<PAGE>
COREFUNDS, INC.
<PAGE>
CORE EQUITY 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 Core Equity 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 Stock Selector Fund in exchange for either Class A, Class B or Class Y
shares of Evergreen Stock Selector Fund and the assumption by Evergreen Stock
Selector Fund of the identified liabilities of the Fund. You will receive shares
of Evergreen Stock Selector Fund having an aggregate net asset value equal to
the aggregate net asset value of your Fund shares. Details about Evergreen Stock
Selector 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.
CORE EQUITY 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 Core Equity 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 Stock Selector Fund, a series of Evergreen
Equity Trust, ("Evergreen Stock") in exchange for shares of Evergreen Stock and
the assumption by Evergreen Stock of the identified liabilities of the Fund. The
Plan also provides for distribution of these shares of Evergreen Stock 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
CORE EQUITY FUND
a series of
CoreFunds, Inc.
530 East Swedesford Road
Wayne, Pennsylvania 19087
By and in Exchange for Shares of
EVERGREEN STOCK SELECTOR FUND
a series of
Evergreen Equity Trust
200 Berkeley Street
Boston, Massachusetts 02116
This Prospectus/Proxy Statement is being furnished to shareholders of
Core Equity Fund ("CoreFunds Equity") in connection with a proposed Agreement
and Plan of Reorganization (the "Plan") to be submitted to shareholders of
CoreFunds Equity 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 to be acquired by Evergreen Stock Selector Fund ("Evergreen Stock") in
exchange for shares of Evergreen Stock and the assumption by Evergreen Stock of
the identified liabilities of CoreFunds Equity (hereinafter referred to as the
"Reorganization"). Evergreen Stock and CoreFunds Equity are sometimes
hereinafter referred to individually as the "Fund" and collectively as the
"Funds." Following the Reorganization, shares of Evergreen Stock will be
distributed to shareholders of CoreFunds Equity in liquidation of CoreFunds
Equity and such Fund will be terminated. Holders of Class A shares of CoreFunds
Equity will receive Class A shares of Evergreen Stock, holders of Class B shares
of CoreFunds Equity will receive Class B shares of Evergreen Stock and holders
of Class Y shares of CoreFunds Equity will receive Class Y shares of Evergreen
Stock. Each such class of shares of Evergreen Stock has the same Rule 12b-1
distribution-related fees, if any, as the shares of the respective class of
CoreFunds Equity held by them prior to the Reorganization. No sales charge will
be imposed in connection with Class A shares of Evergreen Stock received by
holders of Class A shares of CoreFunds Equity. In addition, no contingent
deferred sales charge ("CDSC") will be deducted at the time of the
Reorganization in connection with Class B shares of Evergreen Stock received by
holders of Class B shares of CoreFunds Equity. Holders of Class B shares of
Evergreen Stock received in the Reorganization will be subject to the schedule
of CDSCs currently applicable to the Class B shares of CoreFunds Equity and not
the schedule of CDSCs applicable to Class B shares of Evergreen
<PAGE>
Stock. As a result of the proposed Reorganization, shareholders of CoreFunds
Equity will receive that number of full and fractional shares of Evergreen Stock
having an aggregate net asset value equal to the aggregate net asset value of
such shareholder's shares of CoreFunds Equity. The Reorganization is being
structured as a tax-free reorganization for federal income tax purposes.
Evergreen Stock is a separate series of Evergreen 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
Stock is to seek maximum total return by investing in a diversified portfolio of
common stocks. Such investment object is identical to that of CoreFunds Equity.
Shareholders of CoreFunds Equity 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 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 Stock that
shareholders of CoreFunds Equity 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 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 Stock is a newly
created series of Evergreen Equity Trust and has had no operations to date.
Consequently, there are no current financial statements of Evergreen Stock. A
copy of such Statement of Additional Information is available upon request and
without charge by writing to Evergreen Stock at 200 Berkeley Street, Boston,
Massachusetts 02116 or by calling toll-free 1- 800-343-2898.
The two Prospectuses of Evergreen Stock dated June 1, 1998 are
incorporated herein by reference in their entirety. The Prospectuses, which
pertain (i) to Class A, Class B and Class C shares and (ii) to Class Y shares,
differ only insofar as they describe the separate distribution and shareholder
servicing arrangements applicable to the classes. Shareholders of
<PAGE>
CoreFunds Equity will receive, with this Prospectus/Proxy Statement, copies of
the Prospectus pertaining to the class of shares of Evergreen Stock that they
will receive as a result of the consummation of the Reorganization. Additional
information about Evergreen Stock is contained in its Statement of Additional
Information dated February 1, 1998, as amended June 1, 1998, which has been
filed with the SEC and which is available upon request and without charge by
writing to or calling Evergreen Stock at the address or telephone number listed
in the preceding paragraph.
