-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Th30e/NrLFH/VdbFoVAG46+hzA4KuAPYgC7KQp4yVrPcA6NGhZ8DDmcBKSmRJyCP BDcpRF338Rc4dr9zwsEwFg== 0000950168-95-000751.txt : 19950830 0000950168-95-000751.hdr.sgml : 19950830 ACCESSION NUMBER: 0000950168-95-000751 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950829 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNION FUNDS/ CENTRAL INDEX KEY: 0000757440 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046599663 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04154 FILM NUMBER: 95568629 BUSINESS ADDRESS: STREET 1: 2500 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9146412305 MAIL ADDRESS: STREET 1: 2500 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION HIGH GRADE TAX FREE PORT DATE OF NAME CHANGE: 19940519 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION FUNDS DATE OF NAME CHANGE: 19921230 FORMER COMPANY: FORMER CONFORMED NAME: SALEM FUNDS DATE OF NAME CHANGE: 19920703 N-30D 1 EVERGREEN N30D #82260.1 EVERGREEN GROWTH AND INCOME FUNDS (FORMERLY FIRST UNION GROWTH AND INCOME FUNDS) TABLE OF CONTENTS President's Message....................................................... 1 A Review of 1st Half and Prospects for Remainder of 1995....................................... 2 (Photo of light bulb) UTILITY A Report From Your Portfolio Manager...................................... 4 FUND Statement of Investments.................................................. 5 Statement of Assets and Liabilities....................................... 7 Statement of Operations................................................... 8 Statement of Changes in Net Assets........................................ 9 Financial Highlights...................................................... 10 (Photo of scales) BALANCED A Report From Your Portfolio Manager...................................... 11 FUND Statement of Investments.................................................. 12 Statement of Assets and Liabilities....................................... 16 Statement of Operations................................................... 17 Statement of Changes in Net Assets........................................ 18 Financial Highlights...................................................... 19 (Photo of stock certificate) VALUE A Report From Your Portfolio Manager...................................... 21 FUND Statement of Investments.................................................. 22 Statement of Assets and Liabilities....................................... 24 Statement of Operations................................................... 25 Statement of Changes in Net Assets........................................ 26 Financial Highlights...................................................... 27 Combined Notes to Financial Statements.................................... 30 Trustees and Officers..................................................... IBC
EVERGREEN GROWTH & INCOME FUNDS (FORMERLY FIRST UNION GROWTH AND INCOME 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 Growth and Income Funds John J. Pileggi) (formerly the First Union Growth and Income 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 Value Fund, the Evergreen Balanced Fund and the Evergreen Utility 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 EVERGREEN GROWTH AND INCOME FUNDS (FORMERLY FIRST UNION GROWTH AND INCOME 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. Current evidence 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 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." * 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. 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. Through June, the S&P 500 Reinvested Index* 20%, and the Lehman Brothers Intermediate Bond Index** was up over 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. STOCKS ADVANCE BROADLY LED BY TECHNOLOGY The S&P 500 Index continued the powerful advance which began early in the year throughout the first half. New highs were generated in all the major averages, driven initially by earnings reports that were above expectations, and later in the period by meaningful declines in intermediate and long-term interest rates. Technology stocks continued to lead the market in the second quarter with particular strength in the high-tech components of the group (i.e., semiconductors, computer software and computer systems). Demand appears to be running far in advance of ability to supply, which is creating somewhat of a shortage mentality. Interest rate declines supported a strong advance in the financial sector, with money center banks providing excellent returns. Brokerage related stocks were also strong, reflecting the continued advances in the financial markets. Weakness in the period was concentrated in the energy and consumer cyclical sectors. 2 EVERGREEN GROWTH AND INCOME FUNDS (FORMERLY FIRST UNION GROWTH AND INCOME 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 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 that further substantial interest rate declines from current levels are less likely, removing one of the driving forces behind higher stock prices. Unexpectedly, strong earnings were an additional factor in lifting stock prices. For the balance of 1995 and into 1996, we believe profit comparisons will be less robust related to 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 decline. 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 EVERGREEN UTILITY FUND (FORMERLY FIRST UNION UTILITY PORTFOLIO) (Photo of Light Bulb) A REPORT FROM YOUR PORTFOLIO MANAGER BY BRAD DONOVAN The S&P Utility Composite finished the first half of the (Photo of year up 12%, which compares with the 19% rise in the S&P 500 Brad Donovan) Reinvested Index*. Natural gas stocks continue to lead the sector, rising 19% in price, followed by the telephone and electric utility industries, each up 11% in price. Within Evergreen Utility Fund, we continue to focus on companies with financial and operating strength that have attractive current income and the potential for modest capital appreciation. Further, we have diversified the Fund across sectors of the utility industry and have added several companies outside the utility sector as the prospectus allows up to 10% in such investments. Given positive news on deregulation in the electric utility industry, we have increased our weight in electrics and have initiated new positions in Eastern Utilities Associates and TNP Enterprises. The dividend yield on the electric utility industry as compared with the broader stock market and the bond market indicates that the group exhibits value compared with both stocks and bonds. While the group performed well during the second quarter, we expect electrics (and utilities in general) to outperform if investors become more defensive. The Senate passed their version of the Telecommunications Bill and the House will begin debate on their version of the Bill in early July. The thrust of both bills is to open the local telephone market to competition and allow the Regional Bell Holding Companies (RBOCs) into the out-of-region long distance market, which is currently dominated by AT&T, MCI Communications and Sprint. In our opinion, if the final bill signed by the President is similar to the current versions in both the House and Senate, the long distance sector is poised to gain more from enactment than the RBOCs. Accordingly, we have been reducing our weightings in SBC Communications, Bell Atlantic and BellSouth. The Fund is currently 43% invested in electric utilities, 41% in telecommunications, 6% natural gas stocks and 10% non-utilities. * The S&P 500 is a reinvested unmanaged composite index of 425 industrial, 20 transportation, and 55 public utility common stocks. 4 EVERGREEN UTILITY FUND (FORMERLY FIRST UNION UTILITY PORTFOLIO) STATEMENT OF INVESTMENTS JUNE 30, 1995 (Photo of light bulb) (UNAUDITED)
SHARES VALUE COMMON STOCKS -- 92.4% UTILITIES -- 81.5% 35,000 * Airtouch Communications, Inc..... $ 997,500 17,100 American Electric Power Co., Inc.............................. 600,638 8,400 American Water Works, Inc. 266,700 24,800 Ameritech Corp................... 1,091,200 15,000 AT & T Corp...................... 796,875 7,000 Atlanta Gas & Light Co........... 243,250 10,000 Bell Atlantic Corp............... 560,000 21,000 BellSouth Corp................... 1,333,500 8,400 British Telecommunications, Inc. ADR.............................. 527,100 30,100 Carolina Power & Light Co........ 910,525 38,000 CINERGY Corp..................... 997,500 7,200 Consolidated Natural Gas Co...... 271,800 34,350 DQE, Inc......................... 807,225 24,200 Eastern Enterprises.............. 722,975 25,000 Eastern Utility Association...... 565,625 8,000 Empresa Nacional de Electricidad S.A. ADR......................... 394,000 7,600 Enron Corp....................... 266,950 20,000 Factory Stores of America, Inc.............................. 410,000 22,000 FPL Group, Inc................... 849,750 20,000 Frontier Corp.................... 480,000 41,300 General Public Utilities Corp.... 1,228,675 46,700 GTE Corp......................... 1,593,638 10,000 Hong Kong Telecommunications ADR.............................. 198,750 20,000 Illinova Corp.................... 507,500 50,000 MCI Communications Corp.......... 1,100,000 30,100 Nacional Financiera, S.N.C. PRIDES........................... 933,100 40,000 New England Electric Systems..... 1,380,000 10,000 NICOR, Inc....................... 268,750 28,000 NIPSCO Industries, Inc........... 952,000 8,000 North Carolina Natural Gas Corp............................. 174,000 20,000 NYNEX Corp....................... 805,000 57,000 Pacific Telesis Group............ 1,524,750 19,000 Pacificorp....................... 356,250 40,000 PECO Energy Co................... 1,105,000 7,000 Piedmont Natural Gas, Inc........ 145,250 25,000 Powergen Place, ADR.............. 306,250 SHARES VALUE COMMON STOCKS -- CONTINUED UTILITIES -- CONTINUED 15,000 SBC Communications, Inc.......... $ 714,375 45,600 SCANA Corp....................... 1,020,300 65,000 * Shandong Huaneng Power Development S.A. ADR............. 495,625 20,000 Southern Co...................... 447,500 15,000 Southwest Gas Corp............... 213,750 30,200 Teco Energy, Inc................. 660,625 10,000 * Tele Danmark ADR................. 280,000 24,000 Telefonica de Argentina S.A. ADR.............................. 594,000 17,000 Telefonica de Espana S.A. ADR.............................. 658,750 25,000 TNP Enterprises, Inc............. 403,125 30,000 Unicom Corp...................... 798,750 30,000 U.S. West, Inc................... 1,248,750 30,000 Wisconsin Energy Corp............ 840,000 34,047,576 BASIC INDUSTRY -- .9% 20,200 Hanson PLC ADR................... 356,025 CONSUMER NON-DURABLES -- 1.4% 9,000 American Brands, Inc............. 357,750 15,000 K-mart Corp...................... 219,375 577,125 ENERGY -- 2.1% 4,100 Atlantic Richfield Co............ 449,975 6,300 Exxon Corp....................... 444,938 894,913 FINANCE -- .7% 5,000 Bankers Trust NY Corp............ 310,000 HEALTH TECHNOLOGY -- 1.0% 6,000 Bristol-Myers Squibb Co.......... 408,750 REAL ESTATE INVESTMENT TRUST -- 4.8% 11,600 HealthCare REIT, Inc............. 234,900 7,000 Highwoods Properties, Inc........ 178,500 10,500 JDN Realty Trust Corp............ 213,938 60,000 Sovran Self Storage, Inc. REIT... 1,380,000 2,007,338 TOTAL COMMON STOCKS (COST $37,622,740)........ 38,601,727
