<PAGE>
COREFUNDS, INC.
<PAGE>
EQUITY INDEX FUND
530 EAST SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087
June 1, 1998
Dear Shareholder,
As a result of the Merger of CoreStates Financial Corp with and into a
wholly-owned subsidiary of First Union Corporation effective April 30, 1998, I
am writing to shareholders of Equity Index Fund (the "Fund"), a series of
CoreFunds, Inc., to inform you of a Special Shareholders' meeting to be held on
July 17, 1998. Before that meeting, I would like your vote on the important
issues affecting your Fund as described in the attached Prospectus/Proxy
Statement.
The Prospectus/Proxy Statement includes two proposals. The first proposal
requests that shareholders consider and act upon an Agreement and Plan of
Reorganization whereby all of the assets of the Fund would be acquired by
Evergreen Select Equity Index Fund in exchange for either Institutional Service
or Institutional shares of Evergreen Select Equity Index Fund and the assumption
by Evergreen Select Equity Index Fund of the identified liabilities of the Fund.
You will receive shares of Evergreen Select Equity Index Fund having an
aggregate net asset value equal to the aggregate net asset value of your Fund
shares. Details about Evergreen Select Equity Index Fund's investment objective,
portfolio management team, performance, etc. are contained in the attached
Prospectus/Proxy Statement. For federal income tax purposes, the transaction is
a non-taxable event for shareholders.
The second proposal requests shareholder consideration of an Interim Investment
Advisory Agreement between the Fund and CoreStates Investment Advisers, Inc.,
the Fund's current investment adviser. It is anticipated that the Interim
Investment Advisory Agreement will be in effect from April 30, 1998 to the date
the reorganization
is consummated (scheduled for July 27, 1998).
Information relating to the Interim Investment Advisory Agreement is contained
in the attached Prospectus/Proxy Statement.
The Board of Directors has approved the proposals and recommends that you vote
FOR these proposals.
I realize that this Prospectus/Proxy Statement will take time to review, but
your vote is very important. Please take the time to familiarize yourself with
the proposals. If you attend the meeting, you may vote your shares in person. If
you do not expect to attend the meeting, either complete, date, sign and return
the enclosed proxy card in the enclosed postage paid envelope or vote by calling
toll-free 1-800-733-8481 24 hours a day. Instructions on how to complete the
proxy card or vote by telephone are included immediately after the Notice of
Special Meeting.
<PAGE>
If you have any questions about the proxy, please call our proxy solicitor,
Shareholder Communications Corporation at 800-733-8481 ext. 468. You may also
FAX your completed and signed proxy card to 800-733-1885. If we do not receive
your completed proxy card or your telephone vote after several weeks, you may be
contacted by Shareholder Communications Corporation, who will remind you to vote
your shares.
Thank you for taking this matter seriously and participating in this important
process.
Sincerely,
Kevin P. Robins
Vice President
CoreFunds, Inc.
<PAGE>
COREFUNDS, INC.
EQUITY INDEX FUND
530 EAST SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 17, 1998
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Equity Index Fund (the "Fund"), a series of CoreFunds, Inc.,
will be held at the offices of the Evergreen Funds, 26th Floor, 200 Berkeley
Street, Boston, Massachusetts 02116, on July 17, 1998 at 2:00 p.m. for the
following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization
(the "Plan") dated as of April 15, 1998, providing for the acquisition of all of
the assets of the Fund by Evergreen Select Equity Index Fund, a series of
Evergreen Select Equity Trust, ("Evergreen Equity Index") in exchange for shares
of Evergreen Equity Index and the assumption by Evergreen Equity Index of the
identified liabilities of the Fund. The Plan also provides for distribution of
these shares of Evergreen Equity Index to shareholders of the Fund in
liquidation and subsequent termination of the Fund. A vote in favor of the Plan
is a vote in favor of the liquidation and dissolution of the Fund.
2. To consider and act upon the Interim Investment Advisory Agreement
between the Fund and CoreStates Investment Advisers, Inc.
3. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.
On behalf of the Fund, the Directors of CoreFunds, Inc. have fixed the
close of business on May 29, 1998 as the record date for the determination of
shareholders of the Fund entitled to notice of and to vote at the Meeting or any
adjournment thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND IN PERSON ARE URGED WITHOUT DELAY TO SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE
ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Directors
James W. Jennings
Secretary
June 1, 1998
<PAGE>
INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and may help to avoid the time and expense involved in
validating your vote if you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears
in the Registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of
the party signing should conform exactly to a name shown in the
Registration on the proxy card.
3. ALL OTHER ACCOUNTS: The capacity of the individual
signing the proxy card should be indicated unless it is reflected in
the form of Registration. For example:
REGISTRATION VALID SIGNATURE
CORPORATE
ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp. John Doe, Treasurer
c/o John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith John B. Smith, Jr., Executor
<PAGE>
INSTRUCTIONS FOR TELEPHONE VOTING
To vote your proxy by telephone follow the four easy steps below. Or if you
prefer you may send back your signed proxy ballot in the postage paid envelope
provided.
1. Read the accompanying proxy information and ballot.
2. Identify the twelve-digit "CONTROL NO." in the middle portion of your ballot
on the left hand side. This control number is the key to casting your vote over
the telephone.
3. Dial 1-800-733-8481 ext. 468.
4. Follow the simple instructions.
<PAGE>
PROSPECTUS/PROXY STATEMENT DATED JUNE 1, 1998
Acquisition of Assets of
EQUITY INDEX FUND
a series of
CoreFunds, Inc.
530 East Swedesford Road
Wayne, Pennsylvania 19087
By and in Exchange for Shares of
EVERGREEN SELECT EQUITY INDEX FUND
a series of
Evergreen Select Equity Trust
200 Berkeley Street
Boston, Massachusetts 02116
This Prospectus/Proxy Statement is being furnished to shareholders of
Equity Index Fund ("CoreFunds Equity Index") in connection with a proposed
Agreement and Plan of Reorganization (the "Plan") to be submitted to
shareholders of CoreFunds Equity Index for consideration at a Special Meeting of
Shareholders to be held on July 17, 1998 at 2:00 p.m. at the offices of the
Evergreen Funds, 200 Berkeley Street, 26th Floor, Boston, Massachusetts 02116,
and any adjournments thereof (the "Meeting"). The Plan provides for all of the
assets of CoreFunds Equity Index to be acquired by Evergreen Select Equity Index
Fund ("Evergreen Equity Index") in exchange for shares of Evergreen Equity Index
and the assumption by Evergreen Equity Index of the identified liabilities of
CoreFunds Equity Index (hereinafter referred to as the "Reorganization").
Evergreen Equity Index and CoreFunds Equity Index are sometimes hereinafter
referred to individually as the "Fund" and collectively as the "Funds."
Following the Reorganization, shares of Evergreen Equity Index will be
distributed to shareholders of CoreFunds Equity Index in liquidation of
CoreFunds Equity Index and such Fund will be terminated. Holders of Class A and
Class B shares of CoreFunds Equity Index will receive Institutional Service
shares of Evergreen Equity Index and holders of Class Y shares of CoreFunds
Equity Index will receive Institutional shares of Evergreen Equity Index. Each
such class of shares of Evergreen Equity Index has the same Rule 12b-1
distribution-related fees, if any, as the shares of the respective class of
CoreFunds Equity Index held by them prior to the Reorganization, except that
Institutional Service shares of Evergreen Equity Index will bear substantially
less in 12b-1 distribution fees than Class B shares of CoreFunds Equity Index.
No sales charges are imposed on Evergreen Equity Index's Institutional Service
or Institutional shares. In addition, holders of Class B shares of CoreFunds
Equity Index will not be subject to the imposition of a contingent deferred
sales charge on Institutional Service shares of Evergreen Equity Index received
in the Reorganization. As a
<PAGE>
result of the proposed Reorganization, shareholders of CoreFunds Equity Index
will receive that number of full and fractional shares of Evergreen Equity Index
having an aggregate net asset value equal to the aggregate net asset value of
such shareholder's shares of CoreFunds Equity Index. The Reorganization is being
structured as a tax-free reorganization for federal income tax purposes.
Evergreen Equity Index is a separate newly-organized series of
Evergreen Select Equity Trust, an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The investment objective of Evergreen Equity Index is to seek investment
results that achieve price and yield performance similar to the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500 Index"). Such investment
objective is identical to that of CoreFunds Equity Index.
Shareholders of CoreFunds Equity Index are also being asked to approve
the Interim Investment Advisory Agreement with CoreStates Investment Advisers,
Inc. ("CSIA"), a subsidiary of First Union Corporation (the "Interim Advisory
Agreement"), with the same terms and fees as the previous advisory agreement
between CoreFunds Equity Index and CSIA. The Interim Advisory Agreement will be
in effect for the period of time between April 30, 1998, the date on which the
merger of CoreStates Financial Corp with and into a wholly-owned subsidiary of
First Union Corporation was consummated, and the date of the Reorganization
(scheduled for on or about July 27, 1998).
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about Evergreen Equity Index
that shareholders of CoreFunds Equity Index should know before voting on the
Reorganization. Certain relevant documents listed below, which have been filed
with the Securities and Exchange Commission ("SEC"), are incorporated in whole
or in part by reference. A Statement of Additional Information dated June 1,
1998, relating to this Prospectus/Proxy Statement and the Reorganization which
includes the financial statements of CoreFunds Equity Index dated June 30, 1997
and December 31, 1997, has been filed with the SEC and is incorporated by
reference in its entirety into this Prospectus/Proxy Statement. Evergreen Equity
Index is a newly created series of Evergreen Select Equity Trust and has had no
operations to date. Consequently, there are no current financial statements of
Evergreen Equity Index. A copy of such Statement of Additional Information is
available upon request and without charge by writing to Evergreen Equity Index
at 200 Berkeley Street, Boston, Massachusetts 02116 or by calling toll-free 1-
800-343-2898.
The two Prospectuses of Evergreen Equity Index dated June 1, 1998 are
incorporated herein by reference in their entirety, insofar as they relate to
Evergreen Equity Index only, and not to any other fund described therein. The
Prospectuses, which
<PAGE>
pertain (i) to Institutional Service shares and (ii) to Institutional shares,
differ only insofar as they describe the separate distribution and shareholder
servicing arrangements applicable to the classes. Shareholders of CoreFunds
Equity Index will receive, with this Prospectus/Proxy Statement, copies of the
Prospectus pertaining to the class of shares of Evergreen Equity Index that they
will receive as a result of the consummation of the Reorganization. Additional
information about Evergreen Equity Index is contained in its Statement of
Additional Information of the same date which has been filed with the SEC and
which is available upon request and without charge by writing to or calling
Evergreen Equity Index at the address or telephone number listed in the
preceding paragraph.
The two Prospectuses of CoreFunds Equity Index which pertain (i) as
applicable, to Class A and Class B shares (Individual shares) and (ii) to Class
Y shares (Institutional shares) dated November 1, 1997, insofar as they relate
to CoreFunds Equity Index only, and not to any other funds described therein,
are incorporated herein in their entirety by reference. Copies of the
Prospectuses, related Statement of Additional Information dated the same date,
the Annual Report for the fiscal year ended June 30, 1997 and the Semi-Annual
Report for the six month period ended December 31, 1997, are available upon
request and without charge by writing to CoreFunds Equity Index at the address
listed on the cover page of this Prospectus/Proxy Statement or by calling
toll-free 1-800-355-2673.
Included as Exhibits A and B to this Prospectus/Proxy Statement are a
copy of the Plan and the Interim Advisory Agreement, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The shares offered by this Prospectus/Proxy Statement are not deposits
or obligations of any bank and are not insured or otherwise protected by the
U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other government agency and involve investment risk, including
possible
loss of capital.
<PAGE>
TABLE OF CONTENTS
Page
COMPARISON OF FEES AND EXPENSES...............................................7
SUMMARY ....................................................................11
Proposed Plan of Reorganization ......12
Tax Consequences ......13
Investment Objectives and Policies of the Funds ......14
Comparative Performance Information for each Fund ......14
Management of the Funds ......15
Investment Advisers ......15
Administrators ......16
Portfolio Management ... 17
Distribution of Shares ... 17
Purchase and Redemption Procedures ......18
Exchange Privileges ......19
Dividend Policy ......19
Risks ......20
REASONS FOR THE REORGANIZATION............................................ 21
Agreement and Plan of Reorganization ......23
Federal Income Tax Consequences ......25
Pro-forma Capitalization ... 27
Shareholder Information ......28
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES.......................... 29
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS........................... 31
Forms of Organization ... 31
Capitalization ... 31
Shareholder Liability ......31
Shareholder Meetings and Voting Rights ... 32
Liquidation or Dissolution ... 33
Liability and Indemnification of Trustees ......33
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT...................... 35
Introduction ... 35
Comparison of the Interim Advisory Agreement
and the Previous Advisory Agreement ... 36
Information About CoreFunds Equity Index's
Investment Adviser ... 37
ADDITIONAL INFORMATION.................................................... 37
VOTING INFORMATION CONCERNING THE MEETING................................. 38
FINANCIAL STATEMENTS AND EXPERTS.......................................... 41
LEGAL MATTERS................................................................41
<PAGE>
OTHER BUSINESS...............................................................41
APPENDIX A................................................................ 43
EXHIBIT A...................................................................A-1
EXHIBIT B...................................................................B-1
<PAGE>
COMPARISON OF FEES AND EXPENSES
The amounts for Institutional and Institutional Service shares of
Evergreen Equity Index set forth in the following tables and in the examples are
based on the estimated expenses of Evergreen Equity Index for the period ending
June 30, 1998. The amounts for Class Y , Class A and Class B shares of CoreFunds
Equity Index set forth in the following tables and in the examples are based on
the estimated expenses for CoreFunds Equity Index for the fiscal year ending
June 30, 1998 as set forth in the current Prospectuses of CoreFunds Equity. The
pro forma amounts for Institutional and Institutional Service shares of
Evergreen Equity Index are based on what the combined expenses would have been
for Evergreen Equity Index for the fiscal period ending June 30, 1998. All
amounts are adjusted for voluntary expense waivers.
The following tables show for Evergreen Equity Index, CoreFunds Equity
Index and Evergreen Equity Index pro forma, assuming consummation of the
Reorganization, the shareholder transaction expenses and annual fund operating
expenses associated with an investment in the Institutional and Institutional
Service shares of Evergreen Equity Index and the Class Y, Class A and Class B
shares of CoreFunds Equity Index.