The two Prospectuses of CoreFunds Equity which pertain (i) as
applicable, to Class A, Class B and Class C shares (Individual shares) and (ii)
to Class Y shares (Institutional shares) dated November 1, 1997, insofar as they
relate to CoreFunds Equity 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 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 ..................................................................12
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 . 20
Exchange Privileges ....20
Dividend Policy ....20
Risks ....21
REASONS FOR THE REORGANIZATION.............................................23
Agreement and Plan of Reorganization ....25
Federal Income Tax Consequences ....27
Pro-forma Capitalization ....29
Shareholder Information ....30
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES...........................32
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS............................33
Forms of Organization ....33
Capitalization . 33
Shareholder Liability ....34
Shareholder Meetings and Voting Rights ....35
Liquidation or Dissolution ....36
Liability and Indemnification of Trustees ....36
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT.......................37
Introduction ....37
Comparison of the Interim Advisory Agreement
and the Previous Advisory Agreement ....38
Information About CoreFunds Equity's
Investment Adviser ....39
ADDITIONAL INFORMATION.....................................................40
VOTING INFORMATION CONCERNING THE MEETING............................... 40
FINANCIAL STATEMENTS AND EXPERTS........................................ 43
LEGAL MATTERS..............................................................44
<PAGE>
OTHER BUSINESS.............................................................44
APPENDIX A.................................................................45
EXHIBIT A.................................................................A-1
EXHIBIT B.................................................................B-1
<PAGE>
COMPARISON OF FEES AND EXPENSES
The amounts for Class Y, Class A and Class B shares of Evergreen Stock
set forth in the following tables and in the examples are based on the estimated
expenses of Evergreen Stock for the fiscal period ending September 30, 1998. The
amounts for Class Y , Class A and Class B shares of CoreFunds Equity set forth
in the following tables and in the examples are based on the estimated expenses
for CoreFunds Equity for the fiscal year ending June 30, 1998 as set forth in
the current Prospectuses of CoreFunds Equity. The pro forma amounts for Class Y,
Class A and Class B shares of Evergreen Stock are based on what the combined
expenses will be for Evergreen Stock for the fiscal period ending September 30,
1998. All amounts are adjusted for voluntary expense waivers.
The following tables show for Evergreen Stock, CoreFunds Equity and
Evergreen Stock pro forma, assuming consummation of the Reorganization, the
shareholder transaction expenses and annual fund operating expenses associated
with an investment in the Class Y, Class A and Class B shares of each Fund.
<TABLE>
<CAPTION>
Comparison of Class Y, Class A and Class B Shares
of Evergreen Stock With Class Y, Class A and
Class B Shares of CoreFunds Equity
Evergreen Stock CoreFunds Equity
Class Y Class A Class B Class Y Class A Class B
------- ------- ------- ------- ------- -------
Shareholder
Transaction
Expenses
<S> <C> <C> <C> <C> <C> <C>
Maximum None 4.75% None None 5.50% None
Sales Load
Imposed on
Purchases
(as a
percentage
of offering
price)
Maximum None None None None None None
Sales Load
Imposed on
Reinvested
Dividends
(as a
percentage
of offering
price)
<PAGE>
Contingent
Deferred None None 5.00% in None None 5.00% in
Sales Charge the first the first
(as a year, year,
percentage declining declining
of original to 1.00% to 1.00%
purchase in the in the
price or sixth fifth
redemption year and year and
proceeds, 0.00% 0.00%
whichever is there- there-
lower) after after
Annual Fund
Operating
Expenses (as
a percentage
of average
daily net
assets)
Management 0.74% 0.74% 0.74%
Fee (After 0.65% 0.65% 0.65%
Waiver) (1)
12b-1 None 0.25% 1.00% None 0.25% 1.00%
Fees(2)
Other 0.28% 0.28% 0.19% 0.19% 0.19%
------ ----- ----- ----- ----- -----
Expenses
------
(After
Waiver)(3)
0.28%
<PAGE>
Annual Fund
Operating 1.18% 1.93% 0.93% 1.18% 1.93%
===== ===== ===== ===== ===== =====
Expenses (4)
0.93%
</TABLE>
<TABLE>
<CAPTION>
Evergreen Stock Pro Forma
Shareholder Transaction Expenses Class Y Class A Class B
<S> <C> <C> <C>
Maximum Sales Load Imposed on None 4.75% None
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on None None None
Reinvested Dividends (as a
percentage of offering price)
Contingent Deferred Sales Charge None None
(as a percentage of original 5.00% in
purchase price or redemption the first
proceeds, whichever is lower) year,
declining
to 1.00%
in the
sixth year
and 0.00%
thereafter
Annual Fund Operating Expenses (as
a percentage of average daily net
assets)
Management Fee After Waiver(1)
0.65% 0.65% 0.65%
12b-1 Fees(2) None 0.25% 1.00%
<PAGE>
Other Expenses After Waiver
0.28% 0.28% 0.28%
----- ------ ------
Annual Fund Operating Expenses (4)
0.93% 1.18% 1.93%
====== ======= =====
</TABLE>
- ---------------
(1) The management fee for Evergreen Stock has been reduced from 0.74% of
average daily net assets to reflect the voluntary waiver by the
investment adviser. This voluntary waiver can be terminated at any
time.
(2) Class A shares of Evergreen Stock can pay up to 0.75% of average daily
net assets as a 12b-1 fee. For the foreseeable future, the Class A
12b-1 fees will be limited to 0.25% of average daily net assets.
(3) Absent voluntary waivers by CoreFunds Equity's administrator, Other
Expenses would be 0.28% of average daily net assets.
(4) The investment adviser of Evergreen Stock has undertaken to
limit the Fund's Annual Fund Operating Expenses for a period
of at least two years to 1.02%, 1.27% and
2.02% for Class Y, Class A and Class B shares, respectively.
