1933 Act Registration No. 33-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective [ ] Post-Effective
Amendment No. Amendment No.
EVERGREEN INVESTMENT TRUST
(formerly First Union Funds)
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (914) 694-2020
2500 WESTCHESTER AVENUE
PURCHASE, NEW YORK 10577
-------------------------------------------
(Address of Principal Executive Offices)
Joseph J. McBrien, Esq.
c/o Evergreen Asset Management Corp.
2500 WESTCHESTER AVENUE
PURCHASE, NEW YORK 10577
Copies of All Correspondence to:
John A. Dudley, Esq.
SULLIVAN & WORCESTER
1025 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
Approximate date of proposed public offering: As soon as possible after the
effective date of this Registration Statement.
The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment Company
Act of 1940 (File No. 2-94560); accordingly, no fee is payable herewith.
Registrant is filing as an exhibit to this Registration Statement a copy of an
earlier declaration under Rule 24f-2. Pursuant to Rule 429, this Registration
Statement relates to the aforementioned registration on Form N-1A. A Rule 24f-2
Notice for the Registrant's most recent fiscal year ended December 31, 1994 was
filed with the Commission on or about February 15, 1995.
It is proposed that this filing will become effective on September 25, 1995
pursuant to Rule 488 of the Securities Act of 1933.
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EVERGREEN INVESTMENT TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
Location in Prospectus/Proxy
Item of Part A of Form N-14 Statement
1. Beginning of Registration Statement Cross Reference Sheet; Cover Page
and Outside Front Cover Page of
Prospectus
2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
3. Fee Table, Synopsis and Risk Factors Cover Page; Summary; Risks
4. Information About the Transaction Summary; Reasons for the
Reorganization; Description of the
Merger; Information about the
Reorganization; Distribution of
Shares; Federal Income Tax
Consequences; Comparative
Information on Shareholders' Rights
5. Information about the Registrant Cover Page; Summary; Comparison of
Investment Objectives and Policies;
Distribution of Shares; Federal
Income Tax Consequences; Comparative
Information on Shareholders' Rights;
Additional Information
6. Information about the Company Cover Page; Summary; Comparison of
Being Acquired Investment Objective and Policies;
Distribution of Shares; Federal
Income Tax Consequences;
Comparative Information on
Shareholders' Rights; Additional
Information
7. Voting Information Cover Page; Summary; Information
about the Reorganization; Voting
Information Concerning the Meeting
8. Interest of Certain Persons Financial Statements and Experts;
and Experts Legal Matters
9. Additional Information Required for Inapplicable
Reoffering by Persons Deemed to be
Underwriters
Item of Part B of Form N-14
10. Cover Page Cover Page
11. Table of Contents Omitted
12. Additional Information About the Statement of Additional Information
Registrant of the Evergreen Investment Trust -
Evergreen Value Fund dated July 7,
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1995
13. Additional Information about Statement of Additional Information
the Company Being Acquired of FFB Funds Trust- Equity Fund
dated June 30, 1995
14. Financial Statements Incorporated by reference; Pro Forma
Financial Statements
Item of Part C of Form N-14
15. Indemnification Incorporated by Reference to Part A
Caption - "Comparative Information
on Shareholders' Rights - Liability
and Indemnification of Trustees"
16. Exhibits Item 16. Exhibits
17. Undertakings Item 17. Undertakings
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FFB FUNDS TRUST
FFB EQUITY FUND
237 PARK AVENUE
NEW YORK, NEW YORK 10017
September 28, 1995
Dear Shareholders:
On June 18, 1995, First Fidelity Bancorporation agreed to merge (the
"Merger") with and into a wholly-owned subsidiary of First Union Corporation.
First Fidelity Bancorporation is the parent of First Fidelity Bank, N.A. ("First
Fidelity"), the investment adviser to a group of mutual funds with assets of
$2.55 billion as of June 30, 1995. Your Fund, the FFB Equity Fund ("FFB Fund"),
is a fund included within the First Fidelity family of mutual funds.
First Union National Bank of North Carolina ("FUNB") is a subsidiary of
First Union Corporation. The Capital Management Group ("CMG") of FUNB and
Evergreen Asset Management Corp. ("Evergreen Asset"), a wholly-owned subsidiary
of FUNB, manage or otherwise oversee the investment of over $29.1 billion in
assets belonging to a wide-range of clients, including the Evergreen family of
mutual funds with assets of $8.7 billion as of June 30, 1995.
To facilitate the investment management of assets and the delivery of
shareholder services to the First Fidelity and Evergreen family of mutual funds,
the Trustees of your Fund are proposing to combine certain of the investment
companies in the First Fidelity family of mutual funds with investment companies
in the Evergreen family of mutual funds which have similar investment objectives
and policies.
The proposal contained in the accompanying Prospectus/Proxy Statement
provides following the Merger for a combination of your Fund with the Evergreen
Value Fund (the "Evergreen Fund"), a mutual fund advised by CMG. Your Fund and
the Evergreen Fund have substantially similar investment objectives and
policies. Under the proposed Agreement and Plan of Reorganization (the "Plan"),
the Evergreen Fund will acquire substantially all the assets of your Fund in
exchange for shares of the Evergreen Fund (the "Reorganization"). In addition,
shareholders of the Select Value Fund, a series of The FFB Lexicon Fund, are
also being asked to approve a combination of their fund with the Evergreen Fund.
As of June 30, 1995, the FFB Equity Fund and the Select Value Fund had net
assets of approximately $12.9 million and $82.5 million, respectively, and the
Evergreen Fund had approximately $1.1 billion of net assets. If the
Reorganization had taken place as of June 30, 1995, the Evergreen Fund's net
assets would have been approximately $1.2 billion. I believe that the
combinations will achieve the goal of efficient investment management and
delivery of shareholder services.
Since the Merger will take place prior to the closing date for the
Reorganization and because the Merger by law terminates the investment advisory
contract between First Fidelity and your Fund, the Trustees of FFB
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Funds Trust are also seeking your approval of an Interim Investment Advisory
Agreement with CMG. The Interim Investment Advisory Agreement will have the same
terms and fees as the current investment advisory agreement between your Fund
and First Fidelity and will be in effect for the period of time between the
effective date of the Merger and the closing date for the Reorganization. The
Reorganization is scheduled to take place on or about January 19, 1996.
If shareholders of the FFB Fund approve the Plan, upon consummation of the
transaction contemplated in the Plan, shareholders will receive Class Y shares
of the Evergreen Fund. Class Y shares are not charged any distribution-related
and shareholder servicing-related expenses. The proposed transaction will not
result in any federal income tax liability for you or for the FFB Fund. As a
shareholder of the Evergreen Fund you will have the ability to exchange your
shares for shares of the other funds in the Evergreen family of mutual funds
comparable to your present right to exchange among funds of the First Fidelity
family of mutual funds. Following completion of the Reorganization, your Fund
will be liquidated.
The Trustees of FFB Funds Trust have called a special meeting of
shareholders of the FFB Fund to be held on November 13, 1995 to consider the
proposed transaction. I STRONGLY INVITE YOUR PARTICIPATION BY ASKING YOU TO
REVIEW, COMPLETE AND RETURN YOUR PROXY AS SOON AS POSSIBLE.
Detailed information about the proposed transaction is described in the
enclosed Prospectus/Proxy Statement. I thank you for your participation as a
shareholder and urge you to please exercise your right to vote by completing,
dating and signing the enclosed proxy card. A self-addressed, postage-paid
envelope has been enclosed for your convenience.
A copy of the Evergreen Fund Prospectus accompanies the Prospectus/Proxy
Statement. I urge you to read the Prospectus and retain it for future reference.
If you have any questions regarding the proposed transaction or if you
would like additional information about the Evergreen family of mutual funds,
please telephone 1-800-437-8790.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED AS SOON AS
POSSIBLE.
Sincerely,
-------------------------
Edmund A. Hajim, President
FFB Funds Trust
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[SUBJECT TO COMPLETION, AUGUST 25, 1995 PRELIMINARY COPY]
FFB FUNDS TRUST
FFB EQUITY FUND
237 PARK AVENUE
NEW YORK, NEW YORK 10017
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 13, 1995
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of the FFB Equity Fund (the "FFB Fund"), a series of FFB Funds
Trust, will be held at the offices of FFB Funds Trust, 237 Park Avenue, New
York, New York 10017 on November 13, 1995 at 10:00 a.m. for the following
purposes:
1. To consider and act upon the Agreement and Plan of Reorganization (the
"Plan") dated as of _______________, 1995, providing for the acquisition of
substantially all of the assets of the FFB Fund by the Evergreen Value Fund (the
"Evergreen Fund"), a series of Evergreen Investment Trust, in exchange for Class
Y shares of the Evergreen Fund, and the assumption by the Evergreen Fund of
certain identified liabilities of the FFB Fund. The Plan also provides for
distribution of such shares of the Evergreen Fund to shareholders of the FFB
Fund in liquidation and subsequent termination of the FFB Fund. A vote in favor
of the Plan is a vote in favor of the liquidation and dissolution of the FFB
Fund.
2. To consider and act upon the Interim Investment Advisory Agreement
between the FFB Fund and the Capital Management Group of First Union National
Bank of North Carolina.
3. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.
The Trustees of FFB Funds Trust have fixed the close of business on
September , 1995 as the record date for the determination of shareholders of the
FFB 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 Trustees
Joan V. Fiore
Secretary
September 28, 1995
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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(s) properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the
Registration on the proxy card(s).
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(s).
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the
proxy card(s) 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.
c/o John Doe, Treasurer 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, Jr. John B. Smith, Jr., Executor
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PROSPECTUS/PROXY STATEMENT DATED SEPTEMBER 25, 1995
Acquisition of Assets of
FFB EQUITY FUND
OF
FFB FUNDS TRUST
237 Park Avenue
New York, New York 10017
By and in Exchange for Shares of
EVERGREEN VALUE FUND
OF
EVERGREEN INVESTMENT TRUST
2500 Westchester Avenue
Purchase, New York 10577
This Prospectus/Proxy Statement is being furnished to shareholders of FFB
Equity Fund (the "FFB Fund"), a series of FFB Funds Trust, in connection with a
proposed Agreement and Plan of Reorganization (the "Plan"), to be submitted to
shareholders of the FFB Fund for consideration at a Special Meeting of
Shareholders to be held on November 13, 1995 at 10:00 a.m. Eastern Time, at the
offices of FFB Funds Trust, 237 Park Avenue, New York, New York 10017, and any
adjournments thereof (the "Meeting"). The Plan provides for substantially all of
the assets of the FFB Fund to be acquired by Evergreen Value Fund (the
"Evergreen Fund"), a series of Evergreen Investment Trust, in exchange for Class
Y shares of the Evergreen Fund and the assumption by the Evergreen Fund of
certain identified liabilities of the FFB Fund (hereinafter referred to as the
"Reorganization"). Following the Reorganization, Class Y shares of the Evergreen
Fund will be distributed to shareholders of the FFB Fund in liquidation of the
FFB Fund and the FFB Fund will be terminated. As a result of the proposed
Reorganization, shareholders of the FFB Fund will receive that number of full
and fractional Class Y shares of the Evergreen Fund determined by dividing the
value of the assets of the FFB Fund to be acquired by the ratio of the net asset
value per share of the Evergreen Fund and the FFB Fund. The Reorganization is
being structured as a tax-free reorganization for federal income tax purposes.
Shareholders of the FFB Fund are also being asked to approve the Interim
Investment Advisory Agreement with the Capital Management Group of First Union
National Bank of North Carolina (the "Interim Advisory Agreement") with the same
terms and fees as the current advisory agreement between the FFB Fund and First
Fidelity Bank, N.A. The Interim Advisory Agreement will be in effect for the
period of time between the date on which the merger of First Fidelity
Bancorporation with and into a wholly-owned subsidiary of First Union
Corporation is effected (currently anticipated to be by January 1, 1996) and the
date on which the Evergreen
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Fund and the FFB Fund are combined together (scheduled for on or about January
19, 1996).
The FFB Funds Trust currently consists of FFB Fund and nine other series
with shares outstanding. As is the case with the FFB Fund, the shareholders of
certain of these series are being asked to approve similar Agreements and Plans
of Reorganization providing for the combination of such series with other
Evergreen Funds having similar investment objectives and policies. The FFB New
Jersey Tax-Free Income Fund and the FFB Pennsylvania Tax-Free Money Market Fund
will not be combined with any of the funds in the Evergreen family of mutual
funds and therefore shareholders of those Funds will vote on the approval of new
investment advisory agreements between the Funds and the Capital Management
Group of First Union National Bank of North Carolina and the election of new
Trustees for the FFB Funds Trust. The vote on the election of new Trustees will
take place after all the combinations of the FFB Funds and the Evergreen Funds
are effective.
Evergreen Investment Trust is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). Evergreen Investment Trust is comprised of 17 series, one of which,
the Evergreen Fund, is a party to the Reorganization. The Evergreen Fund seeks
long-term capital growth with current income as a secondary objective.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the Evergreen Fund that
shareholders of the FFB Fund 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 September 25, 1995,
relating to this Prospectus/Proxy Statement and the Reorganization,
incorporating by reference the financial statements of the Evergreen Fund dated
December 31, 1994 and June 30, 1995 and the financial statements of the FFB Fund
dated February 28, 1995 has been filed with the SEC and is incorporated by
reference in its entirety into this Prospectus/Proxy Statement. A copy of such
Statement of Additional Information is available upon request and without charge
by writing to the Evergreen Fund at 2500 Westchester Avenue, Purchase, New York
10577 or by calling toll-free 1-800-807-2940.
On June 30, 1995, the Evergreen Fund, pursuant to an Agreement and Plan of
Reorganization dated as of March 15, 1995, acquired all of the net assets of ABT
Growth and Income Trust. At the time of this combination the total net assets of
the Evergreen Fund were approximately $1 billion, while the total net assets of
ABT Growth and Income Trust were approximately $63.4 million. The effect of this
combination is reflected in the financial information as of June 30, 1995
presented in this Prospectus/Proxy Statement and in the pro-forma financial
statements contained in the Statement of Additional Information.
The Prospectuses of the Evergreen Fund dated July 7, 1995, its Annual
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Report for the fiscal year ended December 31, 1994 and its Semi-Annual Report
for the six months ended June 30, 1995 are incorporated herein by reference in
their entirety, insofar as they relate to the Evergreen Fund only, and not to
any other fund described therein. The two Prospectuses, which pertain (i) to
Class Y shares and (ii) to Class A, Class B and Class C shares, differ only
insofar as they describe the separate distribution and shareholder servicing
arrangements applicable to the Classes. Shareholders of the FFB Fund will
receive, with this Prospectus/Proxy Statement, copies of the Prospectus
pertaining to the Class Y shares of the Evergreen Fund that they will receive as
a result of the consummation of the Reorganization. Additional information about
the Evergreen Fund is contained in its Statement of Additional Information of
the same date which has been filed with the SEC and which is available upon
request and without charge by writing to the Evergreen Fund at the address
listed in the preceding paragraph or by calling toll-free 1-800-807-2940.
The Prospectus of the FFB Fund dated June 30, 1995 is incorporated herein
in its entirety by reference. Copies of the Prospectus and a Statement of
Additional Information dated the same date are available upon request without
charge by writing to the FFB Fund at the address listed on the cover page of
this Prospectus/Proxy Statement or by calling toll-free 1-800-437-8790.
Included as Exhibit A of this Prospectus/Proxy Statement is a copy of the
Plan.
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 FIRST UNION CORPORATION ("FIRST UNION") OR ANY OF ITS
SUBSIDIARIES, ARE NOT ENDORSED OR GUARANTEED BY FIRST UNION OR ANY OF ITS
SUBSIDIARIES, AND ARE NOT INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
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TABLE OF CONTENTS
COMPARISON OF FEES AND EXPENSES.......................................
SUMMARY...............................................................
PROPOSED PLAN OF REORGANIZATION.................................
TAX CONSEQUENCES................................................
INVESTMENT OBJECTIVES AND POLICIES OF THE
EVERGREEN FUND AND THE FFB FUND............................
COMPARATIVE PERFORMANCE INFORMATION OF EACH FUND................
MANAGEMENT OF THE FUNDS.........................................
INVESTMENT ADVISERS, SUB-ADVISERS AND ADMINISTRATORS............
PORTFOLIO MANAGEMENT............................................
DISTRIBUTION OF SHARES..........................................
DISTRIBUTION-RELATED AND SHAREHOLDER
SERVICING-RELATED EXPENSES.................................
PURCHASE AND REDEMPTION PROCEDURES..............................
EXCHANGE PRIVILEGES.............................................
DIVIDEND POLICY.................................................
RISKS.................................................................
INFORMATION ABOUT THE REORGANIZATION..................................
DESCRIPTION OF THE MERGER.......................................
REASONS FOR THE REORGANIZATION..................................
AGREEMENT AND PLAN OF REORGANIZATION............................
FEDERAL INCOME TAX CONSEQUENCES.................................
PRO-FORMA CAPITALIZATION........................................
SHAREHOLDER INFORMATION.........................................
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES......................
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS.......................
FORM OF ORGANIZATION............................................
CAPITALIZATION..................................................
SHAREHOLDER LIABILITY...........................................
SHAREHOLDER MEETINGS AND VOTING RIGHTS..........................
LIQUIDATION OR DISSOLUTION......................................
LIABILITY AND INDEMNIFICATION OF TRUSTEES.......................
RIGHTS OF INSPECTION............................................
INFORMATION REGARDING THE PROPOSED INTERIM ADVISORY AGREEMENT.........
INTRODUCTION....................................................
COMPARISON OF THE INTERIM ADVISORY AGREEMENT
AND THE EXISTING ADVISORY AGREEMENT........................
INFORMATION ABOUT THE FFB FUND'S CURRENT AND
PROPOSED INTERIM INVESTMENT ADVISERS.......................
ADDITIONAL INFORMATION................................................
VOTING INFORMATION CONCERNING THE MEETING.............................
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FINANCIAL STATEMENTS AND EXPERTS......................................
LEGAL MATTERS.........................................................
OTHER BUSINESS........................................................
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COMPARISON OF FEES AND EXPENSES
The amounts for Class Y shares of the Evergreen Fund set forth in the
following table and in the examples are based on the expenses of the Fund for
the fiscal year ended December 31, 1994. The amounts for the shares of the FFB
Fund set forth in the following table and in the examples are estimated based on
the expenses for the FFB Fund for the fiscal year ended February 28, 1995, in
each case adjusted for voluntary expense waivers. The amounts for the Evergreen
Fund Pro Forma are based on the combined expenses expected for the twelve month
period ended June 30, 1995.
The following tables show for the Evergreen Fund and the FFB Fund the
shareholder transaction expenses and annual fund operating expenses associated
with an investment in the Class Y shares of the Evergreen Fund and shares of the
FFB Fund, and such costs and expenses associated with an investment in Class Y
shares of the Evergreen Fund assuming consummation of the Reorganization. The
pro forma expenses of the Evergreen Fund also assume the consummation of the
reorganization between the Evergreen Fund and the Select Value Fund, a series of
The FFB Lexicon Fund.
COMPARISON OF CLASS Y SHARES OF THE EVERGREEN FUND WITH
SHARES OF THE FFB FUND
EVERGREEN
EVERGREEN FUND
FUND FFB FUND PRO FORMA
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).... 0% 4.50% 0%
Maximum Sales Load
Imposed on Reinvested Dividends
(as a percentage of offering price).... None None None
Contingent Deferred Sales Charge......... None None None
Exchange Fee (applies only
after 4 exchanges per year)............ $5 None $5
Redemption Fees.......................... None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily
net assets)
Advisory Fees............................ 0.50% 0.00%(1) 0.50%
Administrative Fees...................... 0.06% 0.00% 0.06%
12b-1 Fees............................... ----- 0.03%(2) ----
Other Expenses........................... 0.10% 1.09% 0.07%
---- ----- -----
Annual Fund Operating Expenses........... 0.66% 1.12%(3) 0.63%(4)
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(1) Advisory and Administrative Expenses were waived and certain Fund expenses
were reimbursed by the investment adviser. Absent fee waivers, Advisory Fees and
Administrative Expenses would be 0.75%, which includes Administrative Expenses
of 0.25% payable to the administrator.
(2) The FFB Fund can pay up to 0.50% of its average daily net assets as a 12b-1
fee.
(3) Without waiver or reimbursement of certain Fund expenses, Annual Fund
Operating Expenses would be 2.34%.
(4) The Evergreen Fund Pro Forma Annual Fund Operating Expenses assume the
consummation of the Reorganization of both the FFB Fund and the Select Value
Fund with the Evergreen Fund. If the Reorganization of the Select Value Fund is
not approved, the total Pro Forma Annual Fund Operating Expenses would have been
0.66% of average daily net assets.
EXAMPLES. The following tables show for each Fund, and for the Evergreen
Fund, 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 Class Y shares of the Evergreen Fund
and shares of the FFB Fund for the periods specified, assuming (i) a 5% annual
return, and (ii) redemption at the end of such period.
EVERGREEN EVERGREEN FUND
FUND CLASS Y CLASS Y SHARES
SHARES FFB FUND PRO FORMA
After 1 year............ $7 $56 $6
After 3 years........... $21 $79 $20
After 5 years........... $37 $104 $35
After 10 years.......... $82 $175 $79
The purpose of the foregoing examples is to assist an FFB Fund shareholder
in understanding the various costs and expenses that an investment in the Class
Y shares of the Evergreen Fund 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 the FFB Fund. 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.
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SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ADDITIONAL
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS/PROXY STATEMENT, AND, TO THE
EXTENT NOT INCONSISTENT WITH SUCH ADDITIONAL INFORMATION, THE PROSPECTUSES OF
THE EVERGREEN FUND DATED JULY 7, 1995 AND THE PROSPECTUS OF THE FFB FUND DATED
JUNE 30, 1995 (WHICH ARE INCORPORATED HEREIN BY REFERENCE), THE PLAN AND THE
INTERIM ADVISORY AGREEMENT, 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 substantially all of the assets of
the FFB Fund in exchange for Class Y shares of the Evergreen Fund and the
assumption by the Evergreen Fund of certain identified liabilities of the FFB
Fund. (The FFB Fund and the Evergreen Fund each may also be referred to in this
Prospectus/Proxy Statement as a "Fund" and together, as the "Funds"). The Plan
also calls for the distribution of Class Y shares of the Evergreen Fund to FFB
Fund shareholders in liquidation of the FFB Fund as part of the Reorganization.
As a result of the Reorganization, the shareholders of the FFB Fund will become
the owners of that number of full and fractional Class Y shares of the Evergreen
Fund determined by dividing the value of the assets of the FFB Fund to be
acquired by the ratio of the net asset value per share of the Evergreen Fund and
the FFB Fund as of the close of business on the date that the FFB Fund's assets
are exchanged for shares of the Evergreen Fund. See "Information About the
Reorganization."
The Trustees of FFB Funds Trust, including the Trustees who are not
"interested persons," as such term is defined in the 1940 Act (the "Independent
Trustees"), have concluded that the Reorganization would be in the best
interests of shareholders of the FFB Fund and that the interests of the
shareholders of the FFB Fund will not be economically diluted as a result of the
transactions contemplated by the Reorganization. Accordingly, the Trustees have
submitted the Plan for the approval of FFB Fund's shareholders. THE BOARD OF
TRUSTEES OF FFB FUNDS TRUST RECOMMENDS APPROVAL BY SHAREHOLDERS OF THE FFB FUND
OF THE PLAN EFFECTING THE REORGANIZATION.