Comparison of Institutional and Institutional Service Shares
of Evergreen Equity Index With Class Y, Class A
and Class B Shares of CoreFunds Equity Index
<TABLE>
<CAPTION>
Evergreen Equity
Index CoreFunds Equity Index
Shareholder Institu-
Transaction Institu- tional
Expenses tional Service Class Y Class A Class B
<S> <C> <C> <C> <C> <C>
Maximum Sales None None None 5.50% None
Load Imposed on
Purchases (as a
percentage of
offering price)
Maximum Sales None None None None None
Load Imposed on
Reinvested
Dividends (as a
percentage of
offering price)
<PAGE>
Contingent
Deferred Sales None None None None 5.00% in
Charge (as a the first
percentage of year
original purchase declining
price or to 1.00%
redemption in the
proceeds, fifth year
whichever is and
lower) 0.00%
thereafter
Annual Fund
Operating
Expenses (as a
percentage of
average daily net
assets)
Management Fee 0.06% 0.06% 0.15% 0.15% 0.15%
(After Waiver)(1)
12b-1 Fees (2) None 0.25% None 0.00% 1.00%
Other Expenses 0.31% 0.31% 0.22% 0.22% 0.22%
----- ----- ----- ----- -----
(After Waiver)
(3)
Annual Fund 0.37% 0.62% 0.37% 0.37% 1.37%
===== ===== ===== ===== =====
Operating
Expenses (4)
</TABLE>
<TABLE>
<CAPTION>
Evergreen Equity Index Pro Forma
Institutional
Shareholder Transaction Expenses Institutional Service
<S> <C> <C>
Maximum Sales Load Imposed on None None
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on None None
Reinvested Dividends (as a
percentage of offering price)
<PAGE>
Contingent Deferred Sales Charge
(as a percentage of original None
purchase price or redemption
proceeds, whichever is lower)
None
Annual Fund Operating Expenses (as
a percentage of average daily net
assets)
Management Fee (After Waiver)(1) 0.06% 0.06%
12b-1 Fees None 0.25%
Other Expenses 0.31% 0.31%
--------- ----------
Annual Fund Operating Expenses (4) 0.37% 0.62%
====== =======
</TABLE>
- ---------------
(1) The management fee for Evergreen Equity Index has been
reduced from 0.40% of average daily net assets to reflect
the voluntary waiver by the investment adviser. The
investment adviser currently intends to continue this fee
waiver through November 30, 1998; however, this waiver may
be modified or canceled at any time. The management fee for
CoreFunds Equity Index has been reduced from 0.40% to
reflect the voluntary waiver by the investment adviser.
(2) Absent waivers, Class A shares of CoreFunds Equity Index may pay a
12b-1 fee of 0.25% of average daily net assets.
(3) Absent voluntary waivers by CoreFunds Equity Index's administrator,
Other Expenses would be 0.31% of average daily net assets.
(4) Absent fee and expense waivers, Annual Fund Operating
Expenses for the Institutional and Institutional Service
shares of Evergreen Equity Index are estimated to be 0.71%
and 0.96% for the fiscal period ending June 30, 1998 and
Annual Fund Operating Expenses for the Class Y , Class A
and Class B shares of CoreFunds Equity Index would be 0.71%, 0.96% and
1.71%, respectively, for the year ending June 30, 1998,
absent fee and expense waivers. The investment adviser of
Evergreen Equity Index has undertaken to limit the Fund's
Annual Fund Operating Expenses for a period of at least two
years to 0.71% and 0.96% for Institutional and Institutional
Service shares, respectively.
Examples. The following tables show for Evergreen Equity Index and
CoreFunds Equity Index, and for Evergreen Equity Index pro forma, assuming
consummation of the Reorganization, examples of the cumulative effect of
shareholder transaction expenses and
<PAGE>
annual fund operating expenses indicated above on a $1,000 investment in each
class of shares for the periods specified, assuming (i) a 5% annual return and
(ii) redemption at the end of such period and, additionally for Class B shares,
no redemption at the end of each period.
<TABLE>
<CAPTION>
Evergreen Equity Index
One Year Three Five Ten Years
<S> <C> <C> <C> <C>
Years Years
Institutional $4 $12 $21 $47
Institutional $6 $20 $35 $77
Service
CoreFunds Equity Index
Three Five
One Year Years Years Ten Years
Class Y $4 $12 $21 $47
Class A $59 $66 $75 $99
Class B (Assuming $64 $73 $85 $111
redemption at end
of period)
Class B (Assuming $14 $43 $75 $111
no redemption at
end of period)
</TABLE>
<TABLE>
<CAPTION>
Evergreen Equity Index Pro Forma
Three Five
One Year Years Years Ten Years
<S> <C> <C> <C> <C>
Institutional $4 $12 $21 $47
Institutional $6 $20 $35 $77
Service
</TABLE>
The purpose of the foregoing examples is to assist CoreFunds Equity
Index shareholders in understanding the various costs and expenses that an
investor in Evergreen Equity Index as a result of the Reorganization would bear
directly and indirectly, as compared with the various direct and indirect
expenses currently borne by a shareholder in CoreFunds Equity Index. These
examples should not be considered a representation of past or future expenses or
annual return. Actual expenses may be greater or less than those shown.
<PAGE>
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy Statement,
the Prospectuses of Evergreen Equity Index dated June 1, 1998 and the
Prospectuses of CoreFunds Equity Index dated November 1, 1997 (which are
incorporated herein by reference), the Plan and the Interim Advisory Agreement,
the forms of which are attached to this Prospectus/Proxy Statement as Exhibits A
and B, respectively.
Proposed Plan of Reorganization
The Plan provides for the transfer of all of the assets of CoreFunds
Equity Index in exchange for shares of Evergreen Equity Index and the assumption
by Evergreen Equity Index of the identified liabilities of CoreFunds Equity
Index. The identified liabilities consist only of those liabilities reflected on
the Fund's statement of assets and liabilities determined immediately preceding
the Reorganization. The Plan also calls for the distribution of shares of
Evergreen Equity Index to CoreFunds Equity Index shareholders in liquidation of
CoreFunds Equity Index as part of the Reorganization. As a result of the
Reorganization, the holders of Class A, Class B and Class Y shares of CoreFunds
Equity Index will become the owners of that number of full and fractional
Institutional Service, Institutional Service and Institutional shares,
respectively, of Evergreen Equity Index having an aggregate net asset value
equal to the aggregate net asset value of the shareholders' shares of CoreFunds
Equity Index, as of the close of business immediately prior to the date that
CoreFunds Equity Index's assets are exchanged for shares of Evergreen Equity
Index. See "Reasons for the Reorganization - Agreement and Plan of
Reorganization."
The Directors of CoreFunds, Inc., including the Directors who are not
"interested persons," as such term is defined in the 1940 Act (the "Independent
Directors"), have concluded that the Reorganization would be in the best
interests of shareholders of CoreFunds Equity Index, and that the interests of
the shareholders of CoreFunds Equity Index will not be diluted as a result of
the transactions contemplated by the Reorganization. Accordingly, the Directors
have submitted the Plan for the approval of CoreFunds Equity Index's
shareholders.
THE BOARD OF DIRECTORS OF COREFUNDS, INC.
RECOMMENDS APPROVAL BY SHAREHOLDERS OF COREFUNDS EQUITY INDEX
OF THE PLAN EFFECTING THE REORGANIZATION.
The Trustees of Evergreen Select Equity Trust have also approved the Plan
and, accordingly, Evergreen Equity Index's participation in the Reorganization.
<PAGE>
Approval of the Reorganization on the part of CoreFunds Equity Index
will require the affirmative vote of a majority of CoreFunds Equity Index's
outstanding shares, with all classes voting together as a single class at a
Meeting at which a quorum of the Fund's shares is present. A majority of the
outstanding shares entitled to vote, represented in person or by proxy, is
required to constitute a quorum at the Meeting. See "Voting Information
Concerning the Meeting."
The merger of CoreStates Financial Corp ("CoreStates Financial") with
and into a wholly-owned subsidiary of First Union Corporation ("First Union")
(the "Merger") has been consummated and, as a result, by law the Merger
terminated the investment advisory agreement between CSIA and CoreFunds Equity
Index. Prior to consummation of the Merger, CoreFunds Equity Index received an
order from the SEC which permitted the implementation, without formal
shareholder approval, of a new investment advisory agreement between the Fund
and CSIA for a period of not more than 150 days (September 27, 1998) beginning
on the date of the closing of the Merger and continuing through the date the
Interim Advisory Agreement is approved by the Fund's shareholders. The Interim
Advisory Agreement has the same terms and fees as the previous investment
advisory agreement between CoreFunds Equity Index and CSIA. The Reorganization
is scheduled to take place on or about July 27, 1998.
Approval of the Interim Advisory Agreement requires the affirmative
vote of (i) 67% or more of the shares of CoreFunds Equity Index present in
person or by proxy at the Meeting, if holders of more than 50% of the shares of
CoreFunds Equity Index outstanding on the record date are present, in person or
by proxy, or (ii) more than 50% of the outstanding shares of CoreFunds Equity
Index, whichever is less. See "Voting Information Concerning the Meeting."
If the shareholders of CoreFunds Equity Index do not vote to approve
the Reorganization, the Directors will consider other possible courses of action
in the best interests of shareholders.
Tax Consequences
Prior to or at the completion of the Reorganization, CoreFunds Equity
Index will have received an opinion of Sullivan & Worcester LLP that the
Reorganization has been structured so that no gain or loss will be recognized by
the Fund or its shareholders for federal income tax purposes as a result of the
receipt of shares of Evergreen Equity Index in the Reorganization. The holding
period and aggregate tax basis of shares of Evergreen Equity Index that are
received by CoreFunds Equity Index's shareholders will be the same as the
holding period and aggregate tax basis of shares of the Fund previously held by
such shareholders, provided that shares of the Fund are held as capital assets.
In addition, the holding period and tax basis of the assets of CoreFunds Equity
Index in the hands of
<PAGE>
Evergreen Equity Index as a result of the Reorganization will be the same as in
the hands of the Fund immediately prior to the Reorganization, and no gain or
loss will be recognized by Evergreen Equity Index upon the receipt of the assets
of the Fund in exchange for shares of Evergreen Equity Index and the assumption
by Evergreen Equity Index of the identified liabilities.
Investment Objectives and Policies of the Funds
The investment objectives and policies of Evergreen Equity Index and
CoreFunds Equity Index are identical.
The investment objective of Evergreen Equity Index is to seek
investment results that achieve price and yield performance similar to the S&P
500 Index by investing at least 90% of its total assets in equity securities
represented in the S&P 500 Index.
Comparative Performance Information for each Fund
Discussions of the manner of calculation of total return are contained
in the respective Prospectuses and Statement of Additional Information of the
Funds. Evergreen Equity Index, as of the date of this Prospectus/Proxy
Statement, had not commenced operations. The following table sets forth, as
applicable, the total return of the Class Y, Class A and Class B shares of
CoreFunds Equity Index for the one , five and ten year periods ended March 31,
1998 and for the period from inception through March 31, 1998. The calculations
of total return assume the reinvestment of all dividends and capital gains
distributions on the reinvestment date and the deduction of all recurring
expenses (including sales charges) that were charged to shareholders' accounts.
<TABLE>
<CAPTION>
Average Annual Total Return (1)
1 Year 5 Years From
Ended Ended 10 Years Inception
March 31, March 31, Ended March To March Inception
1998 1998 31, 1998 31, 1998 Date
------- ------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
CoreFunds
Equity
Index
Class A 38.93% N/A N/A 33.03% 10/9/96
shares
Class B N/A N/A N/A 41.71% 11/10/97
shares
<PAGE>
Class Y 47.00% 21.51% 17.75% 17.10%
shares 2/14/85
- --------------
</TABLE>
(1) Reflects waiver of advisory fees and reimbursements and/or waivers of
expenses. Without such reimbursements and/or waivers, the average
annual total returns during the periods would have been lower.
Management of the Funds
The overall management of Evergreen Equity Index and of CoreFunds
Equity Index is the responsibility of, and is supervised by, the Board of
Trustees of Evergreen Select Equity Trust and the Board of Directors of
CoreFunds, Inc., respectively.
Investment Advisers
The investment adviser to Evergreen Equity Index is First Union
National Bank ("FUNB"). FUNB is a subsidiary of First Union, the sixth largest
bank holding company in the United States based on total assets as of September
30, 1997. FUNB and its affiliates manage the Evergreen family of mutual funds
with assets of approximately $46 billion as of March 31, 1998. For further
information regarding FUNB and First Union, see "Fund Details - Fund
Organization and Service Providers - Investment Advisers" in the Prospectuses of
Evergreen Equity Index.
FUNB manages investments and supervises the daily business affairs of
Evergreen Equity Index subject to the authority of the Trustees. FUNB is
entitled to receive from the Fund an annual fee equal to 0.40% of the Fund's
average daily net assets.
CSIA serves as the investment adviser for CoreFunds Equity Index. As
investment adviser, CSIA has overall responsibility for portfolio management of
the Fund. For its services as investment adviser, CSIA is entitled to receive a
fee at an annual rate of 0.40% of the Fund's average daily net assets.
Each investment adviser may, at its discretion, reduce or waive its fee
or reimburse a Fund for certain of its other expenses in order to reduce its
expense ratios. Each investment adviser may reduce or cease these voluntary
waivers and reimbursements at any time.
Year 2000 Risks. Like other investment companies, financial and
business organizations and individuals around the world, Evergreen Equity Index
could be adversely affected if the computer systems used by the Fund's
investment adviser and the Fund's other service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps to
<PAGE>
address the Year 2000 Problem with respect to the computer systems that it uses
and to obtain assurances that comparable steps are being taken by the Fund's
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Fund.
Administrators
Evergreen Investment Services, Inc. ("EIS") serves as administrator to
Evergreen Equity Index. As administrator, EIS provides facilities, equipment and
personnel to Evergreen Equity Index and is entitled to receive an administration
fee from the Fund based on the aggregate average daily net assets of all the
mutual funds advised by FUNB and its affiliates, calculated in accordance with
the following schedule: 0.050% on the first $7 billion, 0.035% on the next $3
billion, 0.030% on the next $5 billion, 0.020% on the next $10 billion, 0.015%
on the next $5 billion and 0.010% on assets in excess of $30 billion.
SEI Fund Resources ("SEI") acts as the administrator for CoreFunds
Equity Index and provides the Fund with certain administrative personnel and
services including certain legal and accounting services. SEI is entitled to
receive a fee for such services at the annual rate of 0.25% of the Fund's
average daily net assets. SEI will continue during the term of the Interim
Advisory Agreement as CoreFunds Equity Index's administrator for the same
compensation as currently received.
Portfolio Management
The portfolio manager of Evergreen Equity Index is Leonard Capristo. Mr.
Capristo, who joined FUNB in 1989 as the Director of Equity Trading, is
currently a Senior Vice President and Portfolio Manager. Mr. Capristo has 26
years of investment experience.
