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1993 ANNUAL REPORT
FIRST UNION
FUNDS
Trust Shares
Class B Investment Shares
Class C Investment Shares
DECEMBER 31, 1993
[LOGO OF FIRST UNION FUNDS]
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PRESIDENT'S MESSAGE
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Dear Investor:
I am pleased to present you with the Annual Report of First Union Funds for the
year ended December 31, 1993. It contains complete financial
information--including the Investment Reviews and Portfolios of Investments--for
the entire family of funds.
You will notice that we have responded to your growing investment needs by
adding several new portfolios. Because taxes take more of your income than ever,
we have added new state specific municipal portfolios for Florida, Georgia,
North Carolina, South Carolina,* and Virginia residents. Each portfolio helps
state residents keep more of what they earn by pursuing income free from state
and federal taxes.**
In addition, to help you pursue high current income with moderate opportunities
for growth, we've added First Union Utility Portfolio,* which invests in utility
stocks and investment-grade utility bonds.
As always, if you would like more complete information about any of the First
Union Funds, please call 1-800-326-3241 or see your First Union Brokerage
Services Investment Representative and ask for a prospectus. The prospectus
includes more complete information on charges and expenses. Please read it
carefully before investing or sending money.
I urge you to read the information about your investment carefully. We are
committed to keeping your confidence as we help you pursue your financial goals.
As always, we welcome your questions, comments, or suggestions.
Sincerely,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
February 15, 1994
*The First Union South Carolina Municipal Bond and First Union Utility
Portfolios commenced operations on January 4, 1994 and January 5, 1994,
respectively, and therefore, financial statements for these two portfolios are
not included in the Annual Report. If you would like to receive more complete
information about either portfolio, please contact your First Union Brokerage
Services Representative or call 1-800-326-3241, and request a prospectus.
**While each state specific municipal portfolio seeks current income which is
exempt from federal regular income tax and the state taxes imposed by the
relevant state, there is no guarantee that each portfolio will meet its
objective. See page 18 of the Annual Report for a discussion of how well each
state specific municipal portfolio did in meeting its stated objectives in
1993. In addition, dividends paid by the state specific municipal portfolios
may be subject to the federal alternative minimum tax.
THE INVESTMENT ENVIRONMENT:
A REVIEW OF 1993 AND PROSPECTS FOR 1994
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THE ECONOMY: SLOW GROWTH AND LOW INFLATION PROVIDE A FAVORABLE ENVIRONMENT FOR
LONG-TERM INVESTORS
"In like a lamb, out like a lion." That is an apt description of the U.S.
economy in 1993. After a surge in economic growth during the last quarter of the
Bush Presidency, real gross domestic product ("GDP") slumped to a less-than 1%
annualized rate of growth in the first quarter of 1993. Many investors believed
that the Clinton Administration's large tax increase would keep growth at an
anemic pace all year, but that was not to be.
Lower oil prices helped keep inflation in check, and continued declines in
longer-term interest rates led to a surge in mortgage refinancings. This put
extra money in consumers' pockets to buy houses, cars and other big ticket
items. Lower rates also bolstered real estate prices and improved corporate
earnings. The upshot of increasingly lower interest rates was improved economic
growth as the year progressed.
In the fourth quarter of 1993, real GDP advanced at a better-than-expected 5.9%
annualized rate. Housing starts hit 1.3 million units in 1993, the best year
since 1989. Sales of autos and light trucks by U.S. manufacturers were likewise
strong. Units sold in 1993 were 10.6 million, up 12% from the prior year and,
again, the best year since 1989. All in all, 1993's growth exceeded most
investors' expectations.
We believe the 1994 economy will be a mirror image of 1993. Growth should be
strongest in the first quarter and gradually moderate as the year progresses.
The full effect of the Clinton income tax increases hits the American consumer
this year. In addition, we do not think that the 1994 economy will get the big
boost from lower interest rates that the economy did last year. However, the
better employment picture and improved consumer confidence should keep U.S.
sales and production inching ahead this year.
Later in the year, the U.S. should receive an early Christmas present from the
Europeans and the Japanese. The expected economic recovery in the major
industrialized countries abroad should lift U.S. exports and ensure that the
aging U.S. economic expansion lives on for another year.
The recent passage of the North American Free Trade Agreement ("NAFTA") and the
successful conclusion of the Uruguay round of the General Assembly in Tariffs
and Trade ("GATT") are other positive developments for the U.S. economy. Lower
tariffs and reduced trade barriers have the same effect on the economy as a tax
cut. While the benefits of these two treaties will evolve slowly, these
free-trade initiatives should help sustain economic growth in the years ahead as
exports play a bigger role in our economic future.
"No boom, no bust" may be the best way to sum up the economic outlook. Slow
growth with low inflation may not seem exciting, but it is just the ticket to
keep both the stock and bond markets on track for continued positive returns in
1994.
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THE TEMPO OF THE U.S. ECONOMY AS SHOWN BY MANUFACTURING TRENDS
Graphic representation A1 omitted. See Appendix.
THE STOCK MARKET: GRINDING OUT MODEST RETURNS
Record inflows into equity mutual funds and lower interest rates pushed stock
prices further into record territory during 1993. The Standard & Poor's 500
Composite Stock Price Index ("S&P 500") recorded a total return of 10% during
1993.* Dividends accounted for only 2.8% of that return, a record low. According
to a study by Ibbotson & Associates, over the long-term, dividends have
accounted for about 45% of the total return from stocks during the period from
1926-1993. So the persistence of low dividend yields does not bode well for
robust stock market returns in the near future.
During the first half of 1993, stock prices were driven primarily by falling
interest rates. Predictably, higher dividend-yielding groups like utilities and
energy did well. As the year wore on, the economy gained strength and the
downward trend in interest rates stalled. In the fourth quarter, basic industry
stocks--steels, paper, chemicals, forest products--sprang to life as firming
commodity prices pointed toward better profits in 1994.
For the year as a whole, 1993 was much like 1992. Investment returns were modest
compared to those of the 1980s. Small capitalization companies continued to
outperform large capitalization companies. Capital spending and
industrial/cyclical issues outpaced most consumer stocks, and the major stock
market averages traded in a narrow band around a modestly rising trendline. The
much heralded "10% correction" never showed up in 1993, nor, for that matter, in
1992 or 1991.
Our best guess for stocks in 1994 is "more-of-the-same." Despite low dividend
yields, we believe stocks should be capable of producing attractive total
returns in 1994, in line with those of the two previous years. A slow-growth,
low-inflation environment provides a favorable background for equity investing.
In addition, corporate America, with all of its layoffs and restructurings, has
been able to wring outsized profits from a pint-sized economic recovery. We
predict corporate profits, as measured by the S&P 500, should advance a healthy
13% to 15% in 1994, with many industrial/ cyclical companies producing much
larger gains. It will be earnings, not lower interest rates, which drive stock
prices in 1994.
Our greatest concern about equities in 1994 is that economic growth might be too
strong this year. While a robust economy would push earnings higher than we
expect, it would also cause inflation to accelerate and the Federal Reserve
Board (the "Fed") to aggressively raise short-term interest rates. A sharp rise
in interest rates could quickly cause that "10% correction" everybody seems to
be anticipating. Our advice is to stay fully invested in stocks, but keep a
sharp eye on the trend in money market interest rates.
* This index is unmanaged.
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ONWARD AND UPWARD, BUT SLOWLY
Graphic representation A2 omitted. See Appendix.
Past performance is not indicative of future results. This is not
intended to represent the performance of the First Union Funds.
THE BOND AND MONEY MARKETS: BE LONG OR BE WRONG
The greatest bull market in bond market history completed its twelfth year in
1993. After hitting an all-time high of 14.8% in 1981, the long-term treasury
bond yield fell to a 30-year low of 5.8% last October. All of the gain in bond
prices and drop in interest rates occurred in the first three quarters of 1993,
as disappointing economic growth and weak commodity prices provided plenty of
fodder for the bond bulls. In the fourth quarter, however, a surge in retail
sales and industrial production created a "growth scare" among bond investors
and interest rates reversed course and began to rise. Thirty-year treasury bonds
yielded 6.3% at year-end 1993, down 1.1% from year-end 1992.
By most measures, bonds beat stocks in the 1993 performance derby. The Lehman
Brothers Government/Corporate Bond Index ("Lehman G/C Index"),* a broad-based
index of 1 to 30 year maturity taxable bonds, returned 11.0% in 1993, about a
percentage point better than the S&P 500. The municipal bond market also
performed well. The Lehman Brothers Municipal Bond Index, with an average
maturity of 14 years, recorded a total return of 12.3%.* As is typical of most
bond market rallies, long maturity bonds significantly outperformed shorter
maturities. One-to-three year maturity government issues, for example, posted a
total return of 5.4%.
While most interest rates dropped sharply last year, short-term money market
interest rates remained low and stable throughout the year. Treasury bills with
maturities of around 30 days had a total return of 2.9%, the lowest such return
since 1962.
The slow-growth, low-inflation economic environment seems likely to persist
throughout most of 1994 and suggests another good year for bond investors. We
doubt, however, that 1994's bond market returns will be as high as those
experienced in 1993. The on-going economic expansion is likely to pressure
short-term interest rates modestly higher in 1994. Stronger credit demands and a
less accommodative monetary policy by the Fed could lead to 3.5% to 4.0%
Treasury bill rates by year-end. In our opinion, longer-term bond yields still
have room to inch down. The gap between long and short-term rates remains
unusually wide for an economy entering its third year of expansion. If inflation
continues to remain stable around current low levels, we think that long-term
interest rates could, sometime in 1994, test the 30-year lows reached last
October.
*These indices are unmanaged.
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THE DOWNWARD TREND IN INTEREST RATES STALLED AT YEAR END 1993
Graphic representation A3 omitted. See Appendix.
Past performance is not indicative of future results. This is not
intended to represent the performance of the First Union Funds.
*Consumer Price Index (CPI) measures the change in consumer prices as determined
by a monthly survey of the U.S. Bureau of Labor Statistics. Among the CPI
components are the costs of housing, food, transportation, and electricity. The
CPI measures the year over year rate of change expressed as a percentage.
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EQUITY AND BALANCED PORTFOLIO HIGHLIGHTS
FIRST UNION VALUE PORTFOLIO
First Union Value Portfolio ("Value Fund") is a common stock fund which seeks to
provide long-term capital growth along with an attractive level of dividend
income. The Value Fund is broadly diversified and generally invests in large
companies which we believe are undervalued in relation to their earnings
potential, book value, financial quality and dividend yield. It is our belief
that consistently applying such an approach will provide the investor with
attractive long-term returns at moderate levels of risk.
At year-end, the Value Fund's investment portfolio remained overweighted in
basic industry, technology, and capital goods stocks, the three sectors with the
most leverage to the improving economy. Examples of stocks in these three
sectors which have performed well recently include: Rohm & Haas Co. (chemicals),
Temple Inland (paperboard), Norfolk Southern Corp. (rail), Raytheon Co.
(electronics), Xerox Corp. (office equipment), and Phelps Dodge Corp. (copper).
Unless the economy loses momentum early in 1994 or the Fed raises short-term
interest rates substantially, these stocks should continue to outperform the
market. The strength of the Dow Jones Industrial Average, relative to other
less-cyclical averages, such as the S&P 500, is indicative of the strong
economy's effect on the stock market.
During the second half of 1993, the Value Fund's sensitivity to interest rates
was reduced, so as to lessen its vulnerability to higher rates. Thus, by
year-end, the weightings in utilities were about half that of the S&P 500, at
approximately 6%. By mid-January of this year, the Dow Jones Utility Average had
fallen 15% from its September, 1993 high; now, after the decline, utilities are
beginning to look attractive once again and some purchases are planned.
Historically, the stock market has experienced mediocre performance during the
first two years of a newly-elected U.S. president's initial term. In light of
this, and after last year's 10% gain during Bill Clinton's first year in office,
the defensive characteristics of the Value Fund have been strengthened. Despite
the underweighting in utilities, the Value Fund's distribution rate continued to
exceed the S&P 500. The average price-to-earnings ratio is only 13.4, versus
16.4 for the S&P 500, and the average beta of the stocks in the Value Fund's
portfolio is .95 (i.e., 95% of that for the S&P 500). Cash reserves are
approximately 5% of assets.
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN FIRST
UNION VALUE PORTFOLIO--CLASS B INVESTMENT SHARES AND STANDARD & POOR'S 500
COMPOSITE STOCK PRICE INDEX ("S&P 500 INDEX")\.
Graphic representation A4 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Value Portfolio--Class B Investment Shares
from the start of performance, April 12, 1985, through December 31, 1993.
**Represents a hypothetical investment of $10,000 in First Union Value
Portfolio--Class B Investment Shares, after deducting the maximum sales charge
of 4.00% ($10,000 investment minus $400 sales charge = $9,600). The Fund's
performance assumes the reinvestment of all dividends and distributions. The
S&P 500 Index is adjusted to reflect reinvestment of dividends on securities
in the Index.
\The S&P 500 Index is not adjusted to reflect sales loads, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
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PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN FIRST
UNION VALUE PORTFOLIO--CLASS C INVESTMENT SHARES AND STANDARD & POOR'S 500
COMPOSITE STOCK PRICE INDEX ("S&P 500 INDEX")\.
Graphic representation A5 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Value Portfolio--Class C Investment Shares
from the start of performance, January 25, 1993, through December 31, 1993, on
a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union Value
Portfolio--Class C Investment Shares. The ending value of the Fund reflects a
4.00% contingent deferred sales charge on any redemption less than 1 year from
the purchase date. The Fund's performance assumes the reinvestment of all
dividends and distributions. The S&P 500 Index is adjusted to reflect
reinvestment of dividends on securities in the Index.
\The S&P 500 Index is not adjusted to reflect sales loads, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
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PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION VALUE PORTFOLIO--TRUST SHARES AND STANDARD & POOR'S 500
COMPOSITE STOCK PRICE INDEX ("S&P 500 INDEX")\.
Graphic representation A6 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Value Portfolio--Trust Shares from the
start of performance, December 31, 1990, through December 31, 1993.
**The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 Index is adjusted to reflect reinvestment of
dividends on securities in the Index.
\The S&P 500 Index is not adjusted to reflect sales loads, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
FIRST UNION BALANCED PORTFOLIO
First Union Balanced Portfolio ("Balanced Fund") seeks to provide an attractive
long-term total return through capital appreciation, dividends, and interest
income. The Balanced Fund invests in the common stocks of large capitalization
companies, high grade fixed income securities and money market instruments.
Based on our outlook for the various markets, moderate shifts are made in the
asset mix between stocks, fixed income, and money market instruments, to
increase return and reduce risk.
After remaining constant for most of calendar year 1993, an asset mix change was
implemented during November. The Balanced Fund decreased its fixed income
exposure by 5%, with the proceeds being invested in common stocks. The current
asset mix is now 63% stocks and 36% fixed income investments. Somewhat of an
uncoupling of stock and bond price performance is anticipated as the new year
progresses. While increased economic activity has stalled the bond rally, it is
also enhancing 1994 earnings prospects. The catalyst for stocks going forward
will be gains in profits, not higher price/earnings ratios.
The Balanced Fund's equity strategy continues to emphasize a broadly diversified
portfolio of value stocks. Sector focus continues to be on industrial, capital
goods, and technology companies. Sales growth, while improving, should again be
moderate during 1994. Restructuring/cost containment, which these industries
have implemented, will thus be crucial to successful earnings growth. Further
enhancing the prospects of these sectors will be the eventual economic
recoveries in Europe and Japan. Approximately 50% of domestic capital goods
production is exported. Lastly, passage of NAFTA and GATT will open up new
trading markets which will further improve long-term earnings prospects in these
industries. Within the consumer sector, durables remain the most promising. Low
interest rates have rejuvenated the housing and household-products markets along
with the auto and auto equipment markets.
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Real GDP (economic growth) should accelerate from below 3% during 1993 to
roughly 3.5% this year. Despite better growth prospects, an essentially neutral
position on interest rates is being maintained. Continued productivity gains,
weak employment growth, lower energy prices, and a vigilant Fed will keep both
inflation and interest rates near current levels. From a strategic standpoint,
the average maturity of the bond component of the Balanced Fund's investment
portfolio was lengthened during the fourth quarter as a response to a rise in
rates. While the portfolio remains biased toward corporate bonds, these
instruments have become less attractive versus U.S. government bonds (in view of
narrowing yield spreads). Thus, the recent lengthening was accomplished through
the purchase of U.S. government issues. The average maturity of the portfolio
now approximates the Lehman G/C Index of nine years.
This year should be successful for the market if forecasted earnings are
delivered and inflation remains in check, as anticipated.
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION BALANCED PORTFOLIO--CLASS B INVESTMENT SHARES, STANDARD & POOR'S 500
COMPOSITE STOCK PRICE INDEX ("S&P 500 INDEX")\, AND LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX ("LEHMAN G/C INDEX")\.
Graphic representation A7 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Balanced Portfolio--Class B Investment
Shares from the start of performance, June 6, 1991, through December 31, 1993.
**Represents a hypothetical investment of $10,000 in First Union Balanced
Portfolio--Class B Investment Shares, after deducting the maximum sales charge
of 4.00% ($10,000 investment minus $400 sales charge = $9,600). The Fund's
performance assumes the reinvestment of all dividends and distributions. The
S&P 500 Index and Lehman G/C Index are adjusted to reflect reinvestment of
dividends on securities in the Indices.
\The S&P 500 Index and Lehman G/C Index are not adjusted to reflect sales loads,
expenses, or other fees that the SEC requires to be reflected in the Fund's
performance.
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PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION BALANCED PORTFOLIO--CLASS C INVESTMENT SHARES, STANDARD & POOR'S 500
COMPOSITE STOCK PRICE INDEX ("S&P 500 INDEX")\, AND LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX ("LEHMAN G/C INDEX")\.
Graphic representation A8 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Balanced Portfolio--Class C Investment
Shares from the start of performance, January 25, 1993, through December 31,
1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union Balanced
Portfolio--Class C Investment Shares. The ending value of the Fund reflects a
4.00% contingent deferred sales charge on any redemption less than 1 year from
the purchase date. The Fund's performance assumes the reinvestment of all
dividends and distributions. The S&P 500 Index and Lehman G/C Index are
adjusted to reflect reinvestment of dividends on securities in the Indices.
\The S&P 500 Index and Lehman G/C Index are not adjusted to reflect sales loads,
expenses, or other fees that the SEC requires to be reflected in the Fund's
performance.
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PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION BALANCED PORTFOLIO--TRUST SHARES, STANDARD &
POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500 INDEX")\,
AND LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX ("LEHMAN G/C
INDEX")\.
Graphic representation A9 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Balanced Portfolio--Trust Shares from the
start of performance, April 1, 1991, through December 31, 1993.
**The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 Index and Lehman G/C Index are adjusted to reflect
reinvestment of dividends on securities in the Indices.
\The S&P 500 Index and Lehman G/C Index are not adjusted to reflect sales loads,
expenses, or other fees that the SEC requires to be reflected in the Fund's
performance.
TAXABLE BOND FUND HIGHLIGHTS
FIRST UNION FIXED INCOME PORTFOLIO
First Union Fixed Income Portfolio ("Fixed Income Fund") is a short-to
intermediate-term bond fund which seeks to provide investors a high level of
current income with some potential for capital appreciation. The Fixed Income
Fund invests in U.S. government and agency obligations, mortgage-backed
securities and investment grade corporate bonds which generally mature in ten
years or less. The average maturity of the Fund's portfolio will be five years
or less.
The Fixed Income Fund is currently comprised of 31% governments, 37% corporate,
21% mortgage-backed, and 7% asset-backed securities. We expect to increase the
Fund's weighting in Treasuries this year, while at the same time reducing the
portfolio's holdings of corporate securities, as already-narrow yield spreads on
corporates become thinner.
In conjunction with our outlook for moderate economic growth with low inflation,
we expect modest upward pressure on short-term rates (in the neighborhood of a
one-half percentage point advance) and unchanged to lower long-term rates.
The Fixed Income Fund's structure is currently slightly aggressive, with
durations just above the Fund's intermediate benchmark indices. The Fund's
investment adviser anticipates extending duration further during periods of
market weakness to take advantage of slower economic growth, which should become
evident later in 1994.
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PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION FIXED INCOME PORTFOLIO--CLASS B INVESTMENT SHARES AND
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX
("LEHMAN G/C INDEX")\.
Graphic representation A10 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Fixed Income Portfolio--Class B Investment
Shares from the start of performance, January 31, 1989, through December 31,
1993.
**Represents a hypothetical investment of $10,000 in First Union Fixed Income
Portfolio--Class B Investment Shares, after deducting the maximum sales charge
of 4.00% ($10,000 investment minus $400 sales charge = $9,600). The Fund's
performance assumes the reinvestment of all dividends and distributions. The
Lehman G/C Index is adjusted to reflect reinvestment of dividends on
securities in the Index.
\The Lehman G/C Index is not adjusted to reflect sales loads, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
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PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION FIXED INCOME PORTFOLIO--CLASS C INVESTMENT SHARES AND
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX
("LEHMAN G/C INDEX")\.
Graphic representation A11 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Fixed Income Portfolio--Class C Investment
Shares from the start of performance, January 25, 1993, through December 31,
1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union Fixed Income
Portfolio--Class C Investment Shares. The ending value of the Fund reflects a
4.00% contingent deferred sales charge on any redemption less than 1 year from
the purchase date. The Fund's performance assumes the reinvestment of all
dividends and distributions. The Lehman G/C Index is adjusted to reflect
reinvestment of dividends on securities in the Index.
\The Lehman G/C Index is not adjusted to reflect sales loads, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
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PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION FIXED INCOME PORTFOLIO--TRUST SHARES AND
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX
("LEHMAN G/C INDEX")\.
Graphic representation A12 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Fixed Income Portfolio--Trust Shares from
the start of performance, December 31, 1990, through December 31, 1993.
**The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman G/C Index is adjusted to reflect reinvestment of
dividends on securities in the Index.
\The Lehman G/C Index is not adjusted to reflect sales loads, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
FIRST UNION U.S. GOVERNMENT PORTFOLIO
First Union U.S. Government Portfolio ("U.S. Government Fund") is an
intermediate-to long-term U.S. government bond fund which invests primarily in
obligations of the U.S. Treasury and various government agencies. In addition,
the U.S. Government Fund generally maintains substantial positions in
mortgage-backed securities issued by government agencies, such as the Federal
National Mortgage Association and the Government National Mortgage Association.
At least 65% of the U.S. Government Fund's assets must be invested in securities
issued by the U.S. government or its agencies and instrumentalities.
At year-end 1993, mortgage-backed securities comprised 49% of the portfolio,
U.S. Treasuries were 48%, and money market instruments represented 1% of the
portfolio. The modified duration at year-end was 4.71 years, with a weighted
average life of 8.44 years.
The U.S. Government Fund maintained more sizable positions in mortgage-backed
securities during the early part of 1993, in order to provide the higher current
income desired. Mortgage percentages were gradually reduced until interest rate
spreads between mortgage-backed and Treasury securities widened sufficiently to
encourage additional purchases. With the interest rate increases in the fourth
quarter, the U.S. Government Fund's duration and maturity were extended in
anticipation of possible shifts in the relationship of short-term to long-term
interest rates.
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PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION U.S. GOVERNMENT PORTFOLIO--TRUST SHARES AND LEHMAN
BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX
("LEHMAN GOVERNMENT INDEX")\.
Graphic representation A13 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union U.S. Government Portfolio--Trust Shares
from the start of performance, August 25, 1993, through December 31, 1993, on
a cumulative basis.
**The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman Government Index is adjusted to reflect reinvestment
of dividends on securities in the Index.
\The Lehman Government Index is not adjusted to reflect sales loads, expenses,
or other fees that the SEC requires to be reflected in the Fund's performance.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION U.S. GOVERNMENT PORTFOLIO--CLASS B INVESTMENT SHARES AND
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX
("LEHMAN GOVERNMENT INDEX")\.
Graphic representation A14 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union U.S. Government Portfolio--Class B
Investment Shares from the start of performance, January 12, 1993, through
December 31, 1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union U.S. Government
Portfolio--Class B Investment Shares, after deducting the maximum sales charge
of 4.00% ($10,000 investment minus $400 sales charge = $9,600). The Fund's
performance assumes the reinvestment of all dividends and distributions. The
Lehman Government Index is adjusted to reflect reinvestment of dividends on
securities in the Index.
\The Lehman Government Index is not adjusted to reflect sales loads, expenses,
or other fees that the SEC requires to be reflected in the Fund's performance.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION U.S. GOVERNMENT PORTFOLIO--CLASS C INVESTMENT SHARES AND
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX ("LEHMAN GOVERNMENT INDEX")\.
Graphic representation A15 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union U.S. Government Portfolio--Class C
Investment Shares from the start of performance, January 12, 1993, through
December 31, 1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union U.S. Government
Portfolio--Class C Investment Shares. The ending value of the Fund reflects a
4.00% contingent deferred sales charge on any redemption less than 1 year from
the purchase date. The Fund's performance assumes the reinvestment of all
dividends and distributions. The Lehman Government Index is adjusted to
reflect reinvestment of dividends on securities in the Index.
\The Lehman Government Index is not adjusted to reflect sales loads, expenses,
or other fees that the SEC requires to be reflected in the Fund's performance.
FIRST UNION MANAGED BOND PORTFOLIO
First Union Managed Bond Portfolio ("Managed Bond Fund") is an intermediate-to
long-term bond fund which seeks to achieve total return, which includes current
income and the potential for capital appreciation. The Managed Bond Fund invests
in U.S. government securities, mortgage-backed securities and investment-quality
corporate bonds and notes. The average maturity of the Managed Bond Fund will
generally be 12 years or less.
The Managed Bond Fund's performance benchmark is the Lehman G/C Index. This
index is a broad-based index of U.S. dollar-denominated bonds with maturities
ranging from 1 to 30 years. The average maturity of the index is usually between
9 and 11 years.
The Managed Bond Fund entered 1993 with a heavy emphasis on corporate issues and
an underweighting of Treasury and mortgage-backed securities. The Managed Bond
Fund's average maturity/duration was in line with the benchmark Lehman G/C Index
early in 1993. As interest rates fell during the first three quarters of the
year, the maturity and duration of the Managed Bond Fund were reduced to 90% of
the benchmark. When rates began to rise in late October, the maturity/duration
of the Managed Bond Fund was lengthened to 105% of the Lehman G/C Index
benchmark. In the last half of the year, the Managed Bond Fund's overweighting
in corporate bonds was reduced by the increased emphasis on U.S. government
bonds. At year end, the Managed Bond Fund was comprised of 67.3% corporate
bonds, 22.2% Treasury and agency debt, and 7.8% dollar-denominated foreign
bonds.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN FIRST
UNION MANAGED BOND PORTFOLIO-TRUST SHARES AND LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX ("LEHMAN G/C INDEX")\.
Graphic representation A16 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Managed Bond Portfolio-Trust Shares from
the start of performance, April 1, 1991, through December 31, 1993.
**The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman G/C Index is adjusted to reflect reinvestment of
dividends on securities in the Index.
\The Lehman G/C Index is not adjusted to reflect sales loads, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
MUNICIPAL BOND FUND HIGHLIGHTS
FIRST UNION'S STATE SPECIFIC MUNICIPAL BOND PORTFOLIOS (Florida, Georgia, North
Carolina and Virginia)
First Union State Specific Municipal Bond Portfolios ("State Specific Funds")
are intermediate-to long-term bond funds which seek to provide current income
exempt from federal regular income tax and, where applicable, state income and
intangibles taxes, consistent with preservation of capital.*** At least 65% of
the value of each State Specific Fund's total assets will be invested in
municipal bonds of the particular state after which each Fund is named. In order
to meet the objective of providing current income, each State Specific Fund will
generally maintain an average maturity of ten years or greater.
First Union Florida Municipal Bond Portfolio (the "Florida Fund") failed to meet
its investment objective of qualifying as an investment exempt from the Florida
intangibles tax during 1993. Under Florida law, the investment portfolio of the
Florida Fund had to consist entirely of investments exempt from the Florida
intangibles tax on the last business day of calendar year 1993, in order to
qualify as an exempt investment. Unfortunately, the Florida Fund owned several
securities that were not exempt. The Fund's investment adviser, First Union
National Bank of North Carolina, has agreed to reimburse shareholders of the
Florida Fund for the resulting tax liability, and has instituted management
changes in order to prevent similar occurrences in the future.
During 1993, the State Specific Funds maintained a constructive posture toward
the bond market. Average maturities were targeted at the 20-year level in order
to take advantage of the higher yields available on longer maturity bonds and to
participate in appreciating bond prices caused by falling interest rates.
*** For some investors, a portion of the income paid by a State Specific Fund
may be subject to the federal alternative minimum tax.
- --------------------------------------------------------------------------------
At year-end 1993, the State Specific Funds maintained maturities ranging from
18.5 to 22.5 years and durations from 9.5 to 10.5 years. This maturity/duration
structure reflects the belief that municipal bonds should continue to provide
attractive tax-adjusted returns in 1994, due to the recently increased personal
income tax rate, narrow yield spreads to Treasury issues, and expected declines
in new issuance by state and local governments.
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION FLORIDA MUNICIPAL BOND PORTFOLIO--CLASS B INVESTMENT SHARES
AND LEHMAN BROTHERS FLORIDA MUNICIPAL BOND INDEX ("LEHMAN FLORIDA INDEX")\.
Graphic representation A17 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Florida Municipal Bond Portfolio--Class B
Investment Shares from the start of performance, July 5, 1993, through
December 31, 1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union Florida
Municipal Bond Portfolio--Class B Investment Shares, after deducting the
maximum sales charge of 4.00% ($10,000 investment minus $400 sales charge =
$9,600). The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman Florida Index is adjusted to reflect reinvestment of
dividends on securities in the Index.
\The Lehman Florida Index is not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION FLORIDA MUNICIPAL BOND PORTFOLIO--CLASS C INVESTMENT SHARES AND
LEHMAN BROTHERS FLORIDA MUNICIPAL BOND INDEX ("LEHMAN FLORIDA INDEX")\.
Graphic representation A18 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Florida Municipal Bond Portfolio--Class C
Investment Shares from the start of performance, July 1, 1993, through
December 31, 1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union Florida
Municipal Bond Portfolio--Class C Investment Shares. The ending value of the
Fund reflects a 4.00% contingent deferred sales charge on any redemption less
than 1 year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The Lehman Florida Index is
adjusted to reflect reinvestment of dividends on securities in the Index.
\The Lehman Florida Index is not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO--CLASS B INVESTMENT
SHARES AND LEHMAN BROTHERS GEORGIA MUNICIPAL BOND INDEX
("LEHMAN GEORGIA INDEX")\.
Graphic representation A19 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Georgia Municipal Bond Portfolio--Class B
Investment Shares from the start of performance, July 1, 1993, through
December 31, 1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union Georgia
Municipal Bond Portfolio--Class B Investment Shares, after deducting the
maximum sales charge of 4.00% ($10,000 investment minus $400 sales charge =
$9,600). The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman Georgia Index is adjusted to reflect reinvestment of
dividends on securities in the Index.
\The Lehman Georgia Index is not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO--CLASS C INVESTMENT
SHARES AND LEHMAN BROTHERS GEORGIA MUNICIPAL BOND INDEX
("LEHMAN GEORGIA INDEX")\.
Graphic representation A20 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Georgia Municipal Bond Portfolio--Class C
Investment Shares from the start of performance, July 1, 1993, through
December 31, 1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union Georgia
Municipal Bond Portfolio--Class C Investment Shares. The ending value of the
Fund reflects a contingent deferred sales charge of 4% on any redemption less
than one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The Lehman Georgia Index is
adjusted to reflect reinvestment of dividends on securities in the Index.
\The Lehman Georgia Index is not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO--CLASS B
INVESTMENT SHARES AND LEHMAN BROTHERS STATE GENERAL OBLIGATION
BOND INDEX ("LEHMAN STATE INDEX")\.
Graphic representation A21 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union North Carolina Municipal Bond
Portfolio--Class B Investment Shares from the start of performance, January
12, 1993, through December 31, 1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union North Carolina
Municipal Bond Portfolio--Class B Investment Shares, after deducting the
maximum sales charge of 4.00% ($10,000 investment minus $400 sales charge =
$9,600). The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman State Index is adjusted to reflect reinvestment of
dividends on securities in the Index.
\The Lehman State Index is not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO--
CLASS C INVESTMENT SHARES AND LEHMAN BROTHERS STATE GENERAL OBLIGATION
BOND INDEX ("LEHMAN STATE INDEX")\.
Graphic representation A22 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union North Carolina Municipal Bond
Portfolio--Class C Investment Shares from the start of performance, January
12, 1993, through December 31, 1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union North Carolina
Municipal Bond Portfolio--Class C Investment Shares. The ending value of the
Fund reflects a 4.00% contingent deferred sales charge on any redemption less
than 1 year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The Lehman State Index is
adjusted to reflect reinvestment of dividends on securities in the Index.
\The Lehman State Index is not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO--CLASS B INVESTMENT SHARES
AND LEHMAN BROTHERS VIRGINIA MUNICIPAL BOND INDEX ("LEHMAN VIRGINIA INDEX")\.
Graphic representation A23 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Virginia Municipal Bond Portfolio--Class B
Investment Shares from the start of performance, July 7, 1993, through
December 31, 1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union Virginia
Municipal Bond Portfolio--Class B Investment Shares, after deducting the
maximum sales charge of 4.00% ($10,000 investment minus $400 sales charge
=$9,600). The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman Virginia Index is adjusted to reflect reinvestment
of dividends on securities in the Index.
\The Lehman Virginia Index is not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
- -------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO--CLASS C INVESTMENT SHARES AND
LEHMAN BROTHERS VIRGINIA MUNICIPAL BOND INDEX ("LEHMAN VIRGINIA INDEX")\.
Graphic representation A24 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union Virginia Municipal Bond Portfolio--Class C
Investment Shares from the start of performance, July 1, 1993, through
December 31, 1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 if First Union Virginia
Municipal Bond Portfolio--Class C Investment Shares. The ending value of the
Fund reflects a contingent deferred sales charge of 4% on any redemption less
than one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The Lehman Virginia Index is
adjusted to reflect reinvestment of dividends on securities in the Index.
\The Lehman Virginia Index is not adjust to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO (formerly, "First Union Insured Tax
Free Portfolio")
First Union High Grade Tax Free Portfolio ("High Grade Fund") is a municipal
bond fund which has an objective of providing a high level of federally tax free
income, consistent with preservation of capital. The High Grade Fund invests
primarily in municipal bonds that are covered by insurance guaranteeing the
timely payment of principal and interest of the bonds. The insurance underlying
these debt instruments was obtained by the issuers from a commercial insurance
company. Thus, the insurance guarantees the timely payment of principal and
interest, but not the value, of the municipal bonds or shares of the High Grade
Fund. The insurance is in no way related to First Union National Bank of North
Carolina nor to the Federal Deposit Insurance Corporation.
Throughout 1993, the High Grade Fund maintained a constructive stance on the tax
free bond market by emphasizing purchases of bonds in the 15 to 30 year maturity
range. At year-end, the Fund's largest holdings (by state) were: Texas (18.5%),
Illinois (12.5%), and Florida (7.3%). We believe that these state issues are
attractive values, due to the lack of a state income tax and the high level of
bond issuance in each state.
\\Income may be subject to the federal alternative minimum tax and state and
local taxes.
\\\Such insurance does not protect against market loss. No representation is
made as to any insurer's ability to meet its commitments. Please see the
prospectus, which more fully describes the terms of the insurance.
- --------------------------------------------------------------------------------
All of the High Grade Fund's insured bonds continued to be rated AAA by Standard
& Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"). The
High Grade Fund was 96% invested in insured bonds and 3% in tax free money
market instruments on December 31, 1993; in addition, the High Grade Fund's
average maturity was 18.5 years and its duration was 8.2 years.
Insured tax free bonds continue to be very popular among issuers and the
investing public. In 1993, the percentage of new insured tax free bond issues
surged to a record 37% of total municipal issuance.
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO (FORMERLY, "FIRST UNION INSURED
TAX FREE PORTFOLIO")--CLASS B INVESTMENT SHARES, AND LEHMAN BROTHERS INSURED
BOND INDEX ("LEHMAN INSURED INDEX")\.
Graphic representation A25 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union High Grade Tax Free Portfolio--Class B
Investment Shares from the start of performance, February 25, 1992, through
December 31, 1993.
**Represents a hypothetical investment of $10,000 in First Union High Grade Tax
Free Portfolio--Class B Investment Shares, after deducting the maximum sales
charge of 4.00% ($10,000 investment minus $400 sales charge = $9,600). The
Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman Insured Index is adjusted to reflect reinvestment of
dividends on securities in the Index.
\The Lehman Insured Index is not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO (FORMERLY, "FIRST UNION INSURED TAX
FREE PORTFOLIO")--
CLASS C INVESTMENT SHARES AND LEHMAN BROTHERS INSURED BOND INDEX ("LEHMAN
INSURED INDEX")\.
Grapic representation A26 omitted. See Appendix.
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations
of, or guaranteed by, any bank and are not federally insured.
*Reflects operations of First Union High Grade Tax Free Portfolio--Class C
Investment Shares from the start of performance, January 12, 1993, through
December 31, 1993, on a cumulative basis.
**Represents a hypothetical investment of $10,000 in First Union High Grade Tax
Free Portfolio--Class C Investment Shares. The ending value of the Fund
reflects a 4.00% contingent deferred sales charge on any redemption less than
1 year from the purchase date. The Fund's performance assumes the reinvestment
of all dividends and distributions. The Lehman Insured Index is adjusted to
reflect reinvestment of dividends on securities in the Index.
\The Lehman Insured Index is not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
First Union Tax Free Money Market Portfolio ("Tax Free Money Market Fund") seeks
to earn current income exempt from federal regular income tax while providing
safety of capital and liquidity. The Tax Free Money Market Fund invests
primarily in municipal securities maturing in 397 days or less.
During 1993, short-term interest rates remained very stable, as inflation
remained subdued and the Fed sought to stimulate the economy. Near year-end, the
demand for tax free investments rose significantly, pushing tax free rates lower
as taxable rates remained steady.
FIRST UNION TREASURY MONEY MARKET PORTFOLIO
First Union Treasury Money Market Portfolio ("Treasury Money Market Fund") seeks
to provide stability of principal and current income consistent with stability
of principal. The Treasury Money Market Fund invests exclusively in short-term
U.S. Treasury obligations issued by the U.S. government and repurchase
agreements collateralized by U.S. Treasury obligations.
During 1993, short-term interest rates fluctuated within a narrow range of 3%,
as inflation remained subdued and the Fed sought to stimulate the economy with
low interest rates. With short-term rates continuing to trend sideways to
slightly higher, the Treasury Money Market Fund is maintaining a longer average
maturity to help lock in higher yields. The Treasury Money
\\Income may be subject to the federal alternative minimum tax and state and
local taxes.
- --------------------------------------------------------------------------------
Market Fund utilizes the barbell approach as opposed to a laddered maturity
approach (i.e., the portfolio is generally composed of 30% Treasury securities,
with maturities of six months to one year, and 70% overnight repurchase
agreements). As of December 31, 1993, the Fund's asset mix was 42% Treasuries
and 57% repurchase agreements. As of December 31, 1993, the average maturity of
the Treasury Money Market Fund was 52 days.
FIRST UNION MONEY MARKET PORTFOLIO
First Union Money Market Portfolio ("Money Market Fund") seeks to provide
current taxable income while providing safety of capital and maintaining
liquidity . The Money Market Fund invests in high quality (rated A-1 by S&P or
P-1 Moody's) money market instruments and corporate notes maturing in one year
or less. Throughout the year, the Money Market Fund maintained an average
maturity of 65-75 days in order to take advantage of somewhat higher yields
available to longer maturity instruments. At year-end, the Money Market Fund had
an average maturity of 68 days.
