<PAGE>
EVERGREEN TAX-FREE FUNDS
(FORMERLY FIRST UNION TAX-FREE FUNDS)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <S> <C>
President's Message......................................................... 1
A Review of 1st Half
and Prospects for Remainder of 1995......................................... 2
A Report From Your Portfolio Manager........................................ 4
(Photo of state of Georgia) GEORGIA MUNICIPAL Statement of Investments.................................................... 5
BOND FUND Statement of Assets and Liabilities......................................... 7
Statement of Operations..................................................... 8
Statement of Changes in Net Assets.......................................... 9
Financial Highlights........................................................ 10
(Photo of shield) HIGH GRADE Statement of Investments.................................................... 11
TAX FREE FUND Statement of Assets and Liabilities......................................... 14
Statement of Operations..................................................... 15
Statement of Changes in Net Assets.......................................... 16
Financial Highlights........................................................ 17
(Photo of state of N.C.) NORTH CAROLINA Statement of Investments.................................................... 18
MUNICIPAL BOND Statement of Assets and Liabilities......................................... 21
FUND Statement of Operations..................................................... 22
Statement of Changes in Net Assets.......................................... 23
Financial Highlights........................................................ 24
(Photo of state of S.C.) SOUTH CAROLINA Statement of Investments.................................................... 25
MUNICIPAL BOND Statement of Assets and Liabilities......................................... 27
FUND Statement of Operations..................................................... 28
Statement of Changes in Net Assets.......................................... 29
Financial Highlights........................................................ 30
(Photo of state of Virginia) VIRGINIA Statement of Investments.................................................... 31
MUNICIPAL BOND Statement of Assets and Liabilities......................................... 33
FUND Statement of Operations..................................................... 34
Statement of Changes in Net Assets.......................................... 35
Financial Highlights........................................................ 36
Combined Notes to Financial Statements...................................... 37
Trustees and Officers....................................................... 44
</TABLE>
<PAGE>
EVERGREEN TAX-FREE FUNDS
(FORMERLY FIRST UNION TAX-FREE FUNDS)
PRESIDENT'S MESSAGE
BY JOHN J. PILEGGI
Dear Valued Shareholder:
I am pleased to present you with the Semi-Annual (Photo of
Report for the Evergreen Tax-Free Funds (formerly the John J. Pileggi)
First Union Tax-Free Funds) for the six-month period
ended June 30, 1995. This Report contains complete
financial information -- including the Investment Reviews and Statements of
Investments for the Evergreen Georgia Municipal Bond Fund, Evergreen High Grade
Tax Free Fund, Evergreen North Carolina Municipal Bond Fund, Evergreen South
Carolina Municipal Bond Fund, and Virginia Municipal Bond Fund.
As you can see, this Report features our new family of the Evergreen Funds.
This is the result of the First Union Funds combining with and taking the name
of the Evergreen Funds effective July 7, 1995. In addition, we have completed
the acquisition of the ABT Funds, which added two new funds to our expanding
fund family, Florida High Income Municipal Bond and Aggressive Growth funds. The
Evergreen Family of Funds now consists of more than 30 funds, each carefully
designed to help meet specific objectives.
We are excited about the creation of one combined fund family, since it
offers our shareholders a wider range of mutual fund options to help achieve a
broad spectrum of investment needs.
The combination of funds and the acquisition of two new funds provides you
with the following benefits:
(Bullet) a wider array of fund options, many with outstanding track records
(Bullet) free exchanges among all funds*
(Bullet) the investment expertise of two experienced investment advisors -
Evergreen Asset Management Corp. and First Union National Bank of
North Carolina's Capital Management Group
If you wish to receive more complete information about any of the Evergreen
Funds, please call 1-800-807-2940 to speak with a First Union Brokerage
Services' registered representative. We'll be glad to send you a prospectus
describing the fund choices and their objectives, fees and expenses. Please read
the prospectus carefully before you invest or send money.
I hope you're pleased with the recent growth we have experienced, and the
opportunities this growth affords you. As always, we welcome any questions,
comments, and suggestions you may have. We look forward to serving your
investment needs in the months and years to come.
Sincerely,
(Signature of John J. Pileggi)
August 15, 1995
* EXCHANGES MUST BE WITHIN THE SAME CLASS OF SHARES. SHARE EXCHANGES ARE SUBJECT
TO CERTAIN LIMITATIONS DESCRIBED IN THE PROSPECTUS.
1
<PAGE>
EVERGREEN TAX-FREE FUNDS
(FORMERLY FIRST UNION TAX-FREE FUNDS)
SOFT LANDING OR PERFECT LANDING?
REVIEW OF 1ST HALF AND PROSPECTS
FOR REMAINDER OF 1995
BY DICK WAGONER, CHIEF INVESTMENT OFFICER
In our last report we stated, "In our view, the (Photo of
investment climate for 1995 is improving," and we Dick Wagoner)
looked for much improved investment returns.
The basis for our optimism was our belief that the
Federal Reserve's interest rate increases, designed to slow the economy and pre-
empt inflation, were, in fact, going to be effective and would permit the
economy to come in for a "soft landing" after a period of rapid growth in 1994.
In addition to the Fed's actions, we believed then as we believe now that
several powerful secular forces -- including global competition, demographics
and significant productivity gains -- are working to keep inflation in check
longer-term.
Evidence today confirms our view of moderating economic growth in 1995.
Leading economic indicators have fallen 4 out of 5 consecutive months and are
likely to fall again. Industrial production and capacity utilization have also
begun to moderate. Further confirming a slowdown were the back-to-back rises in
unemployment claims in April and May, the first such occurrence in over three
years. These increases along with rising inventories and sluggish retail sales
assure that slower economic growth is at hand for the remainder of the year.
WHILE WE CONTINUE TO BE OPTIMISTIC ABOUT THE INVESTMENT OUTLOOK FOR 1995, WE
BELIEVE THE MARKETS MAY BE GETTING AHEAD OF THEMSELVES IN ANTICIPATION OF A
"PERFECT LANDING."
STANDING OVATION FROM WALL STREET
As the economy began to slow, interest rates fell and the markets responded
with a standing ovation to the prospects of a "soft landing" -- perhaps even
anticipating a "perfect landing" in the economy. For the six months ended June
30, 1995, the S&P 500 Reinvested Index* was up 20% and the Lehman Brothers
Intermediate Bond Index** was up 9%. An increasing number of investors believe
the transition to a slow growth, low inflation economy will be
smooth -- providing a highly favorable investment climate.
While we continue to be optimistic about the investment outlook for 1995, we
believe the markets may be getting ahead of themselves in anticipation of a
"perfect landing" rather than a slowdown which is likely to be characterized by
modestly higher inflation, a choppy and subdued pattern of economic growth, and
less favorable corporate earnings comparisons.
EXPLOSIVE RALLY IN THE MUNICIPAL MARKETS
As evidence of a slowing economy began to mount, intermediate and long-term
interest rates started to decline. By June 30th, the 30-Year U.S. Treasury Bond,
which had reached its highest yield of 7.925% on January 24, had declined in
yield to 6.618% on June 30.
Trends in the tax-free municipal bond market generally paralleled trends in
the taxable market. The municipal bond market's explosive first quarter rally
continued into the second quarter, although at a slower pace. After a basically
flat April, the rally picked up again during May, as all fixed income
investments rose strongly in price due to signs of economic weakness.
As June approached, talk of tax reform, in particular flat tax proposals,
began to eat away at the unfettered strength present in the municipal market.
Many market observers now believe that most of the threat from the passage of a
tax reform bill is built into current municipal bond prices. At these ratios to
taxables, municipals are attractive.
* The S&P 500 is a reinvested unmanaged composite index of 425 industrial, 20
transportation, and 55 public utility common stocks.
** Unmanaged index of selected securities.
2
<PAGE>
EVERGREEN TAX-FREE FUNDS
(FORMERLY FIRST UNION TAX FREE FUNDS)
REVIEW OF 1ST HALF AND PROSPECTS
FOR REMAINDER OF 1995 -- (CONTINUED)
SECOND HALF OUTLOOK
The investment climate for the balance of 1995 is likely to require a more
cautious stance on the part of investors.
The first half of the year witnessed a rapid run-up in equity prices, powered
by declining interest rates and improved corporate profit performance. Interest
rate declines reflected the moderation in economic growth brought on by the
Federal Reserve's actions in 1994 to slow the forward momentum of the economy
and, thus, relieve potential inflationary pressures.
By mid-year 1995, tangible evidence was available to indicate that those
policies had been successful and the Fed signaled a moderation of its stance.
This indicates further substantial interest rate declines from current levels
are less likely, removing one of the driving forces for higher stock prices.
Unexpectedly, strong earnings were an additional factor in lifting stock
prices. For the balance of 1995 and into 1996, profit comparisons will be less
robust as a result of the moderation in the economy and more difficult
year-over-year comparisons. In the absence of a further slowdown in the economy,
profits should continue to grow, but at a more measured pace.
Valuations on stocks are high reflecting the aforementioned variables. While
this in and of itself is not a reason for stocks to fall, it indicates that a
reasonable degree of caution is appropriate.
At this point, it appears that the economic recovery is intact and that
inflation is under control. U.S. manufacturing competitiveness is high related
to corporate restructuring and the level of the dollar in world markets.
Productivity gains have had a powerful impact on our ability to keep inflation
under control. Business capital spending remains high, which bodes well for a
continuation of these trends. Nonetheless, we are approaching the sixth year of
the economic recovery and one must be more cognizant of risks to the outlook
given that we are in the mature phase.
The fixed income markets have also reached levels where further reductions
will be more moderate and will require further evidence that the economy is not
going to repeat its strong second half performance of 1994. We believe that
interest rates may move upward moderately (7% bond yield) as economic data
reflects more growth after three months of very weak growth. However, we do not
expect a recurrence of 4% plus growth, and we believe interest rates will settle
back to the area of recent lows.
Actions on the political front may be the wildcard looking forward. Over the
next 18 months, the issues of tax reform, deficit reduction and Presidential
election politics will all be on the front pages. Positive action on the deficit
could have very positive implications for the financial markets.
3
<PAGE>
EVERGREEN TAX-FREE FUNDS
(FORMERLY FIRST UNION TAX-FREE FUNDS)
A REPORT FROM YOUR
PORTFOLIO MANAGER
BY RICK MARRONE
In late November and early December 1994, anticipating a (Photo of
slowdown in the economy and lower interest rates, we lengthened Rick Marrone)
the average maturity of our portfolios. Purchases were
concentrated in bonds with lower coupon rates, positioning the
Funds to take advantage of the appreciation potential afforded
by declining interest rates.
With economic numbers showing slower growth during the first
half of the year, prices of fixed income securities rose
strongly. Treasury bonds rallied so strongly that each advance
in price forced investors to participate in the market for fear
of getting left behind, which only pushed the rally further.
Municipal bond prices kept pace with their
taxable counterparts and actually outperformed treasuries during
the first quarter.
As the second quarter began, talk of a much lower supply of municipal bonds
and strong demand contributed further to the rally. The supply of issues was
projected to decline by approximately 40%, while strong demand would be present
due to a large number of bonds either being called or maturing in June and July.
This imbalance between supply and demand was so wide that the outstanding supply
of municipal bonds was projected to actually decline by about $27 billion. With
this as a backdrop, the second quarter started out fine and the rally continued
until talk of tax reform popped up during May.
The tax reform debate, and especially the talk of a flat tax, created enough
concern in retail buyers to stall the rally in municipal bonds. While many of
the proposals would adversely affect municipal bonds, it is really too early in
the tax reform debate to draw any meaningful conclusions. This debate will be
played out in the Presidential election and the next Congress will then take it
up. All that we can be sure of is that the final format of tax reform will not
resemble anything we are seeing now after the political process gets through
with the debate.
All of this discussion of tax reform pushed municipal yields higher. On June
30, long municipal bonds were yielding approximately 90-95% of the yield
available on taxable bonds -- levels we haven't seen in over a year. Today
municipals represent very attractive values and most observers believe current
yields compensate for the risk of possible changes in tax laws.