The Trustees of the Evergreen Investment Trust have also approved the Plan,
and accordingly, the Evergreen Fund's participation in the Reorganization.
Approval of the Reorganization on the part of the FFB Fund will
require the affirmative vote of more than 50% of its outstanding voting
securities. See "Voting Information Concerning the Meeting."
Since the merger (the "Merger") of First Fidelity Bancorporation ("FFB")
with and into a wholly-owned subsidiary of First Union Corporation ("First
Union") will take place prior to the closing date for the Reorganization and
because the Merger by law terminates the investment advisory contract between
First Fidelity Bank, N.A. ("First Fidelity") and
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the FFB Fund, arrangements have been made to enter into the Interim Advisory
Agreement with the Capital Management Group of First Union National Bank of
North Carolina. The Interim Advisory Agreement will have the same terms and fees
as the current investment advisory agreement between the FFB Fund and First
Fidelity and will be in effect for the period of time between the effective date
of the Merger and the closing date for the Reorganization. The Reorganization is
scheduled to take place on or about January 19, 1996.
Approval of the Interim Advisory Agreement requires the affirmative vote of
(i) 67% or more of the shares of the FFB Fund present in person or by proxy at
the Meeting, if holders of more than 50% of the shares of the FFB Fund
outstanding on the record date are present, in person or by proxy, or (ii) more
than 50% of the outstanding shares of the FFB Fund, whichever is less. See
"Voting Information Concerning the Meeting."
If the shareholders of the FFB Fund do not vote to approve the
Reorganization, the Trustees of FFB Funds Trust will consider other possible
courses of action in the best interests of shareholders. If the Merger is not
completed, the Reorganization of the FFB Fund and the Evergreen Fund will not be
completed regardless of the vote of the FFB Fund's shareholders.
TAX CONSEQUENCES
Prior to or at the completion of the Reorganization, the FFB Fund will have
received an opinion of counsel that the Reorganization has been structured so
that no gain or loss will be recognized by the FFB Fund or its shareholders for
federal income tax purposes as a result of the receipt of shares of the
Evergreen Fund in the Reorganization. The holding period and aggregate tax basis
of Class Y shares of the Evergreen Fund that are received by FFB Fund
shareholders will be the same as the holding period and aggregate tax basis of
shares of the FFB Fund previously held by such shareholders, provided that
shares of the FFB Fund are held as capital assets. In addition, the holding
period and tax basis of the assets of the FFB Fund in the hands of the Evergreen
Fund as a result of the Reorganization will be the same as in the hands of the
FFB Fund immediately prior to the Reorganization and no gain or loss will be
recognized by the Evergreen Fund upon the receipt of the assets of the FFB Fund
in exchange for Class Y shares of the Evergreen Fund and the assumption by the
Evergreen Fund of certain identified liabilities.
INVESTMENT OBJECTIVES AND POLICIES OF THE EVERGREEN FUND AND THE FFB FUND
The investment objective of the Evergreen Fund is long-term capital
appreciation with current income as a secondary objective. Normally, at least
75% of the Fund's assets will be invested in equity securities of U.S. companies
with prospects for earnings growth and dividends.
The investment objective of the FFB Fund is long-term capital appreciation.
In pursuing this objective, the Fund normally invests at least 65% of its assets
in a diversified portfolio of common stocks,
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preferred stocks, securities convertible into common stocks (such as
preferred stocks and convertible debentures) and warrants of U.S.
corporations. As a secondary objective, the FFB Fund seeks current income
for distribution to shareholders. See "Comparison of Investment Objectives
and Policies" below.
COMPARATIVE PERFORMANCE INFORMATION OF EACH FUND
Discussions of the manner of calculation of total return are contained in
the respective Prospectuses and Statements of Additional Information of the
Funds. The total return of the Class Y shares of the Evergreen Fund and shares
of the FFB Fund for the one and five-year periods ended June 30, 1995 and the
period from inception through June 30, 1995 are set forth in the table below.
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.
AVERAGE ANNUALIZED COMPOUNDED TOTAL RETURN
ONE FIVE SINCE INCEPTION
YEAR YEARS INCEPTION DATE
Evergreen Fund
Class Y shares.................. 21.79% N/A 13.82%* 1/3/91
FFB Fund shares*................... 27.27% 9.93% 10.40% 5/6/86
------------------
* Reflects waiver of advisory fees and reimbursements and/or waivers of
expenses. Without such reimbursements and/or waivers, the average annual total
return during the period would have been lower.
MANAGEMENT OF THE FUNDS
The overall management of the Evergreen Investment Trust and of FFB Funds
Trust is the responsibility of, and is supervised by, their respective Board of
Trustees.
INVESTMENT ADVISERS, SUB-ADVISERS AND ADMINISTRATORS
Evergreen Fund. The Capital Management Group ("CMG"), a division of the
First Union National Bank of North Carolina ("FUNB"), serves as investment
adviser to the Evergreen Fund. The address of FUNB is One First Union Center,
301 S. College Street, Charlotte, North Carolina 28288. FUNB is a subsidiary of
First Union, one of the ten largest banking holding companies in the United
States.
First Union is a bank holding company headquartered in Charlotte,
North Carolina, which had $83.1 billion in consolidated assets as of June
30, 1995. First Union and its subsidiaries provide a broad range of
financial services to individuals and businesses through offices in 36
states. CMG and Evergreen Asset Management Corp. ("Evergreen Asset"), a
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wholly-owned subsidiary of FUNB, manage or otherwise oversee the investment of
over $29.1 billion in assets belonging to a wide range of clients, including all
the Evergreen family of mutual funds. First Union Brokerage Services, Inc., a
wholly-owned subsidiary of FUNB, is a registered broker-dealer that is
principally engaged in providing retail brokerage services consistent with its
federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
CMG manages investments and supervises the daily business affairs of the
Evergreen Fund. As compensation therefor, CMG is entitled to receive an annual
fee from the Evergreen Fund equal to 0.50% of the Fund's average daily net
assets.
Evergreen Asset serves as administrator to the Evergreen Fund. Evergreen
Asset, with its predecessors, has served as investment adviser and administrator
to the Evergreen family of mutual funds since 1971.
In its capacity as administrator, Evergreen Asset is entitled to receive a
fee based on the average daily net assets of the Evergreen Fund at a rate based
on the total assets of the mutual funds administered by Evergreen Asset for
which CMG or Evergreen Asset also serve as investment adviser, calculated in
accordance with the following schedule: 0.050% of 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. Furman Selz Incorporated ("Furman Selz"), an affiliate of Evergreen
Funds Distributor, Inc., distributor for the Evergreen family of mutual funds,
serves as sub- administrator to the Evergreen Fund and is entitled to receive a
fee from the Fund calculated on the average daily net assets of the Fund at a
rate based on the total assets of the mutual funds administered by Evergreen
Asset for which CMG or Evergreen Asset also serve as investment adviser,
calculated in accordance with the following schedule: 0.0100% of the first $7
billion; 0.0075% on the next $3 billion; 0.0050% on the next $15 billion; and
0.0040% on assets in excess of $25 billion. The total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset serve as
investment adviser as of June 30, 1995 were approximately $8.7 billion. For
further information regarding Evergreen Asset, FUNB and First Union, see
"Management of the Funds -- Investment Advisers" in the Prospectus of the
Evergreen Fund.
FFB Fund. First Fidelity Bank, N.A. ("First Fidelity") serves as the
investment adviser for the FFB Fund and provides investment guidance consistent
with the Fund's investment objective and policies and provides administrative
assistance in connection with the operation of the FFB Fund. First Fidelity also
acts as transfer agent, custodian and dividend disbursing agent for the FFB
Fund. Furman Selz acts as administrator of the FFB Fund. Furman Selz provides
personnel, office space and all management and administrative services
reasonably necessary for the operation of the FFB Funds Trust and the FFB Fund
(such as maintaining the FFB Fund's books
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and records, monitoring compliance with various state and Federal laws and
assisting the Trustees in the execution of their duties) other than those
services which are provided by First Fidelity.
As compensation for their investment advisory, administrative or management
services, First Fidelity and Furman Selz are entitled to a monthly fee at an
annual rate of 0.50% and 0.25%, respectively, of the FFB Fund's average daily
net assets. For the fiscal year ended February 28, 1995, First Fidelity and
Furman Selz waived all of their respective fees.
PORTFOLIO MANAGEMENT
The Evergreen Fund is currently managed by experienced members of the
CMG staff. Mr. William T. Davis, Jr. was the Evergreen Fund's portfolio
manager from March, 1991 until his resignation in July, 1995.
DISTRIBUTION OF SHARES
Evergreen Funds Distributor, Inc. ("EFD"), an affiliate of Furman Selz,
acts as underwriter of the Evergreen Fund's shares. EFD distributes the
Evergreen Fund shares directly or through broker-dealers, banks, including FUNB,
or other financial intermediaries. The Evergreen Fund 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.
Class Y shares of the Evergreen Fund, which will be received by the FFB
Fund's shareholders if the Reorganization is approved, are sold without a sales
load or distribution fee only to (i) all shareholders of record in one or more
of the Evergreen family of funds for which Evergreen Asset serves as investment
adviser as of December 30, 1994, (ii) certain institutional investors and (iii)
investment advisory clients of CMG, Evergreen Asset or their affiliates. FFB
Fund shareholders who wish to make subsequent purchases of the Evergreen Fund's
shares will be able to purchase Class Y shares. Class A, Class B and Class C
shares of the Evergreen Fund are sold with either an initial or contingent
deferred sales charge and are subject to certain distribution-related and
shareholder servicing-related expenses. For a description of the Classes of
shares issued by the Evergreen Fund see "Purchase and Redemption of Shares" and
"General Information - Organization; Other Classes of Shares" of the Evergreen
Fund's Prospectus. Class A, Class B and Class C shares are further described in
a separate Evergreen Fund prospectus.
FFB Funds Distributor, Inc. ("FFB Funds Distributor"), an affiliate of
Furman Selz, acts as underwriter of the FFB Fund's shares. There is only one
class of shares outstanding. Shares are sold with an initial sales charge
ranging from 4.50% to 1%. Investors who purchase and redeem shares of the FFB
Fund through a customer account maintained at a Participating Organization may
be charged additional fees by such Participating Organization not to exceed
0.35% on an annualized basis of the average daily value during the month of the
FFB Fund shares in the subaccounts of
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which the Participating Organization is record owner as nominee for its
customers. Currently, [ %] is being charged. The FFB Fund has adopted a Rule
12b-1 distribution plan as described in "Distribution-Related and Shareholder
Servicing-Related Expenses" below.
DISTRIBUTION-RELATED AND SHAREHOLDER SERVICING-RELATED EXPENSES.
Evergreen Fund. The Evergreen Fund has not adopted a Rule 12b-1 plan
or shareholder servicing plan for its Class Y shares.
FFB Fund. The FFB Fund has adopted a Master Distribution Plan (the "FFB
Plan") pursuant to Rule 12b-1 of the 1940 Act. The FFB Plan provides for a
monthly payment by the FFB Fund to FFB Funds Distributor in such amounts that
FFB Funds Distributor may request for direct and indirect distribution expenses,
subject to periodic Board approval and to an overall expense limitation. Each
such payment is based on the average daily value of the FFB Fund's net assets
during the preceding month and is calculated at an annual rate not to exceed
0.50% per annum. Payments under the FFB Plan are currently at the annual rate of
0.03% of the Fund's average daily net assets.
PURCHASE AND REDEMPTION PROCEDURES
Information concerning applicable sales charges, distribution-related fees
and shareholder servicing-related fees are described above. Class Y shares of
the Evergreen Fund are offered at net asset value, and the FFB Fund's shares are
offered at net asset value (plus any applicable sales charges), by their
respective distributors. Investments in the Funds are not insured. The minimum
initial purchase requirement for each Class of shares of each Fund is $1,000.
There is no minimum for subsequent purchases of Evergreen Fund shares. The
minimum for subsequent purchases of FFB Fund shares is $100. 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 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. The Evergreen Fund
and the FFB Fund each may involuntarily redeem shareholders' accounts that have
less than $1,000 and $500, respectively, of invested funds. For the FFB Fund,
there are no minimum investment requirements with respect to investments
effected through certain automatic purchase and redemption arrangements on
behalf of customer accounts maintained at Participating Organizations. The
minimum investment requirements in the FFB Fund may be waived or lowered for
investments effected on a group basis by certain other institutions and their
employees. All funds invested in each Fund are invested in full and fractional
shares. The Funds reserve the right to reject any purchase order.
EXCHANGE PRIVILEGES
The FFB Fund currently permits shareholders to exchange shares for
shares of the same Class of other funds managed by First Fidelity. Holders
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of shares of a Class of the Evergreen Fund generally may exchange their shares
for shares of the same Class of any other funds of the Evergreen mutual fund
family. FFB Fund shareholders will be receiving Class Y shares of the Evergreen
Fund in the Reorganization and, accordingly, with respect to shares of the
Evergreen Fund received by FFB Fund shareholders in the Reorganization, the
exchange privilege is limited to the Class Y shares of other funds of the
Evergreen mutual fund family. The Evergreen Fund imposes a fee of $5 per
exchange on shareholders who exchange in excess of four times per calendar year.
No sales charge is imposed on an exchange. An exchange which represents an
initial investment in another fund of the Evergreen mutual fund family must
amount to at least $1,000. The current exchange privileges, and the requirements
and limitations attendant thereto, are described in the Funds' respective
Prospectuses and Statements of Additional Information.
DIVIDEND POLICY
The Evergreen Fund distributes its investment company taxable income
quarterly. The FFB Fund distributes its net investment income semi-annually.
Each Fund distributes net long-term capital gains at least annually. 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 the Funds for further information concerning
dividends and distributions.
After the Reorganization, shareholders of the FFB Fund that have elected
(or that so elect no later than November 13, 1995), to have their dividends
and/or distributions reinvested, will have dividends and/or distributions
received from the FFB Fund reinvested in shares of the Evergreen Fund.
Shareholders of the FFB Fund that have elected (or that so elect no later than
November 13, 1995) to receive dividends and/or distributions in cash will
receive dividends and/or distributions from the Evergreen Fund in cash after the
Reorganization, although they may, after the Reorganization, elect to have such
dividends and/or distributions reinvested in additional shares of the Evergreen
Fund.
Each Fund has qualified and intends to continue to qualify to be treated as
a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"). While so qualified, so long as each Fund distributes all
of its investment company taxable income and any net realized gains to
shareholders, it is expected that a Fund will not be required to pay any federal
income taxes on the amounts so distributed. A 4% nondeductible excise tax will
be imposed on amounts not distributed if a Fund does not meet certain
distribution requirements by the end of each calendar year. Each Fund
anticipates meeting such distribution requirements.
RISKS
Since the investment objectives and policies of each Fund are substantially
comparable, the risks involved in investing in each Fund's shares are similar.
There is no assurance that investment performances
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will be positive and that the Funds will meet their investment objectives. In
addition, both Funds may employ for hedging purposes the strategy of writing
covered call options and the Evergreen Fund may write put options and purchase
put and call options on national securities exchanges. The risks involved in
these strategies are described in the "Investment Practices and Restrictions -
Options and Futures" section in the Evergreen Fund's Prospectus.
The Evergreen Fund also may enter into futures contracts and options on
futures contracts for hedging purposes. See limitations discussed in "Comparison
of Investment Objectives and Policies." However, the Evergreen Fund does not
currently engage in these investment strategies. For a discussion of the risks
involved in entering into futures contracts and options on futures contracts,
see the "Investment Practices and Restrictions - Options and Futures" section in
the Evergreen Fund's Prospectus.
The Evergreen Fund and the FFB Fund may invest in foreign securities or
securities denominated in or indexed to foreign currencies. These may involve
additional risks. Specifically, they may be affected by the strength of foreign
currencies relative to the U.S. dollar, or by political or economic developments
in foreign countries. Accounting procedures and government supervision may be
less stringent than those applicable to U.S. companies. There may be less
publicly available information about a foreign company than about a U.S.
company. Foreign markets may be less liquid or more volatile than U.S. markets
and may offer less protection to investors. It may also be more difficult to
enforce contractual obligations abroad than would be the case in the United
States because of differences in the legal systems. Foreign securities may be
subject to foreign taxes, which may reduce yield, and be less marketable than
comparable U.S. securities. All these factors are considered by CMG before
making any of these types of investments.
INFORMATION ABOUT THE REORGANIZATION
DESCRIPTION OF THE MERGER
On June 18, 1995, First Union entered into an Agreement and Plan of
Merger (the "Merger Agreement") with FFB, the corporate parent of First
Fidelity, which provides, among other things, for the Merger of FFB with and
into a wholly-owned subsidiary of First Union, subject to the terms and
conditions contained in the Merger Agreement. It is currently expected that the
Merger will be consummated by January 1, 1996 subject to the satisfaction of
various conditions of closing set forth in the Merger Agreement. Consummation of
the Merger is expected to result in the nations's sixth largest bank holding
company, with assets of approximately $118.5 billion. Currently First Union is
the nation's ninth largest bank holding company, with assets of $83.1 billion as
of June 30, 1995, and FFB is the 25th largest, having $35.4 billion in assets as
of June 30, 1995.
Consummation of the Merger is subject to receipt of regulatory and
stockholder approvals, as well as other conditions set forth in the Merger
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Agreement. No assurance can be given that the Merger will be consummated. In
connection with the execution of the Merger Agreement, Banco Santander, S.A.
("Santander"), the owner of approximately 30 percent of the outstanding shares
of FFB's common stock, agreed, among other things, to vote such shares in favor
of the Merger Agreement. It is anticipated that subsequent to the Merger,
Santander will own approximately 11% of First Union's outstanding shares. The
Merger is not in any way conditioned upon the approval by shareholders of any
mutual fund currently managed by First Fidelity, and it is expected that the
Merger will take place whether or not the transaction described herein is
approved by such shareholders.
As a result of the Merger, it is expected that FUNB and Evergreen Asset
will succeed to the investment advisory and administrative functions currently
performed for the FFB Fund by various units of First Fidelity. It is also
expected that First Fidelity, or its successors, will no longer provide
investment advisory or administrative services to investment companies.
REASONS FOR THE REORGANIZATION
The Board of Trustees of FFB Funds Trust has considered and approved the
Reorganization, including entry by FFB Funds Trust on behalf of the FFB Fund
into the Plan, as in the best interests of the shareholders. In addition, the
Trustees have approved the Interim Advisory Agreement with respect to the FFB
Fund.
As noted above, FFB has agreed to merge with First Union. FFB is the parent
company of First Fidelity, investment adviser to the mutual funds which comprise
FFB Funds Trust. The Merger will cause, as a matter of law, termination of the
investment advisory agreement between each of the First Fidelity Funds and First
Fidelity. Accordingly, the Trustees have considered the recommendation of First
Fidelity that the Trustees approve the proposed Reorganization.
In making their recommendation to the Trustees, the representatives of the
respective banks reviewed with the Trustees various factors about the Funds and
the proposed Reorganization. There are substantial similarities between the
Evergreen Fund and the FFB Fund. Specifically, the Evergreen Fund and the FFB
Fund have substantially similar investment objectives and policies, and
comparable risk profiles. See, "Comparison of Investment Objectives and
Policies" below. In terms of total net assets the FFB Fund and the Select Value
Fund, a series of The FFB Lexicon Fund, at June 30, 1995 had net assets of
approximately $12.9 million and $82.4 million, respectively. The Evergreen
Fund's net assets at such date (including the effect of the combination of the
Evergreen Fund and the ABT Growth and Income Trust) were approximately $1
billion. The FFB Fund has not, since its inception in May, 1986, achieved asset
levels on a continuing basis that would permit it, without a significant waiver
of fees and reimbursement of expenses by its investment adviser (the continuance
of which voluntary waivers and reimbursements cannot be assured) to operate
economically and generate a competitive return. The Evergreen Fund has reached
viable asset levels. Given the substantial similarities between
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the Funds and the fact that the Funds would in the future be offered through
certain common distribution channels and be managed by the same entity, First
Fidelity believes that the FFB Fund will not be able to achieve significant
increases in asset levels in the foreseeable future.
In addition, assuming that an alternative to the Reorganization would be to
propose that the FFB Fund be managed by Evergreen Asset or another affiliate of
FUNB following the consummation of the Merger, the FFB Fund would thereafter
share the same investment management resources and be offered through common
distribution channels with the substantially identical Evergreen Fund. The FFB
Fund would also have to bear the cost of maintaining its separate existence.
First Fidelity and FUNB believe that the prospect of dividing the resources of
the FUNB/Evergreen mutual fund organization between two substantially identical
funds could result in both funds being disadvantaged due to an inability to
achieve optimum size, performance levels and the greatest possible economies of
scale. Accordingly, for the reasons noted above and recognizing that there can
be no assurance that any economies of scale or other benefits will be realized,
both First Fidelity and FUNB believe that the proposed Reorganization would be
in the best interest of each Fund and its shareholders.
The Board of Trustees of FFB Funds Trust met and considered the
recommendation of First Fidelity 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 economic dilution of shareholder
interests; (iii) expense ratios, fees and expenses of the FFB Fund and the
Evergreen Fund and of similar funds; the comparative performance records of each
of the Funds; compatibility of their investment objectives and policies; service
features available to shareholders in the respective funds; the investment
experience, expertise and resources of Evergreen Asset; the service and
distribution resources available to the Evergreen family of mutual funds and the
broad array of investment alternatives available to shareholders of the
Evergreen family of mutual funds, including the future marketing plans and
resources expected to be used in connection with the Evergreen family of mutual
funds; and the personnel and financial resources of First Union and its
affiliates; (iv) the fact that FUNB will bear the expenses incurred by the FFB
Fund in connection with the Reorganization; (v) the fact that the Evergreen Fund
will assume certain identified liabilities of the FFB Fund; and (vi) the
expected federal income tax consequences of the Reorganization.
The Trustees also considered the benefits to be derived by shareholders of
the FFB Fund from the sale of its assets to the Evergreen Fund. In this regard,
the Trustees considered the potential benefits of being associated with a larger
entity and the economies of scale that could be realized by the participation by
shareholders of the FFB Fund in the combined fund. In addition, the Trustees
considered that there are alternatives available to shareholders of the FFB
Fund, including the ability to redeem their shares, as well as the option to
vote against the Reorganization.
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During their consideration of the Reorganization, the Trustees met with
Fund counsel, as well as counsel to the Independent Trustees regarding the legal
issues involved. The Trustees of the Evergreen Investment Trust also concluded
at a regular meeting on July 27, 1995 that the proposed Reorganization would be
in the best interests of shareholders of the Evergreen Fund and that the
interests of the shareholders of the Evergreen Fund will not be diluted as a
result of the transactions contemplated by the Reorganization.
THE TRUSTEES OF FFB FUNDS TRUST RECOMMEND THAT THE SHAREHOLDERS OF THE FFB
FUND 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 the Evergreen Fund will acquire substantially all of
the assets of the FFB Fund in exchange for Class Y shares of the Evergreen Fund
and the assumption by the Evergreen Fund of certain identified liabilities of
the FFB Fund on or about January 19, 1996 or such other date as may be agreed
upon by the parties (the "Closing Date"). Prior to the Closing Date, the FFB
Fund will endeavor to discharge all of its known liabilities and obligations.