FIRST UNION MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------------ --------------
CERTIFICATES OF DEPOSIT--4.1%
- ---------------------------------------------------------------------------------------------------
$ 4,000,000 Sanwa Yankee, 3.44%, 2/4/94 $ 4,000,070
------------------------------------------------------------------------------------ --------------
*COMMERCIAL PAPER--54.6%
- ---------------------------------------------------------------------------------------------------
BANKING--14.3%
------------------------------------------------------------------------------------
2,000,000 Den Danske Corp., 3.36%, 3/4/94 1,988,427
------------------------------------------------------------------------------------
4,000,000 Nordbanken North America, Inc., 3.26%, 2/9/94 3,985,873
------------------------------------------------------------------------------------
4,000,000 Skandinaviska Enskilda Banken, 3.25%, 1/20/94 3,993,139
------------------------------------------------------------------------------------
4,000,000 Svenska Handelsbanken, Inc., 3.40%, 2/28/94 3,978,089
------------------------------------------------------------------------------------ --------------
Total 13,945,528
------------------------------------------------------------------------------------ --------------
FINANCE--15.7%
------------------------------------------------------------------------------------
3,296,000 Barton Capital Corp., 3.35%, 2/22/94 3,280,051
------------------------------------------------------------------------------------
4,000,000 CIC Finance (de) Inc., 3.23%, 1/21/94 3,992,822
------------------------------------------------------------------------------------
4,000,000 Iris Partners, 3.27%, 2/11/94 3,985,103
------------------------------------------------------------------------------------
2,000,000 Merrill Lynch & Co. Inc., 3.40%, 1/4/94 1,999,433
------------------------------------------------------------------------------------
2,000,000 Mitsubishi International Corp., 3.38%, 2/1/94 1,994,179
------------------------------------------------------------------------------------ --------------
Total 15,251,588
------------------------------------------------------------------------------------ --------------
FUNDING CORPORATIONS--14.6%
------------------------------------------------------------------------------------
2,012,000 Broadway Capital Corp., 3.30%, 1/14/94 2,009,602
------------------------------------------------------------------------------------
3,000,000 Diamond Asset Funding Corp., 3.30%, 1/26/94 2,993,125
------------------------------------------------------------------------------------
4,000,000 Dynamic Funding Corp., 3.30%, 1/28/94 3,990,100
------------------------------------------------------------------------------------
3,255,000 Premium Funding, Inc., 3.30%, 2/16/94 3,241,275
------------------------------------------------------------------------------------
2,000,000 Sanwa Business Credit Corp., 3.29%, 2/24/94 1,990,130
------------------------------------------------------------------------------------ --------------
Total 14,224,232
------------------------------------------------------------------------------------ --------------
LEASING--6.1%
------------------------------------------------------------------------------------
3,000,000 JAL Capital Corp., 3.43%, 2/17/94 2,986,566
------------------------------------------------------------------------------------
3,000,000 Oryz Leasing, 3.38%, 2/18/94 2,986,480
------------------------------------------------------------------------------------ --------------
Total 5,973,046
------------------------------------------------------------------------------------ --------------
SOVEREIGN GOVERNMENT--3.9%
------------------------------------------------------------------------------------
3,800,000 South Australian Government Finance Authority, 3.40%, 4/5/94 3,766,265
------------------------------------------------------------------------------------ --------------
TOTAL COMMERCIAL PAPER 53,160,659
------------------------------------------------------------------------------------ --------------
CORPORATE BONDS--20.3%
- ---------------------------------------------------------------------------------------------------
2,000,000 American Express Co., 11.95%, 1/15/95 2,162,940
------------------------------------------------------------------------------------
1,000,000 American General Corp., 9.50%, 12/15/94 1,052,321
------------------------------------------------------------------------------------
1,000,000 Associates Corp. of North America, 12.75%, 8/15/94 1,053,669
------------------------------------------------------------------------------------
1,500,000 Beneficial Corp., 12.00%, 11/1/94 1,600,507
------------------------------------------------------------------------------------
1,000,000 Exxon Capital Corp., 8.25%, 10/15/94 1,034,265
------------------------------------------------------------------------------------
3,550,000 Ford Motor Credit Co., 7.70%, 4/1/94 3,586,297
------------------------------------------------------------------------------------
</TABLE>
FIRST UNION MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
$ 1,000,000 International Lease Finance Corp., 7.20%, 10/1/94 $ 1,025,838
------------------------------------------------------------------------------------
1,000,000 ITT Financial Corp., 8.76%, 5/2/94 1,016,801
------------------------------------------------------------------------------------
1,650,000 Merrill Lynch & Co., Inc., 8.375%, 5/1/94 1,675,762
------------------------------------------------------------------------------------
3,800,000 Norwest Financial Inc., 8.25%, 2/1/94 3,815,189
------------------------------------------------------------------------------------
1,700,000 Pepsico, Inc., 7.875%, 1/1/94 1,700,000
------------------------------------------------------------------------------------ --------------
TOTAL CORPORATE BONDS 19,723,589
------------------------------------------------------------------------------------ --------------
MUTUAL FUND SHARES--1.2%
- ---------------------------------------------------------------------------------------------------
1,188,754 Dreyfus Treasury Cash Management Plus (at net asset value) 1,188,754
------------------------------------------------------------------------------------ --------------
VARIABLE RATE ISSUES--14.4%
- ---------------------------------------------------------------------------------------------------
2,000,000 Chemical Bank, 3.488%, 6/15/94 2,001,073
------------------------------------------------------------------------------------
3,000,000 CIT Group Holdings Inc., 3.50%, 7/26/94 2,998,307
------------------------------------------------------------------------------------
3,000,000 Citicorp, 3.55%, 12/7/94 3,000,000
------------------------------------------------------------------------------------
3,000,000 Household Finance Corp., 3.36%, 5/27/94 2,998,316
------------------------------------------------------------------------------------
3,000,000 Salomon Brothers, Inc., 3.638%, 4/15/94 3,000,000
------------------------------------------------------------------------------------ --------------
TOTAL VARIABLE RATE ISSUES 13,997,696
------------------------------------------------------------------------------------ --------------
NOTES--4.0%
- ---------------------------------------------------------------------------------------------------
3,880,784 Premier Auto, 3.48%, 12/2/94 3,880,784
------------------------------------------------------------------------------------ --------------
**REPURCHASE AGREEMENT--0.8%
- ---------------------------------------------------------------------------------------------------
798,000 Donaldson, Lufkin & Jenrette Securities Corp., 3.20%, dated
12/31/93, due 1/3/94 (at amortized cost) (Note 2B) 798,000
------------------------------------------------------------------------------------ --------------
TOTAL INVESTMENTS, AT AMORTIZED COST AND VALUE $ 96,749,552\
------------------------------------------------------------------------------------ --------------
</TABLE>
* Each issue shows the rate of discount at the time of purchase for
discount issues, or the coupon for interest bearing issues.
** Repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
\ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($97,286,292) at December 31, 1993.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments, at value (Notes 2A and 2B) $ 96,749,552
- ---------------------------------------------------------------------------------------------------
Cash 1,818,364
- ---------------------------------------------------------------------------------------------------
Interest receivable 636,600
- ---------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 10,000
- --------------------------------------------------------------------------------------------------- --------------
Total assets 99,214,516
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed $ 1,822,677
- ------------------------------------------------------------------------------------
Dividends payable 25,646
- ------------------------------------------------------------------------------------
Accrued expenses 79,901
- ------------------------------------------------------------------------------------ -------------
Total liabilities 1,928,224
- --------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 97,286,292 shares of beneficial interest outstanding $ 97,286,292
- --------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- ---------------------------------------------------------------------------------------------------
Class B Investment Shares (net assets of $88,171,593 / 88,171,593 shares
of beneficial interest outstanding) $1.00
- --------------------------------------------------------------------------------------------------- --------------
Trust Shares (net assets of $9,114,699 / 9,114,699 shares
of beneficial interest outstanding) $1.00
- --------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 3,255,702
- ----------------------------------------------------------------------------------------------------
Expenses--
- ----------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 332,305
- ----------------------------------------------------------------------------------------
Administrative personnel and services (Note 5) 82,912
- ----------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 147,640
- ----------------------------------------------------------------------------------------
Distribution services fee (Note 5) 259,441
- ----------------------------------------------------------------------------------------
Fund share registration costs 42,023
- ----------------------------------------------------------------------------------------
Legal fees 3,363
- ----------------------------------------------------------------------------------------
Auditing fees 9,043
- ----------------------------------------------------------------------------------------
Printing and postage 47,172
- ----------------------------------------------------------------------------------------
Insurance premiums 7,803
- ----------------------------------------------------------------------------------------
Miscellaneous 6,463
- ---------------------------------------------------------------------------------------- ----------
Total expenses 938,165
- ----------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 231,837
- ----------------------------------------------------------------------------
Waiver of distribution services fee (Note 5) 129,896 361,733
- ---------------------------------------------------------------------------- ---------- ----------
Net expenses 576,432
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income $ 2,679,270
- ---------------------------------------------------------------------------------------------------- ------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1992
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------------
Net investment income $ 2,679,270 $ 2,689,745
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- -------------------------------------------------------------------------------
Class B Investment Shares (2,429,592) (2,264,851)
- -------------------------------------------------------------------------------
Trust Shares (249,678) (424,894)
- ------------------------------------------------------------------------------- ---------------- ----------------
Change in net assets from distributions to shareholders (2,679,270) (2,689,745)
- ------------------------------------------------------------------------------- ---------------- ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -------------------------------------------------------------------------------
Proceeds from sale of shares 397,777,259 226,175,437
- -------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 2,464,947 2,580,447
- -------------------------------------------------------------------------------
Cost of shares redeemed (376,993,301) (224,724,642)
- ------------------------------------------------------------------------------- ---------------- ----------------
Change in net assets from Fund share transactions 23,248,905 4,031,242
- ------------------------------------------------------------------------------- ---------------- ----------------
Change in net assets 23,248,905 4,031,242
- -------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------
Beginning of period 74,037,387 70,006,145
- ------------------------------------------------------------------------------- ---------------- ----------------
End of period $ 97,286,292 $ 74,037,387
- ------------------------------------------------------------------------------- ---------------- ----------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- -------------- --------------------------------------------------------------------- ---------- ---------------
SHORT-TERM MUNICIPAL SECURITIES
- -------------------------------------------------------------------------------------
ALABAMA--2.0%
---------------------------------------------------------------------
$ 3,500,000 Decatur, AL, PCR Weekly VRDN (Series 1992)/(Monsanto Co. Project) P-1 $ 3,500,000
---------------------------------------------------------------------
1,100,000 Livingston, AL, IDB Weekly VRDN (Series 1989)/(Toin Corp. U.S.A.
Project)/(Subject to AMT)/(Industrial Bank of Japan Ltd. LOC) AA 1,100,000
---------------------------------------------------------------------
950,000 Tuscaloosa, AL, Weekly VRDN (Field Container Corp.)/ (American
National Bank & Trust LOC) A-1 950,000
--------------------------------------------------------------------- ---------------
Total 5,550,000
--------------------------------------------------------------------- ---------------
ARIZONA--6.5%
---------------------------------------------------------------------
7,000,000 Apache County, AZ, PCR Weekly VRDN (Series 1981B)/ (Tuscon Electric
Power Co.)/(Mitsubishi Bank Ltd. LOC) VMIG-1 7,000,000
---------------------------------------------------------------------
900,000 Chandler County, AZ, IDA Weekly VRDN (Series 1983)/ (Parsons
Municipal Services) AA 900,000
---------------------------------------------------------------------
480,000 Maricopa County, AZ, IDA Weekly VRDN (McLane County)/(Barclays Bank
PLC LOC) P-1 480,000
---------------------------------------------------------------------
7,100,000 Pima County, AZ, IDA Weekly VRDN (Series 1982A)/ (Tucson Electric
Power Co.)/(Bank of America LOC) VMIG-1 7,100,000
---------------------------------------------------------------------
2,800,000 Tuscon, AZ, IDA Weekly VRDN (Tucson Co. Parking Garage)/(Societe
Generale LOC) VMIG-1 2,800,000
--------------------------------------------------------------------- ---------------
Total 18,280,000
--------------------------------------------------------------------- ---------------
CALIFORNIA--12.1%
---------------------------------------------------------------------
1,400,000 Barstow, CA, Weekly VRDN (Multi-Family Housing Revenue Bond)/(Series
1988A)/(Rimrock Village Apartment Project)/(Mercury Savings & Loan
LOC) NR 1,400,000
---------------------------------------------------------------------
2,000,000 California Public Capital Improvement Finance Authority, 2.90%,
Revenue Bonds (Pooled Loan Project)/(Series 1988B)/(Dai-Ichi Kangyo
Bank LOC)/(MBIA Insured), Optional Tender 2/24/94 VMIG 2,000,000
---------------------------------------------------------------------
8,800,000 Fresno, CA, Weekly VRDN (Housing Heritage Apartments)/ (Series
1985B)/(Western Federal Savings & Loan LOC) AAA 8,800,000
---------------------------------------------------------------------
3,900,000 Fresno, CA, Weekly VRDN (Housing Sanger Project)/ (Series
1985B)/(Western Federal Savings & Loan LOC) AAA 3,900,000
---------------------------------------------------------------------
8,525,000 Oceanside, CA, Weekly VRDN (Community Development Multi-Family
Revenue Bond)/(Parcwood Apartments Project)/(Western Federal Savings
& Loan LOC) AAA 8,525,000
---------------------------------------------------------------------
4,500,000 San Diego, CA, Housing Authority, Weekly VRDN (Multi-Family Housing
Revenue Bonds)/(Oro Vista Apartments Project)/(Series 1987A)/(Mercury
Savings & Loan LOC) AAA 4,500,000
---------------------------------------------------------------------
</TABLE>
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- -------------- --------------------------------------------------------------------- ---------- ---------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
CALIFORNIA--CONTINUED
---------------------------------------------------------------------
$ 5,000,000 Santa Ana, CA, Housing Authority, Weekly VRDN (Multi-Family Housing
Revenue Bonds)/(Vella Verde Apartments)/ (Series 1985B)/(Mercury
Savings & Loan LOC) AAA $ 5,000,000
--------------------------------------------------------------------- ---------------
Total 34,125,000
--------------------------------------------------------------------- ---------------
COLORADO--0.9%
---------------------------------------------------------------------
2,500,000 Arapahoe County, CO, 4.50% (Capital Improvement Trust)/ (Highway
Fund)/(Revenue E-470 Project)/(Series D)/ (Union Bank of Switzerland
LOC), Optional Tender
2/28/94 A-1+ 2,500,000
--------------------------------------------------------------------- ---------------
CONNECTICUT--2.5%
---------------------------------------------------------------------
6,985,000 Connecticut State Housing Finance Authority, Daily VRDN (Housing
Mortgage Finance Project) Floating Trust Receipts VMIG-1 6,985,000
--------------------------------------------------------------------- ---------------
DISTRICT OF COLUMBIA--1.8%
---------------------------------------------------------------------
5,000,000 District of Columbia, 2.80%, Supplemental Student Loan Revenue
(Series 1985)/(Conservative Loan Project)/ (Mitsubishi Bank LOC),
7/1/94 VMIG-1 5,000,000
--------------------------------------------------------------------- ---------------
FLORIDA--7.0%
---------------------------------------------------------------------
2,465,000 Escambia County, FL, HFA, 3.00% (Multi-Family Housing Revenue
Bond)/(Enclave Project-B), Mandatory Tender
4/1/94 AAA 2,465,000
---------------------------------------------------------------------
13,860,000 Florida State Board of Education Public School, Weekly VRDN (Capital
Outlay)/(Series A)/(Class A)/(ADP Investment LOC) AA 13,860,000
---------------------------------------------------------------------
3,500,000 Orange County, FL, IDR, 3.00% (General Accident Life Insurance),
Optional Tender 6/1/94 A-1+ 3,500,000
--------------------------------------------------------------------- ---------------
Total 19,825,000
--------------------------------------------------------------------- ---------------
GEORGIA--6.4%
---------------------------------------------------------------------
2,000,000 Columbus, GA, Weekly VRDN, Industrial Facilities and Pollution
Control Financing Authority, Solid Waste Disposal Revenue Bonds (B&G
Realty, Inc.)/(Bankers Trust LOC) Aa2 2,000,000
---------------------------------------------------------------------
600,000 Columbus, GA, IDA Weekly VRDN (R.P. Real Estate Project)/(Columbus
Bank and Trust Co. LOC) AA 600,000
---------------------------------------------------------------------
800,000 Georgia State, 10.00% (Series B), Mandatory Tender
7/1/94 AAA 850,723
---------------------------------------------------------------------
1,385,500 Georgia State Residential Finance Authority, 2.80%, Home Ownership
Mortgage Revenue Bonds (Series C)/(FHA Insured)/(First National Bank
Chicago BPA)/(Subject to AMT), Optional Tender 6/1/94 AA+ 1,385,000
---------------------------------------------------------------------
</TABLE>
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- -------------- --------------------------------------------------------------------- ---------- ---------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
GEORGIA--CONTINUED
---------------------------------------------------------------------
$ 5,375,400 Metropolitan Atlanta Rapid Transit Authority, GA, Weekly VRDN (Sales
Tax Revenue Refunding Bonds)/(Series
G-BTP-25) AAA $ 5,375,400
---------------------------------------------------------------------
5,965,000 Metropolitan Atlanta Rapid Transit Authority, GA, Weekly VRDN (Sales
Tax Revenue Refunding Bonds)/(Series
A-BTP-58) NR 5,965,000
---------------------------------------------------------------------
2,000,000 Polk, GA, Weekly VRDN (Series 1985)/(Kimoto Tech, Inc.) AA2 2,000,000
--------------------------------------------------------------------- ---------------
Total 18,176,123
--------------------------------------------------------------------- ---------------
HAWAII--6.0%
---------------------------------------------------------------------
17,000,000 Eagle Tax-Exempt Trust, Weekly VRDN (Series 1993Q)/ (Class A
Certificate of Participation)/(Hawaii GO)/(Citibank LOC) AA 17,000,000
--------------------------------------------------------------------- ---------------
ILLINOIS--13.6%
---------------------------------------------------------------------
7,690,800 Chicago, IL, Weekly VRDN (School Finance Authority GO)/ (Series
1985BTP-23A) AAA 7,690,800
---------------------------------------------------------------------
1,100,000 Illinois Development Finance Authority, Weekly VRDN (Series
1986)/(Industrial Bank of Japan Ltd. LOC)/(Subject to AMT) VMIG-1 1,100,000
---------------------------------------------------------------------
1,400,000 Illinois Development Finance Authority, Weekly VRDN (Series
1991)/(Industrial Bank of Japan Ltd. LOC)/(Subject to AMT) VMIG-1 1,400,000
---------------------------------------------------------------------
1,800,000 Illinois Development Finance Authority, Weekly VRDN
(St. Xavier University)/(American National LOC) VMIG-1 1,800,000
---------------------------------------------------------------------
1,300,000 Illinois Development Finance Authority, Weekly VRDN (Dart Container
Corp.)/(National Bank of Detroit LOC) Aa 1,300,000
---------------------------------------------------------------------
6,800,000 Illinois Development Finance Authority, 2.85% (General Accident Life
Insurance), Optional Tender 3/1/94 A-1+ 6,800,000
---------------------------------------------------------------------
905,000 Illinois Development Finance Authority, Daily VRDN A-1 905,000
---------------------------------------------------------------------
3,500,000 Illinois Economic Development Review, Weekly VRDN (MTI Corporate
Project)/(Industrial Bank of Japan Ltd. LOC)/(Subject to AMT) VMIG-1 3,500,000
---------------------------------------------------------------------
1,000,000 Illinois Health Facilities Authority, Weekly VRDN (Methodist Health
Service Corp.) VMIG-1 1,000,000
---------------------------------------------------------------------
7,000,000 Illinois State, 3.50% Certificates, 6/15/94 MIGI 7,016,825
---------------------------------------------------------------------
5,900,131 LaSalle National Bank, Weekly VRDN (Series 1993A)/ (LaSalle National
Bank LOC) A-1+ 5,900,131
--------------------------------------------------------------------- ---------------
Total 38,412,756
--------------------------------------------------------------------- ---------------
INDIANA--0.4%
---------------------------------------------------------------------
800,000 Avilla, IN, EDR Weekly VRDN (G&P Partners Partnership)/ (Credit
Commercial De France LOC)/(Subject to AMT) VMIG-1 800,000
---------------------------------------------------------------------
</TABLE>
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- -------------- --------------------------------------------------------------------- ---------- ---------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
INDIANA--CONTINUED
---------------------------------------------------------------------
$ 350,000 Indiana State Employment Development Commission, Weekly VRDN (Griner
Engineering Co.)/(Credit Commercial De France LOC)/(Subject to AMT) VMIG-1 $ 350,000
--------------------------------------------------------------------- ---------------
Total 1,150,000
--------------------------------------------------------------------- ---------------
IOWA--3.1%
---------------------------------------------------------------------
3,620,000 Iowa Municipalities Workers Compensation Association, 2.80%
(Self-Insured Funding Revenue Bonds)/(Series 1988), 7/1/94 VMIG-1 3,620,000
---------------------------------------------------------------------
5,000,000 Iowa State, 3.25% TRANs (Series A), 6/30/94 MIG-1/
SP-1 5,008,263
--------------------------------------------------------------------- ---------------
Total 8,628,263
--------------------------------------------------------------------- ---------------
KANSAS--0.4%
---------------------------------------------------------------------
1,000,000 Osage, KS, Weekly VRDN (Marley Continental Homes)/ (Series
1984)/(Bankers Trust LOC) Aa2 1,000,000
--------------------------------------------------------------------- ---------------
LOUISIANA--0.4%
---------------------------------------------------------------------
1,000,000 Louisiana Public Facilities Authority, 3.25%, (Multi-Family Housing
Revenue Refunding Bonds)/(Kingston Village Apartments
Project)/(Series 1988)/(National Fire Insurance Company of Hartford
Surety Bond), Mandatory Tender
12/1/94 A-1+ 1,000,000
--------------------------------------------------------------------- ---------------
MARYLAND--6.7%
---------------------------------------------------------------------
2,000,000 Maryland State Health & Higher Education Facilities Authority, Weekly
VRDN (Pooled Loan Project)/(Kennedy Krieger Institute)/(Series
1993D)/(First National Bank LOC) A-1 2,000,000
---------------------------------------------------------------------
3,500,000 Maryland State, Weekly VRDN GO (State & Local Facilities Loan of
1993)/(Third Series Tender Option Certificate)/ (Series K)/(Dai-Ichi
Kangyo Bank LOC) AAA 3,500,000
---------------------------------------------------------------------
4,800,000 Northeast, MD, 2.55% (Waste Disposal Authority), Reserve Recovery
Revenue Bond (Long Option Period Refunding CR-120), Optional Tender
1/1/94 AAA 4,800,000
---------------------------------------------------------------------
8,500,000 Northeast, MD, 2.55% (Waste Disposal Authority), Reserve Recovery
Revenue Bond (Long Option Period Refunding CR-122), Optional Tender
1/1/94 AAA 8,500,000
--------------------------------------------------------------------- ---------------
Total 18,800,000
--------------------------------------------------------------------- ---------------
MASSACHUSETTS--0.7%
---------------------------------------------------------------------
2,000,000 Massachusetts, Daily VRDN GO Refunding Bonds (Series 1993A)/(AMBAC
Insured) AAA 2,000,000
--------------------------------------------------------------------- ---------------
</TABLE>
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- -------------- --------------------------------------------------------------------- ---------- ---------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
MICHIGAN--0.8%
---------------------------------------------------------------------
$ 1,500,000 Detroit, MI, Weekly VRDN (Tax Increment Finance Authority)/(Series
B)/(Central Industrial Park Project)/ (Citibank LOC) A-1 $ 1,500,000
---------------------------------------------------------------------
800,000 Meridian, MI, EDC, IDR Weekly VRDN (Series 1984)/ (Hanna Technology &
Research Center) A-1+ 800,000
--------------------------------------------------------------------- ---------------
Total 2,300,000
--------------------------------------------------------------------- ---------------
MINNESOTA--3.1%
---------------------------------------------------------------------
8,610,000 Minnesota State Housing Finance Agency, 2.40%, (Medium Option Period
A-5C)/(Citibank BPA), Optional Tender
4/1/94 Aa 8,610,000
--------------------------------------------------------------------- ---------------
MISSISSIPPI--0.3%
---------------------------------------------------------------------
805,000 Mississippi Housing Finance Corp., 2.75% (Single Family
Mortgage)/(FGIC Insured), 4/15/94 AAA 805,000
--------------------------------------------------------------------- ---------------
MISSOURI--1.7%
---------------------------------------------------------------------
2,000,000 St. Louis, MO, IDA, Weekly VRDN (Schmuck Markets, Inc.)/(Bankers
Trust LOC) P-1 2,000,000
---------------------------------------------------------------------
2,910,000 Springfield, MO, IDA, Weekly VRDN (Springfield Retirement
Center)/(National Bank of Australia LOC) VMIG-1 2,910,000
--------------------------------------------------------------------- ---------------
Total 4,910,000
--------------------------------------------------------------------- ---------------
MONTANA--1.2%
---------------------------------------------------------------------
3,300,000 Montana State Board Investment Resource Recovery, Weekly VRDN
(Coalstrip Project)/(Fuji Bank Ltd. LOC)/ (Subject to AMT) P-1 3,300,000
--------------------------------------------------------------------- ---------------
NEW YORK--3.6%
---------------------------------------------------------------------
10,000,000 New York City, 3.50%, RANs (Series B), 6/30/94 MIG-1/
SP-1 10,024,000
--------------------------------------------------------------------- ---------------
NORTH CAROLINA--3.0%
---------------------------------------------------------------------
7,700,000 Columbus County, NC, Industrial Facilities & PCR Weekly VRDN (Solid
Waste Disposal Revenue Bonds)/(Federal Paper Board Co., Inc.
Project)/(Series 1992)/(Dai-Ichi Kangyo Bank LOC)/(Subject to AMT) AA-1 7,700,000
---------------------------------------------------------------------
675,000 Forsyth County, NC, 4.50%, Refunding GO Bonds (Series A), 3/1/94 AA+ 676,607
--------------------------------------------------------------------- ---------------
Total 8,376,607
--------------------------------------------------------------------- ---------------
OHIO--1.2%
---------------------------------------------------------------------
3,500,000 City of Cleveland, OH, 3.50%, Public Power Systems Improvement
Revenue BANs (Series 1993B), 8/1/94 MIG1 3,508,292
--------------------------------------------------------------------- ---------------
</TABLE>
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- -------------- --------------------------------------------------------------------- ---------- ---------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
OREGON--0.4%
---------------------------------------------------------------------
$ 1,000,000 Metropolitan Service District, OR, Weekly VRDN (Ridel Oregon Compost
Co.)/(Series 1990-1)/(Bank of Oregon LOC) P-1 $ 1,000,000
--------------------------------------------------------------------- ---------------
PENNSYLVANIA--6.2%
---------------------------------------------------------------------
8,950,000 Montgomery County, PA, IDA Weekly VRDN (Radnor/ Plymouth Partnership
III Project)/(Series 1985)/(Fuji Bank Ltd. LOC) A-1 8,950,000
---------------------------------------------------------------------
4,000,000 Philadelphia, PA, IDA, 3.15% (Commercial Development Revenue
Bonds)/(Suite Hotel Project)/(Series A)/(First National Bank of
Boston LOC), Optional Tender 6/1/94 AA 4,000,000
---------------------------------------------------------------------
3,000,000 Philadelphia, PA, IDA Daily VRDN (30th Street Station Project)/(MBIA
Insured) AAA 3,000,000
---------------------------------------------------------------------
1,595,000 Westmoreland County, PA, IDA 2.97%, Revenue Bond (White Consolidated
Industries, Inc. Project), Optional Tender 6/1/94 P1 1,596,432
--------------------------------------------------------------------- ---------------
Total 17,546,432
--------------------------------------------------------------------- ---------------
PUERTO RICO--1.4%
---------------------------------------------------------------------
4,000,000 Puerto Rico Housing Finance Corporation, 2.50%, Revenue Bond (Medium
Option Period CR-4C1)/(AMBAC Insured), Optional Tender 1/15/94 AAA 4,000,000
--------------------------------------------------------------------- ---------------
RHODE ISLAND--0.4%
---------------------------------------------------------------------
1,000,000 Providence, RI, 6.70%, Refunding Bond (MBIA Insured), Mandatory
Tender 3/15/94 AAA 1,037,980
--------------------------------------------------------------------- ---------------
SOUTH CAROLINA--4.2%
---------------------------------------------------------------------
950,000 South Carolina Jobs, EDA Weekly VRDN (Harvin Choice Meats)/(Bank of
Tokyo Ltd. LOC)/(Subject to AMT) VMIG-1 950,000
---------------------------------------------------------------------
850,000 South Carolina Jobs, EDA Weekly VRDN (Tuttle Co.)/ (Credit Commercial
De France LOC)/(Subject to AMT) VMIG-1 850,000
---------------------------------------------------------------------
750,000 South Carolina Jobs, EDA Daily VRDN (Series 1989B)/ (Ridge Pallets,
Inc.)/(Credit Commercial De France LOC)/ (Subject to AMT) P-1 750,000
---------------------------------------------------------------------
150,000 South Carolina Jobs, EDA Weekly VRDN (Sunbelt Corp. Project)/(Credit
Commercial De France LOC)/(Subject to AMT) VMIG-1 150,000
---------------------------------------------------------------------
350,000 South Carolina Jobs, EDA Weekly VRDN (Kent Manufacturing
Project)/(Credit Commercial De France LOC)/(Subject to AMT) VMIG-1 350,000
---------------------------------------------------------------------
1,720,000 South Carolina Jobs, EDA Weekly VRDN (Batesburg Industrial
Fabrics)/(Credit Commercial De France LOC)/ (Subject to AMT) VMIG-1 1,720,000
---------------------------------------------------------------------
</TABLE>
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- -------------- --------------------------------------------------------------------- ---------- ---------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
SOUTH CAROLINA--CONTINUED
---------------------------------------------------------------------
$ 200,000 South Carolina Jobs, EDA Weekly VRDN (Sudan Co. and Delta
Properties)/(Credit Commercial De France LOC)/ (Subject to AMT) VMIG-1 $ 200,000
---------------------------------------------------------------------
1,450,000 South Carolina Jobs, EDA Weekly VRDN (Regal Beloit Corp.
Project)/(Credit Commercial De France LOC)/ (Subject to AMT) P-1 1,450,000
---------------------------------------------------------------------
400,000 South Carolina Jobs, EDA Weekly VRDN (Specialty Electronics)/(Credit
Commercial De France LOC)/(Subject to AMT) P-1 400,000
---------------------------------------------------------------------
5,049,900 State of South Carolina, Weekly VRDN (Capital Import Bonds)/(Series
V-BTP-27)/(Class A Certificates)/(ADP Investment LOC) NR 5,049,000
--------------------------------------------------------------------- ---------------
Total 11,869,000
--------------------------------------------------------------------- ---------------
TENNESSEE--8.7%
---------------------------------------------------------------------
2,080,000 Anderson County, TN, Weekly VRDN (Hollingsworth Project)/(Third
National Bank LOC) Aa3 2,080,000
---------------------------------------------------------------------
4,075,000 Franklin County, TN, Monthly VRDN (Health & Education Facilities
Board)/(Series 1990)/(University of the South Project) A-1 4,075,000
---------------------------------------------------------------------
1,000,000 Blount, TN, IDR Weekly VRDN (Series 1988)/(Advanced Crystal,
Inc.)/(Subject to AMT)/(Industrial Bank of Japan Ltd. LOC) A-1+ 1,000,000
---------------------------------------------------------------------
3,540,000 Knoxville, TN, Weekly VRDN (Waste Water System Revenue Refunding
Improvement Bonds)/(Series 1993-BTP-57)/(ADP Investment LOC) NR 3,540,000
---------------------------------------------------------------------
4,665,000 Memphis, TN, Weekly VRDN (Electric System Revenue Refunding
Bonds)/(Series 1992-BTP-28)/(Class A Certificates)/(ADP Investment
LOC) NR 4,665,000
---------------------------------------------------------------------
2,990,000 Memphis-Shelby County, TN, IDB Weekly VRDN (Series 1985)/(Wang
International, Inc. Project)/(Northwestern Mutual Life Insured) Aaa 2,990,000
---------------------------------------------------------------------
3,100,000 Metropolitan Nashville Airport Authority, Weekly VRDN (Aerotech,
Inc.)/(Norden Banken LOC)/(Subject to AMT) VMIG-1 3,100,000
---------------------------------------------------------------------
1,120,000 Metropolitan Nashville Davidson County, TN, Weekly VRDN (Health &
Education)/(Harpet's Hall School Project)/(Third National Bank LOC) Aa-3 1,120,000
---------------------------------------------------------------------
500,000 Metropolitan Government, Nashville & Davidson County, TN, 5.75%,
Mandatory Tender 3/1/94 AA 515,037
---------------------------------------------------------------------
1,500,000 Rutherford County, TN, Weekly VRDN (Outboard Marine Corp.) Aa3 1,500,000
--------------------------------------------------------------------- ---------------
Total 24,585,037
--------------------------------------------------------------------- ---------------
</TABLE>
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- -------------- --------------------------------------------------------------------- ---------- ---------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
TEXAS--8.6%
---------------------------------------------------------------------
$ 15,600,000 Eagle Tax-Exempt Trust, Certificates of Participation, Weekly VRDN
(Series 1994E)/(Class A)/(Harris County, TX, Highway and Flood
Control)/(Citibank LOC) AA $ 15,600,000
---------------------------------------------------------------------
1,000,000 El Paso, TX, 4.20%, Water & Sewage Revenue Refunding & Improvement
Bonds, 3/1/94 AA 1,002,468
---------------------------------------------------------------------
890,000 Highland Park, TX, 7.75%, ISD, 2/15/94 AAA 895,584
---------------------------------------------------------------------
2,000,000 San Antonio, TX, 2.95%, Airport System Revenue Bonds (Long Option
Period Refunding CR-129), Mandatory Tender 4/1/94 AAA 2,500,000
---------------------------------------------------------------------
2,500,000 San Antonio, TX, 2.95%, Airport System Revenue Bonds (Long Option
Period Refunding CR-130), Mandatory Tender 4/1/94 AAA 2,000,000
---------------------------------------------------------------------
2,255,000 Tarrant County, TX, Weekly VRDN (Housing Finance
Corporation)/(Multi-Family Housing Revenue)/(Lincoln Meadows
Project)/(Series 1988)/(Continental Casualty Surety Bond)/(Algemene
SBPA) AAA 2,255,000
--------------------------------------------------------------------- ---------------
Total 24,253,052
--------------------------------------------------------------------- ---------------
UTAH--1.7%
---------------------------------------------------------------------
2,847,000 Variable Rate Trust Certificates XVII, Weekly VRDN (Utah
Intermountain Power Supply Agency)/(Payment Guaranteed) Aa 2,847,000
---------------------------------------------------------------------
1,900,000 Variable Rate Trust Certificates XVII, Weekly VRDN (Payment
Guaranteed) Aa 1,900,000
--------------------------------------------------------------------- ---------------
Total 4,747,000
--------------------------------------------------------------------- ---------------
VIRGINIA--6.4%
---------------------------------------------------------------------
5,900,000 Amelia County, VA, IDA Weekly VRDN (Chambers Waste
Systems)/(NationsBank LOC)/(Subject to AMT) VMIG-1 5,900,000
---------------------------------------------------------------------
3,500,000 Charles County & City, VA, Weekly VRDN (Chambers
Development)/(NationsBank LOC)/(Subject to AMT) VMIG-1 3,500,000
---------------------------------------------------------------------
5,500,000 Newport News, VA, Weekly VRDN GO (Series O)/(Tender Option
Certificates) A-1+ 5,500,000
---------------------------------------------------------------------
3,000,000 Virginia Educational Loan Authority Guaranty, 2.85%, Student Loan
Revenue (Series H), Mandatory Tender
2/24/94 VMIG-1 3,000,000
--------------------------------------------------------------------- ---------------
Total 17,900,000
--------------------------------------------------------------------- ---------------
WASHINGTON--4.0%
---------------------------------------------------------------------
6,365,000 King City, WA, Weekly VRDN UT GO Refunding Bonds (Series
1993-C-BTP-56)/(ADP Investment LOC) NR 6,365,000
---------------------------------------------------------------------
793,000 Pilchuck Development Public Corporation, Weekly VRDN (Crystal Creek
Lot Pound11)/(Mitsubishi Bank Ltd. LOC) AA 793,000
---------------------------------------------------------------------
</TABLE>
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- -------------- --------------------------------------------------------------------- ---------- ---------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
WASHINGTON--CONTINUED
---------------------------------------------------------------------
$ 1,000,000 Seattle, WA, Weekly VRDN (Industrial Development Corp.)/(Northwestern
Industrial Project)/(Industrial Bank of Japan Ltd. LOC) AAA $ 1,000,000
---------------------------------------------------------------------
3,177,300 Seattle, WA, Weekly VRDN (Municipal Light & Power Revenue
Bonds)/(Series 1985-BTP-24) AAA 3,177,300
--------------------------------------------------------------------- ---------------
Total 11,335,300
--------------------------------------------------------------------- ---------------
WISCONSIN--0.7%
---------------------------------------------------------------------
1,000,000 Racine, WI, 3.25%, TRANs (University School District),
8/24/94 SP1+ 1,002,184
---------------------------------------------------------------------
1,000,000 Wisconsin State, 9.10%, GO Bonds, 4/1/94 AAA 1,025,891
--------------------------------------------------------------------- ---------------
Total 2,028,075
--------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS, AT AMORTIZED COST $ 360,567,917\
--------------------------------------------------------------------- ---------------
</TABLE>
* See Notes to Portfolio of Investments on page 44.
\ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($281,828,749) at December 31, 1993.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond IDB -- Industrial Development Bond
Assurance Corporation IDR -- Industrial Development Revenue
AMT -- Alternative Minimum Tax ISD -- Independent School District
BANs -- Bond Anticipation Notes LOC -- Letter of Credit
BPA -- Bond Purchase Agreement MBIA -- Municipal Bond Investors
EDA -- Economic Development Authority Assurance
EDC -- Economic Development Commission PCR -- Pollution Control Revenue
EDR -- Economic Development Revenue RANs -- Revenue Anticipation Notes
FGIC -- Financial Guaranty Insurance SBPA -- Surety Bond Purchase Agreement
Company TRANs -- Tax and Revenue Anticipation
FHA -- Federal Housing Administration Notes
GO -- General Obligation UT -- Unlimited Tax
HFA -- Housing Finance Authority VRDN -- Variable Rate Demand Notes
IDA -- Industrial Development Authority
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
STANDARD & POOR'S CORPORATION ("S&P")
S&P's note rating reflects the liquidity concerns and market access risks unique
to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a
plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Moody's short-term ratings are designated Moody's Investment Grade (MIG OR VMIG
(see below)). The purpose of the MIG or VMIG ratings is to provide investors
with a simple system by which the relative investment qualities of short-term
obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are ample,
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS)
AND
TENDER OPTION BONDS (TOBS)
RATINGS
S&P
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, and A/A-1. (The definitions for the
short-term ratings are provided below.)
MOODY'S
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity.
In this case, two ratings are usually assigned, (for example, AAA/VMIG-1), with
the first representing an evaluation of the degree of risk associated with
scheduled principal and interest payments, and the second representing an
evaluation of the degree of risk associated with the demand feature. The VMIG
rating can be assigned a 1 or 2 designation using the same definitions described
above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
S&P
S&P's commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated A-1.
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
MOODY'S
P-1 Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations.
P-2 Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations.
FITCH INVESTORS SERVICE, INC. ("FITCH") TAX-EXEMPT: INVESTMENT NOTE RATING
DEFINITIONS
FIN-1 Notes regarded as having the strongest degree of assurance for timely
payment.
FIN-2 Notes reflecting a degree of assurance for timely payment only slightly
less in degree than the highest category.
FITCH SHORT-TERM RATING DEFINITIONS
F-1+--(Exceptionally Strong Credit Quality). Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--(Very Strong Credit Quality). Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2--(Good Credit Quality). Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the F-1+ and F-1 categories.
NR NR indicates that Fitch does not rate the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA, or D categories.
NR indicates both the bonds and the obligor or credit enhancer are not currently
rated by S&P or Moody's with respect to short-term indebtedness. However,
management considers them to be of comparable quality to securities rated A-1
or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt rated A
by S&P or Moody's.
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments, at amortized cost and value (Note 2A) $ 360,567,917
- --------------------------------------------------------------------------------------------------
Cash 194,569
- --------------------------------------------------------------------------------------------------
Interest receivable 1,917,849
- --------------------------------------------------------------------------------------------------
Receivable for investments sold 100,223
- --------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 8,319
- -------------------------------------------------------------------------------------------------- ---------------
Total assets 362,788,877
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for investments purchased $ 80,204,177
- ----------------------------------------------------------------------------------
Dividends payable 537,701
- ----------------------------------------------------------------------------------
Accrued expenses 218,250
- ---------------------------------------------------------------------------------- --------------
Total liabilities 80,960,128
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS for 281,828,749 shares of beneficial interest outstanding $ 281,828,749
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds per Share:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares (net assets of $278,451,285 / 278,451,285 shares
of beneficial interest outstanding) $1.00
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares (net assets of $3,377,464 / 3,377,464 shares
of beneficial interest outstanding) $1.00
- -------------------------------------------------------------------------------------------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 8,533,496
- ----------------------------------------------------------------------------------------------------
Expenses--
- ----------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 1,115,932
- --------------------------------------------------------------------------------------
Trustees' fees 4,080
- --------------------------------------------------------------------------------------
Administrative personnel and services (Note 5) 277,930
- --------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 124,314
- --------------------------------------------------------------------------------------
Distribution services fee (Note 5) 809,367
- --------------------------------------------------------------------------------------
Fund share registration costs 89,778
- --------------------------------------------------------------------------------------
Legal fees 13,142
- --------------------------------------------------------------------------------------
Auditing fees 10,699
- --------------------------------------------------------------------------------------
Printing and postage 22,563
- --------------------------------------------------------------------------------------
Insurance premiums 11,321
- --------------------------------------------------------------------------------------
Miscellaneous 5,623
- -------------------------------------------------------------------------------------- ------------
Total expenses 2,484,749
- --------------------------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 750,857
- --------------------------------------------------------------------------
Waiver of distribution services fee (Note 5) 189,838 940,695
- -------------------------------------------------------------------------- ---------- ------------
Net expenses 1,544,054
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income $ 6,989,442
- ---------------------------------------------------------------------------------------------------- ------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992
------------------ ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------
Net investment income $ 6,989,442 $ 5,505,416
- ----------------------------------------------------------------------------- ------------------ ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -----------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- -----------------------------------------------------------------------------
Class B Investment Shares (5,828,807) (4,233,926)
- -----------------------------------------------------------------------------
Trust Shares (1,160,635) (1,271,490)
- ----------------------------------------------------------------------------- ------------------ ----------------
Change in net assets from distributions to shareholders (6,989,442) (5,505,416)
- ----------------------------------------------------------------------------- ------------------ ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -----------------------------------------------------------------------------
Proceeds from sale of shares 1,830,901,913 706,887,421
- -----------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 2,181,449 2,018,068
- -----------------------------------------------------------------------------
Cost of shares redeemed (1,752,549,719) (631,637,027)
- ----------------------------------------------------------------------------- ------------------ ----------------
Change in net assets from Fund share transactions 80,533,643 77,268,462
- ----------------------------------------------------------------------------- ------------------ ----------------
Change in net assets 80,533,643 77,268,462
- -----------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------
Beginning of period 201,295,106 124,026,644
- ----------------------------------------------------------------------------- ------------------ ----------------
End of period $ 281,828,749 $ 201,295,106
- ----------------------------------------------------------------------------- ------------------ ----------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION TREASURY MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
U.S. TREASURY OBLIGATIONS--41.7%
- --------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS--7.9%
----------------------------------------------------------------------------------
$ 50,000,000 4/28/94 $ 49,489,750
---------------------------------------------------------------------------------- ---------------
U.S. TREASURY NOTES--33.8%
----------------------------------------------------------------------------------
20,000,000 4.875%, 1/31/94 20,025,413
----------------------------------------------------------------------------------
30,000,000 6.875%, 2/15/94 30,126,537
----------------------------------------------------------------------------------
10,000,000 8.875%, 2/15/94 10,066,754
----------------------------------------------------------------------------------
15,000,000 5.375%, 2/28/94 15,048,978
----------------------------------------------------------------------------------
20,000,000 5.75%, 3/31/94 20,109,767
----------------------------------------------------------------------------------
25,000,000 8.50%, 3/31/94 25,312,284
----------------------------------------------------------------------------------
15,000,000 5.125%, 5/31/94 15,110,374
----------------------------------------------------------------------------------
30,000,000 5.00%, 6/30/94 30,234,019
----------------------------------------------------------------------------------
10,000,000 8.75%, 8/15/94 10,320,051
----------------------------------------------------------------------------------
15,000,000 8.625%, 8/15/94 15,480,029
----------------------------------------------------------------------------------
20,000,000 4.25%, 8/31/94 20,090,480
---------------------------------------------------------------------------------- ---------------
Total 211,924,686
---------------------------------------------------------------------------------- ---------------
TOTAL U.S. TREASURY OBLIGATIONS 261,414,436
---------------------------------------------------------------------------------- ---------------
MUTUAL FUND SHARES--0.9%
- --------------------------------------------------------------------------------------------------
5,604,680 Dreyfus Treasury Cash Management (at net asset value) 5,604,680
---------------------------------------------------------------------------------- ---------------
*REPURCHASE AGREEMENTS--57.2%
- --------------------------------------------------------------------------------------------------
28,000,000 Barclays Bank PLC, 3.10%, dated 12/31/93, due 1/3/94 28,000,000
----------------------------------------------------------------------------------
28,000,000 Carroll, McEntee & McGinley, Inc., 3.10%, dated 12/31/93,
due 1/3/94 28,000,000
----------------------------------------------------------------------------------
60,000,000 Dean Witter Reynolds, Inc., 3.25%, dated 12/31/93, due 1/3/94 60,000,000
----------------------------------------------------------------------------------
27,215,000 Donaldson, Lufkin & Jenrette Securities Corp., 3.20%, dated 12/31/93, due 1/3/94 27,215,000
----------------------------------------------------------------------------------
50,000,000 **Fuji Securities, Inc., 3.15%, dated 12/27/93, due 1/3/94 50,000,000
----------------------------------------------------------------------------------
28,000,000 Goldman, Sachs & Co., 3.05%, dated 12/31/93, due 1/3/94 28,000,000
----------------------------------------------------------------------------------
50,000,000 Kidder, Peabody & Co., Inc., 3.20%, dated 12/27/93, due 1/3/94 50,000,000
----------------------------------------------------------------------------------
60,000,000 NationsBank, 3.15%, dated 12/31/93, due 1/4/94 60,000,000
----------------------------------------------------------------------------------
</TABLE>
FIRST UNION TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
*REPURCHASE AGREEMENTS--CONTINUED
- --------------------------------------------------------------------------------------------------
$ 28,000,000 Nikko Securities Co. International, Inc., 3.15%, dated 12/31/93,
due 1/3/94 $ 28,000,000
---------------------------------------------------------------------------------- ---------------
TOTAL REPURCHASE AGREEMENTS, (NOTE 2B) 359,215,000
---------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS, AT AMORTIZED COST AND VALUE $ 626,234,116\
---------------------------------------------------------------------------------- ---------------
</TABLE>
* Repurchase agreements are fully collateralized by U.S. Treasury obligations,
based on market prices at the date of the portfolio.
** Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement.
\ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($627,583,296) at December 31, 1993.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) $ 359,215,000
- --------------------------------------------------------------------------------
Investments in other securities (Note 2A) 267,019,116
- -------------------------------------------------------------------------------- ---------------
Total investments, at amortized cost and value $ 626,234,116
- -------------------------------------------------------------------------------------------------
Cash 177,145
- -------------------------------------------------------------------------------------------------
Interest receivable 3,879,454
- -------------------------------------------------------------------------------------------------
Deferred expenses (Note 2G) 58,540
- ------------------------------------------------------------------------------------------------- ---------------
Total assets 630,349,255
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------
Dividends payable 1,436,888
- --------------------------------------------------------------------------------
Payable for Fund shares redeemed 1,095,102
- --------------------------------------------------------------------------------
Accrued expenses 233,969
- -------------------------------------------------------------------------------- ---------------
Total liabilities 2,765,959
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSETS for 627,583,296 shares of beneficial interest outstanding $ 627,583,296
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds per Share:
- -------------------------------------------------------------------------------------------------
Class B Investment Shares (net assets of $261,474,610 / 261,474,610 shares of beneficial interest
outstanding) $1.00
- ------------------------------------------------------------------------------------------------- ---------------
Trust Shares (net assets of $366,108,686 / 366,108,686 shares of beneficial interest outstanding)
$1.00
- ------------------------------------------------------------------------------------------------- ---------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 17,977,054
- ---------------------------------------------------------------------------------------------------
Expenses--
- ---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 1,977,645
- -------------------------------------------------------------------------------------
Trustees' fees 8,700
- -------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 490,126
- -------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 225,905
- -------------------------------------------------------------------------------------
Distribution services fee (Note 5) 756,661
- -------------------------------------------------------------------------------------
Fund share registration costs 127,752
- -------------------------------------------------------------------------------------
Legal fees 23,241
- -------------------------------------------------------------------------------------
Auditing fees 14,525
- -------------------------------------------------------------------------------------
Printing and postage 23,294
- -------------------------------------------------------------------------------------
Insurance premiums 17,786
- -------------------------------------------------------------------------------------
Miscellaneous 19,325
- ------------------------------------------------------------------------------------- ------------
Total expenses 3,684,960
- -------------------------------------------------------------------------------------
Deduct--
- -------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 1,712,975
- -----------------------------------------------------------------------
Waiver of administrative personnel and services fee (Note 5) 198,476 1,911,451
- ----------------------------------------------------------------------- ------------ ------------
Net expenses 1,773,509
- --------------------------------------------------------------------------------------------------- -------------
Net investment income $ 16,203,545
- --------------------------------------------------------------------------------------------------- -------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1993 1992
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net investment income $ 16,203,545 $ 16,955,054
- --------------------------------------------------------------------------- ------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ---------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ---------------------------------------------------------------------------
Class B Investment Shares (6,814,308) (6,785,033)
- ---------------------------------------------------------------------------
Trust Shares (9,389,237) (10,170,021)
- --------------------------------------------------------------------------- ------------------ ------------------
Change in net assets from distributions to shareholders (16,203,545) (16,955,054)
- --------------------------------------------------------------------------- ------------------ ------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- ---------------------------------------------------------------------------
Proceeds from sale of shares 2,533,728,363 2,429,665,688
- ---------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 3,678,413 4,379,167
- ---------------------------------------------------------------------------
Cost of shares redeemed (2,404,845,463) (2,303,680,904)
- --------------------------------------------------------------------------- ------------------ ------------------
Change in net assets from Fund share transactions 132,561,313 130,363,951
- --------------------------------------------------------------------------- ------------------ ------------------
Change in net assets 132,561,313 130,363,951
- ---------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------
Beginning of period 495,021,983 364,658,032
- --------------------------------------------------------------------------- ------------------ ------------------
End of period $ 627,583,296 $ 495,021,983
- --------------------------------------------------------------------------- ------------------ ------------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR
SHARES VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
COMMERCIAL PAPER--1.7%
- --------------------------------------------------------------------------------------------------
BANKING--1.7%
----------------------------------------------------------------------------------
$ 15,000,000 Nordbanken North America, Inc., 3.26%, 1/20/94
(identified cost $14,974,192) $ 14,971,785
---------------------------------------------------------------------------------- ---------------
COMMON STOCKS--63.0%
- --------------------------------------------------------------------------------------------------
AUTO PARTS/EQUIPMENT--0.9%
----------------------------------------------------------------------------------
150,000 Eaton Corp. 7,575,000
---------------------------------------------------------------------------------- ---------------
BANKING & FINANCE--4.4%
----------------------------------------------------------------------------------
150,000 A. G. Edwards, Inc. 4,312,500
----------------------------------------------------------------------------------
120,000 BankAmerica Corp. 5,565,000
----------------------------------------------------------------------------------
267,000 Boatmens Bancshares, Inc. 7,976,625
----------------------------------------------------------------------------------
140,000 Corestates Financial Corp. 3,657,500
----------------------------------------------------------------------------------
200,000 NBD Bancorp, Inc. 5,900,000
----------------------------------------------------------------------------------
150,000 NationsBank Corp. 7,350,000
----------------------------------------------------------------------------------
75,000 Suntrust Banks 3,375,000
---------------------------------------------------------------------------------- ---------------
Total 38,136,625
---------------------------------------------------------------------------------- ---------------
BASIC INDUSTRY--2.7%
----------------------------------------------------------------------------------
350,000 Hanson PLC 7,000,000
----------------------------------------------------------------------------------
115,000 International Paper Co. 7,791,250
----------------------------------------------------------------------------------
180,000 Phelps Dodge Corp. 8,775,000
---------------------------------------------------------------------------------- ---------------
Total 23,566,250
---------------------------------------------------------------------------------- ---------------
BUILDING MATERIALS--1.6%
----------------------------------------------------------------------------------
175,000 Sherwin Williams Co. 6,256,250
----------------------------------------------------------------------------------
200,000 Pulte Corp. 7,250,000
---------------------------------------------------------------------------------- ---------------
Total 13,506,250
---------------------------------------------------------------------------------- ---------------
CAPITAL GOODS--2.5%
----------------------------------------------------------------------------------
150,000 Boeing Co. 6,487,500
----------------------------------------------------------------------------------
60,000 Minnesota Mining and Manufacturing Co. 6,525,000
----------------------------------------------------------------------------------
125,000 Raytheon Co. 8,250,000
---------------------------------------------------------------------------------- ---------------
Total 21,262,500
---------------------------------------------------------------------------------- ---------------
CHEMICALS--4.8%
----------------------------------------------------------------------------------
180,000 Air Products & Chemicals, Inc. 7,965,000
----------------------------------------------------------------------------------
105,000 Dow Chemical Co. 5,958,750
----------------------------------------------------------------------------------
140,000 duPont (E.I.) de Nemours & Co. 6,755,000
----------------------------------------------------------------------------------
</TABLE>
FIRST UNION BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
CHEMICALS--CONTINUED
----------------------------------------------------------------------------------
40,000 **FMC Corp. 1,885,000
----------------------------------------------------------------------------------
120,000 Monsanto Co. 8,805,000
----------------------------------------------------------------------------------
162,000 Rohm & Haas Co. $ 9,639,000
---------------------------------------------------------------------------------- ---------------
Total 41,007,750
---------------------------------------------------------------------------------- ---------------
CONGLOMERATE/DIVERSIFIED--0.5%
----------------------------------------------------------------------------------
75,000 Textron, Inc. 4,368,750
---------------------------------------------------------------------------------- ---------------
CONSUMER DURABLES--0.8%
----------------------------------------------------------------------------------
125,000 General Motors Corp. 6,859,375
---------------------------------------------------------------------------------- ---------------
CONSUMER PRODUCTS--1.8%
----------------------------------------------------------------------------------
175,000 Nestle SA 7,559,650
----------------------------------------------------------------------------------
65,000 Nike, Inc. 3,014,375
----------------------------------------------------------------------------------
90,000 Philip Morris Cos., Inc. 5,017,500
---------------------------------------------------------------------------------- ---------------
Total 15,591,525
---------------------------------------------------------------------------------- ---------------
DATA PROCESSING--2.0%
----------------------------------------------------------------------------------
125,000 COMPAQ Computer Corp. 9,250,000
----------------------------------------------------------------------------------
200,000 SunGuard Data Systems 8,250,000
---------------------------------------------------------------------------------- ---------------
Total 17,500,000
---------------------------------------------------------------------------------- ---------------
DRUGS--1.0%
----------------------------------------------------------------------------------
130,000 Schering--Plough Corp. 8,905,000
---------------------------------------------------------------------------------- ---------------
ELECTRONICS--1.3%
----------------------------------------------------------------------------------
205,000 Harris Corp. 9,327,500
----------------------------------------------------------------------------------
90,700 EG&G Inc. 1,666,613
---------------------------------------------------------------------------------- ---------------
Total 10,994,113
---------------------------------------------------------------------------------- ---------------
ENERGY--4.9%
----------------------------------------------------------------------------------
125,000 Exxon Corp. 7,875,000
----------------------------------------------------------------------------------
125,000 Mobil Corp. 9,875,000
----------------------------------------------------------------------------------
90,000 Royal Dutch Petroleum Co. 9,393,750
----------------------------------------------------------------------------------
140,000 Texaco Inc. 9,047,500
----------------------------------------------------------------------------------
200,000 Tosco Corp. 5,825,000
---------------------------------------------------------------------------------- ---------------
Total 42,016,250
---------------------------------------------------------------------------------- ---------------
FINANCE--1.0%
----------------------------------------------------------------------------------
220,000 Beneficial Corp. 8,415,000
---------------------------------------------------------------------------------- ---------------
FINANCIAL SERVICES--0.8%
----------------------------------------------------------------------------------
85,000 Federal National Mortgage Association 6,672,500
---------------------------------------------------------------------------------- ---------------
FOOD & BEVERAGE--2.0%
----------------------------------------------------------------------------------
100,000 CPC International, Inc. 4,762,500
----------------------------------------------------------------------------------
100,000 H.J. Heinz Co. 3,587,500
----------------------------------------------------------------------------------
</TABLE>
FIRST UNION BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
FOOD & BEVERAGE--CONTINUED
----------------------------------------------------------------------------------
150,000 McDonalds Corp. 8,550,000
---------------------------------------------------------------------------------- ---------------
Total 16,900,000
---------------------------------------------------------------------------------- ---------------
HEALTHCARE & COSMETICS--1.7%
----------------------------------------------------------------------------------
95,000 Bausch & Lomb, Inc. $ 4,868,750
----------------------------------------------------------------------------------
200,000 Foundation Health Corp. 6,200,000
----------------------------------------------------------------------------------
55,000 Warner Lambert Co. 3,712,500
---------------------------------------------------------------------------------- ---------------
Total 14,781,250
---------------------------------------------------------------------------------- ---------------
INFORMATION PROCESSING--1.4%
----------------------------------------------------------------------------------
75,000 **Intel Corp. 4,650,000
----------------------------------------------------------------------------------
250,000 **Sun Microsystems, Inc. 7,281,250
---------------------------------------------------------------------------------- ---------------
Total 11,931,250
---------------------------------------------------------------------------------- ---------------
INSURANCE--2.8%
----------------------------------------------------------------------------------
245,000 American General Corp. 7,013,125
----------------------------------------------------------------------------------
87,600 AON Corp. 4,237,650
----------------------------------------------------------------------------------
220,000 Capital Holding Corp. 8,167,500
----------------------------------------------------------------------------------
60,000 Chubb Corp. 4,672,500
---------------------------------------------------------------------------------- ---------------
Total 24,090,775
---------------------------------------------------------------------------------- ---------------
LEISURE/AMUSEMENT--0.5%
----------------------------------------------------------------------------------
100,000 Carnival Cruise Lines, Inc. 4,737,500
---------------------------------------------------------------------------------- ---------------
MACHINERY-DIVERSIFIED--0.7%
----------------------------------------------------------------------------------
150,000 Ingersoll Rand Co. 5,737,500
---------------------------------------------------------------------------------- ---------------
MANUFACTURING/DISTRIBUTING--0.9%
----------------------------------------------------------------------------------
75,000 Avnet, Inc. 2,925,000
----------------------------------------------------------------------------------
100,000 Goodyear Tire and Rubber 4,575,000
---------------------------------------------------------------------------------- ---------------
Total 7,500,000
---------------------------------------------------------------------------------- ---------------
MISCELLANEOUS--0.9%
----------------------------------------------------------------------------------
140,000 Eastman Kodak Co. 7,840,000
---------------------------------------------------------------------------------- ---------------
MULTI-INDUSTRY--5.6%
----------------------------------------------------------------------------------
150,000 Emerson Electric Co. 9,037,500
----------------------------------------------------------------------------------
90,000 General Electric Co. 9,438,750
----------------------------------------------------------------------------------
105,000 ITT Corp. 9,581,250
----------------------------------------------------------------------------------
60,000 Loews Corp. 5,580,000
----------------------------------------------------------------------------------
110,000 Temple Inland, Inc. 5,541,250
----------------------------------------------------------------------------------
145,000 United Technologies Corp. 8,990,000
---------------------------------------------------------------------------------- ---------------
Total 48,168,750
---------------------------------------------------------------------------------- ---------------
OFFICE EQUIPMENT & SUPPLIES--1.9%
----------------------------------------------------------------------------------
180,000 Pitney Bowes, Inc. 7,447,500
----------------------------------------------------------------------------------
</TABLE>
FIRST UNION BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES--CONTINUED
----------------------------------------------------------------------------------
100,000 Xerox Corp. 8,937,500
---------------------------------------------------------------------------------- ---------------
Total 16,385,000
---------------------------------------------------------------------------------- ---------------
OIL & GAS--0.9%
----------------------------------------------------------------------------------
75,000 Atlantic Richfield Co. 7,893,750
---------------------------------------------------------------------------------- ---------------
RETAIL & APPAREL--1.5%
----------------------------------------------------------------------------------
100,000 Dayton Hudson Corp. $ 6,675,000
----------------------------------------------------------------------------------
150,000 May Department Stores Co. 5,906,250
---------------------------------------------------------------------------------- ---------------
Total 12,581,250
---------------------------------------------------------------------------------- ---------------
STEEL-IRON--0.6%
----------------------------------------------------------------------------------
195,000 Birmingham Steel Corp. 5,411,250
---------------------------------------------------------------------------------- ---------------
TELE-COMMUNICATIONS--0.5%
----------------------------------------------------------------------------------
85,170 American Telephone & Telegraph Co. 4,471,425
---------------------------------------------------------------------------------- ---------------
TELEPHONE--2.3%
----------------------------------------------------------------------------------
110,000 Bell Atlantic Corp. 6,490,000
----------------------------------------------------------------------------------
160,000 Southwestern Bell Corp. 6,640,000
----------------------------------------------------------------------------------
150,000 U.S. West, Inc. 6,881,250
---------------------------------------------------------------------------------- ---------------
Total 20,011,250
---------------------------------------------------------------------------------- ---------------
TOBACCO--0.8%
----------------------------------------------------------------------------------
200,000 American Brands, Inc. 6,650,000
---------------------------------------------------------------------------------- ---------------
TRANSPORTATION--4.2%
----------------------------------------------------------------------------------
168,750 British Airways PLC 11,242,969
----------------------------------------------------------------------------------
150,000 Conrail, Inc. 10,031,250
----------------------------------------------------------------------------------
100,000 Norfolk Southern Corp. 7,050,000
----------------------------------------------------------------------------------
125,000 Union Pacific Corp. 7,828,125
---------------------------------------------------------------------------------- ---------------
Total 36,152,344
---------------------------------------------------------------------------------- ---------------
UTILITIES--2.8%
----------------------------------------------------------------------------------
160,000 Central & South West Corp. 4,840,000
----------------------------------------------------------------------------------
120,000 Duke Power Co. 5,085,000
----------------------------------------------------------------------------------
215,000 GTE Corp. 7,525,000
----------------------------------------------------------------------------------
16,800 NICOR, Inc. 470,400
----------------------------------------------------------------------------------
170,000 Union Electric Co. 6,672,500
---------------------------------------------------------------------------------- ---------------
Total 24,592,900
---------------------------------------------------------------------------------- ---------------
TOTAL COMMON STOCKS (IDENTIFIED COST $464,836,439) 542,213,082
---------------------------------------------------------------------------------- ---------------
CORPORATE BONDS--22.1%
- --------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--1.9%
----------------------------------------------------------------------------------
$ 3,414,584 Fleet Financial Home Equity Trust, 6.70%, 1/16/2006 3,456,761
----------------------------------------------------------------------------------
2,500,000 Dillon Read Structured Finance, 6.66%, 8/15/2010 2,437,315
----------------------------------------------------------------------------------
</TABLE>
FIRST UNION BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
CORPORATE BONDS--CONTINUED
- --------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--CONTINUED
----------------------------------------------------------------------------------
10,000,000 Resolution Trust Corporation, 7.50%, 9/25/2022 10,157,270
---------------------------------------------------------------------------------- ---------------
Total 16,051,346
---------------------------------------------------------------------------------- ---------------
BANKING--3.1%
----------------------------------------------------------------------------------
3,000,000 Boatmens Bancshares, Inc., 6.75%, 3/15/2003 3,054,624
----------------------------------------------------------------------------------
$ 10,000,000 Korea Development Bank, 6.25%-8.60%, 5/1/2000-3/25/2002 $ 10,658,210
----------------------------------------------------------------------------------
5,000,000 Wachovia Corp., 7.00%, 12/15/99 5,304,115
----------------------------------------------------------------------------------
7,000,000 Wells Fargo, 5.65%, 8/21/95 7,104,783
---------------------------------------------------------------------------------- ---------------
Total 26,121,732
---------------------------------------------------------------------------------- ---------------
CHEMICALS--0.7%
----------------------------------------------------------------------------------
5,000,000 Dow Chemical Co., 8.625%, 4/1/2006 5,908,745
---------------------------------------------------------------------------------- ---------------
CONSUMER PRODUCTS--1.5%
----------------------------------------------------------------------------------
5,000,000 General Mills, Inc., 9.00%, 12/20/2002 5,882,895
----------------------------------------------------------------------------------
6,405,000 Philip Morris Cos., Inc., 8.65%-8.75%, 12/1/96-5/15/98 7,091,256
---------------------------------------------------------------------------------- ---------------
Total 12,974,151
---------------------------------------------------------------------------------- ---------------
ELECTRICAL EQUIPMENT--0.6%
----------------------------------------------------------------------------------
5,000,000 Xerox Corp., 9.125%, 6/15/94 5,112,110
---------------------------------------------------------------------------------- ---------------
ENERGY--1.4%
----------------------------------------------------------------------------------
4,000,000 Atlantic Richfield Co., 9.00%, 4/1/2021 4,856,760
----------------------------------------------------------------------------------
2,000,000 BP North America, Inc., 9.875%, 3/15/2004 2,524,988
----------------------------------------------------------------------------------
4,400,000 Texaco Capital Corp., 7.90%, 2/13/97 4,764,580
---------------------------------------------------------------------------------- ---------------
Total 12,146,328
---------------------------------------------------------------------------------- ---------------
FINANCE & INSURANCE--6.8%
----------------------------------------------------------------------------------
833,181 CIT Group Securitization Corp., 4.70%, 6/15/2018 831,026
----------------------------------------------------------------------------------
5,500,000 Dean Witter Discover & Co., 6.75%, 10/15/2013 5,214,165
----------------------------------------------------------------------------------
5,500,000 General Electric Capital Corp., 8.75%, 3/14/2003 6,449,168
----------------------------------------------------------------------------------
2,750,000 International Bank for Reconstruction & Development Co., 7.95%,
5/15/2016 3,117,373
----------------------------------------------------------------------------------
5,000,000 International Lease Finance Co., 6.00%, 1/15/95 5,092,060
----------------------------------------------------------------------------------
10,000,000 Merrill Lynch & Co., 7.00%-7.25%, 5/15/97-4/27/2008 10,413,555
----------------------------------------------------------------------------------
4,250,000 Norwest Financial, Inc., 7.10%, 11/15/96 4,502,675
----------------------------------------------------------------------------------
17,000,000 Salomon, Inc., 7.125%-8.10%, 3/15/95-8/1/99 17,667,352
----------------------------------------------------------------------------------
5,000,000 Transamerica Financial Corp., 3.625%, 7/15/94 5,003,095
---------------------------------------------------------------------------------- ---------------
Total 58,290,469
---------------------------------------------------------------------------------- ---------------
FOOD & BEVERAGE--1.2%
----------------------------------------------------------------------------------
5,500,000 Coca Cola Enterprises, 8.35%, 6/20/95 5,803,567
----------------------------------------------------------------------------------
4,250,000 Pepsico, Inc., 7.625%, 11/1/98 4,658,978
---------------------------------------------------------------------------------- ---------------
Total 10,462,545
---------------------------------------------------------------------------------- ---------------
</TABLE>
FIRST UNION BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
CORPORATE BONDS--CONTINUED
- --------------------------------------------------------------------------------------------------
GOVERNMENT AGENCIES--0.9%
----------------------------------------------------------------------------------
7,000,000 United States Government Department, 8.625%, 12/15/2013 7,957,082
---------------------------------------------------------------------------------- ---------------
HARDWARE & TOOLS--0.5%
----------------------------------------------------------------------------------
4,300,000 Stanley Works, 7.375%, 12/15/2002 4,644,383
---------------------------------------------------------------------------------- ---------------
MEDICAL EQUIPMENT--0.6%
----------------------------------------------------------------------------------
$ 5,000,000 Baxter International, Inc., 7.25%, 2/15/2008 $ 5,228,955
---------------------------------------------------------------------------------- ---------------
POLLUTION CONTROL--0.2%
----------------------------------------------------------------------------------
1,400,000 Waste Management, 8.75%, 5/1/2018 1,653,960
---------------------------------------------------------------------------------- ---------------
SOVEREIGN GOVERNMENT--0.6%
----------------------------------------------------------------------------------
5,000,000 Ontario Province CDA, 7.75%, 6/4/2002 5,450,205
---------------------------------------------------------------------------------- ---------------
UTILITIES--2.1%
----------------------------------------------------------------------------------
7,000,000 Indianapolis Power & Light, 8.00%, 10/15/2006 7,909,489
----------------------------------------------------------------------------------
1,000,000 Progress Capital Holdings, 9.80%, 1/14/94 1,001,858
----------------------------------------------------------------------------------
3,600,000 Union Electric Co., 8.00%, 12/15/2022 3,901,691
----------------------------------------------------------------------------------
2,000,000 Virginia Electric & Power Co., 9.375%, 11/1/94 2,083,790
----------------------------------------------------------------------------------
3,125,000 Wisconsin Gas Co., 7.50%, 11/15/98 3,376,313
---------------------------------------------------------------------------------- ---------------
Total 18,273,141
---------------------------------------------------------------------------------- ---------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $180,536,898) 190,275,152
---------------------------------------------------------------------------------- ---------------
GOVERNMENT BONDS--11.8%
- --------------------------------------------------------------------------------------------------
4,501,995 Government National Mortgage Association, 9.50%, 2/15/2021 4,873,410
----------------------------------------------------------------------------------
5,716,226 Government National Mortgage Association, 8.50%, 5/15/2021 6,069,917
----------------------------------------------------------------------------------
3,930,190 Government National Mortgage Association, 8.50%, 7/15/2021 4,173,371
----------------------------------------------------------------------------------
4,911,752 Government National Mortgage Association, 9.00%, 9/15/2021 5,261,714
----------------------------------------------------------------------------------
8,282,989 Government National Mortgage Association, 9.00%, 10/15/2021 8,873,151
----------------------------------------------------------------------------------
6,570,245 Government National Mortgage Association, 8.50%, 6/15/2022 6,976,778
----------------------------------------------------------------------------------
1,900,000 United States Treasury Bond, 7.875%, 2/15/2000 1,983,104
----------------------------------------------------------------------------------
20,000,000 United States Treasury Bond, 7.625%, 2/15/2007 22,068,580
----------------------------------------------------------------------------------
15,000,000 United States Treasury Bond, 8.875%, 8/15/2017 19,134,284
----------------------------------------------------------------------------------
5,000,000 United States Treasury Bond, 8.125%, 5/15/2021 5,987,445
----------------------------------------------------------------------------------
10,000,000 United States Treasury Note, 8.125%, 2/15/98 11,153,090
----------------------------------------------------------------------------------
3,500,000 United States Treasury Note, 8.875%, 11/15/98 4,052,332
----------------------------------------------------------------------------------
500,000 United States Treasury Note, 8.50%, 11/15/2000 584,530
---------------------------------------------------------------------------------- ---------------
TOTAL GOVERNMENT BONDS (IDENTIFIED COST $98,699,944) 101,191,706
---------------------------------------------------------------------------------- ---------------
*REPURCHASE AGREEMENT--0.7%
- --------------------------------------------------------------------------------------------------
5,976,000 Donaldson, Lufkin & Jenrette Securities Corp., 3.20%, dated 12/31/93, due 1/3/94
(at amortized cost) (Note 2B) 5,976,000
---------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS (IDENTIFIED COST $765,023,473) $ 854,627,725\
---------------------------------------------------------------------------------- ---------------
</TABLE>
* Repurchase agreement is fully collateralized by U.S. government and/or agency
obligations based on market prices at the date of the portfolio.
** Non-income producing securities.
\ The cost for federal tax purposes amounts to $765,023,473. The net unrealized
appreciation of investments on a federal tax basis amounts to $89,604,252,
which is comprised of $96,067,168 appreciation and $6,462,916 depreciation at
December 31, 1993.
Note: The categories of investments are shown as a percentage of net assets
($860,653,630) at December 31, 1993.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION BALANCED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified cost $765,023,473; tax cost $765,023,473) $ 854,627,725
- --------------------------------------------------------------------------------------------------
Cash 548
- --------------------------------------------------------------------------------------------------
Dividends and interest receivable 5,513,565
- --------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 2,629,639
- --------------------------------------------------------------------------------------------------
Deferred expenses (Note 2G) 57,898
- -------------------------------------------------------------------------------------------------- ---------------
Total assets 862,829,375
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed $ 1,976,319
- -----------------------------------------------------------------------------------
Distribution payable 972
- -----------------------------------------------------------------------------------
Accrued expenses 198,454
- ----------------------------------------------------------------------------------- -------------
Total liabilities 2,175,745
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS for 71,284,545 shares of beneficial interest outstanding $ 860,653,630
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 770,709,001
- --------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 89,604,252
- --------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (456)
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 340,833
- -------------------------------------------------------------------------------------------------- ---------------
Total $ 860,653,630
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares (net assets of $35,032,277 / 2,901,446 shares of beneficial interest
outstanding) $12.07
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares (net assets of $65,474,779 / 5,420,479 shares of beneficial interest
outstanding) $12.08
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares (net assets of $760,146,574 / 62,962,620 shares of beneficial interest outstanding)
$12.07
- -------------------------------------------------------------------------------------------------- ---------------
OFFERING PRICE PER SHARE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares ( 100/96 of $12.07) $12.57*
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares $12.08
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares $12.07
- -------------------------------------------------------------------------------------------------- ---------------
REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares $12.07
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares ( 96/100 of $12.08) $11.60**
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares $12.07
- -------------------------------------------------------------------------------------------------- ---------------
</TABLE>
* See "What Shares Cost" in the prospectus.
** See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION BALANCED PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 2C):
- ---------------------------------------------------------------------------------------------------
Dividends $ 11,606,013
- ---------------------------------------------------------------------------------------------------
Interest 19,369,515
- --------------------------------------------------------------------------------------------------- --------------
Total income 30,975,528
- ---------------------------------------------------------------------------------------------------
Expenses--
- ---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 3,425,786
- ------------------------------------------------------------------------------------
Trustees' fees 9,440
- ------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 597,752
- ------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 231,607
- ------------------------------------------------------------------------------------
Distribution services fee (Note 5) 295,600
- ------------------------------------------------------------------------------------
Fund share registration costs 151,955
- ------------------------------------------------------------------------------------
Legal fees 21,171
- ------------------------------------------------------------------------------------
Auditing fees 14,990
- ------------------------------------------------------------------------------------
Printing and postage 42,817
- ------------------------------------------------------------------------------------
Insurance premiums 17,554
- ------------------------------------------------------------------------------------
Miscellaneous 9,120
- ------------------------------------------------------------------------------------ -------------
Total expenses 4,817,792
- --------------------------------------------------------------------------------------------------- --------------
Net investment income 26,157,736
- --------------------------------------------------------------------------------------------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) 6,403,838
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 36,471,303
- --------------------------------------------------------------------------------------------------- --------------
Net realized and unrealized gain on investments 42,875,141
- --------------------------------------------------------------------------------------------------- --------------
Change in net assets resulting from operations $ 69,032,877
- --------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1993 1992
---------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------
Net investment income $ 26,157,736 $ 19,481,117
- ----------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($6,403,838 net gain and
$1,730,892 net gain, respectively, as computed for federal tax purposes) 6,403,838 1,730,892
- ----------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments 36,471,303 17,722,011
- ---------------------------------------------------------------------------- ---------------- ---------------
Change in net assets from operations 69,032,877 38,934,020
- ---------------------------------------------------------------------------- ---------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ----------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ----------------------------------------------------------------------------
Class B Investment Shares (954,537) (352,842)
- ----------------------------------------------------------------------------
Class C Investment Shares (945,268) --
- ----------------------------------------------------------------------------
Trust Shares (24,091,006) (18,893,728)
- ----------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions:
- ----------------------------------------------------------------------------
Class B Investment Shares (260,072) (54,883)
- ----------------------------------------------------------------------------
Class C Investment Shares (477,731) --
- ----------------------------------------------------------------------------
Trust Shares (5,667,426) (1,674,968)
- ----------------------------------------------------------------------------
Distributions in excess of net investment income:
- ----------------------------------------------------------------------------
Class B Investment Shares (13,448) --
- ----------------------------------------------------------------------------
Class C Investment Shares (106,237) --
- ----------------------------------------------------------------------------
Trust Shares -- --
- ---------------------------------------------------------------------------- ---------------- ---------------
Change in net assets from distributions to shareholders (32,515,725) (20,976,421)
- ---------------------------------------------------------------------------- ---------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- ----------------------------------------------------------------------------
Proceeds from sale of shares 363,660,154 184,364,148
- ----------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 31,675,975 20,926,924
- ----------------------------------------------------------------------------
Cost of shares redeemed (108,839,064) (99,153,000)
- ---------------------------------------------------------------------------- ---------------- ---------------
Change in net assets from Fund share transactions 286,497,065 106,138,072
- ---------------------------------------------------------------------------- ---------------- ---------------
Change in net assets 323,014,217 124,095,671
- ----------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------
Beginning of period 537,639,413 413,543,742
- ---------------------------------------------------------------------------- ---------------- ---------------
End of period (including undistributed net investment income of $340,833 and
$293,594, respectively) $ 860,653,630 $ 537,639,413
- ---------------------------------------------------------------------------- ---------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
CORPORATE BONDS--65.2%
- --------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--6.8%
----------------------------------------------------------------------------------
$ 3,749,314 CIT Group Holdings, 4.70%, 6/15/2018 $ 3,739,618
----------------------------------------------------------------------------------
6,000,000 Discover Card Trust, 9.00%, 4/1/98-9/17/2001 6,692,914
----------------------------------------------------------------------------------
10,766,027 FCC Grantor Trust, 9.00%, 7/15/97 11,277,725
----------------------------------------------------------------------------------
1,852,340 General Motors Acceptance Corp. Grantor Trust, 5.05%, 1/15/97 1,859,895
----------------------------------------------------------------------------------
2,306,903 JCP Master Credit Card Trust, 8.70%, 9/15/95 2,319,266
----------------------------------------------------------------------------------
633,508 Nissan Auto Receivables, 6.80%, 9/16/96 649,991
----------------------------------------------------------------------------------
943,779 Securitiy Pacific Grantor Trust, 6.70%-10.45%, 1/15/97-5/8/2001 1,070,641
---------------------------------------------------------------------------------- ---------------
Total 27,610,050
---------------------------------------------------------------------------------- ---------------
AUTOMOTIVE--0.6%
----------------------------------------------------------------------------------
2,500,000 Nissan Capital Corp., 7.75%, 8/15/94 2,554,410
---------------------------------------------------------------------------------- ---------------
BANKING--8.0%
----------------------------------------------------------------------------------
2,000,000 Citicorp, 7.57%, 2/24/95 2,077,798
----------------------------------------------------------------------------------
13,000,000 First Chicago Corp., 7.625%-9.20%, 6/15/99-1/15/2003 14,448,669
----------------------------------------------------------------------------------
1,500,000 J.P. Morgan & Co., 9.625%, 12/15/98 1,643,712
----------------------------------------------------------------------------------
9,000,000 Korean Development Bank, 6.25%-7.90%, 5/1/2000-2/1/2002 9,396,312
----------------------------------------------------------------------------------
5,000,000 NationsBank Corp., 6.50%, 8/15/2003 5,005,770
---------------------------------------------------------------------------------- ---------------
Total 32,572,261
---------------------------------------------------------------------------------- ---------------
BASIC INDUSTRY--1.3%
----------------------------------------------------------------------------------
5,000,000 Hanson PLC, 7.375%, 1/15/2003 5,291,510
---------------------------------------------------------------------------------- ---------------
FINANCE--13.7%
----------------------------------------------------------------------------------
3,500,000 Dean Witter Discover & Co., 6.875%, 3/1/2003 3,584,679
----------------------------------------------------------------------------------
3,000,000 Discover Credit Corp., 7.76%, 5/13/97 3,204,177
----------------------------------------------------------------------------------
8,000,000 Ford Motor Credit Company, 7.50%-9.85%, 5/3/96-1/15/2003 8,752,694
----------------------------------------------------------------------------------
11,710,000 General Electric Capital Corp., 8.52%-9.50%, 2/1/99-12/15/2007 12,130,652
----------------------------------------------------------------------------------
9,000,000 General Motors Acceptance Corp., 8.30%-8.70%, 1/28/94-7/18/94 9,121,661
----------------------------------------------------------------------------------
500,000 ITT Financial Corp., 9.95%, 4/25/94 508,686
----------------------------------------------------------------------------------
1,000,000 Morgan Stanley Group, Inc., 9.40%, 3/5/98 1,139,099
----------------------------------------------------------------------------------
10,800,000 Salomon Brothers, Inc., 8.57%-9.01%, 3/10/97-5/1/97 11,892,418
----------------------------------------------------------------------------------
5,000,000 Shearson Lehman Brothers Holdings, 8.875%, 3/1/2002 5,702,855
---------------------------------------------------------------------------------- ---------------
Total 56,036,921
---------------------------------------------------------------------------------- ---------------
INSURANCE--8.4%
----------------------------------------------------------------------------------
5,000,000 American General Finance Corp., 7.125%, 12/1/99 5,318,475
----------------------------------------------------------------------------------
2,000,000 Associated P&C Holdings, Inc., 6.75%, 7/15/2003 2,007,500
----------------------------------------------------------------------------------
10,000,000 Capital Holding Corp., 8.97%, 10/21/96 11,044,390
----------------------------------------------------------------------------------
6,000,000 First Colony Corp., 6.625%, 8/1/2003 6,060,114
----------------------------------------------------------------------------------
</TABLE>
FIRST UNION FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
CORPORATE BONDS--CONTINUED
- --------------------------------------------------------------------------------------------------
INSURANCE--CONTINUED
----------------------------------------------------------------------------------
$ 10,000,000 Metropolitan Life Insurance Co., 6.30%, 11/1/2003 $ 9,850,000
---------------------------------------------------------------------------------- ---------------
Total 34,280,479
---------------------------------------------------------------------------------- ---------------
INTERNATIONAL INDUSTRIAL BUILDING PRODUCTS--1.4%
----------------------------------------------------------------------------------
5,000,000 Boral Industries, 7.90%, 11/19/99 5,414,720
---------------------------------------------------------------------------------- ---------------
MORTGAGE-BACKED SECURITIES--20.9%
----------------------------------------------------------------------------------
11,922,332 CMC Securities Corp., 7.25%-10.00%, 2/25/2015-7/25/2023 12,412,307
----------------------------------------------------------------------------------
9,500,000 CWMBS, Inc., 7.00%, 10/25/2023 9,833,184
----------------------------------------------------------------------------------
6,969,703 Fleet Financial Home Equity Trust, 6.70%, 1/16/2006-10/16/2006 7,099,420
----------------------------------------------------------------------------------
5,797,624 GCC Second Mortgage Trust, 10.00%, 7/15/2005 6,312,447
----------------------------------------------------------------------------------
4,117,526 Green Tree Financial Corp., 4.90%, 4/15/2018 4,118,057
----------------------------------------------------------------------------------
7,359,508 Merrill Lynch Mortgage Investments, 6.85%, 4/15/2012 7,520,674
----------------------------------------------------------------------------------
12,790,760 Prudential Home Mortgage Securities Co., 6.30%-7.50%,
5/25/99-1/25/2023 13,035,684
----------------------------------------------------------------------------------
2,093,797 Residential Funding Mortgage Securities, 8.00%, 9/25/2017 2,163,875
----------------------------------------------------------------------------------
11,830,245 Resolution Trust Corp., 5.90%-8.35%, 7/25/2023-6/25/2029 12,145,373
----------------------------------------------------------------------------------
9,450,133 Saxon Mortgage Securities Corp., 7.375%, 9/25/2023 9,674,460
----------------------------------------------------------------------------------
1,088,351 Shawmut National Trust, 9.15%, 8/15/2005 1,139,350
---------------------------------------------------------------------------------- ---------------
Total 85,454,831
---------------------------------------------------------------------------------- ---------------
PETROLEUM PRODUCTS/CHEMICAL--0.7%
----------------------------------------------------------------------------------
3,000,000 Witco Corp., 6.60%, 4/1/2003 3,045,387
---------------------------------------------------------------------------------- ---------------
PUBLISHING--0.3%
----------------------------------------------------------------------------------
1,000,000 Times Mirror, 8.55%, 6/1/2000 1,130,945
---------------------------------------------------------------------------------- ---------------
SOVEREIGN GOVERNMENT--0.2%
----------------------------------------------------------------------------------
900,000 New Brunswick Province CDA, 7.125%, 10/1/2002 949,787
---------------------------------------------------------------------------------- ---------------
TELECOMMUNICATIONS--2.9%
----------------------------------------------------------------------------------
11,660,000 Illinois Bell Telephone Co., 8.00%, 12/10/2004 11,881,925
---------------------------------------------------------------------------------- ---------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $259,557,957) 266,223,226
---------------------------------------------------------------------------------- ---------------
U.S. GOVERNMENT OBLIGATIONS--8.7%
- --------------------------------------------------------------------------------------------------
1,558,053 Collateralized Mortgage Obligation Trust, 8.20%-9.00%,
5/20/2004-7/1/2017 1,619,233
----------------------------------------------------------------------------------
13,122,670 Federal Home Loan Mortgage Corporation, 7.40%-10.50%,
10/15/2005-11/15/2019 13,773,011
----------------------------------------------------------------------------------
8,599,664 Federal National Mortgage Association, 7.00%-14.00%,
6/1/2011-7/25/2020 8,784,720
----------------------------------------------------------------------------------
11,280,000 U.S. Department of Veterans Affairs, 6.75%, 11/15/2009 11,478,302
---------------------------------------------------------------------------------- ---------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (IDENTIFIED COST $34,714,028) 35,655,266
---------------------------------------------------------------------------------- ---------------
U.S. TREASURY OBLIGATIONS--22.4%
- --------------------------------------------------------------------------------------------------
6,500,000 U.S. Treasury Bonds, 8.00%, 8/15/2001 7,064,649
----------------------------------------------------------------------------------
</TABLE>
FIRST UNION FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
U.S. TREASURY OBLIGATIONS--CONTINUED
- --------------------------------------------------------------------------------------------------
$ 73,400,000 U.S. Treasury Notes, 7.875%-8.875%, 1/15/98-8/15/2000 $ 84,238,636
---------------------------------------------------------------------------------- ---------------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $92,548,141) 91,303,285
---------------------------------------------------------------------------------- ---------------
*REPURCHASE AGREEMENT--2.1%
- --------------------------------------------------------------------------------------------------
8,759,000 Donaldson, Lufkin & Jenrette Securities Corp., 3.20%, dated 12/31/93, due 1/3/94
(at amortized cost) (Note 2B) 8,759,000
---------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS (IDENTIFIED COST $395,579,126) $ 401,940,777\
---------------------------------------------------------------------------------- ---------------
</TABLE>
* Repurchase agreement is fully collateralized by U.S. Treasury obligations,
based on market prices at the date of the portfolio.