Absent the management fee waiver and the limitation on
Annual Fund Operating Expenses, such estimated expenses for
the fiscal period ending September 30, 1998 will be
1.02%, 1.27%, and 2.02% of the average daily
net assets of the Fund's Class Y, Class A and Class B
shares, respectively. Annual Fund Operating Expenses for
the Class Y , Class A and Class B shares of CoreFunds
Equity would be 1.02%, 1.27% and 2.02%, respectively, for the year
ending June 30, 1998, absent expense waivers.
Examples. The following tables show for Evergreen Stock and CoreFunds
Equity, and for Evergreen Stock pro forma, assuming consummation of the
Reorganization, examples of the cumulative effect of shareholder transaction
expenses and 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 of each Fund, no redemption at the end of each period. In the
case of Evergreen Stock pro forma, the examples do not reflect the imposition of
the 4.75% maximum sales load on purchases since CoreFunds Equity shareholders
who receive Class A shares of Evergreen Stock in the Reorganization will not
incur any sales load.
<PAGE>
<TABLE>
<CAPTION>
Evergreen Stock
One Year Three Five Ten Years
Years Years
<S> <C> <C> <C> <C>
Class Y $9 $30 $51 $114
Class A $59 $83 $184
$109
Class B (Assuming $70 $91 $196
redemption at the $124
end of period)
Class B (Assuming $20 $61 $196
no redemption at $104
end of period)
CoreFunds Equity
Three Five
One Year Years Years Ten Years
Class Y $19 $31 $51 $114
Class A $66 $90 $190
$116
Class B (Assuming $70 $91 $225
redemption at end $104
of period)
Class B (Assuming $20 $61 $225
no redemption at $104
end of period)
Evergreen Stock Pro Forma
Three Five
One Year Years Years Ten Years
Class Y $9 $30 $51 $114
Class A $12 $37 $65 $143
Class B $70 $91 $124 $187
(Assuming
redemption at
end of period)
Class B $20 $61 $104 $187
(Assuming no
redemption at
end of period)
</TABLE>
The purpose of the foregoing examples is to assist CoreFunds Equity
shareholders in understanding the various costs and expenses that an investor in
Evergreen Stock 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. 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.
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 Stock dated June 1, 1998 and the Prospectuses of
CoreFunds Equity 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 in exchange for shares of Evergreen Stock and the assumption by Evergreen
Stock of the identified liabilities of CoreFunds Equity. 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 Stock to
CoreFunds Equity shareholders in liquidation of CoreFunds Equity 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 will become the owners of that number
of full and fractional Class A, Class B and Class Y shares, respectively, of
Evergreen Stock having an aggregate net asset value equal to the aggregate net
asset value of the shareholders' shares of CoreFunds Equity, as of the close of
business immediately prior to the date that CoreFunds Equity's assets are
exchanged for shares of Evergreen Stock. 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, and that the interests of the
shareholders of CoreFunds Equity 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's shareholders.
THE BOARD OF DIRECTORS OF COREFUNDS, INC.
<PAGE>
RECOMMENDS APPROVAL BY SHAREHOLDERS OF COREFUNDS EQUITY
OF THE PLAN EFFECTING THE REORGANIZATION.
The Trustees of Evergreen Equity Trust have also approved the Plan and,
accordingly, Evergreen Stock's participation in the Reorganization.
Approval of the Reorganization on the part of CoreFunds Equity will
require the affirmative vote of a majority of CoreFunds Equity'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.
Prior to consummation of the Merger, CoreFunds Equity 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 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 present in person or
by proxy at the Meeting, if holders of more than 50% of the shares of CoreFunds
Equity outstanding on the record date are present, in person or by proxy, or
(ii) more than 50% of the outstanding shares of CoreFunds Equity, whichever is
less. See "Voting Information Concerning the Meeting."
If the shareholders of CoreFunds Equity 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
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 Stock in the Reorganization. The holding period
and aggregate tax basis of shares of Evergreen
<PAGE>
Stock that are received by CoreFunds Equity'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 in the hands of Evergreen Stock 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 Stock upon the receipt of
the assets of the Fund in exchange for shares of Evergreen Stock and the
assumption by Evergreen Stock of the identified liabilities.
Investment Objectives and Policies of the Funds
The investment objectives and policies of Evergreen Stock and CoreFunds
Equity are identical.
The investment objective of Evergreen Stock is to seek maximum total
return. The Fund strives to provide a total return greater than broad market
indices such as the Standard & Poor's 500 Composite Stock Price Index by
investing principally in a diversified portfolio of common stocks of companies
of various market capitalizations that its investment adviser expects will
experience growth in earnings and price.
The Fund may also invest in preferred stocks, convertible securities,
foreign securities represented by American Depositary Receipts and investment
grade debt securities. The Fund may also engage in options and futures
transactions. See "Comparison of Investment Objectives and Policies" below.
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 Stock, 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 for
the one and five 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.
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return (1)
1 Year 5 Years From
Ended Ended Inception
March 31, March 31, To March Inception
1998 1998 31, 1998 Date
------- ------- --------- ---------
<S> <C> <C> <C> <C>
CoreFunds
Equity
Class A 37.18% 19.57% 18.46% 2/28/90
shares
Class Y 45.52% N/A 32.62% 2/21/95
shares
Class B N/A N/A 33.51% 11/10/97
shares
- --------------
</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 Stock and of CoreFunds Equity is
the responsibility of, and is supervised by, the Board of Trustees of Evergreen
Equity Trust and the Board of Directors of CoreFunds, Inc., respectively.