4
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF INVESTMENTS
(Photo of Georgia) JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- 83.9%
GEORGIA -- 81.2%
$500,000 Appling County,
Development Authority, PCR
Bonds,
7.15%, 1/1/21 (MBIA Insured)
(callable 1/1/04 @ 101)..... AAA $ 554,635
1,750,000 Atlanta,
Urban Residential Financial
Revenue Bond
0%, 10/12/16 (FNMA GTD
Insured).................... NR 443,398
300,000 Atlanta,
Water & Sewer RB,
5.00%, 1/1/15, OID
(callable 1/1/04 @ 102)..... AA- 265,464
300,000 Butts County, PC,
6.75%, 12/1/14, OID (MBIA
Insured)
(callable 12/1/04 @ 102).... AAA 326,925
250,000 Cartersville,
Development Authority RB,
7.40%, 11/1/10.............. AA- 280,448
120,000 Cartersville, GO/UT Bond,
6.70%, 1/1/12............... A 128,200
500,000 Cherokee County,
Water & Sewer, Refunding &
Improvement RB, 5.50%,
8/1/18 (MBIA Insured)....... AAA 473,720
500,000 Clayton County,
Housing Authority Mortgage,
RRB,
(Multi-Family Mortgage)
7.125%, 12/1/25 (FNMA/FHA
Insured)
(Callable 12/1/04
@ 102)...................... Aaa 528,600
500,000 DeKalb County,
Multi-family Housing RB,
7.15%, 1/1/25 (FSA Insured)
(Callable 1/1/05 @ 102)..... AAA 521,510
CREDIT
RATING:
PRINCIPAL MOODY'S
VALUE AMOUNT OR S&P
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
GEORGIA -- CONTINUED
$500,000 DeKalb County,
School District (Series A),
GO/UT Bonds,
6.25%, 7/1/11............... AA $ 523,250
345,000 Douglasville County,
Water & Sewer Authority RRB,
5.625%, 6/1/15, OID (AMBAC
Insured).................... AAA 335,523
500,000 Forsyth County,
School District, GO/UT
Bonds,
6.75%, 7/1/16............... A 545,070
400,000 Fulton County,
School District, GO/UT
Bonds,
5.625%, 1/1/21, OID
(callable 1/1/04 @ 102)..... AA 381,028
400,000 Fulton County,
Water & Sewer RB, GO/UT
Bonds,
6.375%, 1/1/14, OID
(callable 1/1/04 @ 102)..... AA 423,544
250,000 Georgia Municipal Electric
Power Authority,
RRB (Series V),
(General Obligations of
Participants Insured)
6.60%, 1/1/18............... A+ 262,355
400,000 Georgia Municipal Electric
Power Authority,
RRB, (Series EE)
7.25%, 1/1/24 (AMBAC
Insured).................... AAA 468,492
400,000 Georgia Housing & Finance
Authority, RB, (SFM),
(Series A) 6.55%, 12/1/27
(FHA/VA Insured) (callable
12/1/04 @ 102) (Subject to
AMT)........................ AA+ 402,872
500,000 Hall County,
School District, GO/UT Bonds
6.70%, 12/1/14, OID
(callable 12/1/04 @ 102).... AAA 538,475
</TABLE>
5
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1995
(Photo of Georgia) (UNAUDITED)
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
</TABLE>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
GEORGIA -- CONTINUED
$330,000 Metro Atlanta Rapid Transit,
7.0%, 7/1/11, OID (FGIC
Insured).................... AAA $ 354,809
500,000 Putnam County,
School District, GO/UT Bonds
6.90%, 2/1/14, OID (AMBAC
Insured)
(callable 2/1/05 @ 102)..... AAA 549,260
300,000 Washington County,
School District, GO/UT Bonds
(State Aid Withholding)
6.875%, 1/1/14, OID (AMBAC
Insured)
(callable 1/1/05 @ 102)..... AAA 329,574
8,637,152
PUERTO RICO -- 2.7%
265,000 Puerto Rico Commonwealth,
GO Bond
6.25%, 7/1/11 (MBIA
Insured).................... AAA 281,890
TOTAL LONG TERM MUNICIPAL
SECURITIES (COST
$8,609,554)............ 8,919,042
MUTUAL FUND SHARES -- 9.0%
480,000 Lehman Municipal Money
Market Fund................. 480,000
475,000 Lehman Tax Free Money Market
Fund
(cost $955,000)............. 475,000
955,000
TOTAL INVESTMENTS -- 92.9%
(COST $9,564,554)...... $ 9,874,042
OTHER ASSETS AND
LIABILITIES -- NET
7.1%................... 758,882
NET ASSETS -- 100%........ $10,632,924
The following abbreviations are used in this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
FGIC -- Financial Guaranty Insurance Company
FHA/VA -- Federal Housing Authority/Veteran Administration
FNMA/FHA -- Federal National Mortgage Association/Federal Housing Authority
FSA -- Financial Security Assurance
GO -- General Obligation
MBIA -- Municipal Bond Investors Assurance
OID -- Original Issue Discount
PCR -- Pollution Control Revenue
RB -- Revenue Bonds
RRB -- Revenue Refunding Bonds
SFM -- Single Family Mortgage
UT -- Unlimited Tax
See accompanying notes to financial statements.
6
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
(Photo of Georgia) (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $9,564,554).............................................................. $ 9,874,042
Cash........................................................................................................... 303
Receivable for Fund shares sold................................................................................ 536,316
Interest receivable............................................................................................ 212,773
Due from Adviser............................................................................................... 25,626
Prepaid expenses............................................................................................... 9,122
Total assets............................................................................................. 10,658,182
LIABILITIES:
Dividends payable.............................................................................................. 12,760
Accrued liabilities............................................................................................ 12,498
Total liabilities........................................................................................ 25,258
NET ASSETS........................................................................................................ $10,632,924
NET ASSETS CONSIST OF:
Paid-in capital................................................................................................ $11,027,313
Accumulated net realized loss.................................................................................. (703,877)
Net unrealized appreciation of investments..................................................................... 309,488
Net assets............................................................................................... $10,632,924
CALCULATION OF NET ASSET VALUE PER SHARE:
Class A Shares ($1,961,635 (divided sign) 209,063 shares of beneficial interest outstanding)................... $ 9.38
Sales charge -- 4.75% of offering price........................................................................ 0.47
Maximum offering price................................................................................... $ 9.85
Class B Shares ($7,498,945 (divided sign) 799,206 shares of beneficial interest outstanding)................... $ 9.38
Class Y Shares ($1,172,344 (divided sign) 124,954 shares of beneficial interest outstanding)................... $ 9.38
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(Photo of Georgia) (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................................................................. $291,911
EXPENSES:
Advisory fee......................................................................................... $ 23,585
Administrative personnel and services fees........................................................... 3,901
Distribution fee-Class A shares...................................................................... 2,004
Distribution and shareholder services fees-Class B shares............................................ 37,389
Custodian fee........................................................................................ 26,206
Transfer agent fee................................................................................... 20,799
Registration and filing fees......................................................................... 14,864
Reports and notices to shareholders.................................................................. 10,853
Professional fees.................................................................................... 9,832
Insurance expense.................................................................................... 1,451
Trustees' fees and expenses.......................................................................... 104
Miscellaneous........................................................................................ 2,299
153,287
Less: Fee waivers and expense reimbursements......................................................... (94,463)
Total expenses.................................................................................... 58,824
Net investment income................................................................................... 233,087
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments..................................................................... 183,580
Net change in unrealized appreciation of investments................................................. 460,405
Net gain on investments................................................................................. 643,985
Net increase in net assets resulting from operations.................................................... $877,072
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF CHANGES IN NET ASSETS
(Photo of Georgia)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1995 DECEMBER 31,
(UNAUDITED) 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income......................................................................... $ 233,087 $ 350,830
Net realized gain (loss) on investments....................................................... 183,580 (887,457 )
Net change in unrealized appreciation (depreciation) of investments........................... 460,405 (185,649 )
Net increase (decrease) in net assets resulting from operations............................ 877,072 (722,276 )
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A Shares................................................................................ (44,445) (64,118 )
Class B Shares................................................................................ (178,343) (278,937 )
Class Y Shares................................................................................ (10,299) (7,775 )
Total distributions to shareholders........................................................ (233,087) (350,830 )
FUND SHARE TRANSACTIONS:
Proceeds from shares sold..................................................................... 2,292,613 6,753,905
Proceeds from reinvestment of dividends....................................................... 160,085 253,659
Payment for shares redeemed................................................................... (1,046,370) (1,860,821 )
Net increase in Fund share transactions.................................................... 1,406,328 5,146,743
Net increase in net assets................................................................. 2,050,313 4,073,637
NET ASSETS:
Beginning of period........................................................................... 8,582,611 4,508,974
End of period................................................................................. $10,632,924 $ 8,582,611
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND --
(FORMERLY FIRST UNION GEORGIA MUNICIPAL BOND PORTFOLIO)
CLASS A, B AND Y SHARES
FINANCIAL HIGHLIGHTS
(Photo of Georgia)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
SIX MONTHS JULY 2, SIX MONTHS JULY 2,
ENDED 1993* ENDED 1993*
JUNE 30, YEAR ENDED THROUGH JUNE 30, YEAR ENDED THROUGH
1995 DECEMBER 31, DECEMBER 31, 1995 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1994 1993 (UNAUDITED) 1994 1993
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period........................ $8.74 $10.19 $10.00 $8.74 $10.19 $10.00
Income (loss) from investment
operations:
Net investment income........... .25 .48 .20 .22 .43 .18
Net realized and unrealized gain
(loss) on investments......... .64 (1.45) .19 .64 (1.45) .19
Total from investment
operations.................. .89 (.97) .39 .86 (1.02) .37
Less distributions to
shareholders from:
Net investment income........... (.25) (.48) (.20) (.22) (.43) (.18)
Net asset value, end of
period........................ $9.38 $8.74 $10.19 $9.38 $8.74 $10.19
TOTAL RETURN(|)................. 10.3% (9.6%) 4.0% 9.9% (10.2%) 3.7%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)...................... $1,962 $1,387 $817 $7,499 $6,912 $3,692
Ratios to average net assets:
Expenses (a).................. .67%(|)(|) .53% .25%(|)(|) 1.41%(|)(|) 1.13% .75%(|)(|)
Net investment income (a)..... 5.54%(|)(|) 5.26% 4.71%(|)(|) 4.77%(|)(|) 4.66% 4.15%(|)(|)
Portfolio turnover rate......... 77% 147% 15% 77% 147% 15%
<CAPTION>
CLASS Y SHARES
SIX MONTHS FEBRUARY 28,
ENDED 1994*
JUNE 30, THROUGH
1995 DECEMBER 31,
(UNAUDITED) 1994
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period........................ $8.74 $9.83
Income (loss) from investment
operations:
Net investment income........... .27 .42
Net realized and unrealized gain
(loss) on investments......... .64 (1.09)
Total from investment
operations.................. .91 (.67)
Less distributions to
shareholders from:
Net investment income........... (.27) (.42)
Net asset value, end of
period........................ $9.38 $8.74
TOTAL RETURN(|)................. 10.4% (6.9%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)...................... $1,172 $284
Ratios to average net assets:
Expenses (a).................. .44%(|)(|) .31%(|)(|)
Net investment income (a)..... 5.85%(|)(|) 5.68%(|)(|)
Portfolio turnover rate......... 77% 147%
</TABLE>
* Commencement of class operations.
(|) Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent
deferred sales charges are not reflected.