\ The cost for federal tax purposes amounts to $395,579,126. The net unrealized
appreciation of investments on a federal tax basis amounts to $6,361,651 which
is comprised of $8,473,339 appreciation and $2,111,688 depreciation at
December 31, 1993.
Note: The categories of investments are shown as a percentage of net assets
($408,186,188) at December 31, 1993.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified cost $395,579,126; tax cost $395,579,126) $ 401,940,777
- --------------------------------------------------------------------------------------------------
Cash 780
- --------------------------------------------------------------------------------------------------
Interest receivable 6,716,039
- --------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 612,623
- -------------------------------------------------------------------------------------------------- ---------------
Total assets 409,270,219
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed $ 1,010,830
- -----------------------------------------------------------------------------------
Accrued expenses 73,201
- ----------------------------------------------------------------------------------- -------------
Total liabilities 1,084,031
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS for 39,150,516 shares of beneficial interest outstanding $ 408,186,188
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 401,715,758
- --------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 6,361,651
- --------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain on investments 65,625
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 43,154
- -------------------------------------------------------------------------------------------------- ---------------
Total $ 408,186,188
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares (net assets of $22,865,159 / 2,193,753 shares of beneficial interest
outstanding) $10.42
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares (net assets of $8,875,956 / 849,941 shares of beneficial interest
outstanding) $10.44
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares (net assets of $376,445,073 / 36,106,822 shares of beneficial interest outstanding)
$10.43
- -------------------------------------------------------------------------------------------------- ---------------
OFFERING PRICE PER SHARE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares (100/96 of $10.42) $10.85*
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares $10.44
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares $10.43
- -------------------------------------------------------------------------------------------------- ---------------
REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares $10.42
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares (96/100 of $10.44) $10.02**
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares $10.43
- -------------------------------------------------------------------------------------------------- ---------------
</TABLE>
* See "What Shares Cost" in the prospectus.
** See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 26,770,183
- ---------------------------------------------------------------------------------------------------
Expenses--
- ---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 1,894,693
- ------------------------------------------------------------------------------------
Trustees' fees 4,735
- ------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 331,342
- ------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 165,456
- ------------------------------------------------------------------------------------
Distribution services fee (Note 5) 51,539
- ------------------------------------------------------------------------------------
Fund share registration costs 42,021
- ------------------------------------------------------------------------------------
Legal fees 12,976
- ------------------------------------------------------------------------------------
Auditing fees 12,564
- ------------------------------------------------------------------------------------
Printing and postage 40,556
- ------------------------------------------------------------------------------------
Insurance premiums 13,233
- ------------------------------------------------------------------------------------
Miscellaneous 11,087
- ------------------------------------------------------------------------------------ -------------
Total expenses 2,580,202
- --------------------------------------------------------------------------------------------------- --------------
Net investment income 24,189,981
- --------------------------------------------------------------------------------------------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Realized gain (loss) on investment transactions (identified cost basis)-- 7,077,185
- ---------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments (1,395,348)
- --------------------------------------------------------------------------------------------------- --------------
Net realized and unrealized gain on investments 5,681,837
- --------------------------------------------------------------------------------------------------- --------------
Change in net assets resulting from operations $ 29,871,818
- --------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1992
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------------
Net investment income $ 24,189,981 $ 20,469,235
- --------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($7,077,185 net gain and
$3,773,544 net gain, respectively, as computed for federal tax purposes) 7,077,185 3,773,544
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments (1,395,348) (4,245,028)
- -------------------------------------------------------------------------------- --------------- ---------------
Change in net assets from operations 29,871,818 19,997,751
- -------------------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- --------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- --------------------------------------------------------------------------------
Class B Investment Shares (1,355,584) (1,259,762)
- --------------------------------------------------------------------------------
Class C Investment Shares (211,451) --
- --------------------------------------------------------------------------------
Trust Shares (22,495,149) (19,134,503)
- --------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions:
- --------------------------------------------------------------------------------
Class B Investment Shares (398,665) (225,885)
- --------------------------------------------------------------------------------
Class C Investment Shares (149,979) --
- --------------------------------------------------------------------------------
Trust Shares (6,674,235) (3,379,315)
- -------------------------------------------------------------------------------- --------------- ---------------
Change in net assets from distributions to shareholders (31,285,063) (23,999,465)
- -------------------------------------------------------------------------------- --------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- --------------------------------------------------------------------------------
Proceeds from sale of shares 123,610,609 120,381,784
- --------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 29,893,794 23,616,250
- --------------------------------------------------------------------------------
Cost of shares redeemed (89,461,179) (68,384,480)
- -------------------------------------------------------------------------------- --------------- ---------------
Change in net assets from Fund share transactions 64,043,224 75,613,554
- -------------------------------------------------------------------------------- --------------- ---------------
Change in net assets 62,629,979 71,611,840
- --------------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------------
Beginning of period 345,556,209 273,944,369
- -------------------------------------------------------------------------------- --------------- ---------------
End of period (including undistributed net investment income of $43,154 and $0
respectively) $ 408,186,188 $ 345,556,209
- -------------------------------------------------------------------------------- --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION FLORIDA MUNICIPAL BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------- ----------------------------------------------------------------------- ---------- --------------
SHORT-TERM MUNICIPAL SECURITIES--6.4%
- --------------------------------------------------------------------------------------
ALASKA--4.5%
-----------------------------------------------------------------------
$ 1,200,000 Anchorage, AK, Weekly VRDN, Higher Education (Alaska Pacific
University)/(First National Bank Seattle LOC) A-1 $ 1,200,000
-----------------------------------------------------------------------
ILLINOIS--1.9%
-----------------------------------------------------------------------
100,000 Illinois Development Finance Authority, Weekly VRDN (Garden Glen
Apartments Project)/(Continental Casualty Surety Bond) A-1+ 100,000
-----------------------------------------------------------------------
100,000 Illinois Development Finance Authority, Weekly VRDN (Multi-Family
Revenue)/(Garden Glen Apartments Project)/ (Continental Casualty Surety
Bond) A-1+ 100,000
-----------------------------------------------------------------------
300,000 Illinois Health Facilities Authority, Daily VRDN (LaGrange Memorial
Health)/(First National Bank of Chicago LOC) VMIG-1 300,000
----------------------------------------------------------------------- --------------
TOTAL SHORT-TERM MUNICIPAL SECURITIES (AT AMORTIZED COST) 1,700,000
----------------------------------------------------------------------- --------------
LONG-TERM MUNICIPAL SECURITIES--92.0%
- --------------------------------------------------------------------------------------
FLORIDA--92.0%
-----------------------------------------------------------------------
500,000 Arcadia, FL, Dedicated Pool, 5.25%, Local Government Revenue Bonds
(FGIC Insured), 12/1/2015 AAA 498,042
-----------------------------------------------------------------------
500,000 Brevard County, FL, 5.25%, Water & Sewage Revenue Bonds (AMBAC
Insured), 3/1/2014 AAA 502,059
-----------------------------------------------------------------------
500,000 Cocoa, FL, 5.25%, Water & Sewage Revenue Bonds
(Series B)/(AMBAC Insured), 10/1/2016 AAA 497,984
-----------------------------------------------------------------------
1,000,000 Destin, FL, 5.60%, Capital Improvement Revenue Bonds (Series A)/(MBIA
Insured), 8/1/2015 AAA 1,023,774
-----------------------------------------------------------------------
1,000,000 Florida State Board of Education, 5.50%, GO Bonds, Capital Outlay,
6/1/2023 AA 1,017,404
-----------------------------------------------------------------------
1,000,000 Florida State Municipal Power Agency, 5.50%, Revenue Refunding Bond
(FGIC Insured), 10/1/2012 AAA 1,024,379
-----------------------------------------------------------------------
500,000 Florida State Turnpike Authority, 5.25%, Revenue Bonds (Series A)/(FGIC
Insured), 7/1/2022 AAA 492,730
-----------------------------------------------------------------------
1,235,000 Hialeah, FL, 5.50%, Capital Improvement Revenue Bonds, 10/1/2013 Baa-1 1,210,126
-----------------------------------------------------------------------
500,000 Hillsborough County, FL, Aviation Authority, 5.50% (Tampa International
Airport)/(FGIC Insured), 10/1/2013 AAA 506,434
-----------------------------------------------------------------------
500,000 Hillsborough County, FL, 5.125%, Capital Improvement Revenue Bonds
(FGIC Insured), 8/1/2014 AAA 492,474
-----------------------------------------------------------------------
1,000,000 Hillsborough County, FL, 5.50%, GO Bonds, Parks & Recreation District,
7/1/2023 AA- 1,015,947
-----------------------------------------------------------------------
</TABLE>
FIRST UNION FLORIDA MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------- ----------------------------------------------------------------------- ---------- --------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------------------
FLORIDA--CONTINUED
-----------------------------------------------------------------------
$ 500,000 Hollywood, FL, 5.50%, Water & Sewage Revenue Bonds (FGIC Insured),
10/1/2015 AAA $ 509,495
-----------------------------------------------------------------------
500,000 Jacksonville Beach, FL, 5.50%, Utility System Revenue Bonds (MBIA
Insured), 10/1/2012 AAA 512,189
-----------------------------------------------------------------------
2,000,000 Jacksonville, FL, 5.50%, Electric Authority, 10/1/2013-
10/1/2014 AA 2,029,171
-----------------------------------------------------------------------
1,000,000 Kissimmee, FL, Utility Authority, 5.50%, Electric System Revenue Bonds
(FGIC Insured), 10/1/2015 AAA 1,018,990
-----------------------------------------------------------------------
1,075,000 Lake County, FL, 5.95%, Resource Recovery Revenue Bonds (Subject to
AMT), 10/1/2013 BBB+ 1,083,927
-----------------------------------------------------------------------
500,000 Lee County, FL, 5.60%, Capital & Transportation Facilities Revenue
Bonds (MBIA Insured), 10/1/2021 AAA 510,753
-----------------------------------------------------------------------
500,000 Orange County, FL, 5.25%, Sales Tax Revenue Bonds,
1/1/2013 A+ 498,808
-----------------------------------------------------------------------
500,000 Orlando & Orange County Expressway Authority, FL, 5.25%, (FGIC
Insured), 7/1/2023 AAA 492,623
-----------------------------------------------------------------------
1,000,000 Orlando & Orange County Expressway Authority, FL, 5.50%, (FGIC
Insured), 7/1/2018 AAA 1,013,617
-----------------------------------------------------------------------
500,000 Palm Beach County, FL, 5.375%, Criminal Justice, (FGIC Insured),
6/1/2011 AAA 509,636
-----------------------------------------------------------------------
500,000 Palm Beach County, FL, 5.20%, Water & Sewage Revenue Bonds (FGIC
Insured), 10/1/2009 AAA 504,337
-----------------------------------------------------------------------
1,000,000 Pembroke Pines, FL, 6.25%, Utility System Revenue Bonds (FGIC Insured),
9/1/2007 AAA 1,099,136
-----------------------------------------------------------------------
1,000,000 Port Everglades, FL, 7.125%, Port Authority Revenue Bonds (Escrowed to
Maturity), 11/1/2016 AAA 1,236,217
-----------------------------------------------------------------------
1,000,000 St. Petersburg, FL, 5.60%, Public Utility Revenue Bonds,
10/1/2015 AA 1,019,757
-----------------------------------------------------------------------
500,000 Sarasota County, FL, 5.625%, Solid Waste System Revenue Bonds,
10/1/2013 A 503,803
-----------------------------------------------------------------------
1,035,000 Sebastian, FL, 5.40%, Utility System Revenue Bonds (AMBAC Insured),
10/1/2013 AAA 1,047,488
-----------------------------------------------------------------------
500,000 Seminole County, FL, 5.375%, Solid Waste Disposal System Revenue Bonds
(FGIC Insured), 10/1/2014 AAA 505,168
-----------------------------------------------------------------------
500,000 Vero Beach, FL, 5.375%, Electric Revenue Bonds (MBIA Insured),
12/1/2021 AAA 499,257
-----------------------------------------------------------------------
1,000,000 West Palm Beach, FL, 5.40%, Utility System Revenue Bonds, (FGIC
Insured), 10/1/2023 AAA 1,000,000
-----------------------------------------------------------------------
</TABLE>
FIRST UNION FLORIDA MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------- ----------------------------------------------------------------------- ---------- --------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------------------
FLORIDA--CONTINUED
-----------------------------------------------------------------------
$ 500,000 West Palm Beach, FL, 5.50%, Parking Revenue Bonds,
(AMBAC Insured), 9/1/2021 AAA $ 505,107
----------------------------------------------------------------------- --------------
TOTAL LONG-TERM MUNICIPAL SECURITIES (IDENTIFIED COST
24,014,124) 24,380,832
----------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $25,714,124) $ 26,080,832\
----------------------------------------------------------------------- --------------
</TABLE>
* See Notes to Portfolio of Investments on page 72.
\ The cost of investments for federal tax purposes amounts to $25,714,124. The
net unrealized appreciation of investments on a federal tax basis amounts to
$366,708, which is comprised of $389,319 appreciation and $22,611 depreciation
at December 31, 1993.
Note: The categories of investments are shown as a percentage of net assets
($26,493,482) at December 31, 1993.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond
Assurance Corporation LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
AMT -- Alternative Minimum Tax
VRDN -- Variable Rate Demand Note
FGIC -- Financial Guaranty Insurance Company
GO -- General Obligation
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION FLORIDA MUNICIPAL BOND PORTFOLIO
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
The municipal bonds rated by Moody's Investors Service, Inc. ("Moody's") in
which the Fund may invest are rated Aaa, Aa, A, or Baa. Municipal bonds rated
Aaa are judged to be of the "best quality." The rating of Aa is assigned to
municipal bonds which are of "high quality by all standards," but as to which
margins of protection or other elements make long-term risks appear somewhat
larger than Aaa-rated municipal bonds. The Aaa and Aa-rated municipal bonds
comprise what are generally known as "high-grade bonds." Municipal bonds which
are rated A by Moody's possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A-rated municipal bonds are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in
the future. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this category. Bonds
which are rated Baa are considered medium grade obligations, i.e., they are
neither highly protected nor poorly secured. The letter ratings carry numerical
modifiers with 1 indicating the higher end of the rating category, 2 indicating
the mid-range, and 3 indicating the lower end of the rating category.
The municipal bonds rated by Standard & Poor's Corporation ("S&P") in which the
Fund may invest are rated AAA, AA, A, or BBB. Municipal bonds rated AAA are
"obligations of the highest quality." The rating AA is accorded issues with
investment characteristics "only slightly less marked than those of the prime
quality issues." The category of A describes "the third strongest capacity for
payment of debt service." Principal and interest payments on bonds in this
category are regarded as safe. It differs from the two higher ratings because,
with respect to general obligation bonds, there is some weakness, either in the
local economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issue to meet debt
obligations at some future date. With respect to revenue bonds, debt service
coverage is good, but not exceptional. Stability of the pledged revenues could
show some variations because of increased competition or economic influences on
revenues. Basic security provisions, while satisfactory, are less stringent.
Bonds which are rated BBB are considered medium grade obligations, i.e., the
lowest investment grade security rating. These ratings may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR indicates the securities are not currently rated by Moody's or S&P. However,
management considers them to be of equivalent quality to the rated securities
the Fund purchases.
Bonds for which the security depends upon the completion of some act or the
fulfillment of some condition are rated conditionally.
FIRST UNION FLORIDA MUNICIPAL BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (Note 2A)
(identified cost $25,714,124; tax cost $25,714,124) $ 26,080,832
- ---------------------------------------------------------------------------------------------------
Cash 77,493
- ---------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 1,554,334
- ---------------------------------------------------------------------------------------------------
Interest receivable 378,066
- ---------------------------------------------------------------------------------------------------
Deferred expenses (Note 2G) 8,911
- --------------------------------------------------------------------------------------------------- --------------
Total assets 28,099,636
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased $ 1,520,514
- ------------------------------------------------------------------------------------
Dividends payable 33,159
- ------------------------------------------------------------------------------------
Payable for Fund shares redeemed 2,900
- ------------------------------------------------------------------------------------
Accrued expenses 49,581
- ------------------------------------------------------------------------------------ -------------
Total liabilities 1,606,154
- --------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 2,561,898 shares of beneficial interest outstanding $ 26,493,482
- --------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $ 26,134,456
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 366,708
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (7,682)
- --------------------------------------------------------------------------------------------------- --------------
Total $ 26,493,482
- --------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE:
- ---------------------------------------------------------------------------------------------------
Class B Investment Shares (net assets of $8,110,120 / 784,075 SHARES OF BENEFICIAL INTEREST
OUTSTANDING) $10.34
- --------------------------------------------------------------------------------------------------- --------------
CLASS C INVESTMENT SHARES (NET ASSETS OF $18,383,362 / 1,777,823 SHARES OF BENEFICIAL INTEREST
OUTSTANDING) $10.34
- --------------------------------------------------------------------------------------------------- --------------
OFFERING PRICE PER SHARE:
- ---------------------------------------------------------------------------------------------------
Class B Investment Shares ( 100/96 of $10.34) $10.77*
- --------------------------------------------------------------------------------------------------- --------------
Class C Investment Shares $10.34
- --------------------------------------------------------------------------------------------------- --------------
REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
Class B Investment Shares $10.34
- --------------------------------------------------------------------------------------------------- --------------
Class C Investment Shares ( 96/100 of $10.34) $ 9.93**
- --------------------------------------------------------------------------------------------------- --------------
</TABLE>
*See "What Shares Cost" in the prospectus.
**See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION FLORIDA MUNICIPAL BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 2, 1993 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 331,332
- ------------------------------------------------------------------------------------------------------
Expenses--
- ------------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 31,835
- -----------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 24,932
- -----------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 24,131
- -----------------------------------------------------------------------------------------
Distribution services fee (Note 5) 39,925
- -----------------------------------------------------------------------------------------
Legal fees 1,885
- -----------------------------------------------------------------------------------------
Printing and postage 9,312
- -----------------------------------------------------------------------------------------
Insurance 6,641
- -----------------------------------------------------------------------------------------
Miscellaneous 2,038
- ----------------------------------------------------------------------------------------- -----------
Total expenses 140,699
- -----------------------------------------------------------------------------------------
Deduct--
- -----------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 31,835
- ------------------------------------------------------------------------------
Waiver of administrative personnel and services fee (Note 5) 24,932
- ------------------------------------------------------------------------------
Reimbursement of other operating expenses (Note 5) 44,007 100,774
- ------------------------------------------------------------------------------ --------- -----------
Net expenses 39,925
- ------------------------------------------------------------------------------------------------------ -----------
Net investment income 291,407
- ------------------------------------------------------------------------------------------------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (7,682)
- ------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 366,708
- ------------------------------------------------------------------------------------------------------ -----------
Net realized and unrealized gain on investments 359,026
- ------------------------------------------------------------------------------------------------------ -----------
Change in net assets resulting from operations $ 650,433
- ------------------------------------------------------------------------------------------------------ -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION FLORIDA MUNICIPAL BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1993*
-----------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------------------------
Net investment income $ 291,407
- ------------------------------------------------------------------------------------------
Net realized gain (loss) on investments ($7,682 net loss as computed
for federal income tax purposes) (7,682)
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 366,708
- ------------------------------------------------------------------------------------------ -----------------------
Change in net assets resulting from operations 650,433
- ------------------------------------------------------------------------------------------ -----------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ------------------------------------------------------------------------------------------
Class B Investment Shares (77,073)
- ------------------------------------------------------------------------------------------
Class C Investment Shares (214,334)
- ------------------------------------------------------------------------------------------ -----------------------
Change in net assets from distributions to shareholders (291,407)
- ------------------------------------------------------------------------------------------ -----------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- ------------------------------------------------------------------------------------------
Proceeds from sale of shares 26,324,308
- ------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 150,806
- ------------------------------------------------------------------------------------------
Cost of shares redeemed (340,658)
- ------------------------------------------------------------------------------------------ -----------------------
Change in net assets from Fund share transactions 26,134,456
- ------------------------------------------------------------------------------------------ -----------------------
Change in net assets 26,493,482
- ------------------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------------------------ -----------------------
End of period $ 26,493,482
- ------------------------------------------------------------------------------------------ -----------------------
</TABLE>
*For the period from July 2, 1993 (commencement of operations) to December 31,
1993.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
OR SHARES (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------ -------------------------------------------------------------------------- ---------- -------------
MUTUAL FUND SHARES--5.3%
- ----------------------------------------------------------------------------------------
170,000 Dreyfus Municipal Cash Management NR $ 170,000
--------------------------------------------------------------------------
70,000 Dreyfus Tax Exempt Cash Management NR 70,000
-------------------------------------------------------------------------- -------------
TOTAL MUNICIPAL FUND SHARES
(AT NET ASSET VALUE) 240,000
-------------------------------------------------------------------------- -------------
SHORT-TERM MUNICIPAL SECURITIES--2.2%
- ----------------------------------------------------------------------------------------
$ 100,000 Somerset, KY, Weekly VRDN (Individual Building Revenue)/ (Series
1984)/(Crane Plumbing Project)/(American National Bank LOC) (at amortized
cost) NR 100,000
-------------------------------------------------------------------------- -------------
LONG-TERM MUNICIPAL SECURITIES--91.4%
- ----------------------------------------------------------------------------------------
GEORGIA--90.2%
--------------------------------------------------------------------------
50,000 Atlanta, GA, 6.25%, Downtown Development Authority (Underground Atlanta
Project), 10/1/2012 AA 54,277
--------------------------------------------------------------------------
300,000 Atlanta, GA, 5.00%, Water & Sewer Revenue Refunding Bonds, 1/1/2015 AA 290,525
--------------------------------------------------------------------------
130,000 Bartow County School District, GA, 5.70%, 5/1/2014 A 132,600
--------------------------------------------------------------------------
60,000 Chatham County, GA, 6.85%, Hospital Authority (Series B)/ (Memorial
Medical Hospital)/(MBIA Insured), 1/1/2021 AAA 67,527
--------------------------------------------------------------------------
250,000 Cherokee County, GA, 5.50%, Water & Sewer Authority Revenue Refunding
Bonds (MBIA Insured), 8/1/2023 AAA 253,125
--------------------------------------------------------------------------
90,000 Clayton County, GA, 5.25%, Water & Sewer Authority (MBIA Insured),
5/1/2012 AAA 89,783
--------------------------------------------------------------------------
100,000 Cobb Marietta, GA, 5.50%, Coliseum Exhibit Hall Authority Revenue
Refunding Bond (MBIA Insured), 10/1/2012 AAA 103,557
--------------------------------------------------------------------------
100,000 Cobb County, GA, 5.50%, Kennestone Hospital Authority (MBIA Insured),
4/1/2017 AAA 100,692
--------------------------------------------------------------------------
100,000 Dade County, GA, 5.60%, Gas, Water & Sewer Revenue Bonds (FGIC Insured),
7/1/2023 AAA 101,526
--------------------------------------------------------------------------
250,000 Dalton-Whitfield County, GA, 5.375%, Hospital Authority Refunding Revenue
Anticipation Certificates (Series 1993)/ (MBIA Insured), 7/1/2020 AAA 247,559
--------------------------------------------------------------------------
200,000 DeKalb County School District, GA, 6.25%, GO Bonds
(Series A), 7/1/2011 AA 224,678
--------------------------------------------------------------------------
75,000 Douglas County School District, GA, 5.63% (MBIA Insured),
1/1/2010 AAA 77,868
--------------------------------------------------------------------------
200,000 Douglasville County, GA, 5.625%, Water & Sewer Authority Revenue Bonds
(AMBAC Insured), 6/1/2015 AAA 208,650
--------------------------------------------------------------------------
90,000 Floyd County, GA, 5.10%, Water Revenue Bond (FGIC Insured), 11/1/2013 AAA 88,233
--------------------------------------------------------------------------
100,000 Fulco, GA 6.25%, Hospital Authority Anticipation Certificates,
9/1/2013 A 107,234
--------------------------------------------------------------------------
</TABLE>
FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------ -------------------------------------------------------------------------- ---------- -------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------------------------
GEORGIA--CONTINUED
--------------------------------------------------------------------------
$ 105,000 Fulton County School District, GA, 6.375%, Refunding GO,
5/1/2017 AA $ 120,550
--------------------------------------------------------------------------
175,000 Fulton County, GA, 6.25%-6.375%, Water & Sewer Revenue Refunding Bonds
(FGIC Insured), 1/1/2006-1/1/2014 AAA 196,875
--------------------------------------------------------------------------
200,000 Fulton-DeKalb County, GA, 5.50%, Hospital Authority Revenue Refunding
Bonds (MBIA Insured), 1/1/2012-1/1/2020 AAA 202,059
--------------------------------------------------------------------------
100,000 Gainesville, GA, 6.00%, Water & Sewer Revenue (Series B)/ (FGIC Insured),
11/15/2012 AAA 109,665
--------------------------------------------------------------------------
100,000 Georgia Municipal Electric Power Authority, 5.50%, Revenue Refunding Bond
(Series Z), (AMBAC Insured), 1/1/2020 AA- 100,821
--------------------------------------------------------------------------
125,000 Georgia State, 6.10%, GO Refunding (Series B), 3/1/2005 AAA 140,407
--------------------------------------------------------------------------
100,000 Georgia State, 5.50%, GO Refunding (Series D), 8/1/2006 AAA 107,432
--------------------------------------------------------------------------
100,000 Georgia State, 6.00%, GO Refunding (Series E), 7/1/2004 AAA 111,821
--------------------------------------------------------------------------
75,000 Gwinnett County, GA, Hospital Authority, 5.00% (Series 1993), 9/1/2019 AAA 70,854
--------------------------------------------------------------------------
200,000 Henry County, GA, 5.25%, Water & Sewer Authority Revenue Refunding Bonds
(Series A)/(AMBAC Insured), 2/1/2018 AAA 197,834
--------------------------------------------------------------------------
100,000 Macon, GA, 5.25%, Lease Revenue (Series A)/(School District Project),
10/1/2013 AA 98,901
--------------------------------------------------------------------------
100,000 Medical Center Hospital Authority, GA, 5.00%, (Columbus Regional
Healthcare System)/(MBIA Insured), 8/1/2018 AAA 94,457
--------------------------------------------------------------------------
100,000 Metropolitan Atlantic Rapid Transit Authority, GA, 6.25%, Sales Tax
Revenue Refunding Bond (Series N), 7/1/2018 AA- 110,603
--------------------------------------------------------------------------
100,000 Paulding County, GA, 5.60%, GO Bonds, 8/1/2011 A 101,846
--------------------------------------------------------------------------
100,000 Private Colleges & Universities Authority, GA, 5.50%, (Agnes Scott College
Project), 6/1/2013 AA 101,179
--------------------------------------------------------------------------
50,000 Savannah, GA, 6.20%, Hospital Authority Revenue Refunding Bonds, 7/1/2023 A 52,998
-------------------------------------------------------------------------- -------------
Total 4,066,136
-------------------------------------------------------------------------- -------------
PUERTO RICO--1.2%
--------------------------------------------------------------------------
50,000 Puerto Rico Electric Power Authority, 6.25%, 7/1/2017 A- 53,662
-------------------------------------------------------------------------- -------------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST, $4,085,070) 4,119,798
-------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $4,425,070) $ 4,459,798\
-------------------------------------------------------------------------- -------------
</TABLE>
* See Notes to Portfolio of Investments on page 79.
\ The cost of investments for federal tax purposes amounts to $4,425,070. The
net unrealized appreciation of investments on a federal tax basis amounts to
$34,728 at December 31, 1993.
Note: The categories of investments are shown as a percentage of net assets
($4,508,974) at December 31, 1993.
FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond LOC -- Letter of Credit
Assurance Corporation MBIA -- Municipal Bond Investors
FGIC -- Financial Guaranty Insurance Assurance
Company VRDN -- Variable Rate Demand Note
GO -- General Obligation
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
The municipal bonds rated by Moody's Investors Service, Inc. ("Moody's") in
which the Fund may invest are rated Aaa, Aa, A, or Baa. Municipal bonds rated
Aaa are judged to be of the "best quality." The rating of Aa is assigned to
municipal bonds which are of "high quality by all standards," but as to which
margins of protection or other elements make long-term risks appear somewhat
larger than Aaa-rated municipal bonds. The Aaa and Aa-rated municipal bonds
comprise what are generally known as "high-grade bonds." Municipal bonds which
are rated A by Moody's possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A-rated municipal bonds are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in
the future. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this category. Bonds
which are rated Baa are considered medium grade obligations, i.e., they are
neither highly protected nor poorly secured. The letter ratings carry numerical
modifiers with 1 indicating the higher end of the rating category,
2 indicating the mid-range, and 3 indicating the lower end of the rating
category.
The municipal bonds rated by Standard & Poor's Corporation ("S&P") in which the
Fund may invest are rated AAA, AA, A, or BBB. Municipal bonds rated AAA are
"obligations of the highest quality." The rating AA is accorded issues with
investment characteristics "only slightly less marked than those of the prime
quality issues." The category of A describes "the third strongest capacity for
payment of debt service." Principal and interest payments on bonds in this
category are regarded as safe. It differs from the two higher ratings because,
with respect to general obligation bonds, there is some weakness, either in the
local economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issue to meet debt
obligations at some future date. With respect to revenue bonds, debt service
coverage is good, but not exceptional. Stability of the pledged revenues could
show some variations because of increased competition or economic influences on
revenues. Basic security provisions, while satisfactory, are less stringent.
Bonds which are rated BBB are considered medium grade obligations, i.e., the
lowest investment grade security rating. These ratings may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR indicates the securities are not currently rated by Moody's or S&P. However,
management considers them to be of equivalent quality to the rated securities
the Fund purchases.
Bonds for which the security depends upon the completion of some act or the
fulfillment of some condition are rated conditionally.
FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------------------
Investments in securities, at value (Note 2A)
(identified cost $4,425,070; tax cost $4,425,070) $ 4,459,798
- -----------------------------------------------------------------------------------------------------
Cash 4,381
- -----------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 199,360
- -----------------------------------------------------------------------------------------------------
Interest receivable 66,498
- -----------------------------------------------------------------------------------------------------
Deferred expenses (Note 2G) 3,142
- ----------------------------------------------------------------------------------------------------- -------------
Total assets 4,733,179
- -----------------------------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased $ 193,767
- ----------------------------------------------------------------------------------------
Dividends payable 4,033
- ----------------------------------------------------------------------------------------
Accrued expenses 26,405
- ---------------------------------------------------------------------------------------- -----------
Total liabilities 224,205
- ----------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 442,421 shares of beneficial interest outstanding $ 4,508,974
- ----------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------
Paid-in capital $ 4,474,246
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 34,728
- ----------------------------------------------------------------------------------------------------- -------------
Total $ 4,508,974
- ----------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE:
- -----------------------------------------------------------------------------------------------------
Class B Investment Shares (net assets of $817,404 / 80,206 shares of
beneficial interest outstanding) $10.19
- ----------------------------------------------------------------------------------------------------- -------------
Class C Investment Shares (net assets of $3,691,570 / 362,215 shares of
beneficial interest outstanding) $10.19
- ----------------------------------------------------------------------------------------------------- -------------
OFFERING PRICE PER SHARE:
- -----------------------------------------------------------------------------------------------------
Class B Investment Shares (100/96 of $10.19) $10.61*
- ----------------------------------------------------------------------------------------------------- -------------
Class C Investment Shares $10.19
- ----------------------------------------------------------------------------------------------------- -------------
REDEMPTION PROCEEDS PER SHARE:
- -----------------------------------------------------------------------------------------------------
Class B Investment Shares $10.19
- ----------------------------------------------------------------------------------------------------- -------------
Class C Investment Shares (96/100 of $10.19) $9.78**
- ----------------------------------------------------------------------------------------------------- -------------
</TABLE>
* See "What Shares Cost" in the prospectus.
** See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 2, 1993 (COMMENCEMENT OF OPERATIONS) TO
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 53,160
- -------------------------------------------------------------------------------------------------------
Expenses--
- -------------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 5,416
- --------------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 24,931
- --------------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 22,549
- --------------------------------------------------------------------------------------------
Distribution services fee (Note 5) 7,283
- --------------------------------------------------------------------------------------------
Legal fees 1,206
- --------------------------------------------------------------------------------------------
Printing and postage 8,715
- --------------------------------------------------------------------------------------------
Insurance 6,436
- --------------------------------------------------------------------------------------------
Miscellaneous 1,921
- -------------------------------------------------------------------------------------------- ---------
Total expenses 78,457
- --------------------------------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 5,416
- ---------------------------------------------------------------------------------
Waiver of administrative personnel and services fee (Note 5) 24,931
- ---------------------------------------------------------------------------------
Reimbursement of other operating expenses (Note 5) 40,827 71,174
- --------------------------------------------------------------------------------- --------- ---------
Net expenses 7,283
- ------------------------------------------------------------------------------------------------------- ---------
Net investment income 45,877
- ------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis)-- 1,437
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 34,728
- ------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain on investments 36,165
- ------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 82,042
- ------------------------------------------------------------------------------------------------------- ---------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
12/31/93*
-------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------------------------------
Net investment income $ 45,877
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($1,437 net gain as computed for federal tax
purposes) 1,437
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) on investments 34,728
- ----------------------------------------------------------------------------------------------------- -------------
Change in net assets from operations 82,042
- ----------------------------------------------------------------------------------------------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -----------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- -----------------------------------------------------------------------------------------------------
Class B Investment Shares (7,930)
- -----------------------------------------------------------------------------------------------------
Class C Investment Shares (37,947)
- -----------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on investment transactions:
- -----------------------------------------------------------------------------------------------------
Class B Investment Shares (255)
- -----------------------------------------------------------------------------------------------------
Class C Investment Shares (1,182)
- ----------------------------------------------------------------------------------------------------- -------------
Change in net assets from distributions to shareholders (47,314)
- ----------------------------------------------------------------------------------------------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -----------------------------------------------------------------------------------------------------
Proceeds from sale of shares 4,449,992
- -----------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 36,136
- -----------------------------------------------------------------------------------------------------
Cost of shares redeemed (11,882)
- ----------------------------------------------------------------------------------------------------- -------------
Change in net assets from Fund share transactions 4,474,246
- ----------------------------------------------------------------------------------------------------- -------------
Change in net assets 4,508,974
- -----------------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------------
Beginning of period --
- ----------------------------------------------------------------------------------------------------- -------------
End of period $ 4,508,974
- ----------------------------------------------------------------------------------------------------- -------------
* For the period from July 2, 1993 (commencement of operations) to December 31, 1993.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO
(FORMERLY, FIRST UNION INSURED TAX FREE PORTFOLIO)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------- ---------------------------------------------------------------------- ---------- ---------------
SHORT-TERM MUNICIPAL SECURITIES--2.7%
- -------------------------------------------------------------------------------------
ILLINOIS--2.7%
----------------------------------------------------------------------
$ 3,900,000 Illinois Development Finance Authority, Weekly VRDN (Series
1993)/(Garden Glen Apartments) A-1+ $ 3,900,000
---------------------------------------------------------------------- ---------------
TOTAL SHORT-TERM MUNICIPAL SECURITIES
(AT AMORTIZED COST) 3,900,000
---------------------------------------------------------------------- ---------------
LONG-TERM MUNICIPAL SECURITIES--95.9%
- -------------------------------------------------------------------------------------
CALIFORNIA--0.8%
----------------------------------------------------------------------
1,000,000 San Jose, CA, 6.00% Redevelopment Agency, Tax Allocation Bonds (MBIA
Insured), 8/1/2015 AAA 1,088,878
---------------------------------------------------------------------- ---------------
DELAWARE--1.9%
----------------------------------------------------------------------
2,400,000 Delaware State Economic Development Authority, 7.30% Gas Facilities
Revenue Bonds (Delmarva Power and Light Project)/(FGIC Insured),
7/1/2021 (Subject to AMT) AAA 2,737,555
---------------------------------------------------------------------- ---------------
DISTRICT OF COLUMBIA--1.6%
----------------------------------------------------------------------
2,000,000 District of Columbia, 6.875% GO Bonds (Series A)/(MBIA Insured)
6/1/2011 AAA 2,226,324
---------------------------------------------------------------------- ---------------
FLORIDA--7.3%
----------------------------------------------------------------------
1,000,000 Alachua County School District, FL, 6.30% GO Bonds (FSA Insured),
7/1/2012 AAA 1,089,394
----------------------------------------------------------------------
1,000,000 Holly Hill, FL, 6.125%, Water and Sewer Revenue Bonds (MBIA Insured),
10/1/2014 AAA 1,095,220
----------------------------------------------------------------------
2,000,000 Hollywood, FL, Water and Sewer Authority, 6.75% Revenue Bonds (FGIC
Insured), Pre-Refunded 10/1/2001 (
10/1/2011 AAA 2,341,606
----------------------------------------------------------------------
3,000,000 Jacksonville, FL, Health Facilities Authority, 6.625% Revenue Bonds
(Memorial Medical Center Project)/(MBIA Insured),
5/1/2008 AAA 3,467,505
----------------------------------------------------------------------
2,250,000 Orange County, FL, Water and Waste Authority, 6.25% Revenue Refunding
Bonds (AMBAC Insured), 10/1/2017 AAA 2,459,945
---------------------------------------------------------------------- ---------------
Total 10,453,670
---------------------------------------------------------------------- ---------------
GEORGE--0.8%
----------------------------------------------------------------------
1,000,000 Georgia Municipal Electric Authority, 6.125% Revenue Bonds (Series
B)/(FGIC Insured), 1/1/2014 AAA 1,078,945
---------------------------------------------------------------------- ---------------
ILLINOIS--12.5%
----------------------------------------------------------------------
2,000,000 Chicago, IL, 5.75% Revenue Bonds, Public Building (Chicago Bank
District)/(FGIC Insured), 1/1/2010 AAA 2,096,396
----------------------------------------------------------------------
</TABLE>
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO
(FORMERLY, FIRST UNION INSURED TAX FREE PORTFOLIO)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------- ---------------------------------------------------------------------- ---------- ---------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
ILLINOIS--CONTINUED
----------------------------------------------------------------------
$ 1,400,000 Chicago, IL, Park District, 6.05% GO Bonds (FGIC Insured), 1/1/2013 AAA $ 1,499,950
----------------------------------------------------------------------
2,000,000 Greenville, IL, 6.75% GO Bonds (AMBAC Insured),
12/1/2014 AAA 2,235,484
----------------------------------------------------------------------
3,000,000 Illinois Development Finance Authority, 7.25% PCR Bonds (Commonwealth
Edison Co. Project)/(MBIA Insured),
6/1/2011 AAA 3,465,561
----------------------------------------------------------------------
1,500,000 Illinois Health Facilities Authority, 6.625% Revenue Bonds (Southern
Illinois Hospital)/(MBIA Insured), 3/1/2020 AAA 1,657,740
----------------------------------------------------------------------
3,000,000 Illinois Health Facilities Authority, 6.75% Revenue Bonds (Memorial
Medical Center Project)/(MBIA Insured),
10/1/2011 AAA 3,309,399
----------------------------------------------------------------------
1,000,000 Illinois State Toll Highway Authority, 6.35% (Series A)/ (FGIC
Insured), Pre-Refunded 1/1/2003 (02), 1/1/2010 AAA 1,145,162
----------------------------------------------------------------------
2,210,000 Northwest Surburban, IL, 5.90%, Action Water Agency (MBIA Insured),
5/1/2015 AAA 2,323,629
---------------------------------------------------------------------- ---------------
Total 17,733,321
---------------------------------------------------------------------- ---------------
INDIANA--3.1%
----------------------------------------------------------------------
2,300,000 Indiana Municipal Power Supply System, 6.125% Revenue Bonds (Series
A)/(MBIA Insured), 1/1/2019 AAA 2,447,796
----------------------------------------------------------------------
2,000,000 Marion County, IN, Convention & Recreational Facility Authority, 5.50%
Excise Tax Revenue Bonds (Series A)/ (AMBAC Insured), 6/1/2021 AAA 2,015,978
---------------------------------------------------------------------- ---------------
Total 4,463,774
---------------------------------------------------------------------- ---------------
IOWA--1.3%
----------------------------------------------------------------------
1,750,000 Salix, IA, 5.90%, PCR (Northwestern Public Service Co.)/ (MBIA
Insured), 6/1/2023 AAA 1,805,673
---------------------------------------------------------------------- ---------------
LOUISIANA--2.1%
----------------------------------------------------------------------
2,500,000 Jefferson, LA, 6.75% Sales Tax Revenue Bonds (FGIC Insured), 12/1/2006 AAA 2,923,302
---------------------------------------------------------------------- ---------------
MICHIGAN--3.7%
----------------------------------------------------------------------
1,750,000 Bay City, MI, Utility Authority, 6.60% Revenue Bonds (AMBAC Insured),
1/1/2012 AAA 1,937,344
----------------------------------------------------------------------
2,000,000 Chippewa Valley School District, MI, 6.375% GO Bonds (FGIC Insured),
5/1/2007 AAA 2,273,274
----------------------------------------------------------------------
1,000,000 Huron Valley School District, MI, 6.125% GO Bonds (FGIC Insured),
5/1/2020 AAA 1,082,412
---------------------------------------------------------------------- ---------------
Total 5,293,030
---------------------------------------------------------------------- ---------------
</TABLE>
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO
(FORMERLY, FIRST UNION INSURED TAX FREE PORTFOLIO)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------- ---------------------------------------------------------------------- ---------- ---------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
NEVADA--6.5%
----------------------------------------------------------------------
$ 2,500,000 Clark County School District, NV, 6.75% GO Bonds (MBIA Insured),
3/1/2007 AAA $ 2,810,258
----------------------------------------------------------------------
1,000,000 Clark County, NV, 6.00% GO Bonds (AMBAC Insured),
6/1/2016 AAA 1,059,512
----------------------------------------------------------------------
2,040,000 Henderson, NV, 6.375% GO Bonds (AMBAC Insured),
12/1/2017 AAA 2,216,121
----------------------------------------------------------------------
1,000,000 Las Vegas Library District, NV, 6.00% GO Bonds (FGIC Insured),
2/1/2012 AAA 1,068,048
----------------------------------------------------------------------
2,000,000 Washoe County, NV, 5.70% GO Bonds (FGIC Insured),
7/1/2017 AAA 2,056,082
---------------------------------------------------------------------- ---------------
Total 9,210,021
---------------------------------------------------------------------- ---------------
NORTH CAROLINA--2.3%
----------------------------------------------------------------------
570,000 North Carolina Municipal Power Agency No. 1, 6.50% Revenue Bonds (MBIA
Insured), 1/1/2010, Escrowed to Maturity AAA 646,211
----------------------------------------------------------------------
2,430,000 North Carolina Municipal Power Agency No. 1, 6.50% Revenue Bonds (MBIA
Insured), 1/1/2010 AAA 2,643,833
---------------------------------------------------------------------- ---------------
Total 3,290,044
---------------------------------------------------------------------- ---------------
OHIO--2.8%
----------------------------------------------------------------------
3,500,000 Lucas County, OH, Hospital Authority, 6.50% Revenue Bonds (St.