Distribution of Shares
Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund Services,
acts as underwriter of Evergreen Equity Index's shares. EDI distributes the
Fund's shares directly or through broker-dealers, banks (including FUNB), or
other financial intermediaries. Evergreen Equity Index offers two classes of
shares: Institutional Service and Institutional. Each class has separate
distribution arrangements. (See "Distribution-Related Expenses" below.) No class
bears the distribution expenses relating to the shares of any other class.
In the proposed Reorganization, Class Y shareholders of CoreFunds
Equity Index will receive Institutional shares of Evergreen Equity Index and
Class A and Class B shareholders of CoreFunds Equity Index will receive
Institutional Service shares of Evergreen Equity Index. The Institutional and
Institutional
<PAGE>
Service shares of Evergreen Equity Index have the same arrangements with respect
to the imposition of Rule 12b-1 distribution and service fees as the Class Y,
Class A and Class B shares of CoreFunds Equity Index, except that the
Institutional Service shares of Evergreen Equity Index bear substantially lower
12b-1 distribution-related fees than Class B shares of CoreFunds Equity Index.
Because the Reorganization will be effected at net asset value without the
imposition of a sales charge, Evergreen Equity Index shares acquired by
shareholders of CoreFunds Equity Index pursuant to the proposed Reorganization
would not be subject to any initial sales charge or contingent deferred sales
charge as a result of the Reorganization.
The following is a summary description of charges and fees for the
Institutional and Institutional Service shares of Evergreen Equity Index which
will be received by CoreFunds Equity Index shareholders in the Reorganization.
More detailed descriptions of the distribution arrangements applicable to the
classes of shares are contained in the respective Evergreen Equity Index
Prospectuses and the CoreFunds Equity Index Prospectuses and in each Fund's
Statement of Additional Information.
Institutional Shares. Institutional shares are sold at net asset value
without any initial or deferred sales charge and are not subject to
distribution-related fees. Institutional shares are only available to
institutional investors. CoreFunds Equity Index shareholders who receive
Evergreen Equity Index Institutional shares in the Reorganization and who wish
to make subsequent purchases of Evergreen Equity Index shares will be able to
purchase Institutional shares.
Institutional Service Shares. Institutional Service shares are sold at
net asset value without any initial sales charge or deferred sales charge and,
as indicated below, are subject to distribution-related fees.
Additional information regarding the classes of shares of each Fund is
included in its respective Prospectuses and Statement of Additional Information.
Distribution-Related Expenses. Evergreen Equity Index has adopted a
Rule 12b-1 plan with respect to its Institutional Service shares under which the
Class may pay for personal services rendered to shareholders and/or the
maintenance of accounts at an annual rate of 0.25% of average daily net assets
attributable to the Class.
CoreFunds Equity Index has adopted a Rule 12b-1 plan with respect to
its Class A and Class B shares under which Class A shares may pay for
distribution-related expenses at an annual rate of 0.25% of average daily net
assets attributable to the Class and Class B shares may pay a fee of 1.00% of
average daily net assets attributable to the Class. This fee consists of a
<PAGE>
shareholder servicing fee of 0.25% and an asset-based distribution fee of 0.75%.
Neither Evergreen Equity Index with respect to its Institutional shares nor
CoreFunds Equity Index with respect to its Class Y shares has adopted a Rule
12b-1 plan. A Rule 12b-1 plan can only be adopted with shareholder approval.
Additional information regarding the Rule 12b-1 plans adopted by each
Fund is included in its respective Prospectuses and Statement of Additional
Information.
Purchase and Redemption Procedures
Information concerning applicable sales charges and
distribution-related fees is provided above. Investments in the Funds are not
insured. The minimum initial purchase requirement for Evergreen Equity Index is
$1,000,000. The minimum initial purchase requirement for Class A, Class B and
Class Y shares of CoreFunds Equity Index is $500, $500 and $1,000,000,
respectively. There is no minimum for subsequent purchases of shares of either
Fund. Each Fund provides for telephone, mail or wire redemption of shares at net
asset value as next determined after receipt of a redemption request on each day
the New York Stock Exchange ("NYSE") is open for trading. Additional information
concerning purchases and redemptions of shares, including how each Fund's net
asset value is determined, is contained in the respective Prospectuses for each
Fund. CoreFunds Equity Index may involuntarily redeem shareholders' accounts
that have less than $500 of invested funds in Class A or Class B shares. All
funds invested in each Fund are invested in full and fractional shares. The
Funds reserve the right to reject any purchase order.
Exchange Privileges
CoreFunds Equity Index currently permits holders of Class A and Class B
shares to exchange such shares for the same class of shares of another
CoreFunds, Inc. portfolio. Exchanges of Class Y shares are generally not
permitted. Holders of shares of a class of Evergreen Equity Index generally may
exchange their shares for shares of the same class of any other Evergreen Select
fund. CoreFunds Equity Index shareholders will be receiving Institutional and
Institutional Service shares of Evergreen Equity Index in the Reorganization
and, accordingly, with respect to shares of Evergreen Equity Index received by
CoreFunds Equity Index shareholders in the Reorganization, the exchange
privilege is limited to the Institutional and Institutional Service shares, as
applicable, of other Evergreen Select funds. Evergreen Equity Index limits
exchanges to five per calendar year and three per calendar quarter. An exchange
which represents an initial investment in another Evergreen Select fund must
amount to at least $1,000,000. The current exchange privileges, and the
requirements and limitations attendant thereto, are described in
<PAGE>
each Fund's respective Prospectuses and Statement of Additional
Information.
Dividend Policy
Evergreen Equity Index distributes its investment company taxable
income monthly and CoreFunds Equity Index distributes such income quarterly.
Distributions of any net realized gains of a Fund will be made at least
annually. Shareholders begin to earn dividends on the first business day after
shares are purchased unless shares were not paid for, in which case dividends
are not earned until the next business day after payment is received. Dividends
and distributions are reinvested in additional shares of the same class of the
respective Fund, or paid in cash, as a shareholder has elected. See the
respective Prospectuses of each Fund for further information concerning
dividends and distributions.
After the Reorganization, shareholders of CoreFunds Equity Index who
have elected to have their dividends and/or distributions reinvested will have
dividends and/or distributions received from Evergreen Equity Index reinvested
in shares of Evergreen Equity Index. Shareholders of CoreFunds Equity Index who
have elected to receive dividends and/or distributions in cash will receive
dividends and/or distributions from Evergreen Equity Index in cash after the
Reorganization, although they may, after the Reorganization, elect to have such
dividends and/or distributions reinvested in additional shares of Evergreen
Equity Index.
Evergreen Equity Index intends to qualify, and CoreFunds Equity Index
has qualified and intends to continue to qualify, to be treated as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). While so qualified, so long as each Fund distributes all of its net
investment company taxable income and any net realized gains to shareholders, it
is expected that a Fund will not be required to pay any federal income taxes on
the amounts so distributed. A 4% nondeductible excise tax will be imposed on
amounts not distributed if a Fund does not meet certain distribution
requirements by the end of each calendar year. Each Fund anticipates meeting
such distribution requirements.
Risks
Since the investment objectives and policies of each Fund are
identical, the risks involved in investing in each Fund's shares are comparable.
There is no assurance that investment performances will be positive and that the
Funds will meet their investment objectives. For a discussion of each Fund's
objectives and policies, see "Comparison of Investment Objectives and Policies."
<PAGE>
Like all equity funds, each Fund is subject to market risk, i.e., the
possibility that stock prices in general will decline over short, or even
extended, periods of time. This is because stock markets tend to be cyclical,
with periods when stock prices generally rise and periods when stock prices
generally decline.
REASONS FOR THE REORGANIZATION
On November 18, 1997, First Union entered into an Agreement and Plan of
Merger with CoreStates Financial, which provided, among other things, for the
Merger of CoreStates Financial with and into a wholly-owned subsidiary of First
Union. The Merger was consummated on April 30, 1998. As a result of the Merger
it is expected that FUNB and its affiliates will succeed to the investment
advisory and administrative functions currently performed for CoreFunds Equity
Index by various units of CoreStates Financial and various unaffiliated parties.
It is also expected that CoreStates Financial and its subsidiaries will no
longer, upon completion of the Reorganization and similar reorganizations of
other portfolios of CoreFunds, Inc., provide investment advisory or
administrative services to investment companies.
Based on information received from CSIA and FUNB, at a meeting held on
February 6, 1998, all of the Directors present, including the Independent
Directors, considered and approved the Reorganization as in the best interests
of shareholders of CoreFunds Equity Index and determined that the interests of
existing shareholders of CoreFunds Equity Index will not be diluted as a result
of the transactions contemplated by the Reorganization. In addition, the
Directors approved the Interim Advisory Agreement with respect to CoreFunds
Equity Index.
As noted above, CoreStates Financial has merged with and into a
wholly-owned subsidiary of First Union. CoreStates Financial is the parent
company of CSIA, investment adviser to the mutual funds which comprise
CoreFunds, Inc. The Merger caused, as a matter of law, termination of the
investment advisory agreement between each series of CoreFunds, Inc. and CSIA
with respect to the Fund. CoreFunds, Inc. has received an order from the SEC
which permits CSIA to continue to act as CoreFunds Equity Index's investment
adviser, without shareholder approval, for a period of not more than 150 days
from the date the Merger was consummated (April 30, 1998) to the date of
shareholder approval of a new investment advisory agreement. Accordingly, the
Directors considered the recommendations of CSIA in approving the proposed
Reorganization.
In approving the Plan, the Directors reviewed various factors about the
Funds and the proposed Reorganization. The Reorganization is part of an overall
plan to combine the portfolios comprising CoreFunds, Inc. with the Evergreen
family of funds. Evergreen Equity Index is a newly created series of
<PAGE>
Evergreen Select Equity Trust and the effect of the Reorganization will be to
carry on the historical activities of CoreFunds Equity Index as a series of
Evergreen Select Equity Trust. Evergreen Equity Index and CoreFunds Equity Index
have identical investment objectives and policies and comparable risk profiles.
See "Comparison of Investment Objectives and Policies" below.
The Board of Directors of CoreFunds, Inc. met and considered the
recommendation of CSIA and FUNB, and, in addition, considered among other
things, (i) the terms and conditions of the Reorganization; (ii) whether the
Reorganization would result in the dilution of shareholders' interests; (iii)
expense ratios, fees and expenses of Evergreen Equity Index and CoreFunds Equity
Index and the agreement by Evergreen Equity Index's investment adviser to limit
the Fund's annual operating expenses for a period of at least two years to the
current annual operating expenses (before waivers) of CoreFunds Equity Index;
(iv) compatibility of their investment objectives and policies; (v) the
investment experience, expertise and resources of FUNB; (vi) the service and
distribution resources available to the Evergreen funds and the broad array of
investment alternatives available to shareholders of the Evergreen funds; (vii)
the personnel and financial resources of First Union and its affiliates; (viii)
the fact that FUNB will bear the expenses incurred by CoreFunds Equity Index in
connection with the Reorganization; (ix) the fact that Evergreen Equity Index
will assume the identified liabilities of CoreFunds Equity Index; and (x) the
expected federal income tax consequences of the Reorganization.
The Directors also considered the benefits to be derived by
shareholders of CoreFunds Equity Index from the sale of its assets to Evergreen
Equity Index. In addition, the Directors considered that there are alternatives
available to shareholders of CoreFunds Equity Index, including the ability to
redeem their shares, as well as the option to vote against the Reorganization.
Section 15(f) of the 1940 Act provides that when a change in the
control of an investment adviser occurs, the investment adviser or any of its
affiliated persons may receive any amount or benefit in connection therewith
under certain conditions. One condition is that for three years thereafter, at
least 75% of the board of directors of a surviving investment company are not
"interested persons" of the company's investment adviser or of the investment
adviser of the terminating investment company. Another condition is that no
"unfair burden" is imposed on the investment company as a result of the
understandings applicable thereto. The term "unfair burden" is considered under
the 1940 Act to include any arrangement during the two-year period after the
transaction whereby the investment adviser (or predecessor or successor
adviser), or any "interested person" of any such adviser, receives or is
entitled to receive any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment
<PAGE>
advisory or other services) or from any person in connection with the purchase
or sale of securities or other property to, from or on behalf of the investment
company (other than fees for bona fide principal underwriting services). FUNB
advised CoreFunds, Inc. that it intends to comply with conditions set forth in
Section 15(f).
During their consideration of the Reorganization the Directors met with
Fund counsel regarding the legal issues involved. The Trustees of Evergreen
Select Equity Trust also concluded at a meeting on February 11, 1998 that the
proposed Reorganization would be in the best interests of shareholders of
Evergreen Equity Index.
The Directors of CoreFunds, Inc. have voted to retain their ability to
make claims under their existing Directors and Officers Errors and Omissions
Liability Insurance Policy for a period of three years following the
consummation of the Reorganization. CoreStates Financial and First Union have
agreed to take appropriate steps to insure that the cost of extending such
coverage will not be borne by CoreFunds Equity Index's shareholders.
THE DIRECTORS OF COREFUNDS, INC. RECOMMEND
THAT THE SHAREHOLDERS OF COREFUNDS EQUITY INDEX APPROVE
THE PROPOSED REORGANIZATION.
Agreement and Plan of Reorganization
The following summary is qualified in its entirety by reference to the
Plan (Exhibit A hereto).
The Plan provides that Evergreen Equity Index will acquire all of the
assets of CoreFunds Equity Index in exchange for shares of Evergreen Equity
Index and the assumption by Evergreen Equity Index of the identified liabilities
of CoreFunds Equity Index on or about July 27, 1998 or such other date as may be
agreed upon by the parties (the "Closing Date"). Prior to the Closing Date,
CoreFunds Equity Index will endeavor to discharge all of its known liabilities
and obligations. Evergreen Equity Index will not assume any liabilities or
obligations of CoreFunds Equity Index other than those reflected in an unaudited
statement of assets and liabilities of CoreFunds Equity Index prepared as of the
close of regular trading on the NYSE, currently 4:00 p.m. Eastern time, on the
business day immediately prior to the Closing Date. Shareholders of CoreFunds
Equity Index will receive the number of full and fractional shares of each class
of Evergreen Equity Index equal to the number of shares of each corresponding
class as they currently hold of CoreFunds Equity Index. Such computations will
take place as of the close of regular trading on the NYSE on the business day
immediately prior to the Closing Date. The net asset value per share of each
class will be determined by dividing assets, less liabilities, in each
<PAGE>
case attributable to the respective class, by the total number of
outstanding shares.
State Street Bank and Trust Company, the custodian for Evergreen Equity
Index, will compute the value of CoreFunds Equity Index's respective portfolio
securities. The method of valuation employed will be consistent with the
procedures set forth in the Prospectuses and Statement of Additional Information
of Evergreen Equity Index, Rule 22c-1 under the 1940 Act, and with the
interpretations of such Rule by the SEC's Division of Investment Management.
