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EVERGREEN
VARIABLE TRUST
ANNUAL REPORT
DECEMBER 31, 1997
(Evergreen Funds logo)
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EVERGREEN VARIABLE TRUST
EVERGREEN VA FUND
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A REPORT FROM YOUR
PORTFOLIO MANAGER
STEPHEN A. LIEBER
The Evergreen VA Fund provided a 37.2% return in 1997, as compared with 22.4%
for the Russell 2000 Index, used as a benchmark for comparability. A significant
portion of the Fund's 105 equity holdings provided exceptional leadership
returns. The largest increases were in the shares of Arterial Vascular
Engineering, Inc., Chancellor Media Corp., and Inter-Tel, Inc., up 318.1%,
197.2%, and 104.5%, respectively for the twelve months ended December 31, 1997.
The top twenty performers provided a gain of over 58.0%. They represented a
diverse group of industries, including four banks. Corporations experiencing a
favorable turnaround in their operations were also a major contributor, led by
Furon Co., ADFlex Solutions, Inc., Input/Output, Inc., and Robbins & Myers,
Inc., up 96.4%, 67.6%, 60.8%, and 58.5%, respectively for the year.
A number of significant gains were realized during the year, ranging up to
147.8% for the holdings in Medic Computer Systems, Inc., 131.2% for the holdings
in Analytical Surveys, Inc., 115.5% for the holdings in Microsoft Corp., and
104.7% for the holdings in Jones Apparel Group, Inc.
Mergers and acquisitions played a favorable role among the Fund's holdings, with
several completed transactions including: American Medical Response Inc., with a
gain of 41.1%, Kysor Industrial Corp., with a gain of 40.3%, Living Centers of
America, Inc., with a gain of 27.4%, Renaissance Hotel Group N.V., with a gain
of 21.9%, and with substantial increases in value through completed mergers in
the case of Evans Withycombe Residential, Inc., and Verifone, Inc. Significant
declines in value occurred in a limited, diverse group of companies. Sizable
losses included Atmel Corp., a semi-conductor producer, down 39.1%, Aspect
Telecommunications Corp., down 34.1%, St. Jude Medical, Inc., down 28.4%, Morgan
Products, Ltd., down 27.8%, Andrew Corp., down 27.6%, Columbia /HCA Healthcare
Corp., down 27.3%, Harman International Industries, Inc., down 26.9%, American
Business Information, Inc., down 24.3%, and Commonwealth Industries, Inc., down
21.9%. Realized losses were limited to three issues, with the largest, Oxford
Health Plans, Inc., held briefly, with a 28.3% loss.
We have endeavored to build this portfolio as a diversified group of holdings of
undervalued growth stocks. It ranges widely in industries, focusing on investing
in growth opportunities with exceptionally conservative valuation. Through this
approach, we have held selectively among major companies, including positions in
the great health care companies, Johnson & Johnson, and Merck & Co., Inc., which
have provided sizable value increases for the Fund. We have also sought
participation in important technological opportunities, with commitments in
Intel Corp., Sun Microsystems, Inc., Cisco Systems, Inc., and a group of
smaller, but pivotal research driven specialists such as Andrew Corp., Inter-
Tel, Inc., Reliability, Inc., and SMART Modular Technologies, Inc.
Expecting a low rate of inflation and declining interest rates, the Fund has
been positioned in a number of rate sensitive and financial investments, ranging
from banks and thrifts, such as Comerica, Inc., and First of America Bank Corp.
in Michigan, to First Palm Beach Bancorp, Inc. and Seacoast Banking Corp. of
Florida Cl. A. in Florida, and Hibernia Corp. Cl. A in Louisiana. In the real
estate and residential construction fields, the Fund has benefited by
significant positions in Starwood Lodging Trust, Countrywide Credit Industries,
Inc., Clayton Homes, Inc., and Toll Brothers, Inc. Medical technology
opportunities in the portfolio investments include Arterial Vascular
Engineering, Inc., Beckman Instruments, Inc., Maxxim Medical, Inc., and Stryker
Corp. Overall, the selection of investments has been based both on macro views
as to the trend of the economy and individual industry outlooks, as well as on
the underlying dynamics of individual corporations.
We anticipate that these strategies will continue to be rewarding for the Fund's
shareholders in 1998, and in the years ahead.
1
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EVERGREEN VARIABLE TRUST
EVERGREEN VA FOUNDATION FUND
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A REPORT FROM YOUR
PORTFOLIO MANAGER
STEPHEN A. LIEBER
The Evergreen VA Foundation Fund provided a 1997 return of 27.8%, compared with
19.0% for the Lipper Analytical Services Balanced Fund Average. The Fund
experienced a positive performance, both in its equities and in its U.S.
Treasury bond investments.
The Fund was managed to combine both an equity and a fixed income portfolio,
using a strategy aimed at capital appreciation in both sectors, and varying the
asset allocation between the two in line with expected opportunities. Through
the year, the bulk of the commitment was on the equity side, although both
stocks and bonds provided capital appreciation for the Fund. The stock
performance was led by a diverse group of companies, with particular strength in
those sectors which might be described as interest sensitive; including banking,
brokerage, residential construction, and insurance. The top ten equity
performances for the year were: Crescent Operating, Inc., +46.2%, First of
America Bank Corp., +31.2%, Continental Homes Holding Corp., +23.6%, Cendant
Corp., +20.4%, Legg Mason, Inc., +15.6%, Applied Power, Inc., +13.1%, Merck &
Co., Inc., +12.3%, Schulman (A), Inc., +12.2%, Raymond James Financial, Inc.,
+11.2%, and Crestar Financial Corp., +10.9%.
The portfolio results included a sizable number of substantial profits. The top
ten ranged from a 173.5% gain in Microsoft Corp., held over a fifteen-month
period, to a 33.8% gain in Conrail, Inc., held over a twelve-month period.
Several major increases in value were accomplished through mergers and
acquisitions. Among those acquisitions were Conrail, Inc., Standard Federal
Bancorporation, Inc., Living Centers of America, Inc., Columbus Realty Trust,
Evans Withycombe Residential, Inc., Pacific Greystone Corp., HFS Inc., and PHH
Corp. Only two losses were recorded, one of 2.5% in Frontier Corp., and one of
7.1% in FlightSafety International, Inc., when it was acquired by Berkshire
Hathaway, Inc. The largest purchases made during the year, among equities, were
in the shares of two banks, Bankers Trust Corp., and Amsouth Bancorp. A portion
of the Bankers Trust Corp. shares were sold in five months with a gain of 59.6%,
while the Amsouth Bancorp. shares were retained in the portfolio. On the fixed
income side, the largest purchase made in October, U.S Treasury 6.00% due 2026,
provided 5.2% appreciation by year-end. There were no losses in the Fund's bond
market holdings.
The strategy to be employed for the Fund in 1998 will be a continuation of the
focus on purchasing common stocks with growth potential at times of comparative
undervaluation. This has proven a rewarding strategy in 1997. We anticipate that
in 1998 there will be considerable searching for stocks promising exceptional
corporate earnings performance, as well as for undervalued companies. The fixed
income positioning of the Fund has correctly anticipated the decline in interest
rates to-date and will remain flexible in asset allocation, seeking to benefit
by indicated interest rate trends.
2
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EVERGREEN VARIABLE TRUST
EVERGREEN VA GROWTH AND INCOME FUND
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A REPORT FROM YOUR
PORTFOLIO MANAGERS
STEPHEN A. LIEBER
GARY BUESSER
Effective July 31, 1997, the portfolio management of Evergreen VA Growth and
Income Fund changed. The Fund is now managed by Stephen A. Lieber, Chairman and
Founder of Evergreen Asset Management Corp., and Gary Buesser, Vice President
and Portfolio Manager of Evergreen Asset Management Corp. Mr. Buesser joined
Evergreen Asset Management in January 1996. While the management of the Fund has
changed, its investment objective has not. Evergreen VA Growth and Income Fund
seeks to achieve a return comprised of capital appreciation in the value of its
shares and current income.
The VA Growth and Income Fund had a strong year in 1997. The Fund's total return
of 34.7% outperformed stock market indices. In 1997, large capitalization stocks
outperformed the mid-cap and small-cap stocks. The S & P 500 Index (large-cap)
had a total return of 33.3% compared to the Russell Mid-Cap Index's return of
29% and the Russell 2000 Index's (small-cap) return of only 22.4%.
1997 provided near perfect conditions for equity investors in the U.S. Economic
growth was more than 3.5%, unemployment rates fell below 5%, and inflation (CPI)
was less than 2%, its lowest level in years. U.S. corporations experienced
outstanding earnings growth of 11% to 12%. Strong economic growth, low inflation
and robust corporate profitability led to excellent stock market returns. An
additional positive was the decline in 30 year Treasury bond rates from 6.6% at
the beginning of the year, to 5.9% at the end of the year, one of the lowest
rate levels in 30 years.
PORTFOLIO HIGHLIGHTS
The strongest sector performance during the year for the Fund was realized in
the following industry groups: Banks (+40%)/ Savings and Loans (+70%), Business
Equipment and Services (+50%), and Publishing, Broadcasting, and Entertainment
(+58%).
The Bank/Thrift industry groups benefited from strong economic growth, low
inflation and the decline in interest rates. Bank stocks produced robust
earnings growth with high loan portfolio quality. Susquehanna Bancshares, Inc.
and Webster Financial Corp. had returns of 65% and 81%, respectively.
The Business Equipment and Services group generated very strong gains for the
year with Compuware Corp. and Platinum Technology Corp. up 158% and 111%,
respectively. Compuware, Corp. one of the largest client/server software vendors
beat analysts' earnings expectations due to strong client/server and Year 2000
software sales. Platinum Technology Corp., a software/server provider of
database management and warehouse solutions, experienced an earnings turnaround
in 1997 due to new products and cost reduction efforts.
The Publishing, Broadcasting and Entertainment group had strong cash flow growth
combined with the continuation of merger and acquisition activity in all three
of these industries. Two radio stocks were up more than 90%, Jacor
Communications, Inc. and American Radio Systems Corp. Cl. A. Both companies made
acquisitions in 1997 that improved their market positions and cash flow
potential in their major market locations.
Other strong performers in 1997 include: Kansas City Southern Industries, Inc.
+111%, McKesson Corp. +103%, Carson Pirie Scott & Co. +98% (acquired by
Proffitt's, Inc.), Schlering Plough Corp. +91%, Warner Lambert Co. +80%, and two
oil-field service stocks Reading & Bates Corp. (acquired by Falcon Drilling Co.,
Inc.) and Halliburton Co., up 76% and 72%, respectively.
ECONOMIC/MARKET OUTLOOK
The greatest concern among investors as we begin the new year is whether U.S.
corporations can continue to produce strong earnings growth in the face of a
probable slowdown in U.S. economic growth and the negative impact of the
unquantifiable Asian situation.
We believe 1998 will provide a good market environment for our value investment
approach. Our investment style seeks quality companies with above-average growth
prospects when they are undervalued in relation to a company's asset value, cash
flow and earnings potential. We look for a catalyst for change in the companies
that we purchase, such as new management, new products, restructuring potential
and earnings turnaround to close the undervaluation gap.
Wall Street analysts at the beginning of the year forecast earnings growth of
13% for the S&P 500 in 1998, above our expectations given the prospect of slower
U.S. economic growth and the negative impact on corporate profitability due to
the problems in Asia. This environment will provide many opportunities for our
bargain hunting value approach to buy quality companies when they are
out-of-favor.
3
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EVERGREEN VARIABLE TRUST
EVERGREEN VA GLOBAL LEADERS FUND
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A REPORT FROM YOUR
PORTFOLIO MANAGERS
STEPHEN A. LIEBER
EDWIN D. MISKA
PERFORMANCE
Evergreen VA Global Leaders Fund concluded its first year of operations with a
solid year of performance relative to the world's stock and currency markets.
The Fund returned 8.80% for the period since its inception on March 6, 1997 to
December 31, 1997. This was lower than the return of the MSCI World Index (GDP
weighted), which returned 11.52%, but higher than the MSCI EAFE Index, which
returned 2.48%. Several factors contributed to this slight underperformance,
including high initial start-up and trading costs, given the Fund's modest asset
size, the effects of foreign currency translation, and turmoil in the Asian
markets.
Overall, despite bouts of volatility exacerbated by regional economic issues
during the year, the principal markets in which your Fund invests registered
solid performance. Seventeen of the 23 countries in the MSCI World Index boasted
positive returns in U.S. dollars for the fiscal period. The strongest market was
Switzerland, with a 37.49% return. Other standouts included Italy with a gain of
35.46%, Spain registering returns of 30.23%, Denmark with a return of 28.81%,
and the United States with a 22.77% return. Only the countries of the Far East
region had negative results.
INVESTMENT PHILOSOPHY
The Fund continued its disciplined strategy of seeking out what we believed to
be the "100 best companies in the world" based on our quantitative and
qualitative analyses. Against a backdrop of a global economic environment that
was generally favorable towards equity investing, the Fund successfully
implemented this strategy by focusing on companies whose financial performance
and product and service-reach distinguish them as "leaders" within their
markets. We continued to concentrate on building a portfolio of companies which
have been and are consistently profitable, exhibit a strong pattern of sustained
earnings growth, both historical and prospective, generate the highest returns
on shareholders' equity and are appropriately priced, offering the most value
relative to other similar issues. When reviewed within a global, country, and
industry perspective, these characteristics generally identify the most
successful corporations representing exceptional investment opportunities. The
Fund has also sought to correctly optimize country and currency exposures based
on a rigorous review of global macroeconomic and political factors. This
combination of a diligent, qualitative stock selection process, strong value
oriented discipline, and a structured economic review has helped the Fund
maximize shareholder returns.
REGIONAL REVIEW-- UNITED STATES
Lead by the strength of the U.S. economy, where fears of higher interest rates
had abated amidst strengthening consumer demand, low unemployment, and almost
non-existent inflationary pressures, corporate earnings continued to be buoyant
and made for rising expectations, encouraging strong investment participation.
Strength of the U.S. dollar vis a vis the world's currencies reflected this
bullish sentiment. The Fund benefited from its U.S. weighting (34.3% at year
end) and outperformance of its U.S. holdings which were up 28.36% for the fiscal
year. Top performers were major names, that have shown an ability to achieve
consistently outstanding results, from a diverse group of industries. For
example, from technology: Computer Associates International Inc. +87.9%, Cisco
Systems Inc. +47.2%, and Compaq Computer Corp. +44.3%. From the consumer sector:
Home Depot Inc. +52.6%, Gap Inc. +51.6%, Carnival Corp. +47.4%, Wal-Mart Stores
Inc. +44.8%, and Mattel, Inc. +41.0%. From financial services: SunAmerica Inc.
+56.1%, and Schwab (Charles) & Co. Inc. +50.4%. In total the Fund benefited from
broad based strength, as 30 of the 36 U.S. positions held at fiscal year end
registered positive performance, with 24 returning in excess of 20%.