Vincent's Medical Center)/(MBIA Insured),
8/15/2007 AAA 3,978,450
---------------------------------------------------------------------- ---------------
OKLAHOMA--1.7%
----------------------------------------------------------------------
2,250,000 Enid, OK, Municipal Authority Tax and Utility, 6.20% Revenue Bonds
(FGIC Insured), 2/1/2012 AAA 2,399,238
---------------------------------------------------------------------- ---------------
PENNSYLVANIA--5.1%
----------------------------------------------------------------------
2,900,000 Allegheny County, PA, Sanitation and Sewer Authority, 6.50% Revenue
Bonds (FGIC Insured), Pre-Refunded
12/1/2001, 12/1/2016 (00) AAA 3,313,972
----------------------------------------------------------------------
3,500,000 Montgomery County, PA, 6.70% IDA Revenue Bonds (Philadelphia Electric
Company)/(MBIA Insured), 12/1/2021 AAA 3,898,097
---------------------------------------------------------------------- ---------------
Total 7,212,069
---------------------------------------------------------------------- ---------------
RHODE ISLAND--2.3%
----------------------------------------------------------------------
1,000,000 Rhode Island Convention Center Authority, 6.65% Revenue Bonds (Series
A)/(MBIA Insured), 5/15/2012 AAA 1,158,333
----------------------------------------------------------------------
2,000,000 Rhode Island Depositors Economic Protection, 5.80% (MBIA Insured),
8/1/2012 AAA 2,100,220
---------------------------------------------------------------------- ---------------
Total 3,258,553
---------------------------------------------------------------------- ---------------
</TABLE>
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO
(FORMERLY, FIRST UNION INSURED TAX FREE PORTFOLIO)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------- ---------------------------------------------------------------------- ---------- ---------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
SOUTH CAROLINA--2.7%
----------------------------------------------------------------------
$ 3,500,000 South Carolina Port Authority, 6.625% Revenue Bonds (AMBAC Insured),
7/1/2011 (Subject to AMT) AAA $ 3,883,065
---------------------------------------------------------------------- ---------------
SOUTH DAKOTA--2.7%
----------------------------------------------------------------------
3,500,000 South Dakota State Health and Education Facilities
Authority, 6.625% Revenue Bonds (MBIA Insured),
7/1/2011 AAA 3,821,048
---------------------------------------------------------------------- ---------------
TENNESSEE--2.7%
----------------------------------------------------------------------
3,500,000 Nashville, TN, Metropolitan Airport Authority, 6.60% Revenue Bonds
(Series C)/(FGIC Insured), 7/1/2015 AAA 3,885,703
---------------------------------------------------------------------- ---------------
TEXAS--18.5%
----------------------------------------------------------------------
2,000,000 Colorado River, TX, 5.375% Revenue Refunding Bonds, Municipal Water
District (AMBAC Insured), 1/1/2013 AAA 2,009,916
----------------------------------------------------------------------
2,000,000 Dallas-Fort Worth, TX, Regional Airport, 7.80% Revenue Bonds (FGIC
Insured), 11/1/2007 AAA 2,501,130
----------------------------------------------------------------------
1,600,000 Dallas-Fort Worth, TX, Regional Airport, 6.50% Revenue Bonds (Series
A)/(FGIC Insured), 11/1/2011 AAA 1,736,874
----------------------------------------------------------------------
1,750,000 Houston, TX, Water and Sewer System, 6.375% Junior Lien Bonds (Series
C)/(AMBAC Insured), 12/1/2017 AAA 1,911,879
----------------------------------------------------------------------
2,600,000 Houston, TX, Water and Sewer System, 5.75% (MBIA Insured), 12/1/2015 AAA 2,687,191
----------------------------------------------------------------------
1,500,000 Lower Colorado River Authority, TX, 6.00% Revenue Bonds (FSA Insured),
1/1/2016 AAA 1,581,885
----------------------------------------------------------------------
2,000,000 Lower Colorado River Authority, TX, 6.00% Revenue Bonds (AMBAC
Insured), 1/1/2017 AAA 2,091,652
----------------------------------------------------------------------
4,315,000 Lower Colorado River Authority, TX, 5.625% Revenue Bonds (FSA
Insured), 1/1/2017 AAA 4,384,277
----------------------------------------------------------------------
2,290,000 Southland Oaks, TX, Municipal Utility District, 6.50% Revenue Bonds
(City of Austin)/(FGIC Insured),
11/15/2009 AAA 2,497,117
----------------------------------------------------------------------
1,500,000 Tarrant County, TX, 5.75% Revenue Bonds (Control & Imperial
Distribution, No. 1 Water)/(AMBAC Insured),
3/1/2013 AAA 1,628,161
----------------------------------------------------------------------
3,000,000 Western Oaks, TX, Municipal Utility District, 6.50% Revenue Bonds
(City of Austin)/(FGIC Insured), 11/15/2009 AAA 3,271,332
---------------------------------------------------------------------- ---------------
Total 26,301,414
---------------------------------------------------------------------- ---------------
UTAH--2.9%
----------------------------------------------------------------------
1,000,000 Salt Lake City, UT, 6.00%, Utah Airport Authority (FGIC Insured),
12/1/2012 AAA 1,053,071
----------------------------------------------------------------------
</TABLE>
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO
(FORMERLY, FIRST UNION INSURED TAX FREE PORTFOLIO)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------- ---------------------------------------------------------------------- ---------- ---------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
UTAH--CONTINUED
----------------------------------------------------------------------
$ 3,000,000 Salt Lake City, UT, 5.875%, Utah Airport Authority (FGIC Insured),
12/1/2018 AAA $ 3,138,690
---------------------------------------------------------------------- ---------------
Total 4,191,761
---------------------------------------------------------------------- ---------------
WASHINGTON--5.6%
----------------------------------------------------------------------
2,540,000 Seattle, WA, Metropolitan Seattle Sewer, 5.70% Revenue Bonds (FGIC
Insured), 1/1/2014 AAA 2,602,583
----------------------------------------------------------------------
3,965,000 Seattle, WA, Metropolitan Seattle Sewer, 6.25% Revenue Bonds (MBIA
Insured), 1/1/2021 AAA 4,289,702
----------------------------------------------------------------------
1,000,000 Spokane, WA, Regional Solid Waste Management System, 6.25% Revenue
Bonds (AMBAC Insured), 12/1/2011 AAA 1,092,774
---------------------------------------------------------------------- ---------------
Total 7,985,059
---------------------------------------------------------------------- ---------------
WEST VIRGINIA--3.6%
----------------------------------------------------------------------
1,500,000 Harrison County, WV, Board of Education, 6.30% GO Bonds (FGIC
Insured), 5/1/2005 AAA 1,680,842
----------------------------------------------------------------------
3,000,000 West Virginia State Building, 7.00% Commercial Lease Revenue Bonds
(MBIA Insured), 7/1/2015 AAA 3,408,888
---------------------------------------------------------------------- ---------------
Total 5,089,730
---------------------------------------------------------------------- ---------------
WISCONSIN--1.6%
----------------------------------------------------------------------
2,000,000 Wisconsin State Health and Education Facilities Authority, 6.625%
Revenue Bonds (Wausau Hospital)/(AMBAC Insured), 8/15/2011 AAA 2,229,074
---------------------------------------------------------------------- ---------------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST, $124,897,397) 136,539,701
---------------------------------------------------------------------- ---------------
TOTAL MUNICIPAL SECURITIES
(IDENTIFIED COST, $128,797,397) $ 140,439,701\
---------------------------------------------------------------------- ---------------
</TABLE>
* See Notes to Portfolio of Investments on page 88.
\ The cost of investments for federal tax purposes amounts to $128,797,397. The
unrealized appreciation of investments on a federal tax basis amounts to
$11,642,304 at December 31, 1993.
Note: The categories of investments are shown as a percentage of net assets
($142,382,424) at December 31, 1993.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond GO -- General Obligation
Assurance Corporation IDA -- Industrial Development Authority
AMT -- Alternative Minimum Tax MBIA -- Municipal Bond Investors
FGIC -- Financial Guaranty Insurance Assurance
Company PCR -- Pollution Control Revenue
FSA -- Financial Security Assurance VRDN -- Variable Rate Demand Note
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO
(FORMERLY, FIRST UNION INSURED TAX FREE PORTFOLIO)
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
MUNICIPAL BOND RATINGS
The three highest ratings of Moody's Investors Service, Inc. ("Moody's") for
municipal bonds are Aaa, Aa and A. Bonds rated Aaa are judged to be of the "best
quality." The rating Aa is assigned to bonds which are of "high quality by all
standards," but as to which margins of protection or other elements make
long-term risks appear somewhat larger than Aaa-rated bonds. The Aaa and
Aa-rated bonds comprise what are generally known as "high grade bonds." Bonds
which are rated A by Moody's possess many favorable investment attributes and
are considered "upper medium grade obligations." Factors giving security to
principal and interest of A-rated bonds are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future. The bonds in the A rating which Moody's believes possess the strongest
investment attributes are designated by the symbol A1.
Moody's highest rating for state and municipal notes and other short-term loans
is designated MIG1/ VMIG1. The designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support,
or demonstrated broad-based access to the market for refinancing.
The highest ratings of Standard & Poor's Corporation ("S&P") for municipal bonds
are AAA (Prime), AA (High Grade), A (Good Grade) and the highest short-term
rating for municipal notes is SP-1. Bonds rated AAA have the highest rating
assigned by S&P to debt obligations. Capacity to pay interest and repay
principal is extremely strong. Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated issues only by a
small degree. Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories. Short-term notes rated SP-1 have a very strong or strong capacity to
pay principal and interest. The ratings from AA, A, and SP-1 may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating category.
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO
(FORMERLY, FIRST UNION INSURED TAX FREE PORTFOLIO)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities, at value (Note 2A)
(identified cost $128,797,397; tax cost $128,797,397) $ 140,439,701
- --------------------------------------------------------------------------------------------------
Interest receivable 2,396,478
- --------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 549,678
- --------------------------------------------------------------------------------------------------
Deferred expenses (Note 2G) 12,596
- -------------------------------------------------------------------------------------------------- ---------------
Total assets 143,398,453
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed $ 680,700
- -------------------------------------------------------------------------------------
Dividends payable 189,403
- -------------------------------------------------------------------------------------
Accrued expenses 145,926
- ------------------------------------------------------------------------------------- -----------
Total liabilities 1,016,029
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS for 12,763,903 shares of beneficial interest outstanding $ 142,382,424
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 130,739,112
- --------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 11,642,304
- --------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain on investments 1,008
- -------------------------------------------------------------------------------------------------- ---------------
Total $ 142,382,424
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares (net assets of $101,352,073 / 9,085,725 shares of beneficial interest
outstanding) $11.16
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares (net assets of $41,030,351 / 3,678,178 shares of beneficial interest
outstanding) $11.16
- -------------------------------------------------------------------------------------------------- ---------------
OFFERING PRICE PER SHARE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares (100/96 of $11.16) $11.63*
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares $11.16
- -------------------------------------------------------------------------------------------------- ---------------
REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares $11.16
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares (96/100 of $11.16) $10.71**
- -------------------------------------------------------------------------------------------------- ---------------
</TABLE>
* See "What Shares Cost" in the prospectus.
** See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO
(FORMERLY, FIRST UNION INSURED TAX FREE PORTFOLIO)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 7,512,837
- ---------------------------------------------------------------------------------------------------
Expenses--
- ---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 643,946
- ------------------------------------------------------------------------------------
Trustees' fees 1,820
- ------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 112,663
- ------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 151,098
- ------------------------------------------------------------------------------------
Distribution services fee (Note 5) 456,290
- ------------------------------------------------------------------------------------
Fund share registration costs 57,710
- ------------------------------------------------------------------------------------
Legal fees 5,334
- ------------------------------------------------------------------------------------
Auditing fees 9,250
- ------------------------------------------------------------------------------------
Printing and postage 38,277
- ------------------------------------------------------------------------------------
Insurance premiums 8,356
- ------------------------------------------------------------------------------------
Miscellaneous 26,500
- ------------------------------------------------------------------------------------ -------------
Total expenses 1,511,244
- ------------------------------------------------------------------------------------
Deduct--
- ------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 280,300
- -----------------------------------------------------------------------
Waiver of distribution services fee (Note 5) 2,256 282,556
- ----------------------------------------------------------------------- ----------- -------------
Net expenses 1,228,688
- --------------------------------------------------------------------------------------------------- --------------
Net investment income 6,284,149
- --------------------------------------------------------------------------------------------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis)-- 889,675
- ---------------------------------------------------------------------------------------------------
Net Change in unrealized appreciation (depreciation) on investment 8,186,978
- --------------------------------------------------------------------------------------------------- --------------
Net realized and unrealized gain on investments 9,076,653
- --------------------------------------------------------------------------------------------------- --------------
Change in net assets resulting from operations $ 15,360,802
- --------------------------------------------------------------------------------------------------- --------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO
(FORMERLY, FIRST UNION INSURED TAX FREE PORTFOLIO)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
12/31/93 12/31/92*
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------
Net investment income $ 6,284,149 $ 4,129,013
- ---------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($889,675 net gain
and $33,796 net loss, respectively, as computed for federal tax purposes) 889,675 (33,796)
- ---------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments 8,186,978 3,455,326
- --------------------------------------------------------------------------------- --------------- ---------------
Change in net assets from operations 15,360,802 7,550,543
- --------------------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ---------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ---------------------------------------------------------------------------------
Class B Investment Shares (5,090,122) (4,129,013)
- ---------------------------------------------------------------------------------
Class C Investment Shares (1,194,027) --
- ---------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions:
- ---------------------------------------------------------------------------------
Class B Investment Shares (610,162) --
- ---------------------------------------------------------------------------------
Class C Investment Shares (244,709) --
- --------------------------------------------------------------------------------- --------------- ---------------
Change in net assets from distributions to shareholders (7,139,020) (4,129,013)
- --------------------------------------------------------------------------------- --------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- ---------------------------------------------------------------------------------
Proceeds from sale of shares 67,975,587 99,185,296
- ---------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 4,602,576 2,558,864
- ---------------------------------------------------------------------------------
Cost of shares redeemed (29,155,897) (14,427,314)
- --------------------------------------------------------------------------------- --------------- ---------------
Change in net assets from Fund share transactions 43,422,266 87,316,846
- --------------------------------------------------------------------------------- --------------- ---------------
Change in net assets 51,644,048 90,738,376
- ---------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------
Beginning of period 90,738,376 --
- --------------------------------------------------------------------------------- --------------- ---------------
End of period $ 142,382,424 $ 90,738,376
- --------------------------------------------------------------------------------- --------------- ---------------
</TABLE>
* For the period from February 21, 1992 (commencement of operations) to December
31, 1992
(See Notes which are an integral part of the Financial Statements)
FIRST UNION MANAGED BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- ---------------
CORPORATE BONDS--75.1%
- --------------------------------------------------------------------------------------------------
BANKING--9.9%
-----------------------------------------------------------------------------------
$ 2,000,000 Banc One Corp., 8.74%, 9/15/2003 $ 2,344,352
-----------------------------------------------------------------------------------
3,000,000 Comerica Inc., 7.125%, 12/1/2013 2,954,082
-----------------------------------------------------------------------------------
3,000,000 First Chicago Corp., 7.625%, 1/15/2003 3,233,775
-----------------------------------------------------------------------------------
2,000,000 Nationsbank Corp., 8.125%, 6/15/2002 2,224,714
----------------------------------------------------------------------------------- ---------------
Total 10,756,923
----------------------------------------------------------------------------------- ---------------
CHEMICALS--2.9%
-----------------------------------------------------------------------------------
3,000,000 ICI Wilmington, Inc., 7.625%, 3/15/97 3,215,178
----------------------------------------------------------------------------------- ---------------
DRUG--2.1%
-----------------------------------------------------------------------------------
2,000,000 Baxter International Inc., 9.25%, 12/15/99 2,315,376
----------------------------------------------------------------------------------- ---------------
ELECTRONICS--3.1%
-----------------------------------------------------------------------------------
3,000,000 Motorola, Inc., 7.60%, 1/1/2007 3,339,747
----------------------------------------------------------------------------------- ---------------
ENERGY--3.1%
-----------------------------------------------------------------------------------
3,000,000 duPont (E.I.) de Nemours & Co., 8.25%, 1/15/2022 3,326,649
----------------------------------------------------------------------------------- ---------------
FINANCE AND INSURANCE--17.8%
-----------------------------------------------------------------------------------
2,380,000 American Express Credit Corp., 7.375%, 2/1/99 2,550,122
-----------------------------------------------------------------------------------
1,725,000 American General Finance Corp., 6.375%, 3/1/2003 1,723,753
-----------------------------------------------------------------------------------
1,500,000 First Colony Corp., 6.625%, 8/1/2003 1,515,029
-----------------------------------------------------------------------------------
3,000,000 General Electric Capital Corp., 7.875%, 12/1/2006 3,379,296
-----------------------------------------------------------------------------------
1,500,000 Household Finance Corp., 9.625%, 3/11/96 1,644,253
-----------------------------------------------------------------------------------
3,000,000 Merrill Lynch & Co., 7.75%, 3/1/99 3,249,651
-----------------------------------------------------------------------------------
2,000,000 Salomon Brothers, Inc., 8.31%, 3/27/95 2,087,418
-----------------------------------------------------------------------------------
3,000,000 Shearson Lehman Brothers, 8.375%, 4/1/97 3,261,666
----------------------------------------------------------------------------------- ---------------
Total 19,411,188
----------------------------------------------------------------------------------- ---------------
FOOD AND BEVERAGE--2.8%
-----------------------------------------------------------------------------------
3,000,000 Grand Metro Investment Corp., 6.50%, 9/15/99 3,099,861
----------------------------------------------------------------------------------- ---------------
FOREST PRODUCTS--3.0%
-----------------------------------------------------------------------------------
3,000,000 International Paper Co., 8.02%, 4/1/99 3,278,997
----------------------------------------------------------------------------------- ---------------
RETAIL--3.7%
-----------------------------------------------------------------------------------
3,000,000 Dillon Read Structured Finance, 6.66%, 8/15/2010 2,924,778
-----------------------------------------------------------------------------------
1,000,000 K-Mart Corp., 8.25%, 1/1/2022 1,112,279
----------------------------------------------------------------------------------- ---------------
Total 4,037,057
----------------------------------------------------------------------------------- ---------------
FOREIGN--7.8%
-----------------------------------------------------------------------------------
3,000,000 Manitoba Province, 8.00%, 4/15/2002 3,338,766
-----------------------------------------------------------------------------------
3,000,000 Ontario Province, 5.70%, 10/1/97 3,043,941
-----------------------------------------------------------------------------------
</TABLE>
FIRST UNION MANAGED BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- ---------------
CORPORATE BONDS--CONTINUED
- --------------------------------------------------------------------------------------------------
FOREIGN--CONTINUED
-----------------------------------------------------------------------------------
$ 2,000,000 Hydro Quebec, 7.55%, 12/10/98 $ 2,137,458
----------------------------------------------------------------------------------- ---------------
Total 8,520,165
----------------------------------------------------------------------------------- ---------------
STEEL--2.0%
-----------------------------------------------------------------------------------
2,000,000 Temple-Inland Inc., 8.125%, 12/15/2006 2,187,218
----------------------------------------------------------------------------------- ---------------
TELE-COMMUNICATIONS--5.7%
-----------------------------------------------------------------------------------
3,100,000 ALLTEL Corp., 6.50%, 11/1/2013 2,919,236
-----------------------------------------------------------------------------------
3,000,000 American Telephone and Telegraph Co., 8.125%, 1/15/2022 3,258,024
----------------------------------------------------------------------------------- ---------------
Total 6,177,260
----------------------------------------------------------------------------------- ---------------
TRANSPORTATION--3.1%
-----------------------------------------------------------------------------------
3,000,000 Norfolk Southern Corp., 7.875%, 2/15/2004 3,362,283
----------------------------------------------------------------------------------- ---------------
UTILITIES--8.1%
-----------------------------------------------------------------------------------
2,000,000 Carolina Power & Light Co., 8.625%, 9/15/2021 2,361,190
-----------------------------------------------------------------------------------
1,500,000 Duke Power, 6.50%, 12/15/95 1,555,049
-----------------------------------------------------------------------------------
2,500,000 Indianapolis Power & Light Co., 8.00%, 10/15/2006 2,824,818
-----------------------------------------------------------------------------------
2,000,000 Progress Capital Holdings, 8.17%, 9/13/96 2,128,212
----------------------------------------------------------------------------------- ---------------
Total 8,869,269
----------------------------------------------------------------------------------- ---------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $76,766,943) 81,897,171
----------------------------------------------------------------------------------- ---------------
U.S. GOVERNMENT OBLIGATIONS--22.2%
- --------------------------------------------------------------------------------------------------
U.S. TREASURY NOTES--14.1%
-----------------------------------------------------------------------------------
2,000,000 7.875%, 7/31/96 2,165,618
-----------------------------------------------------------------------------------
4,500,000 8.25%, 7/15/98 5,065,285
-----------------------------------------------------------------------------------
3,000,000 8.875%, 2/15/99 3,483,717
-----------------------------------------------------------------------------------
2,000,000 8.875%, 5/15/2000 2,368,738
-----------------------------------------------------------------------------------
2,000,000 8.50%, 11/15/2000 2,338,118
----------------------------------------------------------------------------------- ---------------
Total U.S. Treasury Notes 15,421,476
----------------------------------------------------------------------------------- ---------------
GOVERNMENT AGENCY--8.1%
-----------------------------------------------------------------------------------
1,616,687 Government National Mortgage Association, 9.00%, 4/15/2020 1,731,875
-----------------------------------------------------------------------------------
1,500,665 Government National Mortgage Association, 9.50%, 2/15/2021 1,624,470
-----------------------------------------------------------------------------------
1,365,916 Government National Mortgage Association, 9.00%, 8/15/2021 1,463,238
-----------------------------------------------------------------------------------
3,500,000 U.S. Department of Navy, 8.625%, 12/15/2013 3,978,541
----------------------------------------------------------------------------------- ---------------
Total Government Agency 8,798,124
----------------------------------------------------------------------------------- ---------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (IDENTIFIED COST $24,363,348) 24,219,600
----------------------------------------------------------------------------------- ---------------
</TABLE>
FIRST UNION MANAGED BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- ---------------
*REPURCHASE AGREEMENT--0.7%
- --------------------------------------------------------------------------------------------------
$ 803,000 Donaldson, Lufkin & Jenrette Securities Corp., 3.20%, dated
12/31/93, due 1/3/94 (at amortized cost) (Note 2B) $ 803,000
----------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS (IDENTIFIED COST $101,933,291) $ 106,919,771\
----------------------------------------------------------------------------------- ---------------
</TABLE>
* Repurchase agreement is fully collateralized by U.S. government and/or agency
obligations based on market prices at the date of the portfolio.
\ The cost for federal tax purposes amounts to $101,933,291. The net unrealized
appreciation of investments on a federal tax basis amounts to $4,986,480,
which is comprised of $5,519,987 appreciation and $533,507 depreciation at
December 31, 1993.
Note: The categories of investments are shown as a percentage of net assets
($109,067,070) at December 31, 1993.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION MANAGED BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified cost $101,933,291; tax cost $101,933,291) $ 106,919,771
- --------------------------------------------------------------------------------------------------
Cash 233
- --------------------------------------------------------------------------------------------------
Interest receivable 2,124,464
- --------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 25,515
- --------------------------------------------------------------------------------------------------
Deferred expenses (Note 2G) 18,464
- -------------------------------------------------------------------------------------------------- ---------------
Total assets 109,088,447
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Accrued expenses 21,377
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS for 10,423,512 shares of beneficial interest outstanding $ 109,067,070
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 104,003,384
- --------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 4,986,480
- --------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain on investments 265,646
- --------------------------------------------------------------------------------------------------
Accumulated net realized loss on futures contracts (Note 2E) (272,455)
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 84,015
- -------------------------------------------------------------------------------------------------- ---------------
Total $ 109,067,070
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share:
(net assets of $109,067,070 / 10,423,512 shares of beneficial interest outstanding) $10.46
- -------------------------------------------------------------------------------------------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION MANAGED BOND PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 7,751,927
- ----------------------------------------------------------------------------------------------------
Expenses--
- ----------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 576,619
- ----------------------------------------------------------------------------------------
Trustees' fees 1,790
- ----------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 101,082
- ----------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 81,735
- ----------------------------------------------------------------------------------------
Fund share registration costs 27,264
- ----------------------------------------------------------------------------------------
Legal fees 5,347
- ----------------------------------------------------------------------------------------
Auditing fees 9,396
- ----------------------------------------------------------------------------------------
Printing and postage 26,118
- ----------------------------------------------------------------------------------------
Insurance premiums 7,962
- ----------------------------------------------------------------------------------------
Miscellaneous 6,591
- ---------------------------------------------------------------------------------------- ----------
Total expenses 843,904
- ----------------------------------------------------------------------------------------
Deduct--Waiver of administrative personnel and services fee (Note 5) 36,701
- ---------------------------------------------------------------------------------------- ----------
Net expenses 807,203
- ---------------------------------------------------------------------------------------------------- -------------
Net investment income 6,944,724
- ---------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) 3,540,105
- ----------------------------------------------------------------------------------------------------
Net realized gain (loss) on futures contracts (identified cost basis) (272,455)
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 1,457,883
- ---------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain (loss) on investments and futures contracts 4,725,533
- ---------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ 11,670,257
- ---------------------------------------------------------------------------------------------------- -------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION MANAGED BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1992
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------------
Net investment income $ 6,944,724 $ 7,429,567
- --------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions and futures contracts
($3,267,650 net gain and $2,013,813 net gain, respectively, as computed for
federal tax purposes) 3,267,650 2,020,935
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments 1,457,883 (2,907,954)
- -------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from operations 11,670,257 6,542,548
- -------------------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- --------------------------------------------------------------------------------
Dividends to shareholders from net investment income: (6,916,373) (7,405,170)
- --------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions: (3,268,117) (2,052,924)
- -------------------------------------------------------------------------------- --------------- ---------------
Change in net assets from distributions to shareholders (10,184,490) (9,458,094)
- -------------------------------------------------------------------------------- --------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- --------------------------------------------------------------------------------
Proceeds from sale of shares 30,558,683 15,687,048
- --------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 10,049,698 9,439,476
- --------------------------------------------------------------------------------
Cost of shares redeemed (54,682,139) (13,539,472)
- -------------------------------------------------------------------------------- --------------- ---------------
Change in net assets from Fund share transactions (14,073,758) 11,587,052
- -------------------------------------------------------------------------------- --------------- ---------------
Change in net assets (12,587,991) 8,671,506
- --------------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------------
Beginning of period 121,655,061 112,983,555
- -------------------------------------------------------------------------------- --------------- ---------------
End of period (including undistributed net investment income of $84,015 and
$55,664 respectively) $ 109,067,070 $ 121,655,061
- -------------------------------------------------------------------------------- --------------- ---------------
(The accompanying Notes are an integral part of the Financial Statements)
</TABLE>
FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------- ----------------------------------------------------------------------- ----------- --------------
SHORT-TERM MUNICIPAL SECURITIES--3.6%
- --------------------------------------------------------------------------------------
$ 2,100,000 Detroit, MI, Tax Increment Finance Reserve Fund, 3.25% (Central
Industrial Park)/(Citibank LOC), 1/3/94 A1 $ 2,100,000
----------------------------------------------------------------------- --------------
LONG-TERM MUNICIPAL SECURITIES--99.7%
- --------------------------------------------------------------------------------------
1,300,000 Appalachian State University, NC, 5.625% Revenue Bonds (Appalachian
State University Student Center)/(MBIA Insured), 7/15/2014 AAA 1,359,537
-----------------------------------------------------------------------
1,150,000 Charlotte--Mecklenberg Hospital Authority, NC,
5.75%-6.25% Health Care System Revenue Refunding
Bonds, 1/1/2012-1/1/2020 AA 1,190,250
-----------------------------------------------------------------------
1,650,000 Charlotte, NC, 6.20% 6/1/2017 AAA 1,820,777
-----------------------------------------------------------------------
1,000,000 Charlotte, NC, 5.20% Public Improvement Notes, 2/1/2010 AAA 1,036,464
-----------------------------------------------------------------------
3,650,000 Charlotte, NC, 5.25% Partnership (Convention Facilities) (Series
C)/(AMBAC Insured), 12/1/2013-12/1/2020 AAA 3,643,922
-----------------------------------------------------------------------
2,000,000 Concord, NC, 5.75% Utilities System Revenue Bonds, (Callable 12/1/2003
@102), 12/1/2017 AAA 2,092,348
-----------------------------------------------------------------------
800,000 Cumberland County, NC, Hospital Facility, 5.50% Revenue Refunding Bonds
(MBIA Insured), 10/1/2014 AAA 816,876
-----------------------------------------------------------------------
960,000 Duplin County, NC, 5.50% (MBIA Insured)/(Callable
4/1/2003 @102), 4/1/2012-4/1/2013 AAA 1,009,558
-----------------------------------------------------------------------
2,475,000 Durham County, NC, 5.20% GO Bonds (Callable 3/1/2002 @102), 2/1/2008 AAA 2,585,724
-----------------------------------------------------------------------
1,040,000 East Carolina University, NC, 5.50%, 5/1/2016 A 1,053,928
-----------------------------------------------------------------------
2,005,000 Greensboro, NC, 5.25%-6.30% Public Improvement UT Bonds,
5/1/2009-3/1/2010 AAA 2,129,309
-----------------------------------------------------------------------
635,000 Guilford County, NC, 5.40% Public Improvement Sewer & Water Bonds,
4/1/2010 AA1 662,998
-----------------------------------------------------------------------
1,000,000 Lower Cape Fear Water & Sewer, 5.50% Revenue Bonds,
3/1/2008 (Subject to AMT) A 1,033,103
-----------------------------------------------------------------------
3,000,000 Martin County, NC, Individual Facilities Authority, 5.65% (Solid Waste
Wyerhauser Co.), 12/1/2023 A 3,025,737
-----------------------------------------------------------------------
1,000,000 New Hanover County, NC, Hospital Revenue Bonds 4.75% (New Hanover
Regional Medical Center)/(AMBAC Insured), 10/1/2023 AAA 922,245
-----------------------------------------------------------------------
1,000,000 North Carolina Eastern Municipal Power Agency, 6.125% Revenue Refunding
Bonds (Series B), 1/1/2009 A 1,078,732
-----------------------------------------------------------------------
1,000,000 North Carolina Eastern Municipal Power Agency, 6.40% (Series
A)/(Callable 1/1/2003 @102), 1/1/2021 A 1,074,400
-----------------------------------------------------------------------
2,500,000 North Carolina Eastern Municipal Power Agency, 6.00%,
1/1/2022 A 2,673,790
-----------------------------------------------------------------------
</TABLE>
FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------- ----------------------------------------------------------------------- ----------- --------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------------------
$ 1,000,000 North Carolina Eastern Municipal Power Agency, 6.00% Revenue Refunding
Certificates (AMBAC Insured), 1/1/2018 AAA $ 1,084,708
-----------------------------------------------------------------------
1,750,000 North Carolina Eastern Municipal Power Agency, 7.00% Refunding Bonds
(Series C), 1/1/2013 A 2,066,223
-----------------------------------------------------------------------
450,000 North Carolina Medical Care Commission for Rex Hospital, NC,
6.125%-6.25% Hospital Revenue Bonds, (Callable
6/1/2003 @102), 6/1/2010-6/1/2017 A+ 482,927
-----------------------------------------------------------------------
1,800,000 North Carolina Medical Care Commission Hospital Revenue, NC, 5.50%
Revenue Refunding Bonds (Presbyterian Health Service), 10/1/2020 AA 1,831,025
-----------------------------------------------------------------------
500,000 North Carolina Medical Care Commission Hospital Revenue, NC, 5.20%
(Moore Regional Hospital), 10/1/2013 A 498,124
-----------------------------------------------------------------------
2,000,000 North Carolina Medical Care Commission Hospital Revenue, NC, 5.25%
(Wesley Long Community Hospital)/(AMBAC Insured), 10/1/2017 AAA 2,003,308
-----------------------------------------------------------------------
1,500,000 North Carolina Medical Care Commission Hospital Revenue, NC, 5.375%
(Scotland Memorial Hospital), 10/1/2011 AA 1,472,943
-----------------------------------------------------------------------
250,000 North Carolina Medical Care Commission Hospital Revenue, NC, 6.00%
(Wayne Memorial Hospital)/(AMBAC Insured), (Callable 10/1/2002 @102),
10/1/2021 AAA 264,069
-----------------------------------------------------------------------
1,400,000 North Carolina Medical Care Commission Hospital Revenue, NC, 6.00%
Revenue Refunding Bonds (North Carolina Baptist Hospital), 6/1/2022 AA 1,464,253
-----------------------------------------------------------------------
1,500,000 North Carolina Medical Care Commission Hospital Revenue, NC,
5.50%-6.00% Revenue Refunding Bonds (Carolina Medicorp), (Callable
5/1/2001 @100), 5/1/2015-5/1/2021 AA 1,539,860
-----------------------------------------------------------------------
3,000,000 North Carolina Catawba Municipal Power Agency Pound1, 5.75%-6.00%
Revenue Refunding Bonds (MBIA Insured),
1/1/2010-1/1/2020 AAA 3,171,289
-----------------------------------------------------------------------
600,000 North Carolina Catawba Municipal Power Agency Pound1, 5.75%, 1/1/2015 A 616,104
-----------------------------------------------------------------------
1,800,000 North Carolina Catawba Municipal Power Agency Pound1, 6.20% Revenue
Refunding Bonds (FSA Insured), 1/1/2018 AAA 1,930,629
-----------------------------------------------------------------------
1,000,000 Orange County, NC, Water & Sewer Authority, 5.20% Revenue Bonds,
7/1/2016 AA 1,001,317
-----------------------------------------------------------------------
1,000,000 Piedmont-Triad Airport Authority, 6.75% Revenue Refunding Bonds (MBIA
Insured), 7/1/2016 AAA 1,114,746
-----------------------------------------------------------------------
1,100,000 Puerto Rico Commonwealth, 6.00% Custodial Receipts (FSA Insured),
7/1/2022 AAA 1,194,233
-----------------------------------------------------------------------
2,000,000 Puerto Rico Commonwealth, 5.30%-5.50% Refunding Bonds,
7/1/2004-7/1/2013 A 2,041,890
-----------------------------------------------------------------------
</TABLE>
FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------- ----------------------------------------------------------------------- ----------- --------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------------------
$ 1,250,000 Puerto Rico Commonwealth Highway & Transportation Authority, 5.50%
Revenue Refunding Bonds (Series X),
7/1/2015 A $ 1,258,474
-----------------------------------------------------------------------
500,000 Puerto Rico Telephone Authority, 5.50% Revenue Bonds (Series N),
1/1/2022 A+ 510,345
-----------------------------------------------------------------------
500,000 Richmond County, NC, 5.40% GO Bonds (Callable 2/1/2003 @102,
2/1/2010-2/1/2014 @102) A 519,000
-----------------------------------------------------------------------
1,135,000 University of North Carolina at Ashville, NC, 5.50% University Hospital
Revenue Bonds, 6/1/2014-6/1/2015 AAA 1,178,252
-----------------------------------------------------------------------
285,000 University of North Carolina at Chapel Hill, NC, 6.00% University
Hospital Revenue Bonds (Callable 2/15/2002 @102), 2/15/2024 AA- 300,453
-----------------------------------------------------------------------
1,000,000 Wake County, NC, 5.125% Hospital Revenue Refunding Crossover (MBIA
Insured), 10/1/2026 AAA 975,111
----------------------------------------------------------------------- --------------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST, $55,767,786) 57,728,981
----------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST, $57,867,786) $ 59,828,981\
----------------------------------------------------------------------- --------------
</TABLE>
* See Notes to Portfolio of Investments on page 101.
\ The cost of investments for federal tax purposes amounts to $57,867,786. The
unrealized appreciation of investments on a federal tax basis amounts to
$1,961,195, at December 31, 1993.
Note: The categories of investments are shown as a percentage of net assets
($57,906,646) at December 31, 1993.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond
Assurance Corporation LOC -- Letter(s) of Credit
MBIA -- Municipal Bond Investors
AMT -- Alternative Minimum Tax Assurance
FSA -- Financial Security Assurance
UT -- Unlimited Tax
GO -- General Obligation
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
The municipal bonds rated by Moody's Investors Service, Inc. ("Moody's") in
which the Fund may invest are rated Aaa, Aa, A, or Baa. Municipal bonds rated
Aaa are judged to be of the "best quality." The rating of Aa is assigned to
municipal bonds which are of "high quality by all standards," but as to which
margins of protection or other elements make long-term risks appear somewhat
larger than Aaa-rated municipal bonds. The Aaa and Aa-rated municipal bonds
comprise what are generally known as "high-grade bonds." Municipal bonds which
are rated A by Moody's possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A-rated municipal bonds are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in
the future. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this category. Bonds
which are rated Baa are considered medium grade obligations, i.e., they are
neither highly protected nor poorly secured. The letter ratings carry numerical
modifiers with 1 indicating the higher end of the rating category,
2 indicating the mid-range, and 3 indicating the lower end of the rating
category.
The municipal bonds rated by Standard & Poor's Corporation ("S&P") in which the
Fund may invest are rated AAA, AA, A, or BBB. Municipal bonds rated AAA are
"obligations of the highest quality." The rating AA is accorded issues with
investment characteristics "only slightly less marked than those of the prime
quality issues." The category of A describes "the third strongest capacity for
payment of debt service." Principal and interest payments on bonds in this
category are regarded as safe. It differs from the two higher ratings because,
with respect to general obligation bonds, there is some weakness, either in the
local economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issue to meet debt
obligations at some future date. With respect to revenue bonds, debt service
coverage is good, but not exceptional. Stability of the pledged revenues could
show some variations because of increased competition or economic influences on
revenues. Basic security provisions, while satisfactory, are less stringent.
Bonds which are rated BBB are considered medium grade obligations, i.e., the
lowest investment grade security rating. These ratings may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR indicates the securities are not currently rated by Moody's or S&P. However,
management considers them to be of equivalent quality to the rated securities
the Fund purchases.
Bonds for which the security depends upon the completion of some act or the
fulfillment of some condition are rated conditionally.
FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (Note 2A)
(identified cost $57,867,786; tax cost $57,867,786) $ 59,828,981
- ---------------------------------------------------------------------------------------------------
Interest receivable 981,383
- ---------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 775,709
- ---------------------------------------------------------------------------------------------------
Deferred expenses (Note 2G) 37,673
- --------------------------------------------------------------------------------------------------- --------------
Total assets 61,623,746
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased $ 3,472,522
- ------------------------------------------------------------------------------------
Payable for Fund shares redeemed 60,385
- ------------------------------------------------------------------------------------
Dividends payable 56,480
- ------------------------------------------------------------------------------------
Payable to Adviser (Note 5) 11,044
- ------------------------------------------------------------------------------------
Accrued expenses 116,669
- ------------------------------------------------------------------------------------ -------------
Total liabilities 3,717,100
- --------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 5,456,745 shares of beneficial interest outstanding $ 57,906,646
- --------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $ 55,945,451
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 1,961,195
- --------------------------------------------------------------------------------------------------- --------------
Total $ 57,906,646
- --------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE:
- ---------------------------------------------------------------------------------------------------
Class B Investment Shares (net assets of $12,739,133 / 1,200,415 shares of beneficial interest
outstanding) $10.61
- --------------------------------------------------------------------------------------------------- --------------
Class C Investment Shares (net assets of $45,167,513 / 4,256,330 shares of beneficial interest
outstanding) $10.61
- --------------------------------------------------------------------------------------------------- --------------
OFFERING PRICE PER SHARE:
- ---------------------------------------------------------------------------------------------------
Class B Investment Shares (100/96 of $10.61) $11.05*
- --------------------------------------------------------------------------------------------------- --------------
Class C Investment Shares $10.61
- --------------------------------------------------------------------------------------------------- --------------
REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
Class B Investment Shares $10.61
- --------------------------------------------------------------------------------------------------- --------------
Class C Investment Shares (96/100 of $10.61) $10.19**
- --------------------------------------------------------------------------------------------------- --------------
</TABLE>
* See "What Shares Cost" in the prospectus.