5 EVERGREEN UTILITY FUND (FORMERLY FIRST UNION UTILITY PORTFOLIO) STATEMENT OF INVESTMENTS -- (CONTINUED) JUNE 30, 1995 (Photo of light bulb) (UNAUDITED)
PRINCIPAL VALUE CORPORATE BONDS -- 4.4% UTILITIES -- 4.4% $ 175,000 Florida Power Corp., 8.625%, 11/1/21.................. $ 188,787 210,000 Madison Gas & Electric Co., 7.70%, 2/15/28................... 215,049 1,000,000 Norsk Hydro, 7.75%, 6/15/23................... 1,038,593 350,000 Pennsylvania Power & Light Co., 9.25%, 10/1/19................... 390,591 TOTAL CORPORATE BONDS (COST $1,868,305)............... 1,833,020 PRINCIPAL VALUE U.S. TREASURY OBLIGATIONS -- 0.5% $ 210,000 United States Treasury Notes, 9.50%, 11/15/95 (COST $230,475).................. $ 212,950 **REPURCHASE AGREEMENT -- 1.7% 715,273 Cantor Fitzgerald 6.025%, dated 6/30/95, due 7/3/95 (amortized cost)................. 715,273 TOTAL INVESTMENTS -- 99.0% (COST $40,436,793).......... 41,362,970 OTHER ASSETS AND LIABILITIES -- NET 1.0%.................... 432,711 TOTAL NET ASSETS 100%.......... $41,795,681
* Non-income producing securities. ** Fully collateralized by U.S. government and/or agency obligations based on market prices at June 30, 1995. The following abbreviations are used in this portfolio: ADR -- American Depository Receipts PRIDES -- Provisionally Redeemable Income Debt Exchangeable for Stock REIT -- Real Estate Investment Trust See accompanying notes to financial statements. 6 EVERGREEN UTILITY FUND (FORMERLY FIRST UNION UTILITY PORTFOLIO) STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 (Photo of light bulb) (UNAUDITED) ASSETS: Investments at value (identified cost $40,436,793)............................................................. $41,362,970 Receivable for investment securities sold...................................................................... 1,359,349 Dividends and interest receivable.............................................................................. 191,290 Receivable for Fund shares sold................................................................................ 95,522 Prepaid expenses............................................................................................... 65,892 Total assets................................................................................................ 43,075,023 LIABILITIES: Payable for investment securities purchased.................................................................... 958,973 Due to custodian bank.......................................................................................... 266,402 Payable for Fund shares repurchased............................................................................ 51,635 Withholding tax liability...................................................................................... 2,332 Total liabilities........................................................................................... 1,279,342 NET ASSETS........................................................................................................ $41,795,681 NET ASSETS CONSIST OF: Paid-in capital................................................................................................ $41,033,328 Undistributed net investment income............................................................................ 14,537 Accumulated net realized loss.................................................................................. (178,361) Net unrealized appreciation of investments..................................................................... 926,177 Net assets.................................................................................................. $41,795,681 CALCULATION OF NET ASSET VALUE PER SHARE: Class A Shares ($4,601,285 471,366 shares of beneficial interest outstanding).................................. $ 9.76 Sales charge -- 4.75% of offering price........................................................................ 0.49 Maximum offering price...................................................................................... $ 10.25 Class B Shares ($30,817,312 3,155,846 shares of beneficial interest outstanding)............................... $ 9.77 Class C Shares ($153,632 15,720 shares of beneficial interest outstanding)..................................... $ 9.77 Class Y Shares ($6,223,452 637,013 shares of beneficial interest outstanding).................................. $ 9.77
See accompanying notes to financial statements. 7 EVERGREEN UTILITY FUND (FORMERLY FIRST UNION UTILITY PORTFOLIO) STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1995 (Photo of light bulb) (UNAUDITED) INVESTMENT INCOME: Dividends......................................................................................... $ 931,222 Interest.......................................................................................... 147,397 Total income................................................................................... 1,078,619 EXPENSES: Advisory fee...................................................................................... $ 99,092 Administrative personnel and services fees........................................................ 16,382 Distribution fee -- Class A Shares................................................................ 5,366 Distribution and shareholder services fees -- Class B Shares...................................... 148,087 Distribution and shareholder services fees -- Class C Shares...................................... 703 Transfer agent fee................................................................................ 31,467 Custodian fee..................................................................................... 26,073 Registration and filing fees...................................................................... 12,553 Reports and notices to shareholders............................................................... 5,376 Professional fees................................................................................. 4,420 Insurance expense................................................................................. 2,457 Trustees' fees and expenses....................................................................... 276 Other............................................................................................. 2,522 354,774 Less: Fee waivers and expense reimbursements...................................................... (101,253) Total expenses................................................................................. 253,521 Net investment income................................................................................ 825,098 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on investments.................................................................. (84,705) Net change in unrealized appreciation of investments.............................................. 3,322,447 Net gain on investments.............................................................................. 3,237,742 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................. $4,062,840
See accompanying notes to financial statements. 8 EVERGREEN UTILITY FUND (FORMERLY FIRST UNION UTILITY PORTFOLIO) STATEMENT OF CHANGES IN NET ASSETS (Photo of light bulb)
SIX MONTHS ENDED YEAR JUNE 30, ENDED 1995 DECEMBER 31, (UNAUDITED) 1994* INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income........................................................................ $ 825,098 $ 1,350,527 Net realized loss on investments............................................................. (84,705) (93,656) Net change in unrealized appreciation (depreciation) of investments.......................... 3,322,447 (2,396,270) Net increase (decrease) in net assets resulting from operations........................... 4,062,840 (1,139,399) DISTRIBUTIONS TO SHAREHOLDERS FROM: NET INVESTMENT INCOME: Class A Shares............................................................................... (101,068) (191,065) Class B Shares............................................................................... (589,263) (922,823) Class C Shares............................................................................... (2,735) (1,182) Class Y Shares............................................................................... (137,428) (210,047) Total distributions to shareholders from net investment income................................................................ (830,494) (1,325,117) IN EXCESS OF NET INVESTMENT INCOME: Class Y Shares............................................................................... -- (5,477) Total distribution to shareholders in excess of net investment income........................................................ -- (5,477) Total distributions to shareholders.......................................................... (830,494) (1,330,594) FUND SHARE TRANSACTIONS: Proceeds from shares sold.................................................................... 3,964,796 49,288,964 Proceeds from reinvestment of dividends...................................................... 616,940 1,133,996 Payments for shares redeemed................................................................. (4,330,127) (9,641,241) Net increase resulting from Fund share transactions.......................................... 251,609 40,781,719 Net increase in net assets................................................................ 3,483,955 38,311,726 NET ASSETS: Beginning of period.......................................................................... 38,311,726 -- End of period (including undistributed net investment income of $14,537 and $19,933, respectively)........................................................ $41,795,681 $ 38,311,726
See accompanying notes to financial statements. * For the period from January 4, 1994 (commencement of operations) to December 31, 1994. 9 EVERGREEN UTILITY FUND (FORMERLY FIRST UNION UTILITY PORTFOLIO) (Photo of light bulb) FINANCIAL HIGHLIGHTS
