emphasized by your Fund. A complete review of the performance of each class of
shares can be found on page 18.
INVESTMENT ENVIRONMENT
The investment and economic environment during the fiscal period proved very
rewarding for investors. The U.S. economy witnessed phenomenal growth and,
surprisingly, did so without experiencing signs of inflationary pressure.
However, despite few overt signs of inflation, persistent economic growth
prompted the Federal Reserve Board, in a "pre-emptive strike" at inflation, to
increase interest rates by 0.25% on March 25. This Fed-induced rate hike-- the
only Federal Reserve action during the twelve months-- startled investors,
resulting in a short-lived decline in equities before they resumed their upward
ascent. Interest rates, despite some short-term swings, remained relatively low
and stable over the course of the fiscal year, providing more fuel to power the
equity rally.
Strong economic growth, low inflation and low interest rates set the stage for
the equity market's impressive advance. The stock market's powerful rally
featured larger "blue chip" companies, which outperformed their smaller
counterparts. Equities' narrow advance was most evident during the first three
months of 1997, as the broad market experienced modest gains versus the negative
returns for small cap stocks. Since that period, small- and mid-capitalized
stocks have provided excellent returns, and have gained some ground on their
larger counterparts. However, over the 12-month period, larger capitalization
stocks have been the best performers.
INVESTMENT STRATEGY
Throughout the period, the Evergreen Value Fund emphasized large-sized,
market-leading companies that have proven records of earnings growth. Consistent
with a traditional "value" fund, many of the holdings' share prices reflect
statistical measures of value. Such securities may be undervalued due to market
decline, poor economic conditions, actual or anticipated problems, or, simply,
lack of market attention.
Within the current market environment in which stocks, as a whole, have been bid
up to all-time highs and valuation levels that are inflated, it is increasingly
difficult to find companies which are undervalued. This investment environment
dictates that we remain focused on our "bottom-up" stock selection process,
which concentrates on analyzing security fundamentals rather than broad economic
forecasts.
FINANCE
The Fund's largest sector weighting, at approximately 19%, is the financial
sector. Within this group, banks have rebounded from the early 1990s, a period
in which many financial institutions were crippled by bad loans. Financial
companies (banks in particular) have ridden a wave of mergers, low interest
rates and productivity-enhancing technology to outstanding gains. The Fund's
bank holdings include Central Fidelity Banks, Union Planters, Citicorp and
NationsBank, all of which returned over 65% for the fiscal period. Financial
companies have provided investors handsome returns over the past three years,
and have done so with less volatility than other sectors. Going forward, the
fundamental outlook for the industry remains attractive, especially if interest
rates and inflation remain at their current benign levels.
TECHNOLOGY
The technology sector is among the best performing industries over the past two
years, although its advance over the past year has been somewhat narrow. A
relatively small number of spectacular performers such as
20
<PAGE>
EVERGREEN
VALUE FUND
[Value Fund logo appears here]
Intel and Microsoft are largely responsible for the excellent overall
performance in the sector. Despite a mild correction in the first quarter of
1997, technology stocks have continued their powerful advance. Despite any
short-term volatility, we anticipate this trend to continue. The fundamental
outlook for technology-related companies remains positive as companies seek to
increase their productivity through technological improvements. Currently, close
to half of all capital spending is technology-related. The Fund's performance
during the fiscal period was enhanced by particularly strong technology
holdings such as Teradyne, Intel and IBM, which returned 245%, 145% and 98%,
respectively.
UTILITIES
Utilities comprise the Fund's third largest sector weighting. Within this
sector, the portfolio is buoyed by such holdings as Houston Industries and
Illinova Corporation. A strong utility exposure bolsters the Fund in two
specific ways. First, because utility companies tend to be high dividend-paying
companies, our utility weighting tends to increase the Fund's current yield.
Second, utilities provide the portfolio a somewhat defensive posture, as these
companies possess characteristics that allow them to better endure a market
downturn.
OUTLOOK
The outstanding performance of equities over the past couple of years can be
attributed to increased efficiency as well as a very favorable economic
environment. Companies have experienced surging profits as a direct result of
cost-cutting initiatives and productivity gains through technological
enhancements. In addition, a very cooperative economy, which has provided solid
growth, low interest rates and low inflation, has contributed to a stock market
that has doubled over the past three years.
The top individual performers during the fiscal period consisted primarily of
large, industry-leading companies, specifically, those within the financial and
technology industries. We expect these sectors to remain strongly represented in
the coming quarters, as their fundamental outlooks remain very favorable. In
addition we intend to maintain a strong representation of large,
industry-leading companies such as General Electric, Bristol-Myers, Philip
Morris and General Mills, which we believe have the potential to improve the
Fund's relative performance.
In light of the dramatic market performance over the past couple of years, we
approach the remainder of 1997 with a degree of caution. Judging from its
expensive valuation levels, the stock market's upside potential appears to be
limited. At this stage of a market cycle, a correction in equity prices is not
uncommon. Although painful, a correction would reduce stock valuations to more
reasonable levels. Should a market correction occur, we would view it as a
buying opportunity.
Thank you for your investment in Evergreen Value Fund.
Sincerely,
/s/ David C. Francis
DAVID C. FRANCIS
PORTFOLIO MANAGEMENT TEAM LEADER
Evergreen Value Fund
21
<PAGE>
KEYSTONE
FUND FOR TOTAL RETURN
[Fund for Total Return logo appears here]
FUND-AT-A-GLANCE
As of July 31, 1997
ONE-YEAR PERFORMANCE CLASS A CLASS B CLASS C CLASS Y
One year w/o sales
charge 43.66 % 42.44 % 42.58 % N/A
One year with sales
charge 36.84 % 37.44 % 41.58 % N/A
One year dividends per
share $0.275 $0.141 $0.141 $0.155
One year cap gains per
share $0.330 $0.330 $0.330 N/A
AVERAGE
ANNUAL RETURNS CLASS A CLASS B CLASS C CLASS Y
Three years 22.15 % 22.47 % 23.17 % N/A
Five years 16.32 % N/A N/A N/A
Ten years 12.40 % N/A N/A N/A
Since Inception* 12.72 % 16.33 % 16.61 % N/A
CUMULATIVE RETURNS CLASS A CLASS B CLASS C CLASS Y
Eight months w/o sales
charge 20.40 % 19.68 % 19.73 % N/A
Three years 82.28 % 83.69 % 86.87 % N/A
Five years 112.92 % N/A N/A N/A
Ten years 221.82 % N/A N/A N/A
Since Inception* 243.38 % 97.49 % 99.66 % 17.72 %
CLASS A BEGAN 2/13/87; CLASSES B & C BEGAN 2/1/93; CLASS Y BEGAN 1/13/97.
[Graph appears here]
PLOT POINTS
CLASS A: CPI S&P 500
- ------- ----- ------
9,525 10,000 10,000
8,497 10,399 8,824
11,222 10,934 11,458
11,884 11,461 11,672
13,239 11,971 13,159
14,653 12,349 14,839
15,827 12,690 16,110
17,012 13,042 16,960
20,452 13,403 21,381
22,579 13,797 24,920
32,112 14,102 37,905
PORTFOLIO MANAGER
Walter T. McCormick, a Senior Vice President and Chief
Investment Officer, Growth and Income, at Keystone Investment
[Photo of Management Company, has been Portfolio Manager of Keystone
Walter T. Fund for Total Return since the Fund's inception. He also is
McCormick Portfolio Manager of Keystone Balanced Fund (K-1). A chartered
appears here] financial analyst with more than 25 years of investment
management experience, Mr. McCormick is a graduate of
Providence College and earned a M.B.A. at Rutgers University.
22
<PAGE>
KEYSTONE
FUND FOR TOTAL RETURN
[Fund for Total Return logo appears here]
OBJECTIVE
Keystone Fund for Total Return seeks total return through a combination of
growth of capital and income.
STRATEGY
The Fund invests primarily in U.S. common stocks, but also may invest in other
securities, including convertible securities, bonds and foreign stocks in an
effort to provide consistent returns with less price volatility. At the core of
the portfolio are U.S. companies with total market capitalizations of more than
$5 billion. However, the Fund also may invest in mid- or small-cap companies.
LONG-TERM GROWTH
[Graph appears here]
PLOT POINTS
Initial Dividend
-------- --------
9,525 9,525
8,409 8,896
10,078 11,176
9,873 11,903
10,819 13,528
11,025 14,397
11,721 16,297
10,953 16,817
12,194 19,155
13,310 22,402
18,470 32,182
TOP 10 STOCK HOLDINGS JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
% OF
NET
STOCK INDUSTRY ASSETS
1. General Electric Co. Capital Goods 3.0
2. Bristol-Myers Squibb Co. Healthcare Products 2.9
& Services
3. Philip Morris Companies, Inc. Consumer Products & 2.1
Services
4. American Home Products Corp. Healthcare Products 2.0
& Services
5. Motorola, Inc. Electrical Equip. & 2.0
Services
6. International Business Business Equipment & 1.9
Machines Services
7. BMC Software Business Equipment & 1.8
Services
8. Texas Instruments Electrical Equip. & 1.8
Services
9. Tyco International Ltd. Diversified 1.7
Companies
10. Northern Telecom Ltd. Telecommunication 1.6
Services & Equip.
TOP 10 INDUSTRY ALLOCATIONS JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
% OF
NET
INDUSTRY ASSETS
1. Finance & Insurance 8.7
2. Electrical Equipment & Services 8.1
3. Business Equipment & Services 7.5
4. Real Estate 7.4
5. Healthcare Products & Services 7.2
6. Consumer Products & Services 6.0
7. Oil 5.8
8. Diversified Companies 5.2
9. Telecommunication Services & Equip. 5.1
10. Chemical & Agricultural Products 4.6
PORTFOLIO CHARACTERISTICS
Total Net Assets (all classes) $163.3 million
23
<PAGE>
KEYSTONE
FUND FOR TOTAL RETURN
[Fund for Total Return logo appears here]
MANAGEMENT REPORT
September 1997
Dear Shareholders:
We are pleased to report on the Keystone Fund for Total Return for the fiscal
period that ended on July 31, 1997.
PERFORMANCE
The Keystone Fund for Total Return delivered exceptionally strong returns
through the period, reflecting good stock selection and the very positive
investment environment that has helped to propel the stock market to record
highs. In this positive environment, the market leaders tended to be stocks of
the large capitalization, dividend-paying companies that your Fund normally
emphasizes. A complete review of the performance of each class of shares can be
found on page 22.
ENVIRONMENT
The 12-month period that ended on July 31, especially the final eight months,
provided an extremely supportive investment environment for stocks in general,
and large company stocks in particular. In general, the economy in the United
States grew at a steady pace, with inflation well under control. Interest rates,
despite some short-term fluctuations, showed relative stability when looked at
over longer periods of time. Rates remained sufficiently low to provide
liquidity to the bull market for stocks.
The economy showed very strong growth during the final two quarters of 1996,
giving impetus to the stock markets. In early 1997, this momentum stalled
somewhat beginning in February amid concerns that economic growth might be
overheating and set off a round of inflation. This led to the anticipation that
the Federal Reserve Board might step in to pre-empt inflation by limiting
liquidity through increases in short-term interest rates. In fact, the Federal
Reserve Board did raise rates by one-quarter of one percent in late March, and
this did cause a pull-back in the stock market in March and April. This
pull-back, however, turned out to be a temporary pause in a longer-term upward
trend. In hindsight, the March-April downturn probably was healthy, reducing
some of the excess speculation from the stock market. Subsequently, as new
reports gave evidence that economic growth was slowing during the second quarter
of 1997 and that inflation was not becoming a problem, interest rates began
falling. The bull market in stocks resumed and the stock market hit a succession
of new highs in the spring and summer of 1997.
ASSET ALLOCATION JULY 31, 1997
AS A PERCENTAGE OF NET ASSETS
[Pie chart appears below with the following data:]
Common Stocks 88.2%
Convertible Preferred Stocks 5.4%
Short-term Investments & other assets 3.6%
Convertible Debentures 2.8%
PORTFOLIO ALLOCATIONS ARE SUBJECT TO CHANGE.
LARGE CAP LEADERS
Throughout this period, the large capitalization, U.S. companies that usually
are emphasized by your Fund were the market leaders. Many of these companies
have made significant capital investments during the past decade, especially in
technology, which have increased their productivity and improved their
competitive standing in the global markets. At the same time, many companies
also have undergone restructurings and cost-cutting, which have had similar
effects on their productivity and competitive positions. The result is that U.S.
industry has become more competitive on a worldwide basis, and many American
companies have become world leaders.
INVESTMENT STRATEGY
Throughout the period, your Fund has maintained its relatively conservative
approach to equity investing, concentrating on the stocks of large companies
with proven records of consistent earnings growth and market leadership.
Throughout the period, the Fund has emphasized several industries, including
finance and insurance, real estate trusts, healthcare products and services and
technology. In the final two months of the period, the Fund also has increased
its emphasis on technology companies, including electronics companies, office
equipment companies and software companies.
24
<PAGE>
KEYSTONE
FUND FOR TOTAL RETURN
[Fund for Total Return logo appears here]
REAL ESTATE TRUSTS
One of the distinctive areas of emphasis in your Fund during the past year has
been its position in real estate investment trusts. These investments, which
usually provide good yield as well as the opportunity for price appreciation,
have performed extremely well in a very strong market for real estate,
particularly commercial and office properties. While we have taken some profits
and reduced the Fund's exposure to real estate somewhat in recent months, the
Fund's position still remains significant at 7.4% of net assets.
FINANCE AND INSURANCE
The general financial area, including banks, insurance and other financial
service companies, has been the largest area of emphasis, at 12.0% of assets.
These industries have tended to do well in the environment of moderate growth
and low inflation. Significant holdings during the past year have been
BankAmerica Corp., BankBoston Corp., Chase Manhattan Corp., the Student Loan
Marketing Association (Sallie Mae), and The Travelers Group.
HEALTHCARE PRODUCTS AND SERVICES
The pharmaceutical area was another major area of emphasis, at more than 7% of
net assets at the end of the fiscal period. This area rebounded strongly after
the correction in the market during March and April, and we increased our
emphasis when we saw attractive relative values. We have favored pharmaceutical
companies with strong product pipelines, or the ability to develop and introduce
successive new products over time. Holdings include American Home Products,
Johnson & Johnson and Bristol-Myers.
TECHNOLOGY
As the stock market showed new strength in the late spring and early summer, we
increased our emphasis on technology stocks in general when we saw attractive
values. We increased Fund holdings in IBM and Motorola, both of which have had
strong comebacks, and added Microsoft, the world's dominant software company, to
the portfolio. We also have positions in Intel and Texas Instruments.
Many of these companies are benefiting from the very strong demand for personal
computers, which we expect to continue. In our portfolio, we have tended to
emphasize companies that we believe will be leading players in the personal
computer market.
OUTLOOK
As we enter the second half of 1997, we find ourselves in one of the most
positive investment environments in memory, with moderate economic growth,
stable-to-falling interest rates, high and rising corporate profits, liquidity
in the markets and low inflation. In addition, investors continue to put money
into the equity markets, feeding strong demand for stocks in general. The stocks
that have benefited the most from this phenomenon have been the stocks that have
produced the most impressive returns over the past three years-- the large
capitalization, blue chip stocks that are an important part of your Fund's
investment strategy.
We believe that as long as inflation remains under control, interest rates can
remain relatively stable and the favorable environment for stocks can continue.
A word of caution is in order, however. The extraordinarily positive environment
for stock investing cannot continue indefinitely, and we believe mutual fund
investors should moderate their expectations about future returns. In
particular, they should not expect a repeat of the extremely impressive returns
of the past 12 months. Moreover, it would not be unusual if at some point the
market experiences a major correction in stock prices. These corrections, while
very painful when they occur, are normal events in market cycles. Investors
experiencing them should remind themselves of their long-term objectives and not
be overly influenced by short-term events.
We thank you for your support of Keystone Fund for Total Return.
Sincerely,
/s/ Albert H. Elfner, III
ALBERT H. ELFNER, III
CHAIRMAN
Keystone Investment Management Company
/s/ Walter T. McCormick
WALTER T. MCCORMICK
SENIOR VICE PRESIDENT
Chief Investment Officer, Growth and Income
25
<PAGE>
EVERGREEN
GROWTH AND INCOME FUND
[G&I logo appears here]
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR ENDED DECEMBER
ENDED 31,
JULY 31, 1997# 1996 1995*
<S> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF PERIOD................................... $ 22.53 $ 18.63 $ 14.48
INCOME FROM INVESTMENT OPERATIONS
Net investment income................................................. 0.08 0.12 0.13
Net realized and unrealized gain on investments....................... 4.72 4.26 4.64
Total from investment operations...................................... 4.80 4.38 4.77
LESS DISTRIBUTIONS FROM
Net investment income................................................. (0.07) (0.13) (0.14)
In excess of net investment income.................................... 0** 0 0
Net realized gain on investments...................................... 0 (0.35) (0.48)
Total distributions................................................... (0.07) (0.48) (0.62)
NET ASSET VALUE END OF PERIOD......................................... $ 27.26 $ 22.53 $ 18.63
Total return+......................................................... 21.33% 23.50% 33.00%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses...................................................... 1.47%++ 1.41% 1.55%++
Total expenses, excluding indirectly paid expenses.................. 1.47%++ N/A N/A
Total expenses, excluding fee waivers & expense reimbursements...... N/A N/A 1.64%++
Net investment income............................................... 0.57%++ 0.70% 0.99%++
Portfolio turnover rate............................................... 6% 14% 17%
Average commission rate paid per share................................ $ 0.0603 $0.0566 N/A
NET ASSETS END OF PERIOD (MILLIONS)................................... $ 166 $ 85 $ 19
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** less than one cent per share.
# The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR ENDED DECEMBER
ENDED 31,
JULY 31, 1997# 1996 1995*
<S> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING OF PERIOD................................... $ 22.43 $ 18.59 $14.48
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).......................................... (0.02) 0** 0.05
Net realized and unrealized gain on investments....................... 4.69 4.20 4.61
Total from investment operations...................................... 4.67 4.20 4.66
LESS DISTRIBUTIONS FROM
Net investment income................................................. 0 (0.01) (0.07)
Net realized gain on investments...................................... 0 (0.35) (0.48)
Total distributions................................................... 0 (0.36) (0.55)
NET ASSET VALUE END OF PERIOD......................................... $ 27.10 $ 22.43 $18.59
Total return+......................................................... 20.82% 22.60% 32.20%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses...................................................... 2.25%++ 2.17% 2.24%++
Total expenses, excluding indirectly paid expenses.................. 2.25%++ N/A N/A
Total expenses, excluding fee waivers & expense reimbursements...... N/A N/A 2.26%++
Net investment income............................................... (0.19%)++ (0.06%) 0.30%++
Portfolio turnover rate............................................... 6% 14% 17%
Average commission rate paid per share................................ $ 0.0603 $0.0566 N/A
NET ASSETS END OF PERIOD (MILLIONS)................................... $ 542 $ 245 $ 46
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** Less than one cent per share.
# The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
EVERGREEN
GROWTH AND INCOME FUND
[Growth and Income Fund appears here]
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR ENDED DECEMBER
ENDED 31,
JULY 31, 1997# 1996 1995*
<S> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE BEGINNING OF PERIOD................................... $ 22.43 $ 18.58 $14.48
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).......................................... (0.02) 0** 0.06
Net realized and unrealized gain on investments....................... 4.69 4.21 4.60
Total from investment operations...................................... 4.67 4.21 4.66
LESS DISTRIBUTIONS FROM
Net investment income................................................. 0 (0.01) (0.08)
Net realized gain on investments...................................... 0 (0.35) (0.48)
Total distributions................................................... 0 (0.36) (0.56)
NET ASSET VALUE END OF PERIOD......................................... $ 27.10 $ 22.43 $18.58
Total return+......................................................... 20.82% 22.60% 32.20%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses...................................................... 2.25%++ 2.17% 2.15%++
Total expenses, excluding indirectly paid expenses.................. 2.25%++ N/A N/A
Total expenses, excluding fee waivers & expense reimbursements...... N/A N/A 4.94%++
Net investment income............................................... (0.19%)++ (0.06%) 0.35%++
Portfolio turnover rate............................................... 6% 14% 17%
Average commission rate paid per share................................ $ 0.0603 $0.0566 N/A
NET ASSETS END OF PERIOD (MILLIONS)................................... $ 24 $ 10 $ 20
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** Less than one cent per share.
# The Fund changed its fiscal year ended from December 31 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
EVERGREEN
GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
JULY 31, 1997# 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
CLASS Y SHARES
NET ASSET VALUE BEGINNING OF PERIOD............................ $ 22.55 $ 18.64 $ 14.52 $15.41 $14.18
INCOME FROM INVESTMENT OPERATIONS
Net investment income.......................................... 0.11 0.18 0.18 0.14 0.14
Net realized and unrealized gain (loss) on investments......... 4.73 4.25 4.59 0.12 1.91
Total from investment operations............................... 4.84 4.43 4.77 0.26 2.05
LESS DISTRIBUTIONS FROM
Net investment income.......................................... (0.10) (0.17) (0.17) (0.14) (0.14)
In excess of net investment income............................. 0** 0 0 0 0
Net realized gain on investments............................... 0 (0.35) (0.48) (1.01) (0.68)
Total distributions............................................ (0.10) (0.52) (0.65) (1.15) (0.82)
NET ASSET VALUE END OF PERIOD.................................. $ 27.29 $ 22.55 $ 18.64 $14.52 $15.41
Total return................................................... 21.52% 23.80% 32.90% 1.70% 14.40%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses............................................... 1.21%++ 1.16% 1.27% 1.33% 1.26%
Total expenses, excluding indirectly paid expenses........... 1.21%++ 1.16% N/A N/A N/A
Net investment income........................................ 0.82%++ 0.93% 1.11% 0.96% 0.99%
Portfolio turnover rate........................................ 6% 14% 17% 29% 28%
Average commission rate paid per share......................... $ 0.0603 $0.0566 N/A N/A N/A
NET ASSETS END OF PERIOD (MILLIONS)............................ $ 616 $ 442 $ 141 $ 73 $ 77
YEAR ENDED DECEMBER 31,
1992 1991 1990 1989 1988* 1987*
CLASS Y SHARES (CONTINUED)
NET ASSET VALUE BEGINNING OF PERIOD............................ $12.99 $10.72 $12.03 $10.62 $ 9.38 $10.05
INCOME FROM INVESTMENT OPERATIONS
Net investment income.......................................... 0.15 0.19 0.30 0.52 0.19 0.20
Net realized and unrealized gain (loss) on investments......... 1.65 2.58 (0.84) 2.17 2.10 (0.63)
Total from investment operations............................... 1.80 2.77 (0.54) 2.69 2.29 (0.43)
LESS DISTRIBUTIONS FROM
Net investment income.......................................... (0.15) (0.19) (0.30) (0.52) (0.19) (0.24)
In excess of net investment income............................. 0 0 0 0 0 0
Net realized gain on investments............................... (0.46) (0.31) (0.47) (0.76) (0.86) 0
Total distributions............................................ (0.61) (0.50) (0.77) (1.28) (1.05) (0.24)
NET ASSET VALUE END OF PERIOD.................................. $14.18 $12.99 $10.72 $12.03 $10.62 $ 9.38
Total return................................................... 13.80% 25.80% (4.50%) 25.40% 24.60% (4.30%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses............................................... 1.33% 1.41% 1.50% 1.54% 1.56% 1.76%
Total expenses, excluding indirectly paid expenses........... N/A N/A N/A N/A N/A N/A
Net investment income........................................ 1.18% 1.55% 2.62% 4.13% 1.70% 1.90%
Portfolio turnover rate........................................ 30% 23% 41% 53% 41% 48%
Average commission rate paid per share......................... N/A N/A N/A N/A N/A N/A
NET ASSETS END OF PERIOD (MILLIONS)............................ $ 64 $ 48 $ 36 $ 32 $ 24 $ 21
</TABLE>
++ Annualized.
* Net investment income based on the average monthly shares outstanding for the
period indicated.
** Less than one cent per share.
# The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
[I&G Fund logo appears here]
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED JANUARY 31,
JULY 31, 1997# 1997 1996 1995*
<S> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE, BEGINNING OF PERIOD.............................. $ 21.79 $ 20.15 $ 17.28 $ 17.09
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................................. 0.52 1.02 1.01 0.02
Net realized and unrealized gain on investments................... 2.15 1.67 2.94 0.17
Total from investment operations.................................. 2.67 2.69 3.95 0.19
LESS DISTRIBUTIONS FROM
Net investment income............................................. (0.52) (1.05) (1.08) 0
Total distributions............................................... (0.52) (1.05) (1.08) 0
NET ASSET VALUE, END OF PERIOD.................................... $ 23.94 $ 21.79 $ 20.15 $ 17.28
Total return+..................................................... 12.45% 13.80% 23.40% 1.10%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses.................................................. 1.45%++ 1.44% 1.36% 1.45%++
Total expenses, excluding indirectly paid expenses.............. 1.45%++ N/A N/A N/A
Total expenses, excluding fee waivers & expense reimbursements.. N/A N/A 2.50% N/A
Interest expense................................................ N/A 0.03% N/A N/A
Net investment income........................................... 4.69%++ 4.93% 5.39% 4.09%++
Portfolio turnover rate........................................... 72% 168% 138% 151%
Average commission rate paid per share............................ $ 0.0487 $0.0491 N/A N/A
NET ASSETS, END OF PERIOD (THOUSANDS)............................. $ 11,955 $ 9,678 $ 4,412 $ 119
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of Class operations) to
January 31, 1995.
# The Fund changed its fiscal year end from January 31 to July 31, effective
July 31, 1997.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED JANUARY 31,
JULY 31, 1997# 1997 1996 1995*
<S> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE, BEGINNING OF PERIOD.............................. $ 21.69 $ 20.08 $ 17.28 $17.09
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................................. 0.43** 0.89 0.91 0.02
Net realized and unrealized gain on investments................... 2.15 1.64 2.87 0.17
Total from investment operations.................................. 2.58 2.53 3.78 0.19
LESS DISTRIBUTIONS FROM
Net investment income............................................. (0.46) (0.92) (0.98) 0
Total distributions............................................... (0.46) (0.92) (0.98) 0
NET ASSET VALUE, END OF PERIOD.................................... $ 23.81 $ 21.69 $ 20.08 $17.28
Total return+..................................................... 12.06% 13.00% 22.40% 1.10%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses.................................................. 2.20%++ 2.19% 2.11% 2.23%++
Total expenses, excluding paid expenses......................... 2.20%++ N/A N/A N/A
Total expenses, excluding fee waivers & expense reimbursements.. N/A N/A 2.25% N/A
Interest expense................................................ N/A 0.03% N/A N/A
Net investment income........................................... 3.94%++ 4.17% 4.69% 3.23%++
Portfolio turnover rate........................................... 72% 168% 138% 151%
Average commission rate paid per share............................ $ 0.0487 $0.0491 N/A N/A
NET ASSETS, END OF PERIOD (THOUSANDS)............................. $ 43,977 $35,323 $14,750 $ 599
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of operations) to January
31, 1995.