REGIONAL REVIEW-- INTERNATIONAL
Exacting similar results from the Fund's foreign holdings was a challenge, as
both macroeconomic factors within regions and a difficult currency exchange
environment dampened overall return potential. The Fund's international holdings
returned lower absolute results when compared to the U.S. portion (up 0.10% for
the fiscal year), and slightly lower results on a relative basis when measured
against the MSCI EAFE Index which returned 2.48%. The Fund maintained a
diversified portfolio of 75 issues from 15 countries representing 52% of the
Fund's assets. Two major factors contributed towards mitigating overall results:
currency volatility and regional economic instability within Far East Asia. The
unwavering strength of the U.S. dollar continued to exact a toll on local
performance gains, as the U.S. dollar appreciated against all currencies except
the British
4
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EVERGREEN VARIABLE TRUST
EVERGREEN VA GLOBAL LEADERS FUND
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pound. As measured by Morgan Stanley Capital International, the MSCI World Index
suffered a 6.6% impact from currency exchange changes on return between local
and US dollar adjusted returns. As your Fund was not actively engaged in
currency hedging during the year due to its asset size, the same approximate
impact resulted.
The turmoil from regional economic instability which began during the year in
the emerging markets economies of Thailand, Indonesia, and Korea spilled over to
neighboring nations Hong Kong, China, Japan, and Malaysia at fiscal year end,
causing not only regional but also worldwide market instability and volatility.
While the Fund benefited on a relative basis from its overall small allocation
of assets in the region, the overall performance impact was negative despite
having minimal attribution on overall portfolio results. The Fund did have an
exceptional return from its allocation in Japan (3.7% of net assets) which,
despite a lackluster domestic equity economy and uncertain regional environment,
managed to return +9.6% versus -16.75% for the MSCI Japan country index. Shares
of the Fund's largest foreign holdings bucked the negative sentiment and traded
up on strong fundamentals: Seven-Eleven Japan was up 24.4% and Nintendo returned
30.1%.
Among other individual countries, returns from Belgium (+18.0%), Germany
(+20.0%), Great Britain (+9.5%), Denmark (+9.2%) and Sweden (+10.6%) contributed
positively, while shares in Malaysia (-80.2%), Hong Kong (-31.9%), and Australia
(-28.6%) were particularly weak. Among individual issues, positives for the year
included German industrial process software giant SAP AG which was up 90.8%, and
was the Fund's overall best performing stock. From Great Britain banking shares
Lloyds TSB Group Plc was up +51.7%, mobile phone operator Vodafone Group Plc was
up 43.1%, and pharmaceutical firm Smithkline Beecham Plc was up 37.2%. Other
standouts included from Sweden, European clothing retailer Hennes & Mauritz
which returned 62.6%, Dutch specialty publisher VNU which returned 28.0% and
Italian clothing retailer Benetton Group SpA which returned 40.6%.
CONCLUSION
Despite recent regional market volatility and domestic turbulence punctuated by
profit growth warnings from selected issues, overall corporate earnings were
robust in 1997 and outlooks remain positive for a solid, while not spectacular,
year ahead. It will be increasingly difficult for world markets to eclipse the
double digit performance of the past three years. Rising valuations and
expectations have made the margins for error ever thinner. Therefore,
selectivity amongst individual companies and markets will be the key to
outperformance. We believe superior performance will be achieved by the
companies that consistently demonstrate sustained and visible growth in any
economic environment. Firms with superior management and outstanding strong
financial wherewithal are better able to seize opportunities created by market
uncertainties. Your Fund will be ever vigilant to identify such companies and
make them part of your investment portfolio. We will also remain proactive with
respect to changing global macro-economic, political and social changes in order
to optimize shareholder return and minimize risk. We thank you for your support.
5
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EVERGREEN VARIABLE TRUST
EVERGREEN VA AGGRESSIVE GROWTH FUND
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A REPORT FROM YOUR
PORTFOLIO MANAGER
HAROLD J. IRELAND, JR.
Evergreen VA Aggressive Growth Fund ended its first year at $11.10 (net asset
value), and $1,868,314 in total assets. Since our last report to you as of June
30th, the Fund has increased in value 8.1 percent. The Fund had a total return
of 11.0% for the period ended December 31, 1997. The fourth quarter was
particularly a poor one for this Fund because of its large portfolio commitment
to Technology and Oil and Gas Drillers and Services. Technology, as represented
by the NASDAQ-100 Index, is off 14% from its high on October 9, 1997. Somewhat
more severe, the Standard & Poor's Mid-cap Oil & Gas Drilling Equipment &
Services Index is off 24% from its high on October 13, 1997. However, both these
indices in spite of their recent price correction increased 21% and 41%
respectively, during 1997. Part of the problem is investors' nervousness with
the spreading Asian market malaise and its implications of possible slowing of
domestic and worldwide economic growth.
The glut of surplus crude, causing a decline in world oil prices, added to
investors' uncertainty. At the end of the third quarter, oil stood at $21.18/lb.
It ended the year at $17.64/lb., or 17% lower. If the oil commodity price stays
depressed, it is possible producers might throttle back their future capital
expenditure plans. Even factoring a reduction in profits for the Oil Service
industry in 1998, earnings increases will continue, although they probably will
not be at previous growth rates. Overall, we believe that the Oil Drilling and
Oil Services industries have emerged from a fifteen-year down cycle and have
undergone a protracted consolidation and downsizing. These industries are among
the very few which have the ability to raise prices to increase profit margins.
We believe that the multi-year cycle of earnings growth will support rising
stock prices for several years. In addition, new technologies have also made
expenditures on oil drilling much more productive than in the past. A higher
proportion of major oil company budgets is being allocated to outsourcing,
exploration and drilling. The increasing worldwide demand for energy is being
spurred by the rapid growth of Eastern Europe and the countries of the former
Soviet Union. At the same time, these newly emerging capitalist economies have
opened up a great deal of promising land and offshore territory for oil
exploration and development. All of the major oil companies are competing for
these "frontier" drilling concessions. However, the drilling itself is done by
outside contractors. New rigs and trained technicians cannot be developed fast
enough to meet demand.
Despite a difficult quarter and year, it is worth noting that the manager of the
Fund also manages the Evergreen Aggressive Growth Fund from which this Fund is
cloned. That Fund has equaled or outperformed the average of its Lipper Capital
Appreciation Fund peer group (231 funds), 11 of 14 calendar years, the
exceptions being 1987, 1994, and 1997. For this 14 year period, the Fund
compounded at 15.2% vs. 12.5% for its Lipper peer group, a betterment of 2.7
percentage points. The Fund's 10 year compound rate of return was 18.1% as
compared to 14.5% for Lipper, a 3.6 percentage point positive differential.
STRATEGY
The Fund's strategy has always been to go with the winners and hold on for the
long term. A rigorous quantitative screening process produces a list of
candidates for the portfolio and helps separate the contenders from the
pretenders. In-depth analysis of the company, its products and/or services, the
management team and their past successes and current commitment contribute to
the final selection. Finally, careful judgment of each company's franchise and
growth opportunity and the current structure of its industry's competition are
essential in completing the selection process. Since we believe in sticking with
established, dominant companies and do not believe in trading down in quality,
our philosophy has led to lower portfolio turnover.
OUTLOOK
Especially encouraging at this time, is the fact that the Fund's portfolio of
mid-cap investments is relatively inexpensive as compared to large-cap
favorites, i.e. the S & P 500 Index. Based on stock valuation
measurement, the PE/G ration, (price earnings multiple divided by
estimated five-year future earnings growth) investors today are paying a
price earnings multiple of 1.5 times the projected earnings growth for
the S & P 100. In contrast, for the stocks in the portfolio of the
Evergreen VA Aggressive Growth Fund, we are paying a price earnings
multiple of only 0.8 times their projected growth. In the past,
discrepancies this wide have been followed by outperformance and it has
paid handsomely to own smaller aggressive growth stocks rebounding from
such a depressed level.
During the past three years, investors have flocked to large international
big-cap stocks at the expense of smaller, faster growing emerging growth
companies. It is our belief that 1998 will be the year that this price
differential narrows. Compared to strong returns in prior years, this past
calendar year was one of performance disappointment. However, despite this
short-term volatility, we remain confident that our proven strategy has the
potential to continue to produce attractive long-term returns for shareholders.
6
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EVERGREEN VARIABLE TRUST
EVERGREEN VA STRATEGIC INCOME FUND
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A REPORT FROM YOUR
PORTFOLIO MANAGERS
PRESCOTT CROCKER
We are pleased to report on the events and strategies that shaped the
performance of Evergreen VA Strategic Income Fund since the Fund's inception in
March 1997.
Investors with an international perspective witnessed a wide variety of market
conditions over the past nine months. We employed the Fund's flexible investment
philosophy to emphasize the market sectors that we believe offered the best
value and most favorable outlook for risk-adjusted returns. For the period from
March 6, 1997 to December 31, 1997, the Fund returned 5.28%. We attribute these
results to our careful selection of securities and investment sectors. We
believe, however, that performance was limited by the Fund's modest size, a
condition largely associated with the recentness of its inception. As of
December 31, 1997, the Fund was invested as follows: U.S. Treasury securities:
42%, U.S. high yield securities: 33% and foreign bonds: 14%, and other assets
and liabilities, net: 11%.
U.S. investments generated the highest returns of all fixed-income alternatives,
worldwide, last year. The yield on the benchmark 30-year U.S. Treasury bond
peaked at 7.17% in April 1997 and fell to a low of 5.72% in December 1997.
Interest rates declined to 20-year lows, driven by the combination of low
inflation, steady economic growth, a shrinking federal budget deficit and strong
foreign demand. Demand for U.S. Treasuries was particularly strong in the fourth
quarter when the Asian crisis unfolded and foreign investors sought U.S.
Treasuries as a safe-haven from the turmoil in Asia. The return on U.S.
securities increased further for foreign investors, with the dollar
strengthening throughout the year. The dollar was particularly strong compared
to the German deutschmark, gaining approximately 15.5%-- resulting in a decline
of 15 1/2% for the German deutschmark-- from December 31, 1996 to December 31,
1997.
Investors in U.S. high yield bonds also enjoyed a positive investment climate. A
healthy business atmosphere and rising stock market set the stage for attractive
returns in that sector. Default rates reached a ten-year low, as economic
strength helped to improve the creditworthiness of the underlying companies.
Further, a growing number of investors were willing to absorb additional credit
risk, given the solid economic conditions. Another factor that affected the
prices of high yield bonds was the stock market's performance. Like stocks, high
yield bonds are more sensitive to credit developments within the underlying
companies than they are to changes in interest rates. This similarity has
created an historic correlation between the two markets.
In the foreign markets, performance varied between the bonds of developed
countries and those of emerging markets. The bonds of developed countries
performed well, although returns were offset by their currencies generally
losing 8-12% against the U.S. dollar. Conditions in Europe were favorable.
Countries continued to meet the rigorous economic, fiscal and monetary standards
required for entrance into the European Monetary Union, scheduled for January 1,
1999. The environment in the emerging markets contrasted significantly with the
positive scenarios in the U.S. and Europe, however. Emerging market debt was
adversely affected by the Asian crisis, as investors anticipated a significant
slowdown in the economic growth of these developing countries.
We structured the Fund to reflect these trends by emphasizing investments in
U.S. Treasuries and minimizing holdings in foreign securities. The Fund's
foreign investments centered on the so-called "high yield" countries, which
include the United Kingdom, Denmark and Spain.
Looking forward, we expect economic growth to slow and inflation to remain low.
Measured by the consumer price index, the 1997 inflation rate was 1.7%, the
lowest level since 1965. We anticipate that the U.S. economy could slow to the
2.5% range from the estimated 4% rate of growth, last year. In this environment,
we believe the yield on the benchmark 30-year U.S. Treasury could range between
5.5% to 6.5%.
With this as a backdrop, we intend to focus on U.S. Treasuries and industries
that we believe have superior growth potential and pricing opportunity. These
include telecommunications, broadcasting and service industries. Given our
outlook for low inflation and a slower economy, we expect to de-emphasize
commodity-oriented industries and those whose performance coincides with the ups
and downs of economic cycles. We also intend to de-emphasize international
investments because we believe that sector has the most limited growth
prospects. We will continue to monitor opportunities in emerging country debt,
however, in anticipation of a resumption in stable economic growth.
7
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EVERGREEN VARIABLE TRUST
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PERFORMANCE TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN VA FUND
Comparison of change in value of a $10,000 investment in Evergreen VA Fund, the
NASDAQ and the Russell 2000.
(Graph appears here with the following plot points.)
<TABLE>
<CAPTION>
3/96 6/96 9/96 12/96 3/97 6/97 9/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund 9,960 10,590 10,851 11,487 11,618 13,530 15,741 $15,760
NASDAQ 10,012 10,771 11,158 10,594 10,030 11,858 13,874 $12,940
Russell 200 10,207 10,717 10,755 11,314 10,733 12,468 14,318 $13,833
</TABLE>
A $10,000 investment in Evergreen VA Fund, made on March 1, 1996, (commencement
of operations) with all distributions reinvested was worth $15,760 on December
31, 1997. Past performance is no guarantee of future results. The NASDAQ and
Russell 2000 indices are unmanaged market indices. These indices do not include
transaction costs associated with buying and selling securities nor any
management fees.
EVERGREEN VA FOUNDATION FUND
Comparison of change in value of a $10,000 investment in Evergreen VA Foundation
Fund, the Standard & Poors 500 Index and the Lipper Balanced Fund Average.
(Graph appears here with the following plot points.)
<TABLE>
<CAPTION>
3/96 6/96 9/96 12/96 3/97 6/97 9/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund 9,830 10,070 10,470 11,527 11,527 13,056 14,280 $14,735
S&P 500 10,096 10,549 10,875 11,780 12,098 14,207 15,271 $15,662
LBFA 10,038 10,241 10,510 11,095 11,143 12,332 13,129 $13,128
</TABLE>
A $10,000 investment in Evergreen VA Foundation Fund, made on March 1, 1996,
(commencement of operations) with all distributions reinvested was worth $14,735
on December 31, 1997. Past performance is no guarantee of future results. The
Standard & Poors 500 Index is an unmanaged market index. This index does not
include transaction costs associated with buying and selling securities nor any
management fees.
EVERGREEN VA GROWTH AND
INCOME FUND
Comparison of change in value of a $10,000 investment in Evergreen VA Growth &
Income Fund, the Standard & Poors 500 Index and the Lipper Growth & Income
Average.
(Graph appears here with the following plot points.)
<TABLE>
<CAPTION>
3/96 6/96 9/96 12/96 3/97 6/97 9/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund 10,250 10,710 11,150 11,900 11,839 13,881 16,054 $16,025
S&P 500 10,096 10,549 10,875 11,780 12,098 14,207 15,271 15,662
LG&IFA 10,127 10,388 10,723 11,559 11,753 13,400 14,522 14,432
</TABLE>
A $10,000 investment in Evergreen VA Growth and Income Fund, made on March 1,
1996, (commencement of operations) with all distributions reinvested was worth
$16,025 on December 31, 1997. Past performance is no guarantee of future
results. The Standard & Poors 500 Index is an unmanaged market index. This index
does not include transaction costs associated with buying and selling securities
nor any management fees.