Investment Advisers
The investment adviser to Evergreen Stock is Meridian Investment
Company ("Meridian"). Meridian is an indirect subsidiary of 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. Prior to April 30,
1998, Meridian was an affiliate of CSIA. For further information regarding FUNB
and First Union, see "Organization and Service Providers - Service Providers
Investment Adviser" in the Prospectuses of Evergreen Stock.
Meridian manages investments and supervises the daily business affairs
of Evergreen Stock subject to the authority of the Trustees. Meridian is
entitled to receive from the Fund an annual fee equal to 0.74% of the Fund's
average daily net assets.
CSIA serves as the investment adviser for CoreFunds Equity. As investment
adviser, CSIA has overall responsibility for portfolio management of the Fund.
For its services as investment
<PAGE>
adviser, CSIA is entitled to receive a fee at an annual rate of 0.74% 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 Stock 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 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 Stock. As administrator, EIS provides facilities, equipment and
personnel to Evergreen Stock 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 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's administrator for the same compensation as currently
received.
Portfolio Management
The portfolio manager of both Evergreen Stock and CoreFunds Equity is
Joseph E. Stocke. Mr. Stocke is a Senior Managing Director of CSIA and also a
Senior Investment Manager/Equities with Meridian. Mr. Stocke has been with
Meridian since 1983.
Distribution of Shares
<PAGE>
Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund
Services, acts as underwriter of Evergreen Stock's shares. EDI distributes the
Fund's shares directly or through broker-dealers, banks (including FUNB), or
other financial intermediaries. Evergreen Stock offers four classes of shares:
Class A, Class B, Class C and Class Y. Each class has separate distribution
arrangements. (See "Distribution-Related and Shareholder Servicing-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 will receive Class Y shares of Evergreen Stock, Class A shareholders of
CoreFunds Equity will receive Class A shares of Evergreen Stock and Class B
shareholders of CoreFunds Equity will receive Class B shares of Evergreen Stock.
The Class Y, Class A and Class B shares of Evergreen Stock have substantially
similar arrangements with respect to the imposition of Rule 12b-1 distribution
and service fees and similar arrangements with respect to the imposition of
initial sales charges and CDSCs as the Class Y, Class A and Class B shares of
CoreFunds Equity. Because the Reorganization will be effected at net asset value
without the imposition of a sales charge, Evergreen Stock shares acquired by
shareholders of CoreFunds Equity pursuant to the proposed Reorganization would
not be subject to any initial sales charge or CDSC as a result of the
Reorganization. However, Class B shares acquired as a result of the
Reorganization would continue to be subject to a CDSC upon subsequent redemption
to the same extent as if shareholders had continued to hold their shares of
CoreFunds Equity. The CDSC applicable to Class B shares of Evergreen Stock
received in the Reorganization will be the CDSC schedule of CoreFunds Equity in
effect at the time Class B shares of CoreFunds Equity were originally purchased.
The following is a summary description of charges and fees for the
Class Y, Class A and Class B shares of Evergreen Stock which will be received by
CoreFunds Equity shareholders in the Reorganization. More detailed descriptions
of the distribution arrangements applicable to the classes of shares are
contained in the respective Evergreen Stock Prospectuses and the CoreFunds
Equity Prospectuses and in each Fund's Statement of Additional Information.
Class Y Shares. Class Y shares are sold at net asset value without any
initial or deferred sales charge and are not subject to distribution-related
fees. Class Y shares are only available to (i) all shareholders of record in one
or more of the Evergreen family of funds for which Evergreen Asset Management
Corp. ("Evergreen Asset") serves as investment adviser as of December 30, 1994,
(ii) certain institutional investors and (iii) investment advisory clients of
FUNB, Evergreen Asset or their affiliates. CoreFunds Equity shareholders who
receive Evergreen Stock Class Y shares in the Reorganization and who wish to
make
<PAGE>
subsequent purchases of Evergreen Stock shares will be able to purchase Class Y
shares.
Class A Shares. Class A shares are sold at net asset value plus an
initial sales charge and, as indicated below, are subject to
distribution-related fees. For a description of the initial sales charges
applicable to purchases of Class A shares, see "Purchase and Redemption of
Shares - How to Buy Shares" in the applicable Prospectus for Evergreen Stock. No
initial sales charge will be imposed on Class A shares of Evergreen Stock
received by CoreFunds Equity's shareholders in the Reorganization. Subsequent
purchases of Class A shares will be subject to initial sales charges.
Class B Shares. Class B shares are sold without an initial sales charge
but are subject to a CDSC, which ranges from 5% to 1%, if shares are redeemed
during the first six years after the month of purchase. In addition, Class B
shares are subject to distribution-related fees and shareholder
servicing-related fees as described below. Class B shares issued in the
Reorganization will automatically convert to Class A shares after six years in
accordance with the terms of conversion applicable to Class B shares of
CoreFunds Equity rather than in seven years after the month of purchase in
accordance with the conversion terms applicable to Class B shares of Evergreen
Stock. For purposes of determining when Class B shares issued in the
Reorganization to shareholders of CoreFunds Equity will convert to Class A
shares, such shares will be deemed to have been purchased as of the date Class B
shares of CoreFunds Equity were originally purchased.