(|)(|) Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS Y
CLASS A SHARES CLASS B SHARES SHARES
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED JULY 2, 1993 ENDED JULY 2, 1993 ENDED
JUNE 30, YEAR ENDED THROUGH JUNE 30, YEAR ENDED THROUGH JUNE 30,
1995 DECEMBER 31, DECEMBER 31, 1995 DECEMBER 31, DECEMBER 31, 1995
(UNAUDITED) 1994 1993 (UNAUDITED) 1994 1993 (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses............ 2.67% 3.61% 6.82% 3.41% 4.21% 7.32% 2.44%
Net investment
income (loss)..... 3.54% 2.18% (1.86%) 2.77% 1.58% (2.42%) 3.85%
<CAPTION>
FEBRUARY 28,
1994 THROUGH
DECEMBER 31,
1994
<S> <C>
Expenses............ 3.39%
Net investment
income (loss)..... 2.60%
</TABLE>
10
<PAGE>
EVERGREEN HIGH GRADE TAX FREE FUND
(FORMERLY FIRST UNION HIGH GRADE TAX FREE PORTFOLIO)
STATEMENT OF INVESTMENTS
JUNE 30, 1995
(Photo of Shield) (UNAUDITED)
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- 95.2%
CALIFORNIA -- 5.2%
$1,700,000 California State,
GO Bonds,
6.80%, 11/1/09
(FGIC Insured)
(callable 11/1/04 @ 102).. AAA $ 1,866,889
3,000,000 San Jose,
Redevelopment
Agency Tax
Allocation Bonds,
6.00%, 8/1/15 (MBIA
Insured).................. AAA 3,027,750
4,894,639
DISTRICT OF COLUMBIA -- 3.2%
3,250,000 District of Columbia RB
(Series B),
5.50%, 6/1/10, OID (FSA
Insured).................. AAA 3,051,490
FLORIDA -- 1.1%
1,000,000 Hillsborough County,
Industrial Development
Authority RB,
University Community
Hospital,
6.50%, 8/15/19 (MBIA
Insured).................. AAA 1,082,010
GEORGIA -- 11.5%
7,000,000 Atlanta,
Airport Facilities RB,
(Series B),
6.00%, 1/1/21, OID (AMBAC
Insured),
(Subject to AMT).......... AAA 6,760,950
1,500,000 Brunswick,
Water & Sewer RB,
6.10%, 10/1/19, OID (MBIA
Insured).................. AAA 1,536,315
2,400,000 Municipal Electric
Authority,
(5th Crossover Project)
6.50%, 1/1/17 (MBIA
Insured).................. AAA 2,571,072
10,868,337
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
HAWAII -- 1.0%
$1,000,000 Hawaii Department Budget &
Finance,
5.45%, 11/1/23 (MBIA
Insured).................. AAA $ 889,450
ILLINOIS -- 13.1%
2,150,000 Chicago,
GO Bonds,
6.125%, 1/1/16 (AMBAC
Insured).................. AAA 2,148,710
1,500,000 Chicago,
GO Bonds, (Emergency
Telephone System)
5.60%, 1/1/10, OID (FGIC
Insured).................. AAA 1,476,600
3,000,000 Illinois Development
Finance Authority,
PCR Bonds,
(Commonwealth Edison Co.
Project),
6.75%, 6/1/15, (AMBAC
Insured).................. AAA 3,191,730
2,000,000 Illinois Development
Finance Authority, PCR
Bonds, (Commonwealth
Edison Co. Project)
7.25%, 6/1/11 (MBIA
Insured).................. AAA 2,211,220
1,400,000 Illinois Health Facility
Authority, RRB
(Children's Memorial
Hospital),
6.25%, 8/15/13 (MBIA
Insured).................. AAA 1,428,896
1,750,000 Illinois Health Facility
Authority RB (SSM
Healthcare)
6.50% 6/1/12 (MBIA
Insured).................. AAA 1,869,070
12,326,226
INDIANA -- 5.7%
2,300,000 Indiana Municipal Power
Supply System,
RB (Series A),
6.00%, 1/1/12 (MBIA
Insured).................. AAA 2,287,212
</TABLE>
11
<PAGE>
EVERGREEN HIGH GRADE TAX FREE FUND
(FORMERLY FIRST UNION HIGH GRADE TAX FREE PORTFOLIO)
STATEMENT OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1995
(Photo of Shield) (UNAUDITED)
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
INDIANA -- CONTINUED
$1,390,000 Indiana Municipal Power
Supply System RB
(Series B)
6.125%, 1/1/19 (MBIA
Insured).................. AAA $ 1,419,260
1,500,000 Lawrence Township,
Metropolitan School
District,
First Mortgage RB,
6.875%, 7/5/11 (MBIA
Insured).................. AAA 1,654,275
5,360,747
NEVADA -- 6.1%
2,275,000 Clark County
School District,
GO Bonds (Series A),
5.50%, 1/15/16, (MBIA
Insured).................. AAA 2,135,110
1,575,000 Clark County
GO Bonds (Series A),
6.50%, 6/1/17, OID (AMBAC
Insured).................. AAA 1,668,224
2,000,000 Washoe County,
(Reno Sparks Bowling
Facility)
(Series A), 5.70%, 7/1/17,
OID (FGIC Insured)........ AAA 1,897,980
5,701,314
OKLAHOMA -- 1.6%
1,500,000 McGee Creek Authority,
Water RB,
6.00%, 1/1/23, OID (MBIA
insured),................. AAA 1,508,055
RHODE ISLAND -- 2.1%
2,000,000 Rhode Island Depositors
Economic Protection Corp.,
RRB,
5.80%, 8/1/12, OID (MBIA
Insured).................. AAA 1,963,760
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
SOUTH CAROLINA -- 5.3%
$3,500,000 South Carolina Port
Authority RB,
6.625%, 7/1/11 (AMBAC
Insured),
(Subject to AMT).......... AAA $ 3,682,805
1,500,000 South Carolina State PSA,
(Series C),
5.00%, 1/1/18 (FGIC
Insured).................. AAA 1,306,050
4,988,855
SOUTH DAKOTA -- 7.6%
3,500,000 Heartland Consumers Power
District,
Electric RRB,
6.00%, 1/1/17, OID (FSA
Insured).................. AAA 3,516,765
3,500,000 South Dakota State Health
& Educational Facilities
Authority RB,
6.625%, 7/1/11, OID (MBIA
Insured).................. AAA 3,655,470
7,172,235
TENNESSEE -- 7.6%
1,200,000 Bristol,
Health & Educational
Facilities, RB,
(Bristol Memorial
Hospital),
6.75%, 9/1/07
(FGIC Insured)............ AAA 1,333,944
1,700,000 Knox County,
Health, Education &
Housing Facilities Board,
Hospital Facilities RB,
6.25%, 1/1/13 (MBIA
Insured) (Series B)....... AAA 1,785,306
4,100,000 Knox County,
Health, Education &
Housing Facilities Board,
Hospital Facilities RB,
(Fort Sanders Alliance)
5.75%, 1/1/14 (MBIA
Insured) (Series C)....... AAA 4,042,600
7,161,850
</TABLE>
12
<PAGE>
EVERGREEN HIGH GRADE TAX FREE FUND
(FORMERLY FIRST UNION HIGH GRADE TAX FREE PORTFOLIO)
STATEMENT OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1995
(Photo of Shield) (UNAUDITED)
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
TEXAS -- 4.9%
$2,000,000 Harris County,
Toll Roads, Lien Bonds,
5.30%, 8/15/13, OID (AMBAC
Insured).................. AAA $ 1,880,060
3,000,000 Harris County,
5.375%, 8/15/20 (FGIC
Insured).................. AAA 2,732,670
4,612,730
UTAH -- 6.9%
2,500,000 Iron County School
District,
GO Bonds,
6.40%, 1/15/12, OID (MBIA
Insured).................. AAA 2,575,400
1,000,000 Salt Lake City,
Utah Airport Authority RB,
6.00%, 12/1/12, OID (FGIC
Insured).................. AAA 997,790
3,000,000 Salt Lake City,
Utah Airport Authority
RRB,
5.875%, 12/1/18, OID (FGIC
Insured).................. AAA 2,890,920
6,464,110
WASHINGTON -- 3.8%
3,500,000 Tacoma,
Electric System, RB,
6.25%, 1/1/15, OID
(FGIC Insured)............ AAA 3,559,220
WISCONSIN -- 8.5%
4,500,000 Superior,
Limited Obligation RB,
(Midwest Energy)
(Series E)
6.90%, 8/1/21 (FGIC
Insured).................. AAA 5,023,845
2,000,000 Wisconsin State Health &
Education Facilities
Authority, RB, (Wausau
Hospital),
6.625%, 8/15/11 (AMBAC
Insured).................. AAA 2,099,100
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
WISCONSIN -- CONTINUED
$1,000,000 Wisconsin State Health &
Education Facilities, RB
5.50%, 2/15/19 (AMBAC
Insured).................. AAA $ 916,000
8,038,945
TOTAL LONG-TERM
MUNICIPAL SECURITIES
(COST $86,688,472)... 89,643,973
MUTUAL FUNDS -- 3.2%
3,066,103 Lehman Municipal Money
Market Fund
(cost $3,066,103)......... 3,066,103
TOTAL INVESTMENTS --
98.4% (COST
$89,754,575)......... 92,710,076
OTHER ASSETS AND
LIABILITIES -- NET
1.6%................. 1,464,261
TOTAL NET ASSETS --
100%................. $94,174,337
</TABLE>
The following abbreviations are used in this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Security Assurance
GO -- General Obligation
MBIA -- Municipal Bond Investors Assurance
OID -- Original Issue Discount
PCR -- Pollution Control Revenue
PSA -- Public Service Authority
RB -- Revenue Bond
RRB -- Revenue Refunding Bond
See accompanying notes to financial statements.
13
<PAGE>
EVERGREEN HIGH GRADE TAX FREE FUND
(FORMERLY FIRST UNION HIGH GRADE TAX FREE PORTFOLIO)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
(Photo of Shield) (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $89,754,575)............................................................. $92,710,076
Cash........................................................................................................... 525
Interest receivable............................................................................................ 2,087,778
Receivable for Fund shares sold................................................................................ 2,191
Total assets................................................................................................ 94,800,570
LIABILITIES:
Payable for Fund shares redeemed............................................................................... 443,407
Dividends payable.............................................................................................. 152,757
Accrued expenses............................................................................................... 30,069
Total liabilities........................................................................................... 626,233
NET ASSETS........................................................................................................ $94,174,337
NET ASSETS CONSIST OF:
Paid-in capital................................................................................................ 91,671,979
Net unrealized appreciation of investments..................................................................... 2,955,501
Accumulated net realized loss.................................................................................. (453,143)
Net assets.................................................................................................. $94,174,337
CALCULATION OF NET ASSET VALUE PER SHARE:
Class A Shares ($56,557,101 (divided sign) 5,349,237 shares of beneficial interest outstanding)................ $ 10.57
Sales charge -- 4.75% of offering price........................................................................ 0.53
Maximum offering price...................................................................................... $ 11.10
Class B Shares ($32,587,539 (divided sign) 3,082,355 shares of beneficial interest outstanding)................ $ 10.57
Class Y Shares ($5,029,697 (divided sign) 475,682 shares of beneficial interest outstanding)................... $ 10.57
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
EVERGREEN HIGH GRADE TAX FREE FUND
(FORMERLY FIRST UNION HIGH GRADE TAX FREE PORTFOLIO)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(Photo of Shield) (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest........................................................................................... $2,926,478
EXPENSES:
Advisory fee....................................................................................... $240,335
Administrative personnel and services fees......................................................... 39,697
Distribution fee -- Class A Shares................................................................. 72,911
Distribution and shareholders service fees -- Class B Shares....................................... 165,451
Custodian fee...................................................................................... 39,482
Transfer agent fee................................................................................. 32,018
Reports and notices to shareholders................................................................ 19,004
Registration and filing fees....................................................................... 16,714
Professional fees.................................................................................. 9,125
Insurance.......................................................................................... 1,399
Trustees' fees and expenses........................................................................ 1,025
Miscellaneous...................................................................................... 5,603
642,764
Less: Advisory fee waiver............................................................................. (4,383)
Total expenses............................................................................... 638,381
Net investment income................................................................................. 2,288,097
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................................................................... 458,086
Net change in unrealized appreciation of investments............................................... 6,932,042
Net gain on investments............................................................................... 7,390,128
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $9,678,225
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
EVERGREEN HIGH GRADE TAX FREE FUND
(FORMERLY FIRST UNION HIGH GRADE TAX FREE PORTFOLIO)
(Photo of Shield) STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1995 DECEMBER 31,
(UNAUDITED) 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................................................... $ 2,288,097 $ 5,839,738
Net realized gain (loss) on investments..................................................... 458,086 (912,236)
Net change in unrealized appreciation (depreciation) of investments......................... 6,932,042 (15,618,845)
Net increase (decrease) in net assets resulting from operations.......................... 9,678,225 (10,691,343)
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A Shares.............................................................................. (1,459,973) (3,977,507)
Class B Shares.............................................................................. (704,309) (1,722,197)
Class Y Shares.............................................................................. (123,815) (140,034)
Total distributions to shareholders...................................................... (2,288,097) (5,839,738)
FUND SHARE TRANSACTIONS:
Proceeds from share sold.................................................................... 2,060,714 18,114,792
Proceeds from reinvestment of dividends..................................................... 1,296,641 3,537,923
Payments for shares redeemed................................................................ (11,002,826) (53,074,378)
Net decrease in Fund share transactions.................................................. (7,645,471) (31,421,663)
Net decrease in net assets............................................................... (255,343) (47,952,744)
NET ASSETS:
Beginning of period......................................................................... 94,429,680 142,382,424
End of period............................................................................... $94,174,337 $ 94,429,680
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
EVERGREEN HIGH GRADE TAX FREE FUND
(FORMERLY FIRST UNION HIGH GRADE TAX FREE PORTFOLIO)
(Photo of Shield) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
SIX MONTHS FEBRUARY 21, SIX MONTHS JANUARY 11,
ENDED 1992* ENDED 1993*
JUNE 30, YEAR ENDED THROUGH JUNE 30, YEAR ENDED THROUGH
1995 DECEMBER 31, DECEMBER 31, 1995 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1994 1993 1992 (UNAUDITED) 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period................ $9.79 $11.16 $10.42 $10.00 $9.79 $11.16 $10.42
Income (loss) from
investment operations:
Net investment income...... .26 .52 .54 .51 .22 .46 .47
Net realized and unrealized
gain (loss) on
investments.............. .78 (1.37) .81 .42 .78 (1.37) .81
Total from investment
operations............. 1.04 (.85) 1.35 .93 1.00 (.91) 1.28
Less distributions to
shareholders from:
Net investment income...... (.26) (.52) (.54) (.51) (.22) (.46) (.47)
Net realized gains......... -- -- (.07) -- -- -- (.07)
Total distributions...... (.26) (.52) (.61) (.51) (.22) (.46) (.54)
Net asset value, end of
period................... $10.57 $9.79 $11.16 $10.42 $10.57 $9.79 $11.16
TOTAL RETURN(|)............ 10.7% (7.7%) 13.3% 9.4% 10.3% (8.2%) 12.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted).......... $56,557 $57,676 $101,352 $90,738 $32,588 $32,435 $41,030
Ratios to average net
assets:
Expenses (a)............. 1.08%(|)(|) 1.01% .85% .49%(|)(|) 1.83%(|)(|) 1.58% 1.35%(|)(|)
Net investment
income (a)............. 5.01%(|)(|) 5.04% 4.99% 5.79%(|)(|) 4.26%(|)(|) 4.47% 4.44%(|)(|)
Portfolio turnover rate.... 21% 53% 14% 7% 21% 53% 14%
<CAPTION>
CLASS Y SHARES
SIX MONTHS FEBRUARY 28,
ENDED 1994*
JUNE 30, THROUGH
1995 DECEMBER 31,
(UNAUDITED) 1994
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period................ $9.79 $10.93
Income (loss) from
investment operations:
Net investment income...... .27 .46
Net realized and unrealized
gain (loss) on
investments.............. .78 (1.14)
Total from investment
operations............. 1.05 (.68)
Less distributions to
shareholders from:
Net investment income...... (.27) (.46)
Net realized gains......... -- --
Total distributions...... (.27) (.46)
Net asset value, end of
period................... $10.57 $9.79
TOTAL RETURN(|)............ 10.8% (6.3%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted).......... $5,030 $4,318
Ratios to average net
assets:
Expenses (a)............. .84% .76%(|)(|)
Net investment
income (a)............. 5.25% 5.46%(|)(|)
Portfolio turnover rate.... 21% 53%
</TABLE>
* Commencement of class operations.