EVERGREEN VA GLOBAL
LEADERS FUND
Comparison of change in value of a $10,000 investment in Evergreen VA Global
Leaders Fund, and the MSCI World Index.
(Graph appears here with the following plot points.)
<TABLE>
<CAPTION>
3/97 4/97 5/97 6/97 7/97 8/97 9/97 10/97 11/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund 9,690 9,950 10,599 11,019 11,509 10,669 11,309 10,750 10,869 10,880
MSCIWI 9,788 10,094 10,702 11,222 11,724 10,926 11,505 10,885 11,063 11,184
</TABLE>
A $10,000 investment in Evergreen VA Global Leaders Fund, made on March 6, 1997,
(commencement of operations) with all distributions reinvested was worth $10,880
on December 31, 1997. Past performance is no guarantee of future results. The
MSCI World Index is an unmanaged market index. This index does not include
transaction costs associated with buying and selling securities nor any
management fees.
<PAGE>
EVERGREEN VARIABLE TRUST
- --------------------------------------------------------------------------------
PERFORMANCE TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN VA AGGRESSIVE
GROWTH FUND
Comparison of change in value of a $10,000 investment in Evergreen VA Aggressive
Growth Fund, and the NASDAQ Industrial Average.
(Graph appears here with the following plot points.)
<TABLE>
<CAPTION>
3/97 4/97 5/97 6/97 7/97 8/97 9/97 10/97 11/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund 9,210 8,630 9,990 10,270 11,110 11,070 11,699 11,600 11,150 $11,100
NASDAQ Ind 9,284 9,092 10,343 10,786 11,496 11,709 12,542 11,570 11,404 $11,135
</TABLE>
A $10,000 investment in Evergreen VA Aggressive Growth Fund, made on March 6,
1997, (commencement of operations) with all distributions reinvested was worth
$11,100 on December 31, 1997. Past performance is no guarantee of future
results. The NASDAQ Industrial average is an unmanaged market index. This index
does not include transaction costs associated with buying and selling securities
nor any management fees.
EVERGREEN VA STRATEGIC
INCOME FUND
Comparison of change in value of a $10,000 investment in Evergreen VA Strategic
Income Fund, Lehman Brothers Government Bond Index and Consumer Price Index.
<TABLE>
<CAPTION>
3/97 4/97 5/97 6/97 7/97 8/97 9/97 10/97 11/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund 10,030 10,060 10,090 10,121 10,221 10,160 10,371 10,451 10,487 $10,528
LBGBI 9,943 10,055 10,151 10,265 10,453 10,414 10,527 10,650 10,674 $10,760
CPI 10,025 10,038 10,031 10,044 10,054 10,074 10,094 10,114 10,104 $10,092
</TABLE>
A $10,000 investment in Evergreen VA Strategic Income Fund, made on March 6,
1997, (commencement of operations) with all distributions reinvested was worth
$10,528 on December 31, 1997. Past performance is no guarantee of future
results. The Lehman Brothers Government Bond Index (LBGBI) is an unmanaged
market index. This index does not include transaction costs associated with
buying and selling securities nor any management fees. The Consumer Price Index,
a measure of inflation, is through December 31, 1997.
HISTORICAL PERFORMANCE INFORMATION:
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS CUMULATIVE RETURNS
------------------------- -------------------------
SINCE SINCE
ONE-YEAR INCEPTION ONE-YEAR INCEPTION
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Evergreen VA Fund............................................. 37.16% 28.05%* 37.16% 57.54%
Evergreen VA Foundation Fund.................................. 27.80% 23.47%* 27.80% 47.33%
Evergreen VA Growth and Income Fund........................... 34.66% 29.23%* 34.66% 60.23%
Evergreen VA Global Leaders Fund.............................. N/A N/A N/A 8.80%**
Evergreen VA Aggressive Growth Fund........................... N/A N/A N/A 11.00%**
Evergreen VA Strategic Income Fund............................ N/A N/A N/A 5.28%**
</TABLE>
* For the period from March 11, 1996 (commencement of operations) to December
31, 1996.
** For the period from March 6, 1997 (commencement of operations) to December
31, 1997.
9
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997** 1996*
<S> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD........................................................................ $ 11.41 $ 10.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................................................................... 0.06 0.05
Net realized and unrealized gain on investments.......................................................... 4.15 1.44
-------- --------
Total from investment operations........................................................................... 4.21 1.49
-------- --------
LESS DISTRIBUTIONS FROM:
Net investment income.................................................................................... (0.05) (0.05)
Net realized gain on investments......................................................................... (0.68) (0.03)
-------- --------
Total distributions........................................................................................ (0.73) (0.08)
-------- --------
NET ASSET VALUE END OF PERIOD.............................................................................. $ 14.89 $ 11.41
-------- --------
Total return............................................................................................... 37.16% 14.90%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses........................................................................................... 1.01% 1.00%+
Total expenses, excluding indirectly paid expenses....................................................... 1.00% 1.00%+
Total expenses, excluding fee waivers and/or reimbursements.............................................. 1.31% 2.38%+
Net investment income.................................................................................... 0.42% 0.87%+
Portfolio turnover rate.................................................................................... 32% 6%
Average commission rate paid per share..................................................................... $0.0576 $0.0661
NET ASSETS END OF PERIOD (THOUSANDS)....................................................................... $21,600 $10,862
</TABLE>
+ Annualized.
* For the period from March 1, 1996 (commencement of operations) to December
31, 1996.
** Calculated using average shares outstanding throughout the period.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA FOUNDATION FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997** 1996*
<S> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD........................................................................ $ 11.31 $ 10.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................................................................... 0.26 0.16
Net realized and unrealized gain on investments.......................................................... 2.86 1.37
-------- --------
Total from investment operations........................................................................... 3.12 1.53
-------- --------
LESS DISTRIBUTIONS FROM:
Net investment income.................................................................................... (0.24) (0.16)
Distributions in excess of net investment income......................................................... 0.00(a) 0.00
Net realized gain on investments......................................................................... (0.65) (0.06)
-------- --------
Total distributions........................................................................................ (0.89) (0.22)
-------- --------
NET ASSET VALUE END OF PERIOD.............................................................................. $ 13.54 $ 11.31
-------- --------
Total return............................................................................................... 27.80% 15.30%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses........................................................................................... 1.01% 1.00%+
Total expenses, excluding indirectly paid expenses....................................................... 1.00% 1.00%+
Total expenses, excluding fee waivers and/or reimbursements.............................................. 1.10% 1.72%+
Net investment income.................................................................................... 2.15% 2.70%+
Portfolio turnover rate.................................................................................... 26% 12%
Average commission rate paid per share..................................................................... $0.0675 $0.0675
NET ASSETS END OF PERIOD (THOUSANDS)....................................................................... $31,840 $15,812
</TABLE>
+ Annualized.
* For the period from March 1, 1996 (commencement of operations) to December
31, 1996.
(a) Amount is less than 1/2 of one cent per share.
** Calculated using average shares outstanding throughout the period.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997** 1996*
<S> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD........................................................................ $ 11.83 $ 10.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................................................................... 0.08 0.06
Net realized and unrealized gain on investments.......................................................... 4.01 1.84
-------- --------
Total from investment operations........................................................................... 4.09 1.90
-------- --------
LESS DISTRIBUTIONS FROM:
Net investment income.................................................................................... (0.07) (0.06)
Net realized gain on investments......................................................................... (0.56) (0.01)
-------- --------
Total distributions........................................................................................ (0.63) (0.07)
-------- --------
NET ASSET VALUE END OF PERIOD.............................................................................. $ 15.29 $ 11.83
-------- --------
Total return............................................................................................... 34.66% 19.00%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses........................................................................................... 1.01% 1.00%+
Total expenses, excluding indirectly paid expenses....................................................... 1.00% 1.00%+
Total expenses, excluding fee waivers and/or reimbursements.............................................. 1.23% 2.05%+
Net investment income.................................................................................... 0.59% 1.00%+
Portfolio turnover rate.................................................................................... 18% 2%
Average commission rate paid per share..................................................................... $0.0600 $0.0579
NET ASSETS END OF PERIOD (THOUSANDS)....................................................................... $31,088 $14,484
</TABLE>
+ Annualized.
* For the period from March 1, 1996 (commencement of operations) to December
31, 1996.
** Calculated using average shares outstanding throughout the period.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
EVERGREEN VARIABLE TRUST
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1997*
GLOBAL AGGRESIVE STRATEGIC
LEADERS FUND GROWTH FUND INCOME FUND
<S> <C> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD.............................................. $ 10.00 $ 10.00 $ 10.00
--------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)**................................................. 0.11 (0.06) 0.32
Net realized and unrealized gain on investments and foreign currency related
transactions................................................................. 0.77 1.16 0.21
--------- -------- -------
Total from investment operations................................................. 0.88 1.10 0.53
--------- -------- -------
LESS DISTRIBUTIONS FROM:
Net investment income.......................................................... (0.06) 0 (0.31)
Net realized gain on investments............................................... (0.03) 0 (0.02)
--------- -------- --------
Total distributions.............................................................. (0.09) 0 (0.33)
--------- -------- --------
NET ASSET VALUE END OF PERIOD.................................................... $ 10.79 $ 11.10 $ 10.20
--------- -------- --------
Total return..................................................................... 8.80% 11.00% 5.28%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses................................................................. 1.05%+ 1.06%+ 1.02%+
Total expenses, excluding indirectly paid expenses............................. 1.00%+ 1.00%+ 1.00%+
Total expenses, excluding fee waivers and/or reimbursements.................... 2.89%+ 3.02%+ 2.67%+
Net investment income (loss)................................................... 1.15%+ (0.74)%+ 5.34%+
Portfolio turnover rate.......................................................... 11% 39% 119%
Average commission rate paid per share........................................... $ 0.0331 $0.0569 N/A
NET ASSETS END OF PERIOD (THOUSANDS)............................................. $ 2,899 $ 1,868 $ 2,204
</TABLE>
+ Annualized.
* For the period from March 6, 1997 (commencement of operations) to December
31, 1997.
** Calculated using average shares outstanding throughout the period.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<CAPTION>
COMMON STOCKS-- 91.3%
<C> <C> <S> <C>
BANKS-- 4.8%
4,000 Comerica, Inc...................... $ 361,000
4,000 F&M National Corp.................. 137,250
3,000 First of America Bank Corp......... 231,375
4,000 Hibernia Corp. Cl. A............... 75,250
6,000 Seacoast Banking Corp. of
Florida Cl. A.................... 231,000
-----------
1,035,875
-----------
BUILDING, CONSTRUCTION & FURNISHINGS-- 7.5%
16,250 Cavalier Homes, Inc................ 158,438
12,500 Clayton Homes, Inc................. 225,000
5,000 La-Z-Boy Chair Co.................. 215,625
5,000 Lowe's Companies, Inc.............. 238,437
8,000 * M/I Schottenstein Homes, Inc....... 150,000
10,000 * Morgan Products, Ltd............... 53,125
2,400 * Palm Harbor Homes, Inc............. 67,800
27,500 * Presley Companies (The), Cl. A..... 20,625
12,000 * Toll Brothers, Inc................. 321,000
4,500 US Home Corp....................... 176,625
-----------
1,626,675
-----------
BUSINESS EQUIPMENT & SERVICES-- 0.7%
5,000 * Zebra Technologies Corp............ 148,750
-----------
CHEMICAL & AGRICULTURAL PRODUCTS-- 0.8%
1,000 Schulman (A.), Inc................. 25,125
4,000 Sigma-Aldrich Corp................. 159,000
-----------
184,125
-----------
COMMUNICATION SYSTEMS & SERVICES-- 3.0%
7,625 * Andrew Corp........................ 183,000
1,500 Cisco Systems, Inc................. 83,625
5,000 * Coherent, Inc...................... 175,625
6,000 Inter-Tel, Inc..................... 116,250
5,000 * Powertel, Inc...................... 83,750
-----------
642,250
-----------
CONSUMER PRODUCTS & SERVICES-- 7.2%
500 * Broderbund Software, Inc........... 12,813
2,700 * Cendant Corp....................... 92,812
10,000 Commonwealth Industries, Inc....... 145,000
30,000 * Gaylord Container Corp. Cl. A...... 172,500
5,700 Heilig-Meyers Co................... 68,400
5,000 K2, Inc............................ 113,750
8,000 Lancaster Colony Corp.............. 451,000
7,000 Russ Berrie & Co., Inc............. 183,750
4,250 Snap-on, Inc....................... 185,406
3,000 Toro Co. (The)..................... 127,875
-----------
1,553,306
-----------
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
ELECTRICAL EQUIPMENT & SERVICES-- 8.1%
5,000 * ADFlex Solutions, Inc.............. $ 80,625
2,000 AMP, Inc........................... 84,000
6,000 * Atmel Corp......................... 111,375
6,000 * Dupont Photomasks, Inc............. 209,250
5,000 Fair Issac & Co., Inc.............. 166,563
5,000 * Hadco Corp......................... 226,250
8,000 Harman International Industries,
Inc.............................. 339,500
12,031 * Paxar Corp......................... 178,209
5,000 * Reliability, Inc................... 68,750
12,000 * SMART Modular Technologies, Inc.... 276,000
-----------
1,740,522
-----------
ENVIRONMENTAL SERVICES-- 0.9%
10,000 Pall Corp.......................... 206,875
-----------
FINANCE & INSURANCE-- 11.5%
3,000 AMBAC Financial Group, Inc......... 138,000
4,000 Countrywide Credit Industries,
Inc.............................. 171,500
10,500 Edwards (A.G.), Inc................ 417,375
5,000 Enhance Financial Services Group,
Inc.............................. 297,500
5,500 * Interra Financial, Inc............. 379,500
4,000 * Leasing Solutions, Inc............. 95,500
1,800 MBIA, Inc.......................... 120,262
3,000 Mercury General Corp............... 165,750
5,200 Merrill Lynch & Co., Inc........... 379,275
7,500 SunAmerica, Inc.................... 320,625
-----------
2,485,287
-----------
HEALTHCARE PRODUCTS & SERVICES-- 10.3%
3,000 Arrow International, Inc........... 111,000
5,000 * Arterial Vascular Engineering,
Inc.............................. 325,000
8,000 Beckman Instruments, Inc........... 320,000
2,850 Columbia / HCA Healthcare Corp..... 84,431
10,000 * Idexx Laboratories, Inc............ 159,375
2,000 Johnson & Johnson.................. 131,750
6,900 * Maxxim Medical, Inc................ 150,075
1,000 McKesson Corp...................... 108,188
2,000 Merck & Co., Inc................... 212,500
2,000 * St. Jude Medical, Inc.............. 61,000
6,000 Stryker Corp....................... 223,500
15,000 * Visx Inc........................... 331,875
-----------
2,218,694
-----------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 8.8%
6,000 AptarGroup, Inc.................... 333,000
6,000 Fisher Scientific International,
Inc.............................. 286,500
10,000 Furon Co........................... 208,750
6,000 * Input/Output, Inc.................. 178,125
2,400 Kaydon Corp........................ 78,300
5,000 Park Electrochemical Corp.......... 141,875
4,000 Robbins & Myers, Inc............... 158,500
6,000 Spartech Corp...................... 90,750
</TABLE>
(CONTINUED)
14
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES--
CONTINUED
8,000 Teleflex, Inc...................... $ 302,000
2,900 * UCAR International, Inc............ 115,819
-----------
1,893,619
-----------
INFORMATION SERVICES & TECHNOLOGY-- 8.0%
2,000 * American Business Information,
Inc.............................. 20,500
2,000 * American Business Information, Inc.