Class B shares are subject to higher distribution-related fees than the
corresponding Class A shares on which a front-end sales charge is imposed (until
they convert to Class A shares). The higher fees mean a higher expense ratio, so
Class B shares pay correspondingly lower dividends and may have a lower net
asset value than Class A shares of the Fund.
Additional information regarding the classes of shares of each Fund is
included in its respective Prospectuses and Statement of Additional Information.
Distribution-Related and Shareholder Servicing-Related Expenses.
Evergreen Stock has adopted a Rule 12b-1 plan with respect to its Class A shares
under which the Class may pay for distribution-related expenses at an annual
rate which may not exceed 0.75% of average daily net assets attributable to the
Class. Payments with respect to Class A shares are currently limited to 0.25% of
average daily net assets attributable to the Class. This amount may be increased
to the full plan rate for the Fund by the Trustees without shareholder approval.
CoreFunds Equity has adopted a Rule 12b-1 plan with respect to its
Class A shares under which the Class may pay for distribution-related expenses
at an annual rate of 0.25% of
<PAGE>
average daily net assets attributable to the Class. Neither Evergreen Stock nor
CoreFunds Equity has adopted a Rule 12b-1 plan with respect to its Class Y
shares. A Rule 12b-1 plan can only be adopted with shareholder approval.
Each of Evergreen Stock and CoreFunds Equity has also adopted a 12b-1
plan with respect to its Class B shares under which the Class may pay for
distribution-related and shareholder servicing-related expenses at an annual
rate which may not exceed 1.00% of average daily net assets attributable to the
Class.
The Class B Rule 12b-1 plans of each Fund provide that, of the total
1.00% 12b-1 fees, up to 0.25% may be for payment in respect of "shareholder
services." Consistent with the requirements of Rule 12b-1 and the applicable
rules of the National Association of Securities Dealers, Inc. ("NASD"),
following the Reorganization Evergreen Stock may make distribution-related and
shareholder servicing-related payments with respect to CoreFunds Equity shares
sold prior to the Reorganization including payments to CoreFunds Equity's former
underwriter.
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 Stock is $1,000.
The minimum initial purchase requirement for Class A, Class B and Class Y shares
of CoreFunds Equity 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. Each
Fund may involuntarily redeem shareholders' accounts that have less than $1,000
($500 for CoreFunds Equity Class A and Class B shares) of invested funds. All
funds invested in each Fund are invested in full and fractional shares. The
Funds reserve the right to reject any purchase order.
<PAGE>
Exchange Privileges
CoreFunds Equity 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 Stock generally may
exchange their shares for shares of the same class of any other Evergreen fund.
CoreFunds Equity shareholders will be receiving Class Y, Class A and Class B
shares of Evergreen Stock in the Reorganization and, accordingly, with respect
to shares of Evergreen Stock received by CoreFunds Equity shareholders in the
Reorganization, the exchange privilege is limited to the Class Y, Class A and
Class B shares, as applicable, of other Evergreen funds. Evergreen Stock limits
exchanges to five per calendar year and three per calendar quarter. No sales
charge is imposed on an exchange. An exchange which represents an initial
investment in another Evergreen fund must amount to at least $1,000. The current
exchange privileges, and the requirements and limitations attendant thereto, are
described in each Fund's respective Prospectuses and Statement of Additional
Information.
Dividend Policy
Evergreen Stock distributes its investment company taxable income
annually and CoreFunds Equity 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 who have
elected to have their dividends and/or distributions reinvested will have
dividends and/or distributions received from Evergreen Stock reinvested in
shares of Evergreen Stock. Shareholders of CoreFunds Equity who have elected to
receive dividends and/or distributions in cash will receive dividends and/or
distributions from Evergreen Stock 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 Stock.
CoreFunds Equity has qualified and intends to continue to qualify, and
Evergreen Stock intends 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
<PAGE>
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."
Each Fund may invest in the securities of small and mid-sized
companies. Investments in securities of little-known, relatively small or
mid-sized companies may tend to be speculative and volatile. A lack of
management depth in such companies could increase the risks associated with the
loss of key personnel. Also, the material and financial resources of such
companies may be limited, with the consequence that funds or external financing
necessary for growth may be unavailable. Such companies may also be involved in
the development or marketing of new products or services for which there are no
established markets. If projected markets do not materialize or only regional
markets develop, such companies may be insignificant factors in their industries
and may become subject to intense competition from larger companies. Securities
of companies in which the Funds may invest will frequently be traded only in the
over-the-counter market or on regional stock exchanges and will often be closely
held. Securities of this type may have limited liquidity and may be subject to
wide price fluctuations. As a result of the risk factors described above, to the
extent that a Fund invests in the securities of small and mid-sized companies,
the net asset value of the Fund's shares can be expected to vary significantly.
Each Fund may invest in derivatives. The market values of derivatives
or structured securities may vary depending upon the manner in which the
investments have been structured and may fluctuate much more rapidly and to a
much greater extent than investments in other securities. As a result, the
values of such investments may change at rates in excess of the rates at which
traditional securities change and, depending on the structure of a derivative,
would change in a manner opposite to the change in the market value of a
traditional security. See each Fund's Prospectuses and Statement of Additional
Information for further discussion of the risks inherent in the use of
derivatives.