(|) Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent
deferred sales charges are not reflected.
(|)(|) Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, would have been the following:
<TABLE>
<CAPTION>
CLASS Y
CLASS A SHARES CLASS B SHARES SHARES
SIX MONTHS FEBRUARY 21, SIX MONTHS JANUARY 11, SIX MONTHS
ENDED 1992* ENDED 1993* ENDED
JUNE 30, YEAR ENDED THROUGH JUNE 30, YEAR ENDED THROUGH JUNE 30,
1995 DECEMBER 31, DECEMBER 31, 1995 DECEMBER 31, DECEMBER 31, 1995
(UNAUDITED) 1994 1993 1992 (UNAUDITED) 1994 1993 (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses........... 1.09% 1.02% 1.07% 1.11% 1.84% 1.59% 1.57% .85%
Net investment
income........... 5.00% 5.03% 4.77% 5.17% 4.25% 4.46% 4.22% 5.24%
<CAPTION>
FEBRUARY 28,
1994*
THROUGH
DECEMBER 31,
1994
<S> <C>
Expenses........... .77%
Net investment
income........... 5.45%
</TABLE>
17
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF INVESTMENTS
JUNE 30, 1995
(Photo of North Carolina) (UNAUDITED)
<TABLE>
<CAPTION>
CREDIT
RATING
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- 94.8%
NORTH CAROLINA -- 90.2%
$ 610,000 Alamance County,
GO Bond,
5.50%, 3/1/13, OID
(callable @102, 3/1/05)..... AA- $ 593,823
1,000,000 Chapel Hill,
Parking Facility Refinancing
Package,
6.35%, 12/1/18, OID
(callable @102, 12/1/03).... A+ 1,015,140
1,000,000 Charlotte,
Airport RB,
8.5%, 7/1/07
(callable @ 102, 7/1/97).... A- 1,078,730
3,000,000 Charlotte,
Conv. Fac., Series C,
5.25%, 12/20/20
(callable @ 102, 7/1/97).... A- 2,704,620
1,000,000 Charlotte,
Water & Sewer GO Bond,
5.90%, 2/1/19
(callable @102, 12/1/19).... AAA 1,019,170
1,000,000 Concord,
Utilities System RB,
5.5%, 12/1/14, OID
(callable
@ 102, 12/1/05)............. AAA 947,420
3,390,000 Cumberland County,
CTFS Partners Civic Center
(Series A),
6.40%, 12/1/24, OID
(callable @ 102 12/1/04).... AAA 3,500,717
1,845,000 Fayetteville,
Public Works Commission
Revenue Refunding Bonds,
(Series A),
5.25%, 3/1/16, OID
(AMBAC Insured)
(callable @ 102, 3/1/05).... AAA 1,688,267
1,000,000 Fremont,
Housing Development,
FHA Industry Torhunta
Apartments
6.75%, 7/15/22
(callable @ 100 7/15/03).... Aaa 1,024,210
<CAPTION>
CREDIT
RATING
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
NORTH CAROLINA -- CONTINUED
$ 1,000,000 Gastonia,
Combined Utility System Rev.
Bonds,
6.00%, 5/1/14, (MBIA
Insured)
(callable @ 102 5/1/04)..... AAA $ 999,900
3,000,000 Greensboro,
CTFS Partners, (Series A)
5.30%, 6/1/15, OID
(callable @ 102, 6/1/05).... AA- 2,780,580
1,000,000 Harnett County,
6.40%, 12/1/14
(callable
@ 102, 12/1/04)............. AAA 1,037,680
4,750,000 Martin County,
Individual Facilities
Authority,
(Solid Waste Weyerhaeuser
Co.)
6.80%, 5/1/24............... A 4,960,520
360,000 Monroe,
Combined Enterprise System,
6.00%, 3/1/14, OID
(callable @ 102, 3/1/04).... A 357,962
645,000 North Carolina Eastern
Municipal Power Agency,
Electric RRB, (Series C)
5.50%, 1/1/13............... A 628,727
4,000,000 North Carolina Eastern
Municipal Power Agency,
Power System RRB,
(Series B)
5.00%, 1/1/21, (Series A),
(Callable 1/1/03 @102)...... A 3,552,280
3,800,000 North Carolina Eastern
Municipal Power Agency,
Power System RRB,
(Series A),
6.00%, 1/1/22............... A 3,525,260
3,000,000 North Carolina Eastern
Municipal Power Agency,
5.00%, 1/1/20 (FSA
Insured).................... AAA 2,645,370
</TABLE>
18
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1995
(Photo of North Carolina) (UNAUDITED)
<TABLE>
<CAPTION>
CREDIT
RATING
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
NORTH CAROLINA -- CONTINUED
$ 500,000 North Carolina Medical Care
Community,
Mortgage Southminister,
6.875%, 10/1/09 (callable
@ 105, 10/1/99)............. NR $ 510,380
1,350,000 North Carolina Medical Care
Commission,
Hospital RB,
6.25%, 6/1/17
(callable 6/1/03 @102)...... A+ 1,372,842
2,000,000 North Carolina Medical Care
Commission,
RRB, (Presbyterian Health
Service),
5.50%, 10/1/20.............. AA 1,895,400
1,000,000 North Carolina Medical Care
Commission,
(Memorial Mission Hospital),
(Series 1993),
5.50%, 10/1/18.............. AAA 941,210
1,000,000 North Carolina Municipal
Power Agency,
5.50%, 1/1/10 OID........... A 929,140
2,650,000 North Carolina Municipal
Power Agency
Electric RRB,
5.00%, 1/1/15 OID
(callable @102, 1/1/03)..... A 2,232,122
2,500,000 North Carolina Municipal
Power Agency
(Linked CTFS),
6.00%, 1/1/18............... AAA 2,499,950
2,200,000 North Carolina State,
GO Bond, (Series 1994 A)
4.75%, 2/1/12
(callable 102@ 2/1/04)...... AAA 1,977,580
1,000,000 Onslow County,
Combined Enterprise System
RB,
(Series 1994)
6.00%, 6/1/15 (MBIA
Insured).................... AAA 999,940
730,000 Roman County,
GO Bond,
5.60%, 4/1/15, OID
(callable @102, 4/1/05)..... AAA 707,881
<CAPTION>
CREDIT
RATING
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
NORTH CAROLINA -- CONTINUED
$ 1,500,000 Thomasville,
CTFS Partners Cityhall &
Utilities Imports Project,
6.00%, 6/1/17, OID
(FSA Insured)
(callable @ 102, 6/1/03).... AAA $ 1,507,695
3,150,000 Wake County,
Hospital Revenue,
5.125%, 10/1/26, OID (MBIA
Insured)
(Callable @102, 10/1/03).... AAA 2,738,893
52,373,409
PUERTO RICO -- 4.6%
2,000,000 Puerto Rico Commonwealth,
6.25%, 7/1/11, OID (MBIA
Insured)
(Callable @102, 10/1/03).... AAA 2,127,480
600,000 Puerto Rico Commonwealth,
Highway & Transit Authority,
5.50%, 7/1/15, OID.......... A 558,720
2,686,200
TOTAL LONG-TERM MUNICIPAL
SECURITIES -- 94.8%
(COST $53,507,334)..... 55,059,609
MUTUAL FUND SHARES -- .8%
460,000 Lehman Municipal Money
Market Fund (COST
$460,000)................... 460,000
TOTAL INVESTMENTS -- 95.6%
(COST $53,967,334)..... 55,519,609
OTHER ASSETS AND
LIABILITIES -- NET
4.4%................... 2,564,177
TOTAL NET ASSETS --
100%................... $58,083,786
</TABLE>
19
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1995
(Photo of North Carolina) (UNAUDITED)
The following abbreviations are are used in this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation
FHA -- Federal Housing Authority
FSA -- Financial Security Assurance
GO -- General Obligation
MBIA -- Municipal Bond Investors Assurance
OID -- Original Issue Discount
RB -- Revenue Bond
RRB -- Revenue Refunding Bond
See accompanying notes to financial statements.