Cl. A............................ 21,000
8,000 * Gateway 2000, Inc.................. 261,000
6,000 Hewlett-Packard Co................. 375,000
3,000 Intel Corp......................... 210,750
2,000 * Intel Corp. Warrants $41.75
Expiring 3/14/98................. 98,937
5,000 Molex, Inc......................... 160,625
9,000 * Parametric Technology Corp......... 426,375
4,000 * Sun Microsystems, Inc.............. 159,500
-----------
1,733,687
-----------
OIL FIELD SERVICES-- 0.1%
500 * Dril Quip, Inc..................... 17,563
-----------
PAPER & PACKAGING-- 0.5%
1,200 St. Joe Corp....................... 108,600
-----------
PUBLISHING, BROADCASTING & ENTERTAINMENT
-- 1.9%
5,200 Belo (A.H.) Corp. Ser. A........... 291,850
1,500 * Chancellor Media Corp.............. 111,938
-----------
403,788
-----------
REAL ESTATE-- 6.5%
1,500 * Alexander's, Inc. REIT............. 136,219
14,000 Continental Homes Holding Corp..... 563,500
3,500 Equity Residential Properties Trust
REIT............................. 176,968
6,000 Starwood Lodging Trust REIT........ 347,250
10,000 Sunstone Hotel Investors, Inc.
REIT............................. 172,500
-----------
1,396,437
-----------
RETAILING & WHOLESALE-- 3.8%
3,000 Avnet, Inc......................... 198,000
8,000 * Cole National Corp. Cl. A.......... 239,500
5,000 * Costco Companies, Inc.............. 223,125
4,000 St. John Knits, Inc................ 160,000
-----------
820,625
-----------
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
COMMON STOCKS-- CONTINUED
<C> <C> <S> <C>
TELECOMMUNICATION SERVICES & EQUIPMENT
-- 0.1%
1,000 * Aspect Telecommunications Corp..... $ 20,875
-----------
THRIFT INSTITUTIONS-- 2.5%
6,000 First Palm Beach Bancorp, Inc...... 258,750
11,000 York Financial Corp................ 283,250
-----------
542,000
-----------
TRANSPORTATION-- 3.2%
13,500 * Airnet Systems, Inc................ 290,250
3,000 * Heartland Express, Inc............. 80,625
13,500 Southwest Airlines Co.............. 332,437
-----------
703,312
-----------
UTILITIES-- TELEPHONE-- 1.1%
4,000 Sprint Corp........................ 234,500
-----------
TOTAL COMMON STOCKS
(COST $15,142,538)............... 19,717,365
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<C> <C> <S> <C>
- ----------
SHORT-TERM INVESTMENTS-- 12.5%
GOVERNMENT AGENCY NOTES & BONDS-- 12.5%
$ 400,000 Federal Farm Credit Bank
5.55%, 1/13/98................... 399,260
100,000 Federal Home Loan Mortgage Corp.
5.77%, 1/14/98................... 99,792
Federal National Mortgage
Association
500,000 5.58%, 1/5/98...................... 499,689
1,440,000 5.67%, 1/7/98...................... 1,438,640
170,000 5.68%, 1/7/98...................... 169,839
100,000 5.71%, 1/16/98..................... 99,762
-----------
2,706,982
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $2,706,982)................ 2,706,982
-----------
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <S> <C> <C>
TOTAL INVESTMENTS--
(COST $17,849,520)........ 103.8% 22,424,347
OTHER ASSETS AND
LIABILITIES-- NET......... (3.8) (824,185)
------- -----------
NET ASSETS.................. 100.0% $21,600,162
------- -----------
------- -----------
</TABLE>
* Non-income producing securities.
REIT-- Real Estate Investment Trust
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA FOUNDATION FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
- ------------------------------------------------------------------
COMMON STOCKS-- 67.3%
AEROSPACE & DEFENSE-- 1.2%
8,000 Boeing Co. (The)................... $ 391,500
-----------
AUTOMOTIVE EQUIPMENT & MANUFACTURING-- 0.4%
2,300 Goodyear Tire & Rubber Co. (The)... 146,337
-----------
BANKS-- 9.7%
9,500 AmSouth Bancorp.................... 515,969
3,000 BankBoston Corp.................... 281,813
2,000 Bankers Trust Corp................. 224,875
4,000 Citicorp........................... 505,750
3,000 Comerica, Inc...................... 270,750
5,000 Crestar Financial Corp............. 285,000
2,000 F&M National Corp.................. 68,625
600 First Empire State Corp............ 279,000
4,500 First of America Bank Corp......... 347,062
8,000 Seacoast Banking Corp. of Florida
Cl. A............................ 308,000
-----------
3,086,844
-----------
BUILDING, CONSTRUCTION & FURNISHINGS-- 3.1%
5,000 Armstrong World Industries, Inc.... 373,750
19,004 Lennar Corp........................ 409,774
4,000 Lowe's Companies, Inc.............. 190,750
-----------
974,274
-----------
BUSINESS EQUIPMENT & SERVICES-- 0.1%
1,200 * Crescent Operating, Inc............ 29,400
-----------
CAPITAL GOODS-- 1.7%
5,000 Caterpillar, Inc................... 242,813
5,000 Deere & Co......................... 291,562
-----------
534,375
-----------
CHEMICAL & AGRICULTURAL PRODUCTS-- 3.9%
6,000 Du Pont (E. I.) De Nemours & Co.... 360,375
6,000 Monsanto Co........................ 252,000
7,000 Morton International, Inc.......... 240,625
3,000 PPG Industries, Inc................ 171,375
8,500 Schulman (A.), Inc................. 213,562
-----------
1,237,937
-----------
COMMUNICATION SYSTEMS & SERVICES-- 0.5%
3,000 Cisco Systems, Inc................. 167,250
-----------
CONSUMER PRODUCTS & SERVICES-- 2.1%
3,500 Avon Products, Inc................. 214,813
5,947 * Cendant Corp....................... 204,428
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
COMMON STOCKS-- CONTINUED
CONSUMER PRODUCTS & SERVICES-- CONTINUED
6,000 Snap-on, Inc....................... $ 261,750
-----------
680,991
-----------
ELECTRICAL EQUIPMENT & SERVICES-- 5.8%
4,000 AMP, Inc........................... 168,000
3,000 Applied Power, Inc. Cl. A.......... 207,000
6,400 General Electric Co................ 469,600
9,300 Harman International Industries,
Inc.............................. 394,669
6,000 Honeywell, Inc..................... 411,000
3,000 Perkin Elmer Corp.................. 213,187
-----------
1,863,456
-----------
FINANCE & INSURANCE-- 9.9%
2,800 Allstate Corp. (The)............... 254,450
3,000 American International Group,
Inc.............................. 326,250
4,000 Chubb Corp......................... 302,500
4,000 Countrywide Credit Industries,
Inc.............................. 171,500
7,500 John Nuveen Co. (The) Cl. A........ 262,500
5,866 Legg Mason, Inc.................... 328,129
5,000 Lehman Brothers Holdings, Inc...... 255,000
5,000 Merrill Lynch & Co., Inc........... 364,688
5,000 NAC RE Corp........................ 244,063
7,500 Raymond James Financial, Inc....... 297,656
8,000 Torchmark Corp..................... 336,500
-----------
3,143,236
-----------
HEALTHCARE PRODUCTS & SERVICES-- 5.6%
2,000 Abbott Laboratories................ 131,125
6,000 American Home Products Corp........ 459,000
4,050 Columbia/HCA Healthcare Corp....... 119,982
750 * Covance, Inc....................... 14,906
6,000 * HealthCare COMPARE Corp............ 306,750
2,400 Johnson & Johnson.................. 158,100
2,000 Medtronic, Inc..................... 104,625
2,100 Merck & Co., Inc................... 223,125
375 * Quest Diagnostics, Inc............. 6,328
2,000 Warner-Lambert Co.................. 248,000
-----------
1,771,941
-----------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 2.0%
7,087 Autoliv, Inc....................... 232,099
3,000 Corning, Inc....................... 111,375
8,000 Timken Co. (The)................... 275,000
2,000 Unova, Inc......................... 32,875
-----------
651,349
-----------
</TABLE>
(CONTINUED)
16
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA FOUNDATION FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
COMMON STOCKS-- CONTINUED
INFORMATION SERVICES & TECHNOLOGY-- 4.9%
8,100 * Analog Devices, Inc................ $ 224,269
7,000 Hewlett-Packard Co................. 437,500
6,000 Intel Corp......................... 421,500
3,000 International Business Machines
Corp............................. 313,687
4,000 * Sun Microsystems, Inc.............. 159,500
-----------
1,556,456
-----------
LEISURE & TOURISM-- 0.1%
300 Disney Walt Co. (The).............. 29,719
-----------
OIL / ENERGY-- 0.9%
3,200 Consolidated Natural Gas Co........ 193,600
1,600 Exxon Corp......................... 97,900
-----------
291,500
-----------
OIL FIELD SERVICES-- 0.5%
2,000 * Western Atlas, Inc................. 148,000
-----------
PUBLISHING, BROADCASTING & ENTERTAINMENT
-- 0.1%
400 Time Warner, Inc................... 24,800
-----------
REAL ESTATE-- 8.9%
8,000 Apartment Investment & Management
Co. Cl. A REIT................... 294,000
5,000 Brandywine Realty Trust REIT....... 125,625
7,000 Capstead Mortgage Corp. REIT....... 139,562
10,000 CarrAmerica Realty Corp. REIT...... 316,875
19,000 Continental Homes Holding Corp..... 764,750
12,000 Crescent Real Estate Equities, Inc.
REIT............................. 472,500
12,000 Crown American Realty Trust REIT... 111,750
1,000 Equity Residential Properties Trust
REIT............................. 50,562
11,400 * FAC Realty, Inc. REIT.............. 88,350
8,000 Horizon Group, Inc. REIT........... 87,500
3,000 Marriott International, Inc........ 207,750
2,000 Meditrust Co. REIT................. 73,250
1,900 Oasis Residential, Inc. REIT....... 42,394
1,230 Post Property, Inc. REIT........... 49,969
-----------
2,824,837
-----------
RETAILING & WHOLESALE-- 1.6%
4,000 Avnet, Inc......................... 264,000
4,000 Mercantile Stores Co., Inc......... 243,500
-----------
507,500
-----------
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
COMMON STOCKS-- CONTINUED
THRIFT INSTITUTIONS-- 1.8%
6,000 Golden West Financial Corp......... $ 586,875
-----------
UTILITIES-- TELEPHONE-- 2.5%
5,000 GTE Corp........................... 261,250
9,000 Sprint Corp........................ 527,625
-----------
788,875
-----------
TOTAL COMMON STOCKS
(COST $16,623,672)............... 21,437,452
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<C> <C> <S> <C>
- ----------
U.S. GOVERNMENT & AGENCY OBLIGATIONS-- 14.8%
TREASURY NOTES & BONDS-- 14.8%
U.S. Treasury Bonds
$1,000,000 6.00%, 2/15/26..................... 999,063
2,000,000 6.25%, 8/15/23..................... 2,061,876
1,000,000 7.125%, 2/15/23.................... 1,141,251
500,000 U.S. Treasury Notes
6.50%, 8/15/05..................... 521,876
-----------
4,724,066
-----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (COST $4,289,328).... 4,724,066
-----------
SHORT-TERM INVESTMENTS-- 17.4%
GOVERNMENT AGENCY NOTES & BONDS-- 17.4%
1,315,000 Federal Farm Credit Bank
5.55%, 1/13/98................... 1,312,568
Federal Home Loan Mortgage Corp.
130,000 5.60%, 1/9/98...................... 129,838
565,000 5.70%, 1/14/98..................... 563,837
200,000 5.77%, 1/14/98..................... 199,583
Federal National Mortgage
Association
290,000 5.58%, 1/5/98...................... 289,820
2,190,000 5.67%, 1/7/98...................... 2,187,930
850,000 5.71%, 1/16/98..................... 847,978
-----------
5,531,554
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $5,531,554)................ 5,531,554
-----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL INVESTMENTS--
(COST $26,444,554)........ 99.5% 31,693,072
OTHER ASSETS AND
LIABILITIES-- NET......... 0.5 147,291
------- -----------
NET ASSETS.................. 100.0% $31,840,363
------- -----------
------- -----------
</TABLE>
* Non-income producing securities.
REIT-- Real Estate Investment Trust.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
- ------------------------------------------------------------------
COMMON STOCKS-- 84.8%
BANKS-- 6.4%
2,000 AmSouth Bancorp.................... $ 108,625
8,225 Banc One Corp...................... 446,720
2,000 Bankers Trust Corp................. 224,875
5,000 KeyCorp............................ 354,062
4,650 Susquehanna Bancshares, Inc........ 177,863
10,000 Webster Financial Corp............. 665,000
-----------
1,977,145
-----------
BUILDING, CONSTRUCTION & FURNISHINGS-- 2.3%
14,000 * Furniture Brands International,
Inc.............................. 287,000
3,000 Lone Star Industries, Inc.......... 159,375
5,000 Lowe's Companies, Inc.............. 238,437
500 US Home Corp....................... 19,625
-----------
704,437
-----------
BUSINESS EQUIPMENT & SERVICES-- 9.6%
16,500 Air Express International Corp..... 503,250
15,000 Circle International Group, Inc.... 344,062
10,000 * Compuware Corp..................... 320,000
16,500 * Metromail Corp..................... 294,938
14,000 Pittston Burlington Group.......... 367,500
20,000 * Platinum Technology Corp........... 565,000
6,000 * Policy Management Systems Corp..... 417,375
10,000 Reynolds & Reynolds Co. (The), Cl.