Each Fund may invest in foreign securities represented by American
Depositary Receipts. Investing in securities of foreign
<PAGE>
issuers generally involves greater risk than investing in securities of domestic
issuers for the following reasons: publicly available information on issuers and
securities may be scarce; many foreign countries do not follow the same
accounting, auditing, and financial reporting standards as are used in the U.S.;
market trading volumes may be smaller, resulting in less liquidity and more
price volatility compared to U.S. securities of comparable quality; there may be
less regulation of securities trading and its participants; the possibility may
exist for expropriation, confiscatory taxation, nationalization, establishment
of exchange controls, political or social instability or negative diplomatic
developments; and dividend or interest withholding may be imposed at the source.
Fluctuations in foreign exchange rates impose an additional level of
risk, possibly affecting the value of a Fund's foreign investments and earnings,
gains and losses realized through trades, and the unrealized appreciation or
depreciation of investments.
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
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 present Directors including the Independent
Directors considered and approved the Reorganization as in the best interests of
shareholders of CoreFunds Equity and determined that the interests of existing
shareholders of CoreFunds Equity 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.
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
<PAGE>
CoreFunds Equity'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 Stock is a newly created series of Evergreen Equity
Trust and the effect of the Reorganization will be to carry on the historical
activities of CoreFunds Equity as a series of Evergreen Equity Trust. Evergreen
Stock and CoreFunds Equity 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 Stock and CoreFunds Equity and
the agreement by Evergreen Stock'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; (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 in connection with the
Reorganization; (ix) the fact that Evergreen Stock will assume the identified
liabilities of CoreFunds Equity; 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 from the sale of its assets to Evergreen Stock.
In addition, the Directors considered that there are alternatives available to
shareholders of CoreFunds Equity, 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
<PAGE>
"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 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
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
Stock.
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's shareholders.
THE DIRECTORS OF COREFUNDS, INC. RECOMMEND
THAT THE SHAREHOLDERS OF COREFUNDS EQUITY 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 Stock will acquire all of the assets
of CoreFunds Equity in exchange for shares of Evergreen Stock and the assumption
by Evergreen Stock of the identified liabilities of CoreFunds Equity 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 will endeavor to
discharge all of its known liabilities and obligations. Evergreen Stock will not
assume any liabilities or obligations of CoreFunds Equity other than those
reflected in an unaudited statement of assets and liabilities of CoreFunds
Equity prepared as of the close of regular trading on the NYSE,
<PAGE>
currently 4:00 p.m. Eastern time, on the business day immediately prior to the
Closing Date. Shareholders of CoreFunds Equity will receive the number of full
and fractional shares of each class of Evergreen Stock equal to the number of
shares of each corresponding class as they currently hold of CoreFunds Equity.
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 case attributable to the respective class, by the total number of
outstanding shares.
State Street Bank and Trust Company, the custodian for Evergreen Stock,
will compute the value of CoreFunds Equity's 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 Stock, 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 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 Stock received by CoreFunds Equity. Such liquidation and distribution
will be accomplished by the establishment of accounts in the names of the Fund's
shareholders on Evergreen Stock's share records of its transfer agent. Each
account will represent the respective pro rata number of full and fractional
shares of Evergreen Stock due to the Fund's shareholders. All issued and
outstanding shares of CoreFunds Equity, including those represented by
certificates, will be canceled. The shares of Evergreen Stock to be issued will
have no preemptive or conversion rights. After these distributions and the
winding up of its affairs, CoreFunds Equity 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'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's shareholders, the Plan may be terminated (a) by the mutual agreement of
CoreFunds Equity and Evergreen Stock; 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.
<PAGE>
The expenses of CoreFunds Equity 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 or its shareholders.
If the Reorganization is not approved by shareholders of CoreFunds
Equity, 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 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 solely in
exchange for shares of Evergreen Stock and the assumption by Evergreen Stock of
the identified liabilities, followed by the distribution of Evergreen Stock's
shares by CoreFunds Equity in dissolution and liquidation of CoreFunds Equity,
will constitute a "reorganization" within the meaning of section 368(a)(1)(F) of
the Code, and Evergreen Stock and CoreFunds Equity 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 on the
transfer of all of its assets to Evergreen Stock solely in exchange for
Evergreen Stock's shares and the assumption by Evergreen Stock of the identified
liabilities of CoreFunds Equity or upon the distribution of Evergreen Stock's
shares to CoreFunds Equity's shareholders in exchange for their shares of
CoreFunds Equity;
(3) The tax basis of the assets transferred will be the same to
Evergreen Stock as the tax basis of such assets to CoreFunds Equity immediately
prior to the Reorganization, and the holding period of such assets in the hands
of Evergreen Stock will include the period during which the assets were held by
CoreFunds Equity;
(4) No gain or loss will be recognized by Evergreen Stock upon the
receipt of the assets from CoreFunds Equity solely in exchange for the shares of
Evergreen Stock and the assumption by Evergreen Stock of the identified
liabilities of CoreFunds Equity;
<PAGE>
(5) No gain or loss will be recognized by CoreFunds Equity's
shareholders upon the issuance of the shares of Evergreen Stock to them,
provided they receive solely such shares (including fractional shares) in
exchange for their shares of CoreFunds Equity; and
(6) The aggregate tax basis of the shares of Evergreen Stock, including
any fractional shares, received by each of the shareholders of CoreFunds Equity
pursuant to the Reorganization will be the same as the aggregate tax basis of
the shares of CoreFunds Equity held by such shareholder immediately prior to the
Reorganization, and the holding period of the shares of Evergreen Stock,
including fractional shares, received by each such shareholder will include the
period during which the shares of CoreFunds Equity exchanged therefor were held
by such shareholder (provided that the shares of CoreFunds Equity 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 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 Stock
shares he or she received. Shareholders of CoreFunds Equity 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 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 will be available to
Evergreen Stock 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 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 to Evergreen Stock 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
as of December 31, 1997, and the capitalization of Evergreen Stock on a pro
forma basis as of that date, giving
<PAGE>
effect to the proposed acquisition of assets at net asset value. As a newly
created series of Evergreen Equity Trust, Evergreen Stock, 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 1.00 Class Y, Class A and Class B
share, respectively, of Evergreen Stock issued for each Class Y, Class A and
Class B share, respectively, of CoreFunds Equity.