** Calculated based on average shares outstanding.
# The Fund changed its fiscal year end from January 31 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
[I&G logo appears here]
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED JANUARY 31,
JULY 31, 1997# 1997 1996 1995*
<S> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE, BEGINNING OF PERIOD.............................. $ 21.69 $ 20.08 $17.27 $17.09
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................................. 0.44** 0.87 0.90 0.01
Net realized and unrealized gain on investments................... 2.14 1.66 2.89 0.17
Total from investment operations.................................. 2.58 2.53 3.79 0.18
LESS DISTRIBUTIONS FROM
Net investment income............................................. (0.46) (0.92) (0.98) 0
Total distributions............................................... (0.46) (0.92) (0.98) 0
NET ASSET VALUE, END OF PERIOD.................................... $ 23.81 $ 21.69 $20.08 $17.27
Total return+..................................................... 12.06% 12.90% 22.40% 1.10%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses.................................................. 2.20%++ 2.19% 2.11% 2.22%++
Total expenses, excluding paid expenses......................... 2.20%++ N/A N/A N/A
Total expenses, excluding fee waivers & expense reimbursements.. N/A N/A 13.03% N/A
Interest expense................................................ N/A 0.03% N/A N/A
Net investment income........................................... 4.06%++ 4.15% 4.67% 2.68%++
Portfolio turnover rate........................................... 72% 168% 138% 151%
Average commission rate paid per share............................ $ 0.0487 $0.0491 N/A N/A
NET ASSETS, END OF PERIOD (THOUSANDS)............................. $ 950 $ 982 $ 523 $ 24
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of operations) to January
31, 1995.
** Calculated based on average shares outstanding.
# The Fund changed its fiscal year end from January 31 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
[I&G logo appears here]
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED JANUARY 31,
JULY 31, 1997# 1997 1996 1995##
<S> <C> <C> <C> <C>
CLASS Y SHARES
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $ 21.81 $ 20.16 $ 17.28 $18.29
INCOME FROM INVESTMENT OPERATIONS
Net investment income......................................... 0.55 1.08 1.10 0.87
Net realized and unrealized gain (loss) on investments........ 2.16 1.66 2.87 (0.55 )
Total from investment operations.............................. 2.71 2.74 3.97 0.32
LESS DISTRIBUTIONS FROM
Net investment income......................................... (0.54) (1.09) (1.09) (1.08 )
Net realized gain on investments.............................. 0 0 0 (0.25 )
Total distributions........................................... (0.54) (1.09) (1.09) (1.33 )
NET ASSET VALUE, END OF PERIOD................................ $ 23.98 $ 21.81 $ 20.16 $17.28
Total return.................................................. 12.65% 14.10% 23.50% 1.90%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses.............................................. 1.20%++ 1.18% 1.19% 1.24%++
Total expenses, excluding paid expenses..................... 1.20%++ N/A N/A N/A
Interest expense............................................ N/A 0.03% N/A N/A
Net investment income....................................... 4.97%++ 5.14% 5.70% 5.70%++
Portfolio turnover rate....................................... 72% 168% 138% 151%
Average commission rate paid per share........................ $ 0.0487 $0.0491 N/A N/A
NET ASSETS, END OF PERIOD (MILLIONS).......................... $ 900 $ 858 $ 914 $ 942
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES (CONTINUED)
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 20.90 $ 18.82 $ 18.12 $ 18.26 $17.92 $17.11
INCOME FROM INVESTMENT OPERATIONS
Net investment income....................................... 1.08 1.11 1.08 1.02 1.07 1.12
Net realized and unrealized gain (loss) on investments...... (1.41) 2.51 0.70 (0.08) 0.36 0.79
Total from investment operations............................ (0.33) 3.62 1.78 0.94 1.43 1.91
LESS DISTRIBUTIONS FROM
Net investment income....................................... (1.08) (1.08) (1.08) (1.08) (1.09) (1.08)
Net realized gain on investments............................ (1.20) (0.46) 0 0 0 (0.02)
Total distributions......................................... (2.28) (1.54) (1.08) (1.08) (1.09) (1.10)
NET ASSET VALUE, END OF PERIOD.............................. $ 18.29 $ 20.90 $ 18.82 $ 18.12 $18.26 $17.92
Total return................................................ -2.10% 20.20% 10.20% 5.80% 7.90% 1.30%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses............................................ 1.18% 1.18% 1.21% 1.23% 1.18% 1.02%
Total expenses, excluding paid expenses................... N/A N/A N/A N/A N/A N/A
Interest expense.......................................... N/A N/A N/A N/A N/A N/A
Net investment income..................................... 5.29% 5.65% 5.73% 5.90% 5.64% 6.36%
Portfolio turnover rate..................................... 106% 164% 137% 137% 89% 86%
Average commission rate paid per share...................... N/A N/A N/A N/A N/A N/A
NET ASSETS, END OF PERIOD (MILLIONS)........................ $ 1,065 $ 1,142 $ 1,032 $ 1,151 $1,292 $1,312
<CAPTION>
YEAR ENDED MARCH 31,
1988
<S> <C>
CLASS Y SHARES (CONTINUED)
NET ASSET VALUE, BEGINNING OF PERIOD........................ $20.37
INCOME FROM INVESTMENT OPERATIONS
Net investment income....................................... 1.06
Net realized and unrealized gain (loss) on investments...... (2.64)
Total from investment operations............................ (1.58)
LESS DISTRIBUTIONS FROM
Net investment income....................................... (0.80)
Net realized gain on investments............................ (0.88)
Total distributions......................................... (1.68)
NET ASSET VALUE, END OF PERIOD.............................. $17.11
Total return................................................ (7.80%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses............................................ 1.01%
Total expenses, excluding paid expenses................... N/A
Interest expense.......................................... N/A
Net investment income..................................... 5.80%
Portfolio turnover rate..................................... 81%
Average commission rate paid per share...................... N/A
NET ASSETS, END OF PERIOD (MILLIONS)........................ $1,346
</TABLE>
++ Annualized.
# The Fund changed its fiscal year end from January 31 to July 31, effective
July 31, 1997.
## For the ten month period ended January 31, 1995. The Fund changed its fiscal
year end from March 31 to January 31, effective January 31, 1995.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
EVERGREEN
SMALL CAP EQUITY INCOME FUND
[Small Cap Equity Income Fund logo appears here]
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR ENDED DECEMBER
ENDED 31,
JULY 31, 1997# 1996 1995*
<S> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF PERIOD.................................................. $ 13.10 $ 11.57 $ 9.64
INCOME FROM INVESTMENT OPERATIONS
Net investment income................................................................ 0.14** 0.34 0.34
Net realized and unrealized gain on investments...................................... 2.59 2.13 2.45
Total from investment operations..................................................... 2.73 2.47 2.79
LESS DISTRIBUTIONS FROM
Net investment income................................................................ (0.13) (0.34) (0.37)
Net realized gain on investments..................................................... (0.01) (0.60) (0.49)
Total distributions.................................................................. (0.14) (0.94) (0.86)
NET ASSET VALUE END OF PERIOD........................................................ $ 15.69 $ 13.10 $11.57
Total return+........................................................................ 20.99% 22.00% 29.50%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses..................................................................... 1.71%++ 1.75% 1.75%++
Total expenses, excluding indirectly paid expenses................................. 1.70%++ N/A N/A
Total expenses, excluding fee waivers & expense reimbursements 1.84%++ 5.03% 24.45%++
Net investment income.............................................................. 1.88%++ 3.08% 3.39%++
Portfolio turnover rate.............................................................. 13% 50% 48%
Average commission rate paid per share............................................... $ 0.0665 $0.0635 N/A
NET ASSETS END OF PERIOD (THOUSANDS)................................................. $ 4,239 $ 336 $ 216
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of operations) to January
31, 1995.
** Calculation based on average shares outstanding during the period.
# The Fund changed its fiscal year end from January 31 to July 31, effective
July 31, 1997.
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR ENDED DECEMBER
ENDED 31,
JULY 31, 1997# 1996 1995*
<S> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING OF PERIOD.................................................. $ 13.09 $ 11.57 $ 9.64
INCOME FROM INVESTMENT OPERATIONS
Net investment income................................................................ 0.08** 0.27 0.28
Net realized and unrealized gain on investments...................................... 2.57 2.11 2.43
Total from investment operations..................................................... 2.65 2.38 2.71
LESS DISTRIBUTIONS FROM
Net investment income................................................................ (0.09) (0.26) (0.29)
Net realized gain on investments..................................................... (0.01) (0.60) (0.49)
Total distributions.................................................................. (0.10) (0.86) (0.78)
NET ASSET VALUE END OF PERIOD........................................................ $ 15.64 $ 13.09 $11.57
Total return+........................................................................ 20.37% 21.10% 28.70%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses..................................................................... 2.46%++ 2.50% 2.50%++
Total expenses, excluding indirectly paid expenses................................. 2.45%++ N/A N/A
Total expenses, excluding fee waivers & expense reimbursements..................... 2.59%++ 5.72% 20.90%++
Net investment income.............................................................. 1.12%++ 2.39% 2.67%++
Portfolio turnover rate.............................................................. 13% 50% 48%
Average commission rate paid per share............................................... $ 0.0665 $0.0635 N/A
NET ASSETS END OF PERIOD (THOUSANDS)................................................. $ 9,462 $ 692 $ 266
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 3, 1995 (commencement of operations) to January
31, 1995.
** Calculation based on average shares outstanding during the period.
# The Fund changed its fiscal year end from January 31 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
EVERGREEN
SMALL CAP EQUITY INCOME FUND
[Small Cap Equity Income Fund logo appears here]
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR ENDED DECEMBER
ENDED 31,
JULY 31, 1997# 1996 1995*
<S> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE BEGINNING OF PERIOD.................................................. $ 13.09 $ 11.56 $ 9.74
INCOME FROM INVESTMENT OPERATIONS
Net investment income................................................................ 0.10** 0.28 0.28
Net realized and unrealized gain on investments...................................... 2.54 2.10 2.33
Total from investment operations..................................................... 2.64 2.38 2.61
LESS DISTRIBUTIONS FROM
Net investment income................................................................ (0.09) (0.25) (0.30)
Net realized gain on investments..................................................... (0.01) (0.60) (0.49)
Total distributions.................................................................. (0.10) (0.85) (0.79)
NET ASSET VALUE END OF PERIOD........................................................ $ 15.63 $ 13.09 $11.56
Total return+........................................................................ 20.30% 21.10% 27.30%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses..................................................................... 2.45%++ 2.50% 2.50%++
Total expenses, excluding indirectly paid expenses................................. 2.44%++ N/A N/A
Total expenses, excluding fee waivers & expense reimbursements..................... 2.58%++ 5.77% 187.29%++
Net investment income.............................................................. 1.20%++ 2.33% 2.63%++
Portfolio turnover rate.............................................................. 13% 50% 48%
Average commission rate paid per share............................................... $ 0.0665 $0.0635 N/A
NET ASSETS END OF PERIOD (THOUSANDS)................................................. $ 2,770 $ 56 $ 24
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 24, 1995 (commencement of class operations) to
December 31, 1995.
** Calculation based on average shares outstanding during the period.
# The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
JULY 31, 1997# 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C>
CLASS Y SHARES
NET ASSET VALUE BEGINNING OF PERIOD..................... $ 13.12 $ 11.58 $ 9.70 $10.15 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income................................... 0.19** 0.38 0.38 0.34 0.10
Net realized and unrealized gain (loss) on investments.. 2.56 2.13 2.38 (0.41) 0.15
Total from investment operations........................ 2.75 2.51 2.76 (0.07) 0.25
LESS DISTRIBUTIONS FROM
Net investment income................................... (0.15) (0.37) (0.38) (0.33) (0.10)
Net realized gain on investments........................ (0.01) (0.60) (0.50) (0.05) 0
Total distributions..................................... (0.16) (0.97) (0.88) (0.38) (0.10)
NET ASSET VALUE END OF PERIOD........................... $ 15.71 $ 13.12 $11.58 $ 9.70 $10.15
Total return............................................ 21.09% 22.40% 29.10% (0.70%) 2.50%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses........................................ 1.39%++ 1.50% 1.50% 1.48% 0.00%++
Total expenses, excluding indirectly paid expenses.... 1.38%++ N/A N/A N/A N/A
Total expenses, excluding fee waivers & expense
reimbursements 1.59%++ 4.75% 4.34% 4.68% 4.39%++
Net investment income................................. 2.39%++ 3.36% 3.56% 3.72% 4.07%++
Portfolio turnover rate................................. 13% 50% 48% 9% 15%
Average commission rate paid per share.................. $ 0.0665 $0.0635 N/A N/A N/A
NET ASSETS END OF PERIOD (THOUSANDS).................... $ 42,374 8,592 4,806 3,613 2,236
</TABLE>
++ Annualized.
* For the period from October 1, 1993 (commencement of operations) to December
31, 1993.
** Calculation based on average shares outstanding during the period.
# The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
EVERGREEN
UTILITY FUND
[Utility Fund logo appears here]
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
JULY 31, 1997# 1996 1995 1994*
<S> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF PERIOD............................... $ 10.57 $ 10.80 $ 9.00 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................................. 0.25 0.41 0.44 0.45
Net realized and unrealized gain (loss) on investments............ 0.87 0.05 2.25 (1.01)
Total from investment operations.................................. 1.12 0.46 2.69 (0.56)
LESS DISTRIBUTIONS FROM
Net investment income............................................. (0.24) (0.41) (0.44) (0.44)
Net realized gain on investments.................................. 0 (0.28) (0.45) 0
Total distributions............................................... (0.24) (0.69) (0.89) (0.44)
NET ASSET VALUE END OF PERIOD..................................... $ 11.45 $ 10.57 $ 10.80 $ 9.00
Total return+..................................................... 10.72% 4.40% 30.70% (5.60%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.................................................. 1.00%++ 0.87% 0.79% 0.53%++
Total expenses, excluding indirectly paid expenses.............. 0.99%++ N/A N/A N/A
Total expenses, excluding fee waivers & expense reimbursements.. 1.19%++ 1.15% 1.18% 1.43%++
Net investment income........................................... 3.85%++ 3.87% 4.51% 5.07%++
Portfolio turnover rate........................................... 50% 59% 88% 23%
Average commission rate paid per share............................ $ 0.0593 $0.0605 N/A N/A
NET ASSETS END OF PERIOD (THOUSANDS).............................. $ 91,638 $96,243 $107,872 $4,190
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 4, 1994 (commencement of class operations) to
December 31, 1994.
# The Fund changed its fiscal year ended from December 31 to July 31, effective
July 31, 1997.
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
JULY 31, 1997# 1996 1995 1994*
<S> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING OF PERIOD............................... $ 10.58 $ 10.81 $ 9.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................................. 0.20 0.33 0.37 0.39
Net realized and unrealized gain (loss) on investments............ 0.87 0.05 2.26 (1.01)
Total from investment operations.................................. 1.07 0.38 2.63 (0.62)
LESS DISTRIBUTIONS FROM
Net investment income............................................. (0.19) (0.33) (0.37) (0.38)
Net realized gain on investments.................................. 0 (0.28) (0.45) 0
Total distributions............................................... (0.19) (0.61) (0.82) (0.38)
NET ASSET VALUE END OF PERIOD..................................... $ 11.46 $ 10.58 $ 10.81 $ 9.00
Total return+..................................................... 10.21% 3.60% 29.90% (6.20%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.................................................. 1.75%++ 1.62% 1.53% 1.27%++
Total expenses, excluding indirectly paid expenses.............. 1.74%++ N/A N/A N/A
Total expenses, excluding fee waivers & expense reimbursements.. 1.94%++ 1.89% 1.93% 2.11%++
Net investment income........................................... 3.10%++ 3.12% 3.78% 4.19%++
Portfolio turnover rate........................................... 50% 59% 88% 23%
Average commission rate paid per share............................ $ 0.0593 $0.0605 N/A N/A
NET ASSETS END OF PERIOD (THOUSANDS).............................. $ 36,738 $38,511 $ 35,662 $28,792
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from January 4, 1994 (commencement of class operations) to
December 31, 1994.
# The Fund changed its fiscal year ended from December 31 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
34
<PAGE>
EVERGREEN
UTILITY FUND
[Utility Fund logo appears here]
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
JULY 31, 1997# 1996 1995 1994*
<S> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE BEGINNING OF PERIOD............................... $ 10.58 $ 10.82 $ 9.01 $ 9.33
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................................. 0.20 0.33 0.37 0.12
Net realized and unrealized gain (loss) on investments............ 0.87 0.04 2.26 (0.33)
Total from investment operations.................................. 1.07 0.37 2.63 (0.21)
LESS DISTRIBUTIONS FROM
Net investment income............................................. (0.19) (0.33) (0.37) (0.11)
Net realized gain on investments.................................. 0 (0.28) (0.45) 0
Total distributions............................................... (0.19) (0.61) (0.82) (0.11)
NET ASSET VALUE END OF PERIOD..................................... $ 11.46 $ 10.58 $10.82 $ 9.01
Total return+..................................................... 10.21% 3.50% 29.80% (2.20%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.................................................. 1.75%++ 1.63% 1.54% 1.94%++
Total expenses, excluding indirectly paid expenses.............. 1.74%++ N/A N/A N/A
Total expenses, excluding fee waivers & expense reimbursements.. 1.94%++ 1.90% 1.93% 2.78%++
Net investment income........................................... 3.10%++ 3.13% 3.76% 3.96%++
Portfolio turnover rate........................................... 50% 59% 88% 23%
Average commission rate paid per share............................ $ 0.0593 $0.0605 N/A N/A
NET ASSETS END OF PERIOD (THOUSANDS).............................. $ 379 $ 396 $ 246 $ 128
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from September 2, 1994 (commencement of class operations) to
December 31, 1994.
# The Fund changed its fiscal year ended from December 31 to July 31, effective
July 31, 1997.
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
JULY 31, 1997# 1996 1995 1994*
<S> <C> <C> <C> <C>
CLASS Y SHARES
NET ASSET VALUE BEGINNING OF PERIOD............................... $ 10.58 $ 10.82 $ 9.00 $ 9.51
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................................. 0.25 0.44 0.47 0.37
Net realized and unrealized gain (loss) on investments............ 0.88 0.03 2.27 (0.50)
Total from investment operations.................................. 1.13 0.47 2.74 (0.13)
LESS DISTRIBUTIONS FROM
Net investment income............................................. (0.25) (0.43) (0.47) (0.37)
In excess of net investment income................................ 0 0 0 (0.01)
Net realized gain on investments.................................. 0 (0.28) (0.45) 0
Total distributions............................................... (0.25) (0.71) (0.92) (0.38)
NET ASSET VALUE END OF PERIOD..................................... $ 11.46 $ 10.58 $10.82 $ 9.00
Total return...................................................... 10.85% 4.50% 31.30% (1.60%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.................................................. 0.94%++ 0.61% 0.54% 0.40%++
Total expenses, excluding indirectly paid expenses.............. 0.93%++ N/A N/A N/A
Total expenses, excluding fee waivers & expense reimbursements.. 0.73%++ 0.89% 0.93% 1.24%++
Net investment income........................................... 4.06%++ 4.01% 4.76% 4.93%++
Portfolio turnover rate........................................... 50% 59% 88% 23%
Average commission rate paid per share............................ $ 0.0593 $0.0605 N/A N/A
NET ASSETS END OF PERIOD (THOUSANDS).............................. $ 1,627 $ 2,000 $7,791 $5,201
</TABLE>
++ Annualized.
* For the period from February 28, 1994 (commencement of class operations) to
December 31, 1994.
# The Fund changed its fiscal year ended from December 31 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
35
<PAGE>
EVERGREEN
VALUE FUND
[Value Fund logo appears here]
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
JULY 31, 1997# 1996 1995 1994
<S> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF PERIOD............................. $ 20.57 $ 20.45 $ 16.62 $17.63
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................................... 0.21 0.38 0.55 0.52
Net realized and unrealized gain (loss) on investments.......... 4.05 3.49 4.69 (0.20)
Total from investment operations................................ 4.26 3.87 5.24 0.32
LESS DISTRIBUTIONS FROM
Net investment income........................................... (0.19) (0.41) (0.51) (0.51)
Net realized gain on investments................................ 0 (3.32) (0.90) (0.82)
In excess of net investment income.............................. 0 (0.02) 0 0
Total distributions............................................. (0.19) (3.75) (1.41) (1.33)
NET ASSET VALUE END OF PERIOD................................... $ 24.64 $ 20.57 $ 20.45 $16.62
Total return+................................................... 20.78% 18.90% 31.80% 1.90%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses................................................ 0.92%++ 0.91% 0.90% 0.93%
Total expenses, excluding indirectly paid expenses............ 0.92%++ N/A N/A N/A
Total expenses, excluding fee waiver & expense reimbursement.. N/A N/A N/A N/A
Net investment income......................................... 1.66%++ 1.77% 2.78% 2.96%
Portfolio turnover rate......................................... 6% 91% 53% 70%
Average commission rate paid per share.......................... $ 0.0600 $0.0588 N/A N/A
NET ASSETS END OF PERIOD (MILLIONS)............................. $ 392 $ 328 $ 292 $ 189
<CAPTION>
YEAR ENDED DECEMBER 31,
1993
<S> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF PERIOD............................. $17.11
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................................... 0.47
Net realized and unrealized gain (loss) on investments.......... 1.10
Total from investment operations................................ 1.57
LESS DISTRIBUTIONS FROM
Net investment income........................................... (0.47)
Net realized gain on investments................................ (0.58)
In excess of net investment income.............................. 0
Total distributions............................................. (1.05)
NET ASSET VALUE END OF PERIOD................................... $17.63
Total return+................................................... 9.30%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses................................................ 0.99%
Total expenses, excluding indirectly paid expenses............ N/A
Total expenses, excluding fee waiver & expense reimbursement.. N/A
Net investment income......................................... 2.63%
Portfolio turnover rate......................................... 46%
Average commission rate paid per share.......................... N/A
NET ASSETS END OF PERIOD (MILLIONS)............................. $ 190
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED MARCH 31,
1992 1991 1990* 1990 1989
<S> <C> <C> <C> <C> <C>
CLASS A SHARES (CONTINUED)
NET ASSET VALUE BEGINNING OF PERIOD............................. $ 17.08 $ 14.61 $ 15.12 $14.45 $12.83
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................................... 0.44 0.46 0.36 0.54 0.36
Net realized and unrealized gain (loss) on investments.......... 0.89 3.17 (0.44) 1.70 2.11
Total from investment operations................................ 1.33 3.63 (0.08) 2.24 2.47
LESS DISTRIBUTIONS FROM
Net investment income........................................... (0.43) (0.43) (0.36) (0.57) (0.38)
Net realized gain on investments................................ (0.87) (0.73) (0.02) (1.00) (0.47)
In excess of net investment income.............................. 0 0 (0.05) 0 0
Total distributions............................................. (1.30) (1.16) (0.43) (1.57) (0.85)
NET ASSET VALUE END OF PERIOD................................... $ 17.11 $ 17.08 $ 14.61 $15.12 $14.45
Total return+................................................... 8.00% 25.10% (0.50%) 15.50% 19.70%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses................................................ 1.01% 0.96% 1.39%++ 1.55% 1.71%
Total expenses, excluding indirectly paid expenses............ N/A N/A N/A N/A N/A
Total expenses, excluding fee waiver & expense reimbursement.. 1.02% 1.05% N/A N/A N/A
Net investment income......................................... 2.37%* 2.78% 3.28%++ 3.42% 2.72%
Portfolio turnover rate......................................... 56% 69% 13% 11% 24%
Average commission rate paid per share.......................... N/A N/A N/A N/A N/A
NET ASSETS END OF PERIOD (MILLIONS)............................. $ 169 $ 136 $ 105 $ 96 $ 83
<CAPTION>
YEAR ENDED MARCH 31,
1988
<S> <C>
CLASS A SHARES (CONTINUED)
NET ASSET VALUE BEGINNING OF PERIOD............................. $14.66
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................................... 0.26
Net realized and unrealized gain (loss) on investments.......... (1.30)
Total from investment operations................................ (1.04)
LESS DISTRIBUTIONS FROM
Net investment income........................................... (0.26)
Net realized gain on investments................................ (0.53)
In excess of net investment income.............................. 0
Total distributions............................................. (0.79)
NET ASSET VALUE END OF PERIOD................................... $12.83
Total return+................................................... (7.10%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses................................................ 1.74%
Total expenses, excluding indirectly paid expenses............ N/A
Total expenses, excluding fee waiver & expense reimbursement.. N/A
Net investment income......................................... 1.92%
Portfolio turnover rate......................................... 24%
Average commission rate paid per share.......................... N/A
NET ASSETS END OF PERIOD (MILLIONS)............................. $ 22
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
# The Fund changed its fiscal year ended from December 31 to July 31, effective
July 31, 1997.
* For the nine months ended December 31, 1990. The Fund changed fiscal year end
from March 31 to December 31, effective December 31, 1990.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
EVERGREEN
VALUE FUND
[Value Fund logo appears here]
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
JULY 31, 1997# 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING OF PERIOD................... $ 20.58 $ 20.45 $ 16.62 $ 17.63 $ 17.24
INCOME FROM INVESTMENT OPERATIONS
Net investment income................................. 0.12 0.22 0.39 0.42 0.35
Net realized and unrealized gain (loss) on
investments......................................... 4.03 3.50 4.70 (0.20) 1.01
Total from investment operations...................... 4.15 3.72 5.09 0.22 1.36
LESS DISTRIBUTIONS FROM
Net investment income................................. (0.10) (0.25) (0.36) (0.41) (0.35)
Net realized gain on investments...................... 0 (3.32) (0.90) (0.82) (0.58)
In excess of net investment income.................... 0 0 0 0 (0.04)
In excess of net realized gain on investments......... 0 (0.02) 0 0 0
Total distributions................................... (0.10) (3.59) (1.26) (1.23) (0.97)
NET ASSET VALUE END OF PERIOD......................... $ 24.63 $ 20.58 $ 20.45 $ 16.62 $ 17.63
Total return+......................................... 20.23% 18.10% 30.90% 1.30% 8.00%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses...................................... 1.67%++ 1.66% 1.65% 1.53% 1.48%++
Total expenses, excluding indirectly paid expenses.. 1.67%++ N/A N/A N/A N/A
Net investment income............................... 0.92%++ 1.01% 2.04% 2.36% 2.09%++
Portfolio turnover rate............................... 6% 91% 53% 70% 46%
Average commission rate paid per share................ $ 0.0600 $ 0.0588 N/A N/A N/A
NET ASSETS END OF PERIOD (THOUSANDS).................. $276,256 $197,411 $141,072 $104,297 $59,953
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
# The Fund changed its fiscal year ended from December 31 to July 31, effective
July 31, 1997.