A................................ 184,375
-----------
2,996,500
-----------
CAPITAL GOODS-- 0.8%
5,000 Caterpillar, Inc................... 242,813
-----------
CHEMICAL & AGRICULTURAL PRODUCTS-- 4.3%
1,300 Air Products & Chemicals, Inc...... 106,925
10,000 Engelhard Corp..................... 173,750
6,000 Grace (W.R.) & Co.................. 482,625
5,500 Morton International, Inc.......... 189,062
1,000 Pioneer Hi-Bred International,
Inc.............................. 107,250
5,000 Praxair, Inc....................... 225,000
2,000 Solutia, Inc....................... 53,375
-----------
1,337,987
-----------
CONSUMER PRODUCTS & SERVICES-- 2.1%
3,500 Avon Products, Inc................. 214,813
2,500 Black & Decker Corp................ 97,656
5,000 Premark International, Inc......... 145,000
7,000 Russ Berrie & Co., Inc............. 183,750
-----------
641,219
-----------
DIVERSIFIED COMPANIES-- 0.4%
4,000 ITT Industries, Inc................ 125,500
-----------
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
COMMON STOCKS-- CONTINUED
ELECTRICAL EQUIPMENT & SERVICES-- 3.4%
7,800 AVX Corp........................... $ 143,813
3,000 Honeywell, Inc..................... 205,500
5,000 * KLA-Tencor Corp.................... 193,125
500 Perkin Elmer Corp.................. 35,409
11,000 Sensormatic Electronics Corp....... 180,812
14,000 * Unitrode Corp...................... 301,000
-----------
1,059,659
-----------
FINANCE & INSURANCE-- 2.6%
7,500 Edwards (A.G.), Inc................ 298,125
6,000 Federal Home Loan Mortgage Corp.... 251,625
5,000 Lehman Brothers Holdings, Inc...... 255,000
-----------
804,750
-----------
FOOD & BEVERAGE PRODUCTS-- 0.3%
1,000 * CPC International, Inc............. 107,750
-----------
FOREST PRODUCTS-- 0.9%
10,000 Deltic Timber Corp................. 273,750
-----------
HEALTHCARE PRODUCTS & SERVICES-- 12.0%
1,000 Abbott Laboratories................ 65,563
4,000 American Home Products Corp........ 306,000
500 * Amgen, Inc......................... 27,063
6,000 * Boston Scientific Corp............. 275,250
10,000 * Foundation Health Systems, Inc..... 223,750
7,000 * HealthCare COMPARE Corp............ 357,875
10,000 * Lincare Holdings, Inc.............. 570,000
5,000 Manor Care, Inc.................... 175,000
5,000 McKesson Corp...................... 540,938
7,500 * Quorum Health Group, Inc........... 195,937
1,000 Schering-Plough Corp............... 62,125
5,000 * Vencor, Inc........................ 122,187
1,800 Warner-Lambert Co.................. 223,200
5,000 * Wellpoint Health Networks, Inc. Cl.
A................................ 211,250
12,500 West Co., Inc. (The)............... 371,875
-----------
3,728,013
-----------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 7.1%
5,375 Autoliv, Inc....................... 176,031
6,500 Borg-Warner Automotive, Inc........ 338,000
1,000 Carpenter Technology Corp.......... 48,063
5,000 Flowserve Corp..................... 139,687
15,000 Pittston Brink's Group............. 603,750
22,000 * Strattec Security Corp............. 561,000
7,000 Sundstrand Corp.................... 352,625
-----------
2,219,156
-----------
INFORMATION SERVICES & TECHNOLOGY-- 2.7%
5,000 * Adaptec, Inc....................... 185,625
10,875 Computer Associates International,
Inc.............................. 575,016
3,000 * Perceptron, Inc.................... 64,875
-----------
825,516
-----------
</TABLE>
(CONTINUED)
18
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
COMMON STOCKS-- CONTINUED
METAL PRODUCTS & SERVICES-- 0.5%
10,000 * Steel Dynamics, Inc................ $ 161,250
-----------
OIL/ENERGY-- 7.2%
15,000 Berry Petroleum Co. Cl. A.......... 261,563
17,500 * Houston Exploration, Co. (The)..... 321,562
500 Kerr-McGee Corp.................... 31,656
2,000 National Fuel Gas Co............... 97,375
10,000 * Oryx Energy Co..................... 255,000
15,500 * Santa Fe Energy Resources, Inc..... 174,375
20,000 Southwestern Energy Co............. 257,500
18,000 TNP Enterprises, Inc............... 598,500
4,000 Union Texas Petroleum Holdings,
Inc.............................. 83,250
6,000 Williams Companies, Inc. (The)..... 170,250
-----------
2,251,031
-----------
OIL FIELD SERVICES-- 3.9%
11,000 * Atwood Oceanics, Inc............... 521,125
500 * Dril Quip, Inc..................... 17,562
3,444 Halliburton Co..................... 178,873
12,000 * Reading & Bates Corp............... 502,500
-----------
1,220,060
-----------
PUBLISHING, BROADCASTING & ENTERTAINMENT-- 6.8%
7,650 * American Radio Systems Corp. Cl.
A................................ 407,841
5,000 Gaylord Entertainment Co........... 159,688
11,500 * Jacor Communications, Inc.......... 610,937
7,000 * Lin Television Corp................ 381,500
4,500 TCA Cable TV, Inc.................. 207,000
5,500 Time Warner, Inc................... 341,000
-----------
2,107,966
-----------
REAL ESTATE-- 1.9%
2,800 Arden Realty Group, Inc. REIT...... 86,100
3,500 CarrAmerica Realty Corp. REIT...... 110,906
5,000 * Choice Hotels, Inc. REIT........... 80,000
5,000 * Starwood Lodging Trust REIT........ 289,375
1,666 * Sunburst Hospitality Corp.......... 16,452
-----------
582,833
-----------
RETAILING & WHOLESALE-- 1.3%
2,000 * Carson Pirie Scott & Co............ 100,250
10,000 * Cole National Corp. Cl. A.......... 299,375
-----------
399,625
-----------
THRIFT INSTITUTIONS-- 2.2%
20,000 Maryland Federal Bancorp, Inc...... 700,000
-----------
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
COMMON STOCKS-- CONTINUED
TRANSPORTATION-- 5.6%
2,000 * Atlas Air, Inc..................... $ 48,000
5,000 Bombardier, Inc., Cl. B............ 102,866
5,000 Burlington Northern Santa Fe....... 464,687
13,500 Kansas City Southern Industries,
Inc.............................. 428,625
17,000 Petroleum Helicopters, Inc......... 378,250
5,000 Union Pacific Corp................. 312,188
-----------
1,734,616
-----------
UTILITIES-- TELEPHONE-- 0.5%
4,000 * AirTouch Communications, Inc....... 166,250
-----------
TOTAL COMMON STOCKS
(COST $19,720,705)............... 26,367,826
-----------
<CAPTION>
PREFERRED STOCKS-- 0.0% (A)
<C> <C> <S> <C>
HEALTHCARE PRODUCTS & SERVICES-- 0.0%
3,500 * Fresenius National Med Care, Inc.
Ser. D........................... 245
-----------
TOTAL PREFERRED STOCKS
(COST $736)...................... 245
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<C> <C> <S> <C>
- ----------
SHORT-TERM INVESTMENTS-- 19.6%
GOVERNMENT AGENCY NOTES & BONDS-- 19.6%
$2,625,000 Federal Farm Credit Bank
5.55%, 1/13/98................... 2,620,144
Federal Home Loan Mortgage Corp.
150,000 5.69%, 1/14/98..................... 149,692
495,000 5.70%, 1/14/98..................... 493,981
150,000 5.74%, 1/23/98..................... 149,474
175,000 5.75%, 1/26/98..................... 174,301
100,000 5.77%, 1/14/98..................... 99,792
Federal National Mortgage
Association
180,000 5.58%, 1/5/98...................... 179,888
1,285,000 5.67%, 1/7/98...................... 1,283,785
950,000 5.71%, 1/16/98..................... 947,740
-----------
6,098,797
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $6,098,797)................ 6,098,797
-----------
</TABLE>
<TABLE>
<C> <C> <S> <C> <C>
TOTAL INVESTMENTS--
(COST $25,820,238)........ 104.4% 32,466,868
OTHER ASSETS AND
LIABILITIES-- NET......... (4.4) (1,378,950)
------- -----------
NET ASSETS.................. 100.0% $31,087,918
------- -----------
------- -----------
</TABLE>
* Non-income producing securities.
(a) Less than one-tenth of one percent.
REIT-- Real Estate Investment Trust.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA GLOBAL LEADERS FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
- ------------------------------------------------------------------
<CAPTION>
COMMON STOCKS-- 86.8%
<C> <C> <S> <C>
AUSTRALIA-- 0.3%
CHEMICAL & AGRICULTURAL PRODUCTS-- 0.3%
2,500 Incitec, Ltd....................... $ 9,271
-----------
BELGIUM-- 1.3%
HEALTHCARE PRODUCTS & SERVICES-- 0.6%
5 * UCB SA............................. 16,504
-----------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 0.3%
50 * Barco NV........................... 9,176
-----------
RETAILING & WHOLESALE-- 0.4%
25 Colruyt SA......................... 12,770
-----------
TOTAL BELGIUM...................... 38,450
-----------
CANADA-- 5.9%
AUTOMOTIVE EQUIPMENT & MANUFACTURING-- 1.7%
800 Magna International, Inc........... 50,250
-----------
CHEMICAL & AGRICULTURAL PRODUCTS-- 1.3%
1,500 Du Pont Canada, Inc., Cl. A........ 36,790
-----------
ENERGY-- 1.5%
2,000 * Canadian Natural Resources, Ltd.... 42,826
-----------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 1.4%
2,000 Bombardier, Inc., Cl. B............ 41,146
-----------
TOTAL CANADA....................... 171,012
-----------
DENMARK-- 1.1%
HEALTHCARE PRODUCTS & SERVICES-- 1.1%
400 Coloplast AS....................... 30,940
-----------
FRANCE-- 4.5%
AUTOMOTIVE EQUIPMENT & MANUFACTURING-- 0.7%
300 BERTRAND FAURE..................... 21,329
-----------
BUILDING, CONSTRUCTION & FURNISHINGS-- 1.7%
125 LAPEYRE SA......................... 6,885
400 Societe Technip.................... 42,203
-----------
49,088
-----------
FOOD & BEVERAGE PRODUCTS-- 0.8%
40 Sodexho Alliance................... 21,420
5 * Sodexho Alliance, New Shares....... 2,613
-----------
24,033
-----------
HEALTHCARE PRODUCTS & SERVICES-- 0.4%
100 Synthelabo......................... 12,495
-----------
RETAILING & WHOLESALE-- 0.5%
25 Carrefour SA....................... 13,043
-----------
TEXTILE & APPAREL-- 0.4%
150 Hermes International............... 10,468
-----------
TOTAL FRANCE....................... 130,456
-----------
GERMANY-- 6.8%
ELECTRICAL EQUIPMENT & SERVICES-- 1.1%
100 VEW AG............................. 31,407
-----------
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
COMMON STOCKS-- CONTINUED
FOOD & BEVERAGE PRODUCTS-- 0.4%
25 Suedzucker AG...................... $ 11,743
-----------
HEALTHCARE PRODUCTS & SERVICES-- 0.4%
150 Altana AG.......................... 10,298
-----------
INFORMATION SERVICES & TECHNOLOGY-- 1.0%
100 SAP AG............................. 30,379
-----------
TEXTILE & APPAREL-- 1.5%
150 Adidas AG.......................... 19,728
20 Hugo Boss AG....................... 24,737
-----------
44,465
-----------
UTILITIES-- ELECTRIC-- 2.4%
1,300 RWE AG............................. 69,735
-----------
TOTAL GERMANY...................... 198,027
-----------
HONG KONG-- 7.1%
BANKS-- 0.1%
600 Wing Lung Bank..................... 2,873
-----------
DIVERSIFIED COMPANIES-- 1.0%
60,000 First Pacific Ltd.................. 29,036
-----------
FINANCE & INSURANCE-- 1.1%
31,000 National Mutual Asia Ltd........... 30,804
-----------
REAL ESTATE-- 2.5%
6,000 Cheung Kong Holdings, Ltd.......... 39,295
7,000 Henderson Land Development
Co., Ltd......................... 32,972
-----------
72,267
-----------
RETAILING & WHOLESALE-- 0.0% (A)
2,000 Giordano International, Ltd........ 690
-----------
TELECOMMUNICATION SERVICES & EQUIPMENT-- 1.1%
1,500 Hong Kong Telecommunications,
Ltd. ADS......................... 30,938
-----------
UTILITIES-- 1.3%
20,000 Hongkong & China Gas............... 38,715
-----------
TOTAL HONG KONG.................... 205,323
-----------
ITALY-- 3.9%
CONSUMER PRODUCTS & SERVICES-- 1.2%
1,700 Industrie Natuzzi SpA ADS.......... 35,062
-----------
HEALTHCARE PRODUCTS & SERVICES-- 1.3%
600 Luxottica Group SpA ADS............ 37,500
-----------
TEXTILE & APPAREL-- 1.4%
1,224 Benetton Group SpA ADS............. 39,933
-----------
TOTAL ITALY........................ 112,495
-----------
</TABLE>
(CONTINUED)
20
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA GLOBAL LEADERS FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
COMMON STOCKS-- CONTINUED
JAPAN-- 3.7%
CONSUMER PRODUCTS & SERVICES-- 1.0%
300 Nintendo Co., Ltd.................. $ 29,409
-----------
PUBLISHING, BROADCASTING & ENTERTAINMENT-- 0.1%
1,000 Kyodo Printing Co.................. 3,906
-----------
RETAILING & WHOLESALE-- 2.5%
1,000 Seven-Eleven Japan Co., Ltd........ 70,767
-----------
TRANSPORTATION-- 0.1%
1,000 Keisei Electric Railway............ 2,612
-----------
TOTAL JAPAN........................ 106,694
-----------
MALAYSIA-- 0.4%
AUTOMOTIVE EQUIPMENT & MANUFACTURING-- 0.1%
2,000 Perusahaan Otomobil Nasional
Berhad........................... 1,954
-----------
BANKS-- 0.1%
1,000 Malayan Banking Berhad............. 2,905
1,000 RHB Capital Berhad................. 484
-----------
3,389
-----------
BUILDING, CONSTRUCTION & FURNISHINGS-- 0.1%
2,000 United Engineers Ltd. Berhad....... 1,666
-----------
CHEMICAL & AGRICULTURAL PRODUCTS-- 0.1%
2,000 Malaysian Oxygen Berhad............ 4,473
-----------
FINANCE & INSURANCE-- 0.0% (A)
1,400 AMMB Holdings Berhad............... 918
-----------
TOTAL MALAYSIA..................... 12,400
-----------
NETHERLANDS-- 4.7%
ENERGY-- 1.3%
700 IHC Caland NV...................... 36,318
-----------
FOOD & BEVERAGE PRODUCTS-- 0.8%
300 CSM NV............................. 13,316
375 Nutricia Verenigde Bedrijven NV.... 11,374
-----------
24,690
-----------
INFORMATION SERVICES & TECHNOLOGY-- 0.3%
300 Getronics NV....................... 9,558
-----------
PUBLISHING, BROADCASTING & ENTERTAINMENT-- 2.3%