The Evergreen Fund will not assume any liabilities or obligations of the FFB
Fund other than those reflected in an unaudited statement of assets and
liabilities of the FFB Fund prepared as of the close of regular trading on the
New York Stock Exchange, Inc. (the "NYSE"), currently 4:00 p.m. Eastern Time, on
the Closing Date. The number of full and fractional Class Y shares of the
Evergreen Fund to be received by the shareholders of the FFB Fund will be
determined by dividing the value of the assets of the FFB Fund to be acquired by
the ratio of the net asset value per share of the Evergreen Fund and each Class
of the FFB Fund, computed as of the close of regular trading on the NYSE on 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 the Evergreen Fund,
will compute the value of the Funds' respective portfolio securities. The method
of valuation employed will be consistent with the procedures set forth in the
Prospectuses and Statement of Additional Information of the Evergreen Fund, Rule
22c-1 under the 1940 Act, and with the interpretations of such rule by the SEC's
Division of Investment Management.
At or prior to the Closing Date, the FFB Fund shall have declared a
dividend or dividends and distribution or distributions which, together with all
previous dividends and distributions, shall have the effect of distributing to
the FFB Fund's shareholders (in shares of the FFB Fund, or in cash, as the
shareholder has previously elected) all of the FFB Fund's investment company
taxable income for the taxable year ending on or prior to the Closing Date
(computed without regard to any deduction for dividends paid) and all of its net
capital gains realized in all taxable years ending
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on or prior to the Closing Date (after reductions for any capital loss
carryforward).
As soon after the Closing Date as conveniently practicable, the FFB Fund
will liquidate and distribute pro rata to shareholders of record as of the close
of business on the Closing Date the full and fractional Class Y shares of the
Evergreen Fund received by the FFB Fund. Such liquidation and distribution will
be accomplished by the establishment of accounts in the names of the FFB Fund's
shareholders on the share records of the Evergreen Fund's transfer agent. Each
account will represent the respective pro rata number of full and fractional
Class Y shares of the Evergreen Fund due to the FFB Fund's shareholders. All
issued and outstanding shares of the FFB Fund, including those represented by
certificates, will be canceled. The Evergreen Fund does not issue share
certificates to shareholders. The shares of the Evergreen Fund to be issued will
have no preemptive or conversion rights. After such distribution and the winding
up of its affairs, the FFB Fund will be terminated.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan, including approval by the FFB Fund'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 the FFB Fund's
shareholders, the Plan may be terminated (a) by the mutual agreement of the FFB
Fund and the Evergreen Fund; or (b) at or prior to the Closing Date by either
party (i) because of a breach by the other party of any representation,
warranty, or agreement contained therein to be performed at or prior to the
Closing Date if not cured within 30 days, or (ii) because a condition to the
obligation of the terminating party has not been met and it reasonably appears
that it cannot be met.
The expenses of the FFB Fund in connection with the Reorganization
(including the cost of any proxy soliciting agents) and the expenses of the
Evergreen Fund (other than securities registration fees) will be borne by FUNB.
Following the Reorganization, the Evergreen Fund will not be assuming any
liabilities or making any reimbursements in connection with the 12b-1 Plan or
shareholder servicing arrangements of the FFB Fund. No portion of such expenses
shall be borne directly or indirectly by the FFB Fund or its shareholders. If
the Merger is not completed, First Fidelity will bear the expenses of the FFB
Fund and FUNB will bear the expenses of the Evergreen Fund.
If the Reorganization is not approved by shareholders of the FFB Fund, the
Board of Trustees of the FFB Funds Trust will consider other possible courses of
action in the best interests of shareholders. If the Merger is not completed,
the Reorganization will not be completed regardless of the vote of the FFB
Fund's 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
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a condition to the closing of the Reorganization, the FFB Fund will receive an
opinion of counsel 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 substantially all of the assets of the FFB Fund
solely in exchange for shares of the Evergreen Fund and the assumption by the
Evergreen Fund of certain identified liabilities, followed by the distribution
of the Evergreen Fund's shares by the FFB Fund in dissolution and liquidation of
the FFB Fund, will constitute a "reorganization" within the meaning of section
368(a)(1)(C) of the Code, and the Evergreen Fund and the FFB Fund 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 the FFB Fund on the transfer
of substantially all of its assets to the Evergreen Fund solely in exchange for
the Evergreen Fund's shares and the assumption by the Evergreen Fund of certain
identified liabilities of the FFB Fund or upon the distribution of the Evergreen
Fund's shares to the FFB Fund's shareholders in exchange for their shares of the
FFB Fund;
(3) The tax basis of the assets transferred will be the same to the
Evergreen Fund as the tax basis of such assets to the FFB Fund immediately prior
to the Reorganization, and the holding period of such assets in the hands of the
Evergreen Fund will include the period during which the assets were held by the
FFB Fund;
(4) No gain or loss will be recognized by the Evergreen Fund upon the
receipt of the assets from the FFB Fund solely in exchange for the shares of the
Evergreen Fund and the assumption by the Evergreen Fund of certain identified
liabilities of the FFB Fund;
(5) No gain or loss will be recognized by the FFB Fund's shareholders
upon the issuance of the shares of the Evergreen Fund to them, provided they
receive solely such shares (including fractional shares) in exchange for their
shares of the FFB Fund; and
(6) The aggregate tax basis of the shares of the Evergreen Fund,
including any fractional shares, received by each of the shareholders of the FFB
Fund pursuant to the Reorganization will be the same as the aggregate tax basis
of the shares of the FFB Fund held by such shareholder immediately prior to the
Reorganization, and the holding period of the shares of the Evergreen Fund,
including fractional shares, received by each such shareholder will include the
period during which the shares of the FFB Fund exchanged therefor were held by
such shareholder (provided that the shares of the FFB Fund 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, each FFB Fund shareholder would
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recognize a taxable gain or loss equal to the difference between his or her tax
basis in his or her FFB Fund shares and the fair market value of the Evergreen
Fund shares he or she received. Shareholders of the FFB Fund 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 the FFB Fund should also consult their tax advisers as to state
and local tax consequences, if any, of the Reorganization.
PRO-FORMA CAPITALIZATION
The following tables show the capitalization of the Evergreen Fund and the
FFB Fund as of August 31, 1995 individually and on a pro forma basis as of that
date, giving effect to the proposed acquisition of assets at net asset value:
CAPITALIZATION OF THE FFB FUND AND THE EVERGREEN FUND
SELECT EVERGREEN FUND CLASS Y SHARES
VALUE FUND CLASS Y PRO FORMA FOR
FFB FUND SHARES SHARES REORGANIZATION**
Net Assets............
Shares Outstanding***.
Net Asset Value per
Share.................
* Assumes the consolidation of the FFB Fund and the Select Value Fund.
** Assumes only the consolidation of the FFB Fund.
*** Had the Reorganization been consummated on August 31, 1995, the FFB Fund
would have received ________ Class Y shares of the Evergreen Fund, which would
then be available for distribution to shareholders. No assurance can be given as
to how many Class Y shares of the Evergreen Fund FFB Fund shareholders will
receive on the date that the Reorganization takes place, and the foregoing
should not be relied upon to reflect the number of Class Y shares of the
Evergreen Fund that will actually be received on or after such date.
SHAREHOLDER INFORMATION.
As of September , 1995 (the "Record Date"), there were shares of beneficial
interest of the FFB Fund outstanding.
As of the Record Date, the officers and Trustees of FFB Funds Trust
beneficially owned as a group less than 1% of the outstanding shares of the FFB
Fund. To the FFB Funds Trusts's knowledge, the following persons owned
beneficially or of record more than 5% of the FFB Fund's total outstanding
shares as of the Record Date:
PERCENTAGE OF
NUMBER OF TOTAL SHARES
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NAME AND ADDRESS SHARES OUTSTANDING
[TO BE SUPPLIED]
As of September , 1995, the following number of each Class of the shares of
the Evergreen Fund were outstanding: Class A -- _____________; Class B --
___________; Class C -- __________ and Class Y -- _____________.
As of the Record Date, the officers and Trustees of the Evergreen
Investment Trust beneficially owned as a group less than 1% of the outstanding
shares of the Evergreen Fund. To the Evergreen Fund's knowledge, the following
persons owned beneficially or of record more than 5% of the Evergreen Fund's
total outstanding shares as of the Record Date:
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS CLASS NUMBER OF SHARES PERCENTAGE OF CLASS TOTAL SHARES OUTSTANDING
---------------- ----- ---------------- ------------------- ------------------------
<S> <C> <C> <C> <C>
First Union Y
National Bank
Trust Accounts
301 S. Tryon St.
Charlotte, NC 28288
First Union Y
National Bank
Trust Accounts
301 S. Tryon St.
Charlotte, NC 28288
</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 Prospectus and Statements of Additional Information
of the Funds. The investment objectives, policies and restrictions of the
Evergreen Fund can be found in the Prospectus of the Evergreen Fund under the
caption "Investment Objectives and Policies." The Evergreen Fund's Prospectus
also offers additional funds advised by Evergreen Asset or CMG. These additional
funds are not involved in the Reorganization, their investment objectives,
policies and restrictions are not discussed in this Prospectus/Proxy Statement
and their shares are not offered hereby. The investment objectives, policies and
restrictions of the FFB Fund can be found in the Prospectus of the FFB Fund
under the caption "Investment Objective and Policies."
The investment objective of the Evergreen Fund is long-term capital
appreciation with current income as a secondary objective. The Fund's objective
is a fundamental policy and may not be changed without shareholder approval.
Normally, at least 75% of the Fund's assets will be invested in equity
securities of U.S. companies with prospects for earnings
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growth and dividends. There can be no assurance that the Fund's investment
objective will be achieved.
The Evergreen Fund's investments, in order of priority, consist of:
o common and preferred stocks, bonds and convertible preferred stock of
U.S. companies with a minimum market capitalization of $100 million which are
listed on the New York or American Stock Exchanges or trade in over-the-counter
markets. The primary consideration is for those industries and companies with
the potential for capital appreciation; income is a secondary consideration;
o American Depositary Receipts ("ADRs") of foreign companies traded on the
New York or American Stock Exchanges or the over-the-counter market;
o foreign securities (either foreign or U.S. securities traded in foreign
markets). The Fund may also invest in obligations denominated in foreign
currencies. In making these decisions, the Fund's investment adviser will
consider such factors as the condition and growth potential of various economies
and securities markets, currency and taxation implications and other pertinent
financial, social, national and political factors;
o convertible bonds rated no lower than BBB by Standard & Poor's Ratings
Group ("S&P") or Baa by Moody's Investor Services, Inc. ("Moody's") or, if not
rated, determined to be of comparable quality by the Fund's investment adviser;
o money market instruments;
o fixed rate notes and bonds and adjustable and variable rate notes of
companies whose common stock the Fund may acquire rated no lower than BBB by S&P
or Baa by Moody's or which, if not rated, determined to be of comparable quality
by the Fund's investment adviser (up to 5% of total assets);
o zero coupon bonds issued or guaranteed by the U.S. government, its
agencies or instrumentalities (up to 5% of total assets);
o obligations, including certificates of deposit and bankers'
acceptances, of banks or savings and loan associations having at least $1
billion in deposits and insured by the Bank Insurance Fund or the Savings
Association Insurance Fund, including U.S. branches of foreign banks and
foreign branches of U.S. banks; and
o prime commercial paper, including master demand notes rated no lower than
A-1 by S&P or Prime 1 by Moody's.
Bonds rated BBB by S&P or Baa by Moody's may have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to weaken such bonds' prospects for principal and interests payments than
higher rated bonds. However, like the higher rated bonds,
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<PAGE>
these securities are considered investment grade.
As of December 31, 1992, 1993 and 1994, approximately 92%, 95% and 97%,
respectively, of the Evergreen Fund's portfolio consisted of equity securities.
The FFB Fund seeks long-term capital appreciation by investing in a
diversified portfolio of common stocks, preferred stocks, securities convertible
into common stocks (such as convertible preferred stock and convertible
debentures) and warrants of U.S. corporations. As a secondary objective, the FFB
Fund seeks current income for distribution to shareholders. The FFB Fund may
invest up to 10% of its total assets in equity securities issued by non-U.S.
companies including securities represented by ADRs. Although the Evergreen Fund
is not restricted in the amount of its assets which may be invested in foreign
securities, it currently has not invested in any foreign securities.
The FFB Fund invests at least 65% of its total assets in equity securities.
Under normal conditions the FFB Fund may invest up to 35% of its assets (and for
temporary defensive purposes without limits) in U.S. Government securities,
certificates of deposit, bankers' acceptances, commercial paper rated A-1 by S&P
or P-1 by Moody's, repurchase agreements maturing in 7 days or less and debt
obligations of U.S. and foreign corporations (corporate bonds, debentures, notes
and other similar corporate debt instruments) rated at least AA by S&P or Aa by
Moody's.
Unlike the Evergreen Fund, the FFB Fund may sell securities short if at all
times when the short position is open the Fund owns an equal amount of the
securities or securities convertible into, or exchangeable without further
consideration for, securities of the same issuer as the securities sold short.
Both the Evergreen Fund and the FFB Fund may write covered call options.
The Evergreen Fund may write covered put options and may purchase put and call
options on securities. The FFB Fund may buy put options. Although there are no
restrictions on the amount of assets which may be invested in such securities,
the Evergreen Fund does not currently intend to invest more than 5% of its net
assets in options transactions. In addition, the Evergreen Fund, unlike the FFB
Fund except with respect to the FFB Fund's ability to purchase forward foreign
currency contracts, may sell or purchase currency and other financial futures
contracts and may purchase exchange listed put options on financial futures
contracts. Margin deposits on futures contracts and premiums paid for related
options are generally limited by applicable law to 5% of total assets. The
Evergreen Fund and the FFB Fund do not use these transactions for speculation or
leverage. The Evergreen Fund does not currently engage in futures transactions
and related options. See "Investment Practices and Restrictions - Options and
Futures" in the Evergreen Fund's Prospectus for additional information regarding
these investment strategies.
The characteristics of each investment policy and the associated risks are
described in the Prospectus and Statement of Additional Information of
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<PAGE>
each Fund. Both the Evergreen Fund and the FFB Fund have other investment
policies and restrictions which are also set forth in the Prospectus and
Statement of Additional Information of each Fund.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
FORM OF ORGANIZATION
FFB Funds Trust and Evergreen Investment Trust are open-end management
investment companies registered with the SEC under the 1940 Act which
continuously offer shares to the public. Each is organized as a Massachusetts
business trust and is governed by a Declaration of Trust, By-Laws and Board of
Trustees. Both are also governed by applicable Massachusetts and Federal law.
The FFB Fund is a series of FFB Funds Trust. The Evergreen Fund is a series of
Evergreen Investment Trust.
CAPITALIZATION
The beneficial interests in the Evergreen Fund are represented by an
unlimited number of transferable shares of beneficial interest with no par value
per share. The beneficial interests in the FFB Fund are represented by an
unlimited number of transferable shares of beneficial interest with a $0.001 par
value. The respective Declarations of Trust under which each Fund has been
established permit the respective Trustees to allocate shares into an unlimited
number of series, and classes thereof, with rights determined by the Trustees,
all without shareholder approval. Fractional shares may be issued. Each Fund's
shares have equal voting rights with respect to matters affecting shareholders
of all classes of each Fund and each series of the Trust under which the Fund
has been established, and 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 FFB Funds Trust's Trustees or
Evergreen Investment Trust's Trustees. Shareholders of each Fund vote
separately, by class, as to matters, such as approval or amendments of Rule
12b-1 distribution plans, that affect only their particular class and by series
as to matters, such as approval or amendments of investment advisory agreements
or proposed reorganizations, that affect only their particular series.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders of a business trust could, under
certain circumstances, be held personally liable for the obligations of the
business trust. However, the respective Declarations of Trust under which the
Funds were established disclaim shareholder liability for acts or obligations of
the series and require that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Funds or the
Trustees. The Declarations of Trust provide for indemnification out of the
series' property for all losses and expenses of any shareholder held personally
liable for the obligations of the series. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is considered
remote since it is limited to
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<PAGE>
circumstances in which a disclaimer is inoperative and the series itself would
be unable to meet its obligations. A substantial number of mutual funds in the
United States are organized as Massachusetts business trusts.
SHAREHOLDER MEETINGS AND VOTING RIGHTS
Neither Evergreen Investment Trust nor FFB Funds Trust, on behalf of the
Funds or any of their other series, 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 must be called when requested in writing by
the holders of at least 10% (25% in the case of Evergreen Investment Trust) of
the outstanding shares. In addition, each is required to call a meeting of
shareholders for the purpose of electing Trustees if, at any time, less than a
majority of the Trustees then holding office were elected by shareholders. If
Trustees of Evergreen Investment Trust fail or refuse to call a meeting for a
period of 14 days after a request in writing by shareholders holding an
aggregate of at least 25% of the outstanding shares, then shareholders holding
said 25% may call and give notice of such meeting. Evergreen Investment Trust
and FFB Funds Trust currently do not intend to hold regular shareholder
meetings. Neither permits cumulative voting. A majority of shares entitled to
vote on a matter constitutes a quorum for consideration of such matter. In
either case, a majority of the shares voting is sufficient to act on a matter
(unless otherwise specifically required by the applicable governing documents or
other law, including the 1940 Act).
LIQUIDATION OR DISSOLUTION
In the event of the liquidation of a Fund the shareholders are entitled to
receive, when, and as declared by the Trustees, 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 the Fund held by them and
recorded on the books of the Fund.
LIABILITY AND INDEMNIFICATION OF TRUSTEES
The Declaration of Trust of Evergreen Investment Trust provides that no
Trustee or officer shall be liable to the Fund or to any shareholder, Trustee,
officer, employee or agent of the Fund for any action or failure to act except
for his or her own bad faith, willful misfeasance, gross negligence or reckless
disregard of his or her duties. The Declaration of Trust provides that a Trustee
or officer is entitled to indemnification against liabilities and expenses with
respect to claims related to his or her position with Evergreen Investment Trust
unless such Trustee or officer shall have been adjudicated to have acted with
bad faith, willful misfeasance, gross negligence or reckless disregard of his or
her duties, or not to have acted in good faith that his or her action was in the
best interest of the Trust. The Declaration of Trust also provides that a
Trustee or officer is not entitled to indemnification against liabilities in the
event of settlement unless there has been a determination that such
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<PAGE>
Trustee or officer has not engaged in willful misfeasance, bad faith, gross
negligence, or reckless disregard of his or her duties.
The Declaration of Trust of FFB Funds Trust provides that no Trustee,
officer or agent shall be personally liable to any person for any action or
failure to act, except for his or her own bad faith, willful misfeasance, or
gross negligence, or reckless disregard of his or her duties. The Declaration of
Trust provides that a Trustee or officer is entitled to indemnification against
liabilities and expenses with respect to claims related to his or her position
with FFB Funds Trust, unless such Trustee or officer shall have been adjudicated
to have acted with bad faith, willful misfeasance, or gross negligence, or in
reckless disregard of his or her duties, or not to have acted in good faith in
the reasonable belief that his or her action was in the best interest of FFB
Funds Trust, or, in the event of settlement, unless there has been a
determination that such Trustee or officer has engaged in willful misfeasance,
bad faith, gross negligence, or reckless disregard of his or her duties.
RIGHTS OF INSPECTION
Shareholders of the respective Funds have the same right to inspect in
Massachusetts the governing documents, records of meetings of shareholders,
shareholder lists, share transfer records, accounts and books of the Fund as are
permitted shareholders of a corporation under the Massachusetts corporation law.
The purpose of inspection must be for interests of shareholders relative to the
affairs of the Fund.
The foregoing is only a summary of certain characteristics of the
operations of the Declarations of Trust, By-Laws and Massachusetts law and is
not a complete description of those documents or law. Shareholders should refer
to the provisions of such respective Declarations of Trust, By-Laws, and
Massachusetts law directly for more complete information.
INFORMATION REGARDING THE PROPOSED INTERIM
ADVISORY AGREEMENT
INTRODUCTION
In view of the Merger Agreement discussed above, and the factors discussed
below, the Board of Trustees of the FFB Funds Trust recommends that shareholders
of the FFB Fund approve the proposed Interim Advisory Agreement. The Interim
Advisory Agreement would become effective as of the consummation of the Merger
which, as noted earlier, is currently anticipated to occur by January 1, 1996.
The Interim Advisory Agreement would remain in effect until the closing date for
the Reorganization. The terms of the Interim Advisory Agreement are essentially
the same as the Existing Advisory Agreement (as defined below). The only
differences between the Existing Advisory Agreement and the Interim Advisory
Agreement, if approved by shareholders, are that the investment adviser would be
CMG instead of First Fidelity and the length of time each Agreement is in
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effect. A description of the Interim Advisory Agreement pursuant to which CMG
would become the investment adviser to the FFB Fund, as well as the services to
be provided by CMG 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 a Form
of the Interim Advisory Agreement, which will be used for the FFB Fund, attached
hereto as Exhibit B.
First Fidelity, 765 Broad Street, Newark, New Jersey 07102, has served as
investment adviser to the FFB Fund since the commencement of operations of the
FFB Fund pursuant to a Master Advisory Contract, dated February 10, 1988 and
Advisory Contract Supplement, dated February 10, 1988. As used herein, the
Master Advisory Contract and the Advisory Contract Supplement for the FFB Fund,
taken together, are referred to as the FFB Fund's "Existing Advisory Agreement."
At a meeting of the Board of Trustees of the FFB Funds Trust held on August 9,
1995, the Trustees, including all of the Independent Trustees, approved the
proposed Interim Advisory Agreement for the FFB Fund.
The Trustees have authorized the FFB Funds Trust, on behalf of the FFB Fund
and subject to shareholder approval of the Interim Advisory Agreement, to enter
into the Interim Advisory Agreement with CMG to become effective upon
consummation of the Merger. If the Interim Advisory Agreement for the FFB Fund
is not approved by shareholders, the Trustees will consider appropriate actions
to be taken with respect to the FFB Fund's investment advisory arrangements at
that time. The Existing Advisory Agreement for the FFB Fund was approved by the
Fund's sole shareholder on April 29, 1986. The Existing Advisory Agreement was
last approved by the Trustees, including a majority of the Independent Trustees,
on December 8, 1994.
COMPARISON OF THE INTERIM ADVISORY AGREEMENT AND THE EXISTING ADVISORY
AGREEMENT
Advisory Services. The management and advisory services to be provided by
CMG under the Interim Advisory Agreement are identical to those currently
provided by First Fidelity under the Existing Advisory Agreement. Under the
Existing Advisory Agreement, First Fidelity manages the FFB Fund and furnishes
to the FFB Fund investment guidance and policy direction in connection
therewith. First Fidelity provides to the FFB Fund, among other things,
information relating to portfolio composition, credit conditions and average
maturity of the portfolio of the FFB Fund. First Fidelity also furnishes to the
Trustees periodic reports on the investment performance of the FFB Fund.
Pursuant to the Existing Advisory Agreement, First Fidelity provides
administrative assistance in connection with the operations of the FFB Fund.
Administrative services provided by First Fidelity include, among other things,
(i) data processing, clerical and bookkeeping services required in connection
with maintaining the financial accounts and records for the Fund, (ii) compiling
statistical and research data required for the preparation of reports and
statements which are periodically distributed to the FFB Funds Trust's officers
and the Trustees, (iii) handling general
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<PAGE>
shareholder relations with investors, such as advice as to the status of their
accounts, the current yield and dividends declared to date and assistance with
other questions related to their accounts and (iv) compiling information
required in connection with the FFB Funds Trust's filings with the SEC.