20
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
(Photo of North Carolina) (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $53,967,334)............................................................. $55,519,609
Cash........................................................................................................... 115
Receivable for investments sold................................................................................ 1,671,913
Interest receivable............................................................................................ 936,567
Receivable for Fund shares sold................................................................................ 124,355
Prepaid expenses............................................................................................... 23,739
Total assets............................................................................................. 58,276,298
LIABILITIES:
Payable for Fund shares repurchased............................................................................ 85,379
Dividends payable.............................................................................................. 69,123
Accrued expenses............................................................................................... 38,010
Total liabilities........................................................................................ 192,512
NET ASSETS........................................................................................................ $58,083,786
NET ASSETS CONSIST OF:
Paid-in capital................................................................................................ $60,915,230
Net unrealized appreciation of investments..................................................................... 1,552,275
Accumulated net realized loss.................................................................................. (4,383,719)
Net assets.................................................................................................. $58,083,786
CALCULATION OF NET ASSET VALUE PER SHARE:
Class A Shares ($8,164,792 (divided sign) 828,071 shares of beneficial interest outstanding).................. $ 9.86
Sales charge -- 4.75% of offering price....................................................................... 0.49
Maximum offering price..................................................................................... $10.35
Class B Shares ($48,997,570 (divided sign) 4,969,313 shares of beneficial interest outstanding)............... $ 9.86
Class Y Shares ($921,424 (divided sign) 93,455 shares of beneficial interest outstanding)..................... $ 9.86
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(Photo of North Carolina) (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest........................................................................................... $1,714,933
EXPENSES:
Advisory fee....................................................................................... $141,055
Administrative personnel and service fees.......................................................... 23,309
Distribution fee -- Class A Shares................................................................. 10,253
Distribution and shareholder services fees -- Class B Shares....................................... 237,316
Custodian fee...................................................................................... 36,670
Transfer agent fee................................................................................. 31,902
Registration and filing fees....................................................................... 14,957
Reports and notices to shareholders................................................................ 10,577
Professional fees.................................................................................. 9,165
Insurance expense.................................................................................. 1,606
Trustees' fees and expenses........................................................................ 578
Miscellaneous...................................................................................... 6,594
523,982
Less: Advisory fee waiver.......................................................................... (88,900)
Total expenses............................................................................... 435,082
Net investment income................................................................................. 1,279,851
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................................................................... 529,630
Net change in unrealized appreciation of investments............................................... 3,516,143
Net gain on investments............................................................................... 4,045,773
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $5,325,624
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO)
(Photo of North Carolina) STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
JUNE 30, ENDED
1995 DECEMBER
(UNAUDITED) 31, 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income........................................................................ $ 1,279,851 $ 2,665,427
Net realized gain (loss) on investments...................................................... 529,630 (4,913,456)
Net change in unrealized appreciation (depreciation) of investments.......................... 3,516,143 (3,925,063)
Net increase (decrease) in net assets resulting from operations........................... 5,325,624 (6,173,092)
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A Shares............................................................................... (211,685) (503,283)
Class B Shares............................................................................... (1,047,863) (2,144,310)
Class Y Shares............................................................................... (20,303) (17,834)
Total distributions to shareholders....................................................... (1,279,851) (2,665,427)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold.................................................................... 4,965,775 20,561,838
Proceeds from reinvestment of dividends...................................................... 896,729 1,917,225
Payments for shares redeemed................................................................. (5,061,421) (18,310,260)
Net increase in Fund share transactions................................................... 801,083 4,168,803
Net increase (decrease) in net assets..................................................... 4,846,856 (4,669,716)
NET ASSETS:
Beginning of period.......................................................................... 53,236,930 57,906,646
End of period................................................................................ $58,083,786 $53,236,930
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND --
(FORMERLY FIRST UNION NORTH CAROLINA MUNICIPAL BOND PORTFOLIO)
CLASS A, B AND Y SHARES
(Photo of North Carolina) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JANUARY 11,
SIX MONTHS ENDED YEAR ENDED 1993* THROUGH SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, DECEMBER 31, JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994 1993 (UNAUDITED) 1994
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period..................... $9.16 $10.61 $10.00 $9.16 $10.61
Income (loss) from investment
operations:
Net investment income........ .25 .49 .46 .21 .44
Net realized and unrealized
(loss) on
investments................ .70 (1.45) .64 .70 (1.45)
Total from investment
operations............... .95 (.96) 1.10 .91 (1.01)
Less distributions to
shareholders from:
Net investment income........ (.25) (.49) (.46) (.21) (.44)
Net realized gains........... -- -- (.03) -- --
Total distributions.......... (.25) (.49) (.49) (.21) (.44)
Net asset value, end of
period..................... $9.86 $9.16 $10.61 $9.86 $9.16
TOTAL RETURN(|).............. 10.4% (9.1%) 11.3% 10.0% (9.6%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)............ $8,165 $7,979 $12,739 $ 48,998 $ 44,616
Ratios to average net assets:
Expenses (a)............... .91%(|)(|) .79% .32%(|)(|) 1.66%(|)(|) 1.37%
Net investment income
(a)...................... 5.16%(|)(|) 5.11% 4.91%(|)(|) 4.42%(|)(|) 4.53%
Portfolio turnover rate...... 84% 126% 57% 84% 126%
<CAPTION>
CLASS Y SHARES
JANUARY 11, FEBRUARY 28,
1993* THROUGH SIX MONTHS ENDED 1994* THROUGH
DECEMBER 31, JUNE 30, 1995 DECEMBER 31,
1993 (UNAUDITED) 1994
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period..................... $10.00 $9.16 $10.31
Income (loss) from investment
operations:
Net investment income........ .42 .26 .43
Net realized and unrealized
(loss) on
investments................ .64 .70 (1.15)
Total from investment
operations............... 1.06 .96 (.72)
Less distributions to
shareholders from:
Net investment income........ (.42) (.26) (.43)
Net realized gains........... (.03) -- --
Total distributions.......... (.45) (.26) (.43)
Net asset value, end of
period..................... $10.61 $9.86 $9.16
TOTAL RETURN(|).............. 10.8% 10.5% (7.0%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)............ $45,168 $921 $642
Ratios to average net assets:
Expenses (a)............... .79%(|)(|) .72%(|)(|) .59%(|)(|)
Net investment income
(a)...................... 4.47%(|)(|) 5.37%(|)(|) 5.58%(|)(|)
Portfolio turnover rate...... 57% 84% 126%
</TABLE>
* Commencement of class operations.
(|) Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent
deferred sales charges are not reflected.
(|)(|) Annualized.
(a) Net of expense waivers and reimbursements. If the Fund has borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, would have been the following:
<TABLE>
<CAPTION>
CLASS Y
CLASS A SHARES CLASS B SHARES SHARES
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED JANUARY 11, ENDED JANUARY 11, ENDED
JUNE 30, YEAR ENDED 1993 THROUGH JUNE 30, YEAR ENDED 1993 THROUGH JUNE 30,
1995 DECEMBER 31, DECEMBER 31, 1995 DECEMBER 31, DECEMBER 31, 1995
(UNAUDITED) 1994 1993 (UNAUDITED) 1994 1993 (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses........................... 1.23% 1.18% 1.25% 1.98% 1.76% 1.74% 1.04%
Net investment income.............. 4.84% 4.72% 3.98% 4.10% 4.14% 3.52% 5.05%
<CAPTION>
FEBRUARY 28,
1994 THROUGH
DECEMBER 31,
1994
<S> <C>
Expenses........................... .98%
Net investment income.............. 5.19%
</TABLE>
24
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION SOUTH CAROLINA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF INVESTMENTS
JUNE 30, 1995
(Photo of South Carolina) (UNAUDITED)
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- 90.6%
SOUTH CAROLINA -- 88.3%
$200,000 Barnwell County,
School District 45,
5.50%, 2/1/11, OID
(AMBAC Insured)................ Aaa $ 192,498
200,000 Bennettsville,
Combined Utility Systems RB
(Series B),
6.00%, 7/1/09, OID (MBIA
Insured)....................... AAA 204,524
300,000 Charleston County,
Health Facilities RRB,
(Episcopal Church Project),
7.125%, 4/1/20, OID............ NR 301,101
200,000 Chesterfield County,
School District CERTS,
5.90%, 7/2/11, OID
(MBIA Insured)................. Aaa 200,510
200,000 Citadel Military College,
Student and Faculty
Housing RB
(Connie Lee Insured)
5.50%, 10/1/14................. AAA 189,088
100,000 Coastal Carolina University,
RB,
6.80%, 6/1/19 (MBIA Insured)... AAA 108,337
100,000 Colleton County,
GO Bonds,
5.60%, 3/1/09.................. BBB 97,844
100,000 Columbia County,
Water & Sewer RB,
5.70%, 2/1/10.................. Aa 98,728
300,000 Darlington County,
Industrial Development RB,
(Nucor Corp. Project)
5.75%, 8/1/23, OID............. AA- 276,894
300,000 Darlington County,
Industrial Development RB,
(Sonoco Production Co. Project)
6.125%, 6/1/25, OID............ A2 294,135
200,000 Georgetown County,
Water & Sewer District,
Refunding & Improvement
Jr. Lien,
6.50%, 6/1/15, OID............. NR 193,860
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
$200,000 James Island,
PSD RB,
5.75%, 6/1/18
(FGIC Insured)................. AAA $ 191,880
200,000 Lancaster County,
Water & Sewer District RB,
5.25%, 5/1/21, OID (FGIC
Insured)....................... AAA 180,166
100,000 Myrtle Beach,
Tax Incremental RB,
6.40%, 3/1/09, OID
(MBIA Insured)................. AAA 104,656
100,000 Piedmont Municipal Power
Agency,
5.50%, 1/1/12, OID (MBIA
Insured)....................... AAA 96,840
100,000 Richland County,
Solid Waste RB,
(Union Camp Corp. Project)
6.75%, 5/1/22.................. A1 102,391
265,000 South Carolina State,
Multi-Family Housing,
Mortgage Hunting Ridge
Apartments,
6.75, 6/1/25................... BBB+ 264,239
100,000 South Carolina State,
Housing, Finance & Development
Authority RB,
6.55%, 7/1/15.................. Aa 101,708
200,000 South Carolina State,
Job Economics Development
Authority Hospital Facility RB,
Oconee Mem. Hosp. Inc.,
6.15%, 3/1/15, OID (Connie Lee
Insured)....................... AAA 199,752
350,000 York City,
Industrial RB, (Exempt Facility
Hoechst Celanese)
5.70%, 01/1/24, OID............ A2 320,628
3,719,779
</TABLE>
25
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION SOUTH CAROLINA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1995
(Photo of South Carolina) (UNAUDITED)
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
PUERTO RICO -- 2.3%
$100,000 Puerto Rico,
GO Bonds
5.65%, 7/1/15
(MBIA Insured)................. AAA $ 98,703
TOTAL LONG TERM MUNICIPAL
SECURITIES (COST
$3,757,152)............... 3,818,482
SHORT TERM MUNICIPAL SECURITIES -- 7.5%
100,000 Farmington Hills, MI,
Hospital RB, VRDN.............. 100,000
188,000 Lehman Municipal Money Market
Fund........................... 188,000
26,000 Lehman Tax Free Money
Market Fund.................... 26,000
TOTAL SHORT TERM MUNICIPAL
SECURITIES (COST
$314,000)................. 314,000
</TABLE>
<TABLE>
<CAPTION>
VALUE
<C> <S> <C> <C>
TOTAL INVESTMENTS -- 98.1%
(COST
$4,071,152)............... $4,132,482
OTHER ASSETS AND
LIABILITIES --
NET 1.9%.................. 81,907
NET ASSETS -- 100%........... $4,214,389
</TABLE>
The following abbreviations are used in this portfolio:
AMBAC -- American Municipal Bond Assurance Corp.
CERTS -- Certificates of Participation
FGIC -- Financial Guaranty Insurance Co.
GO -- General Obligation
MBIA -- Municipal Bond Investors Assurance
OID -- Original Issue Discount
PSD -- Public Service District
RB -- Revenue Bonds
RRB -- Revenue Refunding Bonds
VRDN -- Variable Rate Demand Note
See accompanying notes to financial statements.