* For the period from February 2, 1993 (commencement of operations) to December
31, 1993.
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
JULY 31, 1997# 1996 1995 1994*
<S> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE BEGINNING OF PERIOD...................... $ 20.56 $ 20.44 $ 16.61 $ 18.28
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................... 0.12 0.22 0.39 0.19
Net realized and unrealized gain (loss) on investments... 4.03 3.50 4.70 (0.81)
Total from investment operations......................... 4.15 3.72 5.09 (0.62)
LESS DISTRIBUTIONS FROM
Net investment income.................................... (0.10) (0.26) (0.36) (0.19)
Net realized gain on investments......................... 0 (3.32) (0.90) (0.82)
In excess of net investment income....................... 0 0 0 (0.04)
In excess of net realized gain on investments............ 0 (0.02) 0 0
Total distributions...................................... (0.10) (3.60) (1.26) (1.05)
NET ASSET VALUE END OF PERIOD............................ $ 24.61 $ 20.56 $ 20.44 $ 16.61
Total return+............................................ 20.25% 18.10% 30.90% (3.40%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses......................................... 1.66%++ 1.67% 1.65% 1.68%++
Total expenses, excluding indirectly paid expenses..... 1.66%++ N/A N/A N/A
Net investment income.................................. 0.94%++ 1.00% 2.03% 2.16%++
Portfolio turnover rate.................................. 6% 91% 53% 70%
Average commission rate paid per share................... $ 0.0600 $0.0588 N/A N/A
NET ASSETS END OF PERIOD (THOUSANDS)..................... $ 2,507 $ 1,458 $ 811 $ 485
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from September 2, 1994 (commencement of class operations) to
December 31, 1994.
# The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
37
<PAGE>
EVERGREEN
VALUE FUND
[Value Fund logo appears here]
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
JULY 31, 1997# 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
NET ASSET VALUE BEGINNING OF PERIOD....... $ 20.57 $ 20.45 $ 16.61 $ 17.63 $ 17.11 $ 17.08
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................... 0.25 0.44 0.57 0.56 0.52 0.49
Net realized and unrealized gain (loss) on
investments............................. 4.03 3.49 4.72 (0.20) 1.12 0.90
Total from investment operations.......... 4.28 3.93 5.29 0.36 1.64 1.39
LESS DISTRIBUTIONS FROM
Net investment income..................... (0.21) (0.47) (0.55) (0.56) (0.52) (0.49)
Net realized gain on investments.......... 0 (3.32) (0.90) (0.82) (0.58) (0.87)
In excess of net investment income........ 0 0 0 0 (0.02) 0
In excess of net realized gain on
investments............................. 0 (0.02) 0 0 0 0
Total distributions....................... (0.21) (3.81) (1.45) (1.38) (1.12) (1.36)
NET ASSET VALUE END OF
PERIOD.................................. $ 24.64 $ 20.57 $ 20.45 $ 16.61 $ 17.63 $ 17.11
Total return.............................. 20.93% 19.20% 32.20% 2.10% 9.70% 8.30%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.......................... 0.67%++ 0.66% 0.65% 0.68% 0.65% 0.68%
Total expenses, excluding indirectly
paid expenses......................... 0.67%++ N/A N/A N/A N/A N/A
Total expenses, excluding fee waivers &
expense reimbursements................ N/A N/A N/A N/A N/A 0.69%
Net investment income................... 1.91%++ 2.02% 3.02% 3.21% 2.98% 2.90%
Portfolio turnover rate................... 6% 91% 53% 70% 46% 56%
Average commission rate paid per share.... $ 0.0600 $0.0588 N/A N/A N/A N/A
NET ASSETS END OF PERIOD (MILLIONS)....... $ 1,149 $ 996 $ 761 $ 507 $ 463 $ 326
<CAPTION>
YEAR ENDED DECEMBER 31,
1991*
<S> <C>
CLASS Y SHARES
NET ASSET VALUE BEGINNING OF PERIOD....... $ 14.28
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................... 0.47
Net realized and unrealized gain (loss) on
investments............................. 3.53
Total from investment operations.......... 4.00
LESS DISTRIBUTIONS FROM
Net investment income..................... (0.47)
Net realized gain on investments.......... (0.73)
In excess of net investment income........ 0
In excess of net realized gain on
investments............................. 0
Total distributions....................... (1.20)
NET ASSET VALUE END OF
PERIOD.................................. $ 17.08
Total return.............................. 25.40%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.......................... 0.69%++
Total expenses, excluding indirectly
paid expenses......................... N/A
Total expenses, excluding fee waivers &
expense reimbursements................ 0.77%++
Net investment income................... 3.04%++
Portfolio turnover rate................... 69%
Average commission rate paid per share.... N/A
NET ASSETS END OF PERIOD (MILLIONS)....... $ 271
</TABLE>
++ Annualized.
* For the period from January 3, 1991 (commencement of class operations) to
December 31, 1991.
# The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
KEYSTONE
FUND FOR TOTAL RETURN
[Fund for Total Return logo appears here]
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED NOVEMBER 30,
JULY 31, 1997# 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE, BEGINNING OF PERIOD.............................. $ 17.33 $ 13.83 $ 11.75 $ 12.31 $ 12.06
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................................. 0.18 0.26 0.25 0.24 0.21
Net realized and unrealized gain (loss) on investments............ 3.34 3.83 2.80 (0.56) 1.31
Total from investment operations.................................. 3.52 4.09 3.05 (0.32) 1.52
LESS DISTRIBUTIONS FROM
Net investment income............................................. (0.16) (0.26) (0.25) (0.24) (0.21)
In excess of net investment income................................ 0 0 (0.07) 0 (0.03)
Net ralized gains on investments.................................. 0 (0.33) (0.65) 0 (1.03)
Total distributions............................................... (0.16) (0.59) (0.97) (0.24) (1.27)
NET ASSET VALUE, END OF PERIOD.................................... $ 20.69 $ 17.33 $ 13.83 $ 11.75 $ 12.31
Total return+..................................................... 20.40% 29.83% 26.57% (2.65%) 12.67%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses.................................................. 1.24%++ 1.41% 1.69% 1.59% 1.85%
Total expenses, excluding indirectly paid expenses.............. 1.22%++ 1.39% 1.67% N/A N/A
Total expenses, excluding fee waivers & expense reimbursements.. N/A N/A N/A N/A N/A
Net investment income........................................... 1.46%++ 1.66% 1.94% 1.93% 1.63%
Portfolio turnover rate........................................... 41% 41% 77% 57% 92%
Average commission rate paid per share............................ $ 0.0501 $0.0037 N/A N/A N/A
NET ASSETS, END OF PERIOD (THOUSANDS)............................. $ 47,812 $40,487 $27,037 $23,162 $26,367
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1992 1991 1990 1989 1988 1987*
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES (CONTINUED)
NET ASSET VALUE, BEGINNING OF PERIOD.............................. $ 11.45 $ 10.29 $ 10.89 $ 9.41 $ 8.59 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................................. 0.23 0.34 0.41 0.42 0.46 0.30
Net realized and unrealized gain (loss) on investments............ 1.19 1.38 (0.61) 2.01 0.89 (1.47)
Total from investment operations.................................. 1.42 1.72 (0.20) 2.43 1.35 (1.17)
LESS DISTRIBUTIONS FROM
Net investment income............................................. (0.23) (0.35) (0.40) (0.42) (0.53) (0.24)
In excess of net investment income................................ (0.05) (0.05) 0 0 0 0
Net ralized gains on investments.................................. (0.53) (0.16) 0 (0.53) 0 0
Total distributions............................................... (0.81) (0.56) (0.40) (0.95) (0.53) (0.24)
NET ASSET VALUE, END OF PERIOD.................................... $ 12.06 $ 11.45 $ 10.29 $ 10.89 $ 9.41 $ 8.59
Total return+..................................................... 12.56% 16.70% (1.85%) 26.17% 15.98% 11.94%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses.................................................. 1.85% 1.88% 2.00% 2.00% 1.47% 1.00%+++
Total expenses, excluding indirectly paid expenses.............. N/A N/A N/A N/A N/A N/A
Total expenses, excluding fee waivers & expense reimbursements.. N/A N/A 2.41% 2.48% 2.92% 4.77%+++
Net investment income........................................... 1.87% 2.98% 3.85% 3.94% 4.87% 4.94%+++
Portfolio turnover rate........................................... 66% 43% 51% 50% 64% 16%
Average commission rate paid per share............................ N/A N/A N/A N/A N/A N/A
NET ASSETS, END OF PERIOD (THOUSANDS)............................. $23,607 $22,974 $22,080 $22,764 $20,735 $ 7,672
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
+++ Annualized for the period from April 14, 1987 (commencement of investment
operations) to November 30, 1987.
# The Fund changed its fiscal year end from November 30 to July 31, effective
July 31, 1997.
* For the period from February 13, 1987 (commencement of operations) to
November 30, 1987.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
39
<PAGE>
KEYSTONE
FUND FOR TOTAL RETURN
[Fund for Total Return logo appears here]
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED NOVEMBER 30,
JULY 31, 1997# 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE, BEGINNING OF PERIOD..................... $ 17.31 $ 13.84 $ 11.77 $ 12.32 $ 12.65
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................... 0.09 0.15 0.15 0.15 0.10
Net realized and unrealized gain (loss) on investments... 3.31 3.80 2.82 (0.56) 0.74
Total from investment operations......................... 3.40 3.95 2.97 (0.41) 0.84
LESS DISTRIBUTIONS FROM
Net investment income.................................... (0.08) (0.15) (0.15) (0.14) (0.10)
In excess of net investment income....................... 0 0 (0.10) 0 (0.04)
Net realized gains on investments........................ 0 (0.33) (0.65) 0 (1.03)
Total distributions...................................... (0.08) (0.48) (0.90) (0.14) (1.17)
NET ASSET VALUE, END OF PERIOD........................... $ 20.63 $ 17.31 $ 13.84 $ 11.77 $ 12.32
Total return+............................................ 19.68% 28.73% 25.59% (3.36%) 6.68%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses......................................... 2.02%++ 2.18% 2.47% 2.31% 2.64%++
Total expenses, excluding indirectly paid expenses..... 2.00%++ 2.16% 2.46% N/A N/A
Net investment income.................................. 0.58%++ 0.88% 1.06% 1.27% 0.84%++
Portfolio turnover rate.................................. 41% 41% 77% 57% 92%
Average commission rate paid per share................... $ 0.0501 $0.0037 N/A N/A N/A
NET ASSETS, END OF PERIOD (THOUSANDS).................... $ 94,309 $43,526 $20,605 $ 7,314 $ 4,283
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from February 1, 1993 (commencement of class operations) to
November 30, 1993.
# The Fund changed its fiscal year end from November 30 to July 31, effective
July 31, 1997.
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED NOVEMBER 30,
JULY 31, 1997# 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE, BEGINNING OF PERIOD..................... $ 17.32 $ 13.85 $ 11.78 $ 12.33 $ 12.65
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................... 0.09 0.14 0.16 0.15 0.10
Net realized and unrealized gain (loss) on investments... 3.32 3.81 2.81 (0.56) 0.75
Total from investment operations......................... 3.41 3.95 2.97 (0.41) 0.85
LESS DISTRIBUTIONS FROM
Net investment income.................................... (0.08) (0.15) (0.16) (0.14) (0.10)
In excess of net investment income....................... 0 0 (0.09) 0 (0.04)
Net realized gain on investments......................... 0 (0.33) (0.65) 0 (1.03)
Total distributions...................................... (0.08) (0.48) (0.90) (0.14) (1.17)
NET ASSET VALUE, END OF PERIOD........................... $ 20.65 $ 17.32 $ 13.85 $ 11.78 $ 12.33
Total return+............................................ 19.73% 28.71% 25.57% (3.36%) 6.76%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses......................................... 2.01%++ 2.17% 2.47% 2.34% 2.64%++
Total expenses, excluding indirectly paid expenses..... 1.99%++ 2.15% 2.44% N/A N/A
Net investment income.................................. 0.66%++ 0.89% 1.16% 1.21% 0.83%++
Portfolio turnover rate.................................. 41% 41% 77% 57% 92%
Average commission rate paid per share................... $ 0.0501 $0.0037 N/A N/A N/A
NET ASSETS, END OF PERIOD (THOUSANDS).................... $ 21,125 $14,562 $ 9,503 $ 5,968 $ 5,030
</TABLE>
+ Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
* For the period from February 1, 1993 (commencement of class operations) to
November 30, 1993.
# The Fund changed its fiscal year end from November 30 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
40
<PAGE>
KEYSTONE
FUND FOR TOTAL RETURN
[Fund for Total Return logo appears here]
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JANUARY 13, 1997
(DATE OF INITIAL
PUBLIC OFFERING)
TO JULY 31, 1997#
<S> <C>
CLASS Y SHARES
NET ASSET VALUE, BEGINNING OF PERIOD..................................................................... $ 17.74
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................................................................... 0.18
Net realized and unrealized gain on investments.......................................................... 2.86
Total from investment operations......................................................................... 3.04
LESS DISTRIBUTIONS FROM
Net investment income.................................................................................... (0.16)
Total distributions...................................................................................... (0.16)
NET ASSET VALUE, END OF PERIOD........................................................................... $ 20.62
Total return............................................................................................. 17.22%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses......................................................................................... 1.34%++
Total expenses, excluding indirectly paid expenses..................................................... 1.34%++
Net investment income.................................................................................. 0.79%++
Portfolio turnover rate.................................................................................. 41%
Average commission rate paid per share................................................................... $0.0501
NET ASSETS, END OF PERIOD (THOUSANDS).................................................................... $ 93
</TABLE>
++ Annualized.
# The Fund changed its fiscal year end from November 30 to July 31, effective
July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
41
<PAGE>
EVERGREEN
GROWTH AND INCOME FUND
[G&I Fund logo
appears here]
SCHEDULE OF INVESTMENTS
July 31, 1997
[CAPTION]
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
COMMON STOCKS-- 77.2%
BANKS-- 4.7%
<C> <C> <S> <C>
118,440 Banc One Corp.................... $ 6,647,445
80,000 Bank of New York Co., Inc.
(The).......................... 3,885,000
191,000 BSB Bancorp, Inc................. 7,425,125
94,000 Carolina First Corp.............. 1,586,250
101,250 Central Fidelity Banks, Inc...... 4,037,344
41,750 Crestar Financial Corp........... 1,970,078
45,000 Cullen/Frost Bankers, Inc........ 2,103,750
157,500 First Security Corp.............. 4,232,812
39,700 First Virginia Banks, Inc........ 2,788,925
210,000 Hibernia Corp. Cl. A............. 3,176,250
83,700 Norwest Corp..................... 5,278,331
65,000 Peoples Heritage Financial
Group.......................... 2,591,875
110,000 State Street Boston Corp......... 6,166,875
45,000 Summit Bancorp................... 2,652,188
108,900 Susquehanna Bancshares, Inc...... 3,021,975
20,000 Wells Fargo & Co................. 5,498,750
63,062,973
<CAPTION>
BUILDING, CONSTRUCTION &
FURNISHINGS-- 1.2%
<C> <C> <S> <C>
320,000 * Furniture Brands International,
Inc............................ 6,580,000
113,000 Lone Star Industries, Inc........ 5,989,000
80,000 Medusa Corp...................... 3,700,000
16,269,000
<CAPTION>
BUSINESS EQUIPMENT &
SERVICES-- 11.4%
<C> <C> <S> <C>
502,500 Air Express International Corp... 15,546,094
815,000 Circle International Group,
Inc............................ 21,190,000
48,000 * Cisco Systems, Inc............... 3,819,000
350,000 Computer Associates
International, Inc............. 23,821,875
120,000 * Compuware Corp................... 7,425,000
133,000 Equifax, Inc..................... 4,513,688
300,000 * Medic Computer Systems, Inc...... 8,100,000
500,000 * Metromail Corp................... 10,031,250
10,000 * MSC Industrial Direct Co., Inc... 432,500
78,000 * Oracle Systems Corp.............. 4,246,125
640,200 Pittston Burlington Group........ 15,844,950
500,000 * Platinum Technology Corp......... 7,750,000
235,000 * Policy Management Systems Corp... 12,822,187
900,000 Reynolds & Reynolds Co. (The),
Cl. A.......................... 17,437,500
50,000 Wackenhut Corp. (The) Cl. B...... 943,750
153,923,919
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
CHEMICAL & AGRICULTURAL
PRODUCTS-- 3.6%
65,000 Air Products & Chemicals, Inc.... $ 5,732,187
79,000 Du Pont (E. I.) De Nemours &
Co............................. 5,288,062
265,000 Engelhard Corp................... 5,697,500
165,000 Grace (W.R.) & Co................ 10,147,500
42,300 H.B. Fuller Co................... 2,183,738
79,000 Pioneer Hi-Bred International,
Inc............................ 5,846,000
260,000 Praxair, Inc..................... 14,332,500
49,227,487
COMMUNICATION SYSTEMS &
SERVICES-- 0.7%
160,000 * AirTouch Communications.......... 5,270,000
168,000 * Aspect Telecommunications Corp... 3,551,625
8,821,625
CONSUMER PRODUCTS &
SERVICES-- 2.6%
96,000 Campbell Soup Co................. 4,980,000
90,000 Colgate-Palmolive Co............. 6,817,500
45,000 CPC International, Inc........... 4,317,187
52,000 Gillette Co. (The)............... 5,148,000
72,000 Harley-Davidson, Inc............. 3,834,000
150,000 Philip Morris Companies, Inc..... 6,768,750
105,000 UST, Inc......................... 3,051,563
34,917,000
DIVERSIFIED COMPANIES-- 1.3%
70,200 General Electric Co.............. 4,927,162
35,000 * ITT Corp......................... 2,237,813
195,000 ITT Industries, Inc.............. 5,520,937
125,000 Morton International, Inc........ 4,179,688
16,865,600
ELECTRICAL EQUIPMENT &
SERVICES-- 5.7%
57,000 * 3Com Corp........................ 3,117,188
80,000 * Adaptec, Inc..................... 3,370,000
42,000 * Applied Materials, Inc........... 3,858,750
201,000 AVX Corp......................... 6,356,625
165,000 Baldor Electric Co............... 5,156,250
205,000 Belden, Inc...................... 7,943,750
70,000 Dallas Semiconductor Corp........ 2,734,375
72,000 Intel Corp....................... 6,610,500
210,000 * KLA Instruments Corp............. 12,718,125
85,000 * Lam Research Corp................ 4,494,375
42,000 * LSI Logic Corp................... 1,325,625
</TABLE>
(CONTINUED)
42
<PAGE>
<PAGE>
EVERGREEN
GROWTH AND INCOME FUND
[G&I Fund logo
appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
ELECTRICAL EQUIPMENT &
SERVICES-- CONTINUED
3,875 * NCR Corp......................... $ 124,242
500,000 Sensormatic Electronics Corp..... 6,687,500
200,000 * Unitrode Corp.................... 11,887,500
76,384,805
ENERGY-- 6.9%
25,000 Anadarko Petroleum Corp.......... 1,746,875
134,000 * Atwood Oceanics, Inc............. 11,390,000
250,000 Berry Petroleum Co. Cl. A........ 4,203,125
45,000 Coastal Corp. (The).............. 2,446,875
165,000 * Denbury Resources, Inc........... 2,877,188
63,140 Halliburton Co................... 2,904,440
110,000 * Houston Exploration, Co. (The)... 1,794,375
25,000 Kerr-McGee Corp.................. 1,565,625
66,161 Monterey Resources, Inc.......... 1,008,955
95,000 Murphy Oil Corp.................. 4,945,938
425,000 * Oryx Energy Co................... 10,492,187
775,000 * Reading & Bates Corp............. 25,768,750
150,000 * Santa Fe Energy Resources, Inc... 1,293,750
350,000 Southwestern Energy Co........... 4,812,500
100,000 Tosco Corp....................... 3,131,250
95,000 Transocean Offshore, Inc......... 7,760,312
63,520 Union Pacific Resource Group,
Inc............................ 1,568,150
87,000 Williams Companies, Inc. (The)... 3,980,250
93,690,545
FINANCE & INSURANCE-- 3.4%
340,000 Federal Home Loan Mortgage
Corp........................... 12,261,250
290,000 Federal National Mortgage
Association.................... 13,720,625
100,000 Hartford Financial Services
Group, Inc. (The).............. 8,712,500
115,000 LaSalle Re Holdings, Ltd......... 3,838,125
67,500 Meadowbrook Insurance Group,
Inc............................ 1,729,687
106,000 Price (T.) Rowe & Associates,
Inc............................ 5,750,500
46,012,687
FOOD RETAILING & DISTRIBUTION--
0.1%
50,000 * Dominick's Supermarkets, Inc..... 1,450,000
FOREST PRODUCTS-- 0.2%
120,000 Deltic Timber Corp............... 3,262,500
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
HEALTHCARE PRODUCTS &
SERVICES-- 11.2%
110,000 Abbott Laboratories.............. $ 7,198,125
65,000 * Amgen, Inc....................... 3,822,813
110,000 * Elan Corp, plc................... 5,225,000
425,000 * Foundation Health Systems, Inc.
Cl. A.......................... 13,759,375
178,500 * Health Management Associates,
Inc. Cl. A..................... 5,700,844
55,000 * HealthCare COMPARE Corp.......... 3,135,000
206,000 * HEALTHSOUTH Corp................. 5,459,000
24,000 Johnson & Johnson................ 1,495,500
90,100 * Laboratory Corp. of America
Holdings....................... 225,250
290,000 * Lincare Holdings, Inc............ 14,210,000
235,000 * Living Centers of America, Inc... 9,238,437
60,000 Manor Care, Inc.................. 1,980,000
200,000 McKesson Corp.................... 17,337,500
42,350 * MedPartners, Inc................. 1,005,813
99,200 Pfizer, Inc...................... 5,914,800
226,000 Schering-Plough Corp............. 12,331,125
225,000 Shared Medical System Corp....... 12,150,000
25,000 * Spacelabs Medical, Inc........... 550,000
138,000 * Sybron International Corp........ 5,649,375
120,000 * Tenet Healthcare Corp............ 3,592,500
95,000 * Vencor, Inc...................... 3,829,687
34,000 Warner-Lambert Co................ 4,749,375
40,020 * Wellpoint Health Networks, Inc... 1,970,985
370,000 West Co., Inc. (The)............. 10,868,750
151,399,254
INDUSTRIAL SPECIALTY PRODUCTS
& SERVICES-- 5.4%
42,625 * Autoliv, Inc..................... 1,483,883
150,000 Borg-Warner Automotive, Inc...... 8,362,500
42,000 Carpenter Technology Corp........ 1,995,000
65,500 Danaher Corp..................... 3,631,156
51,000 Dover Corp....................... 3,640,125
53,200 J & L Specialty Steel, Inc....... 718,200
525,000 JLG Industries, Inc.............. 5,807,812
33,500 Magna Group, Inc................. 2,236,125
23,650 Newmont Mining Corp.............. 975,563
594,000 Pittston Brink's Group........... 20,678,625
300,000 * Strattec Security Corp.**........ 5,925,000
210,000 Sundstrand Corp.................. 13,020,000
15,000 Tecumseh Products Co. Cl. A...... 843,750
25,000 Vulcan Materials Co.............. 2,146,875
22,500 York International Corp.......... 1,087,031
72,551,645
</TABLE>
(CONTINUED)
43
<PAGE>
<PAGE>
EVERGREEN
GROWTH AND INCOME FUND
[G&I Fund logo
appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
INFORMATION SERVICES &
TECHNOLOGY-- 0.2%
63,436 First Data Corp.................. $ 2,767,396
LEISURE & TOURISM-- 1.8%
90,000 Carnival, Corp. Cl. A............ 3,791,250
60,000 * Choice Hotels Holdings, Inc...... 1,087,500
821,400 Gaylord Entertainment Co. Cl. A.. 19,046,212
23,924,962
PAPER & PACKAGING-- 0.2%
75,000 Westvaco Corp.................... 2,507,813
PUBLISHING, BROADCASTING &
ENTERTAINMENT-- 7.1%
248,820 * American Radio Systems Corp.
Cl. A.......................... 10,792,567
49,805 Comcast Corp..................... 1,129,951
39,000 Disney Walt Co. (The)............ 3,151,688
270,000 * Emmis Broadcasting Corp. Cl. A... 11,508,750
42,000 * Evergreen Media Corp. Cl. A...... 1,932,000
425,000 * Jacor Communications, Inc........ 18,221,875
63,300 * Katz Media Group, Inc............ 684,431
40,000 Knight-Ridder, Inc............... 1,987,500
275,000 * Lin Television Corp.............. 13,234,375
15,000 McGraw-Hill Companies, Inc....... 1,017,188
43,000 Scripps, (E.W.) , Inc............ 1,757,625
185,000 TCA Cable TV, Inc................ 6,983,750
250,000 Time Warner, Inc................. 13,640,625
50,000 * U.S. West, Inc................... 1,103,125
35,000 * Univision Communications, Inc.
Cl. A.......................... 1,505,000
8,276 * Viacom Inc. Cl. A................ 252,935
2,800 Washington Post Co. (The)........ 1,158,500
168,000 * Young Broadcasting Inc. Cl. A.... 5,166,000
95,227,885
RETAILING & WHOLESALE-- 0.4%
109,800 * Carson Pirie Scott & Co.......... 3,643,987
12,500 Mercantile Stores Co., Inc....... 839,844
20,000 Sears, Roebuck & Co.............. 1,266,250
5,750,081
THRIFT INSTITUTIONS-- 1.9%
515,000 Webster Financial Corp........... 26,200,625
TRANSPORTATION-- 5.2%
840,000 * Atlas Air, Inc................... 22,260,000
190,000 Burlington Northern Santa Fe..... 18,346,875
202,200 Kansas City Southern Industries,
Inc............................ 15,240,825
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
TRANSPORTATION-- CONTINUED
126,000 Petroleum Helicopters, Inc....... $ 2,047,500
170,000 Union Pacific Corp............... 12,186,875
70,082,075
UTILITIES-- 2.0%
62,000 AT & T Corp...................... 2,282,375
100,000 Century Telephone Enterprises,
Inc............................ 3,675,000
64,000 Commonwealth Energy System....... 1,636,000
70,000 Houston Industries., Inc......... 1,465,625
50,000 Illinova Corp.................... 1,178,125
75,000 MCI Communications Corp.......... 2,648,437
40,000 Texas Utilities Co............... 1,417,500
400,000 TNP Enterprises, Inc............. 9,800,000
45,000 Unicom Corp...................... 1,020,938
60,000 * WorldCom, Inc.................... 2,096,250
27,220,250
TOTAL COMMON STOCKS
(COST $675,874,912)............ 1,041,520,127
<CAPTION>
PREFERRED STOCKS-- 0.0% (A)
<C> <C> <S> <C>
HEALTHCARE PRODUCTS &
SERVICES-- 0.0% (A)
130,000 * Fresenius National Med Care, Inc.