Furman Selz currently acts as administrator of the FFB Fund. Furman Selz
has its offices at 237 Park Avenue, New York, New York 10017. If the Interim
Advisory Agreement is approved by shareholders of the FFB Fund, Furman Selz will
continue during the term of the Interim Advisory Agreement as the FFB Fund's
administrator for the same compensation as currently received. See
"Summary-Investment Advisers, Sub-Adviser and Administrators."
Fees and Expenses. The investment advisory fees and expense
limitations for the FFB Fund under the Existing Advisory Agreement and the
proposed Interim Advisory Agreement are identical. See "Summary-Investment
Advisers, Sub-Adviser and Administrators."
Expense Reimbursement. The Existing Advisory Agreement includes a provision
calling for expense limitations equal to the most restrictive limitation imposed
from time to time by states where the FFB Fund's shares are qualified for sale.
Currently, the most restrictive state expense limitation provision applicable to
the FFB Fund limits the Fund's annual expenses to 2.5% of the first $30 million
of average net assets, 2.0% of the next $70 million of such assets and 1.5% of
any such assets in excess of $100 million. The Interim Advisory Agreement
contains an identical provision.
Payment of Expenses and Transaction Charges. Under the Existing Advisory
Agreement, the FFB Fund is responsible for all of its expenses and liabilities,
including compensation of the Independent Trustees of the FFB Funds Trust; taxes
and governmental fees; interest charges; fees and expenses of the Fund's
independent accountants and legal counsel; trade association membership dues;
fees and expenses of any custodian (including fees and expenses for keeping
books and accounts and calculating the net asset value of shares of the Fund),
transfer agent, registrar and dividend disbursing agent of the Fund; expenses of
issuing, redeeming, registering and qualifying for sale the Fund's shares;
expenses of preparing and printing share certificates, prospectuses,
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; the cost of office supplies; travel expenses of all officers, Trustees
and employees; insurance premiums; brokerage and other expenses of executing
portfolio transactions; expenses of shareholders' meetings; organizational
expenses; and extraordinary expenses.
The Interim Advisory Agreement contains an identical provision.
Limitation of Liability. The Existing Advisory Agreement provides that
First Fidelity shall not be liable to the FFB Fund for any mistake in judgment
or in any other event whatsoever except for lack of good faith, provided that
nothing in the Existing Advisory Agreement shall be deemed to
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protect or purport to protect First Fidelity against the liability to the FFB
Funds Trust or its shareholders to which First Fidelity would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of First Fidelity's duties under the Agreement or by reason of First
Fidelity's reckless disregard of its obligations and duties.
The Interim Advisory Agreement contains an identical provision in terms of
CMG's liability.
Term. If approved by the shareholders of the FFB Fund, the Interim Advisory
Agreement between the FFB Fund and CMG will become effective on the consummation
of the Merger. The Interim Advisory Agreement will be in effect for the period
of time between the effective date of the Merger and the Closing Date for the
Reorganization. The Existing Advisory Agreement provides for an initial term of
two years. Thereafter, the Existing Advisory Agreement will be continued from
year to year, provided that its continuation is specifically approved at least
annually (a) by the vote of a majority of the outstanding voting securities of
the FFB Fund (as defined in the 1940 Act) or by the Board of Trustees and (b) by
the vote, cast in person at a meeting called for the purpose, of a majority of
the Independent Trustees. The Interim Advisory Agreement for the FFB Fund
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 the FFB Fund (as defined in the 1940 Act) or by a vote of a
majority of the FFB Funds Trust's entire Board of Trustees on 60 days' written
notice to CMG or by CMG on 60 days' written notice to the FFB Funds Trust. Also,
the Interim Advisory Agreement will automatically terminate in the event of its
assignment (as defined in the 1940 Act). The Existing Advisory Agreement for the
FFB Fund contains identical provisions as to termination and assignment.
INFORMATION ABOUT THE FFB FUND'S CURRENT AND PROPOSED INTERIM INVESTMENT
ADVISERS
First Fidelity. First Fidelity currently serves as the investment adviser
for the FFB Fund. First Fidelity is a national banking association which
provides commercial banking and trust business services throughout New Jersey.
It is a wholly-owned subsidiary of First Fidelity Incorporated, originally
established in 1812, which, as a result of a reorganization with Fidelcor, Inc.,
a Pennsylvania bank holding company, is now a wholly-owned subsidiary of FFB.
FFB, a New Jersey corporation, provides financial and related services through
its subsidiary organizations. The investment advisory services of First Fidelity
are provided through the Asset Management Group of the Trust Division which, as
of June 30, 1995, had approximately $15 billion of client assets under
management. First Fidelity has provided investment advisory services to
investment companies since 1986 and currently acts as investment adviser to the
First Fidelity family of mutual funds.
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For the fiscal year ended August 31, 1995, First Fidelity received an
aggregate of $ in management fees which is equal to an annual fee of $0. % of
the FFB Fund's average daily net assets. Absent voluntary waivers, First
Fidelity, for such period, would have received $ in management fees (0. % of the
FFB Fund's average daily net assets). First Fidelity also acts as custodian and
transfer agent for the FFB Fund. For these services, First Fidelity received
fees of $ and $ , respectively, for the fiscal year ended August 31, 1995.
Absent voluntary waivers, First Fidelity would have received in such capacities
$ and $
, respectively. First Fidelity will continue to act as the FFB Fund's
custodian and transfer agent during the term of the Interim Advisory Agreement.
CMG. For information about CMG, FUNB, Evergreen Asset and First Union, see
"Summary-Investment Advisers, Sub-Adviser and Administrators." The name, address
and principal occupation of the principal executive officers and directors of
FUNB are set forth in Appendix A to this Prospectus/Proxy Statement.
During the term of the Interim Advisory Agreement, CMG will receive
compensation for managing the FFB Fund at the same effective annual rate ( %) as
received by First Fidelity, pursuant to the Existing Advisory Agreement (net of
any waivers). CMG is the investment adviser to the Evergreen Fund which, if
approved by shareholders of the FFB Fund, will acquire substantially all of the
assets of the FFB Fund. Evergreen Asset receives an annual management fee equal
to 0.50% of the Evergreen Fund's average daily net assets. For the fiscal year
ended December 31, 1994, CMG, received $3,850,673 in management fees. See
"Summary-Investment Advisers, Sub-Adviser and Administrators."
The Board of Trustees considered the Interim Advisory Agreement as part of
its overall approval of the Plan. The Board of Trustees considered, among other
things, the factors set forth above in "Information about the Reorganization -
Reasons for the Reorganization." The Board of Trustees also considered the fact
that there were no material differences between the terms of the Interim
Advisory Agreement and the terms of the Existing Advisory Agreement.
ADDITIONAL INFORMATION
Evergreen Fund. Information concerning the operation and management of the
Evergreen Fund is incorporated herein by reference from the Prospectus dated
July 7, 1995, a copy of which is enclosed, and Statement of Additional
Information dated July 7, 1995. A copy of such Statement of Additional
Information is available upon request and without charge by writing to the
Evergreen Fund, at the address listed on the cover page of this Prospectus/Proxy
Statement or by calling toll-free 1-800-807-2940.
FFB Fund. Information about the FFB Fund is included in its current
Prospectus dated June 30, 1995 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. A copy of the Prospectus and
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Statement of Additional Information and the Fund's Annual Report dated February
28, 1995 are available upon request and without charge by writing to the FFB
Fund at the address listed on the cover page of this Prospectus/Proxy Statement
or by calling toll-free 1-800-437-8790.
Evergreen Investment Trust and FFB Funds Trust are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance therewith file reports and other information including
proxy material, and charter documents with the SEC. These items can be inspected
and copies obtained at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices located at Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New York, New York
10048.
VOTING INFORMATION CONCERNING THE MEETING
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Trustees of FFB Funds Trust to be used
at the Special Meeting of Shareholders to be held at 10:00 a.m. November 13,
1995, at the offices of the FFB Fund, 237 Park Avenue, New York, New York 10017
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 on
or about September 28, 1995. 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 shares
outstanding 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 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. A proxy may be revoked at any time on
or before the Meeting by written notice to the Secretary of FFB Funds Trust, 237
Park Avenue, New York, New York 10017. 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.
Approval of the Plan will require the affirmative vote of more than 50% of
the outstanding voting securities, with all classes voting together as one
class. Approval of the Interim Advisory Agreement will require the affirmative
vote of (i) 67% or more of the outstanding voting securities 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
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<PAGE>
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 First Fidelity, their affiliates or other
representatives of FFB Funds Trust (who will not be paid for their solicitation
activities). has been engaged by First Fidelity to assist in soliciting proxies,
and may contact certain shareholders of the FFB Fund over the telephone.
Shareholders that are contacted by may be asked to cast their vote by telephonic
proxy. Such proxies will be recorded in accordance with the procedures set forth
below. First Fidelity believes these procedures are reasonably designed to
ensure that the identity of the shareholder casting the vote is accurately
determined and that the voting instructions of the shareholder are accurately
reflected. has received an opinion of that addresses the validity, under the
applicable law of the Commonwealth of Massachusetts, of a proxy given orally.
The opinion given by concludes that a Massachusetts court would find that there
is no Massachusetts law or Massachusetts public policy against the acceptance of
proxies signed by an orally-authorized agent.
In all cases where a telephonic proxy is solicited, the representative will
ask you for your full name, address, social security or employer identification
number, title (if you are authorized to act on behalf of an entity, such as a
corporation), and number of shares owned. If the information solicited agrees
with the information provided to
by First Fidelity, then the representative will explain the process, read the
proposals listed on the proxy card and ask for your instructions on each
proposal. The representative, although he or she will answer questions about the
process, will not recommend to the shareholder how he or she should vote, other
than to read any recommendations set forth in the proxy statement. Within 72
hours,
will send you a letter or mailgram to confirm your vote and asking you to
call immediately if your instructions are not correctly reflected in the
confirmation.
If you wish to participate in the Meeting, but do not wish to give your
proxy by telephone, you may still submit the proxy card included with this
Prospectus/Proxy Statement or attend in person. Any proxy given by you, whether
in writing or by telephone, is revocable.
In the event that sufficient votes to approve the Reorganization are not
received by November 13, 1995, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
Any such adjournment will
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<PAGE>
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 Massachusetts law or the Declaration of Trust of FFB Funds
Trust 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 the Evergreen Fund which they receive in the
transaction at their then-current net asset value. Shares of the FFB Fund may be
redeemed at any time prior to the consummation of the Reorganization. FFB Fund
shareholders may wish to consult their tax advisers as to any differing
consequences of redeeming FFB Fund shares prior to the Reorganization or
exchanging such shares in the Reorganization.
FFB Funds Trust 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 FFB Funds Trust
at the address set forth on the cover of this Prospectus/Proxy Statement such
that they will be received by FFB Funds Trust in a reasonable period of time
prior to any such meeting.
The votes of the shareholders of the Evergreen Fund 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 the FFB Fund 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 audited financial statements of the Evergreen Fund as of December 31,
1994 and the financial highlights for the period indicated therein have been
incorporated by reference into this Prospectus/Proxy Statement in reliance on
the report of KPMG Peat Marwick LLP, independent accountants for the Evergreen
Fund, given on the authority of said firm as experts in accounting and auditing.
The audited financial statements of the FFB Fund as of February 28, 1995
and the financial highlights for the period indicated therein have been
incorporated by reference into this Prospectus/Proxy Statement in reliance on
the report of KPMG Peat Marwick LLP, independent accountants for the FFB Fund,
given on the authority of said firm as experts in
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<PAGE>
accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the Evergreen
Fund will be passed upon by Sullivan & Worcester, Washington, D.C.
OTHER BUSINESS
The Trustees of FFB Funds Trust 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 BOARD OF TRUSTEES OF FFB FUNDS TRUST, INCLUDING THE INDEPENDENT
TRUSTEES, RECOMMENDS 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.
September 28, 1995
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<PAGE>
APPENDIX A
The name, address and principal occupation of the principal executive
officers and directors of First Union National Bank of North Carolina are as
follows:
Principal Occupation
Name and Address During Past 5 Years
---------------- -------------------
Directors:
Ben Mayo Boddie Chairman & CEO of
Boddie-Noell Enterprises, Inc. Boddie-Noell
P.O. Box 1908 Enterprises, Inc.
Rocky Mount, NC 27802
John F.A.V. Cecil President of Biltmore
Biltmore Dairy Farms, Inc. Dairy Farms, Inc.
P.O. Box 5355
Asheville, NC 28813
John Crosland, Jr. Chairman of the Board
The Crosland Group, Inc. of The Crosland Group
135 Scaleybark Road
Charlotte, NC 28209
Frank H. Dunn Chairman and CEO of
First Union National Bank of FUNB
North Carolina
One First Union Center
Charlotte, NC 28288-0006
James F. Goodmon Capitol President & Chief
Broadcasting Company, Inc. Executive Officer of
2619 Eastern Blvd. Capitol Broadcasting
Raleigh, NC 27605 Company, Inc.
Charles L. Grace President of Cummins
President Atlantic, Inc.
Cummins Atlantic, Inc.
P.O. Box 240729
Charlotte, NC 28224-0729
Daniel W. Mathis Vice Chairman of FUNB
First Union National Bank of
North Carolina
One First Union Center
Charlotte, NC 28288-0006
Raymond A. Bryan, Jr. Chairman & CEO of
T.A. Loving Company T.A. Loving Company
P.O. Drawer 919
Goldsboro, NC 27530
<PAGE>
John W. Copeland President of Ruddick
Ruddick Corporation Corporation
2000 Two First Union Center
Charlotte, NC 28282
J. William Disher Chairman & President of
Lance Incorporated Lance Incorporated
P.O. Box 32368
Charlotte, NC 28232
Malcolm E. Everett, III President of FUNB
First Union National Bank of
North Carolina
310 S. Tryon Street
Charlotte, NC 28288-0156
Shelton Gorelick President of SGIC, Inc.
SGIC, Inc.
741 Kenilworth Ave., Suite 200
Charlotte, NC 28204
James E.S. Hynes Chairman of Hynes Sales
Hynes Sales Company, Inc. Company, Inc.
P.O. Box 220948
Charlotte, NC 28222
Earl N. Phillips, Jr. President of First
First Factors Corporation Factors Corporation
P.O. Box 2730
High Point, NC 27261
J. Gregory Poole, Jr. Chairman & President of
Gregory Poole Equipment Company Gregory Poole Equipment
P.O. Box 469 Company
Raleigh, NC 27602
Nelson Schwab, III Chairman & CEO of
Paramount Parks Paramount Parks
8720 Red Oak Boulevard
Suite 315
Charlotte, NC 28217
George Shinn Owner and Chairman of
Shinn Enterprises, Inc. Shinn Enterprises, Inc.
One Hive Drive
Charlotte, NC 28217
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<PAGE>
John P. Rostan, III Senior Vice President
Waldensian Bakeries, Inc. of Waldensian Bakeries,
P.O. Box 220 Inc.
Valdese, NC 28690
Charles M. Shelton, Sr. Chairman & CEO of The
The Shelton Companies, Inc. Shelton Companies, Inc.
3600 One First Union Center
Charlotte, NC 28202
Harley F. Shuford, Jr. President and CEO of
Shuford Industries P.O. Box 608 Shuford Industries
Hickory, NC 28603
Principal Executive
Officers:
James Maynor President of First
Union Mortgage
Corporation
Austin A. Adams Executive Vice
President
Howard L. Arthur Senior Vice President
Robert T. Atwood Executive Vice
President and Chief
Financial Officer
Marion A. Cowell, Jr. Executive Vice
President, Secretary
and General Counsel
Edward E. Crutchfield, Jr. Chairman, CEO of First
Union Corporation
Frank H. Dunn, Jr. Chairman and CEO
Malcolm E. Everett, III President
John R. Georgius President of First
Union Corporation
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<PAGE>
James Hatch Senior Vice President
and Corporate
Controller
Don R. Johnson Executive Vice
President
Mark Mahoney Senior Vice President
Barbara K. Massa Senior Vice President
Daniel W. Mathis Vice Chairman
H. Burt Melton Executive Vice
President
Malcolm T. Murray, Jr. Executive Vice
President
Alvin T. Sale Executive Vice
President
Louis A. Schmitt, Jr. Executive Vice
President
Ken Stancliff Senior Vice President
and Corporate Treasurer
Richard K. Wagoner Executive Vice
President and General
Fund Officer
Unless otherwise indicated, the address of each person listed above is
First Union National Bank of North Carolina, One First Union Center, Charlotte,
NC 28288.
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<PAGE>
FFB EQUITY
Draft: 8-18-95 Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this
day of August, 1995, by and between Evergreen Investment Trust, a Massachusetts
business trust (the "Evergreen Trust"), with its principal place of business at
2500 Westchester Avenue, Purchase, New York 10577, with respect to its Evergreen
Value Fund series (the "Acquiring Fund"), and FFB Funds Trust (the "FFB Trust"),
a Massachusetts business trust, with respect to its FFB Equity Fund series, with
its principal place of business at 237 Park Avenue, New York, New York 10017
(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)(C) of the United States
Internal Revenue Code of 1986 (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of substantially all of the
assets of the Selling Fund in exchange solely for Class Y shares of beneficial
interest, without par value, of the Acquiring Fund (the "Acquiring Fund Shares")
and the assumption by the Acquiring Fund of certain stated liabilities of the
Selling Fund and 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 separate investment series
of open-end, registered investment companies of the management type and the
Selling Fund owns securities which 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;
WHEREAS, the Trustees of the Evergreen Trust have determined that the exchange
of substantially all of the assets of the Selling Fund for Acquiring Fund Shares
and the assumption of certain stated liabilities by the Acquiring Fund on the
terms and conditions hereinafter set forth is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing shareholders
of the Acquiring Fund will not be diluted as a result of the transactions
contemplated herein;
WHEREAS, the Trustees of the FFB Trust have determined that the Selling Fund
should exchange substantially all of its assets and certain of its 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;
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
<PAGE>
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 the Selling Fund's assets as set forth in paragraph 1.2
to the Acquiring Fund, and 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 dividing the value of the
Selling Fund's net assets computed in the manner and as of the time and date set
forth in paragraph 2.1 by the ratio of the net asset value per share of the
shares of the Acquiring Fund and the Selling Fund computed in the manner and as
of the time and date set forth in paragraph 2.2 and (ii) to assume certain
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 and futures interests and dividends or interest
receivable, which are 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 Selling Fund
reserves the right to sell any of such securities but will not, without the
prior written approval of the Acquiring Fund, acquire any additional securities
other than securities of the type in which the Acquiring Fund is permitted to
invest. The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a statement of the Acquiring Fund's
investment objectives, policies and restrictions and a list of the securities,
if any, on the Selling Fund's list referred to in the second sentence of this
paragraph which do not conform to the Acquiring Fund's investment objectives,
policies, and restrictions. In the event that the Selling Fund holds any
investments which the Acquiring Fund may not hold, the Selling 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.
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 by Furman Selz Incorporated, the administrator 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.
1.4 Liquidation and Distribution. 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 Closing 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
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<PAGE>
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 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 Section 5.
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 Closing Date (such
time and date being hereinafter called the "Valuation Date"), using the
valuation procedures set forth in the Evergreen Trust's Declaration of Trust and
the Acquiring Fund's then current prospectus 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 of each class of 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 Evergreen Trust's Declaration of Trust and
the Acquiring Fund's then current prospectus and statement of additional
information.
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 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.
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.
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<PAGE>
ARTICLE III
CLOSING AND CLOSING DATE
3.1 Closing Date. The Closing (the "Closing") shall take place on January 19,
1996 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 as of the close of business on the Closing Date unless otherwise
provided. The Closing shall be held as of 9:00 o'clock a.m. at the offices of
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577, or at such other time and/or place as the parties may agree.
3.2 Custodian's Certificate. First Fidelity 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 Closing 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.
3.4 Transfer Agent's Certificate. First Fidelity Bank, N.A., as transfer agent
for the Selling Fund 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 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 the FFB Trust , 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 Massachusetts business
trust duly organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts;
(b) The Selling Fund is a separate investment series of a registered investment
company classified as a management company of the open-end type and its
registration with the Securities and Exchange
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<PAGE>
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 prospectus 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 materially misleading;
(d) The Selling Fund is not, and the execution, delivery and performance of this
Agreement (subject to shareholder approval) will not, result in a violation of
any provision of the FFB Trust's Declaration of Trust or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Selling Fund is a party or by which it is bound;
(e) The Selling Fund has no material contracts or other commitments (other than
this Agreement) which will be terminated with liability to it prior to the
Closing Date;
(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
which 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 which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated;
(g) The financial statements of the Selling Fund at February 28, 1995 have been
audited by KPMG Peat Marwick LLP, certified public accountants, and 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 February 28, 1995 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
and 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 has distributed in each
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<PAGE>
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 (except that, under Massachusetts law,
Selling Fund Shareholders could, under certain circumstances be held personally
liable for obligations of 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 which 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 proxy statement of the Selling Fund to be included in the Registration
Statement referred to 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.
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 Massachusetts
business trust duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts.
(b) The Acquiring Fund is a separate investment series of a Massachusetts
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;
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(c) The current prospectus 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 a violation of Evergreen Trust's Declaration
of Trust or By-Laws or of any 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 which 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 which materially and
adversely affects its business or its ability to consummate the transactions
contemplated herein;
(f) The financial statements of the Acquiring Fund at December 31, 1994 have
been audited by KPMG Peat Marwick LLP, certified public accountants, and are in
accordance with generally accepted accounting principles consistently applied,
and such statements (copies of which have been furnished to the Selling Fund)
fairly reflect the financial condition of the Acquiring Fund as of such date,
and there are no known contingent liabilities affecting the Acquiring Fund as of
such date not disclosed therein;
(g) Since December 31, 1994 there has not been 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 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 Acquiring 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
and 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) For each fiscal year of its operation the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and has distributed in each such year all net
investment income and realized capital gains;
(j) 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 (except that, under Massachusetts law, shareholders of the
Acquiring Fund could, under certain circumstances, be held personally liable for
obligations of the Acquiring Fund). 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
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outstanding any security convertible into any Acquiring Fund Shares;
(k) 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;
(l) 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 (except that, under Massachusetts law,
shareholders of the Acquiring Fund could, under certain circumstances, be held
personally liable for obligations of the Acquiring Fund);
(m) 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 which 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;
(n) The Prospectus and Proxy Statement 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 necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading; and
(o) 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. The FFB Trust 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.
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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 which will be carried over by the Acquiring Fund as a result
of Section 381 of the Code, and which will be certified by the FFB Trust's
President, its Treasurer and its independent auditors.
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.