** See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 11, 1993 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 1,790,446
- -----------------------------------------------------------------------------------------------------
Expenses--
- -----------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 170,496
- ----------------------------------------------------------------------------------------
Trustees' fees 400
- ----------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 48,493
- ----------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 83,995
- ----------------------------------------------------------------------------------------
Distribution services fee (Note 5) 216,917
- ----------------------------------------------------------------------------------------
Legal fees 4,819
- ----------------------------------------------------------------------------------------
Printing and postage 14,234
- ----------------------------------------------------------------------------------------
Insurance premiums 6,467
- ----------------------------------------------------------------------------------------
Miscellaneous 10,123
- ---------------------------------------------------------------------------------------- -----------
Total expenses 555,944
- ----------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 170,496
- ---------------------------------------------------------------------------
Waiver of administrative personnel and services fee (Note 5) 48,493
- ---------------------------------------------------------------------------
Waiver of distribution services fee (Note 5) 15,339
- ---------------------------------------------------------------------------
Reimbursement of other operating expenses (Note 5) 88,757 323,085
- --------------------------------------------------------------------------- ----------- -----------
Net expenses 232,859
- ----------------------------------------------------------------------------------------------------- -------------
Net investment income 1,557,587
- ----------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis)-- 186,359
- -----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 1,961,195
- ----------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain on investments 2,147,554
- ----------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ 3,705,141
- ----------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
12/31/93*
--------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------------------------
Net investment income $ 1,557,587
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions
($186,359 net gain as computed for federal tax purposes) 186,359
- ---------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments 1,961,195
- --------------------------------------------------------------------------------------------------- --------------
Change in net assets from operations 3,705,141
- --------------------------------------------------------------------------------------------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ---------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ---------------------------------------------------------------------------------------------------
Class B Investment Shares (381,265)
- ---------------------------------------------------------------------------------------------------
Class C Investment Shares (1,176,322)
- ---------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions:
- ---------------------------------------------------------------------------------------------------
Class B Investment Shares (40,911)
- ---------------------------------------------------------------------------------------------------
Class C Investment Shares (145,448)
- --------------------------------------------------------------------------------------------------- --------------
Change in net assets from distributions to shareholders (1,743,946)
- --------------------------------------------------------------------------------------------------- --------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- ---------------------------------------------------------------------------------------------------
Proceeds from sale of shares 59,880,096
- ---------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 1,139,374
- ---------------------------------------------------------------------------------------------------
Cost of shares redeemed (5,074,019)
- --------------------------------------------------------------------------------------------------- --------------
Change in net assets from Fund share transactions 55,945,451
- --------------------------------------------------------------------------------------------------- --------------
Change in net assets 57,906,646
- ---------------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------------
Beginning of period --
- --------------------------------------------------------------------------------------------------- --------------
End of period $ 57,906,646
- --------------------------------------------------------------------------------------------------- --------------
* For the period from January 11, 1993 (commencement of operations) to December 31, 1993.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION U.S. GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--49.3%
- --------------------------------------------------------------------------------------------------
$ 43,118,309 Federal Home Loan Mortgage Corporation, PC 8.00%-10.50%,
2/1/2017-4/1/2022 $ 46,063,758
----------------------------------------------------------------------------------
12,254,818 Federal National Mortgage Association, 7.50%-9.50%,
6/1/2022-7/1/2023 12,899,278
----------------------------------------------------------------------------------
79,743,598 Government National Mortgage Association, 7.00%-10.00%,
2/15/2018-12/15/2023 84,184,722
---------------------------------------------------------------------------------- ---------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (IDENTIFIED COST
$143,056,272) 143,147,758
---------------------------------------------------------------------------------- ---------------
U.S. TREASURY OBLIGATIONS--48.4%
- --------------------------------------------------------------------------------------------------
U.S. TREASURY BONDS--24.0%
----------------------------------------------------------------------------------
59,380,000 8.125%-8.875%, 8/15/2000-8/15/2019 69,611,735
----------------------------------------------------------------------------------
U.S. TREASURY NOTES--24.4%
----------------------------------------------------------------------------------
62,600,000 7.875%-9.375%, 4/15/96-8/15/2000 70,844,681
---------------------------------------------------------------------------------- ---------------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $141,501,324) 140,456,416
---------------------------------------------------------------------------------- ---------------
*REPURCHASE AGREEMENT--0.06%
- --------------------------------------------------------------------------------------------------
186,000 Donaldson, Lufkin & Jenrette Securities Corp., 3.20%,
dated 12/31/93, due 1/3/94 (at amortized cost)/(Note 2B) 186,000
---------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS (IDENTIFIED COST $284,743,596) $ 283,790,174\
---------------------------------------------------------------------------------- ---------------
</TABLE>
PC -- Participation Certificate
* Repurchase agreement is fully collateralized by U.S. government and/or agency
obligations based on market prices at the date of the portfolio.
\ The cost for federal tax purposes amounts to $284,743,596. The net unrealized
depreciation of investments on a federal tax basis amounts to $953,422, which
is comprised of $574,502 appreciation and $1,527,924 depreciation at December
31, 1993.
Note: The categories of investments are shown as a percentage of net assets
($290,033,108) at December 31, 1993.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION U.S. GOVERNMENT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified cost and tax cost $284,743,596) $ 283,790,174
- --------------------------------------------------------------------------------------------------
Cash 783
- --------------------------------------------------------------------------------------------------
Interest receivable 4,072,612
- --------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 3,800,929
- --------------------------------------------------------------------------------------------------
Deferred expenses (Note 2G) 119,951
- -------------------------------------------------------------------------------------------------- ---------------
Total assets 291,784,449
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Dividends payable 700,879
- -------------------------------------------------------------------------------------
Payable for Fund shares redeemed 610,410
- -------------------------------------------------------------------------------------
Payable to adviser (Note 5) 11,755
- -------------------------------------------------------------------------------------
Accrued expenses 428,297
- ------------------------------------------------------------------------------------- -----------
Total liabilities 1,751,341
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS for 28,864,613 shares of beneficial interest outstanding $ 290,033,108
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 292,964,932
- --------------------------------------------------------------------------------------------------
Unrealized depreciation of investments (953,422)
- --------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (1,978,402)
- -------------------------------------------------------------------------------------------------- ---------------
Total $ 290,033,108
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares (net assets of $38,851,452 / 3,866,686 shares of
beneficial interest outstanding) $10.05
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares (net assets of $236,696,105 / 23,556,315 shares of beneficial interest
outstanding) $10.05
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares (net assets of $14,485,551 / 1,441,612 shares of beneficial interest outstanding)
$10.05
- -------------------------------------------------------------------------------------------------- ---------------
OFFERING PRICE PER SHARE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares (100/96 of $10.05) $10.47*
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares $10.05
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares $10.05
- -------------------------------------------------------------------------------------------------- ---------------
REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares $10.05
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares (96/100 of $10.05) $ 9.65**
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares $ 10.05
- -------------------------------------------------------------------------------------------------- ---------------
</TABLE>
* See "What Shares Cost" in the prospectus.
** See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION U.S. GOVERNMENT PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 11, 1993 (COMMENCEMENT OF OPERATIONS) TO
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 12,243,396
- ---------------------------------------------------------------------------------------------------
Expenses--
- ---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 802,441
- ------------------------------------------------------------------------------------
Trustees' fees 900
- ------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 139,691
- ------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 235,001
- ------------------------------------------------------------------------------------
Distribution services fee (Note 5) 1,068,084
- ------------------------------------------------------------------------------------
Legal fees 1,324
- ------------------------------------------------------------------------------------
Printing and postage 8,927
- ------------------------------------------------------------------------------------
Insurance premiums 8,569
- ------------------------------------------------------------------------------------
Miscellaneous 9,889
- ------------------------------------------------------------------------------------ -------------
Total expenses 2,274,826
- ------------------------------------------------------------------------------------
Deduct--
- ------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 465,195
- -----------------------------------------------------------------------
Waiver of administrative personnel and services fee (Note 5) 30,827 496,022
- ----------------------------------------------------------------------- ----------- -------------
Net expenses 1,778,804
- --------------------------------------------------------------------------------------------------- --------------
Net investment income 10,464,592
- --------------------------------------------------------------------------------------------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (identified cost basis)-- (1,978,402)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (953,422)
- --------------------------------------------------------------------------------------------------- --------------
Net realized and unrealized loss on investments (2,931,824)
- --------------------------------------------------------------------------------------------------- --------------
Change in net assets resulting from operations $ 7,532,768
- --------------------------------------------------------------------------------------------------- --------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION U.S. GOVERNMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
12/31/93*
---------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------------------------------
Net investment income (Note 2C) $ 10,464,592
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($1,978,402 net loss as computed for federal
tax purposes) (1,978,402)
- --------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) on investments (953,422)
- -------------------------------------------------------------------------------------------------- ---------------
Change in net assets from operations 7,532,768
- -------------------------------------------------------------------------------------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- --------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares (1,599,495)
- --------------------------------------------------------------------------------------------------
Class C Investment Shares (8,671,548)
- --------------------------------------------------------------------------------------------------
Trust Shares (193,549)
- -------------------------------------------------------------------------------------------------- ---------------
Change in net assets from distributions to shareholders (10,464,592)
- -------------------------------------------------------------------------------------------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- --------------------------------------------------------------------------------------------------
Proceeds from sale of shares 319,579,907
- --------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 5,610,882
- --------------------------------------------------------------------------------------------------
Cost of shares redeemed (32,225,857)
- -------------------------------------------------------------------------------------------------- ---------------
Change in net assets from Fund share transactions 292,964,932
- -------------------------------------------------------------------------------------------------- ---------------
Change in net assets 290,033,108
- --------------------------------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------------------------------
Beginning of period --
- -------------------------------------------------------------------------------------------------- ---------------
End of period $ 290,033,108
- -------------------------------------------------------------------------------------------------- ---------------
* For the period from January 11, 1993 (commencement of operations) to December 31, 1993.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FIRST UNION VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
COMMON STOCKS--95.2%
- --------------------------------------------------------------------------------------------------
BANKING & FINANCE--6.1%
----------------------------------------------------------------------------------
735,000 Boatmen's Bancshares, Inc. $ 21,958,125
----------------------------------------------------------------------------------
875,000 National City Corp. 21,437,500
---------------------------------------------------------------------------------- ---------------
Total 43,395,625
---------------------------------------------------------------------------------- ---------------
BASIC INDUSTRY--1.5%
----------------------------------------------------------------------------------
215,000 duPont (E.I.) de Nemours & Co. 10,373,750
---------------------------------------------------------------------------------- ---------------
CAPITAL GOODS--10.2%
----------------------------------------------------------------------------------
240,000 Boeing Co. 10,380,000
----------------------------------------------------------------------------------
185,000 Eastman Kodak Co. 10,360,000
----------------------------------------------------------------------------------
455,000 FMC Corp. 21,441,875
----------------------------------------------------------------------------------
82,000 Minnesota Mining & Manufacturing Co. 8,917,500
----------------------------------------------------------------------------------
335,000 Raytheon Co. 22,110,000
---------------------------------------------------------------------------------- ---------------
Total 73,209,375
---------------------------------------------------------------------------------- ---------------
CHEMICALS/PLASTICS--3.5%
----------------------------------------------------------------------------------
415,000 Rohm & Haas Co. 24,692,500
---------------------------------------------------------------------------------- ---------------
COMMUNICATION--1.5%
----------------------------------------------------------------------------------
230,000 Harris Corp. 10,465,000
---------------------------------------------------------------------------------- ---------------
CONSUMER DURABLES--1.6%
----------------------------------------------------------------------------------
180,000 Ford Motor Co. 11,610,000
---------------------------------------------------------------------------------- ---------------
CONSUMER PRODUCTS--9.1%
----------------------------------------------------------------------------------
640,000 American Brands Inc. 21,280,000
----------------------------------------------------------------------------------
445,000 Anheuser Busch 21,860,625
----------------------------------------------------------------------------------
385,000 Philip Morris Cos., Inc. 21,463,750
---------------------------------------------------------------------------------- ---------------
Total 64,604,375
---------------------------------------------------------------------------------- ---------------
CONTAINERS & PACKAGING--3.6%
----------------------------------------------------------------------------------
510,000 Temple Inland 25,691,251
---------------------------------------------------------------------------------- ---------------
ELECTRICAL EQUIPMENT--1.5%
----------------------------------------------------------------------------------
215,000 Eaton Corp. 10,857,500
---------------------------------------------------------------------------------- ---------------
ELECTRONICS--0.7%
----------------------------------------------------------------------------------
276,000 EG & G Inc. 5,062,905
---------------------------------------------------------------------------------- ---------------
ENERGY--12.1%
----------------------------------------------------------------------------------
210,000 Atlantic Richfield Co. 22,102,500
----------------------------------------------------------------------------------
330,000 Exxon Credit Corp. 20,790,000
----------------------------------------------------------------------------------
280,000 Mobil Co. 22,120,000
----------------------------------------------------------------------------------
335,000 Texaco, Inc. 21,649,375
---------------------------------------------------------------------------------- ---------------
Total 86,661,875
---------------------------------------------------------------------------------- ---------------
</TABLE>
FIRST UNION VALUE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR
SHARES VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
FOOD & BEVERAGE--6.2%
----------------------------------------------------------------------------------
470,000 CPC International Inc. $ 22,383,750
----------------------------------------------------------------------------------
600,000 H.J. Heinz Co. 21,525,000
---------------------------------------------------------------------------------- ---------------
Total 43,908,750
---------------------------------------------------------------------------------- ---------------
HEALTHCARE & COSMETICS--6.3%
----------------------------------------------------------------------------------
370,000 Bristol Myers Squibb Co. 21,506,250
----------------------------------------------------------------------------------
175,000 Schering-Plough Corp. 11,987,500
----------------------------------------------------------------------------------
170,000 Warner Lambert Co. 11,475,000
---------------------------------------------------------------------------------- ---------------
Total 44,968,750
---------------------------------------------------------------------------------- ---------------
INDUSTRIAL PRODUCTS--1.7%
----------------------------------------------------------------------------------
250,000 Phelps Dodge Corp. 12,187,500
---------------------------------------------------------------------------------- ---------------
INSURANCE--6.1%
----------------------------------------------------------------------------------
790,000 American General Corp. 22,613,750
----------------------------------------------------------------------------------
570,000 Capital Holding Corp. 21,161,250
---------------------------------------------------------------------------------- ---------------
Total 43,775,000
---------------------------------------------------------------------------------- ---------------
MULTI-INDUSTRY--4.6%
----------------------------------------------------------------------------------
215,000 General Electric Co. 22,548,125
----------------------------------------------------------------------------------
115,000 ITT Corp. 10,493,750
---------------------------------------------------------------------------------- ---------------
Total 33,041,875
---------------------------------------------------------------------------------- ---------------
OFFICE EQUIPMENT--3.2%
----------------------------------------------------------------------------------
550,000 Pitney Bowes, Inc. 22,756,250
---------------------------------------------------------------------------------- ---------------
RETAIL & APPAREL--3.1%
----------------------------------------------------------------------------------
538,900 Melville Corp. 21,892,812
---------------------------------------------------------------------------------- ---------------
TELE-COMMUNICATIONS--3.6%
----------------------------------------------------------------------------------
285,000 Xerox Corp. 25,471,875
---------------------------------------------------------------------------------- ---------------
TRANSPORTATION--3.1%
----------------------------------------------------------------------------------
310,000 Norfolk Southern Corp. 21,855,000
---------------------------------------------------------------------------------- ---------------
UTILITIES--5.9%
----------------------------------------------------------------------------------
355,000 General Public Utilities Corp. 10,960,625
----------------------------------------------------------------------------------
380,000 NICOR, Inc. 10,640,000
----------------------------------------------------------------------------------
520,000 Union Electric Co. 20,410,000
---------------------------------------------------------------------------------- ---------------
Total 42,010,625
---------------------------------------------------------------------------------- ---------------
TOTAL COMMON STOCKS (IDENTIFIED COST $626,244,789) 678,492,593
---------------------------------------------------------------------------------- ---------------
CORPORATE BOND--1.4%
- --------------------------------------------------------------------------------------------------
$ 10,000,000 Nordbanken of North America, Inc., 3.26%, 1/20/94 9,981,190
---------------------------------------------------------------------------------- ---------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $9,982,794) 9,981,190
---------------------------------------------------------------------------------- ---------------
</TABLE>
FIRST UNION VALUE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- ---------------
U.S. TREASURY SECURITIES--3.7%
- --------------------------------------------------------------------------------------------------
$ 25,000,000 U.S. Treasury Notes, 8.50%, 8/15/95 $ 26,726,475
---------------------------------------------------------------------------------- ---------------
TOTAL U.S. TREASURY SECURITIES (IDENTIFIED COST $27,171,875) 26,726,475
---------------------------------------------------------------------------------- ---------------
*REPURCHASE AGREEMENT--0.1%
- --------------------------------------------------------------------------------------------------
534,000 Donaldson, Lufkin & Jenrette Securities Corp., 3.20%, dated
12/31/93, due 1/3/94 (at amortized cost) (Note 2B) 534,000
---------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS (IDENTIFIED COST $663,684,529) $ 715,734,258\
---------------------------------------------------------------------------------- ---------------
</TABLE>
* Repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
\ The cost for federal tax purposes amounts to $664,350,387. The net unrealized
appreciation of investments on a federal tax basis amounts to $51,383,871,
which is comprised of $67,220,033 appreciation and $15,836,162 depreciation at
December 31, 1993.
Note: The categories of investments are shown as a percentage of net assets
($713,023,604) at December 31, 1993.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B) (identified cost
$663,684,529 tax cost $664,350,387) $ 715,734,258
- --------------------------------------------------------------------------------------------------
Dividends and interest receivable 2,246,920
- --------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 2,057,194
- -------------------------------------------------------------------------------------------------- ---------------
Total assets 720,038,372
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for investments purchased $ 5,713,717
- -----------------------------------------------------------------------------------
Payable for Fund shares redeemed 1,021,957
- -----------------------------------------------------------------------------------
Dividends payable 632
- -----------------------------------------------------------------------------------
Accrued expenses and other liabilities 278,462
- ----------------------------------------------------------------------------------- -------------
Total liabilities 7,014,768
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS for 40,445,217 shares of beneficial interest outstanding $ 713,023,604
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 661,741,032
- --------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 52,049,729
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (131,832)
- --------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (Note 3) (635,325)
- -------------------------------------------------------------------------------------------------- ---------------
Total $ 713,023,604
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares (net assets of $189,982,817 / 10,774,671 shares of beneficial interest
outstanding) $17.63
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares (net assets of $59,953,372 / 3,400,580 shares of beneficial interest
outstanding) $17.63
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares (net assets of $463,087,415 / 26,269,966 shares of beneficial interest outstanding)
$17.63
- -------------------------------------------------------------------------------------------------- ---------------
OFFERING PRICE PER SHARE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares (100/96 of $17.63) $18.36*
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares $17.63
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares $17.63
- -------------------------------------------------------------------------------------------------- ---------------
REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------------------------
Class B Investment Shares $17.63
- -------------------------------------------------------------------------------------------------- ---------------
Class C Investment Shares (96/100 of $17.63) $16.92**
- -------------------------------------------------------------------------------------------------- ---------------
Trust Shares $17.63
- -------------------------------------------------------------------------------------------------- ---------------
</TABLE>
* See "What Shares Cost" in the prospectus.
** See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION VALUE PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 2C):
- ---------------------------------------------------------------------------------------------------
Dividends $ 19,853,868
- ---------------------------------------------------------------------------------------------------
Interest 2,044,496
- --------------------------------------------------------------------------------------------------- --------------
Total income 21,898,364
- ---------------------------------------------------------------------------------------------------
Expenses--
- ---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 3,016,457
- ------------------------------------------------------------------------------------
Trustees' fees 8,490
- ------------------------------------------------------------------------------------
Administrative personnel and services (Note 5) 526,836
- ------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 406,765
- ------------------------------------------------------------------------------------
Distribution services fee (Note 5) 694,708
- ------------------------------------------------------------------------------------
Fund share registration costs 65,042
- ------------------------------------------------------------------------------------
Legal fees 19,022
- ------------------------------------------------------------------------------------
Auditing fees 14,525
- ------------------------------------------------------------------------------------
Printing and postage 46,362
- ------------------------------------------------------------------------------------
Insurance premiums 16,315
- ------------------------------------------------------------------------------------
Miscellaneous 6,675
- ------------------------------------------------------------------------------------ -------------
Total expenses 4,821,197
- --------------------------------------------------------------------------------------------------- --------------
Net investment income 17,077,167
- --------------------------------------------------------------------------------------------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis)-- 23,032,837
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 16,353,921
- --------------------------------------------------------------------------------------------------- --------------
Net realized and unrealized gain on investments 39,386,758
- --------------------------------------------------------------------------------------------------- --------------
Change in net assets resulting from operations $ 56,463,925
- --------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1993 1992
---------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------------
Net investment income $ 17,077,167 $ 12,329,287
- -------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions
($23,232,747 and $24,746,734 net gains, respectively,
as computed for federal tax purposes) 23,032,837 24,280,786
- -------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments 16,353,921 569,873
- ------------------------------------------------------------------------------- ---------------- ---------------
Change in net assets from operations 56,463,925 37,179,946
- ------------------------------------------------------------------------------- ---------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- -------------------------------------------------------------------------------
Class B Investment Shares (4,784,997) (3,806,803)
- -------------------------------------------------------------------------------
Class C Investment Shares (669,485) --
- -------------------------------------------------------------------------------
Trust Shares (11,619,935) (8,459,285)
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions:
- -------------------------------------------------------------------------------
Class B Investment Shares (6,052,200) (8,164,524)
- -------------------------------------------------------------------------------
Class C Investment Shares (1,881,290) --
- -------------------------------------------------------------------------------
Trust Shares (15,175,212) (16,009,458)
- -------------------------------------------------------------------------------
Distributions in excess of net investment income:
- -------------------------------------------------------------------------------
Class B Investment Shares (62,803) --
- -------------------------------------------------------------------------------
Class C Investment Shares (123,293) --
- -------------------------------------------------------------------------------
Trust Shares (330,302) --
- ------------------------------------------------------------------------------- ---------------- ---------------
Change in net assets from distributions to shareholders (40,699,517) (36,440,070)
- ------------------------------------------------------------------------------- ---------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -------------------------------------------------------------------------------
Proceeds from sale of shares 305,551,019 131,143,220
- -------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 38,928,569 35,948,496
- -------------------------------------------------------------------------------
Cost of shares redeemed (142,685,153) (79,217,206)
- ------------------------------------------------------------------------------- ---------------- ---------------
Change in net assets from Fund share transactions 201,794,435 87,874,510
- ------------------------------------------------------------------------------- ---------------- ---------------
Change in net assets 217,558,843 88,614,386
- -------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------
Beginning of period 495,464,761 406,850,375
- ------------------------------------------------------------------------------- ---------------- ---------------
End of period $ 713,023,604 $ 495,464,761
- ------------------------------------------------------------------------------- ---------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------ ---------------------------------------------------------------------- ------------- -------------
LONG-TERM MUNICIPAL SECURITIES--96.6%
- ------------------------------------------------------------------------------------
PUERTO RICO--3.5%
----------------------------------------------------------------------
$ 65,000 Puerto Rico Commonwealth, 6.625%, Highway & Transportation Authority,
7/1/2018 BAA-1/A $ 72,716
----------------------------------------------------------------------
50,000 Puerto Rico Commonwealth, 5.375% GO Bonds, 7/1/2006 BAA-1/A 51,295
----------------------------------------------------------------------
VIRGINIA--84.0%
----------------------------------------------------------------------
100,000 Arlington County, VA, 5.30% IDA Hospital, 9/1/2015 A-1 97,974
----------------------------------------------------------------------
100,000 Arlington County, VA, 5.00% IDA Hospital, 9/1/2021 A-1 93,736
----------------------------------------------------------------------
75,000 Chesapeake, VA, 5.00% GO Bonds, 12/1/2004 AA 77,679
----------------------------------------------------------------------
45,000 Chesapeake, VA, 5.30%, Chesapeake General Hospital Authority (MBIA
Insured), 7/1/2008 AAA 45,776
----------------------------------------------------------------------
100,000 Chesapeake, VA, Hospital, 5.25% (MBIA Insured), 7/1/2018 AAA 99,048
----------------------------------------------------------------------
50,000 Culpeper, VA, 5.45%, 6/1/2010 A 50,293
----------------------------------------------------------------------
100,000 Danville, VA, 5.70%, 4/1/2012 A 103,210
----------------------------------------------------------------------
50,000 Fairfax County, VA, 5.40%, 5/1/2011 AAA 51,449
----------------------------------------------------------------------
200,000 Fairfax, VA, 5.00% IDA Inova Hospital, 8/15/2023 AA/AA 188,229
----------------------------------------------------------------------
50,000 Falls Church, VA, 5.45%, 8/1/2012 AA 51,596
----------------------------------------------------------------------
100,000 Isle Wright County, VA, 5.10%, 8/1/2009 A 99,042
----------------------------------------------------------------------
25,000 Isle Wright County, VA, 5.20%, 8/1/2010 A 24,698
----------------------------------------------------------------------
75,000 Loudon County, VA, 6.25%, Water & Sewer Authority (FGIC Insured),
1/1/2016 AAA 82,174
----------------------------------------------------------------------
75,000 Lynchburg, VA, 5.80% GO Bonds, 3/1/2011 AA 79,297
----------------------------------------------------------------------
50,000 Norfolk, VA, 5.00% GO Bonds, 6/1/2006 AA 50,878
----------------------------------------------------------------------
75,000 Portsmouth, VA, 5.50%, 8/1/2013 A-1/AA- 75,572
----------------------------------------------------------------------
55,000 Prince William County, VA, 5.25% GO Bonds, 8/1/2014 AA 55,139
----------------------------------------------------------------------
100,000 Prince William County, VA, 5.00% Service Authority (FGIC Insured),
7/1/2013 AAA 96,735
----------------------------------------------------------------------
100,000 Prince William County, VA, 5.00% Service Authority (FGIC Insured),
7/1/2021 AAA 94,989
----------------------------------------------------------------------
100,000 Richmond, VA, 5.50% GO Bonds, 1/15/2022 AA 101,486
----------------------------------------------------------------------
75,000 Rivanna, VA, 4.80%, Water & Sewer Authority, 10/1/2015 AA 72,249
----------------------------------------------------------------------
100,000 Roanoke County, VA, 5.50%, 6/1/2013 AA/AA 102,727
----------------------------------------------------------------------
100,000 Roanoke County, VA, 5.125%, Water System Revenue Bonds (FGIC Insured),
7/1/2013 AAA/AAA 98,186
----------------------------------------------------------------------
65,000 Southeastern, VA, 7.00%, Public Service Authority (BIGI Insured),
7/1/2013 AAA 75,070
----------------------------------------------------------------------
</TABLE>
FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
OR SHARES (NOTE 7) VALUE
<C> <S> <C> <C>
- ------------ ---------------------------------------------------------------------- ------------- -------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------------------
VIRGINIA--CONTINUED
----------------------------------------------------------------------
$ 100,000 University of Virginia, 5.20%, 6/1/2012 AA/AA+ $ 100,509
----------------------------------------------------------------------
100,000 Virginia Beach, VA, 6.00%, Virginia Beach General Hospital
Project, 2/15/2012 A1/A+ 108,448
----------------------------------------------------------------------
100,000 Virginia State, 6.00% GO Bonds, 6/1/2015 AAA 107,937
----------------------------------------------------------------------
100,000 Virginia State, 5.40%, Public Building Authority, 8/1/2013 AA/AA 102,771
----------------------------------------------------------------------
100,000 Virginia State, 5.75%, Public Building Authority, 8/1/2012 AA 105,117
----------------------------------------------------------------------
200,000 Virginia State, 5.25%, Public School Authority, 1/1/2011 AA 201,239
----------------------------------------------------------------------
100,000 Virginia State, 5.40%, Public School Authority (MBIA Insured),
8/1/2009 AAA 102,243
----------------------------------------------------------------------
75,000 Virginia State, 5.125%, Water Resource Authority, 5/1/2013 AA 73,819
----------------------------------------------------------------------
100,000 Virginia State, 6.00%,Transportation Board Revenue Bond,
5/15/2019 AA 105,934
----------------------------------------------------------------------
WASHINGTON, D.C.--5.7%
----------------------------------------------------------------------
$ 200,000 Washington, D.C., 5.25%, Metropolitan Area Transit,
7/1/2014 AAA $ 201,062
---------------------------------------------------------------------- -------------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST, $3,274,289) 3,300,322
---------------------------------------------------------------------- -------------
MUTUAL FUND SHARES--3.4%
- ------------------------------------------------------------------------------------
120,000 Dreyfus Municipal Cash Management Plus (at net asset value) NR 120,000
---------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $3,394,289) $ 3,420,322\
---------------------------------------------------------------------- -------------
</TABLE>
* See Notes to Portfolio of Investments on page 117.
\ The cost of investments for federal tax purposes amounts to $3,394,289. The
net unrealized appreciation of investments on a federal tax basis amounts to
$26,033, which is comprised of $39,144 appreciation and $13,111 depreciation
at December 31, 1993.
Note: The categories of investments are shown as a percentage of net assets
($3,540,636) at December 31, 1993.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
BIGI -- Bond Investors Guaranty, Inc. IDA -- Industrial Development Authority
FGIC -- Financial Guaranty Insurance
Company MBIA -- Municipal Bond Investors Assurance
PSA -- Public Service Authority
GO -- General Obligations
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
The municipal bonds rated by Moody's Investors Service, Inc. ("Moody's") in
which the Fund may invest are rated Aaa, Aa, A, or Baa. Municipal bonds rated
Aaa are judged to be of the "best quality." The rating of Aa is assigned to
municipal bonds which are of "high quality by all standards," but as to which
margins of protection or other elements make long-term risks appear somewhat
larger than Aaa-rated municipal bonds. The Aaa and Aa-rated municipal bonds
comprise what are generally known as "high-grade bonds." Municipal bonds which
are rated A by Moody's possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A-rated municipal bonds are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in
the future. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this category. Bonds
which are rated Baa are considered medium grade obligations, i.e., they are
neither highly protected nor poorly secured. The letter ratings carry numerical
modifiers with 1 indicating the higher end of the rating category, 2 indicating
the mid-range, and 3 indicating the lower end of the rating category.
The municipal bonds rated by Standard & Poor's Corporation ("S&P") in which the
Fund may invest are rated AAA, AA, A, or BBB. Municipal bonds rated AAA are
"obligations of the highest quality." The rating AA is accorded issues with
investment characteristics "only slightly less marked than those of the prime
quality issues." The category of A describes "the third strongest capacity for
payment of debt service." Principal and interest payments on bonds in this
category are regarded as safe. It differs from the two higher ratings because,
with respect to general obligation bonds, there is some weakness, either in the
local economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issue to meet debt
obligations at some future date. With respect to revenue bonds, debt service
coverage is good, but not exceptional. Stability of the pledged revenues could
show some variations because of increased competition or economic influences on
revenues. Basic security provisions, while satisfactory, are less stringent.
Bonds which are rated BBB are considered medium grade obligations, i.e., the
lowest investment grade security rating. These ratings may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR indicates the securities are not currently rated by Moody's or S&P. However,
management considers them to be of equivalent quality to the rated securities
the Fund purchases.
Bonds for which the security depends upon the completion of some act or the
fulfillment of some condition are rated conditionally.
FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (Note 2A)
(identified cost and tax cost $3,394,289) $ 3,420,322
- ---------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 84,656
- ---------------------------------------------------------------------------------------------------
Interest receivable 57,560
- ---------------------------------------------------------------------------------------------------
Deferred expenses (Note 2G) 3,741
- --------------------------------------------------------------------------------------------------- -------------
Total assets 3,566,279
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for fund shares redeemed $ 2,602
- ----------------------------------------------------------------------------------------
Dividends payable 1,452
- ----------------------------------------------------------------------------------------
Accrued expenses 21,589
- ---------------------------------------------------------------------------------------- ---------
Total liabilities 25,643
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 347,468 shares of beneficial interest outstanding $ 3,540,636
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $ 3,514,603
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 26,033
- --------------------------------------------------------------------------------------------------- -------------
Total $ 3,540,636
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE:
- ---------------------------------------------------------------------------------------------------
Class B Investment Shares (net assets of $1,305,564 / 128,122 shares of beneficial interest
outstanding) $10.19
- --------------------------------------------------------------------------------------------------- -------------
Class C Investment Shares (net assets of $2,235,072 / 219,346 shares of beneficial interest
outstanding) $10.19
- --------------------------------------------------------------------------------------------------- -------------
OFFERING PRICE PER SHARE:
- ---------------------------------------------------------------------------------------------------
Class B Investment Shares ( 100/96 of $10.19) $10.61*
- --------------------------------------------------------------------------------------------------- -------------
Class C Investment Shares $10.19
- --------------------------------------------------------------------------------------------------- -------------
REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
Class B Investment Shares $10.19
- --------------------------------------------------------------------------------------------------- -------------
Class C Investment Shares ( 96/100 of $10.19) $9.78**
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
*See "What Shares Cost" in the prospectus.
**See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 2, 1993 (COMMENCEMENT OF OPERATIONS) TO
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 42,418
- -----------------------------------------------------------------------------------------------------
Expenses--
- -----------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 4,283
- ------------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 24,931
- ------------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 19,108
- ------------------------------------------------------------------------------------------
Distribution services fee (Note 5) 4,593
- ------------------------------------------------------------------------------------------
Legal fees 1,993
- ------------------------------------------------------------------------------------------
Printing and postage 6,275
- ------------------------------------------------------------------------------------------
Insurance 6,036
- ------------------------------------------------------------------------------------------
Miscellaneous 1,631
- ------------------------------------------------------------------------------------------ ---------
Total expenses 68,850
- ------------------------------------------------------------------------------------------
Deduct--
- ------------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 4,283
- -------------------------------------------------------------------------------
Waiver of administrative personnel and services fee (Note 5) 24,931
- -------------------------------------------------------------------------------
Reimbursement of other operating expenses (Note 5) 35,043 64,257
- ------------------------------------------------------------------------------- --------- ---------
Net expenses 4,593
- ----------------------------------------------------------------------------------------------------- ---------
Net investment income 37,825
- ----------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 26,033
- ----------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 63,858
- ----------------------------------------------------------------------------------------------------- ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
12/31/93*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------------------
Net investment income $ 37,825
- -----------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) on investments 26,033
- ----------------------------------------------------------------------------------------- -----------------------
Change in net assets resulting from operations 63,858
- ----------------------------------------------------------------------------------------- -----------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- -----------------------------------------------------------------------------------------
Class B Investment Shares (16,985)
- -----------------------------------------------------------------------------------------
Class C Investment Shares (20,840)
- ----------------------------------------------------------------------------------------- -----------------------
Change in net assets from distributions to shareholders (37,825)
- ----------------------------------------------------------------------------------------- -----------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -----------------------------------------------------------------------------------------
Proceeds from sale of shares 3,778,173
- -----------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 33,132
- -----------------------------------------------------------------------------------------
Cost of shares redeemed (296,702)
- ----------------------------------------------------------------------------------------- -----------------------
Change in net assets from Fund share transactions 3,514,603
- ----------------------------------------------------------------------------------------- -----------------------
Change in net assets 3,540,636
- -----------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------
Beginning of period --
- ----------------------------------------------------------------------------------------- -----------------------
End of period $ 3,540,636
- ----------------------------------------------------------------------------------------- -----------------------
</TABLE>
*For the period from July 2, 1993 (commencement of operations) to December 31,
1993.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
TRUST SHARES INVESTMENT SHARES
----------------------------------- ------------------------------------------------------------
PERIOD ENDED PERIOD ENDED
----------------------------------- ------------------------------------------------------------
12/31/93 12/31/92 12/31/91* 12/31/93 12/31/92 12/31/91 12/31/90\ 3/31/90
-------- -------- --------- -------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------
INCOME FROM INVESTMENT
OPERATIONS
- -----------------------
Net investment income 0.03 0.03 0.06 0.03 0.03 0.05 0.06 0.09
- ----------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
- -----------------------
Dividends to
shareholders from net
investment income (0.03) (0.03) (0.06) (0.03) (0.03) (0.05) (0.06) (0.09)
- ----------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL RETURN(A) 2.99% 3.43% 5.91% 2.83% 3.24% 5.68% 6.07% 8.96%
- -----------------------
RATIOS TO AVERAGE NET
ASSETS
- -----------------------
Expenses 0.47% 0.64% 0.58%(b) 0.62% 0.82% 0.73% 0.42%(b) 0.35%
- -----------------------
Net investment income 2.96% 3.34% 5.24%(b) 2.81% 3.18% 5.45% 7.85%(b) 8.50%
- -----------------------
Expense waiver/
reimbursement(c) 0.24% 0.11% 0.26%(b) 0.39% 0.24% 0.33% 0.66%(b) 0.51%
- -----------------------
SUPPLEMENTAL DATA
- -----------------------
Net assets, end of
period (000 omitted) $9,115 $9,243 $5,550 $88,171 $64,794 $64,457 $32,216 $21,898
- -----------------------
<CAPTION>
3/31/89\\
---------
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00
- -----------------------
INCOME FROM INVESTMENT
OPERATIONS
- -----------------------
Net investment income 0.02
- ----------------------- -----------
LESS DISTRIBUTIONS
- -----------------------
Dividends to
shareholders from net
investment income (0.02)
- ----------------------- -----------
NET ASSET VALUE,
END OF PERIOD $ 1.00
- ----------------------- -----------
TOTAL RETURN(A) 2.12%
- -----------------------
RATIOS TO AVERAGE NET
ASSETS
- -----------------------
Expenses 0.35%(b)
- -----------------------
Net investment income 8.85%(b)
- -----------------------
Expense waiver/
reimbursement(c) 0.23%(b)
- -----------------------
SUPPLEMENTAL DATA
- -----------------------
Net assets, end of
period (000 omitted) $6,850
- -----------------------
</TABLE>
* Reflects operations for the period from January 3, 1991
(commencement of operations) to December 31, 1991.
\ Nine months ended December 31, 1990.
\\ Reflects operations for the period from January 3, 1989 (commencement of
operations) to March 31, 1989.
(a) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(b) Computed on an annualized basis.
(c) The voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements)
FIRST UNION TAX FREE MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
TRUST SHARES CLASS B INVESTMENT SHARES
----------------------------------- ------------------------------------------------------------
PERIOD ENDED PERIOD ENDED
----------------------------------- ------------------------------------------------------------
12/31/93 12/31/92 12/31/91* 12/31/93 12/31/92 12/31/91 12/31/90\ 3/31/90
-------- -------- --------- -------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------
Net investment income 0.02 0.03 0.01 0.02 0.03 0.04 0.04 0.06
- ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
- ------------------------
Dividends to
shareholders from net
investment income (0.02) (0.03) (0.01) (0.02) (0.03) (0.04) (0.04) (0.06)
- ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL RETURN** 2.38% 2.78% 4.49% 2.16% 2.57% 4.20% 4.17% 5.81%
- ------------------------
RATIOS TO AVERAGE NET
ASSETS
- ------------------------
Expenses 0.29% 0.51% 0.63%(b) 0.52% 0.69% 0.77% 0.65%(b) 0.65%
- ------------------------
Net investment income 2.37% 2.76% 4.30%(b) 2.16% 2.51% 4.09% 5.45%(b) 5.71%
- ------------------------
Expense waiver/
reimbursement(a) 0.24% 0.09% 0.22%(b) 0.30% 0.20% 0.22% 0.19%(b) 0.06%
- ------------------------
SUPPLEMENTAL DATA
- ------------------------
Net assets, end of
period (000 omitted) $3,377 $17,084 $37,546 $278,451 $184,211 $86,481 $48,603 $36,688
- ------------------------
<CAPTION>
3/31/89\\
---------
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00
- ------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------
Net investment income 0.01
- ------------------------ -----------
LESS DISTRIBUTIONS
- ------------------------
Dividends to
shareholders from net
investment income (0.01)
- ------------------------ -----------
NET ASSET VALUE,
END OF PERIOD $ 1.00
- ------------------------ -----------
TOTAL RETURN** 1.28%
- ------------------------
RATIOS TO AVERAGE NET
ASSETS
- ------------------------
Expenses 0.89%(b)
- ------------------------
Net investment income 5.53%(b)
- ------------------------
Expense waiver/
reimbursement(a) 0.00%(b)
- ------------------------
SUPPLEMENTAL DATA
- ------------------------
Net assets, end of
period (000 omitted) $37,207
- ------------------------
</TABLE>
* Reflects operations for the period from January 3, 1991 (commencement of
operations) to December 31, 1991.
** Based on net asset value, which does not reflect sales load or contingent
deferred sales charge, if applicable.
\ Nine months ended December 31, 1990.