CLASS A SHARES CLASS B SHARES CLASS C SHARES SIX MONTHS JANUARY 4, SIX MONTHS JANUARY 4, SIX MONTHS SEPTEMBER 2, ENDED 1994* ENDED 1994* ENDED 1994* JUNE 30, THROUGH JUNE 30, THROUGH JUNE 30, THROUGH 1995 DECEMBER 31, 1995 DECEMBER 31, 1995 DECEMBER 31, (UNAUDITED) 1994 (UNAUDITED) 1994 (UNAUDITED) 1994 PER SHARE DATA Net asset value, beginning of period.... $9.00 $10.00 $9.00 $10.00 $9.01 $9.33 Income (loss) from investment operations: Net investment income................... .22 .45 .19 .39 .18 .12 Net realized and unrealized gain (loss) on investments........................ .76 (1.01) .77 (1.01) .76 (.33) Total from investment operations.... .98 (.56) .96 (.62) .94 (.21) Less distributions to shareholders from: Net investment income................... (.22) (.44) (.19) (.38) (.18) (.11) In excess of net investment income...... -- -- -- -- -- -- Total distributions................. (.22) (.44) (.19) (.38) (.18) (.11) Net asset value, end of period.......... $9.76 $9.00 $9.77 $9.00 $9.77 $9.01 TOTAL RETURN(|)......................... 11.0% 5.6% 10.7% (6.2%) 10.6% (2.2%) RATIO & SUPPLEMENTAL DATA Net assets, end of period (000's omitted).............................. $4,601 $4,190 $30,817 $28,792 $154 $128 Ratios to average net assets: Expenses (a)(|)(|).................... .75% .53% 1.50% 1.27% 1.50% 1.94% Net investment income (a)(|)(|)....... 4.70% 5.07% 3.95% 4.19% 3.91% 3.96% Portfolio turnover rate................. 33% 23% 33% 23% 33% 23% CLASS Y SHARES SIX MONTHS FEBRUARY 28, ENDED 1994* JUNE 30, THROUGH 1995 DECEMBER 31, (UNAUDITED) 1994 PER SHARE DATA Net asset value, beginning of period.... $9.00 $9.51 Income (loss) from investment operations: Net investment income................... .23 .37 Net realized and unrealized gain (loss) on investments........................ .77 (.50) Total from investment operations.... 1.00 (.13) Less distributions to shareholders from: Net investment income................... (.23) (.37) In excess of net investment income...... -- (.01) Total distributions................. (.23) (.38) Net asset value, end of period.......... $9.77 $9.00 TOTAL RETURN(|)......................... 11.2% (1.6%) RATIO & SUPPLEMENTAL DATA Net assets, end of period (000's omitted).............................. $6,223 $5,201 Ratios to average net assets: Expenses (a)(|)(|).................... .50% .40% Net investment income (a)(|)(|)....... 4.91% 4.93% Portfolio turnover rate................. 33% 23%
* Commencement of class operations. (|) Total return is calculated on net asset value per share for the period 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 to average net assets, exclusive of any applicable state expense limitations, would have been the following:
CLASS Y CLASS A SHARES CLASS B SHARES CLASS C SHARES SHARES SIX MONTHS JANUARY 4, SIX MONTHS JANUARY 4, SIX MONTHS SEPTEMBER 2, SIX MONTHS ENDED 1994 ENDED 1994 ENDED 1994 ENDED JUNE 30, THROUGH JUNE 30, THROUGH JUNE 30, THROUGH JUNE 30, 1995 DECEMBER 31, 1995 DECEMBER 31, 1995 DECEMBER 31, 1995 (UNAUDITED) 1994 (UNAUDITED) 1994 (UNAUDITED) 1994 (UNAUDITED) Expenses............................... 1.26% 1.43% 2.01% 2.11% 2.01% 2.78% 1.01% Net investment income.................. 4.19% 4.17% 3.44% 3.35% 3.40% 3.12% 4.40% FEBRUARY 28, 1994 THROUGH DECEMBER 31, 1994 Expenses............................... 1.24% Net investment income.................. 4.09%
10 EVERGREEN BALANCED FUND (FORMERLY FIRST UNION BALANCED PORTFOLIO) (Photo of scales) A REPORT FROM YOUR PORTFOLIO MANAGER BY DEAN HAWES The economic slowdown that began at year-end became much (Photo of more pronounced as the second quarter progressed. The soft Dean Hawes) landing is here! The recent string of economic releases seems to be implying a broad deceleration in economic growth. At the beginning of the year, the net assets of the Evergreen Balanced Fund were invested 55% in stocks, 40% in bonds and 5% in cash equivalent investments, and was well-positioned for the slowdown we anticipated. As interest rates on intermediate and long-term bonds plummeted during the first half, our bond investments, with an average maturity of approximately 9 years, appreciated in value providing an attractive total return. We believe bonds represent reasonable value today and continue to maintain our 9-year target maturity. Similarly stocks, enjoyed a tremendous first half. As the third quarter progresses, the market environment should become more difficult. The current economic slowdown increases the likelihood that more second quarter earnings releases will be disappointing. Analysts may also begin reducing estimates for the balance of the year. Unless the Fed continues to lower short-term interest rates, the timing could be right for a market setback. We would view an intermediate-term correction from current levels as normal and healthy; and not as the beginning of a bear market. From an industry sector standpoint, we remain broadly diversified with continued emphasis on stocks of goods/export companies. Within this sector, we continue to like technology stocks. However, we are deferring new purchases here based on their recent sharp price increases. Good values are being found in the specialty and general merchandise retailers. When the consumer returns to the malls, these stocks should do well. The Fund remains diversified by asset class, utilizing both bonds and stocks. The Fund is further diversified as the stocks in the portfolio represent broad cross-section of corporate America. We are currently positioned for a slowing economy and for a stock market vulnerable to a setback. A late-summer or autumn correction would be viewed as an opportunity to reposition the portfolio for an economy that should be strengthening going into year-end. 11 EVERGREEN BALANCED FUND (FORMERLY FIRST UNION BALANCED PORTFOLIO) STATEMENT OF INVESTMENTS JUNE 30, 1995 (Photo of scales) (UNAUDITED)
SHARES VALUE COMMON STOCKS -- 55.2% AEROSPACE/DEFENSE -- 1.6% 100,000 Boeing Co.................... $ 6,262.500 125,000 Rayatheon Co................. 9,703,125 15,965,625 BANKING & FINANCE -- 4.8% 120,000 Bank America Corp............ 6,315,000 267,000 Boatmen's Bancshares, Inc.... 9,411,750 65,000 Central Fidelity Banks, Inc.......................... 1,982,500 190,000 Corestates Financial Corp.... 6,626,250 97,400 First Virginia Banks, Inc.... 3,652,500 200,000 National City Corp........... 5,875,000 150,000 Nationsbank Corp............. 8,043,750 200,000 NBD Bancorp, Inc............. 6,400,000 48,306,750 BASIC INDUSTRY -- 2.4% 350,000 Hanson PLC -- ADR............ 6,168,750 115,000 International Paper Co....... 9,861,250 130,000 Phelps Dodge Corp............ 7,670,000 23,700,000 CHEMICALS -- 2.7% 41,000 Air Products & Chemicals, Inc............... 2,285,750 105,000 Dow Chemical Co.............. 7,546,875 140,000 DuPont (E.I.) de Nemours & Co......................... 9,625,000 150,000 Imperial Chemical Industries, PLC -- ADR................... 7,312,500 26,770,125 CONGLOMERATE/DIVERSIFIED -- .9% 150,000 Textron, Inc................. 8,718,750 CONSUMER DURABLES -- 1.2% 125,000 General Motors Corp.......... 5,859,375 150,000 Goodyear Tire and Rubber Co.................... 6,187,500 12,046,875 CONSUMER PRODUCTS -- 2.2% 100,000 Eastman Kodak Co............. 6,062,500 175,000 Nestle S.A. -- ADR........... 9,106,125 504,150 Sunbeam Oster, Inc........... 6,995,081 22,163,706 SHARES VALUE COMMON STOCKS -- CONTINUED DATA PROCESSING -- 1.6% 150,000 * COMPAQ Computer Corp......... $ 6,806,250 175,000 Sunguard Data Systems, Inc... 9,143,750 15,950,000 DRUGS -- 1.1% 260,000 Schering-Plough Corp......... 11,472,500 ELECTRONICS -- 2.8% 260,000 GTE Corp..................... 8,872,500 160,000 Hewlett-Packard Co........... 11,920,000 160,000 SBC Communications, Inc...... 7,620,000 28,412,500 ENERGY -- 5.1% 182,000 Chevron Corp................. 8,485,750 145,000 Exxon Corp................... 10,240,625 125,000 Mobil Corp................... 12,000,000 90,000 Royal Dutch Petroleum Co..... 10,968,750 140,000 Texaco, Inc.................. 9,187,500 50,882,625 FINANCE -- 1.0% 220,000 Beneficial Corp.............. 9,680,000 FINANCIAL SERVICES -- .5% 50,000 Federal National Mortgage Association.................. 4,718,750 FOOD & BEVERAGE -- 2.7% 122,500 CPC International, Inc....... 7,564,375 150,400 McCormick & Co............... 3,233,600 200,000 McDonalds Corp............... 7,825,000 250,000 Seagram Co, Ltd.............. 8,656,250 27,279,225 FOREST PRODUCTS -- 1.2% 250,000 Weyerhaeuser Co.............. 11,781,250 HEALTHCARE & COSMETICS -- .7% 513,900 Tenet Healthcare Corp........ 7,387,313 INSURANCE -- 2.4% 225,000 American General Corp........ 7,593,750 220,000 Providian Corp............... 7,975,000 195,000 Travelers, Inc............... 8,531,250 24,100,000 MACHINERY-DIVERSIFIED -- .6% 150,000 Ingersoll Rand Co............ 5,737,500
12 EVERGREEN BALANCED FUND (FORMERLY FIRST UNION BALANCED PORTFOLIO) STATEMENT OF INVESTMENTS -- (CONTINUED) JUNE 30, 1995 (Photo of scales) (UNAUDITED)
SHARES VALUE COMMON STOCKS -- CONTINUED MANUFACTURING/DISTRIBUTING -- 1.3% 260,000 Avnet, Inc................... $12,577,500 17,500 U S Industries, Inc.......... 238,438 12,815,938 MULTI-INDUSTRY -- 5.0% 150,000 Emerson Electric Co.......... 10,725,000 180,000 General Electric Co.......... 10,147,500 55,000 ITT Corp..................... 6,462,500 110,000 Temple Inland, Inc........... 5,238,750 145,000 United Technologies Corp..... 11,328,125 418,500 Westinghouse Electric Corp......................... 6,120,563 50,022,438 OFFICE EQUIPMENT & SUPPLIES -- .7% 180,000 Pitney Bowes, Inc............ 6,907,500 OIL & GAS -- 1.1% 75,000 Atlantic Richfield Co........ 8,231,250 100,000 Unocal Corp.................. 2,762,500 10,993,750 REIT'S -- 1.1% 396,800 HealthCare REIT, Inc......... 8,035,200 100,500 Highwood Properties, Inc..... 2,562,750 10,597,950 RETAIL & APPAREL -- 3.3% 114,350 American Stores Co........... 3,216,094 100,000 Dayton Hudson Corp........... 7,175,000 200,000 Dillard Department Stores, Inc.................. 5,875,000 250,000 Family Dollar Stores, Inc.... 3,687,500 352,800 Fruit Of The Loom, Inc....... 7,452,900 100,000 Sears Roebuck & Co........... 5,987,500 33,393,994 TELEPHONE -- 1.5% 148,000 Bell Atlantic Corp........... 8,288,000 150,000 U.S. West, Inc............... 6,243,750 14,531,750 TOBACCO -- 2.0% 225,000 American Brands, Inc......... 8,943,750 150,000 Philip Morris Cos., Inc...... 11,156,250 20,100,000 SHARES VALUE COMMON STOCKS -- CONTINUED TRANSPORTATION -- 1.5% 150,000 Conrail, Inc................. $ 8,343,750 100,000 Norfolk Southern Corp........ 6,737,500 15,081,250 UTILITIES -- 2.2% 268,200 Carolina Power & Light Co.... 8,113,050 150,000 General Public Utility Corp......................... 4,462,500 450,000 Southern Co.................. 10,068,750 22,644,300 TOTAL COMMON STOCKS (COST $455,668,937)... 552,162,364 PRINCIPAL AMOUNT VALUE CORPORATE BONDS -- 18.7% ASSET-BACKED SECURITIES -- 1.2% $ 1,675,626 Fleet Financial Home Equity Trust, 6.70%, 1/16/06............... 1,683,176 10,000,018 Resolution Trust Corporation, 7.50%, 9/25/22............... 10,108,368 11,791,544 BANKING -- 5.7% 3,000,000 Boatmen's Bancshares, Inc., 6.75%, 3/15/03............... 2,973,468 1,740,000 DR Structured Finance Corp., 8.375%, 8/15/15.............. 1,648,650 5,000,000 First Chicago Corp., 9.875%, 8/15/00.............. 5,685,545 40,000,000 Svenska Handelsbanker, 5.950%, 8/15/95.............. 39,652,000 7,000,000 Wells Fargo & Co., 5.65%, 8/21/95............... 6,997,879 56,957,542 CHEMICALS -- .6% 5,000,000 Dow Chemical Co., 8.625%, 4/1/06............... 5,680,065 CONSUMER PRODUCTS -- .6% 5,000,000 General Mills, Inc., 9.00%, 12/20/02.............. 5,620,240