As soon after the Closing Date as conveniently practicable, CoreFunds
Equity Index will liquidate and distribute pro rata to shareholders of record as
of the close of business on the Closing Date the full and fractional shares of
Evergreen Equity Index received by CoreFunds Equity Index. Such liquidation and
distribution will be accomplished by the establishment of accounts in the names
of the Fund's shareholders on Evergreen Equity Index's share records of its
transfer agent. Each account will represent the respective pro rata number of
full and fractional shares of Evergreen Equity Index due to the Fund's
shareholders. All issued and outstanding shares of CoreFunds Equity Index,
including those represented by certificates, will be canceled. The shares of
Evergreen Equity Index to be issued will have no preemptive or conversion
rights. After these distributions and the winding up of its affairs, CoreFunds
Equity Index will be terminated. In connection with such termination, CoreFunds,
Inc. will file with the SEC an application for termination as a registered
investment company.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan, including approval by CoreFunds Equity Index's shareholders,
accuracy of various representations and warranties and receipt of opinions of
counsel, including opinions with respect to those matters referred to in
"Federal Income Tax Consequences" below. Notwithstanding approval of CoreFunds
Equity Index's shareholders, the Plan may be terminated (a) by the mutual
agreement of CoreFunds Equity Index and Evergreen Equity Index; or (b) at or
prior to the Closing Date by either party (i) because of a breach by the other
party of any representation, warranty, or agreement contained therein to be
performed at or prior to the Closing Date if not cured within 30 days, or (ii)
because a condition to the obligation of the terminating party has not been met
and it reasonably appears that it cannot be met.
The expenses of CoreFunds Equity Index in connection with the
Reorganization (including the cost of any proxy soliciting agent) will be borne
by FUNB whether or not the Reorganization is consummated. No portion of such
expenses will be borne directly or indirectly by CoreFunds Equity Index or its
shareholders.
<PAGE>
If the Reorganization is not approved by shareholders of CoreFunds
Equity Index, the Board of Directors of CoreFunds, Inc. will consider other
possible courses of action in the best interests of shareholders.
Federal Income Tax Consequences
The Reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under section 368(a) of the Code. As a
condition to the closing of the Reorganization, CoreFunds Equity Index will
receive an opinion of Sullivan & Worcester LLP to the effect that, on the basis
of the existing provisions of the Code, U.S. Treasury regulations issued
thereunder, current administrative rules, pronouncements and court decisions,
for federal income tax purposes, upon consummation of the Reorganization:
(1) The transfer of all of the assets of CoreFunds Equity Index solely
in exchange for shares of Evergreen Equity Index and the assumption by Evergreen
Equity Index of the identified liabilities, followed by the distribution of
Evergreen Equity Index shares by CoreFunds Equity Index in dissolution and
liquidation of CoreFunds Equity Index, will constitute a "reorganization" within
the meaning of section 368(a)(1)(F) of the Code, and Evergreen Equity Index and
CoreFunds Equity Index will each be a "party to a reorganization" within the
meaning of section 368(b) of the Code;
(2) No gain or loss will be recognized by CoreFunds Equity Index on the
transfer of all of its assets to Evergreen Equity Index solely in exchange for
Evergreen Equity Index's shares and the assumption by Evergreen Equity Index of
the identified liabilities of CoreFunds Equity Index or upon the distribution of
Evergreen Equity Index's shares to CoreFunds Equity Index's shareholders in
exchange for their shares of CoreFunds Equity Index;
(3) The tax basis of the assets transferred will be the same to
Evergreen Equity Index as the tax basis of such assets to CoreFunds Equity Index
immediately prior to the Reorganization, and the holding period of such assets
in the hands of Evergreen Equity Index will include the period during which the
assets were held by CoreFunds Equity Index;
(4) No gain or loss will be recognized by Evergreen Equity Index upon
the receipt of the assets from CoreFunds Equity Index solely in exchange for the
shares of Evergreen Equity Index and the assumption by Evergreen Equity Index of
the identified liabilities of CoreFunds Equity Index;
(5) No gain or loss will be recognized by CoreFunds Equity Index's
shareholders upon the issuance of the shares of Evergreen Equity Index to them,
provided they receive solely such shares
<PAGE>
(including fractional shares) in exchange for their shares of
CoreFunds Equity Index; and
(6) The aggregate tax basis of the shares of Evergreen Equity Index,
including any fractional shares, received by each of the shareholders of
CoreFunds Equity Index pursuant to the Reorganization will be the same as the
aggregate tax basis of the shares of CoreFunds Equity Index held by such
shareholder immediately prior to the Reorganization, and the holding period of
the shares of Evergreen Equity Index, including fractional shares, received by
each such shareholder will include the period during which the shares of
CoreFunds Equity Index exchanged therefor were held by such shareholder
(provided that the shares of CoreFunds Equity Index were held as a capital asset
on the date of the Reorganization).
Opinions of counsel are not binding upon the Internal Revenue Service
or the courts. If the Reorganization is consummated but does not qualify as a
tax-free reorganization under the Code, a shareholder of CoreFunds Equity Index
would recognize a taxable gain or loss equal to the difference between his or
her tax basis in his or her Fund shares and the fair market value of Evergreen
Equity Index shares he or she received. Shareholders of CoreFunds Equity Index
should consult their tax advisers regarding the effect, if any, of the proposed
Reorganization in light of their individual circumstances. Since the foregoing
discussion relates only to the federal income tax consequences of the
Reorganization, shareholders of CoreFunds Equity Index should also consult their
tax advisers as to the state and local tax consequences, if any, of the
Reorganization.
Capital loss carryforwards of CoreFunds Equity Index will be available
to Evergreen Equity Index to offset capital gains recognized after the
Reorganization, subject to limitations imposed by the Code. These limitations
provide generally that the amount of loss carryforward which may be used in any
year following the closing is an amount equal to the value of all of the
outstanding stock of CoreFunds Equity Index immediately prior to the
Reorganization, multiplied by a long-term tax-exempt bond rate determined
monthly by the Internal Revenue Service. The rate for February, 1998 was 5.23%.
A capital loss carryforward may generally be used without any limit to offset
gains recognized on sale of assets transferred by CoreFunds Equity Index to
Evergreen Equity Index pursuant to the Reorganization, to the extent of the
excess of the value of any such asset on the Closing Date over its tax basis.
Pro-forma Capitalization
The following table sets forth the capitalization of CoreFunds Equity
Index as of December 31, 1997, and the capitalization of Evergreen Equity Index
on a pro forma basis as of that date, giving effect to the proposed acquisition
of assets
<PAGE>
at net asset value. As a newly created series of Evergreen Select Equity Trust,
Evergreen Equity Index, immediately preceding the Closing Date, will have
nominal assets and liabilities. The pro forma data reflects an exchange ratio of
1.00, 1.00 and 0.98638 Institutional, Institutional Service and Institutional
Service shares, respectively, of Evergreen Equity Index issued for each Class Y,
Class A and Class B share, respectively, of CoreFunds Equity Index.
<TABLE>
<CAPTION>
Capitalization of CoreFunds Equity Index
and Evergreen Equity Index (Pro Forma)
Evergreen Equity
CoreFunds Index (After
Equity Index Reorganization)
------------ ----------------
<S> <C> <C>
Net Assets
Institutional.................. N/A $262,831,442
Institutional
Service........................ N/A $9,856,751
Class A........................ $9,114,286 N/A
Class B........................ $742,465 N/A
Class Y........................ $262,831,442 N/A
-------- -------
Total Net $272,688,193 $272,688,193
Assets
Net Asset Value Per
Share
Institutional.................. N/A $39.65
Institutional
Service........................ N/A $39.66
Class A........................ $39.66 N/A
Class B........................ $39.12 N/A
Class Y........................ $39.65 N/A
Shares Outstanding
Institutional.................. N/A 6,628,613
Institutional
Service........................ N/A 248,562
Class A........................ 229,839 N/A
Class B........................ 18,981 N/A
Class Y........................ 6,628,613 N/A
----------- ----------
All Classes.................... 6,877,433 6,877,175
</TABLE>
The table set forth above should not be relied upon to reflect the
number of shares to be received in the Reorganization; the actual number of
shares to be received will depend upon the net asset value and number of shares
outstanding of each Fund at the time of the Reorganization.
Shareholder Information
<PAGE>
As of May 29, 1998 (the "Record Date"), the following number of each
Class of shares of beneficial interest of CoreFunds Equity Index was
outstanding:
Class of Shares
- ---------------
Class Y........................................ 6,825,961
Class A........................................ 259,112
Class B........................................ 41,367
---------
All Classes.................................... 7,126,440
As of March 31, 1998, the officers and Directors of CoreFunds, Inc.
beneficially owned as a group less than 1% of the outstanding shares of
CoreFunds Equity Index. To CoreFunds, Inc.'s knowledge, the following person
owned beneficially or of record more than 5% of CoreFunds Equity Index's total
outstanding shares as of March 31, 1998:
<TABLE>
<CAPTION>
Percentage
of Shares Percentage of
of Class Shares of
Before Class After
No. of Reorgani- Reorgani-
Name and Address Class Shares zation zation
- ---------------- ----- ------ --------- ---------
<S> <C> <C> <C> <C>
Patterson & Co. Y 5,950,881 87.35% 87.35%
PNB Personal
Trust Accounting
P.O. Box 7829
Philadelphia, PA
19101-7829
</TABLE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its entirety by
the descriptions of the respective investment objectives, policies and
restrictions set forth in the respective Prospectuses and Statement of
Additional Information of the Funds. The investment objective, policies and
restrictions of Evergreen Equity Index can be found in the Prospectuses of
Evergreen Equity Index under the caption "Fund Descriptions Investment
Objectives" and "Securities and Investment Practices Used by Each Fund."
Evergreen Equity Index's Prospectuses also offer additional funds advised by
FUNB or its affiliates. These additional funds are not involved in the
Reorganization, their investment objectives and policies are not discussed in
this Prospectus/Proxy Statement, and their shares are not offered hereby. The
investment objective, policies and restrictions of CoreFunds Equity Index can be
found in the respective Prospectuses of the Fund under the caption "Information
on the
<PAGE>
Funds." Unlike the investment objective of CoreFunds Equity Index, which is
fundamental, the investment objective of Evergreen Equity Index is
non-fundamental and can be changed by the Board of Trustees without shareholder
approval.
The investment objective and policies of each Fund are identical. Each
Fund seeks investment results that achieve price and yield performance similar
to the S&P 500 Index. Each Fund invests at least 90% of its total assets in
equity securities that represent a composite of the S&P 500 Index. The S&P 500
Index consists of 500 common stocks, most of which are listed on the New York
Stock Exchange. In choosing the 500 stocks which are included in the S&P 500
Index, Standard & Poor's Corporation ("S&P") considers market values and
industry diversification.
Each Fund's investment portfolio will generally consist of common
stocks of as many issuers listed in the S&P 500 Index as is feasible. Each
Fund's investment adviser uses a computer model that closely monitors the
industry weightings of the S&P 500 Index. Although each Fund's investment
adviser does not screen securities by traditional methods of financing and
market analyses, it monitors the Fund's investments with a view toward removing
stocks of companies which exhibit extreme financial distress or which may impair
the Fund's ability to achieve its investment objective. Each Fund strives to
provide a total return comparable to the S&P 500 Index. Neither Fund is
sponsored by nor affiliated with S&P.
Each Fund may also invest up to 10% of its total assets in U.S.
government securities, warrants (up to 5% of its total assets), certificates of
deposit and bankers' acceptances of domestic branches of U.S. banks. Neither
Fund may engage in options and futures transactions.
Each Fund may invest, for temporary defensive purposes, up to 100% of
its assets in short-term obligations. Such obligations may include U.S.
government securities, master demand notes, commercial paper and notes, bank
deposits and other financial institution obligations.
The characteristics of each investment policy and the associated risks
are described in each Fund's respective Prospectuses and Statement of Additional
Information. The Funds have other investment policies and restrictions which are
also set forth in the Prospectuses and Statement of Additional Information of
each Fund.
<PAGE>
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
Forms of Organization
Evergreen Select Equity Trust and CoreFunds, Inc. are open-end
management investment companies registered with the SEC under the 1940 Act,
which continuously offer shares to the public. Evergreen Select Equity Trust is
organized as a Delaware business trust and is governed by its Declaration of
Trust, By-Laws and a Board of Trustees. CoreFunds, Inc. is organized as a
Maryland corporation and is governed by its Articles of Incorporation, ByLaws
and a Board of Directors. Each entity is also governed by applicable Delaware,
Maryland and federal law. Evergreen Equity Index is a series of Evergreen Select
Equity Trust and CoreFunds Equity Index is a series of CoreFunds, Inc.
Capitalization
The beneficial interests in Evergreen Equity Index are represented by
an unlimited number of transferable shares of beneficial interest, $.001 par
value per share. CoreFunds, Inc.'s authorized shares consist of 30 billion
shares of common stock, par value $.001 per share, of which 500 million are
classified as Class Y shares, 500 million are classified as Class A shares and
500 million are classified as Class B shares of CoreFunds Equity Index.
Evergreen Select Equity Trust's Declaration of Trust and CoreFunds, Inc.'s
Articles of Incorporation permit the Trustees or Directors, respectively, to
allocate shares into an unlimited number of series, and classes thereof, with
rights determined by the Trustees or Directors, respectively, all without
shareholder approval. Fractional shares may be issued by either Fund. Each
Fund's shares represent equal proportionate interests in the assets belonging to
the Funds. Shareholders of each Fund are entitled to receive dividends and other
amounts as determined by the Trustees or Directors. Shareholders of each Fund
vote separately, by class, as to matters, such as approval of or amendments to
Rule 12b-1 distribution plans, that affect only their particular class and by
Fund as to matters, such as approval of or amendments to investment advisory
agreements or proposed reorganizations, that affect only their particular Fund.
Shareholder Liability
Under Delaware law, shareholders of a Delaware business trust are
entitled to the same limitation of personal liability extended to stockholders
of Delaware corporations. No similar statutory or other authority limiting
business trust shareholder liability exists in any other state. As a result, to
the extent that Evergreen Select Equity Trust or a shareholder is subject to the
jurisdiction of courts in those states, it is possible that a court may not
apply Delaware law, and may thereby subject shareholders of Evergreen Select
Equity Trust to liability. To guard against this risk, the Declaration of Trust
of Evergreen
<PAGE>
Select Equity Trust (a) provides that any written obligation of the Trust may
contain a statement that such obligation may only be enforced against the assets
of the Trust or the particular series in question and the obligation is not
binding upon the shareholders of the Trust; however, the omission of such a
disclaimer will not operate to create personal liability for any shareholder;
and (b) provides for indemnification out of Trust property of any shareholder
held personally liable for the obligations of the Trust. Accordingly, the risk
of a shareholder of Evergreen Select Equity Trust incurring financial loss
beyond that shareholder's investment because of shareholder liability is limited
to circumstances in which: (i) the court refuses to apply Delaware law; (ii) no
contractual limitation of liability was in effect; and (iii) the Trust itself is
unable to meet its obligations. In light of Delaware law, the nature of the
Trust's business, and the nature of its assets, the risk of personal liability
to a shareholder of Evergreen Select Equity Trust is remote.