\\ Reflects operations for the period from January 3, 1989 (commencement of
operations) to March 31, 1989.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION TREASURY MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
CLASS B
TRUST SHARES INVESTMENT SHARES
--------------------------- ---------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------- ---------------------------
1993 1992 1991* 1993 1992 1991*
---- ---- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------
Net investment income 0.03 0.04 0.05 0.03 0.03 0.04
- -------------------------------------------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- --------------------------------------------
Dividends to shareholders from net
investment income (0.03) (0.04) (0.05) (0.03) (0.03) (0.04)
- -------------------------------------------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN** 3.04% 3.67% 4.66% 2.73% 3.36% 4.46%
- --------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------
Expenses 0.18% 0.17% 0.20%(b) 0.48% 0.48% 0.47%(b)
- --------------------------------------------
Net investment income 3.00% 3.61% 5.53%(b) 2.70% 3.22% 4.95%(b)
- --------------------------------------------
Expense waiver/reimbursement(a) 0.34% 0.35% 0.32%(b) 0.34% 0.34% 0.61%(b)
- --------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------
Net assets, end of period (000 omitted) $366,109 $286,230 $265,109 $261,475 $208,792 $99,549
- --------------------------------------------
</TABLE>
* For the period from March 6, 1991 (commencement of operations) to December
31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
TRUST SHARES CLASS B INVESTMENT SHARES
------------------------------------ -------------------------------------
YEAR ENDED YEAR ENDED
------------------------------------ -------------------------------------
12/31/93 12/31/92 12/31/91** 12/31/93 12/31/92 12/31/91***
-------- -------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.41 $ 11.02 $ 10.00 $ 11.41 $ 11.02 $ 10.00
- ------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------
Net investment income 0.45 0.46 0.36 0.419 0.42 0.30
- ------------------------------------------
Net realized and unrealized gain (loss)
on investments 0.75 0.42 1.03 0.755 0.43 1.08
- ------------------------------------------ ----------- ----------- ------------- ----------- ----------- -------------
Total from investment operations 1.20 0.88 1.39 1.174 0.85 1.38
- ------------------------------------------ ----------- ----------- ------------- ----------- ----------- -------------
LESS DISTRIBUTIONS
- ------------------------------------------
Dividends to shareholders from net
investment income (0.45) (0.45) (0.36) (0.419) (0.42) (0.35)
- ------------------------------------------
Distributions to shareholders from net
realized gain on investment transactions (0.09) (0.04) (0.01) (0.091) (0.04) (0.01)
- ------------------------------------------
Distributions in excess of net
investment income -- -- -- (0.004)(b) -- --
- ------------------------------------------ ----------- ----------- ------------- ----------- ----------- -------------
Total distributions (0.54) (0.49) (0.37) (0.514) (0.46) (0.36)
- ------------------------------------------ ----------- ----------- ------------- ----------- ----------- -------------
NET ASSET VALUE, END OF PERIOD $ 12.07 $ 11.41 $ 11.02 $ 12.07 $ 11.41 $ 11.02
- ------------------------------------------ ----------- ----------- ------------- ----------- ----------- -------------
TOTAL RETURN* 10.68% 8.21% 15.02% 10.41% 7.94% 11.75%
- ------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------
Expenses 0.66% 0.66% 0.68%(a) 0.91% 0.91% 0.92%(a)
- ------------------------------------------
Net investment income 3.86% 4.20% 4.86%(a) 3.61% 3.93% 4.38%(a)
- ------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------
Net assets, end of period (000 omitted) $760,147 $520,232 $247,472 $35,032 $17,408 $334
- ------------------------------------------
Portfolio turnover rate 19% 12% 19% 19% 12% 19%
- ------------------------------------------
<CAPTION>
CLASS C
INVESTMENT
SHARES
----------
YEAR ENDED
----------
12/31/93\
----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.54
- ------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------
Net investment income 0.34
- ------------------------------------------
Net realized and unrealized gain (loss)
on investments 0.65
- ------------------------------------------ -------------
Total from investment operations 0.99
- ------------------------------------------ -------------
LESS DISTRIBUTIONS
- ------------------------------------------
Dividends to shareholders from net
investment income (0.34)
- ------------------------------------------
Distributions to shareholders from net
realized gain on investment transactions (0.09)
- ------------------------------------------
Distributions in excess of net
investment income (0.02)(b)
- ------------------------------------------ -------------
Total distributions (0.45)
- ------------------------------------------ -------------
NET ASSET VALUE, END OF PERIOD $ 12.08
- ------------------------------------------ -------------
TOTAL RETURN* 8.72%
- ------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------
Expenses 1.41%(a)
- ------------------------------------------
Net investment income 3.09%(a)
- ------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------
Net assets, end of period (000 omitted) $65,475
- ------------------------------------------
Portfolio turnover rate 19%
- ------------------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
** Reflects operations for the period from April 1, 1991 (commencement of
operations) to December 31, 1991.
*** Reflects operations for the period from June 10, 1991 (commencement of
operations) to December 31, 1991.
\ Reflects operations for the period from January 26, 1993 (commencement of
operations) to December 31, 1993.
(a) Computed on an annualized basis.
(b) Distributions in excess of net investment income for the year ended December
31, 1993 were the result of certain book and tax differences. These
distributions do not represent a return of capital for federal income tax
purposes.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
TRUST SHARES
------------------------------------
PERIOD ENDED
------------------------------------
12/31/93 12/31/92 12/31/91*
- ---------------------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.41 $ 10.54 $ 10.06
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.69 0.70 0.71
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.19 (0.02) 0.56
- ---------------------------------------------------------------------------------------- ----------- ----------- -----------
Total from investment operations 0.88 0.68 1.27
- ---------------------------------------------------------------------------------------- ----------- ----------- -----------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.68) (0.70) (0.71)
- ----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.18) (0.11 ) (0.07)
- ----------------------------------------------------------------------------------------
Distributions in excess of net investment income -- -- (0.01)(a)
- ---------------------------------------------------------------------------------------- ----------- ----------- -----------
Total distributions (0.86) (0.81) (0.79)
- ---------------------------------------------------------------------------------------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.43 $ 10.41 $ 10.54
- ---------------------------------------------------------------------------------------- ----------- ----------- -----------
TOTAL RETURN** 8.67% 6.64% 13.80%
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 0.66% 0.69% 0.69%(c)
- ----------------------------------------------------------------------------------------
Net investment income 6.41% 6.67% 7.12%(c)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement(b) -- -- 0.07%(c)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $376,445 $324,068 $256,254
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 73% 66% 55%
- ----------------------------------------------------------------------------------------
</TABLE>
(See notes on page 126.)
(Continued)
FIRST UNION FIXED INCOME PORTFOLIO (CONTINUED)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
CLASS B INVESTMENT SHARES
-----------------------------------------------------------------------------
PERIOD ENDED
-----------------------------------------------------------------------------
12/31/93 12/31/92 12/31/91 12/31/90\ 3/31/90 3/31/89\\
- -------------------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.41 $ 10.54 $ 9.99 $ 9.72 $ 9.50 $ 9.70
- --------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------
Net investment income 0.65 0.71 0.73 0.55 0.79 0.10
- --------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.19 (0.06) 0.60 0.24 0.20 (0.14)
- -------------------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
Total from investment operations 0.84 0.65 1.33 0.79 0.99 (0.04)
- -------------------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
LESS DISTRIBUTIONS
- --------------------------------------------
Dividends to shareholders from net
investment income (0.65) (0.67) (0.70) (0.52) (0.77) (0.16)
- --------------------------------------------
Distributions to shareholders from net
realized gain on investment transactions (0.18) (0.11) (0.07) -- -- --
- --------------------------------------------
Distributions in excess of net investment
income -- -- (0.01)(a) -- -- --
- -------------------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
Total distributions (0.83) (0.78) (0.78) (0.52) (0.77) (0.16)
- -------------------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
NET ASSET VALUE, END OF PERIOD $ 10.42 $ 10.41 $ 10.54 $ 9.99 $ 9.72 $ 9.50
- -------------------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
TOTAL RETURN** 8.29% 6.39% 13.74% 8.31% 10.51% (0.31%)
- --------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------
Expenses 0.93% 0.90% 0.80% 1.01(c) 1.00% 1.78%(c)
- --------------------------------------------
Net investment income 6.15% 6.79% 7.30% 7.53(c) 7.57% 6.10%(c)
- --------------------------------------------
Expense waiver/reimbursement(b) -- -- 0.09% 0.81(c) 0.50% --
- --------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------
Net assets, end of period (000 omitted) $22,865 $21,488 $17,680 $11,765 $6,496 $11,580
- --------------------------------------------
Portfolio turnover rate 73% 66% 55% 27% 32% 18%
- --------------------------------------------
<CAPTION>
CLASS C
INVESTMENT
SHARES
------------
PERIOD ENDED
------------
12/31/93\\\
- -------------------------------------------- ---------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.57
- --------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------
Net investment income 0.58
- --------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.05
------
- --------------------------------------------
Total from investment operations 0.63
------
- --------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------
Dividends to shareholders from net
investment income (0.58)
- --------------------------------------------
Distributions to shareholders from net
realized gain on investment transactions (0.18)
- --------------------------------------------
Distributions in excess of net investment
income --
------
- --------------------------------------------
Total distributions (0.76)
------
- --------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.44
------
- --------------------------------------------
TOTAL RETURN** 6.08%
- --------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------
Expenses 1.57
- --------------------------------------------
Net investment income 5.42
- --------------------------------------------
Expense waiver/reimbursement(b) --
- --------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------
Net assets, end of period (000 omitted) $8,876
- --------------------------------------------
Portfolio turnover rate 73%
- --------------------------------------------
</TABLE>
* Reflects operations for the period from January 4, 1991
(commencement of operations) to December 31, 1991.
** Based on net asset value, which does not reflect sales load
or contingent deferred sales charge, if applicable.
\ Nine months ended December 31, 1990.
\\ Reflects operations for the period from January 28, 1989 (commencement
of operations) to March 31, 1989.
\\\ Reflects operations for the period from January 26, 1993 (commencement of
operations) to December 31, 1993.
(a) Distributions in excess of net investment income for the
year ended December 31, 1991 were a result of certain book
and tax timing differences. These differences did not
represent a return of capital for federal income tax
purposes for the year ended December 31, 1991.
(b) This voluntary expense decrease is reflected in both the
expense and net investment income ratios shown above (Note
5).
(c) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION FLORIDA MUNICIPAL BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
CLASS B CLASS C
INVESTMENT INVESTMENT
SHARES(A) SHARES(A)
- ------------------------------------------------------------ ----------------------- -------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1993* DECEMBER 31, 1993**
- ------------------------------------------------------------ ----------------------- -------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.00
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------
Net investment income 0.22 0.20
- ------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.34 0.34
-------- --------
- ------------------------------------------------------------
Total from investment operations 0.56 0.54
- ------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Dividends to shareholders from net investment income (0.22) (0.20)
-------- --------
- ------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.34 $ 10.34
- ------------------------------------------------------------ -------- --------
TOTAL RETURN*** 5.63% 5.40%
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 0.25%(c) 0.75%(c)
- ------------------------------------------------------------
Net investment income 4.92%(c) 4.46%(c)
- ------------------------------------------------------------
Expense waiver/reimbursement(b) 1.58%(c) 1.58%(c)
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $ 8,110 $ 18,383
- ------------------------------------------------------------
Portfolio turnover rate 3% 3%
- ------------------------------------------------------------
</TABLE>
* Reflects operations for the period from July 6, 1993 (commencement of
operations) to December 31, 1993.
** Reflects operations for the period from July 2, 1993 (commencement of
operations) to December 31, 1993.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Trust Shares were not being offered as of December 31, 1993. Accordingly,
there are no Financial Highlights for such Shares. The Financial Highlights
presented above are historical information for Class B and Class C
Investment Shares.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(c) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
CLASS B CLASS C
INVESTMENT INVESTMENT
SHARES(A) SHARES(A)
- --------------------------------------------------------------------------------- -------------- --------------
PERIOD ENDED PERIOD ENDED
12/31/93* 12/31/93*
- --------------------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.00
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------
Net investment income 0.201 0.179
- ---------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.193 0.193
- --------------------------------------------------------------------------------- -------------- --------------
Total from investment operations 0.394 0.372
- ---------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.201) (0.179)
- ---------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.003) (0.003)
- --------------------------------------------------------------------------------- -------------- --------------
TOTAL DISTRIBUTIONS (0.204) (0.182)
- --------------------------------------------------------------------------------- -------------- --------------
NET ASSET VALUE, END OF PERIOD $ 10.19 $ 10.19
- --------------------------------------------------------------------------------- -------------- --------------
TOTAL RETURN** 3.96% 3.74%
- ---------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------
Expenses 0.25%(c) 0.75%(c)
- ---------------------------------------------------------------------------------
Net investment income 4.71%(c) 4.15%(c)
- ---------------------------------------------------------------------------------
Expense waiver/reimbursement(b) 6.57%(c) 6.57%(c)
- ---------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $817 $3,692
- ---------------------------------------------------------------------------------
Portfolio turnover rate 15% 15%
- ---------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from July 2, 1993 (commencement of
operations) to December 31, 1993.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Trust Shares were not being offered as of December 31, 1993. Accordingly,
there are no Financial Highlights for such Shares. The Financial Highlights
presented above are historical information for Class B and Class C
Investment Shares.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(c) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION HIGH GRADE TAX FREE PORTFOLIO
(FORMERLY, FIRST UNION INSURED TAX FREE PORTFOLIO)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
CLASS C
CLASS B INVESTMENT
INVESTMENT SHARES(C) SHARES(C)
-------------------------------------------- -----------------------
YEAR ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, 1993 DECEMBER 31, 1992* DECEMBER 31, 1993**
- ------------------------------------------ --------------------- --------------------- -----------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.42 $ 10.00 $ 10.42
- ------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------
Net investment income 0.54 0.51 0.47
- ------------------------------------------
Net realized and unrealized gain (loss)
on investments 0.81 0.42 0.81
------- ------- -------
- ------------------------------------------
Total from investment operations 1.35 0.93 1.28
------- ------- -------
- ------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------
Dividends to shareholders from net
investment income (0.54) (0.51) (0.47)
- ------------------------------------------
Distributions to shareholders from net
realized gain on investment transactions (0.07) -- (0.07)
------- ------- -------
- ------------------------------------------
Total distributions (0.61) (0.51) (0.54)
------- ------- -------
- ------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.16 $ 10.42 $ 11.16
------- ------- -------
- ------------------------------------------
TOTAL RETURN*** 13.25% 9.37% 12.41%
- ------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------
Expenses 0.85% 0.49%(a) 1.35%(a)
- ------------------------------------------
Net investment income 4.99% 5.79%(a) 4.44%(a)
- ------------------------------------------
Expense waiver/reimbursement(b) 0.22% 0.62%(a) 0.22%(a)
- ------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------
Net assets, end of period (000 omitted) $101,352 $90,738 $41,030
- ------------------------------------------
Portfolio turnover rate 14% 7% 14%
- ------------------------------------------
</TABLE>
* Reflects operations for the period from February 21, 1992 (commencement of
operations) to
December 31, 1992.
** Reflects operations for the period from January 11, 1993 (commencement of
operations) to December 31, 1993.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(c) Trust Shares were not being offered as of December 31, 1993. Accordingly,
there are no Financial Highlights for such Shares. The Financial Highlights
presented above are historical information for Class B and Class C
Investment Shares.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION MANAGED BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
TRUST SHARES (C)
-------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991*
- ------------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.34 $ 10.60 $ 10.00
- -------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------
Net investment income 0.65 0.66 0.49
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.43 (0.08) 0.63
- ------------------------------------------------------------------------------------- --------- --------- ---------
Total from investment operations 1.08 0.58 1.12
- ------------------------------------------------------------------------------------- --------- --------- ---------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.65) (0.66) (0.49)
- -------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.31) (0.18) (0.03)
- ------------------------------------------------------------------------------------- --------- --------- ---------
Total distributions (0.96) (0.84) (0.52)
- ------------------------------------------------------------------------------------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 10.46 $ 10.34 $ 10.60
- ------------------------------------------------------------------------------------- --------- --------- ---------
TOTAL RETURN** 10.59% 5.65% 11.63%
- -------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------
Expenses 0.70% 0.70% 0.70%(a)
- -------------------------------------------------------------------------------------
Net investment income 6.02% 6.30% 6.57%(a)
- -------------------------------------------------------------------------------------
Expenses waiver/reimbursement(b) 0.03% 0.05% --
- -------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $109,067 $121,655 $112,984
- -------------------------------------------------------------------------------------
Portfolio turnover rate 53% 56% 17%
- -------------------------------------------------------------------------------------
</TABLE>
* For the period from April 1, 1991 (commencement of operations) to December
31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(c) Class B and Class C Investment Shares were not being offered as of December
31, 1993. Accordingly, there are no Financial Highlights for such Shares.
The Financial Highlights presented above are historical information for
Trust Shares.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
CLASS B CLASS C
INVESTMENT INVESTMENT
SHARES(B) SHARES(B)
- -------------------------------------------------------------------------------------- ------------- -------------
YEAR ENDED YEAR ENDED
12/31/93* 12/31/93*
- -------------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.00
- --------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------
Net investment income 0.46 0.42
- --------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.64 0.64
- -------------------------------------------------------------------------------------- ------------- -------------
Total from investment operations 1.10 1.06
- -------------------------------------------------------------------------------------- ------------- -------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.46) (0.42)
- --------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.03) (0.03)
- -------------------------------------------------------------------------------------- ------------- -------------
Total distributions (0.49) (0.45)
- -------------------------------------------------------------------------------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 10.61 $ 10.61
- -------------------------------------------------------------------------------------- ------------- -------------
TOTAL RETURN** 11.28% 10.80%
- --------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------
Expenses 0.32%(a) 0.79%(a)
- --------------------------------------------------------------------------------------
Net investment income 4.91%(a) 4.47%(a)
- --------------------------------------------------------------------------------------
Expense waiver/reimbursement(c) 0.93%(a) 0.95%(a)
- --------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------
Net assets, end of period (000 ommitted) $ 12,739 $ 45,168
- --------------------------------------------------------------------------------------
Portfolio turnover rate 57% 57%
- --------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from January 11, 1993 (commencement of
operations) to December 31, 1993.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) Trust Shares were not being offered as of December 31, 1993. Accordingly,
there are no Financial Highlights for such Shares. The Financial Highlights
presented above are historical information for Class B and Class C
Investment Shares.
(c) This voluntary expense decrease is reflected in both expense and net
investment income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements)
FIRST UNION U.S. GOVERNMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
CLASS B CLASS C
TRUST INVESTMENT INVESTMENT
SHARES SHARES SHARES
- ---------------------------------------------------------------------------- ------------- ------------- -------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
12/31/93* 12/31/93** 12/31/93**
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.25 $ 10.00 $ 10.00
- ----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------
Net investment income 0.25 0.68 0.63
- ----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.20) .05 .05
- ---------------------------------------------------------------------------- ------------- ------------- -------------
Total from investment operations 0.05 0.73 0.68
- ---------------------------------------------------------------------------- ------------- ------------- -------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.25) (0.68) (0.63)
- ---------------------------------------------------------------------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 10.05 $ 10.05 $ 10.05
- ---------------------------------------------------------------------------- ------------- ------------- -------------
TOTAL RETURN*** 0.49% 7.43% 6.91%
- ----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------
Expenses 0.48%(a) 0.68%(a) 1.19%(a)
- ----------------------------------------------------------------------------
Net investment income 7.20%(a) 6.93%(a) 6.44%(a)
- ----------------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.31%(a) 0.31%(a) 0.31%(a)
- ----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $14,486 $38,851 $236,696
- ----------------------------------------------------------------------------
Portfolio turnover rate 39% 39% 39%
- ----------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from September 2, 1993 (commencement of
operations) to December 31, 1993.
** Reflects operations for the period from January 11, 1993 (commencement of
operations) to December 31, 1993.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) The voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above. (Note 5).
(See Notes which are an integral part of the Financial Statements)
FIRST UNION VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
TRUST SHARES
-------------------------------------
PERIOD ENDED
--------------------------------------
12/31/93 12/31/92 12/31/91*
- --------------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.11 $ 17.08 $ 14.28
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------
Net investment income 0.52 0.49 0.47
- ---------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.12 0.90 3.53
- --------------------------------------------------------------------------------- ----------- ----------- -----------
Total from investment operations 1.64 1.39 4.00
- --------------------------------------------------------------------------------- ----------- ----------- -----------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.52) (0.49) (0.47)
- ---------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.58) (0.87) (0.73)
- ---------------------------------------------------------------------------------
Distributions in excess of net investment income (0.02)(c) -- --
- --------------------------------------------------------------------------------- ----------- ----------- -----------
Total distributions (1.12) (1.36) (1.20)
- --------------------------------------------------------------------------------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 17.63 $ 17.11 $ 17.08
- --------------------------------------------------------------------------------- ----------- ----------- -----------
TOTAL RETURN** 9.71% 8.31% 25.41%
- ---------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------
Expenses 0.65% 0.68% 0.69%(b)
- ---------------------------------------------------------------------------------
Net investment income 2.98% 2.90% 3.04%(b)
- ---------------------------------------------------------------------------------
Expense waiver/reimbursement(a) -- 0.01% 0.08%(b)
- ---------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------
Net assets, end of period $463,087 $326,154 $271,391
- ---------------------------------------------------------------------------------
Portfolio turnover rate 46% 56% 69%
- ---------------------------------------------------------------------------------
</TABLE>
* For the period from January 3, 1991 (commencement of operations) to December
31, 1991.
** Based on a net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(c) Distributions in excess of net investment income for the period ended
December 31, 1993 were the result of certain book and tax timing
differences. These distributions do not represent a return of capital for
federal income tax purposes.
(See Notes which are an integral part of the Financial Statements)
FIRST UNION VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
CLASS B INVESTMENT SHARES
-----------------------------------------------------------------------------------------------
PERIOD ENDED
-----------------------------------------------------------------------------------------------
12/31/93 12/31/92 12/31/91 12/31/90** 3/31/90 3/31/89 3/31/88
-------- --------- -------- ----------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 17.11 $ 17.08 $ 14.61 $ 15.12 $ 14.45 $ 12.83 $ 14.66
- -----------------------
INCOME FROM INVESTMENT
OPERATIONS
- -----------------------
Net investment income 0.47 0.44 0.46 0.36 0.54 0.36 0.26
- -----------------------
Net realized and
unrealized gain
(loss) on investments 1.10 0.89 3.17 (0.44) 1.70 2.11 (1.30)
- ----------------------- ---------- ----------- ----------- ------------- ----------- ----------- -----------
Total from investment
operations 1.57 1.33 3.63 (0.08) 2.24 2.47 (1.04)
- ----------------------- ---------- ----------- ----------- ------------- ----------- ----------- -----------
LESS DISTRIBUTIONS
- -----------------------
Dividends to
shareholders from net
investment income (0.47) (0.43) (0.43) (0.36) (0.57) (0.38) (0.26)
- -----------------------
Distributions to
shareholders from net
realized gain on
investment
transactions (0.58) (0.87) (0.73) (0.02) (1.00) (0.47) (0.53)
- -----------------------
Distributions in
excess of net
investment income -- -- -- (0.05 )(a) -- -- --
- ----------------------- ---------- ----------- ----------- ------------- ----------- ----------- -----------
Total distributions (1.05) (1.30) (1.16) (0.43 ) (1.57) (0.85) (0.79)
- ----------------------- ---------- ----------- ----------- ------------- ----------- ----------- -----------
NET ASSET VALUE, END OF
PERIOD $ 17.63 $ 17.11 $ 17.08 $ 14.61 $ 15.12 $ 14.45 $ 12.83
- ----------------------- ---------- ----------- ----------- ------------- ----------- ----------- -----------
TOTAL RETURN* 9.31% 7.96% 25.11% (0.51%) 15.54% 19.73% (7.14%)
- -----------------------
RATIOS TO AVERAGE NET
ASSETS
- -----------------------
Expenses 0.99% 1.01% 0.96% 1.39%(b) 1.55% 1.71% 1.74%
- -----------------------
Net investment income 2.63% 2.57% 2.78% 3.28%(b) 3.42% 2.72% 1.92%
- -----------------------
Expense waiver/
reimbursement(d) -- 0.01% 0.09% -- -- -- --
- -----------------------
SUPPLEMENTAL DATA
- -----------------------
Net assets, end of
period (000 omitted) $189,983 $169,310 $135,565 $104,637 $95,995 $83,121 $21,914
- -----------------------
Portfolio turnover
rate**** 46% 56% 69% 13% 11% 24% 16%
- -----------------------
<CAPTION>
CLASS B INVESTMENT SHARES
-------------------------------------
PERIOD ENDED
-------------------------------------
3/31/87 3/31/86 3/31/85***
--------- ------- ----------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 12.35 $ 10.04 $ 10.00
- -----------------------
INCOME FROM INVESTMENT
OPERATIONS
- -----------------------
Net investment income 0.15 0.19 0.04
- -----------------------
Net realized and
unrealized gain
(loss) on investments 2.38 2.32 0.00
- ----------------------- ----------- ----------- -------------
Total from investment
operations 2.53 2.51 0.04
- ----------------------- ----------- ----------- -------------
LESS DISTRIBUTIONS
- -----------------------
Dividends to
shareholders from net
investment income (0.13) (0.20) (0.00)
- -----------------------
Distributions to
shareholders from net
realized gain on
investment
transactions (0.09) (0.00) (0.00)
- -----------------------
Distributions in
excess of net
investment income -- -- --
- ----------------------- ----------- ----------- -------------
Total distributions (0.22) (0.20) 0.00
- ----------------------- ----------- ----------- -------------
NET ASSET VALUE, END OF
PERIOD $ 14.66 $ 12.35 $ 10.04
- ----------------------- ----------- ----------- -------------
TOTAL RETURN* 20.81% 25.29% (0.40%)
- -----------------------
RATIOS TO AVERAGE NET
ASSETS
- -----------------------
Expenses 1.97% 2.00% 2.00%(b)
- -----------------------
Net investment income 1.41% 2.34% 6.47%(b)
- -----------------------
Expense waiver/
reimbursement(d) -- -- --
- -----------------------
SUPPLEMENTAL DATA
- -----------------------
Net assets, end of
period (000 omitted) $23,221 $5,595 $100
- -----------------------
Portfolio turnover
rate**** 20% 20% 0%
- -----------------------
</TABLE>
(See Notes on page 135.)
(Continued)
FIRST UNION VALUE PORTFOLIO (CONTINUED)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
CLASS C
INVESTMENT
SHARES
---------
PERIOD
ENDED
---------
12/31/93\
---------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.24
- --------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------
Net investment income 0.35
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.01
- -------------------------------------------------------------------------------------------------------- -------------
Total from investment operations 1.36
- -------------------------------------------------------------------------------------------------------- -------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.35)
- --------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.58)
- --------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (0.04)(c)
- -------------------------------------------------------------------------------------------------------- -------------
Total distributions (0.97)
- -------------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, END OF PERIOD $ 17.63
- -------------------------------------------------------------------------------------------------------- -------------
TOTAL RETURN* 7.98%
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------------
Expenses 1.48%(b)
- --------------------------------------------------------------------------------------------------------
Net investment income 2.09%(b)
- --------------------------------------------------------------------------------------------------------
Expense waiver/reimbursement(d) --
- --------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $59,953
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate**** 46%
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
** For the nine months ended December 31, 1990.
*** Reflects operations for the period from August 30, 1984 (commencement of
operations) to March 31, 1985.
**** Portfolio turnover rate for periods ending on or after March 31, 1986
include certain U.S. government obligations.
\ Reflects operations for the period from February 2, 1993 (commencement of
operations) to December 31, 1993.
(a) Distributions in excess of net investment income for the period ended
December 31, 1990 were a result of certain book and tax timing differences.
These distributions did not represent a return of capital for federal
income tax purposes for the year ended December 31, 1990.
(b) Computed on an annualized basis.
(c) Distributions in excess of net investment income for the period ended
December 31, 1993 were the result of certain book and tax timing
differences. These distributions do not represent a return of capital for
federal income tax purposes.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements).
FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
CLASS B CLASS C
INVESTMENT INVESTMENT
SHARES(A) SHARES(A)
- -------------------------------------------------------------------------------------- ------------- -------------
PERIOD ENDED PERIOD ENDED
12/31/93* 12/31/93*
- -------------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.00
- --------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------
Net investment income 0.20 0.17
- --------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.19 0.19
- -------------------------------------------------------------------------------------- ------------- -------------
Total from investment operations 0.39 0.36
- -------------------------------------------------------------------------------------- ------------- -------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.20) (0.17)
- -------------------------------------------------------------------------------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 10.19 $ 10.19
- -------------------------------------------------------------------------------------- ------------- -------------
TOTAL RETURN** 3.89% 3.66%
- --------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------
Expenses 0.25%(b) 0.75%(b)
- --------------------------------------------------------------------------------------
Net investment income 4.64%(b) 4.25%(b)
- --------------------------------------------------------------------------------------
Expense waiver/reimbursement(c) 7.50%(b) 7.50%(b)
- --------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 1,306 $ 2,235
- --------------------------------------------------------------------------------------
Portfolio turnover rate 0% 0%
- --------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from July 2, 1993 (commencement of
operations) to December 31, 1993.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Trust Shares were not being offered as of December 31, 1993. Accordingly,
there are no Financial Highlights for such Shares. The Financial Highlights
presented above are historical information for Class B and Class C
Investment Shares.
(b) Computed on an annualized basis.
(c) The voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements)
FIRST UNION FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
(1) ORGANIZATION
First Union Funds (the "Trust") is an open-end, management investment company
which was established as a Massachusetts business trust under a Declaration of
Trust dated August 30, 1984. The Trust had no operations prior to March 12,
1985, other than organizational matters and the initial sale of shares. As of
December 31, 1993, the Trust consisted of fifteen portfolios. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The Declaration of Trust permits the Trust
to offer separate series of shares of beneficial interest representing interests
in separate portfolios of securities. The Board of Trustees ("Trustees") has
established three classes of shares, Trust Shares, Class B Investment Shares,
and Class C Investment Shares, for: First Union Balanced Portfolio, First Union
Fixed Income Portfolio, First Union Florida Municipal Bond Portfolio, First
Union Georgia Municipal Bond Portfolio, First Union High Grade Tax Free
Portfolio (formerly, "First Union Insured Tax Free Portfolio"), First Union
Managed Bond Portfolio, First Union Money Market Portfolio, First Union North
Carolina Municipal Bond Portfolio, First Union South Carolina Municipal Bond
Portfolio, First Union Tax Free Money Market Portfolio, First Union Treasury
Money Market Portfolio, First Union U.S. Government Portfolio, First Union
Utility Portfolio, First Union Value Portfolio, and First Union Virginia
Municipal Bond Portfolio. As of December 31, 1993, each of the portfolios were
offering all three classes of shares, except for First Union Managed Bond
Portfolio, which was only offering Trust Shares; First Union Money Market
Portfolio, First Union Tax Free Money Market Portfolio, and First Union Treasury
Money Market Portfolio, which were only offering Trust Shares and Class B
Investment Shares; First Union Florida Municipal Bond Portfolio, First Union
Georgia Municipal Bond Portfolio, First Union High Grade Tax Free Portfolio,
First Union North Carolina Municipal Bond Portfolio, and First Union Virginia
Municipal Bond Portfolio, which were only offering Class B Investment Shares and
Class C Investment Shares; and First Union South Carolina Municipal Bond
Portfolio and First Union Utility Portfolio, which were not yet effective.
The financial statements included herein present those of First Union Balanced
Portfolio ("Balanced"), First Union Fixed Income Portfolio ("Fixed Income"),
First Union Florida Municipal Bond Portfolio ("Florida"), First Union Georgia
Municipal Bond Portfolio ("Georgia"), First Union High Grade Tax Free Portfolio
("High Grade Tax Free"), First Union Managed Bond Portfolio ("Managed Bond"),
First Union Money Market Portfolio ("Money Market"), First Union North Carolina
Municipal Bond Portfolio ("North Carolina"), First Union Tax Free Money Market
Portfolio ("Tax Free Money Market"), First Union Treasury Money Market Portfolio
("Treasury Money Market"), First Union U.S. Government Portfolio ("U.S.
Government"), First Union Value Portfolio ("Value"), and First Union Virginia
Municipal Bond Portfolio ("Virginia") (hereinafter each individually referred to
as a "Fund," and collectively as, the "Funds").
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by each Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. government obligations are valued at the mean
between the over-the-counter bid and asked prices as furnished by an
independent pricing service. Listed equity securities are valued at the
last sale price reported on national securities exchanges. Unlisted
securities or listed securities in which there were no sales are valued at
the mean between bid and asked prices. Corporate bonds and other fixed
income securities are valued at the last sale price on a national
securities exchange, if available. Otherwise, they are valued on the basis
of prices furnished by independent pricing services. Municipal bonds are
valued at fair value. An independent pricing service values a Fund's
municipal bonds, taking into consideration yield, stability risk, quality,
coupon, maturity, type of issue, trading characteristics, special
circumstances of a security or trading market, and any other factors or
market data it deems relevant in determining valuations for normal
institutional size trading units of debt securities, and does not rely
exclusively on quoted prices. The
FIRST UNION FUNDS
- --------------------------------------------------------------------------------
Trustees periodically review these valuation methods from time to time
after considering relevant factors which may affect the value of portfolio
securities. Short-term obligations are ordinarily valued at the mean
between bid and asked prices as furnished by an independent pricing
service. However, short-term obligations with maturities of sixty days or
less are valued at the amortized cost method in accordance with Rule 2a-7
of the Investment Company Act of 1940. All other securities are appraised
at fair value as determined in good faith by the Trustees. Investments in
other regulated investment companies are valued at net asset value.
Since Florida, Georgia, North Carolina, and Virginia may invest a portion
of their assets in issuers located in one state, those Funds will be more
susceptible to factors adversely affecting issuers of those states than a
comparable general tax-exempt mutual fund would be. In order to reduce the
risk associated with such factors, at December 31, 1993, 63.1%, 52.5%,
36.1% and 20.3% of the securities in the portfolio of investments of
Florida, Georgia, North Carolina, and Virginia, respectively, were backed
by letters of credit or bond insurance of various financial institutions
and financial guaranty assurance agencies. The aggregate percentages by
financial institution ranged from 0.8% to 37.1%, 11.1% to 27.7%, 3.5% to
14.1% and 2.2% to 10.8% of total investments, respectively, for Florida,
Georgia, North Carolina, and Virginia.
B. REPURCHASE AGREEMENTS--It is the policy of the Funds to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Funds to monitor, on a daily basis, the market value of
each repurchase agreement's underlying securities to ensure the existence
of a proper level of collateral.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Trust's investment adviser to be creditworthy pursuant to guidelines
established by the Trustees. Risks may arise from the potential inability
of counterparties to honor the terms of the repurchase agreement.
Accordingly, these Funds could receive less than the repurchase price on
the sale of collateral securities.
C. INCOME--Interest income is recorded on the accrual basis. Interest income
for Balanced, Fixed Income, Florida, Georgia, High Grade Tax Free, Managed
Bond, Money Market, North Carolina, Treasury Money Market, U.S. Government,
and Virginia includes interest and discount earned (net of premium),
including original issue discount, as required by the Internal Revenue
Code, as amended (the "Code"), plus realized net gains, if any, on
portfolio securities.
Interest income for Tax Free Money Market includes interest earned net of
premium and original issue discount as required by the Code.
Dividend income for Value is recorded on the ex-dividend date. Dividends to
shareholders and capital gains distributions, if any, are recorded on the
ex-dividend date.
D. FEDERAL TAXES--It is the policy of the Funds to comply with the provisions
of the Code applicable to regulated investment companies and to distribute
to shareholders each year all of their net income, including any net
realized gain on investments. Accordingly, no provisions for federal tax
are necessary.
Dividends paid by Georgia, High Grade Tax Free, North Carolina, Tax Free
Money Market, and Virginia representing net interest received on tax-exempt
municipal securities are not includable by shareholders as gross income for
federal income tax purposes because the Funds intend to meet certain
requirements of the Code applicable to regulated investment companies which
will enable the Funds to pay exempt-interest dividends.
The Florida Fund failed to meet its investment objective of qualifying as
an investment exempt from the Florida intangibles tax during 1993. Under
Florida law, the investment portfolio of the Fund had to consist entirely
of investments exempt from the Florida intangibles tax on the last business
day of calendar year 1993, in order to qualify as an exempt investment.
However, at December 31, 1993, the Fund owned several securities that were
not exempt. The Fund's investment adviser has agreed
FIRST UNION FUNDS
- --------------------------------------------------------------------------------
to reimburse shareholders of the Fund for the resulting tax liability and
has instituted management changes in order to prevent similar occurrences
in the future.
At December 31, 1993, Florida and U.S. Government, for federal tax
purposes, had capital loss carryforwards of $7,682 and $1,978,402,
respectively, which will reduce each Fund's taxable income arising from
future net realized gain on investments, if any, to the extent permitted by
the Code and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Funds of any
liability for federal tax. Pursuant to the Code, such capital loss
carryforwards will expire in the year 2001.
E. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, Managed Bond is required to deposit, in a segregated account, an
amount ("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or to pay
to the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the prices at which the contract
was made. On a daily basis, the value of the financial futures contract is
determined and any difference between such value and the original futures
contract value is reflected in the "daily variation margin" account. Daily
variation margin adjustments, arising from this "marking to market"
process, are recorded by the Fund as unrealized gains or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering into futures
contracts include the possibility that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities.
F. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in
when-issued or delayed delivery transactions. To the extent a Fund engages
in such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objectives and policies and not
for the purpose of investment leverage. The Fund will record a when-issued
security and the related liability on the trade date. Until the securities
are received and paid for, the Fund will maintain security positions such
that sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
G. DEFERRED EXPENSES--The costs incurred by each Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method. These costs for Balanced,
Florida, Georgia, High Grade Tax Free, Managed Bond, North Carolina,
Treasury Money Market, U.S. Government, and Virginia will continue to be
amortized through March 1996, June 1998, June 1998, February 1995, December
1995, December 1997, February 1996, December 1997, and June 1998,
respectively.
H. EXPENSES--Expenses of each Fund, other than distribution services fees,
waivers and reimbursements, if any, are allocated to each class of shares
based on its relative average net assets for the period.
I. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS
Dividends from net investment income are declared and paid quarterly for the
Balanced and Value Funds; declared and paid monthly for the Fixed Income and
Managed Bond Funds; and declared daily and paid monthly for the Florida,
Georgia, High Grade Tax Free, Money Market, North Carolina, Tax Free Money
Market, Treasury Money Market, U.S. Government, and Virginia Funds. Payment of
dividends are made in cash or in additional shares at net asset value of the
payable date. Distributions of any net realized capital gains by the Funds are
made at least once every twelve months. The amounts shown in the financial
statements for net investment income, for the fiscal year ended December 31,
1993, for Balanced and Value, differ from those determined for tax purposes
because of certain book and tax differences. This resulted in distributions to
shareholders in excess of net investment income. These distributions for
Balanced and Value do not represent a return of capital for federal income tax
purposes.
FIRST UNION FUNDS
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At December 31, 1993, capital paid-in for Money Market, Tax
Free Money Market and Treasury Money Market aggregated $97,286,292, $281,828,749
and $627,583,296, respectively. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
MONEY MARKET TAX FREE MONEY MARKET TREASURY MONEY MARKET
-------------------------- ---------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1993 1992 1993* 1992** 1993 1992
------------ ------------ -------------- ------------ -------------- --------------
CLASS B
INVESTMENT SHARES: SHARES SHARES SHARES SHARES SHARES SHARES
------------ ------------ -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding,
beginning of period 64,794,708 64,456,652 184,211,312 86,480,613 208,792,392 99,549,141
- ----------------------
Shares sold 390,039,358 205,580,250 1,715,543,145 644,829,192 1,612,728,750 1,820,972,752
- ----------------------
Shares issued to
shareholders in
payment
of dividends declared 2,215,425 2,151,227 2,181,449 2,017,881 3,678,413 4,379,160
- ----------------------
Shares redeemed (368,877,898) (207,393,421) (1,623,484,621) (549,116,374) (1,563,724,945) (1,716,108,661)
- ---------------------- ------------ ------------ -------------- ------------ -------------- --------------
Shares outstanding,
end of period 88,171,593 64,794,708 278,451,285 184,211,312 261,474,610 208,792,392
- ---------------------- ------------ ------------ -------------- ------------ -------------- --------------
<CAPTION>
MONEY MARKET TAX FREE MONEY MARKET TREASURY MONEY MARKET
-------------------------- ---------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1993 1992 1993 1992 1993 1992
------------ ------------ -------------- ------------ -------------- --------------
TRUST SHARES: SHARES SHARES SHARES SHARES SHARES SHARES
------------ ------------ -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding,
beginning of period 9,242,679 5,549,493 17,083,794 37,546,031 286,229,591 265,108,891
- ----------------------
Shares sold 7,737,901 20,595,187 115,358,768 62,058,229 920,999,613 608,692,936
- ----------------------
Shares issued to
shareholders in
payment
of dividends declared 249,522 429,220 -- 187 -- 7
- ----------------------
Shares redeemed (8,115,403) (17,331,221) (129,065,098) (82,520,653) (841,120,518) (587,572,243)
- ---------------------- ------------ ------------ -------------- ------------ -------------- --------------
Shares outstanding,
end of period 9,114,699 9,242,679 3,377,464 17,083,794 366,108,686 286,229,591
- ---------------------- ------------ ------------ -------------- ------------ -------------- --------------
</TABLE>
*For the year ended December 31, 1993, which is inclusive of a reclass to
paid-in capital of ($41,726).
**For the year ended December 31, 1992, which is inclusive of a reclass to
paid-in capital of ($6,248).