Capitalization of CoreFunds Equity
and Evergreen Stock (Pro Forma)
Evergreen
Stock (After
CoreFunds Reorgani-
Equity zation)
---------- ----------
Net Assets
Class A........................ $19,042,009 $19,042,009
Class B........................ $133,399 $133,399
Class C........................ N/A $---
Class Y........................ $557,592,205 $557,592,205
------------ ------------
Total Net $576,767,613 $576,767,613
Assets
Net Asset Value Per
Share
Class A........................ $20.61 $20.61
Class B........................ $18.31 $18.31
Class C........................ N/A $---
Class Y........................ $20.60 $20.60
Shares Outstanding
Class A........................ 924,049 924,049
Class B........................ 7,283 7,283
Class C........................ N/A ---
Class Y........................ 27,068,563 27,068,563
----------- ----------
All Classes.................... 27,999,895 27,999,895
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.
<PAGE>
Shareholder Information
As of May 29, 1998 (the "Record Date"), the following number of each
Class of shares of beneficial interest of CoreFunds Equity was outstanding:
Class of Shares
- ---------------
Class Y........................................ 25,652,621
Class A........................................ 918,760
Class B........................................
17,434
All Classes.................................... 26,588,815
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. To CoreFunds, Inc.'s knowledge, the following persons owned
beneficially or of record more than 5% of CoreFunds Equity'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 22,672,331 88.52% 88.52%
PNB Personal Trust
Accounting
P.O. Box 7829
Philadelphia, PA
19101-7829
National Financial A 295,746 31.71% 31.71%
Services Corp.
For Exclusive Use of
Our Customers
200 Liberty Street,
4th Floor
1 World Financial
Center
New York, NY 10281-
1003
<PAGE>
Percentage
of Shares Percentage of
of Class Shares of
Before Class After
No. of Reorgani- Reorgani-
Name and Address Class Shares zation zation
- ---------------- ----- ------ --------- ---------
Peter E. Grumblatt
Lisa M. Young JTTEN B 2,903 18.91% 18.91%
1302 Village Green
Dr.
Gilbertsville, PA
19525-9593
John R. Heller B 1,380 8.99% 8.99%
4916 Boudinot St.
Philadelphia, PA
19120-4307
CoreStates Bank, NA B 1,286 8.38% 8.38%
Cust. for the IRA of
Alfred J. Zysk
4230 Meridian St.
Philadelphia, PA
19136-3121
Phyllis L. Cowherd B 1,120 7.30% 7.30%
61 W. Market St.
Bethlehem, PA 18018-
5702
</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 Stock can be found in the Prospectuses of Evergreen
Stock under the caption "Description of the Fund - Investment Objective and
Policies." The investment objective, policies and restrictions of CoreFunds
Equity can be found in the respective Prospectuses of the Fund under the caption
"Information on the Funds." Unlike the investment objective of CoreFunds Equity,
which is fundamental, the investment objective of Evergreen Stock 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 maximum total return. Each Fund strives to provide a total return
greater than broad stock market indices such as the Standard & Poor's 500
Composite Stock Index by investing principally in a diversified portfolio of
common
<PAGE>
stocks of companies that its investment adviser expects will experience growth
in earnings and price including stocks of companies with large market
capitalizations (i.e., over $5 billion), medium market capitalizations (i.e.,
between $1 billion and $5 billion) and small market capitalizations (i.e. under
$1 billion). In addition, up to 20% of each Fund's total assets may be invested
in preferred stocks, securities convertible into common stock, corporate bonds
and notes, warrants (up to 5% of total assets), short-term obligations and
foreign securities represented by sponsored and unsponsored American Depositary
Receipts.
Debt securities, which include both secured and unsecured obligations,
will, at the time of investment, be rated within the three highest categories by
Standard & Poor's Ratings Group (AAA, AA, and A), by Moody's Investors Service,
Inc. (Aaa, Aa and A), by Fitch Investors Services L.P. (AAA, AA and A), or if
not rated or rated under a different system, will be of comparable quality to
obligations so rated, as determined by the Fund's investment adviser.
Each Fund may invest in certain types of derivative instruments,
including options and futures contracts, provided that the Fund may neither
purchase futures contracts or options where premiums and margin deposits exceed
5% of total assets nor enter into futures contracts or options where its
obligations would exceed 20% of its total assets. For a description of these
transactions and the risks related thereto, see the Prospectuses of Evergreen
Stock.