13 EVERGREEN BALANCED FUND (FORMERLY FIRST UNION BALANCED PORTFOLIO) STATEMENT OF INVESTMENTS -- (CONTINUED) JUNE 30, 1995 (Photo of scales) (UNAUDITED)
PRINCIPAL AMOUNT VALUE CORPORATE BONDS -- CONTINUED ENERGY -- 1.2% $ 4,000,000 Atlantic Richfield Co., 9.00%, 4/1/21........................ $ 4,695,628 2,000,000 BP North America, Inc., 9.875%, 3/15/04............... 2,413,490 4,400,000 Texaco Capital Corp., 7.90%, 2/13/97................ 4,516,855 11,625,973 FINANCE AND INSURANCE -- 5.2% 407,931 CIT Group Securitization Corp., 4.70%, 6/15/18................ 401,151 12,550,000 Chrysler Financial Corp., 10.34%, 5/15/08............... 12,954,599 5,500,000 Dean Witter, Discover & Co., 6.75%, 10/15/13............... 5,089,282 5,500,000 General Electric Capital Corp., 8.75%, 3/14/03................ 6,136,559 2,750,000 International Bank for Reconstruction & Development Co., 7.95%, 5/15/16................ 3,024,555 5,000,000 Merrill Lynch Pierce, Fenner & Smith, Inc., 7.00%, 4/27/08................ 4,934,450 4,250,000 Norwest Financial, Inc., 7.10%, 11/15/96............... 4,303,491 10,000,000 Salomon, Inc., 4.83%, 11/23/95............... 9,929,300 5,000,000 Smith Barney Holdings, Inc., 5.50%, 1/15/99................ 4,832,390 51,605,777 FOOD AND BEVERAGE -- .4% 4,250,000 PepsiCo, Inc., 7.625%, 11/1/98............... 4,414,535 HARDWARE & TOOLS -- .4% 4,300,000 Stanley Works, 7.375%, 12/15/02.............. 4,463,916 MEDICAL EQUIPMENT -- .5% 5,000,000 Baxter International, Inc., 7.25%, 2/15/08................ 5,139,370 POLLUTION CONTROL -- .2% 1,400,000 Waste Management, International, plc ADS 8.75%, 5/1/18................. 1,593,214 PRINCIPAL AMOUNT VALUE CORPORATE BONDS -- CONTINUED SOVEREIGN GOVERNMENT -- .5% $ 5,000,000 Ontario Province CDA, 7.75%, 6/4/02........................ $ 5,298,595 TOBACCO -- .6% 1,405,000 Philip Morris Cos., Inc. 8.75%, 12/1/96................ 1,450,884 5,000,000 Philip Morris Cos., Inc., 8.65%, 5/15/98................ 5,272,230 6,723,114 UTILITIES -- .3% 3,600,000 Union Electric Co., 8.00%, 12/15/22............... 3,785,443 MISCELLANEOUS -- 1.3% 5,000,000 General American Transportation Corp., 9.30%, 8/1/95................. 5,015,340 7,000,000 (|)(|) Jet Equipment Trust, 9.41%, 6/15/10................ 7,941,080 12,956,420 TOTAL CORPORATE BONDS (COST $177,940,824).... 187,655,748 GOVERNMENT BONDS -- 21.6% 9,000,000 Federal Home Loan Mortgage Corporation, 6.55%, 6/2/98................. 9,020,223 Government National Mortgage Association 3,549,865 8.50%, 5/15/21................ 3,688,512 2,712,108 8.50%, 7/15/21................ 2,818,034 5,001,962 8.50%, 6/15/22................ 5,197,323 2,944,032 9.00%, 9/15/21................ 3,094,896 5,018,456 9.00%, 10/15/21............... 5,275,620 2,924,599 9.50%, 2/15/21................ 3,100,987 23,175,372 United States Treasury Bills 20,000,000 7.625%, 2/15/07............... 21,300,000 10,000,000 9.125%, 5/15/09............... 11,846,860 10,000,000 9.250%, 1/15/96............... 10,184,360 43,331,220 United States Treasury Bonds 8,000,000 6.375%, 7/15/99............... 8,120,000 10,000,000 7.500%, 2/15/05............... 10,896,860 20,000,000 8.75%, 5/15/17................ 24,675,000 32,400,000 8.875%, 8/15/17............... 40,479,750 84,171,610
14 EVERGREEN BALANCED FUND (FORMERLY FIRST UNION BALANCED PORTFOLIO) STATEMENT OF INVESTMENTS -- (CONTINUED) JUNE 30, 1995 (Photo of scales) (UNAUDITED)
PRINCIPAL AMOUNT VALUE GOVERNMENT BONDS -- CONTINUED United States Treasury Notes $ 15,000,000 9.125%, 5/15/18............ $ 19,209,375 10,000,000 8.125%, 2/15/98............ 10,540,610 10,000,000 8.50%, 8/15/95............. 10,034,360 13,000,000 8.625%, 10/15/95........... 13,109,668 3,500,000 8.875%, 11/15/98........... 3,809,526 56,703,539 TOTAL GOVERNMENT BONDS (COST $210,271,593)....... 216,401,964 **REPURCHASE AGREEMENT -- 3.2% 32,496,000 Donaldson, Lufkin & Jenrette Securities Corp. 6.0%, dated 6/30/95, due 7/3/95 (amortized cost).... 32,496,000 TOTAL INVESTMENTS -- 98.7% (COST $876,377,354)......... 988,716,076 OTHER ASSETS AND LIABILITIES -- NET 1.3%.................. 12,747,890 TOTAL NET ASSETS -- 100%.................. $1,001,463,966
* Non-income producing securities. ** Fully collateralized by U.S. government and/or agency obligations based on market prices at June 30, 1995. (|)(|) Restricted security which represents an investment in a security not registered under the Securities Act of 1933. At June 30, 1995 this security amounted to .8% of net assets. ADR -- American Depository Receipts ADS -- American Depository Shares REIT -- Real Estate Investment Trust See accompanying notes to financial statements. 15 EVERGREEN BALANCED FUND (FORMERLY FIRST UNION BALANCED PORTFOLIO) STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 (Photo of scales) (UNAUDITED)
ASSETS: Investments at value (identified cost $876,377,354)......................................................... $ 988,716,076 Cash........................................................................................................ 1,475 Dividends and interest receivable........................................................................... 7,521,050 Receivable for Fund shares sold............................................................................. 7,497,970 Receivable for investment securities sold................................................................... 395,148 Prepaid expenses............................................................................................ 14,475 Total assets.......................................................................................... 1,004,146,194 LIABILITIES: Payable for Fund shares repurchased......................................................................... 1,896,578 Payable for investment securities purchased................................................................. 716,716 Accrued expenses............................................................................................ 47,864 Withholding tax liability................................................................................... 21,070 Total liabilities..................................................................................... 2,682,228 NET ASSETS..................................................................................................... $1,001,463,966 NET ASSETS CONSIST OF: Paid-in capital............................................................................................. $ 876,556,386 Undistributed net investment income......................................................................... 887,267 Undistributed net realized gains............................................................................ 11,681,591 Net unrealized appreciation of investments.................................................................. 112,338,722 Net assets............................................................................................ $1,001,463,966 CALCULATION OF NET ASSET VALUE PER SHARE: Class A Shares ($41,332,348 3,307,261 shares of beneficial interest outstanding)............................ $ 12.50 Sales charge -- 4.75% of offering price..................................................................... 0.62 Maximum offering price................................................................................ $ 13.12 Class B Shares ($105,706,570 8,450,664 shares of beneficial interest outstanding)........................... $ 12.51 Class C Shares ($247,416 19,802 shares of beneficial interest outstanding).................................. $ 12.49 Class Y Shares ($854,177,632 68,335,466 shares of beneficial interest outstanding).......................... $ 12.50
See accompanying notes to financial statements. 16 EVERGREEN BALANCED FUND (FORMERLY FIRST UNION BALANCED PORTFOLIO) STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1995 (Photo of scales) (UNAUDITED)
INVESTMENT INCOME: Dividends.................................................................................... $ 8,596,913 Interest..................................................................................... 15,539,139 Total income........................................................................... 24,136,052 EXPENSES: Advisory fee................................................................................. $2,377,204 Administrative personnel and services fees................................................... 392,991 Distribution fee-Class A Shares.............................................................. 50,528 Distribution and shareholder services fees-Class B Shares.................................... 507,977 Distribution and shareholder services fees-Class C Shares.................................... 1,083 Custodian fee................................................................................ 110,423 Transfer agent fee........................................................................... 80,986 Registration and filing fees................................................................. 28,392 Professional fees............................................................................ 13,556 Reports and notices to shareholders.......................................................... 10,587 Insurance.................................................................................... 9,934 Trustees' fees and expenses.................................................................. 9,635 Other........................................................................................ 2,793 Total expenses......................................................................... 3,596,089 Net investment income........................................................................... 20,539,963 NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments............................................................. 12,066,511 Net change in unrealized appreciation of investments......................................... 95,033,100 Net gain on investments......................................................................... 107,099,611 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................ $127,639,574