Series D....................... 9,750
TOTAL PREFERRED STOCKS
(COST $22,740)................. 9,750
<CAPTION>
CORPORATE BONDS-- 0.2%
<C> <C> <S> <C>
ENERGY-- 0.1%
Columbia Gas Systems, Inc. (The)
106,000 6.39%, 11/28/00.................. 106,511
101,000 6.61%, 11/28/02.................. 102,431
101,000 6.80%, 11/28/05.................. 102,803
101,000 7.05%, 11/28/07.................. 104,020
101,000 7.32%, 11/28/10.................. 104,639
101,000 7.42%, 11/28/15.................. 102,954
101,000 7.62%, 11/28/25.................. 103,187
726,545
PUBLISHING, BROADCASTING &
ENTERTAINMENT-- 0.1%
Time Warner, Inc.
206,000 6.7725%, 8/15/00................. 206,207
123,000 7.975%, 8/15/04.................. 130,578
247,000 8.11%, 8/15/06................... 266,452
247,000 8.18%, 8/15/07................... 267,709
92,000 Viacom Inc.
8.00%, 7/7/06.................. 91,080
962,026
TOTAL CORPORATE BONDS
(COST $1,595,465).............. 1,688,571
</TABLE>
(CONTINUED)
44
<PAGE>
<PAGE>
EVERGREEN
GROWTH AND INCOME FUND
[G&I Fund logo
appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
SHORT-TERM INVESTMENTS-- 22.1%
<C> <C> <S> <C>
COMMERCIAL PAPER-- 19.4%
AC Acquisition Holding Co.
12,325,000 5.58%, 8/21/97................... $ 12,286,792
1,100,000 5.48%, 9/16/97................... 1,092,298
7,800,000 American Honda Finance Corp.
5.53%, 9/12/97................. 7,749,677
1,300,000 BankAmerica Corp.
5.52%, 8/5/97.................. 1,299,203
13,600,000 BMW U.S. Capital Corp.
5.54%, 8/22/97................. 13,556,049
250,000 Case Equipment Loan Trust
5.50%, 9/5/97.................. 248,663
Columbia/HCA Healthcare Corp.
12,700,000 5.53%, 8/29/97................... 12,645,376
3,400,000 5.54%, 9/9/97.................... 3,379,594
10,450,000 Dupont (E.I.) De Nemours & Co.
5.50%, 8/27/97................... 10,408,490
4,200,000 Finova Capital Corp.
5.53%, 9/4/97.................. 4,178,064
800,000 Four Winds Funding Corp.
5.54%, 8/15/97................. 798,277
2,500,000 Lucent Technologies, Inc.
5.49%, 8/8/97.................. 2,497,331
Market Street Funding Corp.
2,150,000 5.54%, 8/22/97................... 2,143,052
3,350,000 5.53%, 9/22/97................... 3,323,241
9,500,000 5.55%, 9/22/97................... 9,423,842
2,150,000 Martin Marietta Corp.
5.63%, 8/7/97.................. 2,147,983
6,900,000 Merrill Lynch & Co., Inc.
5.52%, 9/3/97.................. 6,865,086
3,400,000 Metropolitan Life, Inc.
5.53%, 8/12/97................. 3,394,255
20,000,000 National Fuel Gas Co.
5.52%, 9/22/97................. 19,840,533
12,325,000 Pepsico, Inc.
5.53%, 8/15/97................. 12,298,494
16,750,000 PHH Corp.
5.57%, 8/21/97................. 16,698,168
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
SHORT-TERM INVESTMENTS-- CONTINUED
<C> <C> <S> <C>
COMMERCIAL PAPER-- CONTINUED
15,000,000 Sharp Electronics Corp.
5.52%, 9/19/97................. $ 14,887,300
12,350,000 Shell Oil Co.
5.45%, 8/25/97................. 12,305,128
8,600,000 Sigma Finance, Inc.
5.52%, 9/22/97................. 8,531,429
6,400,000 Southland Corp.
5.57%, 8/7/97.................. 6,394,059
20,000,000 Sumamer Life Insurance
5.50%, 8/11/97................. 19,969,445
9,150,000 Toyota Motor Credit Corp.
5.50%, 8/14/97................. 9,131,827
19,000,000 Trident Capital Finance, Inc.
5.52%, 9/4/97.................. 18,900,947
700,000 Twin Towers, Inc.
5.52%, 9/5/97.................. 696,243
250,000 UBS Finance Delaware, Inc.
5.50%, 8/7/97.................. 249,771
10,000,000 Windmill Funding Corp.
5.55%, 8/21/97................. 9,969,167
14,000,000 Xerox Corp.
5.46%, 8/28/97................. 13,942,670
261,252,454
GOVERNMENT AGENCY NOTES &
BONDS-- 2.7%
20,000,000 Federal Home Loan Mortgage
5.36%, 8/22/97................. 19,937,467
17,000,000 Federal National Mortgage
Association
5.39%, 8/29/97................. 16,928,732
36,866,199
TOTAL SHORT-TERM INVESTMENTS
(COST $298,118,653)............ 298,118,653
</TABLE>
<TABLE>
<C> <C> <S> <C> <C>
TOTAL INVESTMENTS--
(COST $975,611,770).... 99.5% 1,341,337,101
OTHER ASSETS AND
LIABILITIES-- NET...... 0.5 7,355,278
NET ASSETS............... 100.0% $1,348,692,379
</TABLE>
* Non-income producing securities.
** Investment in a non-controlled affiliate. The Fund owns over 5% of
outstanding voting securities. The Fund has a cost basis of $4,482,537 in
this issue at July 31, 1997. The Fund did not earn any income from this
investment during the period ended July 31, 1997.
(a) Less than one-tenth of a percent.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
[I&G Fund logo
appears here]
SCHEDULE OF INVESTMENTS
July 31, 1997
[CAPTION]
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
COMMON STOCKS-- 73.0%
<C> <C> <S> <C>
AUTOMOTIVE EQUIPMENT &
MANUFACTURING-- 0.5%
99,900 Dana Corp......................... $ 4,539,206
BANKS-- 17.8%
17,850 AmSouth Bancorp................... 770,897
2,200,000 Australian & New Zealand Banking
Group Ltd....................... 17,592,366
142,000 BancorpSouth, Inc................. 4,260,000
230,402 Bank of Melbourne Ltd............. 1,691,314
49,000 Bankers Trust New York Corp....... 4,958,187
192,500 + CB Bancshares, Inc................ 6,785,625
24,850 CCB Financial Corp................ 2,068,762
1,908,000 Commonwealth Bank of Australia.... 17,489,820
30,000 Deposit Guaranty Corp............. 982,500
77,606 F&M National Corp................. 2,100,212
490,300 First Hawaiian, Inc............... 18,386,250
3,000 First of America Bank Corp........ 166,500
20,000 First Tennessee National Corp..... 1,040,000
80,500 First Virginia Banks, Inc......... 5,655,125
7,500 Firstbank of Illinois Co.......... 323,438
4,100 FirstMerit Corp................... 199,875
150,000 Fleet Financial Group, Inc........ 10,181,250
33,551 Hudson Chartered Bancorp, Inc..... 949,913
212,940 Interchange Financial Services
Corp............................ 4,764,532
203,251 Jefferson Bankshares, Inc......... 8,079,227
175,900 Magna Group, Inc.................. 6,486,312
12,000 Mercantile Bancorporation, Inc.... 846,750
257,400 National Australia Bank, Ltd...... 18,790,200
274,537 ONBANCorp, Inc.................... 13,898,436
12,500 One Valley Bancorp of West
Virginia, Inc................... 538,281
79,254 Second Bancorp, Inc............... 1,842,656
74,250 Susquehanna Bancshares, Inc....... 2,060,438
3,500 United Bankshares, Inc............ 152,688
107,320 USBancorp, Inc.................... 6,358,710
1,700,000 Westpac Banking Corp., Ltd........ 11,076,722
170,496,986
BUILDING, CONSTRUCTION &
FURNISHINGS-- 1.0%
130,000 Armstrong World Industries,
Inc............................. 9,595,625
BUSINESS EQUIPMENT &
SERVICES-- 0.7%
60,000 International Business Machines
Corp............................ 6,345,000
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
CHEMICAL & AGRICULTURAL
PRODUCTS-- 1.5%
60,000 Du Pont (E.I.) De Nemours & Co.... $ 4,016,250
2,310 Ems-Chemie Holding AG............. 10,343,967
14,360,217
CONSUMER PRODUCTS &
SERVICES-- 0.2%
150,640 Knape & Vogt Manufacturing Co..... 2,410,240
DIVERSIFIED COMPANIES-- 1.1%
524,900 Tomkins Plc, ADR.................. 11,088,512
ELECTRICAL EQUIPMENT &
SERVICES-- 0.1%
31,000 Westinghouse Electric Corp........ 745,938
ENERGY-- 6.9%
247,600 Consolidated Natural Gas Co....... 14,329,850
353,600 Enron Global Power & Pipelines
LLC............................. 11,735,100
513,200 Equitable Resources, Inc.......... 15,299,775
473,491 Monterey Resources, Inc........... 7,220,738
60,000 Murphy Oil Corp................... 3,123,750
131,150 Northwest Natural Gas Co.......... 3,409,900
684,429 * Santa Fe Energy Resources, Inc.... 5,903,200
1,000,000 Santos Ltd.-- ADR................. 4,806,861
65,829,174
FINANCE & INSURANCE-- 2.1%
50,000 Chubb Corp........................ 3,534,156
100,000 LaSalle Re Holdings, Ltd.......... 3,337,500
195,800 Ohio Casualty Corp................ 9,202,600
71,600 Provident Co., Inc................ 4,537,650
20,611,906
FOOD & BEVERAGE PRODUCTS-- 0.3%
105,600 Sbarro, Inc....................... 2,844,600
HEALTHCARE PRODUCTS &
SERVICES-- 3.3%
45,000 Abbott Laboratories............... 2,944,687
53,000 ADAC Laboratories................. 1,033,500
100,000 Baxter International, Inc......... 5,781,250
59,400 Bristol-Myers Squibb Co........... 4,659,187
200,000 Glaxo Wellcome Plc-- ADR.......... 8,500,000
25,000 Rhone Poulenc Rorer, Inc.......... 2,360,938
47,500 Shared Medical System Corp........ 2,565,000
106,800 U.S. Surgical Corp................ 3,964,950
31,809,512
</TABLE>
(CONTINUED)
46
<PAGE>
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
[I&G Fund logo
appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES-- 0.2%
15,000 Fisher Scientific International,
Inc............................. $ 726,563
26,000 Keystone International, Inc....... 940,875
1,667,438
METAL PRODUCTS & SERVICES-- 0.8%
200,601 Freeport McMoRan Copper & Gold,
Inc. Class A.................... 5,466,377
29,800 Phelps Dodge Corp................. 2,534,863
8,001,240
PAPER & PACKAGING-- 0.4%
60,000 Union Camp Corp................... 3,513,750
PUBLISHING, BROADCASTING &
ENTERTAINMENT-- 0.5%
186,500 Reader's Digest Assn., Inc.
(The)........................... 4,650,844
REAL ESTATE-- 6.3%
85,400 Bradley Real Estate, Inc. REIT.... 1,601,250
55,000 Burnham Pacific Properties, Inc.
REIT............................ 783,750
150,000 Columbus Realty Trust REIT........ 3,553,125
120,000 Crown American Realty Trust REIT.. 1,162,500
649,800 Evans Withycombe Residential, Inc.
REIT............................ 13,767,637
381,200 Gables Residential Trust REIT..... 10,173,275
484,512 Horizon Group, Inc. REIT.......... 6,450,066
611,700 + Kranzco Realty Trust REIT......... 10,513,594
53,900 Patriot American Hospitality, Inc.
REIT............................ 1,344,144
158,000 Post Property, Inc. REIT.......... 6,310,125
157,500 Prentiss Properties Trust REIT.... 4,095,000
69,000 Sunstone Hotel Investors, Inc.
REIT............................ 966,000
60,720,466
RETAILING & WHOLESALE-- 1.4%
200,000 Mercantile Stores Co., Inc........ 13,437,500
TELECOMMUNICATION SERVICES &
EQUIPMENT-- 0.3%
5,000 Portugal Telecom SA, ADR.......... 201,250
95,000 Telefonica del Peru SA, ADR....... 2,345,313
2,546,563
THRIFT INSTITUTIONS-- 2.2%
82,782 CFX Corp.......................... 1,655,640
30,800 Eagle Financial Corp.............. 1,039,500
56,000 First Essex Bancorp, Inc.......... 994,000
363,000 IPC Holdings Ltd.................. 10,799,250
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
THRIFT INSTITUTIONS-- CONTINUED
120,000 Jacksonville Bancorp, Inc......... $ 1,965,000
99,000 + People's Savings Financial
Corp............................ 4,257,000
20,710,390
TRANSPORTATION-- 1.7%
452,000 KLM Royal Dutch Air Lines......... 16,159,000
UTILITIES-- ELECTRIC-- 15.4%
54,100 Carolina Power & Light Co......... 1,927,312
290,400 Central Hudson Gas & Electric
Corp............................ 9,637,650
155,200 Florida Progress Corp............. 4,995,500
239,000 FPL Group, Inc.................... 11,442,125
749,000 Houston Industries., Inc.......... 15,682,187
94,900 Illinova Corp..................... 2,236,081
200,000 LG&E Energy Corp.................. 4,362,500
1,177,100 Long Island Lighting Co........... 28,912,519
1,400,000 PP&L Resources, Inc............... 28,612,500
910,300 Public Service Enterprise Group,
Inc............................. 22,529,925
201,300 Texas Utilities Co................ 7,133,569
400,200 TNP Enterprises, Inc.............. 9,804,900
147,276,768
UTILITIES-- GAS-- 1.2%
73,300 Chesapeake Utilities Corp......... 1,218,613
115,900 New Jersey Resources Corp......... 3,665,337
136,800 Peoples Energy Corp............... 5,249,700
29,300 Piedmont Natural Gas Co., Inc..... 732,500
10,000 South Jersey Industry, Inc........ 227,500
8,300 Yankee Energy System, Inc......... 199,200
11,292,850
UTILITIES-- TELEPHONE-- 2.6%
565,100 Frontier Corp..................... 11,655,187
100,000 GTE Corp.......................... 4,650,000
230,000 U.S. West Communications Group,
Inc............................. 8,409,375
24,714,562
OTHER SECURITIES-- 4.5%........... 43,421,850
TOTAL COMMON STOCKS
(COST $617,914,115)............. 698,790,137
<CAPTION>
CONVERTIBLE PREFERRED-- 19.7%
<C> <C> <S> <C>
BANKS-- 0.9%
210,000 National Australia Bank, Ltd.
7.875%,......................... 6,168,750
50,000 SunAmerica, Inc.
$3.188, PERCS................... 2,287,500
8,456,250
</TABLE>
(CONTINUED)
47
<PAGE>
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
[I&G Fund logo
appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
CONVERTIBLE PREFERRED-- CONTINUED
<C> <C> <S> <C>
CHEMICAL & AGRICULTURAL
PRODUCTS-- 2.5%
655,700 Atlantic Richfield Co.
9.0%, DECS (Exchangeable for
Lyondell Petrochemical Co.
common stock)................... $ 16,146,613
225,000 Merrill Lynch & Co., Inc.
6.25%, Series IGL, STRYPES
(Exchangeable for IMC Global,
Inc. common stock).............. 7,889,062
24,035,675
COMMUNICATION SYSTEMS &
SERVICES-- 3.0%
696,000 AirTouch Communications
6.0%............................ 22,098,000
50,000 Worldcom, Inc.
8.0%, DECS...................... 6,131,250
28,229,250
ENERGY-- 0.8%
50,000 Calenergy Capital Trust
6.25%, TIDES.................... 3,725,000
50,000 Callon Petroleum Co.
8.50% Series A.................. 1,931,250
48,000 Nuevo Energy Co.
5.75%, Series A, TECONS......... 2,400,000
8,056,250
FINANCE & INSURANCE-- 1.8%
205,000 Allstate Corp. (The)
6.76%, due 1998, DECS
(Exchangeable for PMI Group,
Inc. common stock).............. 10,070,625
100,000 American General Corp.
$3.00, Series A, MIPS........... 6,950,000
17,020,625
FOOD & BEVERAGE PRODUCTS-- 2.6%
23,900 Ralston Purina Co.
7.00%, SAILS (Exchangeable for
Interstate Bakeries common
stock).......................... 1,487,775
405,000 Wendys Financing I
5.00%, TECONS................... 23,439,375
24,927,150
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES-- 0.3%
150,000 Worthington Industries, Inc.
7.25%, DECS (Exchangeable for
Rouge Steel Co. common stock)... 2,550,000
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
CONVERTIBLE PREFERRED-- CONTINUED
<C> <C> <S> <C>
METAL PRODUCTS & SERVICES-- 1.3%
212,800 Freeport McMoRan Copper & Gold,
Inc. 7.0%, EDS.................. $ 5,812,100
120,000 Timet Capital Trust I
6.625%, BUCS, 144A.............. 6,495,600
12,307,700
PAPER & PACKAGING-- 1.5%
295,000 Crown Cork & Seal Co., Inc.
4.5%, MIPS...................... 14,344,375
PUBLISHING, BROADCASTING &
ENTERTAINMENT-- 1.9%
220,000 Houston Industries, Inc.
7.00%, ACES (Exchangeable for
Time Warner, Inc. common
stock).......................... 11,797,500
253,000 Merrill Lynch & Co., Inc.
6.0%, STRYPES,
(exchangeable for Cox
Communications, Inc. common
stock).......................... 6,072,000
17,869,500
TRANSPORTATION-- 0.9%
78,400 CNF Trust I
5.00%, Series A, TECONS......... 4,508,000
75,000 Hvide Capital Trust
6.5%, 144A...................... 4,650,000
9,158,000
UTILITIES-- 2.2%
85,300 MCN Corp.
8.75%, PRIDES................... 2,473,700
315,000 Philippine Long Distance Telephone
Co., GDS 7.00%, Series III...... 18,742,500
21,216,200
TOTAL CONVERTIBLE PREFERRED
(COST $176,025,506)............. 188,170,975
<CAPTION>
PRINCIPAL
AMOUNT
CONVERTIBLE DEBENTURES-- 5.9%
<C> <C> <S> <C>
BANKS-- 0.2%
$1,500,000 Magna Group, Inc.
8.75%, 11/1/98.................. 2,025,000
BUSINESS EQUIPMENT &
SERVICES-- 0.1%
750,000 Personnel Group Of America, Inc.
5.75%, 7/1/04, 144A............. 860,625
</TABLE>
(CONTINUED)
48
<PAGE>
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
[I&G Fund logo
appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <C> <S> <C>
<CAPTION>
CONVERTIBLE DEBENTURES-- CONTINUED
<C> <C> <S> <C>
ELECTRICAL EQUIPMENT &
SERVICES-- 2.4%
$3,000,000 Adaptec Inc.
4.75%, 2/1/04, 144A............. $ 3,221,400
3,500,000 HMT Technology Corp.
5.75%, 1/15/04, 144A............ 3,185,000
9,700,000 Photronics, Inc.
6.00%, 6/1/04................... 11,882,500
2,500,000 Sci Systems, Inc.
5.00%, 5/1/06, 144A............. 4,362,500
22,651,400
ENERGY-- 0.6%
3,775,000 Offshore Logistics, Inc.
6.00%, 12/15/03, 144A........... 4,133,625
1,500,000 Swift Energy Co.
6.25%, 11/15/06................. 1,537,500
5,671,125
HEALTHCARE PRODUCTS &
SERVICES-- 0.3%
1,320,000 Beverly Enterprises, Inc.
7.625%, 3/15/03................. 1,346,400
1,369,000 Maxxim Medical, Inc.
6.75%, 3/1/03................... 1,533,280
2,879,680
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES-- 0.5%
500,000 Robbins & Myers, Inc.
6.50%, 9/1/03................... 727,500
3,000,000 Solectron Corp.
6.00%, 3/1/06, 144A............. 4,042,500
4,770,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <C> <S> <C>
<CAPTION>
CONVERTIBLE DEBENTURES-- CONTINUED
<C> <C> <S> <C>
OIL FIELD SERVICES-- 0.7%
$1,250,000 Key Energy Group, Inc.
7.50%, 7/1/03, 144A............. $ 2,712,500
1,000,000 Nabors Industries, Inc.
5.00%, 5/15/06.................. 1,855,000
2,000,000 Seacor Holdings, Inc.
5.375%, 11/15/06................ 2,240,000
6,807,500
RETAILING & WHOLESALE-- 1.1%
5,000,000 Costco Wholesale Companies, Inc.
5.75%, 5/15/02.................. 5,356,500
4,000,000 Proffitt's, Inc.
4.75%, 11/1/03.................. 4,900,000
10,256,500
TOTAL CONVERTIBLE DEBENTURES
(COST $47,069,353).............. 55,921,830
<CAPTION>
SHORT-TERM INVESTMENTS-- 1.4%
<C> <C> <S> <C>
GOVERNMENT AGENCY NOTES &
BONDS-- 1.4%
13,200,000 Federal Home Loan Bank
5.43%, 8/27/97.................. 13,148,234
TOTAL SHORT-TERM INVESTMENTS
(COST $13,148,234).............. 13,148,234
</TABLE>
<TABLE>
<C> <C> <S> <C> <C>
TOTAL INVESTMENTS--
(COST $854,157,208)..... 100.0% 956,031,176
OTHER ASSETS AND
LIABILITIES-- NET....... 0.0 437,776
NET ASSETS................ 100.0% $956,468,952
</TABLE>
(CONTINUED)
49
<PAGE>
<PAGE>
EVERGREEN
INCOME AND GROWTH FUND
[I&G Fund logo
appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
* Non-income producing securities.
+ Investment in a non-controlled affiliate. The Fund owns over 5% of outstanding
voting securities. The Fund has a cost basis of $18,665,490 in these issues at
July 31, 1997. The Fund earned $652,022 of income from these investments
during the period ended July 31, 1997.
144A-- Rule 144A securities are restricted as to resale to qualified
institutional investors.
ADR-- American Depository Receipts.
ACES-- Automatically Convertible Equity Securities.
BUCS-- Beneficial Unsecured Convertible Securities.
DECS-- Dividend Enhanced Convertible Stock.
EDS-- Exchangeable Depositary Shares.
GDS-- Global Depositary Shares.
MIPS-- Monthly Income Preferred Shares.
PERCS-- Preferred Equity Redemption Cumulative Stock.
PRIDES-- Preferred Redeemable Increased Dividend Equity Securities
REIT-- Real Estate Investment Trust.
SAILS-- Stock Appreciation Income Linked Securities.
STRYPES-- Structured Yield Product Exchangeable for Stock.
TECONS-- Term Convertible Shares.
TIDES-- Term Income Deferrable Equitable Securities.
GEOGRAPHIC DIVERSIFICATION
The Fund may invest in securities principally traded in markets outside the
United States. While investments in such securities are intended to reduce risk
by providing further diversification, foreign investments involve sovereign risk
in addition to the credit and market risks normally associated with domestic
securities. Foreign investments may be affected favorably or unfavorably by
changes in currency rates and exchange control regulations. At July 31, 1997,
the Fund had investments, excluding short-term investments, in the following
countries:
<TABLE>
<CAPTION>
MARKET PERCENTAGE OF
COUNTRY VALUE NET ASSETS
<S> <C> <C>
United States................................ $769,577,247 80.5%
Australia.................................... 79,256,554 8.3%
Bermuda...................................... 14,136,750 1.5%
Brazil....................................... 4,920,300 0.5%
Canada....................................... 7,611,549 0.8%
France....................................... 10,343,967 1.1%
Peru......................................... 2,345,313 0.2%
Portugal..................................... 201,250 0.0%
Philippines.................................. 18,742,500 2.0%
The Netherlands.............................. 16,159,000 1.7%
United Kingdom............................... 19,588,512 2.0%
$942,882,942 98.6%
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
<PAGE>
EVERGREEN
SMALL CAP EQUITY INCOME FUND
[Small Cap Equity
Income Fund logo
appears here]
SCHEDULE OF INVESTMENTS
July 31, 1997
[CAPTION]
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
COMMON STOCKS-- 75.3%
<C> <C> <S> <C>
AEROSPACE & DEFENSE-- 1.9%
18,000 Curtiss Wright Corp.................. $ 1,122,750
BANKS-- 11.2%
3,750 ABC Bancorp.......................... 62,813
21,000 Amcore Financial, Inc................ 609,000
3,000 BancorpSouth, Inc.................... 90,000
19,200 BSB Bancorp, Inc..................... 746,400
19,500 CB Bancshares, Inc................... 687,375
31,000 Commercial Bankshares, Inc........... 594,812
2,500 First Midwest Bancorp, Inc........... 87,500
30,000 First Oak Brook Bancshares Inc. Cl.