1,200 Elsevier NV ADS.................... 38,700
400 VNU................................ 11,284
125 Wolters Kluwer NV.................. 16,145
-----------
66,129
-----------
TOTAL NETHERLANDS.................. 136,695
-----------
NORWAY-- 1.2%
FOOD & BEVERAGE PRODUCTS-- 0.7%
250 Orkla ASA.......................... 21,494
-----------
PUBLISHING, BROADCASTING & ENTERTAINMENT-- 0.5%
800 Schibsted ASA...................... 13,702
-----------
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
COMMON STOCKS-- CONTINUED
TRANSPORTATION-- 0.0% (A)
25 * Bona Shipholding................... $ 254
-----------
TOTAL NORWAY....................... 35,450
-----------
SPAIN-- 1.7%
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 0.2%
600 Prosegur, CIA de Seguridad SA...... 6,026
-----------
RETAILING & WHOLESALE-- 0.2%
400 Centros Comerciales Pryca, SA...... 5,960
-----------
UTILITIES-- ELECTRIC-- 1.3%
2,000 Endesa ADS......................... 36,375
-----------
TOTAL SPAIN........................ 48,361
-----------
SWEDEN-- 2.3%
HEALTHCARE PRODUCTS & SERVICES-- 1.9%
3,266 Astra AB ADS....................... 56,135
-----------
RETAILING & WHOLESALE-- 0.4%
250 Hennes & Mauritz Cl. B............. 11,020
-----------
TOTAL SWEDEN....................... 67,155
-----------
UNITED KINGDOM-- 7.6%
BANKS-- 0.5%
1,000 Lloyds TSB Group Plc............... 13,010
-----------
BUILDING, CONSTRUCTION & FURNISHINGS-- 0.3%
1,200 Wolseley Plc....................... 9,538
-----------
CHEMICAL & AGRICULTURAL PRODUCTS-- 0.5%
800 Burmah Castrol Plc................. 13,955
-----------
CONSUMER PRODUCTS & SERVICES-- 0.3%
500 Reckitt & Colman Plc............... 7,843
-----------
FINANCE & INSURANCE-- 0.1%
300 Legal & General Group Plc.......... 2,621
-----------
HEALTHCARE PRODUCTS & SERVICES-- 1.4%
800 SmithKline Beecham Plc - ADR....... 41,150
-----------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 1.5%
1,000 Morgan Crucible Company Plc........ 7,605
1,200 Rentokil Initial Plc............... 5,310
700 Smiths Industries Plc.............. 9,750
1,600 TI Group Plc....................... 12,299
1,766 Williams Plc....................... 9,804
-----------
44,768
-----------
PUBLISHING, BROADCASTING & ENTERTAINMENT-- 1.3%
400 Carlton Communications Plc ADS..... 15,600
700 Granada Group Plc.................. 10,693
1,100 United News & Media Plc............ 12,521
-----------
38,814
-----------
RETAILING & WHOLESALE-- 0.9%
500 Argos Plc.......................... 4,513
2,000 Next Plc........................... 22,829
-----------
27,342
-----------
</TABLE>
21
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA GLOBAL LEADERS FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
COMMON STOCKS-- CONTINUED
TELECOMMUNICATION SERVICES & EQUIPMENT-- 0.8%
300 Vodafone Group Plc ADR............. $ 21,750
-----------
TOTAL UNITED KINGDOM............... 220,791
-----------
UNITED STATES-- 34.3%
ADVERTISING & RELATED SERVICES-- 0.9%
400 Gannett Co., Inc................... 24,725
-----------
BANKS-- 0.5%
400 Norwest Corp....................... 15,450
-----------
BUILDING, CONSTRUCTION & FURNISHINGS-- 0.8%
400 Home Depot, Inc. (The)............. 23,550
-----------
CAPITAL GOODS-- 0.8%
400 Deere & Co......................... 23,325
-----------
CHEMICAL & AGRICULTURAL PRODUCTS-- 2.1%
700 Du Pont (E. I.) De Nemours & Co.... 42,044
500 Nalco Chemical Co.................. 19,781
-----------
61,825
-----------
CONSUMER PRODUCTS & SERVICES-- 3.2%
600 Avon Products, Inc................. 36,825
900 Callaway Golf Co................... 25,706
300 * Cendant Corp....................... 10,313
500 Mattel, Inc........................ 18,625
-----------
91,469
-----------
DIVERSIFIED COMPANIES-- 1.2%
900 AlliedSignal, Inc.................. 35,044
-----------
ELECTRICAL EQUIPMENT & SERVICES-- 1.9%
400 General Electric Co................ 29,350
500 Sundstrand Corp.................... 25,187
-----------
54,537
-----------
ENERGY-- 0.9%
600 Dresser Industries Inc............. 25,163
-----------
FINANCE & INSURANCE-- 4.2%
300 Fannie Mae......................... 17,119
200 Marsh & McLennan Co., Inc.......... 14,913
750 MBNA Corp.......................... 20,484
350 Schwab (Charles) & Co., Inc........ 14,678
200 SLM Holding Corp................... 27,825
600 SunAmerica, Inc.................... 25,650
-----------
120,669
-----------
FOOD & BEVERAGE PRODUCTS-- 1.1%
300 Coca Cola Co. (The)................ 33,312
-----------
HEALTHCARE PRODUCTS & SERVICES-- 2.6%
600 Merck & Co., Inc................... 63,750
200 Schering-Plough Corp............... 12,425
-----------
76,175
-----------
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
COMMON STOCKS-- CONTINUED
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES-- 0.5%
400 Dover Corp......................... $ 14,450
-----------
INFORMATION SERVICES & TECHNOLOGY-- 8.4%
650 Cisco Systems, Inc................. 36,237
650 Compaq Computer Corp............... 36,684
600 Computer Associates
International,Inc................ 31,725
800 Intel Corp......................... 56,200
200 * Microsoft Corp..................... 25,850
1,050 * Oracle Systems Corp................ 23,428
700 * Parametric Technology Corp......... 33,163
-----------
243,287
-----------
LEISURE & TOURISM-- 3.1%
400 Carnival, Corp. Cl. A.............. 22,150
400 Disney Walt Co. (The).............. 39,625
400 Marriott International, Inc........ 27,700
-----------
89,475
-----------
RETAILING & WHOLESALE-- 2.1%
300 Gap, Inc........................... 10,631
1,300 Wal-Mart Stores, Inc............... 51,269
-----------
61,900
-----------
TOTAL UNITED STATES................ 994,356
-----------
TOTAL COMMON STOCKS
(COST-- $2,455,458).............. 2,517,876
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<C> <C> <S> <C>
- ----------
SHORT-TERM INVESTMENTS-- 17.1%
UNITED STATES-- 17.1%
GOVERNMENT AGENCY NOTES & BONDS-- 17.1%
$200,000 Federal Farm Credit Bank, 5.55%,
1/13/1998........................ 199,630
295,000 Federal Home Loan Mortgage, 5.77%,
1/6/1998......................... 294,763
-----------
TOTAL UNITED STATES SHORT-TERM
INVESTMENTS
(COST-- $494,393)................ 494,393
-----------
</TABLE>
<TABLE>
<C> <C> <S> <C> <C>
TOTAL INVESTMENTS--
(COST $2,949,851)......... 103.9% 3,012,269
OTHER ASSETS AND
LIABILITIES-- NET......... (3.9%) (112,805)
------- -----------
NET ASSETS.................. 100% $ 2,899,464
------- -----------
------- -----------
</TABLE>
* Non-income producing securities.
ADR-- American Depository Receipts.
ADS-- American Depository Shares.
(a) Less than one-tenth of one percent.
LEGEND OF PORTFOLIO ABBREVIATIONS:
AB-- Aktiebolag (Swedish for "stock company")
AG-- Aktiengesellschaft (German for "stock company")
A/S-- Aktiesel Skabet (Danish for "stock company")
ASA-- Aktiesel Skabet (Norwegian for "stock company")
NV-- Naamloze (Dutch for "corporation")
SA-- Societe Anonima (Spanish for "corporation")
Societe Anonyme (French for "corporation")
SpA-- Societa per Azioni (Italian for "corporation")
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <C> <S> <C>
- ------------------------------------------------------------------
<CAPTION>
COMMON STOCKS-- 90.2%
<C> <C> <S> <C>
BUSINESS SERVICES-- 13.2%
2,500 * APAC TeleServices, Inc............. $ 33,750
700 * CSG System International, Inc...... 28,000
600 Danka Business Systems, ADR........ 9,563
1,100 First Data Corporation............. 32,175
500 * Fiserv, Inc........................ 24,563
900 Paychex, Inc....................... 45,562
400 Saville System, Plc-ADR............ 16,600
2,000 * Sitel Corporation.................. 18,250
1,000 * Sterling Commerce, Inc............. 38,437
-----------
246,900
-----------
COMMUNICATION SYSTEMS & SERVICES-- 5.5%
1,500 Cisco Systems, Inc................. 83,625
250 Eletronics for Imaging, Inc........ 4,156
500 * WorldCom, Inc...................... 15,125
-----------
102,906
-----------
CONSUMER DIVERSIFIED-- 3.2%
700 * Action Performance Companies,
Inc.............................. 26,513
1,400 * Republic Industries, Inc........... 32,637
-----------
59,150
-----------
EDUCATIONAL SERVICES-- 0.8%
400 * Sylvan Learning Systems, Inc....... 15,600
-----------
FINANCIAL-- 1.9%
600 * AMRESCO, Inc....................... 18,150
700 Green Tree Financial Corporation... 18,331
-----------
36,481
-----------
HEALTHCARE-- 12.2%
400 HBO & Company...................... 19,200
1,050 Health Management Associates,
Inc.............................. 26,513
800 HEALTHSOUTH Corporation............ 22,200
700 Medicis Pharmaceutical
Corporation...................... 35,788
800 MedQuest, Inc...................... 27,800
1,000 Medtronic, Inc..................... 52,312
700 Mylan Laboratories, Inc............ 14,656
900 Renal Care Group, Inc.............. 28,800
-----------
227,269
-----------
OIL/GAS-- DRILLING-- 15.6%
600 Cliffs Drilling Company............ 29,925
600 Diamond Offshore Drilling, Inc..... 28,875
1,000 ENSCO International, Inc........... 33,500
700 Falcon Drilling Company, Inc....... 24,544
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
COMMON STOCKS-- CONTINUED
OIL/GAS-- DRILLING-- CONTINUED
1,000 * Global Marine, Inc................. $ 24,500
1,000 * Marine Drilling Companies, Inc..... 20,750
1,000 * Noble Drilling Corporation......... 30,625
800 Patterson Energy, Inc.............. 30,950
1,400 Transocean Offshore, Inc........... 67,462
-----------
291,131
-----------
OIL/GAS-- EQUIPMENT & SERVICES-- 11.1%
1,000 * EVI, Inc........................... 51,750
2,000 Global Industries Ltd.............. 34,000
1,100 * Petroleum Geo-Services, ADR........ 71,225
400 Schlumberger Ltd................... 32,200
300 * SEACOR SMIT, Inc................... 18,075
-----------
207,250
-----------
RETAILING (SPECIALTY)-- 13.0%
500 * Bed Bath & Beyond, Inc............. 19,250
800 * Central Garden & Pet Company....... 21,000
500 Fastenal Company................... 19,125
700 * Henry Schein, Inc.................. 24,500
700 Home Depot, Inc. (The)............. 41,213
600 * Linens 'N Things, Inc.............. 26,175
400 * Men's Wearhouse, Inc............... 13,900
1,500 * Office Depot, Inc.................. 35,906
1,500 Staples, Inc....................... 41,625
-----------
242,694
-----------
SOFTWARE/TECHNOLOGY-- 13.7%
800 * American Power Conversion
Corporation...................... 18,900
700 * BMC Software, Inc.................. 45,937
300 * Citrix Systems, Inc................ 22,800
400 * Etec Systems, Inc.................. 18,600
800 Harbinger Corporation.............. 22,500
400 * Microsoft Corporation.............. 51,700
500 * Networks Associates, Inc........... 26,438
500 * Parametric Technology Corporation.. 23,688
600 Uniphase Corporation............... 24,825
-----------
255,388
-----------
</TABLE>
<TABLE>
<C> <C> <S> <C> <C>
TOTAL INVESTMENTS--
(COST $1,528,423)......... 90.2% 1,684,769
OTHER ASSETS AND
LIABILITIES-- NET......... 9.8 183,545
------- -----------
NET ASSETS.................. 100.0% $ 1,868,314
------- -----------
------- -----------
</TABLE>
* Non-income producing securities.
ADR-- American Depository Receipts
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
EVERGREEN VARIABLE TRUST
EVERGREEN VA STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <C> <S> <C>
- ------------------------------------------------------------------
<CAPTION>
CORPORATE BONDS-- 33.4%
<C> <C> <S> <C>
COMMUNICATION SYSTEMS & SERVICES-- 4.3%
$ 90,000 Adelphia Communications
Corporation,
Sr. Notes, Series B,
9.88%, 3/1/07................... $ 94,950
-----------
CONSUMER PRODUCTS & SERVICES-- 4.5%
145,000 Revlon Worldwide Corporation,
Sr. Secd. Disc. Notes, Series B,
(Eff. Yield 9.22%) (a),
0.00%, 3/15/01.................. 99,688
-----------
FOOD & BEVERAGE PRODUCTS-- 4.2%
90,000 Iowa Select Farms,
Sr. Notes (Subord.),
10.75%, 12/1/05 (b)............. 92,475
-----------
GAMING-- 4.0%
90,000 Trump Atlantic City Associates,
1st Mtge. Notes,
11.25%, 5/1/06.................. 88,875
-----------
PAPER & PACKAGING-- 4.2%
90,000 Delta Mills, Incorporated,
Sr. Notes,
9.63%, 9/1/07 (b)............... 91,350
-----------
PUBLISHING, BROADCASTING &
ENTERTAINMENT-- 1.9%
50,000 Echostar Satellite Broadcast
Corporation,
Sr. Secd. Disc. Notes,
(Eff. Yield 10.39%) (a),
0.00%, 3/15/04.................. 41,500
-----------
RETAILING & WHOLESALE-- 4.1%
90,000 Friendly's Ice Cream Corporation,
Sr. Notes,
10.50%, 12/1/07................. 91,125
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------
<C> <C> <S> <C>
CORPORATE BONDS-- CONTINUED
TELECOMMUNICATION SERVICES &
EQUIPMENT-- 6.2%
$ 50,000 Brooks Fiber Properties,
Incorporated,
Sr. Disc. Notes,
(Eff. Yield 9.22%) (a),
0.00%, 11/1/06.................. $ 39,875
100,000 Tricom SA,
Sr. Notes,
11.38%, 9/1/04.................. 97,000
-----------
136,875
-----------
TOTAL CORPORATE BONDS
(COST $741,277)................. 736,838
-----------
<CAPTION>
FOREIGN BONDS (NON U.S. DOLLARS)-- 14.1%
<C> <C> <S> <C>
625,000 Denmark (Kingdom of), Deb.,
DKK 8.00%, 5/15/03.................... 102,992
14,000,000 Spain (Government of),
ESP 11.45%, 8/30/98................... 95,716
60,000 United Kingdom Treasury,
GBP 8.50%, 12/7/05.................... 111,207
-----------
TOTAL FOREIGN BONDS (NON U.S.