See accompanying notes to financial statements. 17 EVERGREEN BALANCED FUND (FORMERLY FIRST UNION BALANCED PORTFOLIO) (Photo of scales) STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR JUNE 30, 1995 ENDED (UNAUDITED) DECEMBER 31, 1994 INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income............................................................... $ 20,539,963 $ 35,492,616 Net realized gain on investments.................................................... 12,066,511 15,321,171 Net change in unrealized appreciation (depreciation) of investments................. 95,033,100 (72,298,630) Net increase (decrease) in net assets resulting from operations.................. 127,639,574 (21,484,843) DISTRIBUTIONS TO SHAREHOLDERS FROM: NET INVESTMENT INCOME: Class A Shares...................................................................... (821,724) (1,519,114) Class B Shares...................................................................... (1,711,005) (2,795,862) Class C Shares...................................................................... (3,760) (1,794) Class Y Shares...................................................................... (17,611,821) (31,021,065) Total distributions to shareholders from net investment income...................... (20,148,310) (35,337,835) NET REALIZED GAINS: Class A Shares...................................................................... -- (699,327) Class B Shares...................................................................... -- (1,691,363) Class C Shares...................................................................... -- (3,132) Class Y Shares...................................................................... -- (13,311,813) Total distributions to shareholders from net realized gains......................... -- (15,705,635) Total distributions to shareholders.............................................. (20,148,310) (51,043,470) FUND SHARE TRANSACTIONS: Proceeds from shares sold........................................................... 90,952,717 306,060,376 Proceeds from reinvestment of dividends............................................. 19,734,637 49,902,518 Payment for shares redeemed......................................................... (136,628,013) (224,174,850) Net increase (decrease) from Fund share transactions............................. (25,940,659) 131,788,044 Net increase in net assets....................................................... 81,550,605 59,259,731 NET ASSETS: Beginning of period................................................................. 919,913,361 860,653,630 End of period (including undistributed net investment income of $887,267 and $495,614, respectively)........................................................... $1,001,463,966 $ 919,913,361
See accompanying notes to financial statements. 18 EVERGREEN BALANCED FUND -- CLASS A AND B SHARES (FORMERLY FIRST UNION BALANCED PORTFOLIO) (Photo of scales) FINANCIAL HIGHLIGHTS
CLASS A SHARES CLASS B SHARES JUNE 10, 1991* SIX MONTHS SIX MONTHS ENDED YEAR ENDED THROUGH ENDED YEAR ENDED JUNE 30, 1995 DECEMBER 31, DECEMBER 31, JUNE 30, 1995 DECEMBER 31, (UNAUDITED) 1994 1993 1992 1991 (UNAUDITED) 1994 PER SHARE DATA Net asset value, beginning of period........................ $11.17 $12.07 $11.41 $11.02 $10.00 $11.18 $12.08 Income (loss) from investment operations: Net investment income.......... .25 .43 .42 .42 .30 .20 .36 Net realized and unrealized gain (loss) on investments.... 1.32 (.71) .75 .43 1.08 1.33 (.71) Total from investment operations.................. 1.57 (.28) 1.17 .85 1.38 1.53 (.35) Less distributions to shareholders from: Net investment income.......... (.24) (.43) (.42) (.42) (.35) (.20) (.36) Net realized gains............. -- (.19) (.09) (.04) (.01) -- (.19) In excess of net investment income........................ -- -- -- -- -- -- -- Total distributions........... (.24) (.62) (.51) (.46) (.36) (.20) (.55) Net asset value, end of period........................ $12.50 $11.17 $12.07 $11.41 $11.02 $12.51 $11.18 TOTAL RETURN(|)................. 14.2% (2.4%) 10.4% 7.9% 11.8% 13.8% (3.0%) RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted)............... $41,332 $41,010 $35,032 $17,408 $334 $105,707 $100,052 Ratios to average net assets: Expenses....................... .89%(|)(|) .89% .91% .91% .92%(|)(|) 1.64%(|)(|) 1.48% Net investment income.......... 4.19%(|)(|) 3.69% 3.61% 3.93% 4.38%(|)(|) 3.44%(|)(|) 3.12% Portfolio turnover rate......... 23% 35% 19% 12% 19% 23% 35% JANUARY 26, 1993* THROUGH DECEMBER 31, 1993 PER SHARE DATA Net asset value, beginning of period........................ $11.54 Income (loss) from investment operations: Net investment income.......... .34 Net realized and unrealized gain (loss) on investments.... .65 Total from investment operations.................. .99 Less distributions to shareholders from: Net investment income.......... (.34) Net realized gains............. (.09) In excess of net investment income........................ (.02) Total distributions........... (.45) Net asset value, end of period........................ $12.08 TOTAL RETURN(|)................. 8.7% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted)............... $65,475 Ratios to average net assets: Expenses....................... 1.41%(|)(|) Net investment income.......... 3.09%(|)(|) Portfolio turnover rate......... 19%
* Commencement of operations. (|) Total return is calculated on net asset value per share for the period indicated and is not annualized. Initial sales charge or contingent deferred sales charge is not reflected. (|)(|) Annualized. 19 EVERGREEN BALANCED FUND -- CLASS C AND Y SHARES (FORMERLY FIRST UNION BALANCED PORTFOLIO) (Photo of scales) FINANCIAL HIGHLIGHTS -- (CONTINUED)
CLASS C SHARES CLASS Y SHARES SEPTEMBER 2, SIX MONTHS 1994* SIX MONTHS ENDED THROUGH ENDED YEAR ENDED JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995 DECEMBER 31, (UNAUDITED) 1994 (UNAUDITED) 1994 1993 1992 PER SHARE DATA Net asset value, beginning of period....... $11.17 $12.00 $11.17 $12.07 $11.41 $11.02 Income (loss) from investment operations: Net investment income................................... .18 .18 .26 .46 .45 .46 Net realized and unrealized gain (loss) on investments.............................. 1.34 (.61) 1.33 (.71) .75 .42 Total from investment operations........ 1.52 (.43) 1.59 (.25) 1.20 .88 Less distributions to shareholders from: Net investment income................................... (.18) (.21) (.26) (.46) (.45) (.45) Net realized gains........................ -- (.19) -- (.19) (.09) (.04) In excess of net investment income........ (.02) -- -- -- -- -- Total distributions...................... (.20) (.40) (.26) (.65) (.54) (.49) Net asset value, end of period............. $12.49 $11.17 $12.50 $11.17 $12.07 $11.41 TOTAL RETURN(|)............................ 13.7% (3.6%) 14.3% (2.2%) 10.7% 8.2% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted).......................... $247 $195 $854,178 $778,657 $760,147 $520,232 Ratios to average net assets: Expenses.................................. 1.64%(|)(|) 1.64%(|)(|) .64%(|)(|) .64% .66% .66% Net investment income................................... 3.45%(|)(|) 3.23%(|)(|) 4.44%(|)(|) 3.93% 3.86% 4.20% Portfolio turnover rate.................... 23% 35% 23% 35% 19% 12% APRIL 1, 1991* THROUGH DECEMBER 31, 1991 PER SHARE DATA Net asset value, beginning of period....... $10.00 Income (loss) from investment operations: Net investment income................................... .36 Net realized and unrealized gain (loss) on investments.............................. 1.03 Total from investment operations........ 1.39 Less distributions to shareholders from: Net investment income................................... (.36) Net realized gains........................ (.01) In excess of net investment income........ -- Total distributions...................... (.37) Net asset value, end of period............. $11.02 TOTAL RETURN(|)............................ 15.0% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted).......................... $247,472 Ratios to average net assets: Expenses.................................. .68%(|)(|) Net investment income................................... 4.86%(|)(|) Portfolio turnover rate.................... 19%
* 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. 20 EVERGREEN VALUE FUND (FORMERLY FIRST UNION VALUE PORTFOLIO) (Photo of Stock Certificate) A REPORT FROM YOUR PORTFOLIO MANAGER BY BILL DAVIS Given our view of slower economic growth in 1995 and an (Photo of improved investment climate, the Evergreen Value Fund's Bill Davis) strategy early in the year was to become less defensive than it had been in 1994. Funds were gradually committed to "early cycle" stocks as earnings estimates became more realistic and prospects for Fed easing increased. The stock market's rapid advance during the first quarter and into the second quarter, however, caused us to become more cautious as time progressed, as we believed the market had become somewhat extended. Of particular concern has been the rapid run-up in technology stocks and the almost speculative atmosphere which exists with some issues. Unlike many funds which are heavily weighted toward technology, the Value Fund is taking a cautious posture with an underweighting in technology as compared with that of the S&P 500 Reinvested Index.* Other than the previously mentioned underweighting in technology, Evergreen Value Fund sector weightings are fairly close to those of the S&P. Utilities are slightly overweighted, since they appear cheap versus other stocks as well as bonds. Financials have been reduced to a market weighting -- those stocks have done well and would suffer if the bond market corrects. Two subsectors that appear attractive are retailers, which usually perform well in a slowing (but not recessionary) economy, and conglomerates, where restructuring opportunities are numerous. Even though the market is clearly vulnerable to disappointment, a major correction (i.e., more than 7%) seems unlikely since the advance has been based on rather sound fundamentals and is broad-based. We believe the Fund is well-positioned today for a modest stock market correction as it is broadly diversified and value characteristics remain intact. The Fund's P/E (price to earnings) ratio is 11.7x, or 25% below the S&P's 15.5x, and its dividend yield is almost 1% above that of the S&P. Finally, the cash position is now around 10%, reflecting more the absence of values than any fear of a significant market decline. * The S&P 500 is a reinvested unmanaged composite index of 425 industrial, 20 transportation, and 55 public utility common stocks. 21 EVERGREEN VALUE FUND (FORMERLY FIRST UNION VALUE PORTFOLIO) STATEMENT OF INVESTMENTS JUNE 30, 1995 (Photo of Stock Certificate) (UNAUDITED)