A.................................. 1,035,000
21,761 First State Bancorp.................. 424,339
9,747 Hudson Chartered Bancorp, Inc........ 275,962
30,000 Independent Bancshares, Inc.......... 435,000
13,962 Interchange Financial Services
Corp............................... 312,400
2,500 One Valley Bancorp of West Virginia,
Inc................................ 107,656
9,834 Pacific Century Financial Corp....... 502,149
14,000 South Alabama Bancorp, Inc........... 248,500
8,160 State Financial Services Corp........ 171,360
7,500 Susquehanna Bancshares, Inc.......... 208,125
6,598,391
BUILDING, CONSTRUCTION &
FURNISHINGS-- 2.6%
28,000 La-Z-Boy Chair Co.................... 1,051,750
30,100 Shelby Williams Industries, Inc...... 462,788
1,514,538
BUSINESS EQUIPMENT &
SERVICES-- 0.9%
21,400 American Business Products, Inc...... 518,950
CHEMICAL & AGRICULTURAL PRODUCTS--
1.8%
20,000 Learonal, Inc........................ 647,500
15,500 Stepan Co............................ 402,031
1,049,531
CONSUMER PRODUCTS &
SERVICES-- 3.8%
50,000 General Housewares Corp.............. 443,750
52,000 Oneida, Ltd.......................... 1,534,000
6,000 Polaris Industries, Inc.............. 173,625
2,800 Russ Berrie & Co., Inc............... 71,575
2,222,950
DIVERSIFIED COMPANIES-- 2.2%
32,000 Mathews International Corp........... 1,284,000
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
ELECTRICAL EQUIPMENT &
SERVICES-- 2.2%
28,000 BGS Systems, Inc..................... $ 805,000
37,500 Computer Language Research, Inc...... 365,625
10,000 Tech/OPS Sevcon, Inc................. 125,000
1,295,625
ENERGY-- 3.0%
32,800 Berry Petroleum Co. Cl. A............ 551,450
22,300 Penn Virginia Corp................... 1,234,863
1,786,313
FINANCE & INSURANCE-- 3.0%
800 American Heritage Life Investment
Corp............................... 30,400
26,600 Arthur J. Gallagher & Co............. 964,250
5,000 LaSalle Re Holdings, Ltd............. 166,875
16,000 Trenwick Group, Inc.................. 612,000
1,773,525
FOOD & BEVERAGE PRODUCTS-- 4.8%
69,000 Bridgford Foods Corp................. 681,375
2,000 Farmer Brothers Co................... 266,000
20,000 Lance, Inc........................... 395,000
16,000 Luby's Cafeterias, Inc............... 315,000
76,100 Piccadilly Cafeterias, Inc........... 994,056
10,000 Schultz Sav O Stores Inc............. 183,750
2,835,181
HEALTHCARE PRODUCTS &
SERVICES-- 1.1%
12,000 Kinetic Concepts, Inc................ 228,000
15,000 West Co., Inc. (The)................. 440,625
668,625
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES-- 8.7%
24,500 Badger Meter, Inc.................... 1,016,750
22,298 Flowserve Corp....................... 760,906
84,100 Gorman Rupp Co....................... 1,639,950
6,400 Met-Pro Corp......................... 102,400
25,200 Raven Industries, Inc................ 611,100
8,100 Research, Inc........................ 58,725
43,300 Spartech Corp........................ 665,737
8,000 Woodward Governor Co................. 279,000
5,134,568
MACHINERY-- DIVERSIFIED-- 3.5%
55,000 Hardinge Brothers, Inc............... 1,828,750
5,800 Tennant Co........................... 205,900
2,034,650
</TABLE>
(CONTINUED)
51
<PAGE>
<PAGE>
EVERGREEN
SMALL CAP EQUITY INCOME FUND
[Small Cap Equity
Income Fund logo
appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
OIL-- 1.6%
60,000 Quaker State Corp.................... $ 952,500
REAL ESTATE-- 6.3%
891 Bradley Real Estate, Inc. REIT....... 16,706
2,000 CBL & Associates Properties, Inc.
REIT............................... 51,000
36,000 Columbus Realty Trust REIT........... 852,750
46,000 Evans Withycombe Residential, Inc.
REIT............................... 974,625
20,000 Gables Residential Trust REIT........ 533,750
40,000 Innkeepers USA Trust REIT............ 562,500
1,000 Kranzco Realty Trust REIT............ 17,188
2,500 Sovran Self Storage, Inc. REIT....... 74,219
4,000 Summit Properties, Inc. REIT......... 79,000
40,000 Sunstone Hotel Investors, Inc. REIT.. 560,000
3,721,738
TELECOMMUNICATION SERVICES &
EQUIPMENT-- 1.1%
126,000 UNR Industries, Inc.................. 614,250
TEXTILE & APPAREL-- 0.5%
20,500 Superior Surgical Manufacturing Co.,
Inc................................ 281,875
THRIFT INSTITUTIONS-- 5.2%
6,000 First Essex Bancorp, Inc............. 106,500
4,000 First Financial Holdings, Inc........ 131,500
16,000 First Palm Beach Bancorp, Inc........ 514,000
50,000 Horizon Financial Corp............... 787,500
38,000 Jacksonville Bancorp, Inc............ 622,250
12,000 Maryland Federal Bancorp, Inc........ 594,000
7,000 People's Savings Financial Corp...... 301,000
3,056,750
UTILITIES-- ELECTRIC-- 3.2%
33,000 Madison Gas & Electric Co............ 668,250
26,000 Northwestern Public Service Co....... 487,500
14,000 Otter Tail Power Co.................. 446,250
12,000 TNP Enterprises, Inc................. 294,000
1,896,000
UTILITIES-- GAS-- 6.5%
29,100 Chesapeake Utilities Corp............ 483,787
30,000 Connecticut Energy Corp.............. 684,375
28,800 Delta Natural Gas Co., Inc........... 500,400
4,000 Energen Corp......................... 145,000
24,000 Enron Global Power & Pipelines LLC... 796,500
7,400 NUI Corp............................. 170,200
26,000 Public Service Company of North
Carolina, Inc...................... 513,500
26,000 Southwest Gas Corp................... 482,625
2,000 United Cities Gas Co................. 47,500
3,823,887
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
UTILITIES-- TELEPHONE-- 0.2%
4,000 Hickory Tech Corporation............. $ 122,000
TOTAL COMMON STOCKS
(COST $38,477,528)................. 44,308,597
<CAPTION>
CONVERTIBLE PREFERRED-- 7.5%
<C> <C> <S> <C>
ENERGY-- 1.0%
16,000 Callon Petroleum Co.
8.50%, Series A.................... 618,000
FINANCE & INSURANCE-- 1.3%
12,000 American Heritage Life Investment
Corp.
8.50%, PRIDES...................... 742,500
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES-- 1.8%
63,000 Worthington Industries, Inc.
7.25%, DECS........................ 1,071,000
PUBLISHING, BROADCASTING &
ENTERTAINMENT-- 0.2%
4,000 AMC Entertainment, Inc.
$1.75................................ 144,000
TRANSPORTATION-- 3.2%
30,000 Hvide Capital Trust
6.50%, 144A........................ 1,860,000
TOTAL CONVERTIBLE PREFERRED
(COST $3,831,717).................. 4,435,500
<CAPTION>
CONVERTIBLE DEBENTURES-- 11.2%
<C> <C> <S> <C>
BANKS-- 1.4%
700,000 First State Bancorp.
7.50%, 4/30/17..................... 840,000
BUILDING, CONSTRUCTION &
FURNISHINGS-- 0.5%
270,000 Toll Corp.
4.75%, 1/15/04..................... 289,238
BUSINESS EQUIPMENT &
SERVICES-- 0.4%
200,000 Personnel Group Of America, Inc.
5.75%, 7/1/04, 144A................ 229,500
ELECTRICAL EQUIPMENT &
SERVICES-- 2.2%
1,050,000 Photronics, Inc.
6.00%, 6/1/04...................... 1,286,250
ENERGY-- 1.7%
250,000 Key Energy Group, Inc.
7.50%, 7/1/03, 144A................ 542,500
425,000 Offshore Logistics, Inc.
6.00%, 12/15/03, 144A.............. 465,375
1,007,875
</TABLE>
(CONTINUED)
52
<PAGE>
<PAGE>
EVERGREEN
SMALL CAP EQUITY INCOME FUND
[Small Cap Equity
Income Fund logo
appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
CONVERTIBLE DEBENTURES-- CONTINUED
<C> <C> <S> <C>
HEALTHCARE PRODUCTS &
SERVICES-- 1.0%
140,000 Maxxim Medical, Inc.
6.75%, 3/1/03...................... $ 156,800
480,000 Meridian Diagnostics, Inc.
7.00%, 9/1/06...................... 410,400
567,200
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES-- 1.5%
610,000 Robbins & Myers, Inc.
6.50%, 9/1/03...................... 887,550
RETAILING & WHOLESALE-- 2.5%
500,000 Central Garden & Pet Co.
6.00%, 11/15/03, 144A.............. 567,500
750,000 Proffitt's, Inc.
4.75%, 11/1/03..................... 918,750
1,486,250
TOTAL CONVERTIBLE DEBENTURES
(COST $5,488,238).................. 6,593,863
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
SHORT-TERM INVESTMENTS-- 3.0%
<C> <C> <S> <C>
GOVERNMENT AGENCY NOTES &
BONDS-- 3.0%
Federal Home Loan Bank
350,000 5.37%, 8/15/97....................... $ 349,269
350,000 5.43%, 8/27/97....................... 348,627
Federal Home Loan Mortgage
250,000 5.36%, 8/22/97....................... 249,218
20,000 5.36%, 8/26/97....................... 19,926
270,000 5.37%, 8/27/97....................... 268,953
500,000 5.37%, 8/28/97....................... 497,986
1,733,979
TOTAL SHORT-TERM INVESTMENTS
(COST $1,733,979).................. 1,733,979
</TABLE>
<TABLE>
<C> <C> <S> <C> <C>
TOTAL INVESTMENTS--
(COST $49,531,462)....... 97.0% 57,071,939
OTHER ASSETS AND
LIABILITIES-- NET........ 3.0 1,773,247
NET ASSETS................. 100.0% $58,845,186
</TABLE>
144A-- Rule 144A securities are restricted as to resale to qualified
institutional investors.
DECS-- Dividend Enhanced Convertible Stock
PRIDES-- Preferred Redeemable Increased Dividend Equity Securities.
REIT-- Real Estate Investment Trust.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
<PAGE>
<PAGE>
EVERGREEN
UTILITY FUND
[Utility Fund logo
appears here]
SCHEDULE OF INVESTMENTS
July 31, 1997
[CAPTION]
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
COMMON STOCKS-- 80.9%
<C> <C> <S> <C>
AUTOMOTIVE EQUIPMENT &
MANUFACTURING-- 3.1%
100,000 Ford Motor Co................... $ 4,087,500
NATURAL GAS DIVERSIFIED-- 3.2%
108,075 Enron Corp...................... 4,100,095
OIL/GAS PRODUCTIONS-- 2.1%
350,000 Chesapeake Energy Corp.......... 2,756,250
TELECOMMUNICATION SERVICES &
EQUIPMENT-- 3.3%
50,000 Nokia Corp...................... 4,281,250
UTILITIES-- ELECTRIC-- 46.0%
82,000 American Electric Power Co.,
Inc........................... 3,669,500
100,000 Central Hudson Gas & Electric
Corp.......................... 3,318,750
100,000 CINergy Corp.................... 3,362,500
88,774 Duke Energy Corp................ 4,499,732
150,000 Enova Corp...................... 3,637,500
80,000 FPL Group, Inc.................. 3,830,000
100,000 GPU, Inc........................ 3,468,750
170,000 Houston Industries., Inc........ 3,559,375
140,000 Illinova Corp................... 3,298,750
125,000 Long Island Lighting Co......... 3,070,313
48,000 NIPSCO Industries, Inc.......... 2,022,000
100,000 PacifiCorp...................... 2,231,250
100,000 Pinnacle West Capital Corp...... 3,156,250
150,000 PP&L Resources, Inc............. 3,065,625
100,000 Public Service Co. of
Colorado...................... 4,162,500
100,000 Public Service Enterprise Group,
Inc........................... 2,475,000
100,000 Texas Utilities Co.............. 3,543,750
120,000 UtiliCorp United, Inc........... 3,577,500
59,949,045
UTILITIES-- GAS-- 5.7%
105,000 NICOR Inc....................... 3,845,625
50,000 Northwest Natural Gas Co........ 1,300,000
60,000 Peoples Energy Corp............. 2,302,500
7,448,125
UTILITIES-- TELEPHONE-- 17.5%
100,000 ALLTEL Corp..................... 3,287,500
40,000 Ameritech Corp.................. 2,697,500
70,000 BellSouth Corp.................. 3,316,250
80,000 GTE Corp........................ 3,720,000
50,000 SBC Communications, Inc......... 2,959,375
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
UTILITIES-- TELEPHONE-- CONTINUED
60,000 Sprint Corp..................... $ 2,970,000
105,000 U.S. West Communications Group,
Inc........................... 3,839,062
22,789,687
TOTAL COMMON STOCKS
(COST $91,325,591)............ 105,411,952
<CAPTION>
CONVERTIBLE PREFERRED-- 18.8%
<C> <C> <S> <C>
OIL INTEGRATED DOMESTIC-- 2.2%
50,000 Unocal Corp.
6.25% 144A.................... 2,931,250
PUBLISHING, BROADCASTING &
ENTERTAINMENT-- 2.5%
60,000 Houston Industries Inc.
(Exchangeable for Time Warner
Common Stock)
7.0%, ACES.................... 3,217,500
UTILITIES-- ELECTRIC-- 3.9%
50,000 AES Trust I Series A
5.375% TECONS................. 3,200,000
100,000 Companhia Paranaense De Energia-
Copel, Plc-- ADR
6.25%, TIDES.................. 1,925,000
5,125,000
UTILITIES-- GAS-- 2.9%
70,000 MCN Financing III
8% PRIDES..................... 3,832,500
UTILITIES-- TELEPHONE-- 7.3%
125,000 AirTouch Communications, Inc.
6.0%, Series B................ 3,968,750
24,000 Compania de Inversiones en
Telecomunicaciones SA PRIDES*
(exchangeable for ADS's of
Telefonica de Argentina SA)
7.00% 3/3/98 144A............. 1,758,000
100,000 Sprint Corp. (Exchangeable for
Southern N.E. Telephone Common
Stock)
8.25%, DECS................... 3,737,500
9,464,250
TOTAL CONVERTIBLE PREFERRED
(COST $21,681,625)............ 24,570,500
</TABLE>
(CONTINUED)
54
<PAGE>
<PAGE>
EVERGREEN
UTILITY FUND
[Utility Fund logo
appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <C> <S> <C>
<CAPTION>
REPURCHASE AGREEMENT-- 2.3%
<C> <C> <S> <C>
$2,958,828 Donaldson Lufkin & Jenrette
Securities purchased 7/31/97,
5.75%, maturing 8/1/97, maturing
value $2,959,301(a)
(cost-- $2,958,828)............. $ 2,958,828
</TABLE>
<TABLE>
<C> <C> <S> <C> <C>
TOTAL INVESTMENTS--
(COST $115,966,044)...... 102.0% 132,941,280
OTHER ASSETS AND
LIABILITIES-- NET........ (2.0) (2,558,607)
NET ASSETS................. 100.0% $130,382,673
</TABLE>
* Non-income producing securities.
(a) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at July 31, 1997.
144A-- Rule 144A securities are restricted as to resale to qualified
institutional investors.
ADR-- American Depository Receipts.
ADS-- American Depository Shares.
ACES-- Automatically Convertible Equity Securities.
DECS-- Dividend Enhanced Convertible Stock.
PRIDES-- Preferred Redeemable Increased Dividend Equity Securities.
PRIDES*-- Provisionally Redeemable Income Debt Exchangeable for Stock.
TECONS-- Term Convertible Shares.
TIDES-- Term Income Deferrable Equitable Securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
<PAGE>
<PAGE>
EVERGREEN
VALUE FUND
[Value Fund logo
appears here]
SCHEDULE OF INVESTMENTS
July 31, 1997
[CAPTION]
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
COMMON STOCKS-- 91.7%
<C> <C> <S> <C>
AUTOMOTIVE EQUIPMENT &
MANUFACTURING-- 1.4%
626,500 Ford Motor Co................... $ 25,608,188
BANKS-- 16.3%
400,000 BankBoston Corp................. 33,975,000
380,000 Bankers Trust Corp.............. 38,451,250
800,000 Central Fidelity Banks, Inc..... 31,900,000
95,000 Chase Manhattan Corp............ 10,788,438
75,000 Citicorp CCI.................... 10,181,250
675,000 CoreStates Financial Corp....... 41,639,062
450,000 First Chicago NBD Corp.......... 34,143,750
367,500 First Security Corp............. 9,876,563
425,000 First Tennessee National Corp... 22,100,000
405,000 NationsBank Corp................ 28,830,937
230,000 SouthTrust Corp................. 10,838,750
240,000 Summit Bancorp.................. 14,145,000
200,000 Union Planters Corp............. 10,575,000
297,445,000
BUSINESS EQUIPMENT &
SERVICES-- 2.2%
841,610 * Cabletron Systems, Inc.......... 28,509,539
100,000 International Business Machines
Corp.......................... 10,575,000
39,084,539
CHEMICAL & AGRICULTURAL
PRODUCTS-- 1.9%
366,200 Dow Chemical Co................. 34,789,000
COMMUNICATION SYSTEMS &
SERVICES-- 1.0%
225,500 * Cisco Systems, Inc.............. 17,941,344
CONSUMER PRODUCTS &
SERVICES-- 2.7%
200,000 Black & Decker Corp............. 8,425,000
888,300 Philip Morris Companies, Inc.... 40,084,538
48,509,538
DIVERSIFIED COMPANIES-- 11.7%
300,000 Fluor Corp...................... 18,450,000
808,200 Fortune Brands, Inc............. 28,640,587
1,000,000 Frontier Corp................... 20,625,000
673,200 General Electric Co............. 47,250,225
170,000 Loews Corp...................... 18,381,250
560,000 Tenneco, Inc.................... 26,110,000
657,015 * Tyco International Ltd.......... 53,218,215
212,675,277
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
ELECTRICAL EQUIPMENT &
SERVICES-- 4.8%
350,000 * Applied Materials, Inc.......... $ 32,156,250
850,000 CINergy Corp.................... 28,581,250
463,900 Varian Associates, Inc.......... 27,022,175
87,759,675
ENERGY-- 9.4%
1,027,500 Cabot Corp...................... 29,091,094
247,600 Mobil Corp...................... 18,941,400
637,500 Sonat, Inc...................... 31,795,312
154,800 Texaco, Inc..................... 17,966,475
1,350,000 Tosco Corp...................... 42,271,875
700,000 Union Pacific Resource Group,
Inc........................... 17,281,250
360,000 Unocal Corp..................... 14,400,000
171,747,406
FINANCE & INSURANCE-- 2.7%
300,000 Hartford Financial Services
Group, Inc. (The)............. 26,137,500
525,000 Travelers Property Casualty
Corp. Cl. A................... 22,575,000
48,712,500
FOOD & BEVERAGE
PRODUCTS-- 5.3%
1,481,500 American Stores Co.............. 37,407,875
808,200 * Gallaher Group Plc.............. 14,497,087
644,400 General Mills, Inc.............. 44,544,150
96,449,112
HEALTHCARE PRODUCTS &
SERVICES-- 7.5%
555,800 Bristol-Myers Squibb Co......... 43,595,563
790,300 Pharmacia & Upjohn, Inc......... 29,833,825
1,349,999 * Tenet Healthcare Corp........... 40,415,595
1,100,800 * Value Health, Inc............... 22,016,000
135,860,983
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES-- 1.1%
229,600 Aluminum Co. of America......... 20,319,600
INFORMATION SERVICES &
TECHNOLOGY-- 1.2%
240,800 Intel Corp...................... 22,108,450
</TABLE>
(CONTINUED)
56
<PAGE>
<PAGE>
EVERGREEN
VALUE FUND
[Value Fund logo
appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
MANUFACTURING--
DISTRIBUTING-- 1.3%
500,000 * Teradyne, Inc................... $ 23,375,000
OIL-- 6.6%
342,900 Ashland Inc..................... 18,216,563
200,000 Enron Corp...................... 7,587,500
370,000 Kerr-McGee Corp................. 23,171,250
965,000 Ultramar Diamond Shamrock
Corp.......................... 32,086,250
841,350 Williams Companies., Inc.
(The)......................... 38,491,762
119,553,325
RETAILING & WHOLESALE-- 0.5%
1,602,475 * Shoney's Inc.................... 9,715,005
TELECOMMUNICATION SERVICES &
EQUIPMENT-- 3.0%
646,600 Nokia Corp...................... 55,365,125
TRANSPORTATION-- 3.4%
262,100 Burlington Northern Santa Fe.... 25,309,031
322,900 Norfolk Southern Corp........... 35,761,175
61,070,206
UTILITIES-- 7.7%
500,000 CMS Energy Corp................. 18,500,000
700,000 GPU, Inc........................ 24,281,250
683,200 GTE Corp........................ 31,768,800
637,800 Houston Industries., Inc........ 13,353,937
1,200,000 Illinova Corp................... 28,275,000
671,800 NICOR Inc....................... 24,604,675
140,783,662
TOTAL COMMON STOCKS
(COST $1,195,171,697)......... 1,668,872,935
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
CONVERTIBLE PREFERRED-- 1.5%
<C> <C> <S> <C>
ENERGY-- 0.7%
227,664 Unocal Corp.
6.25%, 144A................... $ 13,346,802
MANUFACTURING--
DISTRIBUTING-- 0.8%
98,200 Case Corp.
4.50%, Series A, 144A......... 14,877,300
TOTAL CONVERTIBLE PREFERRED
(COST $24,199,251)............ 28,224,102
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<C> <C> <S> <C> <C>
<CAPTION>
REPURCHASE AGREEMENT-- 6.6%
<C> <C> <S> <C> <C>
Donaldson, Lufkin & Jenrette
$119,249,601 Securities purchased 7/31/97,
5.75%, maturing 8/1/97,
maturing value $119,268,648
(a)
(cost-- $119,249,601)........ 119,249,601
TOTAL INVESTMENTS--
(COST
$1,338,620,549)...... 99.8% 1,816,346,638
OTHER ASSETS AND
LIABILITIES-- NET.... 0.2 3,875,282
NET ASSETS............. 100.0% $1,820,221,920
</TABLE>
* Non-income producing securities.
(a) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at
July 31, 1997.
144A-- Rule 144A securities are restricted as to resale to qualified
institutional investors.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57
<PAGE>
<PAGE>
KEYSTONE
FUND FOR TOTAL RETURN
[Fund for Total Return
logo appears here]
SCHEDULE OF INVESTMENTS
July 31, 1997
[CAPTION]
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
COMMON STOCKS-- 88.2%
<C> <C> <S> <C>
AEROSPACE & DEFENSE-- 1.8%
30,000 Boeing Co. (The)................ $ 1,764,375
9,800 Northrop Grumman Corp........... 1,128,225
2,892,600
AUTOMOTIVE EQUIPMENT &
MANUFACTURING-- 3.5%
50,000 Federal-Mogul Corp.............. 1,768,750
50,000 Ford Motor Co................... 2,043,750
40,000 * Lear Corp....................... 1,915,000
5,727,500
BANKS-- 3.3%
30,000 BankAmerica Corp................ 2,265,000
17,500 BankBoston Corp................. 1,486,406
15,000 Chase Manhattan Corp............ 1,703,438
5,454,844
BUSINESS EQUIPMENT &
SERVICES-- 6.9%
50,000 * BMC Software, Inc............... 3,009,375
20,000 Hewlett-Packard Co.............. 1,401,250
30,000 International Business Machines
Corp.......................... 3,172,500
100,000 * Laidlaw, Inc. Cl. B............. 1,593,750
15,000 * Microsoft Corp.................. 2,120,156
11,297,031
CAPITAL GOODS-- 3.9%
70,000 General Electric Co............. 4,913,125
50,000 Regal Beloit Corp............... 1,415,625
6,328,750
CHEMICAL & AGRICULTURAL
PRODUCTS-- 4.6%
15,000 Dow Chemical Co................. 1,425,000
30,000 Du Pont (E. I.) De Nemours &
Co............................ 2,008,125
50,000 Monsanto Co..................... 2,490,625
46,500 Morton International, Inc....... 1,554,844
7,478,594
CONSUMER PRODUCTS &
SERVICES-- 4.7%
15,000 Gillette Co. (The).............. 1,485,000
75,000 Philip Morris Companies, Inc.... 3,384,375
10,000 Procter & Gamble Co. (The)...... 1,521,250
29,900 Stewart Enterprises, Inc.
Cl. A......................... 1,295,044
7,685,669
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
DIVERSIFIED COMPANIES-- 5.2%
100,000 * Brown & Sharpe Manufacturing Co.
Cl. A......................... $ 1,325,000
75,000 * Owens Illinois, Inc............. 2,587,500
50,000 * Thermo Electron Corp............ 1,709,375
35,000 Tyco International Ltd.......... 2,835,000
8,456,875
ELECTRICAL EQUIPMENT &
SERVICES-- 8.1%
50,033 * Analog Devices, Inc............. 1,572,912
30,000 Emerson Electric Co............. 1,770,000
20,000 Intel Corp...................... 1,835,625
40,000 Motorola, Inc................... 3,212,500
25,000 * Solectron Corp.................. 1,971,875
25,000 Texas Instruments, Inc.......... 2,875,000
13,237,912
ENVIRONMENTAL SERVICES-- 1.2%
50,000 * USA Waste Services, Inc......... 2,015,625
FINANCE & INSURANCE-- 6.1%
25,000 Hartford Life, Inc. Cl. A....... 1,028,125
15,000 Loews Corp...................... 1,621,875
30,000 Nationwide Financial Services,
Inc.
Cl. A......................... 907,500
20,000 PMI Group, Inc. (The)........... 1,180,000
12,500 Student Loan Marketing
Association................... 1,874,219
25,000 Travelers Group, Inc............ 1,798,437
35,000 Travelers Property Casualty
Corp. Cl. A................... 1,505,000
9,915,156
FOOD & BEVERAGE
PRODUCTS-- 3.2%
25,000 Anheuser Busch Companies.,
Inc........................... 1,073,438
50,000 * General Cigar Holdings, Inc.
Cl. A......................... 1,231,250
35,000 H.J. Heinz Co................... 1,616,562
30,000 Nabisco Holdings Corp.
Cl. A......................... 1,275,000
5,196,250
HEALTHCARE PRODUCTS &
SERVICES-- 7.2%
40,000 American Home Products Corp..... 3,297,500
60,000 Bristol-Myers Squibb Co......... 4,706,250
35,000 Johnson & Johnson............... 2,180,938
14,700 Merck & Co., Inc................ 1,527,881
11,712,569
</TABLE>
(CONTINUED)
58
<PAGE>
<PAGE>
KEYSTONE
FUND FOR TOTAL RETURN
[Fund for Total Return
logo appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
LEISURE & TOURISM-- 0.9%
35,000 Carnival, Corp. Cl. A........... $ 1,474,375
NATURAL GAS-- 1.6%
15,000 Burlington Resources, Inc....... 708,750
25,000 Enron Corp...................... 948,438
20,000 Sonat, Inc...................... 997,500
2,654,688
OIL-- 5.8%
15,000 Amoco Corp...................... 1,410,000
10,000 Atlantic Richfield Co........... 748,125
15,000 Chevron Corp.................... 1,186,875
20,000 Exxon Corp...................... 1,285,000
12,000 Mobil Corp...................... 918,000
18,700 Pennzoil Co..................... 1,460,937
12,000 Texaco, Inc..................... 1,392,750
25,000 Unocal Corp..................... 1,000,000
9,401,687
OIL FIELD SERVICES-- 1.4%
21,000 * Falcon Drilling Co., Inc........ 606,375
16,000 Halliburton Co.................. 736,000
12,000 Schlumberger Ltd................ 916,500
2,258,875
PAPER & PACKAGING-- 1.3%
50,000 Unisource Worldwide, Inc........ 931,250
20,000 Weyerhaeuser Co................. 1,245,000
2,176,250
PUBLISHING, BROADCASTING &
ENTERTAINMENT-- 1.1%
75,000 Westinghouse Electric Corp...... 1,804,688
REAL ESTATE-- 7.4%
30,000 Storage USA, Inc. REIT.......... 1,237,500
30,000 Bay Apartment Communities, Inc.