Each Fund also may invest, for temporary defensive purposes, up to 100%
of its assets in short-term obligations. Such obligations may include master
demand notes, U.S. government securities, 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.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
Forms of Organization
Evergreen 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 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 Stock is a series of Evergreen Equity Trust and CoreFunds
Equity is a series of CoreFunds, Inc.
Capitalization
The beneficial interests in Evergreen Stock 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 50 million are classified as
Class Y shares, 50 million are classified as Class A shares and 50 million are
classified as Class B shares of CoreFunds Equity. Evergreen 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 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 Equity
Trust to liability. To guard against this risk, the Declaration of Trust of
Evergreen 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 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
<PAGE>
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 Equity Trust is remote.
Under Maryland law, shareholders of CoreFunds Equity 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 Equity Trust on behalf of Evergreen Stock nor
CoreFunds, Inc. on behalf of CoreFunds Equity 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 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 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 Stock, twenty-five percent
(25%) of the outstanding shares entitled to vote, and with respect to CoreFunds
Equity, a majority of the outstanding shares entitled to vote constitutes a
quorum for consideration of such matter. For Evergreen Stock, a majority of the
votes cast and entitled to vote, and for CoreFunds Equity, 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 Equity Trust, each share of
Evergreen Stock will be entitled to one vote for each dollar of net asset value
applicable to each share. Under the voting provisions governing CoreFunds
Equity, 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'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
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
<PAGE>
In the event of the liquidation of Evergreen Stock or CoreFunds Equity,
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 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, "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 Equity Trust, Articles of
Incorporation of CoreFunds, Inc., By-Laws,
<PAGE>
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 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, 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 is referred to as 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.
The Directors have authorized CoreFunds, Inc., on behalf of CoreFunds
Equity, 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 is not approved by shareholders, the Directors will consider
appropriate actions to be taken with respect to CoreFunds Equity'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.
<PAGE>
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, 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 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 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 (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).
<PAGE>
The Previous Advisory Agreement contained identical provisions as to
termination and assignment.
Information About CoreFunds Equity'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 management fees of $3,459,108, $1,973,776 and
$199,645, respectively, and waived fees of $0, $0 and $51,162, respectively.
CSIA is not 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.
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
APPROVE THE INTERIM ADVISORY AGREEMENT.
ADDITIONAL INFORMATION
Evergreen Stock. Information concerning the operation and management of
Evergreen Stock is incorporated herein by reference from the Prospectuses dated
June 1, 1998, copies of which are enclosed, and Statement of Additional
Information dated February 1, 1998, as amended June 1, 1998. A copy of such
Statement of Additional Information is available upon request and without charge
by writing to Evergreen Stock at the address listed on the cover page of this
Prospectus/Proxy Statement or by calling toll-free 1-800-343-2898.
CoreFunds Equity. 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 at the address listed on the cover page of this
Prospectus/Proxy Statement or by calling toll-free 1-800-355-2673.
Evergreen Stock and CoreFunds Equity are each subject to the
informational requirements of the Securities Exchange Act of 1934
<PAGE>
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 Stock and
CoreFunds Equity.
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 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 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.
<PAGE>
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 (who will not be paid for their soliciting
activities). Shareholder Communications Corporation ("SCC") and its agents have
been engaged by CoreFunds Equity 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 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 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
<PAGE>
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 Stock which they receive in the
transaction at their then-current net asset value. Shares of CoreFunds Equity
may be redeemed at any time prior to the consummation of the Reorganization.
Shareholders of CoreFunds Equity 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 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 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 Stock 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 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
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
<PAGE>
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
Stock 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 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
Stock Selector 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
Core Equity 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 Class A, Class B and Class
Y 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 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,
Class B and Class Y shares of the Selling Fund will receive Class A, Class B and
Class Y shares, respectively, 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 EQUITY TRUST ON
BEHALF OF EVERGREEN STOCK
SELECTOR FUND
By:
Name:
Title:
COREFUNDS, INC.
ON BEHALF OF CORE EQUITY 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.
<PAGE>
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 ____________________________
<PAGE>
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%
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
CORE EQUITY FUND
a Series of
COREFUNDS, INC.
530 East Swedesford Road
Wayne, Pennsylvania 19087
(800) 355-2673
By and In Exchange For Shares of
EVERGREEN CORE STOCK FUND
a Series of
EVERGREEN 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 Core Equity Fund ("CoreFunds
Equity"), a series of CoreFunds, Inc., to Evergreen Core Stock Fund ("Evergreen
Stock"), a series of Evergreen Equity Trust, in exchange for Class A shares (to
be issued to holders of Class A shares of CoreFunds Equity), Class B shares (to
be issued to holders of Class B shares of CoreFunds Equity) and Class Y shares
(to be issued to holders of Class Y shares of CoreFunds Equity) of beneficial
interest, $.001 par value per share, of Evergreen Stock, 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 Stock
dated February 1, 1998, as amended June 1, 1998;
(2) The Statement of Additional Information of CoreFunds Equity
dated November 1, 1997;
(3) Annual Report of CoreFunds Equity for the year ended June 30,
1997; and
(4) Semi-Annual Report of CoreFunds Equity 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 Stock and CoreFunds
<PAGE>
Equity dated June 1, 1998. A copy of the Prospectus/Proxy Statement may be
obtained without charge by calling or writing to Evergreen Stock or CoreFunds
Equity at the telephone numbers or addresses set forth above.
The date of this Statement of Additional Information is June 1, 1998.
<PAGE>