SHARES VALUE COMMON STOCKS -- 91.3% AEROSPACE/DEFENSE -- 5.3% 306,800 Boeing Co..................... $ 19,213,350 431,200 Raytheon Co................... 33,471,900 52,685,250 BANKING & FINANCE -- 6.1% 410,000 Boatmen's Bancshares, Inc..... 14,452,500 541,200 Central Fidelity Banks, Inc... 16,506,600 337,700 First Tennessee National Corp.......................... 15,660,838 510,000 National City Corp............ 14,981,250 61,601,188 CHEMICALS/PLASTICS -- 7.7% 605,600 Air Products & Chemicals, Inc................ 33,762,200 230,000* FMC Corp...................... 15,467,500 255,000 Rohm & Haas Co................ 13,993,125 310,000 Tenneco Inc................... 14,260,000 77,482,825 COMMUNICATION -- .8% 150,000 Harris Corp................... 7,743,750 CONSUMER DURABLES -- 1.6% 535,000 Ford Motor Co................. 15,916,250 CONSUMER PRODUCTS -- 6.6% 804,400 American Brands, Inc.......... 31,974,900 453,500 Philip Morris Cos., Inc....... 33,729,063 65,703,963 ENERGY -- 9.8% 252,600 Atlantic Richfield Co......... 27,722,850 575,000 Chevron Corp.................. 26,809,375 200,000 Exxon Corp.................... 14,125,000 444,900 Texaco, Inc................... 29,196,563 97,853,788 FOOD & BEVERAGE -- 4.5% 545,600 Anheuser Busch Cos., Inc...... 31,031,000 637,500 McCormick & Co................ 13,706,250 44,737,250 HEALTHCARE & COSMETICS -- 4.5% 231,400 Bristol Meyers Squibb Co...... 15,764,125 320,000 Schering-Plough Corp.......... 14,120,000 SHARES VALUE COMMON STOCKS -- CONTINUED HEALTHCARE & COSMETICS -- CONTINUED 180,000 Warner Lambert Co............. $ 15,547,500 45,431,625 INSURANCE -- 6.7% 1,050,000 American General Corp......... 35,437,500 878,400 Providian Corp................ 31,842,000 67,279,500 MULTI-INDUSTRY -- 4.4% 500,000 General Electric Co........... 28,187,500 139,800 ITT Corp...................... 16,426,500 44,614,000 OFFICE EQUIPMENT -- 3.4% 885,100 Pitney Bowes, Inc............. 33,965,712 PROCESS INDUSTRIES -- 1.6% 450,000 Ball Corp..................... 15,693,750 PRODUCER MANUFACTURING -- 2.4% 300,000 Briggs & Stratton Corp........ 10,350,000 235,000 Textron, Inc.................. 13,659,375 24,009,375 RETAIL & APPAREL -- 10.4% 1,143,000 American Stores Co............ 32,146,875 187,500 Dayton Hudson Corp............ 13,453,125 565,000 Dillard Department Stores, Inc................... 16,596,875 660,000 May Department Stores Co...... 27,472,500 428,200 Melville Corp................. 14,665,850 104,335,225 TRANSPORTATION -- 3.1% 470,000 Norfolk Southern Corp......... 31,666,250 UTILITIES -- 12.4% 480,000 Carolina Power & Light Co..... 14,520,000 1,088,400 General Public Utility Corp... 32,379,900 865,000 GTE Corp...................... 29,518,125 1,215,700 NICOR, Inc.................... 32,671,937 710,000 Southern Co................... 15,886,250 124,976,212 TOTAL COMMON STOCKS (COST $801,151,351)........... 915,695,913
22 EVERGREEN VALUE FUND (FORMERLY FIRST UNION VALUE PORTFOLIO) STATEMENT OF INVESTMENTS -- (CONTINUED) JUNE 30, 1995 (Photo of Stock Certificate) (UNAUDITED)
PRINCIPAL VALUE U.S. TREASURY SECURITIES -- 1.0% $ 10,000,000 U.S. Treasury Notes, 6.50%, 11/30/96 (cost $9,885,156)........... $ 10,096,860 **REPURCHASE AGREEMENT -- 8.2% 82,166,000 Donaldson, Lufkin & Jenrette Securities Corp., 6.0%, dated 6/30/95, due 7/3/95 (amortized cost)..... 82,166,000 TOTAL INVESTMENTS -- 100.5% (COST $893,202,507)............... 1,007,958,773 OTHER ASSETS AND LIABILITIES -- NET (.5)%................... (4,649,938) NET ASSETS -- 100%........................ $1,003,308,835
* Non-income producing securities. ** Fully collateralized by U.S. government and/or agency obligations based on market prices at June 30, 1995. See accompanying notes to financial statements. 23 EVERGREEN VALUE FUND (FORMERLY FIRST UNION VALUE PORTFOLIO) STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 (Photo of Stock Certificate) (UNAUDITED)
ASSETS: Investments at value (identified cost $893,202,507)......................................................... $1,007,958,773 Cash........................................................................................................ 29,988 Dividends and interest receivable........................................................................... 2,454,174 Receivable for Fund shares sold............................................................................. 1,064,078 Total assets.......................................................................................... 1,011,507,013 LIABILITIES: Payable for Fund shares repurchased......................................................................... 6,922,737 Payable for investment securities purchased................................................................. 1,040,550 Accrued expenses............................................................................................ 234,891 Total liabilities..................................................................................... 8,198,178 NET ASSETS..................................................................................................... $1,003,308,835 NET ASSETS CONSIST OF: Paid-in capital............................................................................................. $ 867,008,123 Distributions in excess of net investment income............................................................ (664,108) Undistributed net realized gains............................................................................ 22,208,554 Net unrealized appreciation of investments.................................................................. 114,756,266 Net assets............................................................................................ $1,003,308,835 CALCULATION OF NET ASSET VALUE PER SHARE: Class A shares ($210,363,459 10,923,649 shares of beneficial interest outstanding)............................ $19.26 Sales charge -- 4.75% of offering price....................................................................... 0.96 Maximum offering price..................................................................................... $20.22 Class B shares ($121,196,530 6,293,064 shares of beneficial interest outstanding)............................. $19.26 Class C shares ($626,156 32,541 shares of beneficial interest outstanding).................................... $19.24 Class Y shares ($671,122,690 34,853,415 shares of beneficial interest outstanding)............................ $19.26
See accompanying notes to financial statements. 24 EVERGREEN VALUE FUND (FORMERLY FIRST UNION VALUE PORTFOLIO) STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1995 (Photo of Stock Certificate) (UNAUDITED)
INVESTMENT INCOME: Dividends.................................................................................... $ 15,610,380 Interest..................................................................................... 1,600,686 Total income.............................................................................. 17,211,066 EXPENSES: Advisory fee................................................................................. $2,264,453 Administrative personnel and services fees................................................... 374,216 Distribution fee -- Class A shares........................................................... 248,036 Distribution and shareholder services fees -- Class B Shares................................. 560,505 Distribution and shareholder services fees -- Class C Shares................................. 2,799 Transfer agent fee........................................................................... 226,964 Custodian fee................................................................................ 110,852 Registration and filing fees................................................................. 20,102 Professional fees............................................................................ 11,207 Reports and notices to shareholders.......................................................... 10,946 Insurance.................................................................................... 8,725 Trustees' fees and expenses.................................................................. 8,374 Other........................................................................................ 2,881 Total expenses......................................................................... 3,850,060 Net investment income........................................................................... 13,361,006 NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments............................................................. 22,849,455 Net change in unrealized appreciation of investments......................................... 109,494,495 Net gain on investments......................................................................... 132,343,950 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................ $145,704,956
See accompanying notes to financial statements. 25 EVERGREEN VALUE FUND (FORMERLY FIRST UNION VALUE PORTFOLIO) STATEMENT OF CHANGES IN NET ASSETS (Photo of Stock Certificate)