Under Maryland law, shareholders of CoreFunds Equity Index have no
personal liability as such for the acts or obligations of the Fund or CoreFunds,
Inc., as the case may be.
Shareholder Meetings and Voting Rights
Neither Evergreen Select Equity Trust on behalf of Evergreen Equity
Index nor CoreFunds, Inc. on behalf of CoreFunds Equity Index is required to
hold annual meetings of shareholders. However, a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee or Director must be
called when requested in writing by the holders of at least 10% of the
outstanding shares of Evergreen Select Equity Trust or CoreFunds, Inc. In
addition, each is required to call a meeting of shareholders for the purpose of
electing Trustees or Directors if, at any time, less than a majority of the
Trustees or Directors then holding office were elected by shareholders. Neither
Evergreen Select Equity Trust nor CoreFunds, Inc. currently intends to hold
regular shareholder meetings and neither entity permits cumulative voting.
Except when a larger quorum is required by applicable law, with respect to
Evergreen Equity Index, twenty-five percent (25%) of the outstanding shares
entitled to vote, and with respect to CoreFunds Equity Index, a majority of the
outstanding shares entitled to vote constitutes a quorum for consideration of
such matter. For Evergreen Equity Index, a majority of the votes cast and
entitled to vote, and for CoreFunds Equity Index, a majority of the outstanding
shares, is sufficient to act on a matter (unless otherwise specifically required
by the applicable governing documents or other law, including the 1940 Act).
Under the Declaration of Trust of Evergreen Select Equity Trust, each
share of Evergreen Equity Index will be entitled to one vote for each dollar of
net asset value applicable to each share. Under the voting provisions governing
CoreFunds Equity
<PAGE>
Index, each share is entitled to one vote. Over time, the net asset values of
the mutual funds which are each a series of CoreFunds, Inc. have changed in
relation to one another and are expected to continue to do so in the future.
Because of the divergence in net asset values, a given dollar investment in a
fund with a lower net asset value will purchase more shares, and under CoreFunds
Equity Index's voting provisions, have more votes, than the same investment in a
fund with a higher net asset value. Under the Declaration of Trust of Evergreen
Select Equity Trust, voting power is related to the dollar value of the
shareholders' investment rather than to the number of shares held.
Liquidation or Dissolution
In the event of the liquidation of Evergreen Equity Index or CoreFunds
Equity Index, the shareholders are entitled to receive, when and as declared by
the Trustees or Directors, respectively, the excess of the assets belonging to
such Fund or attributable to the class over the liabilities belonging to the
Fund or attributable to the class. In either case, the assets so distributable
to shareholders of the Fund will be distributed among the shareholders in
proportion to the number of shares of a class of the Fund held by them and
recorded on the books of the Fund.
Liability and Indemnification of Trustees
The By-Laws of CoreFunds, Inc. provide that a present or former
Director or officer is entitled to indemnification to the full extent
permissible under the laws of the State of Maryland and the 1940 Act against
liabilities and expenses with respect to claims related to his or her position
with CoreFunds, Inc., provided that no indemnification shall be provided to a
Director or officer against any liability to CoreFunds, Inc. or any shareholder
by reasons of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
Under the Declaration of Trust of Evergreen Select Equity Trust, a
Trustee is liable to the Trust and its shareholders only for such Trustee's own
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of the office of Trustee or the discharge of such
Trustee's functions. As provided in the Declaration of Trust, each Trustee of
the Trust is entitled to be indemnified against all liabilities against him or
her, including the costs of litigation, unless it is determined that the Trustee
(i) did not act in good faith in the reasonable belief that such Trustee's
action was in or not opposed to the best interests of the Trust; (ii) had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard of
such Trustee's duties; and (iii) in a criminal proceeding, had reasonable cause
to believe that such Trustee's conduct was unlawful (collectively,
<PAGE>
"disabling conduct"). A determination that the Trustee did not engage in
disabling conduct and is, therefore, entitled to indemnification may be based
upon the outcome of a court action or administrative proceeding or by (a) a vote
of a majority of those Trustees who are neither "interested persons" within the
meaning of the 1940 Act nor parties to the proceeding or (b) an independent
legal counsel in a written opinion. The Trust may also advance money for such
litigation expenses provided that the Trustee undertakes to repay the Trust if
his or her conduct is later determined to preclude indemnification and certain
other conditions are met.
The foregoing is only a summary of certain characteristics of the
operations of the Declaration of Trust of Evergreen Select Equity Trust,
Articles of Incorporation of CoreFunds, Inc., ByLaws, Delaware and Maryland law
and is not a complete description of those documents or law. Shareholders should
refer to the provisions of such Declaration of Trust, Articles of Incorporation
, By-Laws, Delaware and Maryland law directly for more complete information.
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT
Introduction
In view of the Merger discussed above, and the factors discussed below,
the Board of Directors of CoreFunds, Inc. recommends that shareholders of
CoreFunds Equity Index approve the Interim Advisory Agreement. The Merger became
effective on April 30, 1998. Pursuant to an order received from the SEC all fees
payable under the Interim Advisory Agreement will be placed in escrow and paid
to CSIA if shareholders approve the contract within 150 days of its effective
date. The Interim Advisory Agreement will remain in effect until the earlier of
the Closing Date for the Reorganization or two years from its effective date.
The terms of the Interim Advisory Agreement are essentially the same as the
Previous Advisory Agreement (as defined below). The only difference between the
Previous Advisory Agreement and the Interim Advisory Agreement, if approved by
shareholders, is the length of time each Agreement is in effect. A description
of the Interim Advisory Agreement pursuant to which CSIA continues as investment
adviser to CoreFunds Equity Index, as well as the services to be provided by
CSIA pursuant thereto, is set forth below under "Advisory Services." The
description of the Interim Advisory Agreement in this Prospectus/Proxy Statement
is qualified in its entirety by reference to the Interim Advisory Agreement,
attached hereto as Exhibit B.
CSIA, a Pennsylvania corporation, is an indirect wholly-owned
subsidiary of First Union. CSIA's address is 1500 Market Street, Philadelphia,
Pennsylvania 19102. CSIA has served as investment adviser pursuant to an
Investment Advisory Agreement dated April 12, 1996. As used herein, the
Investment Advisory Agreement for CoreFunds Equity Index is referred to as
<PAGE>
the "Previous Advisory Agreement." At a meeting of the Board of Directors of
CoreFunds, Inc. held on February 6, 1998, the Directors, including a majority of
the Independent Directors, approved the Interim Advisory Agreement for CoreFunds
Equity
Index.
The Directors have authorized CoreFunds, Inc., on behalf of CoreFunds
Equity Index, to enter into the Interim Advisory Agreement with CSIA. Such
Agreement became effective on April 30, 1998. If the Interim Advisory Agreement
for CoreFunds Equity Index is not approved by shareholders, the Directors will
consider appropriate actions to be taken with respect to CoreFunds Equity
Index's investment advisory arrangements at that time. The Previous Advisory
Agreement was last approved by the Directors, including a majority of the
Independent Directors, on June 5, 1997.
Comparison of the Interim Advisory Agreement and the Previous Advisory Agreement
Advisory Services. The management and advisory services to be provided
by CSIA under the Interim Advisory Agreement are identical to those currently
provided by CSIA under the Previous Advisory Agreement. Under the Previous
Advisory Agreement and Interim Advisory Agreement, CSIA manages the investment
portfolio of CoreFunds Equity Index, makes decisions about and places orders for
all purchases and sales of the Fund's securities, and maintains certain records
relating to these purchases and sales.
Fees. The investment advisory fees for CoreFunds Equity Index under the
Previous Advisory Agreement and the Interim Advisory Agreement are identical.
See "Summary - Investment Advisers."
Payment of Expenses and Transaction Charges. Under the Previous
Advisory Agreement, CSIA was required to pay all expenses incurred by it in
connection with its activities under the Agreement other than the cost of
securities (including brokerage commissions, if any) purchased for the Fund and
the cost of obtaining market quotations of portfolio securities held by the
Fund.
The Interim Advisory Agreement contains an identical provision.
Limitation of Liability. The Previous Advisory Agreement provided that CSIA
was not liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection
<PAGE>
with the performance of the Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of CSIA in the performance of its duties or from reckless disregard by it
of its obligations and duties under the Agreement.
The Interim Advisory Agreement contains an identical provision.
Termination; Assignment. The Interim Advisory Agreement provides that
it may be terminated without penalty by vote of a majority of the outstanding
voting securities of CoreFunds Equity Index (as defined in the 1940 Act) or by a
vote of a majority of CoreFunds, Inc.'s entire Board of Directors on 60 days'
written notice to CSIA or by CSIA on 60 days' written notice to CoreFunds, Inc.
Also, the Interim Advisory Agreement will automatically terminate in the event
of its assignment (as defined in the 1940 Act).
The Previous Advisory Agreement contained identical provisions as to
termination and assignment.
Information About CoreFunds Equity Index's Investment Adviser
CSIA, a registered investment adviser, manages, in addition to the
Fund, other funds of CoreFunds, Inc. The name and address of each executive
officer and director of CSIA is set forth in Appendix A to this Prospectus/Proxy
Statement.
During the fiscal years ended June 30, 1997, 1996 and 1995, CSIA
received from CoreFunds Equity Index management fees of $283,548, $182,967 and
$85,692, respectively, and waived fees of $516,386, $365,435 and $259,535,
respectively. CSIA is currently waiving a portion of its management fee. See
"Comparison of Fees and Expenses." CoreStates Bank, N.A. acts without charge as
custodian for CoreFunds Equity Index.
The Board of Directors considered the Interim Advisory Agreement as
part of its overall approval of the Plan. The Board of Directors considered,
among other things, the factors set forth above in "Reasons for the
Reorganization." The Board of Directors also considered the fact that there were
no material differences between the terms of the Interim Advisory Agreement and
the terms of the Previous Advisory Agreement.
THE DIRECTORS OF COREFUNDS, INC. RECOMMEND
THAT THE SHAREHOLDERS OF COREFUNDS EQUITY INDEX
APPROVE THE INTERIM ADVISORY AGREEMENT.
ADDITIONAL INFORMATION
Evergreen Equity Index. Information concerning the operation and management
of Evergreen Equity Index is
<PAGE>
incorporated herein by reference from the Prospectuses dated June 1, 1998,
copies of which are enclosed, and Statement of Additional Information of the
same date. A copy of such Statement of Additional Information is available upon
request and without charge by writing to Evergreen Equity Index at the address
listed on the cover page of this Prospectus/Proxy Statement or by calling
toll-free 1-800-343-2898.
CoreFunds Equity Index. Information about the Fund is included in its
current Prospectuses dated November 1, 1997 and in the Statement of Additional
Information of the same date, that have been filed with the SEC, all of which
are incorporated herein by reference. Copies of the Prospectuses and Statement
of Additional Information are available upon request and without charge by
writing to CoreFunds Equity Index at the address listed on the cover page of
this Prospectus/Proxy Statement or by calling toll-free 1-800-355-2673.
Evergreen Equity Index and CoreFunds Equity Index are each subject to
the informational requirements of the Securities Exchange Act of 1934 and the
1940 Act, and in accordance therewith file reports and other information
including proxy material, and charter documents with the SEC. These items can be
inspected and copies obtained at the Public Reference Facilities maintained by
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
Regional Offices located at Northwest Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661- 2511 and Seven World Trade Center, Suite 1300, New
York, New York 10048.
The SEC maintains a Web site (http://www.sec.gov) that contains each
Fund's Statement of Additional Information and other material incorporated by
reference herein together with other information regarding Evergreen Equity
Index and CoreFunds Equity Index.
VOTING INFORMATION CONCERNING THE MEETING
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Directors of CoreFunds, Inc. to be used at the
Special Meeting of Shareholders to be held at 2:00 p.m., July 17, 1998, at the
offices of the Evergreen Funds, 200 Berkeley Street, 26th Floor, Boston,
Massachusetts 02116, and at any adjournments thereof. This Prospectus/Proxy
Statement, along with a Notice of the Meeting and a proxy card, is first being
mailed to shareholders of CoreFunds Equity Index on or about June 8, 1998. Only
shareholders of record as of the close of business on the Record Date will be
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
The holders of a majority of the outstanding shares at the close of business on
the Record Date present in person or represented by proxy will constitute a
quorum for the Meeting. If the enclosed form of proxy is properly executed and
returned in time to be voted at the Meeting, the proxies named therein
<PAGE>
will vote the shares represented by the proxy in accordance with the
instructions marked thereon. Unmarked proxies will be voted FOR the proposed
Reorganization, FOR the Interim Advisory Agreement and FOR any other matters
deemed appropriate. Proxies that reflect abstentions and "broker non-votes"
(i.e., shares held by brokers or nominees as to which (i) instructions have not
been received from the beneficial owners or the persons entitled to vote or (ii)
the broker or nominee does not have discretionary voting power on a particular
matter) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but will have the effect of
being counted as votes against the Plan and the Interim Advisory Agreement which
must be approved by a percentage of the shares present at the Meeting or a
majority of the outstanding voting securities. A proxy may be revoked at any
time on or before the Meeting by written notice to the Secretary of CoreFunds,
Inc. at the address set forth on the cover of this Prospectus/Proxy Statement.
Unless revoked, all valid proxies will be voted in accordance with the
specifications thereon or, in the absence of such specifications, FOR approval
of the Plan and the Reorganization contemplated thereby and FOR approval of the
Interim Advisory Agreement.
Approval of the Plan will require the affirmative vote of a majority of
the outstanding shares, with all classes voting together as a single class at
the Meeting at which a quorum of the Fund's shares is present. Approval of the
Interim Advisory Agreement will require the affirmative vote of (i) 67% or more
of the outstanding voting securities present at the Meeting if holders of more
than 50% of the outstanding voting securities are present, in person or by
proxy, at the Meeting, or (ii) more than 50% of the outstanding voting
securities, whichever is less, with all classes voting together as one class.
Each full share outstanding is entitled to one vote and each fractional share
outstanding is entitled to a proportionate share of one vote.
Proxy solicitations will be made primarily by mail, but proxy
solicitations may also be made by telephone, telegraph or personal solicitations
conducted by officers and employees of FUNB or CSIA, their affiliates or other
representatives of CoreFunds Equity Index (who will not be paid for their
soliciting activities). Shareholder Communications Corporation ("SCC") and its
agents have been engaged by CoreFunds Equity Index to assist in soliciting
proxies, and may call shareholders to ask if they would be willing to authorize
SCC to execute a proxy on their behalf authorizing the voting of their shares in
accordance with the instructions given over the telephone by the shareholders.