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 Evergreen 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; and
6.2 The Selling Fund shall have received on the Closing Date an opinion from
Sullivan & Worcester, counsel to the Acquiring Fund, dated as of the Closing
Date, in a form reasonably satisfactory to the Selling Fund, covering the
following points:
That (a) the Acquiring Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the power
to own all of its properties and assets and to carry on its business as
presently conducted; (b) this Agreement has been duly authorized, executed and
delivered by the Acquiring Fund, and, assuming that the Prospectus and Proxy
Statement, and Registration Statement comply with the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder and, assuming due
authorization, execution and delivery of this Agreement by the Selling Fund, is
a valid and binding
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<PAGE>
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; (c) 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 (except that, under Massachusetts law,
shareholders of the Acquiring Fund could, under certain circumstances, be held
personally liable for obligations of the Acquiring Fund), and no shareholder of
the Acquiring Fund has any preemptive rights in respect thereof; (d) 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
Evergreen 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; (e) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the Commonwealth of Massachusetts, is required for the
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 such as may be required under state securities laws; (f) only insofar
as they relate to the Acquiring Fund, the descriptions in the Prospectus and
Proxy Statement of statutes, legal and governmental 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, 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; (h) the Acquiring Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act and to such counsel's best knowledge, such registration with the Commission
as an investment company under the 1940 Act is in full force and effect; and (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. In addition, 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 (f) of their above opinion), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of the
Evergreen 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 the
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FFB Trust and the Selling Fund. Such opinion shall contain such other
assumptions and limitations as shall be in the opinion of Sullivan & Worcester
appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to 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.
6.3 The merger between First Union Corporation and First Fidelity Corporation
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 the FFB Trust's President or
Vice President and its 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 the FFB Trust; and
7.3 The Acquiring Fund shall have received on the Closing Date an opinion of
Baker & McKenzie, counsel to the Selling Fund, in a form satisfactory to the
Acquiring Fund covering the following points:
That (a) the Selling Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the power
to own all of its properties and assets and to carry on its business as
presently conducted; (b) this Agreement has been duly authorized, executed and
delivered by the Selling Fund, and, assuming that the Prospectus and Proxy
Statement, and Registration Statement comply with the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder 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; (c) 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 FFB
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 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
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<PAGE>
any penalty, under any agreement, judgment, or decree to which the Selling Fund
is a party or by which it is bound; (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 Commonwealth of Massachusetts is required for the
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 such as may be required under state securities laws; (e) only insofar as
they relate to the Selling Fund, the descriptions in the Prospectus and Proxy
Statement of statutes, legal and governmental proceedings and material
contracts, if any, are accurate and fairly present the information required to
be shown; (f) such counsel does not know of any legal or governmental
proceedings, only 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; (g) the Selling Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act and to such counsel's best knowledge, such registration with the Commission
as an investment company under the 1940 Act is in full force and effect; (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; (i) assuming that a consideration
therefor 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 (except that, under Massachusetts law,
Selling Fund Shareholders could, under certain circumstances be held personally
liable for obligations of the Selling Fund). 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 (e) of their above opinion ), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of the
FFB Trust's 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 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 Acquiring Fund, contained in the
Prospectus and Proxy Statement or Registration Statement, and that such opinion
is solely for the benefit of the Evergreen Trust and the Acquiring Fund. Such
opinion shall contain such other assumptions and limitations as shall be in the
opinion of Baker & McKenzie appropriate to render the opinions expressed therein
and shall indicate, with respect to matters of Massachusetts law, that as Baker
& McKenzie are not admitted to the bar of Massachusetts, such opinions are based
either upon the review of published statutes, case and rules and regulations of
the Commonwealth of Massachusetts or upon an opinion of Massachusetts counsel.
In this paragraph 7.3, references to 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.
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7.4 The merger between First Union Corporation and First Fidelity Bancorporation
shall be completed prior to the Closing Date.
ARTICLE VIII
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 the FFB Trust's Declaration of
Trust 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 Selling Fund shall have declared a dividend or dividends which, together
with all previous such dividends, shall have the effect of distributing to the
Selling Fund Shareholders all of the Selling Fund's investment company taxable
income for all taxable years ending on or prior to the Closing Date (computed
without regard to any deduction for dividends paid) and all of its net capital
gain realized in all taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carryforward);
8.6 The parties shall have received a favorable opinion of Sullivan & Worcester,
addressed to the Acquiring Fund and the Selling Fund substantially to the effect
that for Federal income tax purposes:
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(a) The transfer of substantially all of the Selling Fund assets in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of certain 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)(C) 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 certain 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 certain 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 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); and
(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 8.6.
8.7 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 (i) they are independent certified public
accountants with respect to the Selling Fund within the meaning of the 1933 Act
and the applicable published rules and regulations thereunder; (ii) 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) consisting of a reading of any unaudited pro forma financial
statements included in the Registration Statement and Prospectus and Proxy
Statement, and inquiries of appropriate officials of the FFB Trust responsible
for financial and accounting matters, nothing came to their attention which
caused them to believe that such unaudited pro forma financial statements do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the published rules and regulations thereunder;
or (iii) 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; (iv) 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 pro forma financial statements which are included in
the Registration Statement and Prospectus and Proxy Statement, were prepared
based on the valuation of the Selling Fund's assets in accordance with the
Evergreen Trust's Declaration of Trust and the Acquiring Fund's then current
prospectus and statement of additional information pursuant to procedures
customarily utilized by the Acquiring Fund in valuing its own assets (such
procedures having been previously described to KPMG Peat Marwick LLP in writing
by the Acquiring Fund); and
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<PAGE>
(v) 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 ratio appearing in the Registration Statement and Prospectus
and Proxy Statement agree with underlying accounting records of the Selling Fund
or to 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.
8.8 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 (i) 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; (ii) 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) consisting of a reading of any unaudited pro forma financial
statements included in the Registration Statement and Prospectus and Proxy
Statement, and inquiries of appropriate officials of the Evergreen Trust
responsible for financial and accounting matters, nothing came to their
attention which caused them to believe that such unaudited pro forma financial
statements do not comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the published rules and regulations
thereunder; (iii) 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
(iv) 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
underlying accounting records of the Acquiring Fund or to written estimates by
each Fund's management and were found to be mathematically correct.
8.9 The Acquiring Fund and the Selling Fund shall also have received from KPMG
Peat Marwick LLP a letter addressed to the Acquiring Fund and the Selling Fund,
dated on the Closing Date 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 or substantially 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 IX
BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund and the Selling Fund each represents and warrants to the
other that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
-15-
<PAGE>
9.2 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 of North Carolina ("FUNB"). Such
expenses include, without limitation, (i) expenses incurred in connection with
the entering into and the carrying out of the provisions of this Agreement; (ii)
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; (iii) 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; (iv) postage; (v) printing; (vi)
accounting fees; (vii) legal fees; and (viii) solicitation cost of the
transaction. Not withstanding the foregoing, the Acquiring Fund shall pay its
own Federal and state registration fees. In the event that the merger of First
Fidelity Bancorporation and First Union Corporation 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 contempleted by this Agreement
incurred by the Selling Fund will be borne by First Fidelity Bank, N.A.
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 the
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
survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 In addition to the termination provisions set forth in paragraph 9.2, 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:
(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
or the Selling Fund, the Evergreen Trust or the FFB Trust or their respective
Trustees or officers, to the other party or its, Trustees 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 9.2.
-16-
<PAGE>
ARTICLE XII
AMENDMENTS
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 FFB Trust 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
NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, overnight courier or certified mail addressed to:
the Acquiring Fund
Evergreen Investment Trust
2500 Westchester Avenue
Purchase, New York 10577
Attention: Joseph J. McBrien, Esq.
or to the Selling Fund
FFB Funds Trust
237 Park Avenue
New York, New York 10017
Attention: Edmund A. Hajim
ARTICLE XIV
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
14.1 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.
14.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder
-17-
<PAGE>
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.
14.5 It is expressly agreed to that the obligations of the Selling Fund and the
Acquiring Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the FFB Trust or the
Evergreen Trust, personally, but bind only the trust property of the Selling
Fund and the Acquiring Fund, as provided in the Declarations of Trust of the FFB
Trust and the Evergreen Trust. The execution and delivery of this Agreement have
been authorized by the Trustees of the FFB Trust on behalf of the Selling Fund,
and the Evergreen Trust on behalf of the Acquiring Fund and signed by authorized
officers of the FFB Trust and the Evergreen 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 FFB Trust and the Evergreen Trust as provided in their
Declarations of Trust.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and sealed this
Agreement, all as of the date first written above.
EVERGREEN INVESTMENT TRUST
on behalf of Evergreen Value Fund
By:/s/ John J. Pileggi
Name: John J. Pileggi
Title: President
(Seal)
FFB FUNDS TRUST
on behalf of FFB Equity Fund
By: /s/ Edmund A. Hajim
Name: Edmund A. Hajim
Title: President
-19-
<PAGE>
EXHIBIT B
INTERIM MASTER ADVISORY CONTRACT
FFB FUNDS TRUST
230 Park Avenue
New York, New York l0l69
December __, 1995
First Union National Bank of
North Carolina
One First Union
Charlotte, North Carolina 28288
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and First Union National Bank of North Carolina (the "Adviser") as follows:
1. The Trust is an open-end investment company organized as a
Massachusetts business trust, and consists of one or more separate investment
portfolios as may be established and designated by the Trustees from time to
time (the "Funds"). This contract shall pertain to any Fund as shall be
designated in a Supplement to this contract ("Supplement"), as further agreed
between the Trust and the Adviser. A separate class of shares of beneficial
interest of the Trust is offered to investors with respect to each Fund. The
Trust engages in the business of investing and reinvesting the assets of the
Funds in the manner and in accordance with the investment objective and
restrictions specified in the Trust's Declaration of Trust and the currently
effective Prospectus or Prospectuses (the "Prospectus") relating to the Trust
and the Funds included in the Trust's Registration Statement, as amended from
time to time (the "Registration Statement"), filed by the Trust under the
Investment Company Act of 1940 (the "1940 Act") and the Securities Act of 1933
(the "1933 Act"). Copies of the documents referred to in the preceding sentence
have been furnished to the Adviser. Any amendments to those documents shall be
furnished to the Adviser promptly.
2. The Trust employs the Adviser to provide the investment advisory
and administrative services specified elsewhere in this contract, and the
Adviser hereby accepts such employment. Pursuant to a Master Distribution
Contract (the "Master Distribution Contract") and a Master Administrative
Services Contract (the "Master Administrative Services Contract") between the
Trust and Furman Selz Mager Dietz & Birney Incorporated (the "Sponsor"), the
Trust has employed the Sponsor
<PAGE>
to act as distributor for the Funds and to provide to the Trust
management and other services.
3. (a) The Adviser shall, at its expense, (i) employ or associate with
itself such persons as it believes appropriate to assist it in performing its
obligations under this contract and (ii) provide all advisory, administrative,
management and shareholder services, equipment, facilities and personnel
necessary to perform its obligations under this contract. The Trust recognizes
that in those cases where the Adviser makes arrangements with its correspondent
banks to maintain a subaccount for certain of their customers who invest in
shares of the Funds, such correspondent banks may also agree to provide services
to subaccount holders of the type provided by the Adviser to shareholders of
record. The Adviser shall obtain the Trust's prior written approval to each
arrangement whereby a correspondent bank agrees to provide such services. Such
correspondent banks will be compensated for such services exclusively by the
Adviser.
(b) Except as provided in subparagraph (a) in the Master
Administrative Services Contract, the Trust shall be responsible for all of its
expenses and liabilities, including compensation of its trustees who are not
affiliated with the Sponsor; taxes and governmental fees; interest charges; fees
and expenses of the Trust's independent accountants and legal counsel; trade
association membership dues; fees and expenses of any custodian (including fees
and expenses for keeping books and accounts and calculating the net asset value
of shares of the Funds), transfer agent, registrar and dividend disbursing agent
of the Trust; expenses of issuing, redeeming, registering and qualifying for
sale the Trust's shares; expenses of preparing and printing share certificates,
prospectuses, shareholders' reports, notices, proxy statements and reports to
regulatory agencies; the cost of office supplies; travel expenses of all
officers, trustees and employees; insurance premiums; brokerage and other
expenses of executing portfolio transactions; expenses of shareholders'
meetings; organizational expenses; and extraordinary expenses.
4. (a) The Adviser shall provide to the Trust investment guidance and
policy direction in connection with the management of the portfolios of the
Funds, including oral and written research analysis, advice, statistical and
economic data and information and judgments, of both a macroeconomic and
microeconomic character, concerning, among other things, interest rate trends,
portfolio composition, credit conditions of both a general and specific nature
and, where applicable, the average maturity of the portfolio of the Fund.
- 2 -
<PAGE>
(b) The Adviser shall also provide to the Trust's officers
administrative assistance in connection with the operation of the Trust for the
account of the Funds. Administrative services provided by the Adviser shall
include (i) data processing, clerical and bookkeeping services required in
connection with maintaining the financial accounts and records for the Trust and
the Funds, (ii) the compilation of statistical and research data required for
the preparation of periodic reports and statements of the Fund which are
distributed to the Trust's officers and Board of Trustees, (iii) handling, or
causing to be handled, general shareholder relations with Fund investors, such
as advice as to the status of their accounts, the current yield and dividends
declared to date and assistance with other questions related to their accounts,
(iv) the compilation of information required in connection with the Trust's
filings with the Securities and Exchange Commission and (v) such other services
as the Adviser shall from time to time determine, upon consultation with the
Sponsor, to be necessary or useful to the administration of the Trust and the
Funds.
(c) As manager of the assets of the Funds, the Adviser shall make
investments for the account of the Funds in accordance with the Adviser's best
judgment and within the investment objective and restrictions set forth in the
Trust's Declaration of Trust, the Prospectus, the 1940 Act and the provisions of
the Internal Revenue Code relating to regulated investment companies, subject to
policy decisions adopted by the Trust's Board of Trustees. The Adviser shall
advise the Trust's officers and Board of Trustees, at such times as the Trust's
Board of Trustees may specify, of investments made for the Funds and shall, when
requested by the Trust's officers or Board of Trustees, supply the reasons for
making particular investments. It is understood that the Adviser will not use
any inside information pertinent to investment decisions undertaken in
connection with this contract that may be in its possession or in the possession
of any of its affiliates, nor will the Adviser seek to obtain any such
information.
(d) The Adviser shall furnish to the Trust's Board of Trustees
periodic reports on the investment performance of the Funds and on the
performance of its obligations under this contract and shall supply such
additional reports and information as the Trust's officers or Board of Trustees
shall reasonably request.
(e) On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other customers, the
Adviser, to the extent permitted by applicable law, may aggregate the securities
to be so
- 3 -
<PAGE>
sold or purchased in order to obtain the best execution or lower brokerage
commissions, if any. The Adviser may also on occasion purchase or sell a
particular security for one or more customers in different amounts. On either
occasion, and to the extent permitted by applicable law and regulations,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Funds and to such other customers.
(f) The Adviser may cause the Funds to pay a broker which
provides brokerage and research services to the Adviser a commission for
effecting a securities transaction in excess of the amount another broker might
have charged. Such higher commissions may not be paid unless the Adviser
determines in good faith that the amount paid is reasonable in relation to the
services received in terms of the particular transaction or the Adviser's
overall responsibilities to the Fund and any other of the Adviser's clients.
5. The Adviser shall give the Trust the benefit of the Adviser's best
judgment and efforts in rendering services under this contract. As an inducement
to the Adviser's undertaking to render these services, the Trust agrees that the
Adviser shall not be liable under this contract for any mistake in judgment or
in any other event whatsoever except for lack of good faith, provided that
nothing in this contract shall be deemed to protect or purport to protect the
Adviser against the liability to the Trust or its shareholders to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of the Adviser's duties under this
contract or by reason of the Adviser's reckless disregard of its obligations and
duties hereunder.
6. In consideration of the services to be rendered by the Adviser
under this contract, the Trust shall pay the Adviser a monthly fee ("fee") with
respect to each Fund on the first business day of each month, based upon the
average daily value (as determined on each business day at the time set forth in
the Prospectus for determining net asset value per share) of the net assets of
the Fund during the preceding month, at annual rates set forth in a Supplement
to this contract with respect to the Fund, provided, that no fee shall accrue or
be payable hereunder with respect to a Fund until the first day after the day
(the "Approval Date") on which this contract has been approved by the vote of a
majority of the outstanding voting securities of that Fund (as defined in the
1940 Act). If the fees payable to the Adviser pursuant to this paragraph 6 begin
to accrue before the end of any month or if this contract terminates before the
end of any month, the fees for the period from that date to the end of that
month or
- 4 -
<PAGE>
from the beginning of that month to the date of termination, as the case may be,
shall be prorated according to the proportion which the period bears to the full
month in which the effectiveness or termination occurs. For purposes of
calculating the monthly fees, the value of the net assets of a Fund shall be
computed in the manner specified in the Prospectus for the computation of net
asset value. For purposes of this contract, a "business day" is any day the New
York Stock Exchange is open for trading.
7. If the aggregate expenses of every character incurred by, or
allocated to, a Fund in any fiscal year, other than interest, taxes, brokerage
commissions and other portfolio transaction expenses, other expenditures which
are capitalized in accordance with generally accepted accounting principles and
any extraordinary expenses, but including the fees payable under the
Distribution Contract and the fees provided for in paragraph 6 ("includable
expenses") shall exceed the expense limitations applicable to the Fund imposed
by state securities laws or regulations thereunder, as these limitations may be
raised or lowered from time to time, the Adviser shall pay the Fund an amount
equal to 70% of that excess. With respect to portions of a fiscal year in which
this contract shall be in effect, the foregoing limitations shall be prorated
according to the proportion which that portion of the fiscal year bears to the
full fiscal year. At the end of each month of the Trust's fiscal year, the
Sponsor will review the includable expenses accrued during that fiscal year to
the end of the period and shall estimate the contemplated includable expenses
for the balance of that fiscal year. If as a result of that review and
estimation it appears likely that the includable expenses will exceed the
limitations referred to in this paragraph 7 for a fiscal year with respect to
the Fund, the monthly fees relating to the Fund payable to the Adviser under
this contract for such month shall be reduced, subject to a later adjustment, by
an amount equal to 70% of a pro rata portion (prorated on the basis of the
remaining months of the fiscal year, including the month just ended) of the
amount by which the includable expenses for the fiscal year (less an amount
equal to the aggregate of actual reductions made pursuant to this provision with
respect to prior months of the fiscal year) are expected to exceed the
limitations provided for in this paragraph 7. For purposes of the foregoing, the
value of the net assets of the Fund shall be computed in the manner specified in
the penultimate sentence of paragraph 6, and any payments required to be made by
the Adviser shall be made once a year promptly after the end of the Trust's
fiscal year.
- 5 -
<PAGE>
8. This contract and any Supplement shall become effective with
respect to a Fund on the date specified in the Supplement, and shall thereafter
continue in effect with respect to the Fund until the earlier of the Closing
Date defined in the Agreement and Plan of Reorganization dated September __,
1995 approved by shareholders of the Fund or two years from such date only so
long as the continuance is specifically approved at least annually (a) by the
vote of a majority of the outstanding voting securities of the Fund (as defined
in the 1940 Act) or by the Trust's Board of Trustees and (b) by the vote, cast
in person at a meeting called for the purpose, of a majority of the Trust's
Trustees who are not parties to this contract or "interested persons" (as
defined in the 1940 Act) of any such party.
This contract and any Supplement thereto may be terminated with
respect to a Fund at any time, without the payment of any penalty, by a vote of
a majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) or by a vote of a majority of the Trust's entire Board of Trustees on
60 days' written notice to the Adviser or by the Adviser on 60 days' written
notice to the Trust. This contract shall terminate automatically in the event of
its assignment (as defined in the 1940 Act).
9. Except to the extent necessary to perform the Adviser's obligations
under this contract, nothing herein shall be deemed to limit or restrict the
right of the Adviser, or any affiliate of the Adviser, or any employee of the
Adviser, to engage in any other business, whether of a similar or dissimilar
nature, or to render services of any kind to any other corporation, firm,
individual or association.
10. This contract shall be construed and its provisions
interpreted in accordance with the laws of the state of New York.
11. This contract may be executed in counterparts, but
all of the copies, together, shall constitute one contract.
12. Any notice given by a party to this Agreement shall be
sufficiently given when sent by registered or certified mail to the other party
at the address of such party set forth above or at such other address as such
party may from time to time specify in writing to the other party.
13. The Declaration of Trust establishing the Trust, filed on March
25, 1987, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the Office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "FFB Funds Trust" refers to the trustees
under the
- 6 -
<PAGE>
Declaration collectively as trustees and not as individuals or personally, and
that no shareholder, trustee, officer, employee or agent of the Trust shall be
subject to claims against or obligations of the Trust to any extent whatsoever,
but that the Trust estate only shall be liable.
If the foregoing correctly sets forth the agreement between the Trust
and the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
FFB FUNDS TRUST
By: __________________________
Title:
ACCEPTED:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: ________________________
Title:
- 7 -
<PAGE>
EXHIBIT C
INTERIM ADVISORY CONTRACT SUPPLEMENT
FFB Funds Trust
237 Park Avenue
New York, NY 10017
December __, 1995
First Union National Bank of
North Carolina
One First Union
Charlotte, North Carolina 28288
Re: FFB Equity Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
First Union National Bank of North Carolina (the "Adviser") as follows:
1. The Trust is an open-end management investment company organized as a
Massachusetts business trust and consists of such separate investment portfolios
as have been or may be established by the Trustees of the Trust from time to
time. A separate class of shares of beneficial interest of the Trust is offered
to investors with respect to each investment portfolio. FFB Equity Fund (the
"Fund") is a separate investment portfolio of the Trust.
2. The Trust and the Adviser have entered into an Interim Master Advisory
Contract (the "Interim Master Advisory Contract") pursuant to which the Trust
has employed the Adviser to provide investment advisory and other services
specified in that contract, and the Adviser has accepted such employment.
3. As provided for in paragraph 1 of the Interim Master Advisory Contract,
the Trust hereby adopts the Interim Master Advisory Contract with respect to the
Fund, and the Adviser hereby acknowledges that the Interim Master Advisory
Contract shall pertain to the Fund, the terms and conditions of such Interim
Master Advisory Contract being hereby incorporated herein by reference.
4. The term "Fund" as used in the Interim Master Advisory Contract shall
for purposes of this Supplement pertain to the Fund.
5. As provided for in paragraph 6 of the Interim Master Advisory Contract
and subject to further conditions as set forth therein, the Trust shall with
respect to the Fund pay the Adviser a monthly fee (payable on the first business
day of each month) at the annual rate of 0.50% of the average daily value (as
<PAGE>
determined on each business day at the time set forth in the Prospectus for
determining net asset value per share) of the net assets of the Fund during the
preceding month.
6. This Supplement and the Interim Master Advisory Contract (together, the
"Contract") shall become effective with respect to the Fund on December __, 1995
and shall thereafter continue in effect with respect to the Fund until the
earlier of the Closing Date defined in the Agreement and Plan of Reorganization
dated September __, 1995, approved by shareholders of the Fund or two years from
the date hereof only so long as the continuance is specifically approved at
least annually (a) by the vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act, or by the Trust's Board of
Trustees and (b) by the vote, cast in person at a meeting called for that
purpose, of a majority of the Trust's Trustees who are not parities to this
Contact or "interested persons" (as defined in the 1940 Act) of any such party.