DOLLARS)
(COST $306,289)................. 309,915
-----------
<CAPTION>
U.S. TREASURY OBLIGATIONS-- 33.0%
<C> <C> <S> <C>
U.S. Treasury Notes
$ 350,000 6.63%, 5/15/07.................... 370,454
350,000 6.25%, 6/30/02.................... 356,944
-----------
TOTAL TREASURY OBLIGATIONS
(COST $716,195)............... 727,398
-----------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS-- 9.0% (COST $199,645)
<C> <C> <S> <C>
200,000 U.S. Treasury Bills,
4.92%, 1/15/98.................. 199,645
-----------
</TABLE>
<TABLE>
<C> <C> <S> <C> <C>
TOTAL INVESTMENTS--
(COST $1,963,406)........ 89.5% 1,973,796
OTHER ASSETS AND
LIABILITIES-- NET........ 10.5 230,579
------- -----------
NET ASSETS................. 100.0% $ 2,204,375
------- -----------
------- -----------
</TABLE>
(a) Effective yield (calculated at date of purchase) is the yield at which the
bond accretes on an annual basis until maturity date.
(b) Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to Section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
LEGEND OF PORTFOLIO ABBREVIATIONS:
DKK-- Danish Krone
ESP-- Spanish Peseta
GBP-- Pound Sterling
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
EVERGREEN VARIABLE TRUST
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
GROWTH GLOBAL AGGRESSIVE
EVERGREEN FOUNDATION AND INCOME LEADERS GROWTH
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at value
(identified cost, $17,849,520,
$26,444,554, $25,820,238, $2,949,851,
$1,528,423, $1,963,406,
respectively).......................... $22,424,347 $31,693,072 $32,466,868 $3,012,269 $1,684,769
Foreign currency, at value (identified
cost, $0, $0, $0, $31, $0, $4,201,
respectively).......................... 0 0 0 31 0
Cash..................................... 50,139 190,139 8,287 0 183,480
Receivable for investments sold.......... 54,932 207,221 0 0 0
Receivable for Fund shares sold.......... 0 5,056 0 20,299 0
Dividends and interest receivable........ 14,081 133,580 15,391 4,460 211
Unamortized organization expense......... 13,702 13,704 13,702 8,448 8,475
Prepaid expense and other assets......... 189 110 216 4,588 99
Total assets........................... 22,557,390 32,242,882 32,504,464 3,050,095 1,877,034
LIABILITIES
Payable for investments purchased........ 929,049 369,199 1,387,518 135,956 0
Due to custodian......................... 0 0 0 9,929 0
Payable for Fund shares repurchased...... 0 0 0 0 0
Advisory fee payable..................... 14,692 21,677 20,033 0 461
Due to related parties................... 628 782 736 122 37
Accrued expenses and other liabilities... 12,859 10,861 8,259 4,624 8,222
Total liabilities...................... 957,228 402,519 1,416,546 150,631 8,720
NET ASSETS................................. $21,600,162 $31,840,363 $31,087,918 $2,899,464 $1,868,314
NET ASSETS REPRESENTED BY
Paid-in capital.......................... $16,699,746 $26,399,046 $24,373,685 $2,837,576 $1,749,486
Undistributed net investment income
(loss)................................. 0 0 0 (513) (253)
Accumulated distributions in excess of
net investment income.................. (985) (5,485) (4,790) 0 0
Accumulated net realized gain (loss) on
investments and foreign currency
related transactions................... 326,574 198,284 72,393 0 (37,265)
Net unrealized appreciation on
investments and foreign currency
related transactions................... 4,574,827 5,248,518 6,646,630 62,401 156,346
Total net assets....................... $21,600,162 $31,840,363 $31,087,918 $2,899,464 $1,868,314
SHARES OUTSTANDING......................... 1,450,979 2,351,230 2,032,687 268,669 168,377
NET ASSET VALUE PER SHARE.................. $ 14.89 $ 13.54 $ 15.29 $ 10.79 $ 11.10
<CAPTION>
STRATEGIC
INCOME
FUND
<S> <C>
ASSETS
Investments, at value
(identified cost, $17,849,520,
$26,444,554, $25,820,238, $2,949,851,
$1,528,423, $1,963,406,
respectively).......................... $1,973,796
Foreign currency, at value (identified
cost, $0, $0, $0, $31, $0, $4,201,
respectively).......................... 4,188
Cash..................................... 220,494
Receivable for investments sold.......... 0
Receivable for Fund shares sold.......... 0
Dividends and interest receivable........ 23,816
Unamortized organization expense......... 8,475
Prepaid expense and other assets......... 1,542
Total assets........................... 2,232,311
LIABILITIES
Payable for investments purchased........ 0
Due to custodian......................... 0
Payable for Fund shares repurchased...... 582
Advisory fee payable..................... 0
Due to related parties................... 19,563
Accrued expenses and other liabilities... 7,791
Total liabilities...................... 27,936
NET ASSETS................................. $2,204,375
NET ASSETS REPRESENTED BY
Paid-in capital.......................... $2,194,420
Undistributed net investment income
(loss)................................. 1,266
Accumulated distributions in excess of
net investment income.................. 0
Accumulated net realized gain (loss) on
investments and foreign currency
related transactions................... (1,626)
Net unrealized appreciation on
investments and foreign currency
related transactions................... 10,315
Total net assets....................... $2,204,375
SHARES OUTSTANDING......................... 216,179
NET ASSET VALUE PER SHARE.................. $ 10.20
</TABLE>
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
EVERGREEN VARIABLE TRUST
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
GROWTH GLOBAL AGGRESSIVE
EVERGREEN FOUNDATION AND INCOME LEADERS GROWTH
FUND FUND FUND FUND* FUND*
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest....................................... $ 101,158 $ 439,761 $ 175,355 $ 4,858 $ 1,192
Dividends (net of foreign withholding taxes of
$0, $0, $41, $1,844, $28 and $0,
respectively)................................ 125,834 257,497 171,438 24,088 1,573
TOTAL INCOME..................................... 226,992 697,258 346,793 28,946 2,765
EXPENSES
Management fee................................. 152,253 186,702 206,973 12,787 6,358
Administrative services fees................... 3,373 8,318 7,404 515 354
Transfer agent fees............................ 3,841 2,585 3,221 49 37
Custodian fees................................. 13,094 15,135 15,339 5,322 3,181
Professional fees.............................. 17,017 16,100 15,497 14,405 14,414
Trustees' fees and expenses.................... 2,463 1,872 2,019 390 521
Insurance expenses............................. 8,684 8,437 8,946 935 563
Printing....................................... 3,113 4,391 3,092 2,716 3,978
Amortization of organization expenses.......... 4,689 4,333 4,333 1,668 1,640
Miscellaneous.................................. 1,635 375 657 68 934
Total expenses............................... 210,162 248,248 267,481 38,855 31,980
Less: Indirectly paid expenses................. (2,269) (1,610) (1,668) (757) (606)
Fee waivers and/or reimbursement from
Investment Adviser........................... (47,624) (20,317) (47,995) (24,670) (20,795)
Net expenses................................. 160,269 226,321 217,818 13,428 10,579
Net investment income (loss)................... 66,723 470,937 128,975 15,518 (7,814)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY RELATED
TRANSACTIONS
Net realized gain (loss) on investments........ 1,210,189 1,288,151 1,072,723 5,672 (37,265)
Net realized loss on foreign currency related
transactions................................. 0 0 0 (3,277) 0
Net realized gain (loss) on investments and
foreign currency related transactions........ 1,210,189 1,288,151 1,072,723 2,395 (37,265)
Net change in unrealized appreciation on
investments and foreign currency related
transactions................................. 3,658,731 3,805,707 5,223,120 62,401 156,346
Net realized and unrealized gain on investments
and foreign currency related transactions.... 4,868,920 5,093,858 6,295,843 64,796 119,081
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $4,935,643 $5,564,795 $6,424,818 $80,314 $111,267
<CAPTION>
STRATEGIC
INCOME
FUND*
<S> <C>
INVESTMENT INCOME
Interest....................................... $70,641
Dividends (net of foreign withholding taxes of
$0, $0, $41, $1,844, $28 and $0,
respectively)................................ 0
TOTAL INCOME..................................... 70,641
EXPENSES
Management fee................................. 6,441
Administrative services fees................... 371
Transfer agent fees............................ 71
Custodian fees................................. 962
Professional fees.............................. 14,436
Trustees' fees and expenses.................... 277
Insurance expenses............................. 560
Printing....................................... 4,669
Amortization of organization expenses.......... 1,640
Miscellaneous.................................. 242
Total expenses............................... 29,669
Less: Indirectly paid expenses................. (260)
Fee waivers and/or reimbursement from
Investment Adviser........................... (18,277)
Net expenses................................. 11,132
Net investment income (loss)................... 59,509
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY RELATED
TRANSACTIONS
Net realized gain (loss) on investments........ 1,239
Net realized loss on foreign currency related
transactions................................. (62)
Net realized gain (loss) on investments and
foreign currency related transactions........ 1,177
Net change in unrealized appreciation on
investments and foreign currency related
transactions................................. 10,315
Net realized and unrealized gain on investments
and foreign currency related transactions.... 11,492
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $71,001
</TABLE>
* For the period from March 6, 1997 (commencement of operations) to December 31,
1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
EVERGREEN VARIABLE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
GROWTH GLOBAL AGGRESSIVE
EVERGREEN FOUNDATION AND INCOME LEADERS GROWTH
FUND FUND FUND FUND* FUND*
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)............. $ 66,723 $ 470,937 $ 128,975 $ 15,518 $ (7,814)
Net realized gain (loss) on investments
and foreign currency related
transactions........................... 1,210,189 1,288,151 1,072,723 2,395 (37,265)
Net change in unrealized appreciation on
investments and and foreign currency
related transactions................... 3,658,731 3,805,707 5,223,120 62,401 156,346
Net increase in net assets resulting
from operations...................... 4,935,643 5,564,795 6,424,818 80,314 111,267
DISTRIBUTION TO SHAREHOLDERS
From net investment income............... (66,336) (470,937) (127,123 ) (13,693) 0
In excess of net investment income....... 0 (18,569) 0 0 0
From net realized gain on investments.... (899,946) (1,300,033) (1,004,449 ) (6,846) 0
Total distributions to shareholders.... (966,282) (1,789,539) (1,131,572 ) (20,539) 0
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold................ 7,331,021 11,637,130 10,949,903 2,913,597 1,903,355
Net asset value of shares issued in
reinvestment of distributions.......... 966,282 1,789,539 1,131,572 20,539 0
Payment for shares redeemed.............. (1,528,968) (1,173,846) (770,650) (94,457) (146,318)
Net increase in net assets resulting
from capital share transactions...... 6,768,335 12,252,823 11,310,825 2,839,679 1,757,037
Total increase in net assets........... 10,737,696 16,028,079 16,604,071 2,899,454 1,868,304
NET ASSETS
Beginning of period...................... 10,862,466 15,812,284 14,483,847 10 10
END OF PERIOD............................ $21,600,162 $31,840,363 $31,087,918 $2,899,464 $1,868,314
Undistributed net investment income
(loss)................................. 0 0 0 (513) (253)
Accumulated distributions in excess of
net investment income.................. (985) (5,485) (4,790) 0 0
<CAPTION>
STRATEGIC
INCOME
FUND*
<S> <C>
OPERATIONS
Net investment income (loss)............. $ 59,509
Net realized gain (loss) on investments
and foreign currency related
transactions........................... 1,177
Net change in unrealized appreciation on
investments and and foreign currency
related transactions................... 10,315
Net increase in net assets resulting
from operations...................... 71,001
DISTRIBUTION TO SHAREHOLDERS
From net investment income............... (58,403)
In excess of net investment income....... 0
From net realized gain on investments.... (3,203)
Total distributions to shareholders.... (61,606)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold................ 2,160,728
Net asset value of shares issued in
reinvestment of distributions.......... 61,606
Payment for shares redeemed.............. (27,364)
Net increase in net assets resulting
from capital share transactions...... 2,194,970
Total increase in net assets........... 2,204,365
NET ASSETS
Beginning of period...................... 10
END OF PERIOD............................ $2,204,375
Undistributed net investment income
(loss)................................. 1,266
Accumulated distributions in excess of
net investment income.................. 0
</TABLE>
* For the period from March 6, 1997 (commencement of operations) to December 31,
1997.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
EVERGREEN VARIABLE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
Period ended December 31, 1996*
<TABLE>
<CAPTION>
GROWTH
EVERGREEN FOUNDATION AND INCOME
FUND FUND FUND
<S> <C> <C> <C>
OPERATIONS
Net investment income.................................................. $ 43,997 $ 220,736 $ 64,862
Net realized gain on investments....................................... 42,797 304,381 16,894
Net change in unrealized appreciation on investments................... 916,096 1,442,811 1,423,510
Net increase in net assets resulting from operations................. 1,002,890 1,967,928 1,505,266
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income............................................. (43,997) (220,736) (64,756)
In excess of net investment income..................................... (1,372) (2,920) (2,154)
From net realized gain on investments.................................. (26,466) (78,211) (17,000)
In excess of net realized gain on investments.......................... 0 0 (31)
Total distributions to shareholders.................................. (71,835) (301,867) (83,941)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold.............................................. 10,637,851 14,456,301 13,455,462
Net asset value of shares issued in reinvestment of distributions...... 71,835 301,867 83,941
Payment for shares redeemed............................................ (811,608) (645,278) (510,215)
Net increase in net assets resulting from capital share
transactions....................................................... 9,898,078 14,112,890 13,029,188
Total increase in net assets......................................... 10,829,133 15,778,951 14,450,513
NET ASSETS
Beginning of period.................................................... 33,333 33,333 33,334
END OF PERIOD.......................................................... $10,862,466 $15,812,284 $14,483,847
Accumulated distributions in excess of net investment income............. $ (1,372) $ (2,920) $ (2,154)
</TABLE>
* For the period from March 1, 1996 (commencement of operations) to December 31,
1996.
SEE COMBINED NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
EVERGREEN VARIABLE TRUST
COMBINED NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. ORGANIZATION
Evergreen Variable Trust (the "Trust") is organized as a Massachusetts business
trust with six separate investment series, Evergreen VA Fund ("Evergreen"),
Evergreen VA Foundation Fund ("Foundation"), Evergreen VA Growth and Income Fund
("Growth and Income"), Evergreen VA Global Leaders Fund ("Global Leaders"),
Evergreen VA Aggressive Growth Fund ("Aggressive Growth"), and Evergreen VA
Strategic Income Fund ("Strategic Income"), collectively known as the "Funds".