26
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION SOUTH CAROLINA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
(Photo of South Carolina) (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $4,071,152)................................................................ $4,132,482
Cash............................................................................................................. 264
Receivable for securities sold................................................................................... 125,503
Interest receivable.............................................................................................. 62,604
Receivable for Fund shares sold.................................................................................. 50,024
Due from Adviser................................................................................................. 22,183
Prepaid expenses................................................................................................. 25,685
Total assets............................................................................................... 4,418,745
LIABILITIES:
Payable for securities purchased................................................................................. 198,264
Dividends payable................................................................................................ 6,092
Total liabilities.......................................................................................... 204,356
NET ASSETS.......................................................................................................... $4,214,389
NET ASSETS CONSIST OF:
Paid-in capital.................................................................................................. 4,168,323
Accumulated net realized loss.................................................................................... (15,264)
Net unrealized appreciation of investments....................................................................... 61,330
Net assets................................................................................................. $4,214,389
CALCULATION OF NET ASSET VALUE PER SHARE:
Class A Shares ($580,636 (divided sign) 61,368 shares of beneficial interest outstanding)........................ $ 9.46
Sales charge -- 4.75% of offering price.......................................................................... 0.47
Maximum offering price..................................................................................... $ 9.93
Class B Shares ($3,354,017 (divided sign) 354,399 shares of beneficial interest outstanding)..................... $ 9.46
Class Y Shares ($279,736 (divided sign) 29,555 shares of beneficial interest outstanding)........................ $ 9.46
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION SOUTH CAROLINA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(Photo of South Carolina) (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest.............................................................................................. $106,057
EXPENSES:
Advisory fee.......................................................................................... $ 8,783
Administrative personnel and service fee.............................................................. 1,451
Distribution fee-Class A Shares....................................................................... 535
Distribution and shareholder services fees-Class B Shares............................................. 14,289
Custodian fee......................................................................................... 20,658
Transfer agent fee.................................................................................... 19,649
Registration and filing fees.......................................................................... 10,751
Reports and notices to shareholders................................................................... 9,418
Professional fees..................................................................................... 8,817
Insurance expense..................................................................................... 1,671
Trustees' fees and expenses........................................................................... 47
Miscellaneous......................................................................................... 1,566
97,635
Less: Fee waivers and expense reimbursements.......................................................... (79,478)
Total expenses..................................................................................... 18,157
Net investment income.................................................................................... 87,900
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments...................................................................... 18,145
Net change in unrealized appreciation of investments.................................................. 281,110
Net gain on investments.................................................................................. 299,255
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $387,155
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION SOUTH CAROLINA MUNICIPAL BOND PORTFOLIO)
(Photo of South Carolina) STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JANUARY 3, 1994*
JUNE 30, 1995 THROUGH
(UNAUDITED) DECEMBER 31, 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................................................... $ 87,900 $ 88,479
Net realized gain (loss) on investments................................................. 18,145 (33,409)
Net change in unrealized appreciation (depreciation) of investments..................... 281,110 (219,781)
Net increase (decrease) in net assets resulting from operations......................... 387,155 (164,711)
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A Shares.......................................................................... (12,028) (9,315)
Class B Shares.......................................................................... (69,201) (76,164)
Class Y Shares.......................................................................... (6,671) (3,000)
Total distributions to shareholders.................................................. (87,900) (88,479)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold............................................................... 1,204,920 3,326,606
Proceeds from reinvestment of dividends................................................. 54,709 57,330
Payment for shares redeemed............................................................. (205,235) (270,006)
Net increase from Fund share transactions............................................ 1,054,394 3,113,930
Net increase in net assets........................................................... 1,353,649 2,860,740
NET ASSETS:
Beginning of period..................................................................... 2,860,740 --
End of period........................................................................... $ 4,214,389 $ 2,860,740
</TABLE>
* Commencement of operations.
See accompanying notes to financial statements.
29
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION SOUTH CAROLINA MUNICIPAL BOND PORTFOLIO)
CLASS A, B AND Y SHARES
(Photo of South Carolina) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS Y
CLASS A SHARES CLASS B SHARES SHARES
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED JANUARY 3, ENDED JANUARY 3, ENDED
JUNE 30, 1995 1994* THROUGH JUNE 30, 1995 1994* THROUGH JUNE 30, 1995
(UNAUDITED) DECEMBER 31, 1994 (UNAUDITED) DECEMBER 31, 1994 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period.......................... $8.62 $10.00 $8.62 $ 10.00 $8.62
Income (loss) from investment
operations:
Net investment income............. .26 .46 .22 .41 .27
Net realized and unrealized gain
(loss) on investments........... .84 (1.38) .84 (1.38) .84
Total from investment
operations.................... 1.10 (.92) 1.06 (.97) 1.11
Less distributions to shareholders
from net investment income...... (.26) (.46) (.22) (.41) (.27)
Net asset value, end of period.... $9.46 $8.62 $9.46 $8.62 $9.46
TOTAL RETURN(|)................... 12.8% (9.3%) 12.4% (9.8%) 13.0%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)........................ $581 $312 $ 3,354 $2,456 $280
Ratios to average net assets:
Expenses (a)(|)(|).............. .45% .25% 1.19% .87% .19%
Net investment income
(a)(|)(|)..................... 5.62% 5.57% 4.84% 4.88% 5.87%
Portfolio turnover rate........... 60% 23% 60% 23% 60%
<CAPTION>
FEBRUARY 28,
1994* THROUGH
DECEMBER 31, 1994
<S> <C>
PER SHARE DATA
Net asset value, beginning of
period.......................... $9.74
Income (loss) from investment
operations:
Net investment income............. .43
Net realized and unrealized gain
(loss) on investments........... (1.12)
Total from investment
operations.................... (.69)
Less distributions to shareholders
from net investment income...... (.43)
Net asset value, end of period.... $8.62
TOTAL RETURN(|)................... (7.1%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)........................ $92
Ratios to average net assets:
Expenses (a)(|)(|).............. .00%
Net investment income
(a)(|)(|)..................... 5.92%
Portfolio turnover rate........... 23%
</TABLE>
* Commencement of class operations.
(|) Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charges or contingent
deferred sales charges are not reflected.
(|)(|) Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS Y
CLASS A SHARES CLASS B SHARES SHARES
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED JANUARY 3, 1994 ENDED JANUARY 3, 1994 ENDED
JUNE 30, 1995 THROUGH JUNE 30, 1995 THROUGH JUNE 30, 1995
(UNAUDITED) DECEMBER 31, 1994 (UNAUDITED) DECEMBER 31, 1994 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Expenses.................... 4.97% 10.71% 5.71% 11.33% 4.71%
Net investment income
(loss).................... 1.10% (4.89%) .32% (5.58%) 1.35%
<CAPTION>
FEBRUARY 28, 1994
THROUGH
DECEMBER 31, 1994
<S> <<C>
Expenses.................... 10.46%
Net investment income
(loss).................... (4.54%)
</TABLE>
30
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF INVESTMENTS
JUNE 30, 1995
(Photo of Virginia) (UNAUDITED)
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- 93.2%
VIRGINIA -- 85.7%
100,000 Arlington County,
IDA Hosp.,
5.30%, 9/1/15, OID
(callable @102, 9/1/03)..... A-1 $ 87,883
300,000 Chesapeake,
5.50%, 5/14/14, OID
(callable @102, 5/1/05)..... AA 287,751
200,000 Fairfax County,
IDA,
5.00%, 8/15/14.............. AA 181,212
250,000 Fairfax County,
IDA,
Inova Health Systems
Hospital,
5.25%, 8/15/19.............. AA- 228,610
200,000 Fairfax County,
Multi-Family Housing,
Reference GNMA
Mt. Vernon Apts,
6.625%, 9/20/20
(callable @102, 3/20/05).... AAA 205,138
700,000 Fairfax County,
Water Authority RB,
6.00%, 4/1/22, OID
(callable @102, 4/1/07)..... AA- 689,836
250,000 Hanover County,
Memorial Medical Center,
6.375%, 8/15/18
(MBIA Insured).............. AAA 262,583
200,000 Henrico County,
IDA,
7.00%, 8/1/13, OID
(callable @102, 8/1/05)..... AA 219,720
100,000 Isle Wright County,
5.10%, 8/1/09, OID
(callable @102, 8/1/02)..... A 95,074
250,000 Isle Wight County,
6.55%, 4/1/24
(callable @102, 4/1/04)..... A- 255,185
100,000 James Madison University,
RRB,
5.25%, 6/1/13
(AMBAC Insured)............. AAA 92,448
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
VIRGINIA -- CONTINUED
$200,000 Norfolk,
Water Revenue,
5.375%, 11/1/23, OID (AMBAC
Insured)
(callable @102, 11/1/03).... AAA $ 182,544
250,000 Prince William County,
Park Authority RB,
6.875%, 10/15/16
(callable @102,
10/15/04)................... A- 261,870
600,000 Richmond,
GO Bonds, (State Aid
Withholding)
5.50%, 1/15/22
(callable @102, 1/15/03).... AA 549,270
380,000 Riverside,
6.00%, 7/1/25, OID (MBIA
insured)
(callable @102, 7/1/05)..... AAA 374,277
300,000 Roanoke County,
PU Bonds, Improvement Bonds,
5.00%, 6/1/21
(callable @100, 6/1/03)..... AA 260,787
300,000 University of Virginia,
5.20%, 6/1/15, OID
(callable @102, 6/1/03)..... AA 274,251
200,000 Virginia Beach,
GO Bond,
5.45%, 7/15/10, OID......... AA 196,372
175,000 Virginia Beach General
Hospital,
6.00%, 2/15/09
(AMBAC insured)............. AAA 180,416
100,000 Virginia Beach General
Hospital,
6.00%, 2/15/12.............. AAA 101,466
200,000 Virginia College Building
Authority,
RRB (Hampton University
Project),
5.75%, 4/1/14
(callable @102 4/1/14)...... A+ 191,146
</TABLE>
31
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1995
(Photo of Virginia) (UNAUDITED)
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
VIRGINIA -- CONTINUED
100,000 Virginia Guaranteed Student
Loan, RB, Reference Amount
Sub (Series C),
5.75%, 9/1/10
(callable @102, 3/1/04)..... A 95,135
200,000 Virginia State,
Resident Authority Water &
Sewer,
Reference Washington County
Service Lot 21,
5.25%, 10/1/14, OID
(callable @102, 10/1/03).... AA 183,416
300,000 Virginia State,
HDA,
Multi-Family RB
(Series H),
6.35%, 11/1/11
(callable @102, 11/1/04).... AA+ 304,239
100,000 Virginia State,
Commonwealth Bonds (Series
A),
6.95%, 1/1/10
(callable @102, 1/1/00)..... AA+ 103,639
100,000 Virginia State,
7.10%, 1/1/17
(callable @101, 3/1/04)..... AA 104,908
100,000 Virginia State,
Public School Authority
(Series A),
6.50%, 8/1/15, OID
(callable @102, 1/1/02)..... AA+ 105,138
100,000 Virginia State,
Public Building Authority,
(Series B)
5.40%, 8/13/13, OID
(callable @102, 8/1/03)..... AA 92,697
300,000 West Point,
IDA, (Chesapeake Corp.)
6.25%, 3/1/19, OID
(callable @102, 3/1/04)..... BBB 290,613
6,457,624
PUERTO RICO -- 6.3%
300,000 Puerto Rico Commonwealth,
GO Bonds,
6.25%, 7/1/13,
(MBIA insured).............. A 318,423
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
PUERTO RICO -- CONTINUED
150,000 Puerto Rico, Commonwealth,
GO Bonds
6.45%, 7/1/17
(callable @100.5, 7/1/04)... A 153,198
471,621
WASHINGTON, D.C. -- 1.2%
100,000 Metropolitan Airport
Authority,
General Airport RRB,
5.375%, 10/1/13
(MBIA Insured).............. AAA 93,746
TOTAL LONG-TERM MUNICIPAL
SECURITIES (COST
$6,910,519)............ 7,022,991
MUTUAL FUND SHARES -- 3.2%
240,000 Lehman Municipal Money
Market Fund
(cost $240,000)............. 240,000
TOTAL INVESTMENTS -- 96.4%
(COST $7,150,519)...... 7,262,991
OTHER ASSETS AND
LIABILITIES -- NET
3.6%................... 274,301
NET ASSETS -- 100%........ $7,537,292
</TABLE>
The following abbreviations are used in this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation
GO -- General Obligations
GTD -- Guaranteed
HDA -- Housing and Development Authority
IDA -- Industrial Development Authority
MBIA -- Municipal Bond Investors Assurance
OID -- Original Issue Discount
PU -- Public Utility
RB -- Revenue Bond
RRB -- Revenue Refunding Bond
See accompanying notes to financial statements.