This Supplement and the Interim Master Advisory Contract may be terminated with
respect to the Fund at any time, without the payment of any penalty, by vote of
a majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) or by a vote of a majority of the Trust's entire Board of Trustees on
60 days' written notice to the Trust. This Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
If the foregoing correctly sets forth the agreement between the Trust and
the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
FFB FUNDS TRUST
By:______________________
Accepted:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By:______________________________
- 2 -
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 25, 1995
Acquisition of the Assets of
FFB EQUITY FUND
OF
FFB FUNDS TRUST
237 Park Avenue
New York, New York 10017
1-800-437-8790
By and in Exchange for Shares of
EVERGREEN VALUE FUND
OF
EVERGREEN INVESTMENT TRUST
2500 Westchester Avenue
Purchase, NY 10577
1-800-807-2940
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets of the FFB Equity Fund, a series of FFB Funds
Trust, in exchange for Class Y shares of Evergreen Value Fund, a series of
Evergreen Investment Trust, and the assumption by Evergreen Value Fund of
certain identified liabilities of the FFB Equity Fund, is not a prospectus. A
Prospectus/Proxy Statement dated September 25, 1995 relating to the
above-referenced matter may be obtained from Evergreen Value Fund, 2500
Westchester Avenue, Purchase, New York 10577 or by calling toll-free
1-800-807-2940. This Statement of Additional Information relates to and should
be read in conjunction with such Prospectus/Proxy Statement.
This Statement of Additional Information incorporates by reference the
following documents, a copy of each of which accompanies this Statement of
Additional Information:
1. The Prospectus of the Evergreen Value Fund dated July
7, 1995.
2. The Statement of Additional Information of the
Evergreen Value Fund dated July 7, 1995.
3. The Annual Report of the First Union Value Fund (now
known as Evergreen Value Fund) dated December 31, 1994.
4. The Semi-Annual Report of the First Union Value Fund
(now known as Evergreen Value Fund) dated June 30,
1995.
<PAGE>
5. The Prospectus of the FFB Equity Fund dated June
30, 1995.
6. The Statement of Additional Information of the FFB
Equity Fund dated June 30, 1995.
7. The Annual Report of the FFB Equity Fund dated February
28, 1995.
The following pro forma financial information relates to the FFB Equity
Fund and the Evergreen Value Fund:
-2-
<PAGE>
EVERGREEN VALUE FUND
Pro Forma Combining Financial Statements - June 30, 1995
<PAGE>
<TABLE>
<CAPTION>
Evergreen Lexicon FFB Equity Adjustments Pro-Forma
Value Fund Select Value Fund Combined
6/30/95 6/30/95 6/30/95 6/30/95
Security Description Shares Value Shares Value Shares Value Shares Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common Stocks (90.6%)
Banking
& Finance (7.1%)
American Intl. Grp. 20,000 $2,280,000 20,000 $2,280,000
Baybanks Inc. 15,000 $1,188,750 15,000 1,188,750
Boatmen's Bancshrs. Inc. 410,000 14,452,500 410,000 14,452,500
Central Fidelity Banks, 541,200 16,506,600 541,200 16,506,600
Chemical Banking Corp. 49,700 2,348,325 49,700 2,348,325
Citicorp 55,800 3,229,425 5,000 $289,375 60,800 3,518,800
Dun & Bradstreet 20,000 1,050,000 20,000 1,050,000
Equifax Inc. 60,000 2,002,500 60,000 2,002,500
First Tennessee Nat. 337,700 15,660,838 337,700 15,660,838
Loews Corp. 6,200 750,200 6,200 750,200
National City Corp. 510,000 14,981,250 510,000 14,981,250
NationsBank Corp. 2,500 134,062 2,500 134,062
Pacificorp 103,300 1,936,875 103,300 1,936,875
Salomon Incorporated 89,750 3,601,219 89,750 3,601,219
UJB Financial Corp. 33,000 1,002,375 33,000 1,002,375
Wells Fargo and Comp. 10,950 1,973,738 10,950 1,973,738
66,933,688 16,030,907 423,437 83,388,032
Chemicals
/Plastics (7.2%)
Air Products &
Chemicals, Inc. 605,600 33,762,200 605,600 33,762,200
duPont (EI) deNemours 5,000 343,750 5,000 343,750
FMC Corp. 230,000 15,467,500 230,000 15,467,500
Monsanto Company 22,600 2,036,825 22,600 2,036,825
Rohm & Haas Co. 255,000 13,993,125 255,000 13,993,125
Tenneco Inc. 310,000 14,260,000 310,000 14,260,000
Union Carbide Corp. 68,000 2,269,500 74,800 2,496,450 142,800 4,765,950
79,752,325 4,533,275 343,750 0 1,571,000 84,629,350
Consumer Prod. (6.9%)
American Brands, Inc. 804,400 31,974,900 804,400 31,974,900
Chiquita Brands
International Inc. 121,000 1,694,000 121,000 1,694,000
Eastman Kodak Co. 35,000 2,121,875 35,000 2,121,875
Philip Morris Cos., Inc. 500,500 37,215,650 48,900 3,636,938 7,000 520,625 556,400 41,373,213
Universal
Corporation-Virginia 103,500 2,173,500 103,500 2,173,500
VF Corporation 24,000 1,290,000 24,000 1,290,000
71,312,425 8,794,438 520,625 0 80,627,488
Cosmetics/Healthcare/
Pharmaceuticals (4.3%)
Amgen Inc. 2,000 160,875 2,000 160,875
Avon Products Inc. 25,000 1,675,000 25,000 1,675,000
Bristol Meyers Squibb Co 243,200 16,568,000 243,200 16,568,000
Colgate-Palmolive Co. 4,000 292,500 4,000 292,500
Gillette Company 3,000 133,875 3,000 133,875
Mallinckrodt Group Inc. 40,000 1,420,000 40,000 1,420,000
Merck & Co. 7,000 343,000 7,000 343,000
Schering-Plough Corp. 320,000 14,120,000 320,000 14,120,000
Warner Lambert Co. 180,000 15,547,500 180,000 15,547,500
49,330,500 0 930,250 0 50,260,750
Durable Goods (3.7%)
Advanced Micro
Devices Incorporated 24,200 880,275 24,200 880,275
American Financial Group 59,397 1,544,322 59,397 1,544,322
Attwoods Contingent PLC 40,382 0 40,382 0
Banyan Systems Inc. 156,200 2,147,750 156,200 2,147,750
Comdisco Inc. 110,500 3,356,438 110,500 3,356,438
Comsat Corp. 164,100 3,220,463 164,100 3,220,463
Ford Motor Company 535,000 15,916,250 111,100 3,305,225 646,100 19,221,475
McDonnell Douglas Corp. 21,600 1,657,800 3,000 230,250 24,600 1,888,050
Motorola Inc. 30,000 2,013,750 30,000 2,013,750
Potash Corp. of
Saskatchewan, Inc. 46,400 2,592,600 46,400 2,592,600
Sun Healthcare Group Inc 217,300 3,422,475 217,300 3,422,475
YPF Sociedad Anonima ADR 156,800 2,959,600 156,800 2,959,600
15,916,250 27,100,698 230,250 0 43,247,198
Electrical
Equipment (3.2%)
Emerson Electric Co. 38,000 2,717,000 38,000 2,717,000
General Electric Co. 528,000 29,766,000 5,000 281,875 533,000 30,047,875
Phillips Electronics ADR 93,100 3,980,025 3,000 128,250 96,100 4,108,275
Texas Instruments 1,000 133,875 1,000 133,875
32,483,000 3,980,025 544,000 0 37,007,025
Energy-Oil/Gas,
Metals,
& Mining (9.4%)
Amoco Corp. 2,500 166,563 2,500 166,563
Amoco Corporation 27,100 1,805,538 27,100 1,805,538
Atlantic Richfield Co. 267,600 29,369,100 267,600 29,369,100
Barrick Gold Co. 45,000 1,136,250 45,000 1,136,250
British Petroleum 2,250 192,656 2,250 192,656
Chevron Corp. 575,000 26,809,375 575,000 26,809,375
Cyprus Amax
Minerals Company 20,000 570,000 26,000 741,000 46,000 1,311,000
Exxon Corp. 200,000 14,125,000 2,000 141,250 202,000 14,266,250
Mobil Corp. 2,500 240,000 2,500 240,000
Mobil Corporation 15,500 1,488,000 15,500 1,488,000
Peco Energy Co. 50,000 1,381,250 50,000 1,381,250
Royal Dutch Petro.-NY 1,500 182,813 1,500 182,813
Texaco Inc. 444,900 29,196,563 444,900 29,196,563
Unocal Corp. 48,000 1,326,000 48,000 1,326,000
YPF Sociedad Anonima
ADS class D 20,000 377,500 20,000 377,500
103,913,538 4,034,538 1,300,782 109,248,858
Entertainment
Walt Disney Co. 4,000 222,500 4,000 222,500
0 0 0 0 222,500 0 222,500
Food &
Beverages (4.0%)
Anheuser
Busch Cos., Inc. 545,600 31,031,000 545,600 31,031,000
Campbell Soup Co. 3,000 147,000 3,000 147,000
Coca-Cola Co. 4,000 255,000 4,000 255,000
Kellogg Co. 2,000 142,750 2,000 142,750
McCormick & Co. Inc. 637,500 13,706,250 637,500 13,706,250
Wendy's Interntl. Inc. 90,000 1,608,750 90,000 1,608,750
46,346,000 0 0 544,750 0 46,890,750
Industrial (3.2%)
Avery Dennison Corp. 35,000 1,409,000 35,000 1,409,000
Ball Corp. 450,000 15,693,750 450,000 15,693,750
Chemed Corp. 40,000 1,390,000 40,000 1,390,000
ITT Corp. 139,800 16,426,500 2,000 235,000 141,800 16,661,500
Kennametal Inc. 30,000 1,057,500 30,000 1,057,500
Wellman Inc. 25,200 689,850 25,200 689,850
36,666,600 0 0 235,000 0 36,901,600
Insurance Serv. (5.9%)
Aflac Inc. 4,000 175,000 4,000 175,000
American General Corp. 1,050,000 35,437,500 1,050,000 35,437,500
Providian Corp. 878,400 31,842,000 878,400 31,842,000
Reliastar Fin. Corp. 10,000 382,500 10,000 382,500
U.S. Healthcare Inc. 30,000 918,750 5,000 153,125 35,000 1,071,875
68,198,250 0 0 710,625 0 68,908,875
Machinery-
Diversified (0.0%)
Caterpillar Inc. 2,000 128,500 2,000 128,500
Deere & Co. 3,000 256,875 3,000 256,875
0 0 0 0 385,375 0 385,375
Retail (12.2%)
American Stores Co. 1,143,000 32,146,875 1,143,000 32,146,875
Dayton Hudson Corp. 187,500 13,453,125 187,500 13,453,125
Dillard Department
Stores, Inc. 565,000 16,596,875 565,000 16,596,875
Lowe's Companies 9,000 268,875 9,000 268,875
Mattel, Inc. 9,000 234,000 9,000 234,000
May Department
Stores Co. 660,000 27,472,500 660,000 27,472,500
Melville Corp. 428,200 14,665,850 428,200 14,665,850
Penney JC, Inc. 34,000 1,632,000 34,000 1,632,000
Pitney Bowes, Inc. 885,100 33,965,743 885,100 33,965,743
Sears Roebuck & Co. 25,000 1,496,875 25,000 1,496,875
St John Knits 10,000 448,750 10,000 448,750
Wal-Mart Stores, Inc. 9,000 240,750 9,000 240,750
141,878,593 0 0 743,625 0 142,622,218
Technology (2.7%)
Applied Materials 2,500 216,652 2,500 216,652
Automatic
Data Processing 13,000 817,375 13,000 817,375
Boeing Co. 336,800 21,092,108 336,800 21,092,108
Cisco Systems Inc. 5,000 252,812 5,000 252,812
Compaq Computer Corp. 15,000 680,625 15,000 680,625
DSC Comm. Corp. 5,000 232,500 5,000 232,500
EMC Corp. 25,000 606,250 25,000 606,250 50,000 1,212,500
Intel Corp. 25,000 1,582,813 5,000 316,562 30,000 1,899,375
International
Business Machines 35,000 3,360,000 35,000 3,360,000
LSI Logic Corp. 5,000 195,625 5,000 195,625
Medtronic Inc. 2,500 192,813 2,500 192,813
Micron Technology Inc. 5,000 274,375 5,000 274,375
Oracle Systems 6,000 231,750 6,000 231,750
Three Com Corp. 4,000 268,000 4,000 268,000
26,556,358 1,582,813 2,787,339 0 30,926,510
Telecommun. (0.8%)
Harris Corp. 150,000 7,743,750 150,000 7,743,750
MCI Communications 25,000 550,000 25,000 550,000
Telefonos de
Mexico 'L' ADR 9,000 266,625 9,000 266,625
U.S. Robotics 2,000 218,000 2,000 218,000
7,743,750 0 0 1,034,625 0 8,778,375
Transport (2.7%)
Atlantic
Southeast Air. 10,000 301,250 10,000 301,250
Norfolk
Southern Corp. 470,000 31,666,250 470,000 31,666,250
31,666,250 0 0 301,250 0 31,967,500
Utilities (11.5%)
BCF Incorporated 23,000 738,875 23,000 738,875
Carolina Power &
Lights Co. 480,000 14,520,000 480,000 14,520,000
Ericcson L M
Telephone Co. ADR 104,000 2,080,000 104,000 2,080,000
General Public
Utilities Corp. 1,088,400 32,379,900 1,088,400 32,379,900
GTE Corp. 865,000 29,518,125 865,000 29,518,125
Houston Ind. Inc. 12,500 526,562 12,500 526,562
Montana Power Co. 94,700 2,178,100 94,700 2,178,100
NICOR, Inc. 1,215,700 32,671,938 1,215,700 32,671,938
PacifiCorp 8,000 150,000 8,000 150,000
PECO Energy Co. 5,000 138,035 5,000 138,035
Southern Co. 710,000 15,886,250 710,000 15,886,250
Telefonos de Mexico,
Class L Spons. ADR 100,500 2,977,309 100,500 2,977,309
Ohio Edison Co. 20,000 452,500 20,000 452,500
125,428,713 8,500,846 288,035 134,217,594
Miscellaneous-
(5.8%)
AMP Inc. 20,000 845,000 20,000 845,000
Comerica Inc. 10,000 321,250 10,000 321,250
Cantor Fitzgerald 1,185,934 1,185,934 1,185,934 1,185,934
Florida Progress Corp. 15,000 468,750 15,000 468,750
Hanson PLC ADR 80,000 1,410,000 80,000 1,410,000
Houston Industries 50,000 2,106,250 50,000 2,106,250
Omnicon Group Inc. 20,000 1,212,500 1,212,500
Miscellaneous
Briggs & Stratton Corp. 300,000 10,350,000 300,000 10,350,000
Emprfsas Ica ADR 105,000 1,076,250 105,000 1,076,250
Nucor Corp. 10,000 535,000 10,000 535,000
Pittson Ser. Grp. 30,000 720,000 30,000 720,000
Raytheon Co. 431,200 33,471,900 431,200 33,471,900
Reuters
Holdings PLC-ADR 3,500 175,438 3,500 175,438
Textron, Inc. 235,000 13,659,375 235,000 13,659,375
65,030,959 1,796,250 710,438 0 67,537,647
Total Common Stocks
(Cost $923,918,738) 969,157,199 76,353,790 12,256,656 1,057,767,645
Convertible
Preferred Stocks (0.4%)
Glendale Federal Pfd.
Series E Conv. 60,000 2,040,000 60,000 2,040,000
AK Steel Holding Pfd. 45,000 1,293,750 45,000 1,293,750
Reynolds
Metals Co. CVTP 20,000 965,000 20,000 965,000
Total Convertible
Preferred Stocks
(Cost $3,937,061) $4,298,750 0 0 0 0 0 125,00 4,298,750
U.S. Treasury
Obligations (0.9%)
U.S. Treas. Bill 9/14/95 475,000 469,808 475,000 469,808
U.S. Treas. Bill 5/30/96 5,000 4,750 5,000 4,750
U.S. Treas. Notes
6.5% 11/30/96 10,000,000 10,096,860 10,000,000 10,096,860
Total U.S. Treasury
Obligations
(Cost $10,359,530) 10,096,860 0 0 474,558 10,571,418
Repurchase
Agreements (7.8%)
Donaldson, Lufkin,
and Jenrette
Securities Corp.
6.0% dated
6/30/95, due 7/3/95 82,166,000 82,166,000 82,166,00 82,166,000
J.P. Morgan Securities
6.2% 7/3/95 6,210,704 6,210,704 6,210,704 6,210,704
Total Repurchase
Agreements
(Cost $88,376,704)* 82,166,000 6,210,704 0 0 0 88,376,704
Total Investments
(Cost -
$1,026,592,033)**(99.4%) 1,065,718,809 82,564,494 12,731,214 1,161,014,517
Other Assets
& Liabilities (0.6%) 6,359,538 (56,978) 206,650 6,509,210
Total Net Assets (100.0%) $1,072,078,347 $82,507,516 $12,937,864 $1,167,523,727
</TABLE>
* The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio.
** Also represents cost for federal tax purposes.
(See Notes which are an integral part of the Pro-Forma Financial Statements)
<PAGE>
<TABLE>
<CAPTION>
Lexicon
Evergreen Select Value FFB Equity Pro Forma
Value Fund Fund Fund Adjustments Combined
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value
(Cost $ 1,026,592,033) $1,065,718,809 $82,564,494 $12,731,214 $1,161,014,517
Cash 0 14,329 247,408 261,737
Interest receivable 69,344 0 0 69,344
Dividends receivable 2,568,213 92,744 18,844 2,679,801
Receivable for investment securities sold 5,416,799 0 264,159 5,680,958
Receivable for fund shares sold 1,053,305 0 0 1,053,305
Prepaid expenses 0 0 152 152
TOTAL ASSETS 1,074,826,470 82,671,567 13,261,777 1,170,759,814
LIABILITIES:
Payable for investment securities purchased 1,160,924 85,993 309,416 1,556,333
Due to custodian bank 751,891 0 0 751,891
Payable for fund shares repurchased 597,153 0 0 597,153
Accrued advisory fee 144,913 50,011 14,497 209,421
Accrued expenses 93,242 28,047 0 121,289
TOTAL LIABILITIES 2,748,123 164,051 323,913 3,236,087
NET ASSETS 1,072,078,347 82,507,516 12,937,864 1,167,523,727
NET ASSETS CONSIST OF:
Paid in capital 925,498,906 68,326,919 10,773,908 1,004,599,733
Undistributed net investment income (664,108) 1,896 42,862 (619,350)
Accumulated realized gain on investments 23,262,949 5,658,527 199,384 29,120,860
Net unrealized appreciation of investments 123,980,600 8,520,174 1,921,710 134,422,484
NET ASSETS 1,072,078,347 82,507,516 12,937,864 1,167,523,727
Net asset value and offering price per share:
Class A $19.26 - - $19.26
Maximum offering price (4.75% sales charge) $20.22 - - $20.22
Class B $19.26 - - $19.26
Class C $19.24 - - $19.24
Class Y $19.26 13.40 13.10 $19.26
Net Assets:
Class A 273,746,370 273,746,370
Class B 121,178,524 121,178,524
Class C 626,156 626,156
Class Y 676,527,297 82,507,516 12,937,864 771,972,677
Shares outstanding:
Class A 14,214,559 14,214,559
Class B 6,292,129 6,292,129
Class C 32,541 32,541
Class Y 35,134,028 6,156,989 987,253 (2,188,615) 40,089,655
</TABLE>
(See Notes which are an integral part of the Pro Forma Financial Statements)
<PAGE>
<TABLE>
<CAPTION>
Evergreen ABT Adj. Lexicon FFB Equity
Value Growth & Income ABT Evergreen Select Value Fund
Fund Fund Adjustments Value Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest income $32,485,202 $1,934,897 $34,420,099 $1,895,529 $163,370
EXPENSES:
Investment advisory fee 4,271,743 323,467 4,595,210 479,478 34,228
Trustees' fees 13,630 32,246 45,876 2,943 6,340
Administrative personnel and
service fees 711,673 53,841 765,514 108,682 17,114
Custodian and portfolio accounting
fees 213,783 38,861 252,644 0 9,843
Transfer and dividend
disbursing agent 420,904 93,009 513,913 106 9,958
fees 12B-1 Distribution &
Servicing Fees:
Class "A" 805,308 27,673 832,981 0 0
Class "B" 387,870 0 387,870 0 0
Class "C" 299,902 0 299,902 0 0
Class "Y" 2,099 0 2,099 0 0
Fund share registration costs 76,092 30,497 106,589 13,982 3,776
Professional fees 23,313 29,107 52,420 22,648 9,467
Printing and postage 12,791 6,251 19,042 15,448 13,615
Insurance premiums 17,766 30,557 48,323 778 198
Miscellaneous 5,969 3,697 9,666 (5,668) 9,141
TOTAL EXPENSES 7,262,843 669,206 7,932,049 638,397 113,680
Less fee waiver and expense
reimbursements 0 0 0 0 (168,966) (51,342)
NET EXPENSES 7,262,843 669,206 7,932,049 469,431 62,338
NET INVESTMENT INCOME 25,222,359 1,265,691 26,488,050 1,426,098 101,032
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss on investments 36,546,034 551,612 37,097,646 6,467,067 157,896
Net increase (decrease) in
unrealized appreciation of
investments 108,195,210 3,243,590 111,438,800 8,645,928 2,006,657
Net gain (loss) on investments 144,741,244 3,795,202 0 148,536,446 15,112,995 2,164,553
Net increase in net assets
resulting from operations 169,963,603 5,060,893 0 175,024,496 16,539,093 2,265,585
Pro Forma
Adjustments Combined
<C> <C>
$0 $36,478,998
(185,475)(1) 4,923,441
(41,529)(2) 13,630
(475,181)(1) 416,12
(33,648)(3) 228,83
(68,325)(2) 455,652
0 832,981
0 387,870
(180)(4) 299,722
(2,099)(4) 0
(30,497)(2) 93,850
(55,394)(2) 29,141
(32,460)(5) 15,645
(28,533)(5) 20,766
(5,678)(5) 7,461
(958,999) 7,725,127
220,308 (6) 0
(738,691) 7,725,127
738,691 28,753,871
0 73,643,680
219,634,010
0 293,277,690
738,691 322,031,562
</TABLE>
(See Notes which are an integral part of the Pro Forma Financial Statements)
(1)Reflects an decrease in investment advisory fee and a decrease in
administrative personnel and service fees based on the surviving Fund's
fee schedul
(2)Reflects elimination of duplicate service fees.
(3)Based on surviving Fund's contract in effect for custodian and portfolio
accounting services
(4)Reflects a decrease in distribution service fees shares based on the
surviving Fund's fee schedule.
(5)Adjustment reflects the expected cost savings when the funds combine.
(6)Reflects an adjustment in waiver of investment advisory fee based on the
surviving Fund's voluntary advisory fee waiver in effect for the year
ended June 30, 1995
Evergreen Value Fund
Notes to Pro Forma Combining Financial Statements (Unaudited)
June 30, 1995
1. Basis of Combination - The Pro forma Statement of Assets and Liabilities,
including the Pro Forma Portfolio of Investments, and the related Pro forma
Statement of Operations ("Pro forma Statements") reflect the accounts of
Evergreen Value Fund ( Evergreen ), FFB Equity Fund ( FFB Equity ) and Lexicon
Select Value Fund ("Lexicon") at June 30, 1995 and for the year then ended.
The Pro forma Statements give effect to the proposed transfer of all
assets and liabilities of FFB Equity and Lexicon Value Fund
shares in exchange for shares of Evergreen. The Pro forma Statements
do not reflect the expense of each Fund in carrying out its
obligations under the Agreement and Plan of Reorganization. The actual
fiscal year end of the combined Fund will be December 31, the fiscal year
end of Evergreen.