In addition, shareholders may call SCC at 1-800-733-8481 extension 468 between
the hours of 9:00 a.m. and 11:00 p.m. Eastern time in order to initiate the
processing of their votes by telephone. SCC will utilize a telephone vote
solicitation procedure designed to authenticate the shareholder's identity by
asking the shareholder to provide his or her social security number (in the case
of an individual) or taxpayer identification
<PAGE>
number (in the case of an entity). The shareholder's telephone instructions will
be implemented in a proxy executed by SCC and a confirmation will be sent to the
shareholder to ensure that the vote has been authorized in accordance with the
shareholder's instructions. Although a shareholder's vote may be solicited and
cast in this manner, each shareholder will receive a copy of this
Prospectus/Proxy Statement and may vote by mail using the enclosed proxy card.
CoreFunds Equity Index believes that this telephonic voting system complies with
applicable law and has reviewed an opinion of counsel to that effect.
If you wish to participate in the Meeting, you may submit the proxy
card included with this Prospectus/Proxy Statement, vote by telephone, vote by
fax or attend in person. Any proxy given by you is revocable.
In the event that sufficient votes to approve the Reorganization are
not received by July 17, 1998, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
Any such adjournment will require an affirmative vote by the holders of a
majority of the shares present in person or by proxy and entitled to vote at the
Meeting. The persons named as proxies will vote upon such adjournment after
consideration of all circumstances which may bear upon a decision to adjourn the
Meeting.
A shareholder who objects to the proposed Reorganization will not be
entitled under either Maryland law or the Articles of Incorporation of
CoreFunds, Inc. to demand payment for, or an appraisal of, his or her shares.
However, shareholders should be aware that the Reorganization as proposed is not
expected to result in recognition of gain or loss to shareholders for federal
income tax purposes and that, if the Reorganization is consummated, shareholders
will be free to redeem the shares of Evergreen Equity Index which they receive
in the transaction at their then-current net asset value. Shares of CoreFunds
Equity Index may be redeemed at any time prior to the consummation of the
Reorganization. Shareholders of CoreFunds Equity Index may wish to consult their
tax advisers as to any differing consequences of redeeming Fund shares prior to
the Reorganization or exchanging such shares in the Reorganization.
CoreFunds Equity Index does not hold annual shareholder meetings. If
the Reorganization is not approved, shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for a subsequent shareholder
meeting should send their written proposals to the Secretary of CoreFunds, Inc.
at the address set forth on the cover of this Prospectus/Proxy
<PAGE>
Statement such that they will be received by the Fund in a reasonable period of
time prior to any such meeting.
The votes of the shareholders of Evergreen Equity Index are not being
solicited by this Prospectus/Proxy Statement and are not required to carry out
the Reorganization.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES.
Please advise CoreFunds Equity Index whether other persons are beneficial owners
of shares for which proxies are being solicited and, if so, the number of copies
of this Prospectus/Proxy Statement needed to supply copies to the beneficial
owners of the respective shares.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements and financial highlights of CoreFunds Equity
Index incorporated in this Prospectus/Proxy Statement by reference from the
Annual Report of CoreFunds, Inc. for the year ended June 30, 1997 have been
audited by Ernst & Young LLP, independent auditors, as stated in their report,
which is incorporated herein by reference and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Evergreen
Equity Index will be passed upon by Sullivan & Worcester LLP, Washington, D.C.
OTHER BUSINESS
The Directors of CoreFunds, Inc. do not intend to present any other
business at the Meeting. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying form of proxy will
vote thereon in accordance with their judgment.
THE DIRECTORS OF COREFUNDS, INC. RECOMMEND APPROVAL OF THE PLAN AND THE
INTERIM ADVISORY AGREEMENT, AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE
CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF THE PLAN AND THE INTERIM ADVISORY
AGREEMENT.
June 1, 1998
<PAGE>
APPENDIX A
The names and addresses of the principal executive officers
and directors of CoreStates Investment Advisers, Inc. are as
follows:
<TABLE>
<CAPTION>
OFFICERS:
Name Address
- ---- -------
<S> <C>
David C. Francis, Chief First Union National Bank
Investment Officer 201 South College Street
Charlotte, North Carolina 28288-
1195
L. Robert Cheshire, Vice First Union National Bank
President 201 South College Street
Charlotte, North Carolina 28288-
1195
John E. Gray, Vice First Union National Bank
President 201 South College Street
Charlotte, North Carolina 28288-
1195
Dillon S. Harris, Jr., Vice First Union National Bank
President 201 South College Street
Charlotte, North Carolina 28288-
1195
J. Kellie Allen, Vice First Union National Bank
President 201 South College Street
Charlotte, North Carolina 28288-1195
DIRECTORS:
Name Address
- ---- -------
Donald A. McMullen First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-
1195
William M. Ennis First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-
1195
<PAGE>
Name Address
- ---- -------
William D. Munn First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-1195
</TABLE>
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 15th day of April, 1998, by and between Evergreen Select Equity Trust, a
Delaware business trust, with its principal place of business at 200 Berkeley
Street, Boston, Massachusetts 02116 (the "Trust"), with respect to its Evergreen
Select Equity Index Fund series (the "Acquiring Fund"), and CoreFunds, Inc., a
Maryland corporation, with its principal place of business at 530 East
Swedesford Road, Wayne, Pennsylvania 19087 ("CoreFunds"), with respect to its
Equity Index Fund series (the "Selling Fund").
This Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(F) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of (i) the transfer of all of
the assets of the Selling Fund in exchange solely for Institutional Service and
Institutional shares of beneficial interest, $.001 par value per share, of the
Acquiring Fund (the "Acquiring Fund Shares"); (ii) the assumption by the
Acquiring Fund of the identified liabilities of the Selling Fund; and (iii) the
distribution, after the Closing Date hereinafter referred to, of the Acquiring
Fund Shares to the shareholders of the Selling Fund in liquidation of the
Selling Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are each a separate
investment series of an open-end, registered investment company of the
management type and the Selling Fund owns securities that generally are assets
of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial
interest or shares of common stock, as the case may be;
WHEREAS, the Trustees of the Trust have determined that the exchange of
all of the assets of the Selling Fund for Acquiring Fund Shares and the
assumption of the identified liabilities of the Selling Fund by the Acquiring
Fund on the terms and conditions hereinafter set forth are in the best interests
of the Acquiring Fund's shareholders;
WHEREAS, based on the information furnished by CoreStates Investment
Advisers, Inc. and First Union National Bank, the Directors of CoreFunds have
determined that the Selling Fund should exchange all of its assets and the
identified liabilities for Acquiring Fund Shares and that the interests of the
existing shareholders of the Selling Fund will not be diluted as a result of the
transactions contemplated herein;
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR
THE ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND
LIABILITIES AND LIQUIDATION OF THE SELLING FUND
1.1 THE EXCHANGE. Subject to the terms and conditions herein set forth
and on the basis of the representations and warranties contained herein, the
Selling Fund agrees to transfer all of the Selling Fund's assets as set forth in
paragraph 1.2 to the Acquiring Fund. The Acquiring Fund agrees in exchange
therefor (i) to deliver to the Selling Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of each such class of the Selling Fund by the net
asset value per share of the corresponding class of Acquiring Fund Shares
computed in the manner and as of the time and date set forth in paragraph 2.2;
and (ii) to assume the identified liabilities of the Selling Fund, as set forth
in paragraph 1.3. Such transactions shall take place at the closing provided for
in paragraph 3.1 (the "Closing Date").
1.2 ASSETS TO BE ACQUIRED. The assets of the Selling Fund to be
acquired by the Acquiring Fund shall consist of all property, including, without
limitation, all cash, securities, commodities, interests in futures and
dividends or interest receivables, that is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books of the Selling Fund
on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of Selling Fund's
assets as of the date thereof. The Selling Fund hereby represents that as of the
date of the execution of this Agreement there have been no changes in its
financial position as reflected in said financial statements other than those
occurring in the ordinary course of its business in connection with the purchase
and sale of securities and the payment of its normal operating expenses.
The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a list of the securities, if any, on the
Selling Fund's list referred to in the second sentence of this paragraph that do
not conform to the Acquiring Fund's investment objectives, policies, and
restrictions. The Selling Fund will, within a reasonable period of time prior to
the Closing Date, furnish the Acquiring Fund with a list of its portfolio
securities and other investments. In the event that the Selling Fund holds any
investments that the
<PAGE>
Acquiring Fund may not hold, the Selling Fund, if requested by the Acquiring
Fund, will dispose of such securities prior to the Closing Date. In addition, if
it is determined that the Selling Fund and the Acquiring Fund portfolios, when
aggregated, would contain investments exceeding certain percentage limitations
imposed upon the Acquiring Fund with respect to such investments, the Selling
Fund if requested by the Acquiring Fund will dispose of a sufficient amount of
such investments as may be necessary to avoid violating such limitations as of
the Closing Date. Notwithstanding the foregoing, nothing herein will require the
Selling Fund to dispose of any investments or securities if, in the reasonable
judgment of the Selling Fund, such disposition would adversely affect the
tax-free nature of the Reorganization or would violate the Selling Fund's
fiduciary duty to its shareholders.
1.3 LIABILITIES TO BE ASSUMED. The Selling Fund will endeavor to
discharge all of its known liabilities and obligations prior to the Closing
Date. The Acquiring Fund shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and Liabilities of the
Selling Fund prepared on behalf of the Selling Fund, as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall assume only those liabilities of the Selling Fund reflected in such
Statement of Assets and Liabilities and shall not assume any other liabilities,
whether absolute or contingent, known or unknown, accrued or unaccrued, all of
which shall remain the obligation of the Selling Fund.
In addition, upon completion of the Reorganization, for purposes of
calculating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by the Acquiring Fund under the National
Association of Securities Dealers, Inc. Conduct Rule 2830 ("Aggregate NASD
Cap"), the Acquiring Fund will add to its Aggregate NASD Cap immediately prior
to the Reorganization the Aggregate NASD Cap of the Selling Fund immediately
prior to the Reorganization, in each case calculated in accordance with such
Rule 2830.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date
as is conveniently practicable (the "Liquidation Date"), (a) the Selling Fund
will liquidate and distribute pro rata to the Selling Fund's shareholders of
record, determined as of the close of business on the Valuation Date (the
"Selling Fund Shareholders"), the Acquiring Fund Shares received by the Selling
Fund pursuant to paragraph 1.1; and (b) the Selling Fund will thereupon proceed
to dissolve as set forth in paragraph 1.8 below. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Selling Fund on the books of the Acquiring
Fund to open accounts on the share records of the Acquiring Fund in the names of
the Selling Fund Shareholders and
<PAGE>
representing the respective pro rata number of the Acquiring Fund Shares due
such shareholders. All issued and outstanding shares of the Selling Fund will
simultaneously be canceled on the books of the Selling Fund. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Shares of the
Acquiring Fund will be issued in the manner described in the combined Prospectus
and Proxy Statement on Form N-14 to be distributed to shareholders of the
Selling Fund as described in paragraph 5.7.
1.6 TRANSFER TAXES. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the Selling
Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the
Selling Fund is and shall remain the responsibility of the Selling Fund up to
and including the Closing Date and such later date on which the Selling Fund is
terminated.
1.8 TERMINATION. The Selling Fund shall be terminated promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on the New York Stock Exchange on the
business day next preceding the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the Trust's Declaration of Trust and the Acquiring Fund's then current
prospectuses and statement of additional information or such other valuation
procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of the Acquiring
Fund Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Trust's Declaration of Trust and the
Acquiring Fund's then current prospectuses and statement of additional
information.
<PAGE>
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares of
each class to be issued (including fractional shares, if any) in exchange for
the Selling Fund's assets shall be determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of the Selling Fund attributable to each of its
classes by the net asset value per share of the respective classes of the
Acquiring Fund determined in accordance with paragraph 2.2. Holders of Class A
and Class B shares of the Selling Fund will receive Institutional Service shares
of the Acquiring Fund and holders of Class Y shares of the Selling Fund will
receive Institutional shares of the Acquiring Fund.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
State Street Bank and Trust Company in accordance with its regular practice in
pricing the shares and assets of the Acquiring Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The Closing (the "Closing") shall take place on or
about July 27, 1998 or such other date as the parties may agree to in writing
(the "Closing Date"). All acts taking place at the Closing shall be deemed to
take place simultaneously immediately prior to the opening of business on the
Closing Date unless otherwise provided. The Closing shall be held as of 9:00
a.m. at the offices of the Evergreen Funds, 200 Berkeley Street, Boston, MA
02116, or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. CoreStates Bank, N.A., as custodian for
the Selling Fund (the "Custodian"), shall deliver at the Closing a certificate
of an authorized officer stating that (a) the Selling Fund's portfolio
securities, cash, and any other assets shall have been delivered in proper form
to the Acquiring Fund on the Closing Date; and (b) all necessary taxes including
all applicable federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities by the Selling Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation
Date (a) the New York Stock Exchange or another primary trading market for
portfolio securities of the Acquiring Fund or the Selling Fund shall be closed
to trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Selling Fund is impracticable, the Valuation Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
<PAGE>
3.4 TRANSFER AGENT'S CERTIFICATE. Evergreen Service Company, as
transfer agent for the Selling Fund as of the Closing Date, shall deliver at the
Closing a certificate of an authorized officer stating that its records contain
the names and addresses of the Selling Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver or
cause Evergreen Service Company, its transfer agent, to issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Secretary of CoreFunds or provide evidence satisfactory to the
Selling Fund that such Acquiring Fund Shares have been credited to the Selling
Fund's account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts and other documents as such other party or its
counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE SELLING FUND. The Selling Fund represents
and warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Maryland.
(b) The Selling Fund is a separate investment series of a
Maryland corporation that is registered as an investment company classified as a
management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), is in
full force and effect.
(c) The current prospectuses and statement of additional
information of the Selling Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) The Selling Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not result,
in violation of any provision of CoreFunds' Articles of Incorporation or By-Laws
or of any material agreement, indenture, instrument, contract, lease, or other
undertaking to which the Selling Fund is a party or by which it is bound.
<PAGE>
(e) The Selling Fund has no material contracts or other
commitments (other than this Agreement) that will be terminated with liability
to it prior to the Closing Date, except for liabilities, if any, to be
discharged or reflected in the Statement of Assets and Liabilities as provided
in paragraph 1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted
by the Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Selling Fund or any of its properties
or assets, which, if adversely determined, would materially and adversely affect
its financial condition, the conduct of its business, or the ability of the
Selling Fund to carry out the transactions contemplated by this Agreement. The
Selling Fund knows of no facts that might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
(g) The financial statements of the Selling Fund at December
31, 1997 are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) fairly reflect the financial condition of the Selling
Fund as of such date, and there are no known contingent liabilities of the
Selling Fund as of such date not disclosed therein.