32
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
(Photo of Virginia) (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $7,150,519)................................................................ $7,262,991
Cash............................................................................................................. 616
Receivable for securities sold................................................................................... 371,878
Interest receivable.............................................................................................. 131,016
Receivable for Fund shares sold.................................................................................. 23,696
Due from Adviser................................................................................................. 28,765
Prepaid expenses................................................................................................. 6,393
Total assets............................................................................................... 7,825,355
LIABILITIES:
Payable for securities purchased................................................................................. 268,045
Payable for Fund shares purchased................................................................................ 14,330
Dividends payable................................................................................................ 5,688
Total liabilities.......................................................................................... 288,063
NET ASSETS.......................................................................................................... $7,537,292
NET ASSETS CONSIST OF:
Paid-in capital.................................................................................................. $7,731,772
Accumulated net realized loss.................................................................................... (306,952)
Net unrealized appreciation of investments....................................................................... 112,472
Net assets................................................................................................. $7,537,292
CALCULATION OF NET ASSET VALUE PER SHARE:
Class A Shares ($2,032,464 212,382 shares of beneficial interest outstanding).................................... $ 9.57
Sales charge -- 4.75% of offering price.......................................................................... 0.48
Maximum offering price..................................................................................... $ 10.05
Class B Shares ($4,907,119 512,754 shares of beneficial interest outstanding).................................... $ 9.57
Class Y Shares ($597,709 62,457 shares of beneficial interest outstanding)....................................... $ 9.57
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(Photo of Virginia) (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................................................................. $198,726
EXPENSES:
Advisory fee......................................................................................... $ 16,662
Administrative personnel and services fees........................................................... 2,701
Distribution fee -- Class A Shares................................................................... 2,287
Distribution and shareholder services fees -- Class B Shares......................................... 21,779
Custodian fee........................................................................................ 28,333
Transfer agent fee................................................................................... 21,667
Registration and filing fees......................................................................... 14,399
Reports and notices to shareholders.................................................................. 12,567
Professional fees.................................................................................... 9,541
Insurance expense.................................................................................... 1,505
Trustees' fees and expenses.......................................................................... 80
Miscellaneous........................................................................................ 2,599
134,120
Less: Fee waivers and expense reimbursements......................................................... (96,290)
Total expenses.................................................................................... 37,830
Net investment income................................................................................... 160,896
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments..................................................................... (48,399)
Net change in unrealized appreciation of investments................................................. 522,139
Net gain on investments................................................................................. 473,740
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................................... $634,636
</TABLE>
See accompanying notes to financial statements.
34
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
(FORMERLY FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO)
(Photo of Virginia) STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................................................... $ 160,896 $ 236,912
Net realized loss on investments........................................................ (48,399) (258,553)
Net change in unrealized appreciation (depreciation) of investments..................... 522,139 (435,700)
Net increase (decrease) in net assets resulting from operations...................... 634,636 (457,341)
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A Shares.......................................................................... (48,470) (82,301)
Class B Shares.......................................................................... (99,037) (148,091)
Class Y Shares.......................................................................... (13,388) (6,520)
Total distributions to shareholders.................................................. (160,895) (236,912)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold............................................................... 1,503,821 3,657,110
Proceeds from reinvestment of dividends................................................. 127,901 190,012
Payment for shares redeemed............................................................. (335,012) (926,664)
Net increase in Fund share transactions.............................................. 1,296,710 2,920,458
Net increase in net assets........................................................... 1,770,451 2,226,205
NET ASSETS:
Beginning of period..................................................................... 5,766,841 3,540,636
End of period........................................................................... $ 7,537,292 $ 5,766,841
</TABLE>
See accompanying notes to financial statements.
35
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND --
(FORMERLY FIRST UNION VIRGINIA MUNICIPAL BOND PORTFOLIO)
CLASS A, B AND Y SHARES
(Photo of Virginia) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
SIX MONTHS JULY 2, SIX MONTHS JULY 2,
ENDED 1993* ENDED 1993*
JUNE 30, YEAR ENDED THROUGH JUNE 30, YEAR ENDED THROUGH
1995 DECEMBER 31, DECEMBER 31, 1995 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1994 1993 (UNAUDITED) 1994 1993
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period........................ $8.85 $10.19 $10.00 $8.85 $10.19 $10.00
Income (loss) from investment
operations:
Net investment income........... .25 .47 .20 .21 .42 .17
Net realized and unrealized gain
(loss) on investments......... .72 (1.34) .19 .72 (1.34) .19
Total from investment
operations.................. .97 (.87) .39 .93 (.92) .36
Less distributions to
shareholders from net
investment income............. (.25) (.47) (.20) (.21) (.42) (.17)
Net asset value, end of
period........................ $9.57 $8.85 $10.19 $9.57 $8.85 $10.19
TOTAL RETURN(|)................. 11.0% (8.6%) 3.9% 10.6% (9.1%) 3.7%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)...................... $2,032 $1,606 $1,306 $4,907 $3,817 $2,235
Ratios to average net assets:
Expenses (a).................. .66%(|)(|) .53% .25%(|)(|) 1.41%(|)(|) 1.12% .75%(|)(|)
Net investment income (a)..... 5.30%(|)(|) 5.11% 4.64%(|)(|) 4.55%(|)(|) 4.54% 4.25%(|)(|)
Portfolio turnover rate......... 73% 59% 0% 73% 59% 0%
<CAPTION>
CLASS Y SHARES
SIX MONTHS FEBRUARY 28,
ENDED 1994*
JUNE 30, THROUGH
1995 DECEMBER 31,
(UNAUDITED) 1994
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period........................ $8.85 $9.83
Income (loss) from investment
operations:
Net investment income........... .26 .41
Net realized and unrealized gain
(loss) on investments......... .72 (.98)
Total from investment
operations.................. .98 (.57)
Less distributions to
shareholders from net
investment income............. (.26) (.41)
Net asset value, end of
period........................ $9.57 $8.85
TOTAL RETURN(|)................. 11.1% (5.8%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)...................... $598 $344
Ratios to average net assets:
Expenses (a).................. .42%(|)(|) .28%(|)(|)
Net investment income (a)..... 5.56%(|)(|) 5.54%(|)(|)
Portfolio turnover rate......... 73% 59%
</TABLE>
* Commencement of class operations.
(|) Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent
deferred sales charges are not reflected.
(|)(|) Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS Y
CLASS A SHARES CLASS B SHARES SHARES
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED JULY 2, 1993 ENDED JULY 2, 1993 ENDED
JUNE 30, YEAR ENDED THROUGH JUNE 30, YEAR ENDED THROUGH JUNE 30,
1995 DECEMBER 31, DECEMBER 31, 1995 DECEMBER 31, DECEMBER 31, 1995
(UNAUDITED) 1994 1993 (UNAUDITED) 1994 1993 (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses............ 3.55% 5.14% 7.75% 4.30% 5.73% 8.25% 3.31%
Net investment
income (loss)..... 2.41% .50% (2.86%) 1.66% (.07%) (3.25%) 2.67%
<CAPTION>
FEBRUARY 28,
1994 THROUGH
DECEMBER 31,
1994
<S> <C>
Expenses............ 4.89%
Net investment
income (loss)..... .93%
</TABLE>
36
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
NOTE 1 -- ORGANIZATION
Evergreen Investment Trust (formerly First Union Funds) (the "Trust") is a
Massachusetts business trust registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management company. The Trust
consisted of seventeen funds at June 30, 1995. The financial statements included
herein are only those of the Evergreen Tax-Free Funds -- Evergreen Georgia
Municipal Bond Fund ("Georgia"), Evergreen High Grade Tax Free Fund ("High
Grade") Evergreen North Carolina Municipal Bond Fund ("North Carolina")
Evergreen South Carolina Municipal Bond Fund ("South Carolina") and Evergreen
Virginia Municipal Bond Fund ("Virginia") collectively referred to as the
"Funds" (see Note 8).
NOTE 2 -- CHANGE IN FISCAL YEAR
On March 15, 1995, the Trustees approved a change in the Funds' fiscal year
end from December 31 to August 31. These financial statements are as of and for
the six months ended June 30, 1995.
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. These policies are
in conformity with generally accepted accounting principles.
SECURITY VALUATIONS -- Municipal bonds are valued at the bid price by an
independent pricing service taking into consideration yield, liquidity, risk,
credit quality, coupon, maturity, type of issue and any other factors or market
data it deems relevant in determining valuations for normal institutional size
trading units of debt securities. The independent pricing service does not rely
exclusively on quoted prices. Short term securities purchased with remaining
maturities of sixty days or less are stated at amortized cost which approximates
market value.
SECURITY TRANSACTIONS -- Security transactions are accounted for on the
date purchased or sold. Net realized gains or losses are determined on the
identified cost basis.
INVESTMENT INCOME AND EXPENSES -- Interest income and expenses are accrued
daily. Premiums and discounts paid on securities are amortized into income as
required by the Internal Revenue Code, as amended, (the "Code").
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the Federal Reserve Bank and are designated as being held
on the Funds' behalf by its custodian under a book-entry system. The Funds
monitor the adequacy of the collateral on a daily basis, and can require the
seller to provide additional collateral in the event the market value of the
securities pledged falls below the carrying value of the repurchase agreement,
including accrued interest. The Funds will only enter into repurchase agreements
with banks and other financial institutions which are deemed by the Funds'
investment adviser to be creditworthy pursuant to guidelines established by the
Trustees.
DIVIDENDS TO SHAREHOLDERS -- Dividends from net investment income for the
Funds are declared daily and paid monthly. Dividends from net realized capital
gains on investments, if any, will be distributed at least annually. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. To the extent these differences are permanent in nature, such
amounts are reclassified within the capital accounts.
INCOME TAXES -- It is each Fund's policy to meet the requirements of the
Code applicable to regulated investment companies and to distribute
substantially all of its taxable net income to its shareholders. Accordingly, no
provisions for federal income or excise taxes are necessary. To the extent that
realized capital gains can be offset by capital loss carryforwards, it is the
Funds' policy not to distribute such gains.
37
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED) -- CONTINUED
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES -- continued
At December 31, 1994 (the Funds' most recent fiscal year end), Georgia,
High Grade, North Carolina, South Carolina and Virginia had capital loss
carryforwards of $885,457, $912,236, $4,913,455, $33,409 and $258,553,
respectively. Pursuant to the Code, such capital loss carryforwards will expire
in the year 2002 for each of the Funds.
WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Funds record
when-issued or delayed delivery transactions on the trade date and 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.
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 not to exceed a period of five years from the
Fund's commencement.
NOTE 4 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AGREEMENT -- First Union National Bank of North
Carolina (the "Adviser"), each Fund's investment adviser, is entitled to a fee
of .50 of 1% of the average daily net assets of each Fund pursuant to an
investment advisory agreement. The Adviser voluntarily waived its advisory fee
and reimbursed operating expenses for the six month period ended June 30, 1995
for each of the Funds as noted below. The Adviser can modify or terminate this
voluntary waiver at any time.
<TABLE>
<CAPTION>
ADVISORY FEE OPERATING EXPENSE
WAIVERS REIMBURSEMENTS
<S> <C> <C>
Georgia.................................................. $ 23,585 $66,977
High Grade............................................... 4,383 --
North Carolina........................................... 88,900 --
South Carolina........................................... 8,783 69,244
Virginia................................................. 16,662 76,927
</TABLE>
ADMINISTRATIVE AGREEMENT -- Federated Investor Services ("FAS") provided
each Fund with certain administrative personnel and services including certain
clerical and recordkeeping services for the six-month period ended June 30, 1995
(see Note 8). In addition, certain of the Trust's officers and Trustees were
officers or directors of FAS. FAS' fee was based on the level of average net
assets of the Trust for the period, subject to a minimum fee for each Fund. For
Georgia, South Carolina and Virginia, FAS waived $3,901, $1,431 and $2,701,
respectively, of its fee for the six months ended June 30, 1995.
PLAN OF DISTRIBUTION AND SHAREHOLDER SERVICING -- The Trust has adopted a
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the
terms of the Plan, the Trust compensated Federated Securities Corp. ("FSC"), the
principal distributor, from the net assets of all of the Funds in the Trust to
finance activities intended to result in the sale of Class A and Class B shares
(see Note 8). The Plan provides that the Funds may incur distribution expenses
up to .75 of 1% of the average daily net assets of the Class A and Class B
shares, annually, to finance such activities. For the six-month period ended
June 30, 1995, FSC limited its fees on Class A shares to .25 of 1% of Class A
shares average daily net assets for each Fund.
Under the terms of a Shareholder Services Agreement with First Union
Brokerage Services ("FUBS"), the Funds will pay FUBS up to .25 of 1% of average
daily net assets of the Funds' Class B shares for the period. This fee is
designed to obtain certain services for shareholders and to maintain the
shareholder accounts.
38
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED) -- CONTINUED
NOTE 4 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES -- continued
TRANSFER AND DIVIDEND DISBURSEMENT AGENT -- Federated Services Company
("FServ") served as Transfer and dividend disbursing agent for the Trust for the
six-month period ended June 30, 1995 (see Note 8). FServ's fee was based on the
size, type and number of accounts and transactions made by shareholders.
ORGANIZATIONAL EXPENSES -- Organizational expenses were borne initially by
FAS. The Funds have agreed to reimburse FAS for the organizational expenses
during the five-year period following the dates the Funds commenced operations.