The Reorganization will be accomplished through a series of
acquisitions of substantially all of the assets of the aforementioned
funds by Evergreen, and in addition assume certain identified
liabilities of the same. Thereafter there will be a distribution
of such shares of Evergreen to shareholders of the aforementioned
funds in liquidation and subsequent termination thereof. The
information contained herein is based on the experience of each fund
for the year ended June 30, 1995 and is designed to permit
shareholders of the consolidating mutual funds to evaluate the financial
effect of the proposed Reorganization. The expenses of Evergreen, FFB and
Lexicon in connection with the Reorganization (including the cost of
any proxy soliciting agents), will be borne by First Union National Bank
of North Carolina.
The Pro forma Statements should be read in conjunction with the
historical financial statements of each Fund incorporated by reference
in the Statement of Additional Information.
2. Shares of Beneficial Interest - The pro forma net asset value per
share assumes the issuance of additional shares of Evergreen Class Y which
would have been issued at June 30, 1995 in connection with the
proposed reorganization. The amount of additional shares assumed to be
issued was calculated based on the net assets of the funds as of June
30, 1995 of $82,507,516 and $12,937,864 for Lexicon and FFB respectively, and
the net asset value per share of the respective share class of Evergreen of
$19.26. Additional shares issued were converted and distributed among
the aformentioned funds according to their relative share value
conversion ratio.
The pro forma shares outstanding of 14,214,559 Class A, 6,292,129
Class B, 32,541
<PAGE>
Class C, and 40,089,655 Class Y consist of 4,955,627 additional shares
of Class Y to be issued in the proposed reorganization, as calculated
above, in addition to shares of Evergreen outstanding as of June 30, 1995.
3. Pro Forma Operations - The Pro Forma Statement of Operations
assumes similar rates of gross investment income for the investments
of each Fund. Accordingly, the combined gross investment income is
equal to the sum of each Fund's gross investment income. Pro forma
operating expenses include the actual expenses of the Funds and the
combined Fund, with certain expenses adjusted to reflect the expected
expenses of the combined entity. The investment advisory,
administrative personnel and service fees and distribution service fees
have been charged to the combined Fund based on the fee schedule in
effect for Evergreen at the combined level of average net assets for the
year ended June 30, 1995.
<PAGE>
<PAGE>
EQUITY
Draft: 8-18-95
EVERGREEN INVESTMENT TRUST
PART C
OTHER INFORMATION
Item 15. Indemnification.
The response to this item is incorporated by reference to
"Liability and Indemnification of Trustees" under the caption "Comparative
Information on Shareholders' Rights" in Part A of this Registration Statement.
Item 16. Exhibits:
1(a). Declaration of Trust. Incorporated by reference to the Registrant's
Registration Statement on Form N-1A filed on November 13, 1984 -
Registration No. 33-16706 ("Form N-1A Registration Statement")
1(b). Certificate of Amendment to Declaration of Trust. Incorporated by
reference to Post-Effective Amendment No. 28 to the Registrant's Form N-1A
Registration Statement filed on April 15, 1993.
1(c). Instrument providing for the Establishment and Designation of
Classes. Incorporated by reference to Post-Effective Amendment No. 28 to
the Registrant's Form N-1A Registration Statement filed on April 15, 1993.
1(d). Certificate of Amendment to Declaration of Trust. Incorporated by
reference to Post-Effective Amendment No. 40 to the Registrant's Form N-1A
Registration Statement filed on July 6, 1995.
2(a). Bylaws. Incorporated by reference to the Form N-1A Registration
Statement.
2(b). Amendment to the Bylaws. Incorporated by reference to Post-
Effective Amendment No. 3 to the Registrant's Form N-1A Registration
Statement filed on July 30, 1987.
3. Not applicable.
4. Agreement and Plan of Reorganization. Exhibit A to Prospectus
contained in Part A of this Registration Statement.
5. Not applicable.
6(a). Investment advisory agreement between First Union National Bank of
North Carolina and the Registrant. Incorporated by reference to Post-
Effective Amendment No. 38 to the Registrant's Form N-1A Registration
Statement filed on December 30, 1994.
<PAGE>
6(b). Exhibit to Investment Advisory Agreement. Incorporated by reference
to Post-Effective Amendment No. 38 to the Registrant's Form N-1A
Registration Statement filed on December 30, 1994.
6(c). Form of Interim Investment Advisory Agreement. Exhibit B to
Prospectus contained in Part A of this Registration Statement.
7. Distribution Agreement between Evergreen Funds Distributor, Inc. and
the Registrant. Incorporated by reference to Post-Effective Amendment No.
40 to the Registrant's Form N-1A Registration Statement filed on July 6,
1995.
8. Not applicable.
9(a). Custody Agreement between State Street Bank and Trust Company and
Registrant. Incorporated by reference to Post-Effective Amendment No. 38
to the Registrant's Form N-1A Registration Statement filed on December 30,
1994.
9(b). Amendment to Custody Agreement. Incorporated by reference to Post-
Effective No. 38 to the Registrant's From N-1A Registration Statement filed
on December 30, 1994.
10. Not Applicable.
11. Opinion and consent of Sullivan & Worcester. Filed herewith.
12. Tax opinion and consent of Sullivan & Worcester. Filed herewith.
13. Not applicable.
14(a). Consent of KPMG Peat Marwick LLP, independent accountants, as to the use
of their report dated February 13, 1995 concerning the financial statements of
the Evergreen Value Fund for the fiscal year ended December 31, 1994. Filed
herewith.
14(b). Consent of KPMG Peat Marwick LLP, independent accountants, as to the use
of their report dated April 27, 1995 concerning the financial statements of the
FFB Equity Fund for the fiscal year ended February 28, 1995. Filed herewith.
15. Not applicable.
17(a). Form of Proxy Card. Filed herewith.
17(b). Registrant's Rule 24f-2 Declaration. Filed herewith.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which is
a part of this Registration Statement by any person or
-2-
<PAGE>
party who is deemed to be an underwriter within the meaning of Rule 145(c) of
the Securities Act, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons who
may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
-3-
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration
Statement has been signed on behalf of the Registrant, in the City of New York
and State of New York, on the 20th day of August, 1995.
Evergreen Investment Trust
By: /s/ John J. Pileggi
----------------------
Name: John J. Pileggi
Title: President
Each person whose signature appears below hereby authorizes John J.
Pileggi, Joan V. Fiore and Joseph J. McBrien, as attorney-in-fact, to sign on
his behalf, any amendments to this Registration Statement and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission and any
state securities commission.
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/John J. Pileggi President (Principal August 20, 1995
------------------ Executive Officer)
John J. Pileggi and Treasurer
(Principal Financial
and Accounting Officer)
/s/James Howell Trustee August 20, 1995
---------------
James Howell
/s/Gerald McDonnell Trustee August 20, 1995
-------------------
Gerald McDonnell
/s/Thomas L. McVerry Trustee August 20, 1995
--------------------
Thomas L. McVerry
/s/William W. Pettit Trustee August 20, 1995
--------------------
William W. Pettit
/s/Russell A Salton, III Trustee August 20, 1995
------------------------
Russell A. Salton, III
/s/Michael S. Scofield Trustee August 20, 1995
----------------------
Michael S. Scofield
-4-
<PAGE>
INDEX TO EXHIBITS
N-14 EXHIBIT NO. Page
11. Opinion and Consent of Sullivan & Worcester.
12. Tax Opinion and Consent of Sullivan & Worcester
14(a) Consent of KPMG Peat Marwick LLP
14(b) Consent of KPMG Peat Marwick LLP
17(a) Form of Proxy
17(b) Registrant's Rule 24f-2 Declaration
OTHER EXHIBITS*
Prospectus dated June 30, 1995 of FFB Equity Fund
Statement of Additional Information dated June 30, 1995 of FFB
Equity Fund
Annual Report of FFB Equity Fund dated February 28, 1995
-------------------
*Incorporated by Reference into Form N-14 Registration Statement.
SULLIVAN & WORCESTER
1025 CONNECTICUT AVENUE. N.W.
WASHINGTON, D.C. 20038
(202) 775-8190
TELECOPIER NO. 202-293-2275
IN BOSTON, MASSACHUSETTS IN NEW YORK CITY
ONE POST OFFICE SQUARE 767 THIRD AVENUE
BOSTON, MASSACHUSETTS 02100 NEW YORK, NEW YORK 10017
(617) 338-2800 (212) 486-8200
TELECOPIER NO. 617-338-2880 TELECOPIER NO. 212-756-2151
TWX: 710-321-1976
August 23, 1995
Evergreen Investment Trust
2500 Westchester Avenue
Purchase, NY 10577
Ladies and Gentlemen:
We have been requested by the Evergreen Investment Trust, a Massachusetts
business trust with transferable shares and currently consisting of 15 series
(the "Trust") established under a Declaration of Trust dated August 30, 1984 as
amended (the "Declaration"), for our opinion with respect to certain matters
relating to the Evergreen Value Fund (the "Acquiring Fund"), a series of the
Trust. We understand that the Trust is about to file a Registration Statement on
Form N-14 for the purpose of registering shares of the Trust under the
Securities Act of 1933, as amended (the "1933 Act"), in connection with the
proposed acquisition by the Acquiring Fund of substantially all of the assets of
the FFB Equity Fund (the "Acquired Fund"), a series of FFB Funds Trust, a
Massachusetts business trust with transferable shares, in exchange solely for
shares of the Acquiring Fund and the assumption by the Acquiring Fund of certain
liabilities of the Acquired Fund pursuant to an Agreement and Plan of
Reorganization the form of which is included in the Form N-14 Registration
Statement (the "Plan").
We have, as counsel, participated in various business and other proceedings
relating to the Trust. We have examined copies of either certified or otherwise
proved to be genuine to our satisfaction, of the Trust's Declaration and
By-Laws, and other documents relating to its organization, operation, and
proposed operation, including the proposed Plan and we have made such other
investigations as, in our judgment, are necessary or appropriate to enable us to
render the opinion expressed below.
Based upon the foregoing, and assuming the approval by shareholders of the
Acquired Fund of certain matters scheduled for their consideration at a meeting
presently anticipated to be held on November 13, 1995, it is our opinion that
the shares of the Acquiring Fund currently being registered, when issued in
accordance with the Plan and the Trust's Declaration and By-Laws, will be
legally issued, fully paid and non-assessable by the
<PAGE>
Evergreen Investment Trust
August 23, 1995
Page 2
Trust, subject to compliance with the 1933 Act, the Investment Company Act of
1940, as amended and applicable state laws regulating the offer and sale of
securities.
With respect to the opinion stated in the paragraph above, we note that
shareholders of a Massachusetts business trust may under some circumstances be
subject to assessment at the instance of creditors to pay the obligations of
such trust in the event that its assets are insufficient for the purpose.
We hereby consent to the filing of this opinion with and as a part of the
Registration Statement on Form N-14 and to the reference to our firm under the
caption "Legal Matters" in the Prospectus/Proxy Statement filed as part of the
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the 1933 Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ SULLIVAN & WORCESTER
------------------------
SULLIVAN & WORCESTER
SULLIVAN & WORCESTER
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 338-2800
TELECOPIER NO. 617-338-2880
TWX: 710-321-1976
IN WASHINGTON, D.C. IN NEW YORK CITY
1025 CONNECTICUT AVENUE. N.W. 767 THIRD AVENUE
WASHINGTON, D.C. 20038 NEW YORK, NEW YORK 10017
(202) 775-8190 (212) 486-8200
TELECOPIER NO. 202-293-2275 TELECOPIER NO. 212-756-2151
August 23, 1995
Evergreen Value Fund
2500 Westchester Avenue
Purchase, New York 10577
FFB Equity Fund
237 Park Avenue
New York, New York 10017
Re: Acquisition of Assets of FFB Equity Fund
Ladies and Gentlemen:
You have asked for our opinion as to certain tax
consequences of the proposed acquisition of assets of FFB
Equity Fund ("Selling Fund"), a series of FFB Funds Trust, a
Massachusetts business trust, by Evergreen Value Fund
("Acquiring Fund"), a series of Evergreen Investment Trust, a
Massachusetts business trust, in exchange for voting shares of
Acquiring Fund (the "Reorganization").
In rendering our opinion, we have reviewed and relied
upon the draft Prospectus/Proxy Statement and associated form
of Agreement and Plan of Reorganization (the "Reorganization
Agreement") expected to be filed with the Securities and
Exchange Commission on or about August 23, 1995. We have
relied, without independent verification, upon the factual
statements made therein, and assume that there will be no
change in material facts disclosed therein between the date of
this letter and the date of closing of the Reorganization. We
further assume that the Reorganization will be carried out in
accordance with the Reorganization Agreement. We have also
relied upon the following representations, each of which has
been made to us by officers of Evergreen Investment Trust on
behalf of Acquiring Fund or of FFB Funds Trust on behalf of
Selling Fund:
The Reorganization will be consummated
substantially as described in the Reorganization Agreement.
Acquiring Fund will acquire from Selling
Fund at least 90% of the fair market value of the net assets
and at least 70% of the fair market value of the gross assets
held by Selling Fund immediately prior to the Reorganization.
For purposes of this
<PAGE>
Evergreen Value Fund
FFB Equity Fund
August 23, 1995
Page 2
representation, assets of Selling Fund used to pay
reorganization expenses, cash retained to pay liabilities, and
redemptions and distributions (except for regular and normal
distributions) made by Selling Fund immediately preceding the
transfer which are part of the plan of reorganization, will be
considered as assets held by Selling Fund immediately prior to
the transfer.
To the best of the knowledge of management
of Selling Fund, there is no plan or intention on the part of
the shareholders of Selling Fund to sell, exchange, or
otherwise dispose of a number of Acquiring Fund shares
received in the Reorganization that would reduce the former
Selling Fund shareholders' ownership of Acquiring Fund shares
to a number of shares having a value, as of the date of the
Reorganization (the "Closing Date"), of less than 50 percent
of the value of all of the formerly outstanding shares of
Selling Fund as of the same date. For purposes of this
representation, Selling Fund shares exchanged for cash or
other property will be treated as outstanding Selling Fund
shares on the Closing Date. There are no dissenters' rights in
the Reorganization, and no cash will be exchanged for Selling
Fund shares in lieu of fractional shares of Acquiring Fund.
Moreover, shares of Selling Fund and shares of Acquiring Fund
held by Selling Fund shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the
Reorganization will be considered in making this
representation.
Selling Fund has not redeemed and will not
redeem the shares of any of its shareholders in connection
with the Reorganization except to the extent necessary to
comply with its legal obligation to redeem its shares.
The management of Acquiring Fund has no plan
or intention to redeem or reacquire any of the Acquiring Fund
shares to be received by Selling Fund shareholders in
connection with the Reorganization, except to the extent
necessary to comply with its legal obligation to redeem its
shares.
The management of Acquiring Fund has no plan
or intention to sell or dispose of any of the assets of
Selling Fund which will be acquired by Acquiring Fund in the
Reorganization, except for dispositions made in the ordinary
course of business, and to the extent necessary to enable
Acquiring Fund to comply with its legal obligation to redeem
its shares.
Following the Reorganization, Acquiring Fund
will continue the historic business of Selling Fund in a
substantially unchanged manner as part of the regulated
investment company business of Acquiring Fund, or will use a
significant portion of Selling Fund's historic business assets
in a business.
<PAGE>
Evergreen Value Fund
FFB Equity Fund
August 23, 1995
Page 3
There is no intercorporate indebtedness
between Acquiring Fund and Selling Fund.
Acquiring Fund does not own, directly or
indirectly, and has not owned in the last five years, directly
or indirectly, any shares of Selling Fund. Acquiring Fund will
not acquire any shares of Selling Fund prior to the Closing
Date.
Acquiring Fund will not make any payment of
cash or of property other than shares to Selling Fund or to
any shareholder of Selling Fund in connection with the
Reorganization.
Pursuant to the Reorganization Agreement,
the shareholders of Selling Fund will receive solely Acquiring
Fund voting shares in exchange for their voting shares of
Selling Fund.
The fair market value of the Acquiring Fund
shares to be received by the Selling Fund shareholders will be
approximately equal to the fair market value of the Selling
Fund shares surrendered in exchange therefor.
Subsequent to the transfer of Selling Fund's
assets to Acquiring Fund pursuant to the Reorganization
Agreement, Selling Fund will distribute the shares of
Acquiring Fund, together with other assets it may have, in
final liquidation as expeditiously as possible.
Selling Fund is not under the jurisdiction
of a court in a Title 11 or similar case within the meaning of
ss. 368(a)(3)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
Selling Fund is treated as a corporation for
federal income tax purposes and at all times in its existence
has qualified as a regulated investment company, as defined in
ss. 851 of the Code.
Acquiring Fund is treated as a corporation
for federal income tax purposes and at all times in its
existence has qualified as a regulated investment company, as
defined in ss. 851 of the Code.
The sum of the liabilities of Selling Fund
to be assumed by Acquiring Fund and the expenses of the
Reorganization does not exceed twenty percent of the fair
market value of the assets of Selling Fund.
The foregoing representations are true on
the date of this letter and will be true on the date of
closing of the Reorganization.
<PAGE>
Evergreen Value Fund
FFB Equity Fund
August 23, 1995
Page 4
Based on and subject to the foregoing, and our
examination of the legal authority we have deemed to be
relevant, it is our opinion that for federal income tax
purposes:
The acquisition by Acquiring Fund of substantially
all of the assets of Selling Fund solely in exchange for
voting shares of Acquiring Fund followed by the distribution
by Selling Fund of said Acquiring Fund shares to the
shareholders of Selling Fund in exchange for their Selling
Fund shares will constitute a reorganization within the
meaning of ss. 368(a)(1)(C) of the Code, and Acquiring Fund
and Selling Fund will each be "a party to a reorganization"
within the meaning of ss. 368(b) of the Code.
No gain or loss will be recognized to Selling Fund
upon the transfer of substantially all of its assets to
Acquiring Fund solely in exchange for Acquiring Fund voting
shares and assumption by Acquiring Fund of certain identified
liabilities of Selling Fund, or upon the distribution of such
Acquiring Fund voting shares to the shareholders of Selling
Fund in exchange for all of their Selling Fund shares.
No gain or loss will be recognized by Acquiring
Fund upon the receipt of the assets of Selling Fund (including
any cash retained initially by Selling Fund to pay liabilities
but later transferred) solely in exchange for Acquiring Fund
voting shares and assumption by Acquiring Fund of certain
identified liabilities of Selling Fund.
The basis of the assets of Selling Fund acquired by
Acquiring Fund will be the same as the basis of those assets
in the hands of Selling Fund immediately prior to the
transfer, and the holding period of the assets of Selling Fund
in the hands of Acquiring Fund will include the period during
which those assets were held by Selling Fund.
The shareholders of Selling Fund will recognize no
gain or loss upon the exchange of all of their Selling Fund
shares solely for Acquiring Fund voting shares. Gain, if any,
will be realized by Selling Fund shareholders who in exchange
for their Selling Fund shares receive other property or money
in addition to Acquiring Fund shares, and will be recognized,
but not in excess of the amount of cash and the value of such
other property received. If the exchange has the effect of the
distribution of a dividend, then the amount of gain recognized
that is not in excess of the ratable share of undistributed
earnings and profits of Selling Fund will be treated as a
dividend.
The basis of the Acquiring Fund voting shares to be
received by the Selling Fund shareholders will be the same as
the basis of the Selling Fund shares surrendered in exchange
therefor.
<PAGE>
Evergreen Value Fund
FFB Equity Fund
August 23, 1995
Page 5
The holding period of the Acquiring Fund voting
shares to be received by the Selling Fund shareholders will
include the period during which the Selling Fund shares
surrendered in exchange therefor were held, provided the
Selling Fund shares were held as a capital asset on the date
of the exchange.
This opinion letter is delivered to you in
satisfaction of the requirements of Paragraph 8.6 of the
Reorganization Agreement. We hereby consent to the filing of
this opinion as an exhibit to the Registration Statement on
Form N-14 and to use of our name and any reference to our firm
in the Registration Statement or in the Prospectus/Proxy
Statement constituting a part thereof. In giving such consent,
we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ SULLIVAN & WORCESTER
------------------------
SULLIVAN & WORCESTER
Consent of Independent Accountants
The Board of Trustees
Evergreen Investment Trust:
We consent to the use of our report dated February 13, 1995, on the
Evergreen Value Fund (formerly First Union Value Portfolio of First Union Funds)
incorporated herein by reference, to the reference to our firm under the heading
"Financial Statements and Experts" in the Registration Statement on Form N-14
and to the references to our firm under the heading "Financial Highlights" in
the prospectus filed with the Securities and Exchange Commission, incorporated
herein by reference, in this Registration Statement on Form N-14.
/s/KPMG Peat Marwick
KPMG Peat Marwick
Pittsburgh, Pennsylvania
August 23, 1995
Consent of Independent Accountants
The Board of Trustees
FFB Funds Trust:
We consent to the use of our report dated April 27, 1995, with respect to
the FFB Equity Fund of FFB Funds Trust incorporated herein by reference in the
Prospectus/Proxy Statement and included in the Registration Statement on Form
N-14. We also consent to the reference to our firm under the heading "Financial
Statements and Experts" in the Prospectus/Proxy Statement, "Financial
Highlights" in the Prospectus, and "Independent Accountants" and "Financial
Statements" in the Statement of Additional Information incorporated herein by
reference.
/s/KPMG Peat Marwick
KPMG Peat Marwick
New York, New York
August 23, 1995
EQUITY
Draft: 8-18-95
VOTE THIS PROXY CARD TODAY
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
................................................................
FFB FUNDS TRUST- FFB EQUITY FUND
SPECIAL MEETING OF SHAREHOLDERS -- NOVEMBER 13, 1995
The undersigned hereby appoints , and
and each of them, attorneys and proxies for the
undersigned, with full powers of substitution and revocation, to represent the
undersigned and to vote on behalf of the undersigned all shares of the FFB
Equity Fund (the "Fund"), which the undersigned is entitled to vote at a Meeting
of Shareholders of the Fund to be held at 237 Park Avenue, New York, New York
10017 on November 13, 1995, at 10:00 a.m. and any adjournments thereof (the
"Meeting"). The undersigned hereby acknowledges receipt of the Notice of Meeting
and Prospectus/Proxy Statement, and hereby instructs said attorneys and proxies
to vote said shares as indicated hereon. In their discretion, the proxies are
authorized to vote upon such other matters as may properly come before the
Meeting. A majority of the proxies present and acting at the Meeting in person
or by substitute (or, if only one shall be so present, then that one) shall have
and may exercise all of the powers and authority of said proxies hereunder. The
undersigned hereby revokes any proxy previously given.
NOTE: Please sign exactly as your name appears on this Proxy. If joint owners,
EITHER may sign this Proxy. When signing as attorney, executor, administrator,
trustee, guardian, or corporate officer, please give your full title.
DATE:______________, 1995 _____________________________
------------------------------
Signature(s)
------------------------------
Title(s), if applicable
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
<PAGE>
PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW. THIS PROXY
WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE
FOLLOWING PROPOSALS. IN THE ABSENCE OF ANY SPECIFICATION, THIS PROXY WILL BE
VOTED IN FAVOR OF THE PROPOSALS.