SIX MONTHS ENDED JUNE 30, YEAR ENDED 1995 DECEMBER 31, (UNAUDITED) 1994 INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................................................... $ 13,361,006 $ 23,555,892 Net realized gain on investments........................................................ 22,849,455 37,989,054 Net change in unrealized appreciation (depreciation) of investments..................... 109,494,495 (46,787,958) Net increase in net assets resulting from operations................................. 145,704,956 14,756,988 DISTRIBUTIONS TO SHAREHOLDERS FROM: NET INVESTMENT INCOME: Class A Shares.......................................................................... (2,823,593) (5,495,722) Class B Shares.......................................................................... (1,203,736) (1,952,154) Class C Shares.......................................................................... (6,031) (2,060) Class Y Shares.......................................................................... (9,278,469) (15,879,870) Total distributions to shareholders from net investment income.................... (13,311,829) (23,329,806) IN EXCESS OF NET INVESTMENT INCOME: Class B Shares.......................................................................... (50) (24,340) Class C Shares.......................................................................... (65) (951) Class Y Shares.......................................................................... (278,638) -- Total distribution to shareholders in excess of net investment income................... (278,753) (25,291) NET REALIZED GAINS: Class A Shares.......................................................................... (41,512) (8,939,524) Class B Shares.......................................................................... (23,772) (4,906,369) Class C Shares.......................................................................... (122) (22,671) Class Y Shares.......................................................................... (132,485) (24,431,670) Total distribution to shareholders from net realized gains.............................. (197,891) (38,300,234) Total distribution to shareholders................................................... (13,788,473) (61,655,331) FUND SHARE TRANSACTIONS: Proceeds from shares sold............................................................... 175,942,182 270,641,999 Proceeds from reinvestment of dividends................................................. 12,802,723 57,894,547 Payment for shares redeemed............................................................. (117,969,326) (194,045,034) Net increase resulting from Fund share transactions.................................. 70,775,579 134,491,512 Net increase in net assets........................................................... 202,692,062 87,593,169 NET ASSETS: Beginning of period..................................................................... 800,616,773 713,023,604 End of period (including distributions in excess of net investment income of ($664,108) and ($434,532), respectively)......................................................... $1,003,308,835 $800,616,773
See accompanying notes to financial statements. 26 EVERGREEN VALUE FUND -- CLASS A SHARES (FORMERLY FIRST UNION VALUE PORTFOLIO) FINANCIAL HIGHLIGHTS (Photo of Stock Certificate)
NINE MONTHS SIX MONTHS ENDED ENDED JUNE 30, 1995 YEAR ENDED DECEMBER 31, DECEMBER 31, (UNAUDITED) 1994 1993 1992 1991 1990* PER SHARE DATA Net asset value, beginning of period............................... $16.62 $17.63 $17.11 $17.08 $14.61 $15.12 Income (loss) from investment operations: Net investment income................... .26 .52 .47 .44 .46 .36 Net realized and unrealized gain (loss) on investments....................... 2.64 (.20) 1.10 .89 3.17 (.44) Total from investment operations..... 2.90 .32 1.57 1.33 3.63 (.08) Less distributions to shareholders from: Net investment income............................... (.26) (.51) (.47) (.43) (.43) (.36) Net realized gains...................... -- (.82) (.58) (.87) (.73) (.02) In excess of net investment income...... -- -- -- -- -- (.05) Total distributions.................. (.26) (1.33) (1.05) (1.30) (1.16) (.43) Net asset value, end of period.......... $19.26 $16.62 $17.63 $17.11 $17.08 $14.61 TOTAL RETURN(|)......................... 17.5% 1.9% 9.3% 8.0% 25.1% (.5%) RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted)...................... $ 210,363 $188,807 $189,983 $169,310 $135,565 $104,637 Ratios to average net assets: Expenses............................. .92%(|)(|) .93% .99% 1.01%(a) .96%(a) 1.39%(|)(|) Net investment income................ 2.90%(|)(|) 2.96% 2.63% 2.37%(a) 2.78%(a) 3.28%(|)(|) Portfolio turnover rate (b)............. 36% 70% 46% 56% 69% 13%
* The Fund changed its fiscal year end from March 31 to December 31. (|) Total return is calculated on net asset value per share for the periods indicated and is not annualized. Initial sales charge or contingent deferred sales charge is not reflected. (|)(|) Annualized. (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:
YEAR ENDED DECEMBER 31, 1992 1991 Expenses............................................................................... 1.02% 1.05% Net investment income.................................................................. 2.36% 2.69%
(b) Portfolio turnover rate includes certain U.S. government obligations. 27 EVERGREEN VALUE FUND -- CLASS B AND C SHARES (FORMERLY FIRST UNION VALUE PORTFOLIO) FINANCIAL HIGHLIGHTS (Photo of Stock Certificate)
CLASS B SHARES CLASS C SHARES FEBRUARY 2, SEPTEMBER 2, SIX MONTHS 1993* SIX MONTHS 1994* ENDED YEAR ENDED THROUGH ENDED THROUGH JUNE 30, 1995 DECEMBER 31, DECEMBER 31, JUNE 30, 1995 DECEMBER 31, (UNAUDITED) 1994 1993 (UNAUDITED) 1994 PER SHARE DATA Net asset value, beginning of period...... $16.62 $17.63 $17.24 $16.61 $18.28 Income (loss) from investment operations: Net investment income..................... .19 .42 .35 .19 .19 Net realized and unrealized gain (loss) on investments............................ 2.64 (.20) 1.01 2.63 (.81) Total from investment operations....... 2.83 .22 1.36 2.82 (.62) Less distributions to shareholders from: Net investment income..................... (.19) (.41) (.35) (.19) (.19) Net realized gains........................ -- (.82) (.58) -- (.82) In excess of net investment income................................. -- -- (.04) -- (.04) Total distributions.................... (.19) (1.23) (.97) (.19) (1.05) Net asset value, end of period............ $19.26 $16.62 $17.63 $19.24 $16.61 TOTAL RETURN(|)........................... 17.1% 1.3% 8.0% 17.1% (3.4%) RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted)............................... $121,197 $104,297 $ 59,953 $626 $485 Ratios to average net assets: Expenses............................... 1.67%(|)(|) 1.53% 1.48%(|)(|) 1.67%(|)(|) 1.68%(|)(|) Net investment income.................. 2.15%(|)(|) 2.36% 2.09%(|)(|) 2.16%(|)(|) 2.16%(|)(|) Portfolio turnover rate................... 36% 70% 46% 36% 70%
* Commencement of class operations. (|) Total return is calculated on net asset value per share for the period indicated and is not annualized. Contingent deferred sales charge is not reflected. (|)(|) Annualized. 28 EVERGREEN VALUE FUND -- CLASS Y SHARES (FORMERLY FIRST UNION VALUE PORTFOLIO) FINANCIAL HIGHLIGHTS (Photo of Stock Certificate)
SIX MONTHS ENDED JANUARY 3, 1991* JUNE 30, 1995 YEAR ENDED DECEMBER 31, THROUGH DECEMBER (UNAUDITED) 1994 1993 1992 31, 1991 PER SHARE DATA Net asset value, beginning of period................ $16.61 $17.63 $17.11 $17.08 $14.28 Income from investment operations: Net investment income............................... .27 .56 .52 .49 .47 Net realized and unrealized gain (loss) on investments................................... 2.66 (.20) 1.12 .90 3.53 Total from investment operations................. 2.93 .36 1.64 1.39 4.00 Less distributions to shareholders from: Net investment income............................... (.27) (.56) (.52) (.49) (.47) Net realized gains.................................. -- (.82) (.58) (.87) (.73) In excess of net investment income.................. (.01) -- (.02) -- -- Total distributions.............................. (.28) (1.38) (1.12) (1.36) (1.20) Net asset value, end of period...................... $19.26 $16.61 $17.63 $17.11 $17.08 TOTAL RETURN(|)..................................... 17.7% 2.1% 9.7% 8.3% 25.4% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted)........... $671,123 $507,028 $463,087 $326,154 $271,391 Ratios to average net assets: Expenses......................................... .67%(|)(|) .68% .65% .68%(a) .69%(|)(|)(a) Net investment income............................ 3.12%(|)(|) 3.21% 2.98% 2.90%(a) 3.04%(|)(|)(a) Portfolio turnover rate............................. 36% 70% 46% 56% 69%
* Commencement of class operations. (|) Total return is calculated on net asset value per share for the period indicated and is not annualized. (|)(|) 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:
JANUARY 3, 1991 YEAR ENDED THROUGH DECEMBER 31, 1992 DECEMBER 31, 1991 Expenses.......................................................... .69% .77% Net investment income............................................. 2.89% 2.96%
29 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 Growth and Income Funds -- Evergreen Utility Fund ("Utility"), Evergreen Balanced Fund ("Balanced") and Evergreen Value Fund ("Value") collectively referred to as the "Funds" (see Note 7). NOTE 2 -- 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 -- Listed equity securities are valued at the last sale price reported on the primary national securities exchange on which the security is traded. U.S. Government obligations, corporate bonds and other fixed income securities are generally valued at the mean between the over-the-counter bid and asked price as furnished by an independent pricing service. 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 -- Dividend income is recorded on the ex-dividend date. Interest income and expenses are accrued daily. Premiums and discounts paid on securities are amortized or acreted 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 Utility are declared and paid monthly. Dividends from net investment income for Balanced and Value are declared and paid quarterly. 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. At December 31, 1994 (the Fund's most recent fiscal year end), Utility had capital loss carryforward of $42,434. Pursuant to the Code, this capital loss carryforward will expire in 2002. 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. 30 COMBINED NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1995 -- CONTINUED (UNAUDITED) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- Continued 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 3 -- 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. For Utility, the Adviser voluntarily waived $84,871 of its advisory fees for the six month period ended June 30, 1995. The Adviser can modify or terminate this voluntary waiver at any time. 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 7). 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 Utility, FAS voluntarily waive its fee of $16,382 for the six month period 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, Class B and Class C shares (see Note 7). 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, Class B and Class C 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 and Class C shares for the period. This fee is designed to obtain certain services for shareholders and to maintain the shareholder accounts. 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 7). FServ's fee was based on the size, type and number of accounts and transactions made by shareholders. ORGANIZATIONAL EXPENSES -- Organizational expenses for Utility were borne initially by FAS. Utility has agreed to reimburse FAS for such organizational expenses during the five-year period following the date it commenced operations. Pursuant to these arrangements, for the six months ended June 30, 1995, the Utility paid and has a remaining liability as follows:
COMMENCEMENT ORGANIZATIONAL OF ORGANIZATIONAL EXPENSES OPERATIONS EXPENSES PAID REMAINING 1/1/94 $3,333 $ 38,538
As a result of the change in the administration agreement (see Note 7), 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. 31 COMBINED NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1995 -- CONTINUED (UNAUDITED) NOTE 4 -- 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:
PURCHASES SALES Utility......................................................................................... $ 14,316,614 $ 12,694,816 Balanced........................................................................................ 201,723,579 192,947,680 Value........................................................................................... 322,825,333 292,499,422
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:
APPRECIATION DEPRECIATION NET Utility......................................................................... $ 2,299,646 ($1,424,691 ) $ 874,955 Balanced........................................................................ 120,367,493 (8,028,771 ) 112,338,772 Value........................................................................... 115,716,361 (2,014,486 ) 113,701,875
NOTE 5 -- 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 four classes which are designated Class A, Class B, Class C and Class Y shares. Class A shares are offered with a 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 C shares are offered with a 1% contingent deferred sales charge on shares redeemed within the first year of purchase. 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 3) and have exclusive voting rights with respect to their distribution plan. 32 COMBINED NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1995 -- CONTINUED (UNAUDITED) NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- Continued Transactions in shares of beneficial interest were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 1995 DECEMBER 31, 1994* UTILITY SHARES AMOUNT SHARES AMOUNT CLASS A Shares sold.............................................................. 68,217 $ 643,790 1,050,103 $10,216,835 Shares issued on reinvestment of dividends............................... 9,923 93,152 17,247 160,044 Shares redeemed.......................................................... (72,466) (677,888) (601,659) (5,692,851) Net increase............................................................. 5,674 59,054 465,691 4,684,028 CLASS B Shares sold.............................................................. 245,058 2,300,570 3,519,138 33,433,097 Shares issued on reinvestment of dividends............................... 54,656 513,316 85,030 784,986 Shares redeemed.......................................................... (341,738) (3,199,626) (406,297) (3,732,308) Net increase (decrease).................................................. (42,024) (385,740) 3,197,871 30,485,775 CLASS C Shares sold.............................................................. 2,355 22,121 14,069 129,494 Shares issued on reinvestment of dividends............................... 284 2,667 130 1,182 Shares redeemed.......................................................... (1,117) (10,446) -- -- Net increase............................................................. 1,522 14,342 14,199 130,676 CLASS Y Shares sold.............................................................. 103,930 998,315 580,992 5,509,538 Shares issued on reinvestment of dividends............................... 816 7,805 20,357 187,784 Shares redeemed.......................................................... (45,396) (442,167) (23,687) (216,082) Net increase............................................................. 59,350 563,953 577,662 5,481,240 Total net increase resulting from Fund share transactions................ 24,522 $ 251,609 4,255,423 $40,781,719
* For Class A and B Shares, the Fund share transaction activity is for the period January 4, 1994 (commencement of class operations) through December 31, 1994. For Class C Shares, the Fund share transaction activity is for the period September 2, 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. 33 COMBINED NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1995 -- CONTINUED (UNAUDITED) NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- Continued
SIX MONTHS ENDED YEAR ENDED JUNE 30, 1995 DECEMBER 31, 1994* BALANCED AMOUNT SHARES AMOUNT SHARES CLASS A Shares sold...................................................... 76,754 $ 913,888 1,428,629 $ 17,003,092 Shares issued on reinvestment of dividends....................... 65,845 790,354 186,207 2,147,984 Shares redeemed.................................................. (506,456) (5,960,295) (845,164) (9,900,621) Net increase (decrease).......................................... (363,857) (4,256,053) 769,672 9,250,455 CLASS B Shares sold...................................................... 166,676 1,965,737 4,255,156 50,429,083 Shares issued on reinvestment of dividends....................... 136,161 1,637,207 374,859 4,311,708 Shares redeemed.................................................. (800,089) (9,419,017) (1,102,578) (12,868,198) Net increase (decrease).......................................... (497,252) (5,816,073) 3,527,437 41,872,593 CLASS C Shares sold...................................................... 2,701 32,377 17,041 196,697 Shares issued on reinvestment of dividends....................... 297 3,578 438 4,924 Shares redeemed.................................................. (675) (8,138) -- -- Net increase..................................................... 2,323 27,817 17,479 201,621 CLASS Y Shares sold...................................................... 7,394,783 88,040,715 20,165,185 238,431,504 Shares issued on reinvestment of dividends....................... 1,439,706 17,303,498 3,761,875 43,437,902 Shares redeemed.................................................. (10,201,006) (121,240,563) (17,187,695) (201,406,031) Net increase (decrease).......................................... (1,366,517) (15,896,350) 6,739,365 80,463,375 Total net increase (decrease) resulting from Fund share transactions................................................... (2,225,303) ($25,940,659) 11,053,953 $131,788,044
* For Class C Shares, the Fund share transaction activity is for the period September 2, 1994 (commencement of class operations) through December 31, 1994. 34 COMBINED NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1995 -- CONTINUED (UNAUDITED) NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- Continued
SIX MONTHS ENDED YEAR ENDED JUNE 30, 1995 DECEMBER 31, 1994* VALUE AMOUNT SHARES AMOUNT SHARES CLASS A Shares sold........................................................ 328,150 $ 5,920,926 1,358,029 $ 23,876,719 Shares issued on reinvestment of dividends......................... 153,111 2,819,896 839,511 14,241,623 Shares redeemed.................................................... (917,814) (16,486,220) (1,612,008) (28,379,135) Net increase (decrease)............................................ (436,553) (7,745,398) 585,532 9,739,207 CLASS B Shares sold........................................................ 381,708 6,850,417 3,054,952 53,734,405 Shares issued on reinvestment of dividends......................... 64,338 1,185,953 393,979 6,650,920 Shares redeemed.................................................... (426,985) (7,643,215) (575,508) (10,093,747) Net increase....................................................... 19,061 393,155 2,873,423 50,291,578 CLASS C Shares sold........................................................ 3,459 60,981 27,701 488,315 Shares issued on reinvestment of dividends......................... 338 6,224 1,540 25,674 Shares redeemed.................................................... (463) (8,357) (34) (589) Net increase....................................................... 3,334 58,848 29,207 513,400 CLASS Y Shares sold........................................................ 9,045,607 163,109,858 10,949,430 192,542,560 Shares issued on reinvestment of dividends......................... 477,119 8,790,650 2,177,091 36,976,330 Shares redeemed.................................................... (5,185,489) (93,831,534) (8,880,310) (155,571,563) Net increase....................................................... 4,337,237 78,068,974 4,246,211 73,947,327 Total net increase resulting from Fund share transactions.......... 3,923,079 $ 70,775,579 7,734,373 $134,491,512
* For Class C Shares, the Fund share transaction activity is for the period September 2, 1994 (commencement of class operations) through December 31, 1994. NOTE 6 -- RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. The Funds' restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined by the Funds' pricing committee. Additional information on restricted securities held at June 30, 1995 is as follows:
FUND SECURITY ACQUISITION DATE ACQUISITION COST Balanced Jet Equipment Trust 12/20/94 $7,000,000
35 COMBINED NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1995 -- CONTINUED (UNAUDITED) NOTE 7 -- SUBSEQUENT EVENTS Effective July 1, 1995, the First Union Value Portfolio acquired substantially all of the net assets by a non-taxable exchange of 5,502,193 shares of ABT Growth and Income Fund for 3,289,535 shares of the First Union Value Portfolio. The net assets of ABT Growth and Income Fund acquired included unrealized appreciation of $10,278,721. The aggregate net assets of First Union Value Portfolio immediately after the combination were $935,777,632. Also effective July 1, 1995, the First Union Utility Portfolio acquired substantially all of the net assets by a non-taxable exchange of 8,586,399 shares of ABT Utility Fund for 10,160,068 shares of First Union Utility Portfolio. The net assets of ABT Utility Fund acquired included unrealized appreciation of $6,321,522. The aggregate net assets of First Union Utility Portfolio immediately after the combination were $140,913,190. Pursuant to a contract approved by the Trustees on April 20, 1995, effective July 7, 1995, Evergreen Asset Management Corp. 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. In addition, officers of Furman Selz, Inc. became the Trust's officers. Effective July 7, 1995, each of the Funds changed their names as follows:
FORMER NAME NEW NAME First Union Utility Portfolio Evergreen Utility Fund First Union Balanced Portfolio Evergreen Balanced Fund First Union Value Portfolio Evergreen Value Fund
36 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 -----END PRIVACY-ENHANCED MESSAGE-----