Pursuant to these arrangements, for the six months ended June 30, 1995, the
Funds have paid and have a remaining liability as follows:
<TABLE>
<CAPTION>
COMMENCEMENT ORGANIZATIONAL
OF ORGANIZATIONAL EXPENSES
OPERATIONS EXPENSES PAID REMAINING
<S> <C> <C> <C>
Georgia..................................................................... 7/2/93 $1,926 $ 25,749
High Grade.................................................................. 2/21/92 5,423 17,306
North Carolina.............................................................. 1/11/93 6,875 50,977
South Carolina.............................................................. 1/3/94 5,811 74,261
Virginia.................................................................... 7/2/94 1,780 24,607
</TABLE>
As a result of the change in the administration agreement (see Note 8), the
Adviser purchased the remaining unreimbursed initial organizational expenses
from FAS. No change will be made to the payment schedule as a result of this
transaction.
NOTE 5 -- INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of investments, excluding
short-term securities, for the six months ended June 30, 1995 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Georgia............................................................................................ $ 7,458,337 $ 7,089,278
High Grade......................................................................................... 19,826,395 28,618,016
North Carolina..................................................................................... 46,841,193 51,932,570
South Carolina..................................................................................... 2,378,458 2,035,833
Virginia........................................................................................... 5,600,456 4,760,823
</TABLE>
On June 30, 1995, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost of investments
for federal tax purposes was as follows:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION NET
<S> <C> <C> <C>
Georgia............................................................................. $ 378,233 ($68,745) $ 309,488
High Grade.......................................................................... 3,556,830 (601,329) 2,955,501
North Carolina...................................................................... 1,913,807 (361,532) 1,552,275
South Carolina...................................................................... 91,694 (30,364) 61,330
Virginia............................................................................ 191,188 (78,716) 112,472
</TABLE>
NOTE 6 -- SHARES OF BENEFICIAL INTEREST
There is an unlimited number of no par value shares of beneficial interest
authorized for each of the Funds. The shares are divided into three classes
which are designated Class A, Class B, and Class Y shares. Class A shares are
offered with a
39
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED) -- CONTINUED
NOTE 6 -- SHARES OF BENEFICIAL INTEREST -- continued
front-end sales charge of 4.75%. Class B shares are offered with a contingent
deferred sales charge payable when shares are redeemed which would decline from
5% to zero over a seven-year period (after which it is expected that they will
convert to Class A shares). Class Y shares are sold without a sales charge and
are available only to investment advisory clients of the Adviser and its
affiliates, certain institutional investors and Class Y shareholders of record
of certain other funds managed by the Adviser and its affiliates as of December
30, 1994. All classes have identical voting, dividend, liquidation and other
rights, except that certain classes bear different distribution expenses (see
Note 4) and have exclusive voting rights with respect to their distribution
plan.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994*
GEORGIA SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold................................................................ 49,456 $ 465,666 100,861 $ 940,685
Shares issued on reinvestment of dividends................................. 3,223 30,039 5,104 46,518
Shares redeemed............................................................ (2,288) (21,467) (27,500) (247,702)
Net increase............................................................... 50,391 474,238 78,465 739,501
CLASS B
Shares sold................................................................ 102,518 958,247 586,440 5,520,982
Shares issued on reinvestment of dividends................................. 13,618 126,788 22,504 204,561
Shares redeemed............................................................ (107,791) (1,024,792) (180,297) (1,612,750)
Net increase............................................................... 8,345 60,243 428,647 4,112,793
CLASS Y
Shares sold................................................................ 92,083 868,700 32,285 292,238
Shares issued on reinvestment of dividends................................. 350 3,258 289 2,580
Shares redeemed............................................................ (12) (111) (41) (369)
Net increase............................................................... 92,421 871,847 32,533 294,449
Total net increase resulting from Fund share transactions.................. 151,157 $ 1,406,328 539,645 $ 5,146,743
</TABLE>
* For Class Y shares, the Fund share transaction activity is for the period
February 28, 1994 (commencement of class operations) through December 31,
1994.
40
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED) -- CONTINUED
NOTE 6 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994*
HIGH GRADE AMOUNT SHARES AMOUNT
SHARES
<S> <C> <C> <C> <C>
CLASS A
Shares sold............................................................ 73,734 $ 776,748 555,825 $ 6,063,674
Shares issued on reinvestment of dividends............................. 82,236 860,456 238,904 2,470,837
Shares redeemed........................................................ (695,125) (7,264,049) (3,992,062) (41,107,207)
Net decrease........................................................... (539,155) (5,626,845) (3,197,333) (32,572,696)
CLASS B
Shares sold............................................................ 64,711 679,295 619,543 6,598,572
Shares issued on reinvestment of dividends............................. 40,317 421,753 102,516 1,054,230
Shares redeemed........................................................ (334,089) (3,488,379) (1,088,820) (11,052,338)
Net decrease........................................................... (229,061) (2,387,331) (366,761) (3,399,536)
CLASS Y
Shares sold............................................................ 57,267 604,671 532,658 5,452,546
Shares issued on reinvestment of dividends............................. 1,374 14,432 1,287 12,856
Shares redeemed........................................................ (23,873) (250,398) (93,031) (914,833)
Net increase........................................................... 34,768 368,705 440,914 4,550,569
Total net decrease resulting from Fund share transactions.............. (733,448) ($7,645,471) (3,123,180) ($31,421,663)
</TABLE>
* For Class Y shares, the Fund share transaction activity is for the period
February 28, 1994 (commencement of class operations) through December 31,
1994.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994*
NORTH CAROLINA AMOUNT SHARES AMOUNT
SHARES
<S> <C> <C> <C> <C>
CLASS A
Shares sold............................................................ 102,094 $ 1,003,598 417,470 $ 4,151,733
Shares issued on reinvestment of dividends............................. 14,513 142,536 36,125 349,098
Shares redeemed........................................................ (159,680) (1,566,500) (782,865) (7,703,364)
Net decrease........................................................... (43,073) (420,366) (329,270) (3,202,533)
CLASS B
Shares sold............................................................ 374,669 3,692,245 1,588,728 15,705,181
Shares issued on reinvestment of dividends............................. 76,496 751,224 163,431 1,564,184
Shares redeemed........................................................ (353,921) (3,453,989) (1,136,420) (10,565,842)
Net increase........................................................... 97,244 989,480 615,739 6,703,523
CLASS Y
Shares sold............................................................ 27,366 269,932 74,100 704,924
Shares issued on reinvestment of dividends............................. 302 2,969 420 3,943
Shares redeemed........................................................ (4,375) (40,932) (4,358) (41,054)
Net increase........................................................... 23,293 231,969 70,162 667,813
Total net increase resulting from Fund share transactions.............. 77,464 $ 801,083 356,631 $ 4,168,803
</TABLE>
* For Class Y shares, the Fund share transaction activity is for the period
February 28, 1994 (commencement of class operations) through December 31,
1994.
41
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED) -- CONTINUED
NOTE 6 -- SHARES OF BENEFICIAL INTEREST -- continued
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994*
SOUTH CAROLINA AMOUNT SHARES AMOUNT
SHARES
<S> <C> <C> <C> <C>
CLASS A
Shares sold................................................................... 26,504 $ 248,016 41,168 $ 382,655
Shares issued on reinvestment of dividends.................................... 483 4,538 246 2,190
Shares redeemed............................................................... (1,840) (17,134) (5,193) (48,887)
Net increase.................................................................. 25,147 235,420 36,221 335,958
CLASS B
Shares sold................................................................... 84,206 789,260 304,136 2,846,537
Shares issued on reinvestment of dividends.................................... 5,329 49,695 6,194 55,132
Shares redeemed............................................................... (20,025) (187,462) (25,441) (220,905)
Net increase.................................................................. 69,510 651,493 284,889 2,680,764
CLASS Y
Shares sold................................................................... 18,873 167,644 10,721 97,415
Shares issued on reinvestment of dividends.................................... 54 476 1 7
Shares redeemed............................................................... (70) (639) (24) (214)
Net increase.................................................................. 18,857 167,481 10,698 97,208
Total net increase resulting from Fund share transactions..................... 113,514 $1,054,394 331,808 $3,113,930
</TABLE>
* For Class A and B shares, the Fund share transaction activity is for the
period January 3, 1994 (commencement of class operations) through December 31,
1994. For Class Y shares, the Fund share transaction activity is for the
period February 28, 1994 (commencement of class operations) through December
31, 1994.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994*
VIRGINIA AMOUNT SHARES AMOUNT
SHARES
<S> <C> <C> <C> <C>
CLASS A
Shares sold................................................................... 38,961 $ 371,440 86,681 $ 821,129
Shares issued on reinvestment of dividends.................................... 4,467 42,440 7,518 68,995
Shares redeemed............................................................... (12,541) (119,308) (40,827) (366,090)
Net increase.................................................................. 30,887 294,572 53,372 524,034
CLASS B
Shares sold................................................................... 83,106 795,276 259,308 2,456,021
Shares issued on reinvestment of dividends.................................... 8,235 78,273 13,100 120,183
Shares redeemed............................................................... (10,138) (94,774) (60,204) (530,916)
Net increase.................................................................. 81,203 778,775 212,204 2,045,288
CLASS Y
Shares sold................................................................... 35,326 337,105 42,022 379,970
Shares issued on reinvestment of dividends.................................... 756 7,188 93 824
Shares redeemed............................................................... (12,532) (120,930) (3,209) (29,658)
Net increase.................................................................. 23,550 223,363 38,906 351,136
Total net increase resulting from Fund share transactions..................... 135,640 $1,296,710 304,482 $2,920,458
</TABLE>
* For Class Y shares, the Fund share transaction activity is for the period
February 28, 1994 (commencement of class operations) through December 31,
1994.
42
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED) -- CONTINUED
NOTE 7 -- CONCENTRATION OF CREDIT RISK
Since Georgia, North Carolina, South Carolina and Virginia invest a
substantial portion of their assets in issuers located in a single state, these
Funds will be more susceptible to factors adversely affecting issuers of that
state than would be to a comparable general tax-exempt mutual fund. Certain debt
obligations held in the Funds' portfolios may be entitled to the benefit of
standby letters of credit or other guarantees of banks or other financial
institutions.
NOTE 8 -- SUBSEQUENT EVENTS
Pursuant to a contract approved by the Trustees on April 20, 1995,
effective July 7, 1995, Evergreen Asset Management Corp. (an affiliate of the
Adviser) and Boston Financial Data Services became the Administrator and
transfer agent respectively. Evergreen Funds Distributor, Inc., a wholly owned
subsidiary of Furman Selz, Inc., became the Funds' distributor and
sub-administrator. Officers of Furman Selz, Inc. became the Trust's officers.
Effective July 7, 1995, the First Union High Grade Tax Free Fund acquired
substantially all of the net assets by a non-taxable exchange of 2,806,998
shares of Evergreen National Tax-Free Fund for 2,679,627 shares of the First
Union High Grade Tax Free Fund. The net assets of Evergreen National Tax-Free
Fund acquired included unrealized appreciation of $528,003. The aggregate net
assets of First Union High Grade Tax Free Fund immediately after the combination
were $128,792,690. In addition, effective July 7, 1995, each of the Funds
changed their names as follows:
<TABLE>
<CAPTION>
FORMER NAME NEW NAME
<S> <C>
First Union Georgia Municipal Bond Fund Evergreen Georgia Municipal Bond Fund
First Union High Grade Tax Free Fund Evergreen High Grade Tax Free Fund
First Union North Carolina Municipal Bond Fund Evergreen North Carolina Municipal Bond Fund
First Union South Carolina Municipal Bond Fund Evergreen South Carolina Municipal Bond Fund
First Union Virginia Municipal Bond Fund Evergreen Virginia Municipal Bond Fund
</TABLE>
43
<PAGE>
TRUSTEES AND OFFICERS
TRUSTEES:
Mr. James S. Howell, Chairman
Mr. Gerald M. McDonnell
Mr. Thomas L. McVerry
Mr. William W. Pettit
Mr. Russell A. Salton, III M.D.
Mr. Michael S. Scofield
OFFICERS (EFFECTIVE JULY 7, 1995):
John J. Pileggi
President and Treasurer
Joan V. Fiore
Secretary
Sheryl Hirschfeld
Assistant Secretary
Donald E. Brostrom
Assistant Treasurer
Stephen W. St. Clair
Assistant Treasurer
44