<TABLE>
<CAPTION>
BALANCED
----------------------------------------------
YEAR ENDED DECEMBER 31,
1993 1992
---------------------- ----------------------
CLASS B INVESTMENT SHARES: SHARES DOLLARS SHARES DOLLARS
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period 1,526,276 $16,774,930 233,717 $ 2,439,355
- -----------------------------------------------------------------
Shares sold 1,582,202 18,730,505 1,378,031 15,280,546
- -----------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 99,375 1,185,158 35,486 394,915
- -----------------------------------------------------------------
Shares redeemed (306,407) (3,630,320) (120,958) (1,339,886)
- ----------------------------------------------------------------- --------- ----------- --------- -----------
Shares outstanding, end of period 2,901,446 $33,060,273 1,526,276 $16,774,930
- ----------------------------------------------------------------- --------- ----------- --------- -----------
</TABLE>
FIRST UNION FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIXED INCOME
----------------------------------------------
YEAR ENDED DECEMBER 31,
1993 1992
---------------------- ----------------------
CLASS B INVESTMENT SHARES: SHARES DOLLARS SHARES DOLLARS
- ----------------------------------------------------------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period 2,063,540 $20,773,856 1,677,632 $16,722,099
- -----------------------------------------------------------------
Shares sold 481,694 5,143,194 785,228 8,264,471
- -----------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 144,232 1,529,307 130,603 1,366,646
- -----------------------------------------------------------------
Shares redeemed (495,713) (5,294,878) (529,923) (5,579,360)
- ----------------------------------------------------------------- --------- ----------- --------- -----------
Shares outstanding, end of period 2,193,753 $22,151,479 2,063,540 $20,773,856
- ----------------------------------------------------------------- --------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
FLORIDA GEORGIA
--------------------- --------------------
PERIOD ENDED PERIOD ENDED
DECEMBER 31, 1993(a) DECEMBER 31, 1993(b)
--------------------- --------------------
SHARES DOLLARS SHARES DOLLARS
- --------------------------------------------------------------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period -- $ -- -- $ --
- ---------------------------------------------------------------------
Shares sold 792,567 8,099,364 79,679 806,248
- ---------------------------------------------------------------------
Shares issued to shareholders in payment
of dividends declared 4,610 47,316 627 6,358
- ---------------------------------------------------------------------
Shares redeemed (13,102) (133,968) (100) (1,013)
- --------------------------------------------------------------------- --------- ---------- --------- ---------
Shares outstanding, end of period 784,075 $8,012,712 80,206 $ 811,593
- --------------------------------------------------------------------- --------- ---------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
HIGH GRADE TAX FREE NORTH CAROLINA
------------------------------------------------ ----------------------
YEAR ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, 1993 DECEMBER 31, 1992(c) DECEMBER 31, 1993(d)
----------------------- ----------------------- ----------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
---------- ----------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding, beginning of
period 8,706,211 $87,316,846 -- $ -- -- $ --
- --------------------------------------
Shares sold 2,372,549 25,481,548 9,866,376 99,185,296 1,519,411 15,643,890
- --------------------------------------
Shares issued to shareholders in
payment of dividends declared 338,294 3,700,973 249,606 2,558,864 27,953 291,429
- --------------------------------------
Shares redeemed (2,331,329) (25,357,024) (1,409,771) (14,427,314) (346,949) (3,632,402)
- -------------------------------------- ---------- ----------- ---------- ----------- --------- -----------
Shares outstanding, end of period 9,085,725 $91,142,343 8,706,211 $87,316,846 1,200,415 $12,302,917
- -------------------------------------- ---------- ----------- ---------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT VALUE
----------------------- --------------------------------------------------
PERIOD ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, 1993(d) 1993 1992
----------------------- ------------------------ ------------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
---------- ----------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding, beginning of
period -- $ -- 9,896,132 $143,265,809 7,932,213 $109,734,218
- ----------------------------------
Shares sold 4,717,613 47,917,982 1,670,336 29,146,008 2,353,622 40,142,598
- ----------------------------------
Shares issued to shareholders in
payment of dividends declared 85,591 869,493 612,728 10,927,661 692,096 11,865,216
- ----------------------------------
Shares redeemed (936,518) (9,556,254) (1,404,525) (24,783,785) (1,081,799) (18,476,223)
- ---------------------------------- ---------- ----------- ---------- ------------ ---------- ------------
Shares outstanding, end of period 3,866,686 $39,231,221 10,774,671 $158,555,693 9,896,132 $143,265,809
- ---------------------------------- ---------- ----------- ---------- ------------ ---------- ------------
</TABLE>
FIRST UNION FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VIRGINIA
---------------------
PERIOD ENDED
DECEMBER 31, 1993(b)
---------------------
CLASS B INVESTMENT SHARES: SHARES DOLLARS
--------- ----------
<S> <C> <C>
Shares outstanding, beginning of period -- --
- --------------------------------------------------------------------------------------------
Shares sold 152,762 1,544,349
- --------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 1,492 15,096
- --------------------------------------------------------------------------------------------
Shares redeemed (26,132) (262,837)
- -------------------------------------------------------------------------------------------- --------- ----------
Shares outstanding, end of period 128,122 $1,296,608
- -------------------------------------------------------------------------------------------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
BALANCED FIXED INCOME FLORIDA
---------------------- --------------------- ----------------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, 1993(e) DECEMBER 31, 1993(e) DECEMBER 31, 1993(b)
--------- ----------- --------- ---------- --------- -----------
CLASS C INVESTMENT SHARES: SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
--------- ----------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding, beginning of period -- $ -- -- $ -- -- $ --
- ------------------------------------------
Shares sold 5,420,941 64,347,220 876,785 9,419,506 1,787,845 18,224,944
- ------------------------------------------
Shares issued to shareholders in payment
of dividends declared 111,109 1,330,890 25,320 268,072 10,087 103,490
- ------------------------------------------
Shares redeemed (111,571) (1,334,779) (52,164) (601,263) (20,109) (206,690)
- ------------------------------------------ --------- ----------- --------- ---------- --------- -----------
Shares outstanding, end of period 5,420,479 $64,343,331 849,941 $9,086,315 1,777,823 $18,121,744
- ------------------------------------------ --------- ----------- --------- ---------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
GEORGIA HIGH GRADE TAX FREE NORTH CAROLINA
---------------------- --------------------- ----------------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, 1993(b) DECEMBER 31, 1993(d) DECEMBER 31, 1993(d)
---------- ----------- --------------------- ----------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
--------- ---------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding, beginning of period -- $ -- -- $ -- -- $ --
- ------------------------------------------
Shares sold 360,422 3,643,744 3,967,806 42,494,039 4,313,146 44,236,206
- ------------------------------------------
Shares issued to shareholders in payment
of dividends declared 2,856 29,778 81,800 901,603 81,273 847,945
- ------------------------------------------
Shares redeemed (1,063) (10,869) (371,428) (3,798,873) (138,089) (1,441,617)
- ------------------------------------------ --------- ---------- --------- ----------- --------- -----------
Shares outstanding, end of period 362,215 $3,662,653 3,678,178 $39,596,769 4,256,330 $43,642,534
- ------------------------------------------ --------- ---------- --------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT VALUE VIRGINIA
------------------------ ---------------------- ---------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1993(d) DECEMBER 31, 1993(g) DECEMBER 31, 1993(b)
------------------------ ---------------------- ---------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
---------- ------------ --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding, beginning of period -- $ -- -- $ -- -- $ --
- ----------------------------------------
Shares sold 24,115,682 244,699,849 3,381,196 59,423,618 220,937 2,233,824
- ----------------------------------------
Shares issued to shareholders in payment
of dividends declared 451,760 4,588,421 147,332 2,593,366 1,782 18,036
- ----------------------------------------
Shares redeemed (1,011,127) (10,259,387) (127,948) (2,272,549) (3,373) (33,865)
- ---------------------------------------- ---------- ------------ --------- ----------- --------- ----------
Shares outstanding, end of period 23,556,315 $239,028,883 3,400,580 $59,744,435 219,346 $2,217,995
- ---------------------------------------- ---------- ------------ --------- ----------- --------- ----------
</TABLE>
FIRST UNION FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED
--------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1993 1992
------------------------ ------------------------
TRUST SHARES: SHARES DOLLARS SHARES DOLLARS
- ------------------------------------------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period 45,613,053 $467,437,006 37,291,037 $375,634,509
- -------------------------------------------------------------
Shares sold 23,651,918 280,582,429 15,295,993 169,083,602
- -------------------------------------------------------------
Shares issued to shareholders in payment of dividends
declared 2,447,097 29,159,927 1,859,294 20,532,009
- -------------------------------------------------------------
Shares redeemed (8,749,448) (103,873,965) (8,833,271) (97,813,114)
- ------------------------------------------------------------- ---------- ------------ ---------- ------------
Shares outstanding, end of period 62,962,620 $673,305,397 45,613,053 $467,437,006
- ------------------------------------------------------------- ---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
FIXED INCOME
--------------------------------------------------
YEAR ENDED DECEMBER 31,
1993 1992
------------------------ ------------------------
SHARES DOLLARS SHARES DOLLARS
- ------------------------------------------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period 31,120,259 $316,898,677 24,309,569 $245,336,880
- -------------------------------------------------------------
Shares sold 10,175,682 109,047,909 10,650,095 112,117,313
- -------------------------------------------------------------
Shares issued to shareholders in payment of dividends
declared 2,632,696 28,096,415 2,126,821 22,249,604
- -------------------------------------------------------------
Shares redeemed (7,821,815) (83,565,038) (5,966,226) (62,805,120)
- ------------------------------------------------------------- ---------- ------------ ---------- ------------
Shares outstanding, end of period 36,106,822 $370,477,963 31,120,259 $316,898,677
- ------------------------------------------------------------- ---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
MANAGED BOND U.S. GOVERNMENT
- ---------------------------------- ---------- ------------ ---------- ------------ ---------- ------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
- ---------------------------------- ---------- ------------ ---------- ------------ ---------- ------------
1993 1992 DECEMBER 31, 1993(f)
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
- ---------------------------------- ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding, beginning
of period 11,770,665 $118,077,142 10,655,660 $106,490,090 -- $ --
- ----------------------------------
Shares sold 2,814,758 30,558,683 1,491,260 15,687,048 2,640,585 26,962,076
- ----------------------------------
Shares issued to shareholders in
payment of dividends declared 941,085 10,049,698 905,910 9,439,476 15,175 152,968
- ----------------------------------
Shares redeemed (5,102,996) (54,682,139) (1,282,165) (13,539,472) (1,214,148) (12,410,216)
- ---------------------------------- ---------- ------------ ---------- ------------ ---------- ------------
Shares outstanding, end of period 10,423,512 $104,003,384 11,770,665 $118,077,142 1,441,612 $ 14,704,828
- ---------------------------------- ---------- ------------ ---------- ------------ ---------- ------------
</TABLE>
FIRST UNION FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
---------------------------------------------------
YEAR ENDED DECEMBER 31,
1993 1992
-------------------------- ------------------------
TRUST SHARES: SHARES DOLLARS SHARES DOLLARS
- ------------------------------------------------------------ ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period 19,060,986 $ 316,680,788 15,892,487 $262,337,868
- ------------------------------------------------------------
Shares sold 12,354,825 216,981,393 5,319,171 91,000,623
- ------------------------------------------------------------
Shares issued to shareholders in payment
of dividends declared 1,415,290 25,407,542 1,404,748 24,083,280
- ------------------------------------------------------------
Shares redeemed (6,561,135) (115,628,819) (3,555,420) (60,740,983)
- ------------------------------------------------------------ ---------- ------------- ---------- ------------
Shares outstanding, end of period 26,269,966 $ 443,440,904 19,060,986 $316,680,788
- ------------------------------------------------------------ ---------- ------------- ---------- ------------
</TABLE>
(a) For the period from July 6, 1993 (commencement of operations) to December
31, 1993.
(b) For the period from July 2, 1993 (commencement of operations) to December
31, 1993.
(c) For the period from February 21, 1992 (commencement of operations) to
Dececmber 31, 1992.
(d) For the period from January 11, 1993 (commencement of operations) to
December 31, 1993.
(e) For the period from January 26, 1993 (commencement of operations) to
December 31, 1993.
(f) For the period from September 2, 1993 (commencement of operations) to
December 31, 1993.
(g) For the period from February 2, 1993 (commencement of operations) to
December 31, 1993.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
First Union National Bank of North Carolina, the Trust's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.35 of 1% of each Fund's average daily net assets for Money Market, Tax Free
Money Market, and Treasury Money Market, and .50 of 1% of the average daily net
assets for Balanced, Fixed Income, Florida, Georgia, High Grade Tax Free,
Managed Bond, North Carolina, U.S. Government, Value, and Virginia. The Adviser
may voluntarily waive a portion of its fees. The Adviser can modify or terminate
this voluntary waiver of expenses at any time at its sole discretion. For the
year ended December 31, 1993, the Adviser earned and waived the following
investment advisory fees on each Fund:
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT
ADVISORY ADVISORY
FEES EARNED FEES WAIVED
<S> <C> <C>
Balanced $ 3,425,786 $ --
- ------------------------------------------------------------------------------------
Fixed Income 1,894,693 --
- ------------------------------------------------------------------------------------
Florida 31,835 31,835
- ------------------------------------------------------------------------------------
Georgia 5,416 5,416
- ------------------------------------------------------------------------------------
High Grade Tax Free 643,946 280,300
- ------------------------------------------------------------------------------------
Managed Bond 576,619 --
- ------------------------------------------------------------------------------------
Money Market 332,305 231,837
- ------------------------------------------------------------------------------------
North Carolina 170,496 170,496
- ------------------------------------------------------------------------------------
Tax Free Money Market 1,115,932 750,857
- ------------------------------------------------------------------------------------
Treasury Money Market 1,977,645 1,712,975
- ------------------------------------------------------------------------------------
U.S. Government 802,441 465,195
- ------------------------------------------------------------------------------------
Value 3,016,457 --
- ------------------------------------------------------------------------------------
Virginia 4,283 4,283
- ------------------------------------------------------------------------------------
</TABLE>
FIRST UNION FUNDS
- --------------------------------------------------------------------------------
In addition, the Adviser voluntarily reimbursed other operating expenses on the
following Funds:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------
Florida $ 44,007
- ------------------------------------------------------------------------------------
Georgia 40,827
- ------------------------------------------------------------------------------------
North Carolina 88,757
- ------------------------------------------------------------------------------------
Virginia 35,043
- ------------------------------------------------------------------------------------
</TABLE>
Federated Administrative Services ("FAS") provides each Fund with certain
administrative personnel and services at an annual rate of .15 of 1% on the
first $250 million of the Trust's average aggregate daily net assets; .125 of 1%
on the next $250 million; .10 of 1% on the next $250 million; and .075 of 1% on
the average aggregate daily net assets of the Trust in excess of $750 million.
FAS may voluntarily waive a portion of its fee on each Fund. For the year ended
December 31, 1993, FAS earned, and voluntarily waived, the following
administrative fees on each Fund:
<TABLE>
<CAPTION>
FAS FAS
FEES EARNED FEES WAIVED
<S> <C> <C>
Balanced $ 597,752 $ --
- ------------------------------------------------------------------------------------
Fixed Income 331,342 --
- ------------------------------------------------------------------------------------
Florida 24,932 24,932
- ------------------------------------------------------------------------------------
Georgia 24,931 24,931
- ------------------------------------------------------------------------------------
High Grade Tax Free 112,663 --
- ------------------------------------------------------------------------------------
Managed Bond 101,082 36,701
- ------------------------------------------------------------------------------------
Money Market 82,912 --
- ------------------------------------------------------------------------------------
North Carolina 48,493 48,493
- ------------------------------------------------------------------------------------
Tax Free Money Market 277,930 --
- ------------------------------------------------------------------------------------
Treasury Money Market 490,126 198,476
- ------------------------------------------------------------------------------------
U.S. Government 139,691 30,827
- ------------------------------------------------------------------------------------
Value 526,836 --
- ------------------------------------------------------------------------------------
Virginia 24,931 24,931
- ------------------------------------------------------------------------------------
</TABLE>
Organizational expenses for the Funds were borne initially by FAS. Balanced,
Managed Bond, Money Market, North Carolina, Tax Free Money Market, Treasury
Money Market, and U.S. Government have agreed to pay FAS, at an annual rate of
.005 of 1% of average daily net assets until expenses borne by FAS are
reimbursed, or the expiration of five years from the date these portfolios
became effective, whichever occurs earlier. Florida, Georgia, High Grade Tax
Free, and Virginia have agreed to pay FAS during the five year period following
the date these portfolios became effective.
FIRST UNION FUNDS
- --------------------------------------------------------------------------------
For the year ended December 31, 1993, the following amounts were paid to FAS
pursuant to this agreement:
<TABLE>
<CAPTION>
EFFECTIVE ORGANIZATIONAL ORGANIZATIONAL
DATE EXPENSES EXPENSES PAID
<S> <C> <C> <C>
Balanced 1/2/91 $ 32,513 $ 1,689
- -----------------------------------------------------------------
Florida 6/14/93 40,000 1,556
- -----------------------------------------------------------------
Georgia 6/14/93 40,000 1,333
- -----------------------------------------------------------------
High Grade Tax Free 7/12/88 75,393 22,004
- -----------------------------------------------------------------
Managed Bond 1/2/91 32,513 5,794
- -----------------------------------------------------------------
Money Market 7/12/88 17,588 4,839
- -----------------------------------------------------------------
North Carolina 12/28/92 60,000 4,667
- -----------------------------------------------------------------
Tax Free Money Market 7/12/88 18,827 5,517
- -----------------------------------------------------------------
Treasury Money Market 10/15/90 43,568 14,924
- -----------------------------------------------------------------
U.S. Government 12/28/92 40,000 4,000
- -----------------------------------------------------------------
Virginia 6/14/93 40,000 1,333
- -----------------------------------------------------------------
</TABLE>
The Trust has adopted two Distribution Plans (the "Plans") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The Trust will pay Federated
Securities Corp. ("FSC"), the principal distributor, up to .35 of 1% of the
average daily net assets of the Class B Investment Shares for Money Market, Tax
Free Money Market, and Treasury Money Market, and up to .75 of 1% of the average
daily net assets of the Class B and Class C Investment Shares for Balanced,
Fixed Income, Florida, Georgia, High Grade Tax Free, Managed Bond, North
Carolina, U.S. Government, Value, and Virginia, annually, to pay commissions,
maintenance fees and to compensate FSC. For the foreseeable future, FSC intends
to limit its fees to .30 of 1% of the Class B Investment Shares' average daily
net assets for Money Market, Tax Free Money Market, and Treasury Money Market,
to .25 of 1% of the Class B Investment Shares' average daily net assets for
Balanced, Florida, Georgia, High Grade Tax Free, North Carolina, U.S. Goverment,
Value, and Virginia, and to .10 of 1% of the Class B Investment Shares' average
daily net assets for Fixed Income. Managed Bond does not offer Investment Shares
to which the Plan relates and therefore, no payments were made by the Fund to
FSC. FSC may voluntarily waive a portion of its fee. During the year ended
December 31, 1993, FSC earned and voluntarily waived distribution services fees
for each Fund as follows:
<TABLE>
<CAPTION>
DISTRIBUTION DISTRIBUTION
SERVICES SERVICES
FEES EARNED FEES WAIVED
<S> <C> <C>
Balanced $ 295,600 $ --
- -----------------------------------------------------------------------------------
Fixed Income 51,539 --
- -----------------------------------------------------------------------------------
Florida 39,925 --
- -----------------------------------------------------------------------------------
Georgia 7,283 --
- -----------------------------------------------------------------------------------
High Grade Tax Free 456,290 2,256
- -----------------------------------------------------------------------------------
Money Market 259,441 129,896
- -----------------------------------------------------------------------------------
North Carolina 216,917 15,339
- -----------------------------------------------------------------------------------
Tax Free Money Market 809,367 189,838
- -----------------------------------------------------------------------------------
Treasury Money Market 756,661 --
- -----------------------------------------------------------------------------------
U.S. Government 1,068,084 --
- -----------------------------------------------------------------------------------
Value 694,708 --
- -----------------------------------------------------------------------------------
Virginia 4,593 --
- -----------------------------------------------------------------------------------
</TABLE>
Certain Officers and Trustees of the Trust are also Officers and Trustees of FAS
and FSC.
FIRST UNION FUNDS
- --------------------------------------------------------------------------------
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term obligations) for the
year ended December 31, 1993, for each Fund were as follows:
<TABLE>
<CAPTION>
FIXED HIGH GRADE
BALANCED INCOME FLORIDA GEORGIA TAX FREE
- -------------------------------------------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
PURCHASES $419,502,065 $323,122,989 $ 24,513,002 $ 4,443,671 $56,860,666
- -------------------------------------------- ------------ ------------ ------------ ----------- -----------
SALES $127,077,589 $258,402,195 $ 490,070 $ 358,740 $17,059,741
- -------------------------------------------- ------------ ------------ ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Managed North U.S.
Bond Carolina Government Value Virginia
- -------------------------------------------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
PURCHASES $ 56,919,402 $ 75,816,867 $368,356,767 $479,436,229 $ 3,275,205
- ------------------------------------------- ------------ ------------ ------------ ------------ -----------
SALES $ 61,863,276 $ 20,210,872 $ 61,311,491 $258,673,657 $ --
- ------------------------------------------- ------------ ------------ ------------ ------------ -----------
</TABLE>
(7) CURRENT CREDIT RATINGS
Current credit ratings and related notes of Florida, Georgia, High Grade Tax
Free, North Carolina, Tax Free Money Market, and Virginia are unaudited.
FIRST UNION FUNDS
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Trustees and Shareholders of
FIRST UNION FUNDS:
We have audited the statement of assets and liabilities, including the
portfolios of investments, for First Union Fund portfolios, listed below, as of
December 31, 1993, the related statements of operations, changes in net assets,
and the financial highlights for each of the years or periods listed below:
First Union Money Market Portfolio--statement of operations for the year
ended December 31, 1993, statement of changes in net assets for the years
ended December 31, 1993 and 1992, and the financial highlights for the
period or years from January 3, 1989 (commencement of operations) through
December 31, 1993.
First Union Tax Free Money Market Portfolio--statement of operations for
the year ended December 31, 1993, statement of changes in net assets for
the years ended December 31, 1993 and 1992, and the financial highlights
for the period or years from January 3, 1989 (commencement of operations)
through December 31, 1993.
First Union Treasury Money Market Portfolio--statement of operations for
the year ended December 31, 1993, statement of changes in net assets for
the years ended December 31, 1993 and 1992, and the financial highlights
for the period or years from March 6, 1991 (commencement of operations) to
December 31, 1993.
First Union Balanced Portfolio--statement of operations for the year ended
December 31, 1993, statement of changes in net assets for the years ended
December 31, 1993 and 1992, and the financial highlights for the period or
years from April 1, 1991 (commencement of operations) through December 31,
1993.
First Union Fixed Income Portfolio--statement of operations for the year
ended December 31, 1993, statement of changes in net assets for the years
ended December 31, 1993 and 1992, and the financial highlights for the
period or years from January 28, 1989 (commencement of operations) through
December 31, 1993.
First Union Florida Municipal Bond Portfolio--statements of operations and
changes in net assets and the financial highlights for the period from July
2, 1993 (commencement of operations) to December 31, 1993.
First Union Georgia Municipal Bond Portfolio--statements of operations and
changes in net assets and the financial highlights for the period from July
2, 1993 (commencement of operations) to December 31, 1993.
First Union High Grade Tax Free Portfolio (formerly, "First Union Insured
Tax Free Portfolio")-- statement of operations for the year ended December
31, 1993, and statement of changes in net assets and the financial
highlights for the year ended December 31, 1993 and for the period from
February 21, 1992 (commencement of operations) to December 31, 1992.
First Union Managed Bond Portfolio--statement of operations for the year
ended December 31, 1993, statement of changes in net assets for the years
ended December 31, 1993 and 1992, and the financial highlights for the
period or years from April 1, 1991 (commencement of operations) to December
31, 1993.
First Union North Carolina Municipal Bond Portfolio--statements of
operations and changes in net assets and the financial highlights for the
period from January 11, 1993 (commencement of operations) to December 31,
1993.
First Union U.S. Government Portfolio--statements of operations and changes
in net assets and the financial highlights for the period from January 11,
1993 (commencement of operations) to December 31, 1993.
First Union Value Portfolio--statement of operations for the year ended
December 31, 1993, statement of changes in net assets for the years ended
December 31, 1993 and 1992, and the
FIRST UNION FUNDS
- --------------------------------------------------------------------------------
financial highlights for the period or years from August 30, 1984
(commencement of operations) through December 31, 1993.
First Union Virginia Municipal Bond Portfolio--statements of operations and
changes in net assets and the financial highlights for the period from July
2, 1993 (commencement of operations) to December 31, 1993.
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 the audit to gain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1993, 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 First
Union Money Market Portfolio, First Union Tax Free Money Market Portfolio, First
Union Treasury Money Market Portfolio, First Union Balanced Portfolio, First
Union Fixed Income Portfolio, First Union Florida Municipal Bond Portfolio,
First Union Georgia Municipal Bond Portfolio, First Union High Grade Tax Free
Portfolio, First Union Managed Bond Portfolio, First Union North Carolina
Municipal Bond Portfolio, First Union U.S. Government Portfolio, First Union
Value Portfolio, and First Union Virginia Municipal Bond Portfolio as of
December 31, 1993, the results of their operations, changes in their net assets,
and the financial highlights for each of the periods listed above, in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK
Pittsburgh, Pennsylvania
February 11, 1994
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
James S. Howell, Chairman Edward C. Gonzales
Edward C. Gonzales President and Treasurer
Gerald M. McDonnell Joseph S. Machi
Thomas L. McVerry Vice President and Assistant Treasurer
William Walt Pettit Peter J. Germain
Russell A. Salton, III, M.D. Secretary
Michael S. Scofield Mark A. Sheehan
Assistant Secretary
Mutual funds are not obligations of or insured by any bank, nor are they insured
by the federal government or any of its agencies. Investment in these shares
involves risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by a Fund's prospectus, which contains facts concerning its
objective and policies, management fees, expenses and other information.
Federated Securities Corp., Distributor
3012205 (2/94)
APPENDIX
A1. The graphic presentation displayed here consists of an
area chart representing the Federal Reserve Index of
Industrial Production - Manufacturing Trends (the "Index") .
The "x" axis represents computation periods and is divided
into eight equal intervals. Every second interval
represents a year end beginning with 1990 and ending with
1993. The "y" axis represents the value of the Index. The
change in the level of the Index over time is charted by a
solid line. Beginning with mid-year 1989 and ending
mid-year 1993, the approximate values of the Index were 107
and 115, respectively.
A2. The graphic presentation displayed here consists of an
area chart representing the Standard and Poor's 500
Composite Stock Price Index (the "Index") . The "x" axis
represents computation periods and is divided into eight
equal intervals. Every second interval represents a year
end beginning with 1990 and ending with 1993. The "y" axis
represents the value of the Index. The change in the level
of the Index over time is charted by a solid line.
Beginning with mid-year 1989 and ending mid-year 1993, the
approximate values of the Index were 350 and 470,
respectively.
A3. The graphic presentation displayed here consists of an
area chart representing the Government Yield Curve and
Inflation (the "Index") . The "x" axis represents
computation periods and is divided into three equal
intervals which are preceded and followed by one equal
interval. The second interval represents the year-end 1990
and the fourth interval represents year-end 1993. The "y"
axis represents the value of the Index. The change in the
level of the Index over time is charted by: (1) vertical
bars representing the Consumer Price Index; (2) a solid line
with circles representing the three month Treasury bill
yield; and (3) a solid line with squares representing 30
year Treasury bond yields. Beginning with mid-year 1989 and
ending mid-year 1993, the approximate values of the Index
started at 5, 8, and 8.5 and ended with 2.5, 3, and 6.5,
respectively.
A4. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Value
Portfolio - Class B Investment Shares ("Shares") is
represented by a solid line. The S&P 500 Index is
represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a
hypothetical $10,000 purchase in Shares and the S&P 500.
The "y" axis reflects the cost of the investment. The "x"
axis reflects computation periods from the Shares' start of
performance, 4/12/85, through 12/31/93. The right margin
reflects the ending value of the hypothetical investment in
Shares as compared to the S&P 500; the ending values were
$27,420 and $34,534, respectively. There is also a legend
in the upper left quadrant of the graphic presentation which
indicates the Average Annual Total Return for the period
ended December 31, 1993; beginning with the start of
performance of Shares (4/12/85), and the one-year and
five-year periods, the Average Annual Total Returns were
12.27%, 4.95%, 11.67%, respectively.
A5. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Value
Portfolio - Class C Investment Shares ("Shares") is
represented by a solid line. The S&P 500 Index is
represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a
hypothetical $10,000 purchase in Shares and the S&P 500.
The "y" axis reflects the cost of the investment. The "x"
axis reflects computation periods from the Shares' start of
performance, 1/25/93, through 12/31/93. The right margin
reflects the ending value of the hypothetical investment in
Shares as compared to the S&P 500; the ending values were
$10,497 and $10,902, respectively. There is also a legend
in the upper left quadrant of the graphic presentation which
indicates the Average Annual Total Return for the period
ended December 31, 1993; beginning with the start of
performance of Shares (1/25/93), through the eleven month
period, the Average Annual Total Return was 4.97%.
A6. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Value
Portfolio - Trust Shares ("Shares") is represented by a
solid line. The S&P 500 Index is represented by a broken
line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000
purchase in Shares and the S&P 500. The "y" axis reflects
the cost of the investment. The "x" axis reflects
computation periods from the Shares' start of performance,
12/31/90, through 12/31/93. The right margin reflects the
ending value of the hypothetical investment in Shares as
compared to the S&P 500; the ending values were $14,902 and
$15,444, respectively. There is also a legend in the upper
left quadrant of the graphic presentation which indicates
the Average Annual Total Return for the period ended
December 31, 1993; beginning with the start of performance
of Shares (12/31/90), and the one-year period, the Average
Annual Total Returns were 14.22% and 9.71%, respectively.
A7. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Balanced
Portfolio - Class B Investment Shares ("Shares") is
represented by a bold solid line. The S&P 500 Index is
represented by a broken line and the Lehman G/C Index is
represented by a non bold solid line. The line graph is a
visual representation of a comparison of change in value of
a hypothetical $10,000 purchase in Shares, the S&P 500, and
the Lehman G/C Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from
the Shares' start of performance, 6/6/91, through 12/31/93.
The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the S&P 500
and the Lehman G/C Index; the ending values were $12,784,
$12,903, and 13,296, respectively. There is also a legend
in the upper left quadrant of the graphic presentation which
indicates the Average Annual Total Return for the period
ended December 31, 1993; beginning with the start of
performance of Shares (6/6/91), and the one-year period, the
Average Annual Total Returns were 10.02% and 5.94%,
respectively.
A8. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Balanced
Portfolio - Class C Investment Shares ("Shares") is
represented by a bold solid line. The S&P 500 Index is
represented by a broken line and the Lehman G/C Index is
represented by a non bold solid line. The line graph is a
visual representation of a comparison of change in value of
a hypothetical $10,000 purchase in Shares, the S&P 500, and
the Lehman G/C Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from
the Shares' start of performance, 1/25/93, through 12/31/93.
The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the S&P 500
and the Lehman G/C Index; the ending values were $10,458,
$10,902, and 10,869, respectively. There is also a legend
in the upper left quadrant of the graphic presentation which
indicates the Average Annual Total Return for the period
ended December 31, 1993; beginning with the start of
performance of Shares (1/25/93), through the eleven month
period, the Average Annual Total Return was 4.58%.
A9. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Balanced
Portfolio - Trust Shares ("Shares") is represented by a bold
solid line. The S&P 500 Index is represented by a broken
line and the Lehman G/C Index is represented by a non bold
solid line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000
purchase in Shares, the S&P 500, and the Lehman G/C Index.
The "y" axis reflects the cost of the investment. The "x"
axis reflects computation periods from the Shares' start of
performance, 4/1/91, through 12/31/93. The right margin
reflects the ending value of the hypothetical investment in
Shares as compared to the S&P 500 and the Lehman G/C Index;
the ending values were $13,776, $13,477, and $13,512,
respectively. There is also a legend in the upper left
quadrant of the graphic presentation which indicates the
Average Annual Total Return for the period ended December
31, 1993; beginning with the start of performance of Shares
(4/1/91), and the one-year period, the Average Annual Total
Returns were 12.37% and 10.68%, respectively.
A10. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Fixed Income
Portfolio - Class B Investment Shares ("Shares") is
represented by a solid line. The Lehman G/C Index is
represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a
hypothetical $10,000 purchase in Shares and the Lehman G/C
Index. The "y" axis reflects the cost of the investment.
The "x" axis reflects computation periods from the Shares'
start of performance, 1/31/89, through 12/31/93. The right
margin reflects the ending value of the hypothetical
investment in Shares as compared to the Lehman G/C Index;
the ending values were $15,011 and $16,280, respectively.
There is also a legend in the upper left quadrant of the
graphic presentation which indicates the Average Annual
Total Return for the period ended December 31, 1993;
beginning with the start of performance of Shares (1/31/89),
and the one-year period, the Average Annual Total Returns
were 8.62% and 3.99%, respectively.
A11. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Fixed Income
Portfolio - Class C Investment Shares ("Shares") is
represented by a solid line. The Lehman G/C Index is
represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a
hypothetical $10,000 purchase in Shares and the Lehman G/C
Index. The "y" axis reflects the cost of the investment.
The "x" axis reflects computation periods from the Shares'
start of performance, 1/25/93, through 12/31/93. The right
margin reflects the ending value of the hypothetical
investment in Shares as compared to the Lehman G/C Index;
the ending values were $10,181 and $10,672, respectively.
There is also a legend in the upper left quadrant of the
graphic presentation which indicates the Average Annual
Total Return for the period ended December 31, 1993;
beginning with the start of performance of Shares (1/25/93),
through the eleven month period, the Average Annual Total
Return was 1.81%.
A12. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Fixed Income
Portfolio - Trust Shares ("Shares") is represented by a
solid line. The Lehman G/C Index is represented by a broken
line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000
purchase in Shares and the Lehman G/C Index. The "y" axis
reflects the cost of the investment. The "x" axis reflects
computation periods from the Shares' start of performance,
12/31/90, through 12/31/93. The right margin reflects the
ending value of the hypothetical investment in Shares as
compared to the Lehman G/C Index; the ending values were
$13,189 and $13,364, respectively. There is also a legend
in the upper left quadrant of the graphic presentation which
indicates the Average Annual Total Return for the period
ended December 31, 1993; beginning with the start of
performance of Shares (12/31/90), and the one-year period,
the Average Annual Total Returns were 9.67% and 8.67%,
respectively.
A13. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union U.S.
Government Portfolio - Trust Shares ("Shares") is
represented by a solid line. The Lehman Government Index is
represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a
hypothetical $10,000 purchase in Shares and the Lehman
Government Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from
the Shares' start of performance, 8/25/93, through 12/31/93.
The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the Lehman
Government Index; the ending values were $10,049 and
$10,056, respectively. There is also a legend in the upper
left quadrant of the graphic presentation which indicates
the Average Annual Total Return for the period ended
December 31, 1993; beginning with the start of performance
of Shares (8/25/93), through the four month period, the
Average Annual Total Return was 0.49%.
A14. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union U.S.
Government Portfolio - Class B Investment Shares ("Shares")
is represented by a solid line. The Lehman Government Index
is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a
hypothetical $10,000 purchase in Shares and the Lehman
Government Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from
the Shares' start of performance, 1/12/93, through 12/31/93.
The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the Lehman
Government Index; the ending values were $10,313 and
$10,817, respectively. There is also a legend in the upper
left quadrant of the graphic presentation which indicates
the Average Annual Total Return for the period ended
December 31, 1993; beginning with the start of performance
of Shares (1/12/93), through the eleven month period, the
Average Annual Total Return was 3.10%.
A15. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union U.S.
Government Portfolio - Class C Investment Shares ("Shares")
is represented by a solid line. The Lehman Government Index
is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a
hypothetical $10,000 purchase in Shares and the Lehman
Government Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from
the Shares' start of performance, 1/12/93, through 12/31/93.
The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the Lehman
Government Index; the ending values were $10,268 and
$10,817, respectively. There is also a legend in the upper
left quadrant of the graphic presentation which indicates
the Average Annual Total Return for the period ended
December 31, 1993; beginning with the start of performance
of Shares (1/12/93), through the eleven month period, the
Average Annual Total Return was 2.68%.
A16. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Managed Bond
Portfolio - Trust Shares ("Shares") is represented by a
solid line. The Lehman G/C Index is represented by a broken
line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000
purchase in Shares and the Lehman G/C Index. The "y" axis
reflects the cost of the investment. The "x" axis reflects
computation periods from the Shares' start of performance,
4/1/91, through 12/31/93. The right margin reflects the
ending value of the hypothetical investment in Shares as
compared to the Lehman G/C Index; the ending values were
$13,041 and $13,512, respectively. There is also a legend
in the upper left quadrant of the graphic presentation which
indicates the Average Annual Total Return for the period
ended December 31, 1993; beginning with the start of
performance of Shares (4/1/91), and the one-year period, the
Average Annual Total Returns were 10.15% and 10.59%,
respectively.
A17. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Florida
Municipal Bond Portfolio - Class B Investment Shares
("Shares") is represented by a solid line. The Lehman
Florida Index is represented by a broken line. The line
graph is a visual representation of a comparison of change
in value of a hypothetical $10,000 purchase in Shares and
the Lehman Florida Index. The "y" axis reflects the cost of
the investment. The "x" axis reflects computation periods
from the Shares' start of performance, 7/5/93, through
12/31/93. The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the Lehman
Florida Index; the ending values were $10,140 and $10,487,
respectively. There is also a legend in the upper left
quadrant of the graphic presentation which indicates the
Average Annual Total Return for the period ended December
31, 1993; beginning with the start of performance of Shares
(7/5/93), through the six month period, the Average Annual
Total Return was 1.38%.
A18. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Florida
Municipal Bond Portfolio - Class C Investment Shares
("Shares") is represented by a solid line. The Lehman
Florida Index is represented by a broken line. The line
graph is a visual representation of a comparison of change
in value of a hypothetical $10,000 purchase in Shares and
the Lehman Florida Index. The "y" axis reflects the cost of
the investment. The "x" axis reflects computation periods
from the Shares' start of performance, 7/1/93, through
12/31/93. The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the Lehman
Florida Index; the ending values were $10,134 and $10,487,
respectively. There is also a legend in the upper left
quadrant of the graphic presentation which indicates the
Average Annual Total Return for the period ended December
31, 1993; beginning with the start of performance of Shares
(7/1/93), through the six month period, the Average Annual
Total Return was 1.34%.
A19. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Georgia
Municipal Bond Portfolio - Class B Investment Shares
("Shares") is represented by a solid line. The Lehman
Georgia Index is represented by a broken line. The line
graph is a visual representation of a comparison of change
in value of a hypothetical $10,000 purchase in Shares and
the Lehman Georgia Index. The "y" axis reflects the cost of
the investment. The "x" axis reflects computation periods
from the Shares' start of performance, 7/1/93, through
12/31/93. The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the Lehman
Georgia Index; the ending values were $9,977 and $10,496,
respectively. There is also a legend in the upper left
quadrant of the graphic presentation which indicates the
Average Annual Total Return for the period ended December
31, 1993; beginning with the start of performance of Shares
(7/1/93), through the six month period, the Average Annual
Total Return was (0.23%).
A20. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Georgia
Municipal Bond Portfolio - Class C Investment Shares
("Shares") is represented by a solid line. The Lehman
Georgia Index is represented by a broken line. The line
graph is a visual representation of a comparison of change
in value of a hypothetical $10,000 purchase in Shares and
the Lehman Georgia Index. The "y" axis reflects the cost of
the investment. The "x" axis reflects computation periods
from the Shares' start of performance, 7/1/93, through
12/31/93. The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the Lehman
Georgia Index; the ending values were $9,968 and $10,496,
respectively. There is also a legend in the upper left
quadrant of the graphic presentation which indicates the
Average Annual Total Return for the period ended December
31, 1993; beginning with the start of performance of Shares
(7/1/93), through the six month period, the Average Annual
Total Return was (0.32%).
A21. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union North Carolina
Municipal Bond Portfolio - Class B Investment Shares
("Shares") is represented by a solid line. The Lehman State
Index is represented by a broken line. The line graph is a
visual representation of a comparison of change in value of
a hypothetical $10,000 purchase in Shares and the Lehman
State Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from
the Shares' start of performance, 1/12/93, through 12/31/93.
The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the Lehman
State Index; the ending values were $10,683 and $11,175,
respectively. There is also a legend in the upper left
quadrant of the graphic presentation which indicates the
Average Annual Total Return for the period ended December
31, 1993; beginning with the start of performance of Shares
(1/12/93), through the eleven month period, the Average
Annual Total Return was 6.79%.
A22. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union North Carolina
Municipal Bond Portfolio - Class C Investment Shares
("Shares") is represented by a solid line. The Lehman State
Index is represented by a broken line. The line graph is a
visual representation of a comparison of change in value of
a hypothetical $10,000 purchase in Shares and the Lehman
State Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from
the Shares' start of performance, 1/12/93, through 12/31/93.
The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the Lehman
State Index; the ending values were $10,663 and $11,175,
respectively. There is also a legend in the upper left
quadrant of the graphic presentation which indicates the
Average Annual Total Return for the period ended December
31, 1993; beginning with the start of performance of Shares
(1/12/93), through the eleven month period, the Average
Annual Total Return was 6.63%.
A23. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Virginia
Municipal Bond Portfolio - Class B Investment Shares
("Shares") is represented by a solid line. The Lehman
Virginia Index is represented by a broken line. The line
graph is a visual representation of a comparison of change
in value of a hypothetical $10,000 purchase in Shares and
the Lehman Virginia Index. The "y" axis reflects the cost
of the investment. The "x" axis reflects computation
periods from the Shares' start of performance, 7/7/93,
through 12/31/93. The right margin reflects the ending
value of the hypothetical investment in Shares as compared
to the Lehman Virginia Index; the ending values were $9,973
and $10,450, respectively. There is also a legend in the
upper left quadrant of the graphic presentation which
indicates the Average Annual Total Return for the period
ended December 31, 1993; beginning with the start of
performance of Shares (7/7/93), through the six month
period, the Average Annual Total Return was (0.30%).
A24. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union Virginia
Municipal Bond Portfolio - Class C Investment Shares
("Shares") is represented by a solid line. The Lehman
Virginia Index is represented by a broken line. The line
graph is a visual representation of a comparison of change
in value of a hypothetical $10,000 purchase in Shares and
the Lehman Virginia Index. The "y" axis reflects the cost
of the investment. The "x" axis reflects computation
periods from the Shares' start of performance, 7/1/93,
through 12/31/93. The right margin reflects the ending
value of the hypothetical investment in Shares as compared
to the Lehman Virginia Index; the ending values were $9,961
and $10,450, respectively. There is also a legend in the
upper left quadrant of the graphic presentation which
indicates the Average Annual Total Return for the period
ended December 31, 1993; beginning with the start of
performance of Shares (7/1/93), through the six month
period, the Average Annual Total Return was (0.39%).
A25. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union High Grade Tax
Free Portfolio - Class B Investment Shares ("Shares") is
represented by a solid line. The Lehman Insured Index is
represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a
hypothetical $10,000 purchase in Shares and the Lehman
Insured Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from
the Shares' start of performance, 2/25/92, through 12/31/93.
The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the Lehman
Insured Index; the ending values were $11,890 and $12,321,
respectively. There is also a legend in the upper left
quadrant of the graphic presentation which indicates the
Average Annual Total Return for the period ended December
31, 1993; beginning with the start of performance of Shares
(2/25/92), and the one-year period, the Average Annual Total
Returns were 9.82% and 8.76%, respectively.
A26. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. First Union High Grade Tax
Free Portfolio - Class C Investment Shares ("Shares") is
represented by a solid line. The Lehman Insured Index is
represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a
hypothetical $10,000 purchase in Shares and the Lehman
Insured Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from
the Shares' start of performance, 1/12/93, through 12/31/93.
The right margin reflects the ending value of the
hypothetical investment in Shares as compared to the Lehman
Insured Index; the ending values were $10,820 and $11,301,
respectively. There is also a legend in the upper left
quadrant of the graphic presentation which indicates the
Average Annual Total Return for the period ended December
31, 1993; beginning with the start of performance of Shares
(1/12/93), and the eleven month period, the Average Annual
Total Return was 8.20%.