The Funds are registered under the Investment Company Act of 1940, as open-
ended, diversified, management investment companies. Shares of each Fund may
only be purchased by insurance companies for the purpose of funding variable
annuity contracts or variable life insurance policies.
The investment adviser to Evergreen, Foundation, Growth and Income and Global
Leaders is Evergreen Asset Management Corp. ("Evergreen Asset"), a wholly-owned
subsidiary of First Union Corporation ("First Union"). Lieber & Co., a wholly
owned subsidiary of First Union, provides certain sub-advisory services to
Evergreen Asset in connection with its duties as investment adviser to
Evergreen, Foundation, Growth and Income and Global Leaders. The Capital
Management Group of First Union ("CMG") serves as the investment advisor to
Aggressive Growth. Keystone Investment Management Company ("Keystone"), a
wholly-owned subsidiary of First Union, is the investment adviser to Strategic
Income.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies 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.
SECURITY VALUATIONS-- Investments in securities traded on a national securities
exchange or included on the NASDAQ National Market System ("NMS") are valued at
the last reported sale price. Securities traded on an exchange or NMS for which
there has been no sale and other securities traded in the over-the-counter
market are valued at the mean between the last reported bid and asked price.
International securities traded on an established exchange are valued on the
basis of the last sales price on the exchange where primarily traded. Unlisted
securities for which market quotations are not readily available are valued at a
price quoted by one or more brokers. 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, 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
various relationships between securities which are generally recognized by
institutional traders. Securities for which market quotations are not available
from independent pricing services are valued at fair value as determined in good
faith according to procedures approved by the Funds' Board of Trustees.
Short-term investments with a remaining maturities of 60 days or less are
carried at amortized cost, which approximates market value.
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 advisor to be creditworthy
pursuant to guidelines established by the Board of Trustees.
FOREIGN CURRENCY-- The books and records of the Funds are maintained in United
States (U.S.) dollars. Foreign currency amounts are translated into United
States 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, foreign currency related
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Fund and the amount actually received and is
included in realized gain (loss) on foreign currency related transactions. 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 foreign currency related transactions.
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.
29
<PAGE>
EVERGREEN VARIABLE TRUST
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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 are subject to foreign taxes, which are accrued as applicable.
DISTRIBUTIONS-- Dividends from net investment income and net realized capital
gains on investments, if any, will be distributed at least annually.
Distributions to shareholders are recorded at the close of business on the
ex-dividend date. Income and capital gain distributions 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 foreign
currency related gains, net operating losses and certain distributions from real
estate investment trusts.
FEDERAL TAXES-- The Funds have qualified and intend to qualify in the future 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 and net taxable 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.
Additionally, the Funds intend to meet the diversification standards on the
underlying assets of a variable insurance contract under the Code. Failure to
meet these standards would cause the disqualification of the variable insurance
contract as an annuity contract or life insurance contract and would result in
the immediate imposition of federal income tax on contract owners with respect
to earnings allocable to the contract.
UNAMORTIZED ORGANIZATION EXPENSES-- Organization expenses are amortized to
operations over a five-year period (from the date a Fund commenced operations)
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.
30
<PAGE>
EVERGREEN VARIABLE TRUST
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. SHARES OF BENEFICIAL INTEREST
The Funds have an unlimited number of shares of beneficial interest authorized.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997 1996*
<S> <C> <C>
EVERGREEN
Shares sold............................................................................................ 540,931 1,018,981
Shares issued in reinvestment of distributions......................................................... 66,227 6,296
Shares redeemed........................................................................................ (108,385) (76,404)
Net increase........................................................................................... 498,773 948,873
FOUNDATION
Shares sold............................................................................................ 905,499 1,429,795
Shares issued in reinvestment of distributions......................................................... 135,505 26,433
Shares redeemed........................................................................................ (88,122) (61,213)
Net increase........................................................................................... 952,882 1,395,015
GROWTH AND INCOME
Shares sold............................................................................................ 786,872 1,260,584
Shares issued in reinvestment of distributions......................................................... 74,988 7,071
Shares redeemed........................................................................................ (53,607) (46,555)
Net increase........................................................................................... 808,253 1,221,100
GLOBAL LEADERS**
Shares sold............................................................................................ 275,213
Shares issued in reinvestment of distributions......................................................... 1,894
Shares redeemed........................................................................................ (8,439)
Net increase........................................................................................... 268,668
AGGRESSIVE GROWTH**
Shares sold............................................................................................ 181,866
Shares issued in reinvestment of distributions......................................................... 0
Shares redeemed........................................................................................ (13,490)
Net increase........................................................................................... 168,376
STRATEGIC INCOME**
Shares sold............................................................................................ 212,808
Shares issued in reinvestment of distributions......................................................... 6,063
Shares redeemed........................................................................................ (2,693)
Net increase........................................................................................... 216,178
</TABLE>
* For the period from March 1, 1996 (commencement of operations) to December
31, 1996.
** For the period from March 6, 1997 (commencement of operations) to December
31, 1997.
31
<PAGE>
EVERGREEN VARIABLE TRUST
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT ADVISORY AND OTHER AFFILIATE TRANSACTIONS
Evergreen, Foundation, Growth and Income and Global Leaders have entered into
investment advisory agreements with Evergreen Asset. In return for providing
investment management and administrative services to each Fund, Evergreen Asset
is paid a management fee that is calculated daily and paid monthly. The
management fee is computed at an annual rate of 0.95% of each respective Fund's
average daily net assets. Foundation pays an investment advisory fee at an
annual rate of 0.825% of its average daily net assets.
Lieber & Company, an affiliate of First Union, is the investment sub-adviser to
Evergreen, Foundation, Growth and Income and Global Leaders, and also provides
brokerage services with respect to substantially all security transactions
executed on the New York or American Stock Exchanges. For transactions executed
during the year ended December 31, 1997, Evergreen, Foundation, Growth and
Income and Global Leaders incurred brokerage commissions of $16,810, $16,976,
$17,413 and $1,965, respectively, with Lieber & Company. Lieber & Company is
reimbursed by Evergreen Asset at no additional expense to the Funds.
Aggressive Growth has entered into an investment advisory agreement with CMG. In
return for providing investment management and administrative services to the
Fund, CMG is paid a management fee that is calculated daily and paid monthly.
The management fee is computed at an annual rate of 0.60% of the Fund's average
daily net assets.
Strategic Income has entered into an investment advisory agreement with
Keystone. In return for providing investment management and administrative
services to the Fund, Keystone is paid a management fee that is calculated and
paid monthly. The management fee is computed at an annual rate of 2.0% of the
Fund's gross investment income plus an amount which is determined by applying
percentage rates, starting at 0.45% and declining as net assets increase to
0.20% per annum, to the average daily net assets of the Fund.
Each investment adviser has voluntarily agreed to reimburse the Funds to the
extent that each Fund's annual operating expenses (including the investment
advisory fee and amortization of organizational expenses but excluding interest,
taxes, brokerage commissions and extraordinary expenses) exceed 1.00%, excluding
indirectly paid expenses, of its average daily net assets. For the year ended
December 31, 1997, the investment advisers voluntarily waived and/or reimbursed
the following amounts:
<TABLE>
<CAPTION>
WAIVED REIMBURSED
<S> <C> <C>
Evergreen.............................................. $47,286 $ 0
Foundation............................................. 20,317 0
Growth and Income...................................... 47,995 0
Global Leaders......................................... 12,787 11,883
Aggressive Growth...................................... 6,280 14,437
Strategic Income....................................... 6,441 11,836
</TABLE>
Each Fund has entered into an administrative services agreement with Evergreen
Investment Services, Inc. ("EIS"), formerly Evergreen Keystone Investment
Services, Inc., a subsidiary of First Union, to provide administrative services
to each Fund. BISYS Fund Services ("BISYS") serves as sub-administrator to each
Fund. As sub-administrator, BISYS provides the officers of the Funds. The
administrator and sub-administrator for each Fund are entitled to an annual fee
based on the daily average net assets of the funds administered by EIS 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 each Fund. The sub-administration fee is
calculated by applying percentage rates, which start at 0.01% and decline to
0.004% per annum as net assets increase, to the average daily net assets of each
Fund.
During the year ended December 31, 1997, the Funds paid or accrued to EIS the
following amounts for administrative fees:
<TABLE>
<S> <C>
Evergreen............................................................. $4,994
Foundation............................................................ 7,044
Growth and Income..................................................... 6,751
Global Leaders........................................................ 385
Aggressive Growth..................................................... 301
Strategic Income...................................................... 323
</TABLE>
32
<PAGE>
EVERGREEN VARIABLE TRUST
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of investments, excluding
short-term securities, for the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Evergreen........................................... $ 9,589,766 $4,601,677
Foundation.......................................... 11,116,215 5,014,078
Growth and Income................................... 11,117,105 3,276,540
Global Leaders*..................................... 2,626,316 176,556
Aggressive Growth*.................................. 2,057,255 528,832
Strategic Income*
U.S. Government................................. 716,188 0
Non-U.S. Government............................. 1,870,427 832,180
</TABLE>
* For Global Leaders, Aggressive Growth and Strategic Income the above
investment activity is for the period March 6, 1997 (commencement of
operations) to December 31, 1997.
On December 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
UNREALIZED UNREALIZED NET UNREALIZED
TAX COST APPRECIATION DEPRECIATION APPRECIATION
<S> <C> <C> <C> <C>
Evergreen.......... $17,849,520 $5,012,257 $ (437,430) $4,574,827
Foundation......... 26,444,554 5,479,557 (231,039) 5,248,518
Growth and Income.. 25,820,238 7,057,955 (411,325) 6,646,630
Global Leaders..... 2,949,851 225,880 (163,462) 62,418
Aggressive......... 1,533,365 265,641 (114,237) 151,404
Strategic Income... 1,964,133 23,573 (13,910) 9,663
</TABLE>
6. 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.
7. FINANCING AGREEMENT
On October 31, 1996, a financing agreement among certain of the Evergreen Funds,
State Street Bank & Trust ("State Street") and a group of banks (collectively,
the "Banks") became effective. Under this agreement, the Banks provided an
unsecured credit facility in the aggregate amount of $225 million ($112.5
million committed and $112.5 million uncommitted) allocated evenly among the
Banks. Borrowings under this facility bore interest at 0.75% per annum above the
Federal Funds rate. A commitment fee of 0.10% per annum was incurred on the
unused portion of the committed facility, which was allocated to all
participating funds. State Street served as agent for the Banks, and as agent
was entitled to a fee of $15,000 which was allocated to all of the participating
Funds. This agreement was terminated on October 31, 1997.
On October 31, 1997, a temporary financing agreement between the participating
Funds and First Union became effective. Under this agreement, First Union
provided a fully committed unsecured credit facility in the aggregate amount of
$300 million. Borrowings under this facility bore interest at 1.00% per annum
above the Federal Funds rate. State Street served as administrative agent under
this agreement, but received no compensation for its services. This agreement
was terminated on December 22, 1997.
On December 22, 1997, a financing agreement among all of the Evergreen Funds,
State Street and a group of Banks (the "Banks") became effective. Under this
agreement, the Banks provide an unsecured credit facility in the aggregate
amount of $400 million ($275 million committed and $125 million uncommitted).
The credit facility is allocated among the Banks, under the terms of the
financing agreement. The credit facility is to be accessed by the Funds for
temporary or emergency purposes only and is subject to each Fund's borrowing
restrictions. Borrowings under this facility bear interest at 0.50% per annum
above the Federal Funds rate. A commitment fee of 0.065% per annum will be
incurred on the unused portion of the committed facility, which will be
allocated to all Funds. For its assistance in arranging this financing
agreement, the Capital Market Group of First Union was paid a one time
arrangement fee of $27,500. State Street serves as administrative agent for the
Banks, and as administrative agent is entitled to a fee of $20,000 per annum
which is allocated to all of the Funds.
During the year ended December 31, 1997, the Funds had no borrowings under these
agreements.
33
<PAGE>
EVERGREEN VARIABLE TRUST
COMBINED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. DEFERRED TRUSTEES' FEES
Each Trustee may defer any or all compensation related to performance of duties
as a Trustee of the Funds. Each Trustee's deferred balances are allocated to
deferral accounts which are included in the accrued expenses for each Fund. The
investment performance of the deferral accounts are based on the investment
performance of certain Evergreen Funds. Any gains earned or losses incurred in
the deferral accounts are reported in each Fund's Trustees' fees and expenses.
Trustees will be paid either in one lump sum or in quarterly installments for up
to ten years at their election, not earlier than either the year in which the
Trustee ceases to be a member of the Board of Trustees or January 1, 2000. As of
December 31, 1997, the value of the Trustees deferral accounts was $4,223,
$5,485, $4,790, $255, and $253 for Evergreen, Foundation, Growth and Income,
Global Leaders and Aggressive Growth, respectively.
34
<PAGE>
EVERGREEN
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholders
Evergreen Variable Trust
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of the Evergreen VA Funds listed below as of
December 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 VA FUND-- statement of operations for the year ended December 31,
1997, statements of changes in net assets and financial highlights for the
year ended December 31, 1997 and the period from March 1, 1996 (commencement
of operations) through December 31, 1996.
EVERGREEN VA FOUNDATION FUND-- statement of operations for the year ended
December 31, 1997, statements of changes in net assets and financial
highlights for the year ended December 31, 1997 and the period from March 1,
1996 (commencement of operations) through December 31, 1996.
EVERGREEN VA GROWTH AND INCOME FUND-- statement of operations for the year
ended December 31, 1997, statements of changes in net assets and financial
highlights for the year ended December 31, 1997 and the period from March 1,
1996 (commencement of operations) through December 31, 1996.
EVERGREEN VA GLOBAL LEADERS FUND-- statement of operations, statement of
changes in net assets and financial highlights for the period from March 6,
1997 (commencement of operations) through December 31, 1997.
EVERGREEN VA AGGRESSIVE GROWTH FUND-- statement of operations, statement of
changes in net assets and financial highlights for the period from March 6,
1997 (commencement of operations) through December 31, 1997.
EVERGREEN VA STRATEGIC INCOME FUND-- statement of operations, statement of
changes in net assets and financial highlights for the period from March 6,
1997 (commencement of operations) through December 31, 1997.
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 and financial highlights. Our procedures included confirmation of
securities owned as of December 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 VA Fund, Evergreen VA Foundation Fund, Evergreen VA Growth and Income
Fund, Evergreen VA Global Leaders Fund, Evergreen VA Aggressive Growth Fund and
Evergreen VA Strategic Income Fund as of December 31, 1997, the results of their
operations, 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
January 30, 1998
35
<PAGE>
This report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully
before investing or sending money.
<TABLE>
<C> <S>
NOT MAY LOSE VALUE
FDIC NO BANK GUARANTEE
INSURED
</TABLE>
EVERGREEN DISTRIBUTOR, INC.