REIT.......................... 1,153,125
40,000 * Boston Properties, Inc. REIT.... 1,115,000
25,000 Camden Property Trust REIT...... 756,250
50,000 * Equity Office Properties Trust
REIT.......................... 1,450,000
25,000 Equity Residential Properties
Trust REIT.................... 1,260,937
30,000 First Industrial Realty Trust,
Inc. REIT..................... 928,125
33,000 Golf Trust of America, Inc.
REIT.......................... 932,250
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
REAL ESTATE-- CONTINUED
45,000 Patriot American Hospitality,
Inc. REIT..................... $ 1,122,187
49,000 Prentiss Properties Trust
REIT.......................... 1,274,000
25,000 Spieker Properties, Inc. REIT... 929,688
12,159,062
RETAILING & WHOLESALE-- 2.3%
50,000 * Costco Companies., Inc.......... 1,895,313
50,000 Wal-Mart Stores, Inc............ 1,878,125
3,773,438
TELECOMMUNICATION SERVICES &
EQUIPMENT-- 5.1%
17,000 Ameritech Corp.................. 1,146,437
14,000 BellSouth Corp.................. 663,250
50,000 Deutsche Telekom AG, ADR........ 1,168,750
18,000 GTE Corp........................ 837,000
15,000 Loral Space & Communications
Ltd. 144A..................... 761,250
25,000 Northern Telecom Ltd............ 2,614,062
19,000 SBC Communications, Inc......... 1,124,563
8,315,312
TRANSPORTATION-- 1.6%
50,300 Canadian National Railway Co.... 2,612,456
TOTAL COMMON STOCKS
(COST $101,764,915)........... 144,030,206
<CAPTION>
CONVERTIBLE PREFERRED-- 5.4%
<C> <C> <S> <C>
BUSINESS EQUIPMENT &
SERVICES-- 0.6%
35,000 Houghton Mifflin Co
6.00%, SAILS.................. 962,500
FINANCE & INSURANCE-- 2.6%
15,000 Allstate Corp. (The)
6.76%, Exchangeable Notes Due
4/15/98, DECS................. 736,875
10,000 Conseco, Inc.
7.00%, PRIDES................. 1,430,000
25,000 Salomon, Inc.
7.625%, DECS.................. 900,000
27,500 SunAmerica, Inc.
$3.188, PERCS................. 1,258,125
4,325,000
</TABLE>
(CONTINUED)
59
<PAGE>
<PAGE>
KEYSTONE
FUND FOR TOTAL RETURN
[Fund for Total Return
logo appears here]
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
CONVERTIBLE PREFERRED-- CONTINUED
<C> <C> <S> <C>
METAL PRODUCTS &
SERVICES-- 0.5%
15,000 Timet Capital Trust I
6.625%, BUCS, 144A............ $ 815,625
RETAILING & WHOLESALE-- 1.7%
50,000 Kmart Financing I
7.75%......................... 2,725,000
TOTAL CONVERTIBLE PREFERRED
(COST $8,562,374)............. 8,828,125
<CAPTION>
CONVERTIBLE DEBENTURES-- 2.8%
<C> <C> <S> <C>
CAPITAL GOODS-- 0.4%
400,000 Robbins & Myers, Inc.
6.50%, 9/1/03................. 572,000
CONSUMER PRODUCTS &
SERVICES-- 1.3%
1,000,000 CUC International, Inc.
3.00%, 2/15/02, 144A.......... 1,033,440
1,000,000 Sunrise Assisted Living, Inc.
5.50%, 6/15/02, 144A.......... 1,170,000
2,203,440
ENVIRONMENTAL SERVICES-- 0.5%
500,000 US Filter Corp.
6.00%, 9/15/05, 144A.......... 868,125
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
<CAPTION>
CONVERTIBLE DEBENTURES-- CONTINUED
<C> <C> <S> <C>
RETAILING & WHOLESALE-- 0.6%
750,000 Staples, Inc.
4.50%, 10/1/00, 144A.......... $ 944,063
TOTAL CONVERTIBLE DEBENTURES
(COST $3,650,000)............. 4,587,628
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<C> <C> <S> <C> <C>
<CAPTION>
REPURCHASE AGREEMENT-- 3.5%
<C> <C> <S> <C> <C>
$ 5,803,000 Keystone Joint Repurchase
Agreement Investments in
repurchase agreements, in a
joint trading account purchased
7/31/97, 5.815%, maturing
8/1/97, maturing value
$5,803,937 (a)
(cost-- $5,803,000)............. 5,803,000
TOTAL INVESTMENTS--
(COST $119,780,289)..... 99.9% 163,248,959
OTHER ASSETS AND
LIABILITIES-- NET....... 0.1 88,810
NET ASSETS................ 100.0% $163,337,769
</TABLE>
* Non-income producing securities.
(a) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at
July 31, 1997.
144A-- Rule 144A securities are restricted as to resale to qualified
institutional investors.
ADR-- American Depository Receipts.
BUCS-- Beneficial Unsecured Convertible Securities.
DECS-- Dividend Enhanced Convertible Stock.
PERCS-- Preferred Equity Redemption Cumulative Stock.
PRIDES-- Preferred Redeemable Increased Dividend Equity Securities.
REIT-- Real Estate Investment Trust.
SAILS-- Stock Appreciation Income Linked Securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60
<PAGE>
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 1997
<TABLE>
<CAPTION>
GROWTH AND INCOME AND SMALL CAP
INCOME GROWTH EQUITY INCOME UTILITY VALUE
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at value (identified cost,
$975,611,770, $854,157,208,
$49,531,462, $115,966,044,
$1,338,620,549 and $119,780,289,
respectively).......................... $1,341,337,101 $956,031,176 $57,071,939 $132,941,280 $1,816,346,638
Foreign currency, at value (identified
cost, $728,604)........................ 0 726,556 0 0 0
Cash..................................... 59,553 59,996 12,054 0 0
Receivable for Fund shares sold.......... 11,793,688 498,983 1,660,187 84,097 3,962,110
Receivable for investments sold.......... 800,785 28,229,812 216,544 0 0
Dividends and interest receivable........ 811,482 2,671,624 120,475 550,448 3,268,766
Foreign tax reclaim receivable........... 0 144,457 0 14,773 0
Unamortized organization expense......... 0 0 8,209 0 0
Prepaid expenses and other assets........ 52,196 38,807 21,087 33,975 28,818
Total assets......................... 1,354,854,805 988,401,411 59,110,495 133,624,573 1,823,606,332
LIABILITIES
Payable for investments purchased........ 3,216,172 30,496,546 172,816 3,009,441 0
Payable for Fund shares repurchased...... 1,207,905 294,886 7,938 117,608 1,943,742
Advisory fee payable..................... 1,015,659 782,429 45,607 38,105 800,295
Distribution fee payable................. 499,041 38,950 8,420 53,137 306,191
Due to related parties................... 4,571 28,942 0 0 41,718
Accrued expenses and other liabilities... 219,078 290,706 30,528 23,609 292,466
Total liabilities.................... 6,162,426 31,932,459 265,309 3,241,900 3,384,412
NET ASSETS................................. $1,348,692,379 $956,468,952 $58,845,186 $130,382,673 $1,820,221,920
NET ASSETS REPRESENTED BY
Paid-in capital.......................... $ 959,749,798 $810,797,352 $50,140,980 $101,882,730 $1,282,326,696
Undistributed net investment income
(accumulated distributions in excess of
net investment income)................. (10,791) 1,748,160 54,884 170,484 2,948,270
Accumulated undistributed net realized
gains on investments................... 23,228,041 42,048,929 1,108,845 11,354,223 57,220,865
Net unrealized appreciation on
investments and foreign currency
related transactions................... 365,725,331 101,874,511 7,540,477 16,975,236 477,726,089
Total net assets $1,348,692,379 $956,468,952 $58,845,186 $130,382,673 $1,820,221,920
NET ASSETS CONSIST OF
Class A.................................. $ 166,331,730 $ 11,954,975 $ 4,239,468 $ 91,638,151 $ 392,231,175
Class B.................................. 542,405,067 43,976,735 9,461,757 36,737,882 276,255,780
Class C.................................. 23,970,925 950,016 2,769,938 379,331 2,506,664
Class Y.................................. 615,984,657 899,587,226 42,374,023 1,627,309 1,149,228,301
Total net assets..................... $1,348,692,379 $956,468,952 $58,845,186 $130,382,673 $1,820,221,920
SHARES OUTSTANDING
Class A.................................. 6,101,395 499,294 270,261 8,001,245 15,920,815
Class B.................................. 20,017,483 1,846,743 604,997 3,205,111 11,217,935
Class C.................................. 884,622 39,893 177,252 33,095 101,865
Class Y.................................. 22,572,148 37,520,690 2,697,579 142,005 46,643,861
NET ASSET VALUE PER SHARE
Class A.................................. $ 27.26 $ 23.94 $ 15.69 $ 11.45 $ 24.64
Class A-- Offering price (based on sales
charge of 4.75%)....................... $ 28.62 $ 25.13 $ 16.47 $ 12.02 $ 25.87
Class B.................................. $ 27.10 $ 23.81 $ 15.64 $ 11.46 $ 24.63
Class C.................................. $ 27.10 $ 23.81 $ 15.63 $ 11.46 $ 24.61
Class Y.................................. $ 27.29 $ 23.98 $ 15.71 $ 11.46 $ 24.64
<CAPTION>
FUND FOR
TOTAL RETURN
<S> <C>
ASSETS
Investments at value (identified cost,
$975,611,770, $854,157,208,
$49,531,462, $115,966,044,
$1,338,620,549 and $119,780,289,
respectively).......................... $163,248,959
Foreign currency, at value (identified
cost, $728,604)........................ 0
Cash..................................... 513
Receivable for Fund shares sold.......... 411,079
Receivable for investments sold.......... 0
Dividends and interest receivable........ 215,198
Foreign tax reclaim receivable........... 5,909
Unamortized organization expense......... 0
Prepaid expenses and other assets........ 47,897
Total assets......................... 163,929,555
LIABILITIES
Payable for investments purchased........ 202,118
Payable for Fund shares repurchased...... 324,156
Advisory fee payable..................... 0
Distribution fee payable................. 41,347
Due to related parties................... 0
Accrued expenses and other liabilities... 24,165
Total liabilities.................... 591,786
NET ASSETS................................. $163,337,769
NET ASSETS REPRESENTED BY
Paid-in capital.......................... $111,464,266
Undistributed net investment income
(accumulated distributions in excess of
net investment income)................. (165,774)
Accumulated undistributed net realized
gains on investments................... 8,570,610
Net unrealized appreciation on
investments and foreign currency
related transactions................... 43,468,667
Total net assets $163,337,769
NET ASSETS CONSIST OF
Class A.................................. $ 47,811,561
Class B.................................. 94,308,619
Class C.................................. 21,125,065
Class Y.................................. 92,524
Total net assets..................... $163,337,769
SHARES OUTSTANDING
Class A.................................. 2,311,356
Class B.................................. 4,571,389
Class C.................................. 1,023,037
Class Y.................................. 4,487
NET ASSET VALUE PER SHARE
Class A.................................. $ 20.69
Class A-- Offering price (based on sales
charge of 4.75%)....................... $ 21.72
Class B.................................. $ 20.63
Class C.................................. $ 20.65
Class Y.................................. $ 20.62
</TABLE>
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
61
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
STATEMENTS OF OPERATIONS
For the fiscal period ended July 31, 1997*
<TABLE>
<CAPTION>
GROWTH AND INCOME AND SMALL CAP
INCOME GROWTH EQUITY INCOME UTILITY VALUE
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest............................ $ 6,788,322 $ 1,911,374 $ 214,624 $ 315,785 $ 3,327,625
Dividends (net of foreign
withholding taxes of $2,188,
$616,492, $0, $13,932, $66,594 and
$9,996, respectively)............. 5,272,237 25,509,573 442,383 3,384,897 21,209,437
TOTAL INCOME.......................... 12,060,559 27,420,947 657,007 3,700,682 24,537,062
EXPENSES
Management fee...................... 5,736,248 4,371,784 180,153 382,537 4,753,235
Distribution Plan expenses.......... 2,437,220 204,355 22,325 351,019 1,858,117
Transfer agent fees................. 972,612 615,213 17,226 114,229 656,927
Administrative and services fees.... 0 0 0 28,507 352,965
Registration fees................... 164,820 37,061 35,869 40,605 60,606
Custodian fees...................... 150,578 166,126 20,060 64,097 249,997
Printing............................ 149,010 83,901 5,783 42,726 157,711
Professional fees................... 18,699 32,599 16,637 17,318 33,306
Amortization of organization
expenses.......................... 0 0 3,327 13,764 0
Trustees fees....................... 5,555 27,903 3,966 3,756 31,008
Other............................... 20,626 13,309 3,076 9,895 30,523
Total expenses.................. 9,655,368 5,552,251 308,422 1,068,453 8,184,395
Less: Indirectly paid expenses...... (2,717) (20,952) (1,323) (8,117) (1,012)
Fee waivers and/or reimbursement
from Investment Adviser........... 0 0 (35,183) (146,640) 0
Net expenses.................... 9,652,651 5,531,299 271,916 913,696 8,183,383
NET INVESTMENT INCOME............... 2,407,908 21,889,648 385,091 2,786,986 16,353,679
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gain from
Investments....................... 23,375,321 43,892,663 1,108,151 11,377,530 58,756,392
Foreign currency related
transactions.................... 0 194,336 0 0 0
Net realized gain on investments and
foreign currency related
transactions...................... 23,375,321 44,086,999 1,108,151 11,377,530 58,756,392
Net change in unrealized
appreciation on investments and
foreign currency related
transactions...................... 188,382,086 42,180,501 6,035,485 (1,002,220) 239,837,361
Net realized and unrealized gain on
investments and foreign currency
related transactions.............. 211,757,407 86,267,500 7,143,636 10,375,310 298,593,753
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS................... $214,165,315 $108,157,148 $ 7,528,727 $13,162,296 $314,947,432
<CAPTION>
FUND FOR
TOTAL RETURN
<S> <C>
INVESTMENT INCOME
Interest............................ $ 460,814
Dividends (net of foreign
withholding taxes of $2,188,
$616,492, $0, $13,932, $66,594 and
$9,996, respectively)............. 1,820,865
TOTAL INCOME.......................... 2,281,679
EXPENSES
Management fee...................... 546,092
Distribution Plan expenses.......... 646,911
Transfer agent fees................. 190,455
Administrative and services fees.... 10,250
Registration fees................... 52,957
Custodian fees...................... 39,951
Printing............................ 17,484
Professional fees................... 19,568
Amortization of organization
expenses.......................... 0
Trustees fees....................... 0
Other............................... 5,445
Total expenses.................. 1,529,113
Less: Indirectly paid expenses...... (14,235 )
Fee waivers and/or reimbursement
from Investment Adviser........... 0
Net expenses.................... 1,514,878
NET INVESTMENT INCOME............... 766,801
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gain from
Investments....................... 8,565,826
Foreign currency related
transactions.................... 67,725
Net realized gain on investments and
foreign currency related
transactions...................... 8,633,551
Net change in unrealized
appreciation on investments and
foreign currency related
transactions...................... 15,979,989
Net realized and unrealized gain on
investments and foreign currency
related transactions.............. 24,613,540
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS................... $25,380,341
</TABLE>
* Each of the Funds changed their fiscal year end to July 31. The Statements of
Operations are for the following periods: for Fund for Total Return, the eight
months ended July 31, 1997; for Growth and Income Fund, Small Cap Equity
Income Fund, Utility Fund and Value Fund, the seven months ended July 31,
1997; and Income and Growth Fund, the six months ended July 31, 1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
62
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
GROWTH AND INCOME AND SMALL CAP
INCOME GROWTH EQUITY INCOME UTILITY VALUE
FUND** FUND* FUND** FUND** FUND**
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest.................... $ 4,585,041 $ 3,845,707 $ 86,418 $ 452,100 $ 2,988,223
Dividends (net of foreign
withholding taxes of
$3,984, $1,278,418, $0,
$18,580, $23,070, and
$5,991, respectively)..... 6,484,943 53,144,164 221,319 6,423,879 34,250,957
TOTAL INCOME.................. 11,069,984 56,989,871 307,737 6,875,979 37,239,180
EXPENSES
Management fee.............. 5,287,338 8,823,541 63,333 725,733 6,950,730
Distribution Plan
expenses.................. 1,415,844 279,046 5,239 635,044 2,452,995
Transfer agent fees......... 329,132 871,200 50,036 224,192 631,695
Administrative service
fees...................... 0 0 0 70,215 670,060
Registration fees........... 219,285 101,620 71,195 45,962 166,097
Custodian fees.............. 184,341 289,300 59,940 91,954 328,227
Professional fees........... 48,605 32,629 15,594 30,625 87,113
Printing.................... 34,721 383,131 11,634 85,237 294,326
Insurance................... 13,443 54,655 7,193 2,903 17,785
Trustees fees............... 11,987 49,710 5,346 1,386 17,961
Interest expense............ 0 220,252 0 0 0
Amortization of organization
expenses.................. 0 0 5,744 0 0
Other....................... 4,589 33,481 1,724 21,098 23,242
Total expenses.......... 7,549,285 11,138,565 296,978 1,934,349 11,640,231
Less: Indirectly paid
expenses.................. 0 0 0 0 0
Fee waivers and/or
reimbursement from
Investment Adviser........ (5,000) 0 (196,739) (396,483) 0
Net expenses............ 7,544,285 11,138,565 100,239 1,537,866 11,640,231
NET INVESTMENT INCOME....... 3,525,699 45,851,306 207,498 5,338,113 25,598,949
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain on:
Investment transactions..... 11,660,346 27,747,824 329,191 3,459,558 216,135,176
Foreign currency
transactions.............. 0 84,342 0 0 0
Covered call options........ 0 784,954 0 0 0
Net realized gain on
investments, foreign
currency and covered call
options................... 11,660,346 28,617,120 329,191 3,459,558 216,135,176
Net change in unrealized
appreciation
(depreciation) of:
Investments............... 102,653,116 43,509,351 833,605 (3,509,310) 11,014,356
Foreign currency
transactions............ 0 (1,098) 0 0 0
Net change in unrealized
appreciation on
investments and foreign
currency.................. 102,653,116 43,508,253 833,605 (3,509,310) 11,014,356
Net realized and unrealized
gain (loss) on
investments, foreign
currencies and covered
call options.............. 114,313,462 72,125,373 1,162,796 (49,752) 227,149,532
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $117,839,161 $117,976,679 $ 1,370,294 $5,288,361 $252,748,481
<CAPTION>
FUND FOR
TOTAL RETURN***
<S> <C>
INVESTMENT INCOME
Interest.................... $ 289,654
Dividends (net of foreign
withholding taxes of
$3,984, $1,278,418, $0,
$18,580, $23,070, and
$5,991, respectively)..... 1,807,120
TOTAL INCOME.................. 2,096,774
EXPENSES
Management fee.............. 448,266
Distribution Plan
expenses.................. 448,502
Transfer agent fees......... 165,963
Administrative service
fees...................... 27,066
Registration fees........... 43,415
Custodian fees.............. 62,950
Professional fees........... 28,295
Printing.................... 21,283
Insurance................... 0
Trustees fees............... 0
Interest expense............ 0
Amortization of organization
expenses.................. 0
Other....................... 9,069
Total expenses.......... 1,254,809
Less: Indirectly paid
expenses.................. (11,473)
Fee waivers and/or
reimbursement from
Investment Adviser........ 0
Net expenses............ 1,243,336
NET INVESTMENT INCOME....... 853,438
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain on:
Investment transactions..... 1,756,488
Foreign currency
transactions.............. 156,942
Covered call options........ 0
Net realized gain on
investments, foreign
currency and covered call
options................... 1,913,430
Net change in unrealized
appreciation
(depreciation) of:
Investments............... 16,084,525
Foreign currency
transactions............ 0
Net change in unrealized
appreciation on
investments and foreign
currency.................. 16,084,525
Net realized and unrealized
gain (loss) on
investments, foreign
currencies and covered
call options.............. 17,997,955
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $18,851,393
</TABLE>
*-- year ended January 31, 1997; **-- year ended December 31, 1996; and
***-- year ended November 30, 1996
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
63
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
STATEMENTS OF CHANGES IN NET ASSETS
For the fiscal period ended July 31, 1997*
<TABLE>
<CAPTION>
GROWTH AND INCOME AND SMALL CAP
INCOME GROWTH EQUITY INCOME UTILITY VALUE
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income........... $ 2,407,908 $ 21,889,648 $ 385,091 $ 2,786,986 $ 16,353,679
Net realized gain on investments
and foreign currency related
transactions.................. 23,375,321 44,086,999 1,108,151 11,377,530 58,756,392
Net change in unrealized
appreciation on investments
and foreign currency related
transactions.................. 188,382,086 42,180,501 6,035,485 (1,002,220) 239,837,361
Net increase in net assets
resulting from operations... 214,165,315 108,157,148 7,528,727 13,162,296 314,947,432
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income:
Class A....................... (342,216) (248,453) (11,097) (2,030,267) (2,943,697)
Class B....................... 0 (790,199) (17,755) (639,939) (1,098,593)
Class C....................... 0 (19,512) (6,915) (6,346) (9,131)
Class Y....................... (2,065,692) (20,540,101) (297,079) (40,667) (10,102,012)
In excess of net investment
income:
Class A....................... (15,263) 0 0 0 0
Class B....................... 0 0 0 0 0
Class C....................... 0 0 0 0 0
Class Y....................... (92,131) 0 0 0 0
Net realized gain on
investments:
Class A....................... 0 0 (1,322) 0 0
Class B....................... 0 0 (2,116) 0 0
Class C....................... 0 0 (824) 0 0
Class Y....................... 0 0 (35,401) 0 0
Total distributions to
shareholders................ (2,515,302) (21,598,265) (372,509) (2,717,219) (14,153,433)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold:
Class A....................... 71,457,862 2,114,635 3,587,404 494,721 21,010,689
Class B....................... 236,281,947 6,799,151 8,164,490 1,349,827 50,184,755
Class C....................... 12,290,220 66,274 2,529,352 13,731 1,018,408
Class Y....................... 145,062,792 8,929,797 36,298,202 259,189 137,931,136
Net asset value of shares issued
in reinvestment of
distributions:
Class A....................... 352,344 225,329 12,209 1,602,820 2,835,467
Class B....................... 3,746 710,178 19,472 571,837 1,086,571
Class C....................... 0 15,602 7,467 5,855 9,201
Class Y....................... 1,641,399 18,026,674 165,502 17,278 6,740,306
Payment for shares redeemed:
Class A....................... (15,573,680) (1,121,079) (37,984) (14,079,531) (24,085,514)
Class B....................... (18,705,681) (2,685,666) (142,514) (6,601,705) (15,577,742)
Class C....................... (1,340,999) (189,123) (91,950) (66,033) (355,395)
Class Y....................... (75,878,946) (67,224,141) (8,498,878) (779,946) (184,606,592)
Net increase (decrease) in net
assets resulting from
capital share
transactions................ 355,591,004 (34,332,369) 42,012,772 (17,211,957) (3,808,710)
Total increase (decrease) in
net assets................ 567,241,017 52,226,514 49,168,990 (6,766,880) 296,985,289
NET ASSETS
Beginning of period............. 781,451,362 904,242,438 9,676,196 137,149,553 1,523,236,631
END OF PERIOD................... $1,348,692,379 $956,468,952 $58,845,186 $130,382,673 $1,820,221,920
Undistributed net investment
income.......................... $ (10,791) $ 1,748,160 $ 54,884 $ 170,484 $ 2,948,270
<CAPTION>
FUND FOR
TOTAL RETURN
<S> <C>
OPERATIONS
Net investment income........... $ 766,801
Net realized gain on investments
and foreign currency related
transactions.................. 8,633,551
Net change in unrealized
appreciation on investments
and foreign currency related
transactions.................. 15,979,989
Net increase in net assets
resulting from operations... 25,380,341
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income:
Class A....................... (368,590)
Class B....................... (315,494)
Class C....................... (78,332)
Class Y....................... 0
In excess of net investment
income:
Class A....................... 0
Class B....................... 0
Class C....................... 0
Class Y....................... 0
Net realized gain on
investments:
Class A....................... 0
Class B....................... 0
Class C....................... 0
Class Y....................... 0
Total distributions to
shareholders................ (762,416)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold:
Class A....................... 9,464,499
Class B....................... 48,001,066
Class C....................... 6,315,824
Class Y....................... 85,018
Net asset value of shares issued
in reinvestment of
distributions:
Class A....................... 331,175
Class B....................... 275,911
Class C....................... 73,683
Class Y....................... 0
Payment for shares redeemed:
Class A....................... (10,121,645)
Class B....................... (11,087,288)
Class C....................... (3,193,608)
Class Y....................... 0
Net increase (decrease) in net
assets resulting from
capital share
transactions................ 40,144,635
Total increase (decrease) in
net assets................ 64,762,560
NET ASSETS
Beginning of period............. 98,575,209
END OF PERIOD................... $163,337,769
Undistributed net investment
income.......................... $ (165,774)
</TABLE>
* Each of the Funds changed their fiscal year end to July 31. The Statements of
Changes in Net Assets are for the following periods: for Fund for Total
Return, the eight months ended July 31, 1997; for Growth and Income Fund,
Small Cap Equity Income Fund, Utility Fund and Value Fund, the seven months
ended July 31, 1997; and Income and Growth Fund, the six months ended July 31,
1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
64
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH AND INCOME AND SMALL CAP
INCOME GROWTH EQUITY INCOME UTILITY VALUE
FUND** FUND* FUND** FUND** FUND**
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income............ $ 3,525,699 $ 45,851,306 $ 207,498 $ 5,338,113 $ 25,598,949
Net realized gain (loss) on
investments and foreign
currency related
transactions................... 11,660,346 28,617,120 329,191 3,459,558 216,135,176
Net change in unrealized
appreciation (depreciation) on
investments and foreign
currency related transactions.. 102,653,116 43,508,253 833,605 (3,509,310) 11,014,356
Net increase (decrease) in net
assets resulting from
operations................... 117,839,161 117,976,679 1,370,294 5,288,361 252,748,481
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income:
Class A........................ (346,965) (379,400) (7,618) (3,887,411) (5,758,586)
Class B........................ (65,442) (1,152,510) (9,798) (1,173,301) (1,939,188)
Class C........................ (2,714) (39,024) (710) (11,835) (14,165)
Class Y........................ (3,093,315) (45,453,926) (186,039) (229,804) (19,538,457)
In excess of net investment
income:
Class A........................ (602) 0 0 0 0
Class B........................ (114) 0 0 0 0
Class C........................ (5) 0 0 0 0
Class Y........................ (5,366) 0 0 0 0
Net realized gain on investments:
Class A........................ (1,255,570) 0 (12,475) (2,465,668) (45,832,278)
Class B........................ (3,652,416) 0 (27,933) (979,858) (27,532,324)
Class C........................ (141,822) 0 (1,936) (10,055) (204,292)
Class Y........................ (6,629,223) 0 (279,606) (53,192) (141,841,285)
In excess of net realized gain on
investments:
Class A........................ (4,767) 0 0 (16,378) (229,771)
Class B........................ (13,868) 0 0 (6,509) (138,028)
Class C........................ (538) 0 0 (67) (1,024)
Class Y........................ (25,172) 0 0 (353) (711,093)
Total distributions to
shareholders................. (15,237,899) (47,024,860) (526,115) (8,834,431) (243,740,491)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold:
Class A........................ 76,959,622 5,918,321 285,774 2,626,118 23,895,251
Class B........................ 185,314,202 19,899,458 341,494 8,401,385 47,442,303
Class C........................ 7,294,757 684,918 48,265 274,673 832,827
Class Y........................ 200,509,060 28,512,144 3,628,792 1,120,499 324,801,783
Net asset value of shares issued
in reinvestment of
distributions:
Class A........................ 1,546,893 341,281 19,575 5,051,093 49,562,452
Class B........................ 3,613,927 1,003,747 36,358 1,935,353 28,693,188
Class C........................ 115,108 29,305 1,697 20,723 215,421
Class Y........................ 7,729,161 40,431,169 316,899 74,971 108,890,530
Payment for shares redeemed:
Class A........................ (21,729,967) (1,646,836) (213,193) (16,984,094) (39,736,035)
Class B........................ (13,411,376) (2,649,792) (11,697) (6,652,890) (18,943,891)
Class C........................ (597,615) (328,507) (22,125) (135,909) (377,207)
Class Y........................ (135,786,868) (193,045,864) (912,038) (6,607,014) (316,060,052)
Shares issued in acquistion of
FFB Lexicon Capital
Appreciation Fund.............. 159,432,723 0 0 0 0
Class Y........................