(h) Since December 31, 1997 there has not been any material
adverse change in the Selling Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Selling Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquiring Fund. For the purposes of this subparagraph (h), a
decline in the net asset value of the Selling Fund shall not constitute a
material adverse change.
(i) At the Closing Date, all federal and other tax returns and
reports of the Selling Fund required by law to have been filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid, or provision shall have been made for the
payment thereof. To the best of the Selling Fund's knowledge, no such return is
currently under audit, and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, the Selling Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and
<PAGE>
has distributed in each such year all net investment income and
realized capital gains.
(k) All issued and outstanding shares of the Selling Fund are,
and at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Selling Fund. All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.4. The Selling Fund does not have outstanding any
options, warrants, or other rights to subscribe for or purchase any of the
Selling Fund shares, nor is there outstanding any security convertible into any
of the Selling Fund shares.
(l) At the Closing Date, the Selling Fund will have good and
marketable title to the Selling Fund's assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.2 and full right, power, and authority to sell,
assign, transfer, and deliver such assets hereunder, and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act, other than as
disclosed to the Acquiring Fund and accepted by the Acquiring Fund.
(m) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Selling
Fund and, subject to approval by the Selling Fund Shareholders, this Agreement
constitutes a valid and binding obligation of the Selling Fund, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights and to general equity principles.
(n) The information to be furnished by the Selling Fund for
use in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable thereto.
(o) The Prospectus and Proxy Statement of the Selling Fund to
be included in the Registration Statement (as defined in paragraph 5.7)(other
than information therein that relates to the Acquiring Fund) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading.
<PAGE>
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Acquiring
Fund represents and warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust that is registered as an investment company classified
as a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect.
(c) The current prospectuses and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring Fund is
a party or by which it is bound.
(e) Except as otherwise disclosed in writing to the Selling
Fund and accepted by the Selling Fund, no litigation, administrative proceeding
or investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect its financial condition and the conduct of its business or the
ability of the Acquiring Fund to carry out the transactions contemplated by this
Agreement. The Acquiring Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental body
that materially and adversely affects its business or its ability to consummate
the transactions contemplated herein.
(f) The Acquiring Fund has no known liabilities of a material
amount, contingent or otherwise.
(g) At the Closing Date, there will not be any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence
<PAGE>
by the Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and accepted by
the Selling Fund. For the purposes of this subparagraph (g), a decline in the
net asset value of the Acquiring Fund shall not constitute a material adverse
change.
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid or provision shall have been made for the
payment thereof. To the best of the Acquiring Fund's knowledge, no such return
is currently under audit, and no assessment has been asserted with respect to
such returns.
(i) All issued and outstanding Acquiring Fund Shares are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. The Acquiring Fund does not have outstanding any options,
warrants, or other rights to subscribe for or purchase any Acquiring Fund
Shares, nor is there outstanding any security convertible into any Acquiring
Fund Shares.
(j) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights and to general equity
principles.
(k) The Acquiring Fund Shares to be issued and delivered to
the Selling Fund, for the account of the Selling Fund Shareholders, pursuant to
the terms of this Agreement will, at the Closing Date, have been duly authorized
and, when so issued and delivered, will be duly and validly issued Acquiring
Fund Shares, and will be fully paid and non-assessable.
(l) The information to be furnished by the Acquiring Fund for
use in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto.
(m) The Prospectus and Proxy Statement (as defined in
paragraph 5.7) to be included in the Registration Statement (only insofar as it
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
<PAGE>
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading.
(n) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act,
and such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Selling
Fund each will operate its business in the ordinary course between the date
hereof and the Closing Date, it being understood that such ordinary course of
business will include customary dividends and distributions.
5.2 APPROVAL OF SHAREHOLDERS. CoreFunds will call a meeting of the
Selling Fund Shareholders to consider and act upon this Agreement and to take
all other action necessary to obtain approval of the transactions contemplated
herein.
5.3 INVESTMENT REPRESENTATION. The Selling Fund covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Selling Fund will assist the Acquiring
Fund in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Selling Fund shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Selling Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but
in any case within sixty days after the Closing Date, the Selling Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Selling Fund for
federal income tax purposes that will be carried over by the Acquiring Fund as a
result of Section 381 of the Code, and which will be reviewed by KPMG Peat
Marwick LLP and certified by CoreFunds' President and Treasurer.
<PAGE>
5.7 PREPARATION OF FORM N-14 REGISTRATION STATEMENT. The Selling Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus, which will include the proxy statement, referred to
in paragraph 4.1(o) (the "Prospectus and Proxy Statement"), all to be included
in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act in
connection with the meeting of the Selling Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.8 CAPITAL LOSS CARRYFORWARDS. As promptly as practicable, but in any
case within sixty days after the Closing Date, the Acquiring Fund and the
Selling Fund shall cause KPMG Peat Marwick LLP to issue a letter addressed to
the Acquiring Fund and the Selling Fund, in form and substance satisfactory to
the Funds, setting forth the federal income tax implications relating to capital
loss carryforwards (if any) of the Selling Fund and the related impact, if any,
of the proposed transfer of all of the assets of the Selling Fund to the
Acquiring Fund and the ultimate dissolution of the Selling Fund, upon the
shareholders of the Selling Fund.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations, covenants, and warranties of the Acquiring
Fund contained in this Agreement shall be true and correct as of the date hereof
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by the Trust's President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Selling Fund and dated as of the Closing Date, to
such effect and as to such other matters as the Selling Fund shall reasonably
request.
6.2 The Selling Fund shall have received on the Closing Date an opinion
from Sullivan & Worcester LLP, counsel to the Acquiring Fund, dated as of the
Closing Date, in a form reasonably satisfactory to the Selling Fund, covering
the following points:
(a) The Acquiring Fund is a separate investment
series of a Delaware business trust duly organized, validly
<PAGE>
existing and in good standing under the laws of the State of Delaware and has
the power to own all of its properties and assets and to carry on its business
as presently conducted.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed, and
delivered by the Acquiring Fund and, assuming due authorization, execution and
delivery of this Agreement by the Selling Fund, is a valid and binding
obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) Assuming that a consideration therefor not less than the
net asset value thereof has been paid, the Acquiring Fund Shares to be issued
and delivered to the Selling Fund on behalf of the Selling Fund Shareholders as
provided by this Agreement are duly authorized and upon such delivery will be
legally issued and outstanding and fully paid and non-assessable, and no
shareholder of the Acquiring Fund has any preemptive rights in respect thereof.
(e) The Registration Statement, to such counsel's knowledge,
has been declared effective by the Commission and no stop order under the 1933
Act pertaining thereto has been issued, and to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the State of Delaware is required for consummation by
the Acquiring Fund of the transactions contemplated herein, except such as have
been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
(f) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Acquiring Fund is
a party or by which it is bound.
(g) Only insofar as they relate to the Acquiring Fund,
the descriptions in the Prospectus and Proxy Statement of
<PAGE>
statutes, legal and governmental proceedings and material contracts, if any, are
accurate and fairly present the information required to be shown.
(h) Such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.
(i) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Acquiring Fund or
any of its properties or assets and the Acquiring Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business, other
than as previously disclosed in the Registration Statement.
Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Acquiring Fund at
which the contents of the Prospectus and Proxy Statement and related matters
were discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Prospectus and Proxy Statement (except to the extent indicated
in paragraph (g) of their above opinion), on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions of the Trust's officers
and other representatives of the Acquiring Fund), no facts have come to their
attention that lead them to believe that the Prospectus and Proxy Statement as
of its date, as of the date of the Selling Fund Shareholders' meeting, and as of
the Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding the Acquiring Fund
or necessary, in the light of the circumstances under which they were made, to
make the statements therein regarding the Acquiring Fund not misleading. Such
opinion may state that such counsel does not express any opinion or belief as to
the financial statements or any financial or statistical data, or as to the
information relating to the Selling Fund, contained in the Prospectus and Proxy
Statement or the Registration Statement, and that such opinion is solely for the
benefit of CoreFunds and the Selling Fund. Such opinion shall contain such other
assumptions and limitations as shall be in the opinion of Sullivan & Worcester
LLP appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to the Prospectus and Proxy Statement
include and relate to only the text of such Prospectus and Proxy Statement and
not to any exhibits or
<PAGE>
attachments thereto or to any documents incorporated by reference
therein.
6.3 The merger between First Union Corporation and CoreStates Financial
Corp shall be completed prior to the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Selling Fund of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
7.1 All representations, covenants, and warranties of the Selling Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date, and the Selling Fund shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by CoreFunds'
President or Vice President and the Treasurer or Assistant Treasurer, in form
and substance satisfactory to the Acquiring Fund and dated as of the Closing
Date, to such effect and as to such other matters as the Acquiring Fund shall
reasonably request.
7.2 The Selling Fund shall have delivered to the Acquiring Fund a
statement of the Selling Fund's assets and liabilities, together with a list of
the Selling Fund's portfolio securities showing the tax costs of such securities
by lot and the holding periods of such securities, as of the Closing Date,
certified by the Treasurer of CoreFunds.
7.3 The Acquiring Fund shall have received on the Closing Date an
opinion of Morgan, Lewis & Bockius LLP, counsel to the Selling Fund, in a form
satisfactory to the Acquiring Fund covering the following points:
(a) The Selling Fund is a separate investment series of a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland and has the power to own all of its properties and
assets and to carry on its business as presently conducted.
(b) The Selling Fund is a separate investment series of a
Maryland corporation registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
<PAGE>
(c) This Agreement has been duly authorized, executed and
delivered by the Selling Fund and, assuming due authorization, execution, and
delivery of this Agreement by the Acquiring Fund, is a valid and binding
obligation of the Selling Fund enforceable against the Selling Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the State of Maryland is required for consummation by the Selling Fund
of the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act, and as may be required under state
securities laws.
(e) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of CoreFunds' Articles of Incorporation or By-laws, or any provision
of any material agreement, indenture, instrument, contract, lease or other
undertaking (in each case known to such counsel) to which the Selling Fund is a
party or by which it or any of its properties may be bound or, to the knowledge
of such counsel, result in the acceleration of any obligation or the imposition
of any penalty, under any agreement, judgment, or decree to which the Selling
Fund is a party or by which it is bound.
(f) Only insofar as they relate to the Selling Fund, the
descriptions in the Prospectus and Proxy Statement of statutes, legal and
government proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown.
(g) Such counsel does not know of any legal or governmental
proceedings, insofar as they relate to the Selling Fund existing on or before
the date of mailing of the Prospectus and Proxy Statement and the Closing Date,
required to be described in the Prospectus and Proxy Statement or to be filed as
an exhibit to the Registration Statement which are not described or filed as
required.
(h) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Selling Fund or
any of its respective properties or assets and the Selling Fund is neither a
party to nor subject to the provisions of any order, decree or judgment of any
court or governmental body, which materially and adversely affects its business
other than as previously disclosed in the Prospectus and Proxy Statement.
<PAGE>
(i) Assuming that a consideration therefor of not less than
the net asset value thereof has been paid, and assuming that such shares were
issued in accordance with the terms of the Selling Fund's registration
statement, or any amendment thereto, in effect at the time of such issuance, all
issued and outstanding shares of the Selling Fund are legally issued and fully
paid and non-assessable.
Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Selling Fund at which
the contents of the Prospectus and Proxy Statement and related matters were
discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Prospectus and Proxy Statement (except to the extent indicated
in paragraph (f) of their above opinion), on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions of CoreFunds' officers and
other representatives of the Selling Fund), no facts have come to their
attention that lead them to believe that the Prospectus and Proxy Statement as
of its date, as of the date of the Selling Fund Shareholders' meeting, and as of
the Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding the Selling Fund
or necessary, in the light of the circumstances under which they were made, to
make the statements therein regarding the Selling Fund not misleading. Such
opinion may state that they do not express any opinion or belief as to the
financial statements or any financial or statistical data, or as to the
information relating to the Acquiring Fund, contained in the Prospectus and
Proxy Statement or Registration Statement, and that such opinion is solely for
the benefit of the Trust and the Acquiring Fund.
Such opinion shall contain such other assumptions and limitations as
shall be in the opinion of Morgan, Lewis & Bockius LLP appropriate to render the
opinions expressed therein, and shall indicate, with respect to matters of
Maryland law, that as Morgan, Lewis & Bockius LLP are not admitted to the bar of
Maryland, such opinions are based either upon the review of published statutes,
cases and rules and regulations of the State of Maryland or upon an opinion of
Maryland counsel.
In this paragraph 7.3, references to the Prospectus and Proxy Statement
include and relate to only the text of such Prospectus and Proxy Statement and
not to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
7.4 The merger between First Union Corporation and CoreStates Financial
Corp shall be completed prior to the Closing Date.
ARTICLE VIII
<PAGE>
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE SELLING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Selling Fund in accordance with the provisions of CoreFunds' Articles of
Incorporation and By-Laws and certified copies of the resolutions evidencing
such approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Selling Fund
may waive the conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, nor instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act and no action, suit or
other proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein.
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of state Blue Sky securities authorities,
including any necessary "no-action" positions of and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Selling Fund,
provided that either party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The parties shall have received a favorable opinion of Sullivan &
Worcester LLP addressed to the Acquiring Fund and the Selling Fund substantially
to the effect that for federal income tax purposes:
<PAGE>
(a) The transfer of all of the Selling Fund assets in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund followed by the distribution of the
Acquiring Fund Shares to the Selling Fund in dissolution and liquidation of the
Selling Fund will constitute a "reorganization" within the meaning of Section
368(a)(1)(F) of the Code and the Acquiring Fund and the Selling Fund will each
be a "party to a reorganization" within the meaning of Section 368(b) of the
Code.
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the identified
liabilities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund
upon the transfer of the Selling Fund assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Selling Fund
Shareholders in exchange for their shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund.
(e) The aggregate tax basis for the Acquiring Fund Shares
received by each Selling Fund Shareholder pursuant to the Reorganization will be
the same as the aggregate tax basis of the Selling Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Acquiring Fund Shares to be received by each Selling Fund Shareholder will
include the period during which the Selling Fund shares exchanged therefor were
held by such shareholder (provided the Selling Fund shares were held as capital
assets on the date of the Reorganization).
(f) The tax basis of the Selling Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the Selling
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Selling Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Selling Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Selling Fund may waive the conditions set forth in this paragraph
8.5.