Shares issued in acquistion of
FFB Lexicon Select Value
Fund........................... 0 0 0 0 95,883,824
Class Y........................
Shares issued in acquistion of
FFB Lexicon Equity Fund........ 0 0 0 0 14,077,973
Class Y........................
Net increase (decrease) in net
assets resulting from capital
share transactions........... 470,989,627 (100,850,656) 3,519,801 (10,875,092) 319,178,367
Total increase (decrease) in
net assets................. 573,590,889 (29,898,837) 4,363,980 (14,421,162) 328,186,357
NET ASSETS
Beginning of period.............. 207,860,473 934,141,275 5,312,216 151,570,715 1,195,050,274
END OF PERIOD.................... $781,451,362 $904,242,438 $ 9,676,196 $137,149,553 $1,523,236,631
Undistributed net investments
income (accumulated distributions
in excess of net investment
income).......................... $ 6,087 $ 1,321,369 $ 3,333 $ 100,717 $ 292,413
<CAPTION>
FUND FOR
TOTAL
RETURN***
<S> <C>
OPERATIONS
Net investment income............ $ 853,438
Net realized gain (loss) on
investments and foreign
currency related
transactions................... 1,913,430
Net change in unrealized
appreciation (depreciation) on
investments and foreign
currency related transactions.. 16,084,525
Net increase (decrease) in net
assets resulting from
operations................... 18,851,393
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income:
Class A........................ (539,949 )
Class B........................ (273,356 )
Class C........................ (112,998 )
Class Y........................ 0
In excess of net investment
income:
Class A........................ 0
Class B........................ 0
Class C........................ 0
Class Y........................ 0
Net realized gain on investments:
Class A........................ (754,551 )
Class B........................ (808,105 )
Class C........................ (270,058 )
Class Y........................ 0
In excess of net realized gain on
investments:
Class A........................ 0
Class B........................ 0
Class C........................ 0
Class Y........................ 0
Total distributions to
shareholders................. (2,759,017 )
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold:
Class A........................ 11,818,891
Class B........................ 23,867,265
Class C........................ 6,185,359
Class Y........................ 0
Net asset value of shares issued
in reinvestment of
distributions:
Class A........................ 1,193,118
Class B........................ 974,432
Class C........................ 362,645
Class Y........................ 0
Payment for shares redeemed:
Class A........................ (6,837,747 )
Class B........................ (8,156,600 )
Class C........................ (4,069,150 )
Class Y........................ 0
Shares issued in acquistion of
FFB Lexicon Capital
Appreciation Fund.............. 0
Class Y........................
Shares issued in acquistion of
FFB Lexicon Select Value
Fund........................... 0
Class Y........................
Shares issued in acquistion of
FFB Lexicon Equity Fund........ 0
Class Y........................
Net increase (decrease) in net
assets resulting from capital
share transactions........... 25,338,213
Total increase (decrease) in
net assets................. 41,430,589
NET ASSETS
Beginning of period.............. 57,144,620
END OF PERIOD.................... $98,575,209
Undistributed net investments
income (accumulated distributions
in excess of net investment
income).......................... $ (233,100 )
</TABLE>
*-- year ended January 31, 1997; **-- year ended December 31, 1996; and
***-- year ended November 30, 1996
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
65
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH AND INCOME AND SMALL CAP
INCOME GROWTH EQUITY INCOME UTILITY VALUE
FUND** FUND* FUND** FUND** FUND**
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income............ $ 1,291,809 $ 53,831,619 $ 159,722 $ 3,889,362 $ 29,177,545
Net realized gain on
investments.................... 5,206,584 18,456,772 232,995 6,197,705 50,649,714
Net change in unrealized
appreciation (depreciation) on
investments.................... 28,342,991 126,889,047 786,111 17,561,515 196,633,111
Net increase in net assets
resulting from operations.... 34,841,384 199,177,438 1,178,828 27,648,582 276,460,370
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income:
Class A........................ (93,250) (115,623) (5,089) (2,358,231) (6,221,428)
Class B........................ (104,385) (338,493) (4,875) (1,177,734) (2,281,745)
Class C........................ (5,584) (10,937) (421) (6,275) (12,030)
Class Y........................ (1,088,590) (53,434,290) (155,906) (298,965) (19,218,021)
In excess of net investment
income:
Class A........................ (518) 0 0 0 0
Class B........................ (580) 0 0 0 0
Class C........................ (31) 0 0 0 0
Class Y........................ (6,050) 0 0 0 0
Net realized gain on investments:
Class A........................ (468,664) 0 (8,583) (4,315,104) (12,319,599)
Class B........................ (1,156,785) 0 (10,427) (1,416,839) (5,935,694)
Class C........................ (48,338) 0 (900) (9,717) (33,758)
Class Y........................ (3,524,196) 0 (196,151) (316,309) (32,229,160)
Total distributions to
shareholders................. (6,496,971) (53,899,343) (382,352) (9,899,174) (78,251,435)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold:
Class A........................ 17,981,665 4,349,310 210,178 1,885,138 12,018,651
Class B........................ 43,094,733 13,730,445 248,049 4,989,454 18,428,845
Class C........................ 1,808,328 469,424 19,533 109,078 307,770
Class Y........................ 68,368,276 34,117,050 973,677 1,826,095 278,777,942
Net asset value of shares issued
in reinvestment of
distributions:
Class A........................ 545,083 101,915 13,667 5,335,896 17,771,730
Class B........................ 1,234,636 302,547 14,752 2,287,981 7,933,916
Class C........................ 50,033 8,587 1,317 15,571 45,762
Class Y........................ 3,882,512 48,020,816 285,901 84,251 40,900,972
Payment for shares redeemed:
Class A........................ (1,048,468) (423,996) (30,712) (13,551,249) (35,747,673)
Class B........................ (1,763,506) (692,877) (26,158) (6,110,450) (13,658,563)
Class C........................ (96,507) (4,731) 0 (37,152) (149,074)
Class Y........................ (27,997,743) (253,504,082) (807,286) (487,291) (193,762,147)
Shares issued in acquisition of
ABT Utility Income Fund, Inc.
Class A........................ 0 0 0 99,162,259 0
Shares issued in acquisition of
ABT Growth & Income Trust
Class A........................ 0 0 0 0 63,356,435
Net increase (decrease) in net
assets resulting from capital
share transactions........... 106,059,042 (153,525,592) 902,918 95,509,581 196,224,566
Total increase (decrease) in
net assets................. 134,403,455 (8,247,497) 1,699,394 113,258,989 394,433,501
NET ASSETS
Beginning of period.............. 73,457,018 942,388,772 3,612,822 38,311,726 800,616,773
END OF PERIOD.................... $207,860,473 $934,141,275 $ 5,312,216 $151,570,715 $1,195,050,274
Undistributed net investment
income........................... $ 0 $ 2,410,572 $ 0 $ 68,090 $ 1,943,860
<CAPTION>
FUND FOR
TOTAL
RETURN***
<S> <C>
OPERATIONS
Net investment income............ $ 708,899
Net realized gain on
investments.................... 2,737,174
Net change in unrealized
appreciation (depreciation) on
investments.................... 7,477,718
Net increase in net assets
resulting from operations.... 10,923,791
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income:
Class A........................ (466,226 )
Class B........................ (149,198 )
Class C........................ (93,475 )
Class Y........................ 0
In excess of net investment
income:
Class A........................ (138,497 )
Class B........................ (110,954 )
Class C........................ (54,085 )
Class Y........................ 0
Net realized gain on investments:
Class A........................ (1,220,537 )
Class B........................ (868,298 )
Class C........................ (423,790 )
Class Y........................ 0
Total distributions to
shareholders................. (3,525,060 )
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold:
Class A........................ 3,618,417
Class B........................ 13,668,348
Class C........................ 3,797,262
Class Y........................ 0
Net asset value of shares issued
in reinvestment of
distributions:
Class A........................ 1,664,588
Class B........................ 1,002,721
Class C........................ 527,153
Class Y........................ 0
Payment for shares redeemed:
Class A........................ (5,386,215 )
Class B........................ (3,483,004 )
Class C........................ (2,107,107 )
Class Y........................ 0
Shares issued in acquisition of
ABT Utility Income Fund, Inc.
Class A........................ 0
Shares issued in acquisition of
ABT Growth & Income Trust
Class A........................ 0
Net increase (decrease) in net
assets resulting from capital
share transactions........... 13,302,163
Total increase (decrease) in
net assets................. 20,700,894
NET ASSETS
Beginning of period.............. 36,443,726
END OF PERIOD.................... $57,144,620
Undistributed net investment
income........................... $ (35,682 )
</TABLE>
*-- year ended January 31, 1996; **-- year ended December 31, 1995 and
***-- year ended November 30, 1995
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
66
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
COMBINED NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Evergreen Keystone Growth and Income Funds consist of Evergreen Growth and
Income Fund ("Growth and Income"), Evergreen Income and Growth Fund ("Income and
Growth"), Evergreen Small Cap Equity Income Fund ("Small Cap"), Evergreen
Utility Fund ("Utility"), Evergreen Value Fund ("Value") and Keystone Fund for
Total Return ("Total Return"), each of which is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as diversified, open-end
management investment companies. Growth and Income is a Massachusetts business
trust organized in 1986. Income and Growth is a Massachusetts business trust
organized in 1986, and was originally organized as a Maryland Corporation in
1978. Small Cap is a separate series of The Evergreen American Retirement Trust,
a Massachusetts business trust organized in 1987. Utility and Value are separate
series of The Evergreen Investment Trust, a Massachusetts business trust
organized in 1984. Total Return is a Massachusetts business trust organized in
1986. Growth and Income, Income and Growth, Small Cap, Utility, Value and Total
Return, are collectively referred to herein as the "Funds".
The Funds offer Class A, Class B, Class C and Class Y shares. Class A shares are
sold with a maximum front-end sales charge of 4.75%. Class B and Class C shares
are sold without a front-end sales charge, but pay a higher ongoing distribution
fee than Class A. Class B shares are sold subject to a contingent deferred sales
charge that is payable upon redemption and decreases depending on how long the
shares have been held. Class C shares are sold subject to a contingent deferred
sales charge payable on shares redeemed within one year after the month of
purchase. Class B shares purchased after January 1, 1997 will automatically
convert to Class A shares after seven years. Class B shares purchased prior to
January 1, 1997 retain their existing conversion rights. Class Y shares are sold
at net asset value and are not subject to contingent deferred sales charges or
distribution fees. Class Y shares are sold only to investment advisory clients
of First Union Corporation ("First Union") and its affiliates, certain
institutional investors or Class Y shareholders of record of certain other funds
managed by First Union and its affiliates as of December 30, 1994.
2. 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 and Income
acquired substantially all of the net assets of FFB Lexicon Capital Appreciation
Fund, an open-end investment company registered under the 1940 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 and 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 and Income upon
the acquisition were $375,936,243.
Effective on the close of business on January 19, 1996, Value acquired
substantially all the net assets of FFB Lexicon Select Value Fund and FFB Equity
Fund, open-end investment companies registered under the 1940 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 upon 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 1940 Act valued at $63,356,435. The net assets were exchanged through
a non-taxable exchange for 3,289,535 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
upon 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
1940 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
upon the acquisition were $140,913,190.
3. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect amounts
reported herein. Actual results could differ from these estimates.
67
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A. VALUATION OF SECURITIES
The Funds value securities traded on a national securities exchange or included
on the NASDAQ National Market System ("NMS") at the last reported sales price on
the exchange where primarily traded. The Funds value securities traded on an
exchange or NMS for which there has been no sale and other securities traded in
the over-the-counter market at the mean between the last reported bid and asked
price. U.S. government obligations held by the Funds are valued at the mean
between the over-the-counter bid and asked prices. Corporate bonds, other
fixed-income securities, and mortgage and other asset-backed securities are
valued at prices provided by an independent pricing service. In determining
value for normal institutional-size transactions, the pricing service uses
methods based on market transactions for comparable securities and analysis of
various relationships between similar securities which are generally recognized
by institutional traders. Securities for which valuations are not available from
an independent pricing service, including restricted securities, are valued at
fair value as determined in good faith according to procedures established by
the Board of Trustees. Short-term investments with remaining maturities of 60
days or less are carried at amortized cost, which approximates market value.
B. REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held by the custodian on the Fund's behalf. Each
Fund monitors the adequacy of the collateral daily and will require the seller
to provide additional collateral in the event the market value of the securities
pledged falls below the carrying value of the repurchase agreement, including
accrued interest. 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 Board of
Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange Commission,
Total Return, along with certain other funds managed by Keystone, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are fully collateralized by
U.S. Treasury and/or federal agency obligations.
C. REVERSE REPURCHASE AGREEMENTS
To obtain short-term financing, Small Cap, Utility, Value and Total Return may
enter into reverse repurchase agreements with qualified third-party
broker-dealers. Interest on the value of reverse repurchase agreements is based
upon competitive market rates at the time of issuance. At the time a Fund enters
into a reverse repurchase agreement, it will establish and maintain a segregated
account with the custodian containing qualifying assets having a value not less
than the repurchase price, including accrued interest. If the counterparty to
the transaction is rendered insolvent, the ultimate realization of the
securities to be repurchased by the Fund may be delayed or limited.
D. FOREIGN CURRENCY
The books and records of the Funds are maintained in United States (U.S.)
dollars. Foreign currency amounts are translated into U.S. dollars as follows:
market value of investments, assets and liabilities at the daily rate of
exchange; purchases and sales of investments, income and expenses at the rate of
exchange prevailing on the respective dates of such transactions. Net unrealized
foreign exchange gain (loss) resulting from changes in foreign currency exchange
rates is a component of net unrealized appreciation (depreciation) on
investments and foreign currency related transactions. Net realized foreign
currency gains and losses resulting from changes in exchange rates include
foreign currency gains and losses between trade date and settlement date on
investment securities transactions and foreign currency related transactions.
Foreign currency gains and losses from the difference between the amounts of
interest and dividends recorded on the books of the Fund and the amount actually
received is included in dividend and interest income. The portion of foreign
currency gains and losses related to fluctuations in exchange rates between the
initial purchase trade date and subsequent sale trade date is included in
realized gain (loss) on investments.
E. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Funds may enter into forward foreign currency exchange contracts ("forward
contracts") to settle portfolio purchases and sales of securities denominated in
a foreign currency and to hedge certain foreign currency assets or liabilities.
Forward contracts are recorded at the forward rate and marked-to-market daily.
Realized gains and losses arising from such transactions are included in net
realized gain (loss) on foreign currency related transactions. The Fund bears
the risk of an unfavorable change in the foreign currency exchange rate
underlying the forward contract and is subject to the credit risk that the other
party will not fulfill their obligations under the contract. Forward contracts
involve elements of market risk in excess of the amount reflected in the
statement of assets and liabilities.
F. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums. Dividend income is recorded on the
ex-dividend date or in the case of some foreign securities, on the date
thereafter when the Fund is made aware of the dividend. Foreign income may be
subject to foreign withholding taxes which are accrued as applicable. Capital
gains realized on some foreign securities may be subject to foreign taxes and
are accrued as applicable.
G. FEDERAL INCOME TAXES
The Funds have qualified and intend to continue to qualify as regulated
investment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable
income, net tax-exempt income and net capital gains, if any, to their
shareholders. The Funds also intend to avoid any excise tax liability by making
the required distributions under the Code. Accordingly, no provision for federal
income taxes is required. To the extent that realized capital gains can be
offset by capital loss carryforwards, it is each Fund's policy not to distribute
such gains.
68
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
H. DISTRIBUTIONS
Distributions from net investment income for the Funds, except Utility, are
declared and paid quarterly. Distributions for Utility from net investment
income are declared and paid monthly. Distributions from net realized capital
gains, if any, are paid at least annually. Distributions to shareholders are
recorded at the close of business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. The significant differences between financial statement
amounts available for distributions and distributions made in accordance with
income tax regulations are primarily due to differing treatment for realized
gains from foreign currency related transactions and certain distributions
received from real estate investment trusts.
L. CLASS ALLOCATIONS
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the relative
net assets of each class. Currently, class specific expenses are limited to
expenses incurred under the Distribution Plans for each class.
M. ORGANIZATION EXPENSES
Organization expenses are amortized to operations over a five-year period on a
straight-line basis. In the event any of the initial shares of the Funds are
redeemed by any holder during the five-year amortization period, redemption
proceeds will be reduced by any unamortized organization expenses in the same
proportion as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of the redemption.
4. CAPITAL SHARE TRANSACTIONS
The Funds, except Total Return, have an unlimited number of $0.0001 par value
shares of beneficial interest authorized. Total Return has an unlimited number
of shares of beneficial interest with no par value, authorized. Shares of
beneficial interest of the Funds are currently divided into Class A, Class B,
Class C and Class Y. Transactions in shares of the Funds were as follows:
GROWTH AND INCOME
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED YEAR ENDED
JULY 31, 1997** DECEMBER 31, 1996 DECEMBER 31, 1995*
<S> <C> <C> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
CLASS A
Shares sold.................................. 2,967,692 $ 71,457,862 3,719,917 $ 76,959,622 1,049,648 $ 17,981,665
Shares issued on reinvestment of
distribution............................... 14,532 352,344 69,271 1,546,893 29,563 545,083
Shares redeemed.............................. (645,446) (15,573,680) (1,044,500) (21,729,967) (59,282) (1,048,468)
Net increase................................. 2,336,778 56,236,526 2,744,688 56,776,548 1,019,929 17,478,280
CLASS B
Shares sold.................................. 9,881,863 236,281,947 8,914,571 185,314,202 2,516,682 43,094,733
Shares issued on reinvestment of
distribution............................... 166 3,746 160,953 3,613,927 66,937 1,234,636
Shares redeemed.............................. (779,920) (18,705,681) (646,461) (13,411,376) (97,308) (1,763,506)
Net increase................................. 9,102,109 217,580,012 8,429,063 175,516,753 2,486,311 42,565,863
CLASS C
Shares sold.................................. 511,624 12,290,220 348,918 7,294,757 106,185 1,808,328
Shares issued on reinvestment of
distribution............................... -- -- 5,130 115,108 2,716 50,033
Shares redeemed.............................. (55,491) (1,340,999) (29,065) (597,615) (5,395) (96,507)
Net increase................................. 456,133 10,949,221 324,983 6,812,250 103,506 1,761,854
CLASS Y
Shares sold.................................. 6,060,064 145,062,792 9,899,164 200,509,060 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
distribution............................... 67,571 1,641,399 349,251 7,729,161 211,697 3,882,512
Shares redeemed.............................. (3,163,527) (75,878,946) (6,820,349) (135,786,868) (1,658,100) (27,997,743)
Net increase................................. 2,964,108 70,825,245 12,059,927 231,884,076 2,490,683 44,253,045
Total net increase resulting from Fund share
transactions............................... 14,859,128 $355,591,004 23,558,661 $470,989,627 6,100,429 $106,059,042
</TABLE>
* The Funds share activity for Class A, Class B and Class C reflect the period
from January 3, 1995 (commencement of class operations) through December 31,
1995.
** The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
69
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
INCOME AND GROWTH
PERIOD ENDED YEAR ENDED YEAR ENDED
JULY 31, 1997* JANUARY 31, 1997 JANUARY 31, 1996
<S> <C> <C> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
CLASS A
Shares sold................................. 96,124 $ 2,114,635 288,739 $ 5,918,321 228,841 $ 4,349,310
Shares issued on reinvestment of
distribution.............................. 10,209 225,329 16,567 341,281 5,285 101,915
Shares redeemed............................. (51,264) (1,121,079) (80,074) (1,646,836) (22,041) (423,996)
Net increase................................ 55,069 1,218,885 225,232 4,612,766 212,085 4,027,229
CLASS B
Shares sold................................. 308,925 6,799,151 973,616 19,899,458 719,805 13,730,445
Shares issued on reinvestment of
distribution.............................. 32,359 710,178 48,861 1,003,747 15,667 302,547
Shares redeemed............................. (123,038) (2,685,666) (128,458) (2,649,792) (35,675) (692,877)
Net increase................................ 218,246 4,823,663 894,019 18,253,413 699,797 13,340,115
CLASS C
Shares sold................................. 2,951 66,274 33,684 684,918 24,468 469,424
Shares issued on reinvestment of
distribution.............................. 712 15,602 1,429 29,305 445 8,587
Shares redeemed............................. (9,060) (189,123) (15,865) (328,507) (262) (4,731)
Net increase (decrease)..................... (5,397) (107,247) 19,248 385,716 24,651 473,280
CLASS Y
Shares sold................................. 407,330 8,929,797 1,398,445 28,512,144 1,829,669 34,117,050
Shares issued on reinvestment of
distribution.............................. 816,636 18,026,674 1,968,663 40,431,169 2,547,340 48,020,816
Shares redeemed............................. (3,049,701) (67,224,141) (9,386,347) (193,045,864) (13,511,557) (253,504,082)
Net decrease................................ (1,825,735) (40,267,670) (6,019,239) (124,102,551) (9,134,548) (171,366,216)
Total net decrease resulting from Fund share
transactions.............................. (1,557,817) $(34,332,369) (4,880,740) $(100,850,656) (8,198,015) $(153,525,592)
</TABLE>
* The Fund changed its fiscal year end from January 31 to July 31, effective
July 31, 1997.
70
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SMALL CAP EQUITY INCOME
PERIOD ENDED YEAR ENDED YEAR ENDED
JULY 31, 1997** DECEMBER 31, 1996 DECEMBER 31, 1995*
<S> <C> <C> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
CLASS A
Shares sold............................................. 246,413 $ 3,587,404 23,318 $ 285,774 20,272 $ 210,178
Shares issued on reinvestment of distribution........... 854 12,209 1,564 19,575 1,218 13,667
Shares redeemed......................................... (2,663) (37,984) (17,926) (213,193) (2,789) (30,712)
Net increase............................................ 244,604 3,561,629 6,956 92,156 18,701 193,133
CLASS B
Shares sold............................................. 560,543 8,164,490 27,963 341,494 24,055 248,049
Shares issued on reinvestment of distribution........... 1,366 19,472 2,883 36,358 1,305 14,752
Shares redeemed......................................... (9,769) (142,514) (966) (11,697) (2,383) (26,158)
Net increase............................................ 552,140 8,041,448 29,880 366,155 22,977 236,643
CLASS C
Shares sold............................................. 178,877 2,529,352 3,956 48,265 1,928 19,533
Shares issued on reinvestment of distribution........... 524 7,467 136 1,697 116 1,317
Shares redeemed......................................... (6,447) (91,950) (1,838) (22,125) 0 0
Net increase............................................ 172,954 2,444,869 2,254 27,837 2,044 20,850
CLASS Y
Shares sold............................................. 2,593,853 36,298,202 289,906 3,628,792 93,274 973,677
Shares issued on reinvestment of distribution........... 11,719 165,502 25,358 316,899 25,655 285,901
Shares redeemed......................................... (562,869) (8,498,878) (75,598) (912,038) (76,033) (807,286)
Net increase............................................ 2,042,703 27,964,826 239,666 3,033,653 42,896 452,292
Total net increase resulting from Fund share
transactions.......................................... 3,012,401 $42,012,772 278,756 $3,519,801 86,618 $ 902,918
</TABLE>
* The Fund share activity for Class A, Class B and Class C shares reflect the
period from January 3, 1995, January 3, 1995, January 24, 1995, respectively,
(commencement of class operations) through December 31, 1995.