8.6 The Acquiring Fund shall have received from KPMG Peat Marwick LLP a
letter addressed to the Acquiring Fund, in form and substance satisfactory to
the Acquiring Fund, to the effect that:
<PAGE>
(a) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the Capitalization Table
appearing in the Registration Statement and Prospectus and Proxy Statement has
been obtained from and is consistent with the accounting records of the Selling
Fund; and
(b) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the data utilized in the
calculations of the projected expense ratios appearing in the Registration
Statement and Prospectus and Proxy Statement agree with underlying accounting
records of the Selling Fund or with written estimates by Selling Fund's
management and were found to be mathematically correct.
In addition, the Acquiring Fund shall have received from KPMG Peat
Marwick LLP a letter addressed to the Acquiring Fund dated on the Closing Date,
in form and substance satisfactory to the Acquiring Fund, to the effect, that on
the basis of limited procedures agreed upon by the Acquiring Fund (but not an
examination in accordance with generally accepted auditing standards), the
calculation of net asset value per share of the Selling Fund as of the Valuation
Date was determined in accordance with generally accepted accounting practices
and the portfolio valuation practices of the Acquiring Fund.
8.7 The Selling Fund shall have received from KPMG Peat Marwick LLP a
letter addressed to the Selling Fund, in form and substance satisfactory to the
Selling Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards), the Capitalization Table appearing
in the Registration Statement and Prospectus and Proxy Statement has been
obtained from and is consistent with the accounting records of the Acquiring
Fund; and
(c) on the basis of limited procedures agreed upon by the
Selling Fund (but not an examination in accordance with generally accepted
auditing standards), the data utilized in the calculations of the projected
expense ratio appearing in the Registration Statement and Prospectus and Proxy
Statement agree with written estimates by each Fund's management and were found
to be mathematically correct.
<PAGE>
ARTICLE IX
EXPENSES
9.1 Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Selling Fund and the
Acquiring Fund will be borne by First Union National Bank ("FUNB"). Such
expenses include, without limitation, (a) expenses incurred in connection with
the entering into and the carrying out of the provisions of this Agreement; (b)
expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the Acquiring Fund Shares to be issued
pursuant to the provisions of this Agreement; (c) registration or qualification
fees and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund Shares to be
issued in connection herewith in each state in which the Selling Fund
Shareholders are resident as of the date of the mailing of the Prospectus and
Proxy Statement to such shareholders; (d) postage; (e) printing; (f) accounting
fees; (g) legal fees; and (h) solicitation costs of the transaction.
Notwithstanding the foregoing, the Acquiring Fund shall pay its own federal and
state registration fees. In the event that the merger of First Union Corporation
and CoreStates Financial Corp is not completed, this Agreement shall terminate.
In such event, all expenses of the transactions contemplated by this Agreement
incurred by the Acquiring Fund will be borne by FUNB and all expenses of the
transactions contemplated by this Agreement incurred by the Selling Fund will be
borne by CoreStates Investment Advisers, Inc.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties, and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall not survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or
the Selling Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
<PAGE>
(a) of a breach by the other of any representation, warranty,
or agreement contained herein to be performed at or prior to the Closing Date,
if not cured within 30 days; or
(b) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Selling Fund, the Trust, CoreFunds, the respective Trustees,
Directors or officers, to the other party or its Trustees, Directors or
officers, but each shall bear the expenses incurred by it incidental to the
preparation and carrying out of this Agreement as provided in paragraph 9.1.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Selling Fund and the Acquiring Fund; provided, however, that following the
meeting of the Selling Fund Shareholders called by the Selling Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Selling Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflicts
of laws provisions thereof; provided, however, that the due authorization,
execution and delivery of this Agreement, in the case of the Selling Fund, shall
be governed and construed in accordance with the laws of the State of Maryland,
without giving effect to the conflicts of laws provisions thereof.
<PAGE>
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of the Acquiring Fund
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of the Trust personally, but shall bind only the
trust property of the Acquiring Fund, as provided in the Declaration of Trust of
the Trust. The execution and delivery of this Agreement have been authorized by
the Trustees of the Trust on behalf of the Acquiring Fund and signed by
authorized officers of the Trust, acting as such, and neither such authorization
by such Trustees nor such execution and delivery by such officers shall be
deemed to have been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the trust property of the
Acquiring Fund as provided in the Declaration of Trust of the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all
as of the date first written above.
EVERGREEN SELECT EQUITY TRUST
ON BEHALF OF EVERGREEN SELECT
EQUITY INDEX FUND
By:
Name:
Title:
COREFUNDS, INC.
ON BEHALF OF EQUITY INDEX FUND
By:
Name:
Title:
<PAGE>
EXHIBIT B
INTERIM INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of April 30, 1998 between COREFUNDS, INC., a Maryland
corporation (hereinafter the "Company"), and CORESTATES INVESTMENT ADVISERS,
INC., a Pennsylvania corporation (hereinafter the "Investment Adviser").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company is authorized to issue shares of Common Stock in
separate classes representing shares in separate portfolios of securities and
other assets; and
WHEREAS, the Company desires to retain the Investment Adviser to
furnish investment advisory services to the Company and its portfolios, and the
Investment Adviser is willing to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Adviser to
act as investment adviser to the portfolios of the Company for the period and on
the terms set forth in this Agreement. The Investment Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Company has furnished the Investment
Adviser with copies properly certified or authenticated of each of the
following:
a. the Company's Articles of Incorporation, as filed with the
Secretary of State of Maryland on September 11, 1984, and all amendments thereto
(such Articles, as presently in effect and as they shall from time to time be
amended or supplemented, are herein called the "Articles of Incorporation");
b. the Company's By-Laws and amendments thereto
(such By-Laws, as presently in effect and as they shall
from time to time be amended, are herein called the "By-Laws");
c. resolutions of the Company's Board of
Directors authorizing the appointment of the Investment Adviser
and approving this Agreement;
d. the Company's Notification of Registration on
Form N-8A under the 1940 Act as filed with the Securities and
<PAGE>
Exchange Commission on September 11, 1984 and all amendments
thereto;
e. the Company's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") (File No. 2-93214) and under the
1940 Act as filed with the Securities and Exchange Commission and all amendments
thereto; and
f. the Company's most recent Prospectuses and Statement of
Additional Information (such Prospectuses and Statement of Additional
Information, as presently in effect and all amendments and supplements thereto,
are herein called the
"Prospectuses").
The Company will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Company's Board of
Directors, the Investment Adviser will provide a continuous investment program
for each portfolio of the Company, including investment guidelines and
management with respect to all securities and investments and cash equivalents
held by the existing portfolios and such other portfolios (hereinafter
collectively, the "Portfolios") offered by the Company and identified by the
Company as appropriate. The Investment Adviser will determine from time to time
what securities and other investments will be purchased, retained, or sold by
the Company. The Investment Adviser will provide the services under this
Agreement in accordance with the Company's investment objective, policies, and
restrictions as stated in the Prospectuses and resolutions of the Company's
Board of Directors.
The Investment Adviser further agrees that it:
a. will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission and will in addition conduct its
activities under this Agreement in accordance with any regulations of the
Comptroller of the Currency pertaining to the investment advisory activities of
national banks;
b. will not make loans to any person to purchase
or carry the Company's shares or make loans to the Company;
c. will place orders pursuant to its investment determinations
for the Company on behalf of its Portfolios either directly with the issuer or
with any broker or dealer. In placing orders with brokers and dealers the
primary consideration of the Investment Adviser will be the prompt execution of
orders in an effective manner at the most favorable price. Subject to this
consideration, brokers or dealers who provide supplemental research to the
Investment Adviser may
<PAGE>
receive orders for transactions with the Company. In no instance will portfolio
securities be purchased from or sold to CoreStates Financial Corp or any
affiliated person of either the Company or CoreStates Financial Corp;
d. will maintain all books and records with respect to the
Company's portfolio securities transactions and will furnish the Company's Board
of Directors such periodic and special reports as the Board may request;
e. will treat confidentially and as proprietary information of
the Company all records and other information relative to the Company and prior,
present, or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably withheld and may not be
withheld where the Investment Adviser may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the
Company;
f. will provide to the Company and the Company's other service
providers, at such intervals as may be reasonably requested by the Company,
information relating to (i) the performance of services by the Investment
Adviser hereunder, and (ii) market quotations of portfolio securities held by
the Company on behalf of its Portfolios;
g. will direct and use its best efforts to cause the broker or
dealer involved in any portfolio transaction with the Company to send a written
confirmation of such transaction to the Company's Custodian and Transfer Agent;
and
h. will not purchase shares of the Company for itself or for
accounts with respect to which it is exercising sole investment discretion in
connection with such transactions.
4. Services Not Exclusive. The investment management services furnished
by the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to others so long
as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all records which
it maintains for the Company are the property of the Company and further agrees
to surrender promptly to the Company any of such records upon the Company's
request. The Investment Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
<PAGE>
6. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Company and the cost of obtaining market
quotations of portfolio securities held by the Company.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, effective as of the date of this Agreement, the
Company will pay the Investment Adviser and the Investment Adviser will accept
as full compensation for services rendered to the Portfolios therefor, the fees
detailed in Appendix A attached to this Agreement; provided, however, that if
the total expenses borne by any Portfolio of the Company in any fiscal year of
the Company exceeds any expense limitations imposed by applicable state
securities laws or regulations, the Investment Adviser will reimburse the
Portfolio for a portion of such excess equal to the amount of such excess times
the ratio of the fees otherwise payable to the Investment Adviser hereunder to
the aggregate fees otherwise payable to the Investment Adviser hereunder and SEI
Fund Resources pursuant to an Administration Agreement between it and the
Company. The Investment Adviser's obligation to reimburse the Company on behalf
of its Portfolios hereunder is limited in any fiscal year of the Company to the
amount of the Investment Adviser's fee hereunder for such fiscal year; provided,
however, that notwithstanding the foregoing, the Investment Adviser shall
reimburse the Company for such excess regardless of the fees paid to it to the
extent that the securities laws or regulations of any state having jurisdiction
over the Company so require. Any such expense reimbursements will be estimated
daily and reconciled and paid on a monthly basis.
8. Use of Investment Adviser's Name and Logo. The Company agrees that
it shall furnish to the Investment Adviser, prior to any use or distribution
thereof, copies of all prospectuses, statements of additional information, proxy
statements, reports to shareholders, sales literature, advertisements, and other
material prepared for distribution to shareholders of the Portfolios of the
Company or to the public, which in any way refer to or describe the Investment
Adviser or which include any trade names, trademarks, or logos of the Investment
Adviser or any affiliate of the Investment Adviser. The Company further agrees
that it shall not use or distribute any such material if the Investment Adviser
reasonably objects in writing to such use or distribution within ten business
days after the date such material is furnished to the Investment Adviser. The
provisions of this section shall survive the termination of this Agreement.
9. Limitation of Liability. The Investment Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Company in connection with the performance of this Agreement, except a loss
resulting from a
<PAGE>
breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith, or gross
negligence on the part of the Investment Adviser in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement.
10. Duration and Termination. This Agreement will become effective for
each Portfolio as of the date first above written. Subject to the provisions for
termination as provided herein, this Agreement shall remain in effect for each
Portfolio until the earlier of the Closing Date defined in the Agreement and
Plan of Reorganization dated as of April 15, 1998 with respect to each Portfolio
or for two years from the date first above written and from year to year
thereafter, provided such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Company's Board of
Directors who are not parties to this Agreement or interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Company's Board of Directors or by vote
of a majority of the Portfolio's outstanding voting securities. Notwithstanding
the foregoing, this Agreement may be terminated at any time on sixty days
written notice, without the payment of any penalty, by the Company (by vote of
the Board of Directors or by vote of a majority of the Portfolio's outstanding
voting securities) or by the Investment Adviser. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested persons" and
"assignment" shall have the same meaning of such terms in the 1940 Act.)
11. Name Protection After Termination. In the event this Agreement is
terminated by either party or upon written notice from the Investment Adviser at
any time, the Company hereby agrees that it will eliminate from its corporate
name any references to the name "CoreFunds." The Company shall have the
nonexclusive use of the name "CoreFunds" in whole or in part so long as this
Agreement is effective or until such notice is given.
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved by vote of a majority of the Portfolio's outstanding
voting securities.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule, or
<PAGE>
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by Pennsylvania
law.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
COREFUNDS, INC.
By ____________________________
CORESTATES INVESTMENT ADVISERS, INC.
By ____________________________
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APPENDIX A
Portfolio Advisory Fee as a
Percentage of average
daily net assets
Growth Equity Fund .75%
Core Equity Fund .74%
Special Equity Fund 1.50%
Equity Index Fund .40%
International Growth Fund .80%
Balanced Fund .70%
Short-Intermediate Bond Fund .50%
Bond Fund .74%
Short Term Income Fund .74%
Government Income Fund .50%
Intermediate Municipal Bond Fund .50%
Pennsylvania Municipal Bond Fund .50%
New Jersey Municipal Bond Fund .50%
Global Bond Fund .60%
Cash Reserve .40%
Treasury Reserve .40%
Tax-Free Reserve .40%
Elite Cash Reserve .20%
Elite Government Reserve .20%
Elite Treasury Reserve .20%
Elite Tax-Free Reserve .20%
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STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
EQUITY INDEX FUND
a Series of
COREFUNDS, INC.
530 East Swedesford Road
Wayne, Pennsylvania 19087
(800) 355-2673
By and In Exchange For Shares of
EVERGREEN SELECT EQUITY INDEX FUND
a Series of
EVERGREEN SELECT EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets and liabilities of Equity Index Fund ("CoreFunds
Equity Index"), a series of CoreFunds, Inc., to Evergreen Select Equity Index
Fund ("Evergreen Equity Index"), a series of Evergreen Select Equity Trust, in
exchange for Institutional Service shares (to be issued to holders of Class A
and Class B shares of CoreFunds Equity Index) and Institutional shares (to be
issued to holders of Class Y shares of CoreFunds Equity Index) of beneficial
interest, $.001 par value per share, of Evergreen Equity Index, consists of this
cover page and the following described documents, each of which is attached
hereto and incorporated by reference herein:
(1) The Statement of Additional Information of Evergreen
Equity Index dated June 1, 1998;
(2) The Statement of Additional Information of CoreFunds Equity
Index dated November 1, 1997;
(3) Annual Report of CoreFunds Equity Index for the year ended
June 30, 1997; and
(4) Semi-Annual Report of CoreFunds Equity Index for the six month
period ended December 31, 1997.
This Statement of Additional Information, which is not a prospectus,
supplements, and should be read in conjunction with, the Prospectus/Proxy
Statement of Evergreen Equity Index and CoreFunds Equity Index dated June 1,
1998. A copy of the Prospectus/Proxy Statement may be obtained without charge by
<PAGE>
calling or writing to Evergreen Equity Index or CoreFunds Equity Index at the
telephone numbers or addresses set forth above.
The date of this Statement of Additional Information is June 1, 1998.
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