** The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
71
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
UTILITY
PERIOD ENDED YEAR ENDED YEAR ENDED
JULY 31, 1997** DECEMBER 31, 1996 DECEMBER 31, 1995
<S> <C> <C> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
CLASS A
Shares sold................................. 45,144 $ 494,721 246,512 $ 2,626,118 190,219 $ 1,885,138
Shares issued in acquisition of ABT Utility
Income Fund, Inc.......................... -- -- -- -- 10,160,068 99,162,259
Shares issued on reinvestment of
distribution.............................. 147,141 1,602,820 478,287 5,051,093 505,736 5,335,896
Shares redeemed............................. (1,294,589) (14,079,531) (1,609,448) (16,984,094) (1,333,516) (13,551,249)
Net increase (decrease)..................... (1,102,304) (11,981,990) (884,649) (9,306,883) 9,522,507 92,832,044
CLASS B
Shares sold................................. 123,876 1,349,827 787,800 8,401,385 506,602 4,989,454
Shares issued on reinvestment of
distribution.............................. 52,424 571,837 183,056 1,935,353 222,027 2,287,981
Shares redeemed............................. (611,224) (6,601,705) (630,402) (6,652,890) (626,919) (6,110,450)
Net increase (decrease)..................... (434,924) (4,680,041) 340,454 3,683,848 101,710 1,166,985
CLASS C
Shares sold................................. 1,231 13,731 25,812 274,673 10,650 109,078
Shares issued on reinvestment of
distribution.............................. 536 5,855 1,963 20,723 1,497 15,571
Shares redeemed............................. (6,079) (66,033) (13,100) (135,909) (3,614) (37,152)
Net increase (decrease)..................... (4,312) (46,447) 14,675 159,487 8,533 87,497
CLASS Y
Shares sold................................. 23,627 259,189 106,165 1,120,499 184,329 1,826,095
Shares issued on reinvestment of
distribution.............................. 1,585 17,278 7,089 74,971 8,025 84,251
Shares redeemed............................. (72,220) (779,946) (644,560) (6,607,014) (49,697) (487,291)
Net increase (decrease)..................... (47,008) (503,479) (531,306) (5,411,544) 142,657 1,423,055
Total net increase (decrease) resulting from
Fund share transactions................... (1,588,548) $(17,211,957) (1,060,826) $(10,875,092) 9,775,407 $ 95,509,581
</TABLE>
** The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
72
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
VALUE
PERIOD ENDED YEAR ENDED YEAR ENDED
JULY 31, 1997** DECEMBER 31, 1996 DECEMBER 31, 1995
<S> <C> <C> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
CLASS A
Shares sold.............................. 948,931 $ 21,010,689 1,109,850 $ 23,895,251 628,945 $ 12,018,651
Shares issued in acquisition of ABT
Growth and Income Trust................ 0 0 0 0 3,289,535 63,356,435
Shares issued on reinvestment of
distribution........................... 127,041 2,835,467 2,371,895 49,562,452 883,572 17,771,730
Shares redeemed.......................... (1,099,102) (24,085,514) (1,836,296) (39,736,035) (1,863,758) (35,747,673)
Net increase (decrease).................. (23,130) (239,358) 1,645,449 33,721,668 2,938,294 57,399,143
CLASS B
Shares sold.............................. 2,284,482 50,184,755 2,197,426 47,442,303 951,887 18,428,845
Shares issued on reinvestment of
distribution........................... 48,527 1,086,571 1,374,236 28,693,188 394,396 7,933,916
Shares redeemed.......................... (709,716) (15,577,742) (873,740) (18,943,891) (723,565) (13,658,563)
Net increase............................. 1,623,293 35,693,584 2,697,922 57,191,600 622,718 12,704,198
CLASS C
Shares sold.............................. 46,777 1,018,408 38,761 832,827 15,721 307,770
Shares issued on reinvestment of
distribution........................... 410 9,201 10,328 215,421 2,274 45,762
Shares redeemed.......................... (16,263) (355,395) (17,818) (377,207) (7,532) (149,074)
Net increase............................. 30,924 672,214 31,271 671,041 10,463 204,458
CLASS Y
Shares sold.............................. 6,289,283 137,931,136 15,195,754 324,801,783 14,762,272 278,777,942
Shares issued in acquisition of FFB
Lexicon Select Value Fund.............. 0 0 4,720,676 95,883,824 0 0
Shares issued in acquisition of FFB
Equity Fund............................ 0 0 692,924 14,077,973 0 0
Shares issued on reinvestment of
distribution........................... 302,057 6,740,306 5,208,388 108,890,530 2,044,972 40,900,972
Shares redeemed.......................... (8,383,008) (184,606,592) (14,584,293) (316,060,052) (10,121,343) (193,762,147)
Net increase (decrease).................. (1,791,668) (39,935,150) 11,233,449 227,594,058 6,685,901 125,916,767
Total net increase (decrease) resulting
from Fund share transactions........... (160,581) $ (3,808,710) 15,608,091 $ 319,178,367 10,257,376 $ 196,224,566
</TABLE>
** The Fund changed its fiscal year end from December 31 to July 31, effective
July 31, 1997.
73
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
KEYSTONE FUND FOR TOTAL RETURN
PERIOD ENDED YEAR ENDED YEAR ENDED
JULY 31, 1997*# NOVEMBER 30, 1996 NOVEMBER 30, 1995
<S> <C> <C> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
CLASS A
Shares sold........................................ 521,092 $ 9,464,499 756,854 $11,818,891 280,062 $ 3,618,417
Shares issued on reinvestment of distribution...... 18,071 331,175 71,945 1,193,118 126,167 1,664,588
Shares redeemed.................................... (564,385) (10,121,645) (446,563) (6,837,747) (422,494) (5,386,215)
Net increase (decrease)............................ (25,222) (325,971) 382,236 6,174,262 (16,265) (103,210)
CLASS B
Shares sold........................................ 2,651,702 48,001,066 1,503,008 23,867,265 1,057,718 13,668,348
Shares issued on reinvestment of distribution...... 15,072 275,911 57,897 974,432 75,397 1,002,721
Shares redeemed.................................... (609,684) (11,087,288) (534,970) (8,156,600) (266,010) (3,483,004)
Net increase....................................... 2,057,090 37,189,689 1,025,935 16,685,097 867,105 11,188,065
CLASS C
Shares sold........................................ 350,562 6,315,824 398,635 6,185,359 303,795 3,797,262
Shares issued on reinvestment of distribution...... 4,023 73,683 21,672 362,645 39,802 527,153
Shares redeemed.................................... (172,539) (3,193,608) (265,577) (4,069,150) (164,102) (2,107,107)
Net increase....................................... 182,046 3,195,899 154,730 2,478,854 179,495 2,217,308
CLASS Y
Shares sold........................................ 4,487 85,018 0 0 0 0
Shares issued on reinvestment of distribution...... 0 0 0 0 0 0
Shares redeemed.................................... 0 0 0 0 0 0
Net increase....................................... 4,487 85,018 0 0 0 0
Total net increase resulting from Fund share
transactions..................................... 2,218,401 $ 40,144,635 1,562,901 $25,338,213 1,030,335 $13,302,163
</TABLE>
* The Fund share activity for Class Y shares reflect the period from January 13,
1997 (commencement of class operations) through July 31, 1997.
# The Fund changed its fiscal year end from November 30 to July 31, effective
July 31, 1997.
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities, excluding
short-term securities, were as follows for the period ended July 31, 1997 and
each Fund's previous fiscal year end:
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1997** FUND'S PREVIOUS FISCAL YEAR*
COST OF PROCEEDS COST OF PROCEEDS
PURCHASES FROM SALES PURCHASES FROM SALES
<S> <C> <C> <C> <C>
Growth and Income......................... $229,043,231 $ 47,424,367 $ 238,741,288 $ 61,805,548
Income and Growth......................... 626,983,951 657,874,692 1,474,882,363 1,463,903,225
Small Cap................................. 42,724,562 3,893,209 6,550,736 3,042,710
Utility................................... 64,274,576 81,054,578 83,136,428 96,084,227
Value..................................... 95,991,449 159,700,317 1,210,509,734 1,274,623,554
Total Return.............................. 88,212,224 49,211,301 49,291,647 27,160,592
</TABLE>
* Investment activity for Growth and Income, Small Cap, Utility
and Value is for the year ended December 31, 1996, Income and
Growth is for the year ended January 31, 1997 and Total
Return is for the year ended November 30, 1996.
** Investment activity for Growth and Income, Small Cap, Utility
and Value is for the seven months ended July 31, 1997, Income
and Growth is for the six months ended July 31, 1997 and
Total Return is for the eight months ended July 31, 1997.
74
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
On July 31, 1997, the composition of unrealized appreciation and depreciation of
investment securities based on the aggregate cost of investments for federal
income tax purposes was as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
<S> <C> <C> <C> <C>
Growth and Income......................... $ 975,656,115 $372,134,629 $ 6,453,643 $365,680,986
Income and Growth......................... 854,284,316 136,340,327 33,866,911 102,473,416
Small Cap................................. 49,531,462 8,139,049 598,572 7,540,477
Utility................................... 115,966,044 19,364,529 2,389,293 16,975,236
Value..................................... 1,339,048,825 500,743,472 23,445,659 477,297,813
Total Return.............................. 119,780,289 44,851,368 1,382,698 43,468,670
</TABLE>
6. DISTRIBUTION PLANS
Evergreen Keystone Distributor, Inc. (formerly, Evergreen Funds Distributor,
Inc.) ("EKD"), a wholly-owned subsidiary of The BISYS Group Inc. ("BISYS") is
serving as principal underwriter to the Funds. Prior to December 11, 1996,
Evergreen Keystone Investment Services, Inc. (formerly, Keystone Investment
Distributors Company) ("EKIS"), a wholly-owned subsidiary of Keystone, served as
Total Return's principal underwriter.
Each Fund has adopted Distribution Plans for each class of shares, except Class
Y, as allowed by Rule 12b-1 of the 1940 Act. Distribution plans permit the fund
to reimburse its principal underwriter for costs related to selling shares of
the fund and for various other services. These costs, which consist primarily of
commissions and services fees to broker-dealers who sell shares of the fund, are
paid by shareholders through expenses called "Distribution Plan expenses". Each
class, except Class Y, currently pays a service fee equal to 0.25% of the
average daily net assets of the class. Class B and Class C also presently pay
distribution fees equal to 0.75% of the average daily net assets of the Class.
Distribution Plan expenses are calculated daily and paid monthly.
With respect to Class B and Class C shares, the principal underwriter may pay
distribution costs greater than the allowable annual amounts the Fund is
permitted to pay. The Fund may reimburse the principal underwriter for such
excess amounts in later years with annual interest at the prime rate plus 1.00%.
EKD has entered into a Shareholder Services agreement with First Union Brokerage
Services ("FUBS"), an affiliate of First Union, whereby they will pay FUBS
services fees up to the annual limit of .25 of 1% of average daily net assets of
its Class B and Class C shares of the Funds.
75
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During the period ended July 31, 1997 and each Fund's previous fiscal year,
amounts paid to EKD and/or EKIS pursuant to each Fund's Class A, Class B and
Class C Distribution Plans were as follows
<TABLE>
<CAPTION>
PERIOD ENDED JULY 31, 1997*
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Growth and Income.................................................. $175,321 $2,170,223 $ 91,676
Income and Growth.................................................. 13,129 186,670 4,556
Small Cap.......................................................... 1,710 15,062 5,553
Utility............................................................ 134,715 214,190 2,114
Value.............................................................. 509,860 1,337,333 10,924
Total Return....................................................... 66,585 460,418 119,908
</TABLE>
* Distribution Plan expenses for Growth and Income, Small Cap,
Utility and Value are for the seven months ended July 31,
1997, Income and Growth are for the six months ended July 31,
1997 and Total Return are for the eight months ended July 31,
1997.
<TABLE>
<CAPTION>
PREVIOUS FISCAL YEAR**
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Growth and Income.................................................. $122,222 $1,245,549 $ 48,073
Income and Growth.................................................. 18,106 252,431 8,509
Small Cap.......................................................... 618 4,265 356
Utility............................................................ 252,753 378,500 3,791
Value.............................................................. 767,254 1,674,133 11,608
Total Return....................................................... 75,270 260,237 112,995
</TABLE>
** Distribution Plan expenses for Growth and Income, Small Cap,
Utility and Value are for the fiscal year ended December 31,
1996, Income and Growth are for the fiscal year ended January
31, 1997 and Total Return are for the fiscal year ended
November 30, 1996.
Each of the Distribution Plans for Total Return may be terminated at any time by
vote of the Independent Trustees or by vote of a majority of the outstanding
voting shares of the respective class. However, after the termination of any
Distribution Plan, and subject to the discretion of the Independent Trustees,
payments to EKIS and/or EKD may continue as compensation for services which had
been provided while the Distribution Plan was in effect.
EKD intends, but is not obligated, to continue to pay distribution costs that
exceed the current annual payments from each Fund. EKD intends to seek full
payment of such distribution costs from each Fund at such time in the future as,
and to the extent that, payment thereof by the Class B or Class C shares would
be within permitted limits.
EKD and/or its predecessor has advised the Funds that it has retained the
following amounts from front-end sales charges resulting from the sales of Class
A shares during the period ended July 31, 1997 and each Fund's previous fiscal
year:
<TABLE>
<CAPTION>
PERIOD ENDED PREVIOUS
JULY 31, 1997* FISCAL YEAR**
<S> <C> <C>
Growth and Income..................................................... $169,177 $ 158,858
Income and Growth..................................................... 4,194 20,208
Small Cap............................................................. 6,942 340
Utility............................................................... 1,789 7,857
Value................................................................. 51,343 56,609
Total Return.......................................................... 9,998 75,270
</TABLE>
* Front end sales commissions for Growth and Income, Small Cap,
Utility and Value are for the seven months ended July 31,
1997, Income and Growth are for the six months ended July 31,
1997 and Total Return are for the eight months ended July 31,
1997.
** Front end sales commissions for Growth and Income, Small Cap,
Utility and Value are for the fiscal year ended December 31,
1996, Income and Growth are for the fiscal year ended January
31, 1997 and Total Return are for the fiscal year ended
November 30, 1996.
Contingent deferred sales charges paid by redeeming shareholders are paid to EKD
or its predecessor.
7. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED
TRANSACTIONS
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 $146,640 and $396,483, respectively, of its fee
for Utility for the seven months ended July 31, 1997 and year ended December 31,
1996.
76
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Pursuant to an agreement with Growth and Income's, Income and Growth'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 Fund'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. Evergreen Asset waived advisory
fees aggregating $53,123 and $63,333 for the seven months ended July 31, 1997
and the year ended December 31, 1996, respectively pursuant to this agreement.
Additionally, for the year ended December 31, 1996 Evergreen Asset reimbursed
other expenses amounting to $133,406. First Union and Evergreen Asset can modify
or terminate voluntary waivers at any time.
Keystone Investment Management Company ("Keystone"), a subsidiary of First Union
Corporation ("First Union"), is the investment adviser for Total Return. In
return for providing investment management and administrative services to Total
Return, the Fund pays Keystone a management fee that is calculated daily and
paid monthly. The management fee is computed at an annual rate of 1.50% of Total
Return's gross investment income plus an amount determined by applying
percentage rates starting at 0.60% and declining to 0.30% per annum as net
assets increase, to the average daily net asset value of the Fund.
Evergreen Keystone Investment Services, Inc. ("EKIS"), a subsidiary of First
Union, is the administrator for the Funds. Prior to March 11, 1997, Evergreen
Asset was the administrator for Growth and Income, Income and Growth, Small Cap,
Utility and Value. Furman Selz LLC ("Furman Selz") was the sub-administrator
through December 31, 1996 for Growth and Income, Income and Growth, Small Cap,
Utility and Value. Effective January 1, 1997, BISYS acquired Furman Selz' mutual
fund unit and accordingly BISYS Fund Services became sub-administrator for the
Funds. The administrator (and sub-administrator) for each Fund is (are) entitled
to an annual fee based on the average daily net assets of the funds administered
by EKIS for which First Union or its investment advisory subsidiaries are also
the investment advisers. The administration fee is calculated by applying
percentage rates, which start at 0.05% and decline to 0.01% per annum as net
assets increase, to the average daily net asset value of the Fund. The
sub-administration fee is calculated by applying percentage rates, which start
at 0.01% and decline to .004% as net assets increase, to the average daily net
asset value of the Fund. For Growth and Income, Income and Growth, Small Cap and
Total Return the administration and sub-administration fee is paid by their
respective investment advisor and is not a Fund expense.
Lieber & Company, an affiliate of First Union, is the investment sub-adviser to
Growth and Income, Income and Growth, and Small Cap and also provides brokerage
services with respect to substantially all security transactions of each Fund
effected on the New York or American Stock Exchanges. For the period ended July
31, 1997 and the previous fiscal year, Growth and Income, Income and Growth, and
Small Cap incurred the following brokerage commissions with Lieber & Company:
<TABLE>
<CAPTION>
PERIOD ENDED PREVIOUS
JULY 31, 1997* FISCAL YEAR**
<S> <C> <C>
Growth and Income..................................................... $ 348,590 $ 429,888
Income and Growth..................................................... 1,066,378 2,835,293
Small Cap............................................................. 61,390 13,246
</TABLE>
* Commissions paid to Leiber & Co. for Growth and Income and
Small Cap are for the seven months ended July 31, 1997,
Income and Growth are for the six months ended July 31, 1997.
** Commissions paid to Leiber & Co for Growth and Income and
Small Cap are for the fiscal year ended December 31, 1996,
Income and Growth are for the fiscal ended January 31, 1997.
Lieber & Company is reimbursed by Evergreen Asset, at no additional expense to
the Funds, for its cost of providing investment advisory services.
During the period ended July 31, 1997 and the year ended November 30, Total
Return Fund paid or accrued to EKIS $10,250 and $27,066, respectively, for
certain accounting services.
Evergreen Keystone Service Company ("EKSC") (formerly, Keystone Investor
Resource Center, Inc.), a wholly-owned subsidiary of Keystone, serves as the
transfer and dividend disbursing agent for the Total Return Fund. Effective May
5, 1997, EKSC also began providing the transfer and dividend disbursing agent
services for Growth and Income, Income and Growth, Small Cap, Utility and Value
that were formerly provided by State Street Bank and Trust Company ("State
Street"). For certain accounts, First Union had been sub-contracted by State
Street to maintain shareholder sub-account records, take fund purchase and
redemption orders and answer inquiries.
77
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For each account of Growth and Income and Value, First Union earned the
following fees:
<TABLE>
<CAPTION>
PERIOD ENDED PREVIOUS
JULY 31, 1997* FISCAL YEAR**
<S> <C> <C>
Growth and Income..................................................... $ 27,062 $ 11,011
Value................................................................. 159,620 110,847
</TABLE>
* First Union fees for Growth and Income and Value are for the
seven months ended July 31, 1997.
** First Union fees for Growth and Income and Value are for the
fiscal year ended December 31, 1996.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
8. EXPENSE OFFSET ARRANGEMENT
The Funds have entered into an expense offset arrangement with their custodian.
The assets deposited with the custodian under this expense offset arrangement
could have been invested in income-producing assets.
9. DEFERRED TRUSTEES' FEES
Each Independent Trustee of Growth and Income, Income and Growth, Small Cap,
Utility and Value may defer any or all compensation related to performance of
duties as a Trustee. Each Trustee's deferred balances are allocated to deferral
accounts which are included in the accrued expenses for the Fund. The investment
performance of the deferral accounts are based on the investment performance of
certain Evergreen Keystone Funds. Any gains earned or losses incurred in the
deferral accounts are reported in the Fund's Trustees's fees and expenses.
Trustees will be paid either in one lump sum or in quarterly installments for up
to ten years at their election, not earlier than either the year in which the
Trustee ceases to be a member of the Board of Trustees or January 1, 2000. As of
July 31, 1997, the value of the Trustees deferral account for Growth and Income,
Income and Growth, Small Cap, Utility, and Value was $10,791, $70,668, $6,067,
$5,597, and $55,017.
10. FINANCING AGREEMENT
On October 31, 1996, a financing agreement between all of the Evergreen Funds
and State Street, Societe Generale and ABN AMRO Bank N.V. (collectively, the
"Banks") became effective. Under this agreement, the Banks provide an unsecured
credit facility in the aggregate amount of $225 million ($112.5 million
committed and $112.5 million uncommitted) allocated evenly between the Banks.
Borrowings under this facility bear interest at 0.75% per annum above the
Federal Funds rate. A commitment fee of 0.10% per annum will be incurred on the
unused portion of the committed facility which will be allocated to all
participating funds. State Street acts as agent for the Banks, and as agent is
entitled to a fee of $15,000 which is allocated to all of the Evergreen Funds.
During the period ended July 31, 1997 and the previous year, Growth and Income,
Income and Growth, Small Cap, Utility and Value had no significant borrowings
under this agreement.
11. CONCENTRATION OF CREDIT RISK
Utility invests a substantial portion of its assets in issuers in the Utilities
industry, therefore, it may be more affected by economic and political
developments in that industry than would be a comparable general equity fund.
12. CHANGE IN FISCAL YEAR END
Growth and Income, Small Cap, Utility and Value changed their fiscal year end
from December 31 to July 31, effective July 31, 1997. Income and Growth changed
its fiscal year end from January 31 to July 31, effective July 31, 1997.
Keystone Fund for Total Return changed its fiscal year end from November 30 to
July 31, effective July 31, 1997.
13. DISTRIBUTIONS TO SHAREHOLDERS
For Small Cap, $39,663 ( approximately $0.01 per share) of the dividend declared
on June 20, 1997 has been redesignated as a distribution from long-term capital
gains.
A distribution of $0.058, $0.031, $0.031 and $0.066 per share for class A, class
B, class C and Class Y, respectively, for Total Return was declared on August
22, 1997 from net investment income. This distribution was payable on August 26,
1997 to shareholders of record at the close of business on August 22, 1997.
These dividends are not reflected in these financial statements.
A distribution of $0.041, $0.034, $0.034 and $0.043 per share for Class A, Class
B, Class C and Class Y, respectively, for Utility Fund was declared on August
14, 1997 from net investment income. This distribution was payable on August 16,
1997 to shareholders of record at the close of business on August 14, 1997.
These dividends are not reflected in these financial statements.
78
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholders
Evergreen Growth and Income Fund
Evergreen American Retirement Trust
Evergreen Investment Trust
Keystone Fund for Total Return
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Evergreen Keystone Growth and Income Funds
listed below as of July 31, 1997, and the related statements of operations,
statements of changes in net assets and financial highlights for each of the
years or periods listed below:
EVERGREEN GROWTH AND INCOME FUND-- statements of operations and changes in
net assets for the seven months ended July 31, 1997 and the year ended
December 31, 1996 and financial highlights for the periods presented on
pages 26-28, except for the periods ended prior to December 31, 1996. The
financial highlights for the periods ended prior to December 31, 1996 and
the statement of changes in net assets for the year ended December 31, 1995
were audited by other auditors, whose opinion thereon dated February 15,
1996 was unqualified.
EVERGREEN SMALL CAP EQUITY INCOME FUND (ONE OF THE SERIES CONSTITUTING
EVERGREEN AMERICAN RETIREMENT TRUST)-- statements of operations and changes
in net assets for the seven months ended July 31, 1997 and the year ended
December 31, 1996 and financial highlights for the periods presented on
pages 32 and 33, except for the periods ended prior to December 31, 1996.
The financial highlights for the periods ended prior to December 31, 1996
and the statement of changes in net assets for the year ended December 31,
1995, were audited by other auditors, whose opinion thereon dated February
15, 1996 was unqualified.
EVERGREEN UTILITY FUND (ONE OF THE SERIES CONSTITUTING EVERGREEN INVESTMENT
TRUST)-- statements of operations for the seven months ended July 31, 1997
and the year ended December 31, 1996, the statements of changes in net
assets for the seven months ended July 31, 1997 and each of the years in the
two-year period ended December 31, 1996 and the financial highlights for the
periods presented on pages 34 and 35.
EVERGREEN VALUE FUND (ONE OF THE SERIES CONSTITUTING EVERGREEN INVESTMENT
TRUST)-- statements of operations for the seven months ended July 31, 1997
and the year ended December 31, 1996, statements of changes in net assets
for the seven months ended July 31, 1997 and each of the years in the
two-year period ended December 31, 1996 and the financial highlights for the
periods presented on pages 36-38.
KEYSTONE FUND FOR TOTAL RETURN-- statements of operations for the eight
months ended July 31, 1997 and the year ended November 30, 1996, statements
of changes in net assets for the eight months ended July 31, 1997 and each
of the years in the two-year period ended November 30, 1996 and the
financial highlights for the periods presented on pages 39-41.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Evergreen Growth and Income Fund, Evergreen Small Cap Equity Income Fund,
Evergreen Utility Fund, Evergreen Value Fund, and Keystone Fund for Total Return
as of July 31, 1997, the results of their operations, the changes in their net
assets and financial highlights for each of the years or periods specified in
the first paragraph above in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
August 22, 1997
79
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
EVERGREEN INCOME AND GROWTH FUND
In our opinion, the accompanying Statement of Assets and Liabilities, including
the Statement of Investments, and the Statements of Operations and of Changes in
Net Assets and the Financial Highlights present fairly, in all material
respects, the financial position of Evergreen Income and Growth Fund (the
"Fund") at July 31, 1997, and the results of its operations, the changes in its
net assets, and its financial highlights for the six months ended July 31, 1997
and the year ended January 31, 1997, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 1997 by correspondence with the custodian
and brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for the
opinion expressed above. The Statement of Changes in Net Assets for the year
ended January 31, 1996, and the financial highlights for each of the years or
periods ended from March 31, 1988 through January 31, 1996 were audited by other
auditors, whose report dated March 21, 1996 was unqualified.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
August 26, 1997
80
<PAGE>
EVERGREEN KEYSTONE
[Evergreen Keystone logo appears here]
FEDERAL INCOME TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
During the period ended July 31, 1997, the Funds paid the following
distributions in shares or cash:
<TABLE>
<CAPTION>
LONG-TERM ORDINARY
TOTAL CAPITAL GAIN INCOME
DISTRIBUTIONS DISTRIBUTIONS DIVIDENDS
<S> <C> <C> <C>
Evergreen Growth and Income Fund......................... $ 2,515,302 $ 0 $ 2,515,302
Evergreen Income and Growth Fund......................... 21,598,265 0 21,598,265
Evergreen Small Cap Equity Income Fund................... 372,509 39,663 332,846
Evergreen Utility Fund................................... 2,717,219 0 2,717,219
Evergreen Value Fund..................................... 14,153,433 0 14,153,433
Keystone Fund for Total Return........................... 789,414 0 789,414
</TABLE>
Of the ordinary income distributions stated above for Evergreen Growth and
Income Fund, Evergreen Income and Growth Fund, Evergreen Small Cap Equity Income
Fund, Evergreen Utility Fund, Evergreen Value Fund, and Keystone Fund for Total
Return, 100.0%, 48.4%, 38.0%, 53.2%, 56.6% and 53.9%, respectively, are eligible
for the corporate dividend received deduction. The above figures may differ from
those previously reported and those cited elsewhere in this report due to
differences in the calculation of income and capital gains for accounting (book)
purposes and Internal Revenue Service (tax) purposes. In January 1998, we will
send you complete information on the distributions paid during the calendar year
1997 to help you in completing your federal tax return.
SEMI-ANNUAL FINANCIAL STATEMENTS
Growth and Income, Small Cap, Utility and Value have prepared a semi-annual
report to shareholders as of June 30, 1997. This report was filed with the
Securities & Exchange Commission, but was not mailed to shareholders. If you
would like to obtain a copy of this report please call 1(800)343-2898.
81
<PAGE>
This brochure must be preceded or accompanied by a prospectus of an Evergreen
Keystone 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 No bank guarantee
INSURED
Evergreen Keystone Distributor, Inc.
Form #540390 Rev. 01
9/97
61177