1. To approve the proposed Agreement and Plan of Reorganization
with the Evergreen Value Fund.
o YES o NO o ABSTAIN
2. To approve the proposed Interim Investment Advisory
Agreement with the Capital Management Group of First Union
National Bank of North Carolina.
o YES o NO o ABSTAIN
3. To consider and vote upon such other matters as may properly come before said
meeting or any adjournments thereof.
o YES o NO o ABSTAIN
These items are discussed in greater detail in the attached
Prospectus/Proxy Statement. The Board of Trustees of FFB Funds Trust has fixed
the close of business on September , 1995, as the record date for the
determination of shareholders entitled to notice of and to vote at the meeting.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE REQUESTED
TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE WHICH
NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. INSTRUCTIONS FOR THE PROPER
EXECUTION OF PROXIES ARE SET FORTH ON THE INSIDE COVER.
Joan V. Fiore
Secretary
September 28, 1995
In their discretion, the Proxies, and each of them, are authorized to vote
upon any other business that may properly come before the meeting, or any
adjournment(s) thereof, including any adjournment(s) necessary to obtain the
requisite quorums and for approvals.
As filed with the Securities and Exchange Commission on November 13, 1984
File No.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 x
Pre-Effective Amendment No.
Post-Effective Amendment No.
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 x
Amendment No.
SALEM FUNDS
(Exact name of Registrant as specified in Charter)
99 High Street Boston Massachusetts
Address of Principal Executive Offices) (zip code)
Registrant's Telephone Number, including Area Code:
Roger T. Wickers, Esq., 99 High Street, Boston, Massachusetts 02110
(Name and Address of Agent for Service)
It is proposed that this filing will become effective immediately upon
filing pursuant to paragraph (b) on (date) pursuant to paragraph (b) 60
days after filing pursuant to paragraph (a) on (date) pursuant to
paragraph (a) of rule 485
Approximate date of proposed Public offering : As soon as possible after the
effective date of this Registration statement.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Proposed
Maximum Proposed
Offering Maximum
Title of Price Aggregate Amount of
securities Amount Being Per Offering Registration
Being Registered Registered Unit Price Fee
Shares of bene- * $1.00 * $500
ficial Interest,
without par value
Registrant seeks to hereby register an indefinite number of securities of
Registrant.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
File a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
----------------------------------------------------
THE FFB EQUITY FUND
----------------------------------------------------
ANNUAL REPORT
AS OF FEBRUARY 28, 1995
--------------------------------------------------------------------------------
INVESTMENT
--------------------------------------------------------------------------------
STRATEGIES
--------------------------------------------------------------------------------
FOR
--------------------------------------------------------------------------------
THE '90S
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INVESTMENT ADVISER
First Fidelity Bank, National Association, New Jersey
765 Broad Street
Newark, New Jersey 07101
ADMINISTRATOR
Furman Selz Incorporated
237 Park Avenue
New York, New York 10017
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
First Fidelity Bank, National Association, New Jersey
765 Board Street
Newark, New Jersey 07101
DISTRIBUTOR
FFB Funds Distributor, Inc.
237 Park Avenue
New York, New York 10017
LEGAL COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
--------------------------------------------------------------------------------
This report is for the information of the shareholders of The FFB Funds Trust.
Its use in connection with any offering of the Trust's shares is authorized only
in case of a concurrent or prior delivery of the Trust's current prospectus.
--------------------------------------------------------------------------------
The FFB Funds are not deposits, guaranteed by or obligations of First
Fidelity Bank or its affiliates and are not insured by the FDIC, the
Federal Reserve Board or any other government agency. Shares of The FFB
Funds involve investment risks, including the possible loss of principal.
For information call 1-800-437-8790.
--------------------------------------------------------------------------------
THE FFB FUNDS
April 27, 1995
Dear Shareholder:
We are pleased to present the annual report for The FFB Equity Fund for the year
ended February 28, 1995. Net assets were $6,665,136 and the net asset value was
$10.90.
We have recently sharpened the focus of the portfolio of investments. Our goal
is to have a more focused portfolio by including more equities of companies with
large market capitalizations.
Several factors which had plagued The FFB Equity Fund during 1994 are now
assisting our recent relative improvement. The strength of the technology
section of the market continues to fortify the portfolio at a time it needs it
while weak transportation, basic industry, and consumer cyclical are not helping
our performance.
The rally in interest rates left us a little behind as we continued to
underweigh utility stocks. We did have a market exposure to the financial sector
which was strong in January.
Audited financial statements and the portfolio of investments at February 28,
1995 are included in this report. We appreciate your support.
[Sig]
Edmund A. Hajim
Chairman of the Board
and President
1
FFB EQUITY FUND
PORTFOLIO MANAGER'S DISCUSSION OF FUND PERFORMANCE
The objective of the FFB Equity Fund is to seek long-term capital appreciation
by investing primarily in equity securities of U.S. corporations. As a secondary
objective the Fund seeks current income for distribution to shareholders.
For the year ended February 28, 1995, the Fund's total return was 3.42% (not
reflecting sales charge) versus a total return of 7.35% for the S&P 500. The
investment return was disappointing despite good returns in the technology,
healthcare, finance and energy sectors. Micron Technology, Adaptec, Inc., Intel
Corp., and U.S. Robotics increased between 25% and 40%. Amgen and Reliastar were
up 17%. However, several stocks such as Atlantic Southeast and Tel Mexico
underperformed significantly because of negative news on regional feeder line
aircraft crashes and the collapse of the Mexican peso. Furthermore, utilities
did not respond well due to higher interest rates.
The events that hurt the stocks in this portfolio are behind us. The stocks are
now responding to a better market environment and are trading on their own
fundamentals rather than outside events. In February, the portfolio increased
6.4% compared to the S&P 500 up 3.8%. We expect these positive returns to
continue.
There are several reasons for our optimism. The interest rate increases of 1994
appear to be over. Although the Federal Reserve increased rates in February,
investors were expecting an increase believing that this move would be the last,
or at least near to the last increase. Consumer confidence picked up and
corporate earnings continued to escalate. With the economy growing at a more
reasonable pace and inflation under control, the market environment is in a
better condition than it was a year ago. Investors are more willing to invest in
this type of environment which should prove positive for the equity market in
general.
2
FFB EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS*
Periods Ended February 28, 1995
<TABLE>
<CAPTION>
% Return With Sales Charge
------------------------------------------------
1 year 3 year 5 year Since Inception
------ ------ ------ ---------------
<S> <C> <C> <C>
-1.21% 2.23% 7.34% 8.50%
</TABLE>
<TABLE>
<CAPTION>
% Return Without Sales Charge
------------------------------------------------
1 year 3 year 5 year Since Inception
------ ------ ------ ---------------
<S> <C> <C> <C>
3.42% 3.81% 8.33% 9.08%
</TABLE>
FUND PERFORMANCE COMPARISON**
The following graph illustrates the total return based on a $10,000 investment
in the FFB Equity Fund made at the inception date of May 6, 1986 and held
through February 28, 1995, as well as the performance of the S&P 500 Total
Return Index over the same period. Past performance is not predictive of future
performance.
FFB EQUITY FUND
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P 500 TOTAL FFB EQUITY
(FISCAL YEAR COVERED) RETURN FUND
<S> <C> <C>
MAY 6, 1986 10000 9550
FEB. 28, 1987 12067 11433
FEB. 28, 1988 11439 10633
FEB. 28, 1989 12785 11269
FEB. 28, 1990 15169 13588
FEB. 28, 1991 17337 15772
FEB. 28, 1992 20101 18122
FEB. 28, 1993 22076 18908
FEB. 28, 1994 23810 19606
FEB. 28, 1995 25562 20276
</TABLE>
* Assumes reinvestment of dividends and distributions and reflects voluntary
fee waivers.
** Assumes payment of the maximum sales charge and reinvestment of all dividends
and distributions and includes the effect of Fund operating expenses. Total
returns are aggregate since inception on May 6, 1986, have not been
annualized, and reflect voluntary fee waivers. The S&P 500 Total Return Index
is a widely accepted unmanaged index of stock market performance which
reflects the reinvestment of income dividends and, where applicable, capital
gain distributions. This Index does not include Fund operating expenses. If
Fund's operating expenses had been applied to the index, index performance
would have been lower. The investment return and principal value of an
investment in the Fund will fluctuate, so then an investor's shares, when
redeemed, may be worth more or less than their original cost.
3
[PIE CHART]
4
FFB FUNDS TRUST
EQUITY FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1995
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES COST (NOTE 1A)
-------- ------------- ---------
<C> <S> <C> <C>
COMMON STOCKS -- 96.4%
BASIC MATERIALS -- 2.3%
2,700 Nucor Corp................................................. $ 155,147 $ 151,537
------------- ---------
CAPITAL GOODS -- 9.3%
4,500 General Electric Co. ...................................... 212,568 246,937
2,500 Harsco Corp ............................................... 101,269 108,125
2,500 McDonnell Douglas.......................................... 120,729 140,000
2,700 Thermo Electron Corp.* .................................... 107,607 127,913
------------- ---------
542,173 622,975
------------- ---------
CHEMICALS -- 3.3%
2,000 duPont (EI) deNemours...................................... 117,281 112,250
2,400 W. R. Grace & Co. ......................................... 89,010 108,000
------------- ---------
206,291 220,250
------------- ---------
CONSUMER CYCLICAL -- 11.6%
2,500 Chrysler Corp. ............................................ 123,325 108,750
9,000 International Game Technology.............................. 159,290 126,000
3,000 Lowe's Companies........................................... 104,460 100,875
5,000 Mattel, Inc. .............................................. 106,985 111,875
2,000 Sears, Roebuck & Co. ...................................... 96,137 98,500
2,500 The Walt Disney Company ................................... 102,700 133,437
4,000 Wal-Mart Stores, Inc. ..................................... 96,225 95,000
------------- ---------
789,122 774,437
------------- ---------
CONSUMER STAPLES -- 10.1%
2,000 Campbell Soup Co. ......................................... 78,075 90,750
1,500 Colgate-Palmolive Co. ..................................... 94,562 96,750
1,000 Gillette Company........................................... 53,715 79,125
4,000 Philip Morris Cos., Inc. .................................. 239,492 243,000
3,000 The Coca-Cola Co. ......................................... 148,221 165,000
------------- ---------
614,065 674,625
------------- ---------
ENERGY -- OIL/GAS -- 9.1%
2,000 Amoco Corp. ............................................... 119,531 118,500
2,100 Chevron Corp. ............................................. 88,572 99,750
1,500 Exxon Corp. ............................................... 96,756 96,000
1,400 Mobil Corp. ............................................... 113,685 121,800
1,500 Royal Dutch Petroleum -- NY................................ 161,962 168,188
------------- ---------
580,506 604,238
------------- ---------
</TABLE>
See accompanying notes to financial statements.
5
FFB FUNDS TRUST
EQUITY FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
FEBRUARY 28, 1995
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES COST (NOTE 1A)
-------- ------------- ---------
<C> <S> <C> <C>
COMMON STOCKS -- (CONTINUED)
FINANCE -- 10.4%
3,000 Aflac Inc. ................................................ $ 100,795 $ 113,250
2,000 Chase Manhattan Bank....................................... 77,325 71,750
3,700 Citicorp................................................... 156,419 166,500
2,000 NationsBank Corp. ......................................... 97,075 99,750
7,000 Reliastar Financial Corp. ................................. 199,210 238,875
------------- ---------
630,824 690,125
------------- ---------
HEALTHCARE -- 8.8%
2,000 Amgen Inc.* ............................................... 88,281 138,000
3,500 Lincare Holdings, Inc.* ................................... 93,700 98,000
5,500 Merck & Co. ............................................... 198,600 233,063
3,000 Smithkline Beecham PLC -- ADR.............................. 94,238 116,625
------------- ---------
474,819 585,688
------------- ---------
MISCELLANEOUS -- 2.0%
1,400 ITT Corp. ................................................. 122,558 136,500
------------- ---------
TECHNOLOGY -- 20.4%
4,000 Adaptec Inc.* ............................................. 82,250 132,000
3,000 Applied Materials*......................................... 126,000 138,375
3,500 Cisco Systems Inc.* ....................................... 86,313 118,125
15,000 EMC Corp.* ................................................ 273,344 256,875
1,800 Intel Corp. ............................................... 115,200 143,550
4,000 Micron Technology Inc. .................................... 154,929 248,000
2,300 Reuters Holdings PLC-ADR................................... 100,606 97,463
1,000 Texas Instruments.......................................... 75,450 78,750
2,700 U.S. Robotics*............................................. 112,100 145,800
------------- ---------
1,126,192 1,358,938
------------- ---------
TRANSPORTATION -- 2.3%
7,500 Atlantic Southeast Airlines................................ 158,875 150,000
------------- ---------
</TABLE>
See accompanying notes to financial statements.
6
FFB FUNDS TRUST
EQUITY FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
FEBRUARY 28, 1995
<TABLE>
<CAPTION>
SHARES/ MARKET
PRINCIPAL VALUE
AMOUNT COST (NOTE 1A)
-------- ------------- ---------
<C> <S> <C> <C>
COMMON STOCKS -- (CONTINUED)
UTILITIES -- 6.8%
3,000 Entergy Corp. ............................................. $ 78,030 $ 67,125
3,000 Illinova Corp. ............................................ 64,365 70,125
6,000 MCI Communications Corp. .................................. 128,850 120,750
3,000 Montana Power Co. ......................................... 72,240 71,250
2,500 PECO Energy Co. ........................................... 69,461 66,875
2,000 Telefonos de Mexico Class L ADR............................ 90,532 55,250
------------- ---------
503,478 451,375
------------- ---------
TOTAL COMMON STOCKS........................................ 5,904,050 6,420,688
------------- ---------
U.S. TREASURY OBLIGATIONS -- 2.6%
$5,000 U.S. Treasury Bill, 06/01/95++............................. 4,921 4,926
175,000 U.S. Treasury Bill, 06/29/95............................... 171,512 171,512
------------- ---------
TOTAL U.S. TREASURY BILLS.................................. 176,433 176,438
------------- ---------
TOTAL INVESTMENTS -- 99.0%+................................ $6,080,483 6,597,126
==============
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.0%..............
68,010
---------
NET ASSETS -- 100%......................................... $6,665,136
=========
</TABLE>
---------------
* Non-income producing security.
ADR -- American Depository Receipts.
+ Cost for Federal Income tax purposes is $6,118,710.
++ This security is pledged as collateral for a Letter of Credit.
Investment percentages shown are a percentage of net assets.
See accompanying notes to financial statements.
7
FFB FUNDS TRUST
EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities at value (cost $6,080,483).................................. $6,597,126
Cash.................................................................................. 111,655
Dividend receivable................................................................... 13,177
Prepaid expenses...................................................................... 33
---------
Total Assets..................................................................... 6,721,991
---------
LIABILITIES
Payable for investments purchased..................................................... 33,950
Other accrued expenses................................................................ 22,905
---------
Total Liabilities................................................................ 56,855
---------
NET ASSETS............................................................................ $6,665,136
=========
NET ASSETS
Shares of beneficial interest outstanding (par value $.001 per share); 1,000,000,000
shares authorized................................................................... $ 612
Additional paid-in capital............................................................ 6,392,644
Undistributed net investment loss..................................................... (12,468)
Accumulated undistributed net realized loss on investment transactions................ (232,295)
Unrealized appreciation on investments................................................ 516,643
---------
Net Assets Applicable to Shares Outstanding........................................... $6,665,136
=========
Shares of Beneficial Interest Outstanding............................................. 611,678
=========
Net Asset Value Per Share Outstanding................................................. $10.90
=========
Maximum Offering Price Per Share ($10.90/$0.955)...................................... $11.41
=========
</TABLE>
See accompanying notes to financial statements.
8
FFB FUNDS TRUST
EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1995
<TABLE>
<S> <C> <C>
Investment Income:
Dividends................................................................. $123,053
Interest.................................................................. 15,738
----------
$138,791
Expenses:
Advisory.................................................................. $ 29,045
Reports to shareholders................................................... 17,500
Administrative services................................................... 14,522
Custodian................................................................. 10,600
Audit..................................................................... 9,000
Transfer agent............................................................ 8,700
Trustees.................................................................. 7,000
Registration.............................................................. 2,990
Legal..................................................................... 266
Insurance................................................................. 187
Miscellaneous............................................................. 8,600
----------
Total expenses before waivers.......................................... 108,410
Less: Expenses waived by Adviser/Administrator......................... (43,567)
----------
Net expenses........................................................... 64,843
----------
Net investment income....................................................... 73,948
----------
Net realized loss on investments............................................ (207,946)
Change in unrealized appreciation on investments............................ 369,973
----------
Net realized and unrealized gain on investments............................. 162,027
----------
Net increase in net assets resulting from operations........................ $235,975
==========
</TABLE>
See accompanying notes to financial statements.
9
FFB FUNDS TRUST
EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28,
1995 1994
------------ -------------
<S> <C> <C>
Net Increase In Net Assets:
Operations:
Net investment income................................................. $ 73,948 $ 46,194
Net realized gain (loss) on investments............................... (207,946) 272,054
Change in unrealized appreciation (depreciation) on investments....... 369,973
(146,054)
------------ -------------
Net increase in net assets resulting from operations.................... 235,975 172,194
------------ -------------
Distributions to Shareholders from:
Net investment income................................................. (75,940) (110,505)
Net realized gain on investments...................................... -- (372,188)
Tax Return of Capital................................................. -- (285,007)
------------ -------------
(75,940) (767,700)
------------ -------------
Net decrease in undistributed net investment income included in price of
shares sold and repurchased........................................... (10,598) (26,578)
------------ -------------
Capital Share Transactions:
Proceeds from sales of shares......................................... 1,163,196 1,535,326
Net asset value of shares issued in reinvestment of distributions..... 74,399 671,269
------------ -------------
1,237,595 2,206,595
Cost of shares redeemed............................................... (401,333) (723,037)
------------ -------------
Net increase in net assets from capital share transactions.............. 836,262 1,483,558
------------ -------------
Net increase in net assets.............................................. 985,699 861,474
Net Assets:
Beginning of year..................................................... 5,679,437 4,817,963
------------ -------------
End of period......................................................... $6,665,136 $ 5,679,437
========== ===========
</TABLE>
See accompanying notes to financial statements.
10
FFB FUNDS TRUST
EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1995
1. Description and Organization. FFB Funds Trust (the "Trust") was
organized in Massachusetts as a business trust on March 25, 1987 and currently
consists of ten separately managed portfolios. The FFB Equity Fund (the "Fund")
began operations May 6, 1986.
(a) The Fund values its investments in securities at the last sales price
on the securities exchange on which such securities are primarily traded or at
the last sales price on the national securities market. Securities not listed on
an exchange or the national securities market, or securities for which there
were no transactions, are valued at the average of the most recent bid and asked
prices. The bid price is used when no asked price is available. In the absence
of market quotations, investments are valued at fair value in the opinion of the
Board of Trustees. Short-term investments which mature in 60 days or less are
valued at amortized cost, if their term to maturity at purchase was 60 days or
less, or by amortizing their value on the 61st day prior to maturity, if their
original term to maturity at purchase exceeded 60 days.
(b) It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute to
its shareholders all of its net investment taxable and non-taxable income and
any net taxable gains realized. Therefore, no Federal income tax provision is
required.
(c) The Fund's dividends from net investment income are declared and paid
semi-annually. Distributions from short-term and long-term capital gains, if
any, are declared and paid annually.
(d) Security transactions are accounted for on the trade date. Interest
income, including the amortization of discount or premium, is recorded as
earned. Dividend income is recorded on the ex-dividend date. Gains or losses on
the sale of securities are calculated on the identified cost basis.
(e) The Fund follows the accounting policy known as equalization whereby a
portion of the proceeds from sales and the cost of redemptions of capital
shares, equivalent on a per share basis to the amount of distributable
investment income on the transaction, is credited or charged to undistributed
investment income. As a result, distributable investment income per share is
unaffected by sales or redemptions of Fund shares.
(f) Each Fund bears all costs of its operations other than expenses
specifically assumed by the Administrator or Adviser. Expenses specifically
identifiable to a particular Fund are borne by that Fund. Other expenses are
allocated to each Fund based on its net assets in relation to the total net
assets of the Trust or on another reasonable basis.
2. Adviser and Administrator. The Trust retains First Fidelity Bank,
National Association, New Jersey ("First Fidelity") to act as Adviser and Furman
Selz Incorporated ("Furman Selz") to act as Administrator for the Funds. First
Fidelity furnishes to the Trust investment guidance and policy direction in
connection with the management of the Fund's portfolio, subject to policy
established by the Board of Trustees of the Trust. First Fidelity is a
wholly-owned subsidiary of First Fidelity Bancorporation.
Furman Selz provides management and administrative services necessary for
the operation of the Trust and the Fund. Furman Selz also furnishes office space
and certain facilities required for conducting the business of the Trust and
pays the compensation of the Trust's officers and Trustees affiliated with
Furman Selz.
As compensation for their advisory, administrative and management services
to the Fund, First Fidelity is paid a monthly fee at the annual rate of 0.50% of
average daily net assets; and Furman Selz is paid a monthly fee at the annual
rate of 0.25% of average daily net assets.
For the year ended February 28, 1995, First Fidelity and Furman Selz each
voluntarily waived its entire fee, totalling $29,045 and $14,522, respectively.
11
FFB FUNDS TRUST
EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FEBRUARY 28, 1995
3. Other Services with Affiliates. First Fidelity is transfer agent and
dividend disbursing agent for the Trust. Furman Selz acts as the Trust's
Sub-Transfer Agent and receives an annual per account fee, plus reimbursement of
out-of-pocket expenses.
In addition, First Fidelity may enter into agreements (the "Subaccounting
Agreements") with certain banks, financial institutions and corporations (the
"Participating Organizations") so that each Participating Organization handles
recordkeeping and provides certain administrative services for its customers who
invest in the Fund through accounts maintained at the Participating
Organization. In such cases, the Participating Organization or one of its
nominees will be the shareholder of record as nominee for its customers and will
maintain subaccounts for its customers. Each Participating Organization will
receive monthly payments, which in some cases may be based upon expenses that
the Participating Organization has incurred in the performance of its services
under the Subaccounting Agreement. The payment from the Fund will not exceed, on
an annualized basis, an amount equal to 0.25% of the average daily value of the
Fund's shares, during the preceding month, in the subaccounts of which the
Participating Organization is record owner as nominee for its customers. For the
year ended February 28, 1995, no payments were made by the Fund to Participating
Organizations.
First Fidelity also acts as custodian for the Fund. For furnishing
custodian services, First Fidelity is paid a monthly fee with respect to the
Fund at an annual rate based on a percentage of average daily net assets plus
certain transaction and out-of-pocket expenses. For the year ended February 28,
1995, First Fidelity received custodian fees of $10,070.
Furman Selz performs fund accounting services and maintains the books and
records for the Fund. Furman Selz is not paid a fund accounting fee from the
Fund.
FFB Funds Distributor, Inc., a wholly-owned subsidiary of Furman Selz, acts
as Distributor for the Trust. The Trust has adopted a Master Distribution Plan
(the "Plan") pursuant to Rule 12b-1 of the Investment Company Act of 1940, after
having concluded that there is a reasonable likelihood that the Plan will
benefit each Fund and its shareholders. The Plan provides for a monthly payment
by the Fund to the Distributor in such amounts that the Distributor presents for
Board of Trustees approval, provided that each such payment is based on the
average daily value of the Fund's net assets during the preceding month and is
calculated at an annual rate not to exceed 0.50% for the Fund. For the year
ended February 28, 1995, the Fund made no distribution payments under the Plan.
Certain states in which the Fund is qualified for sale impose limitations
on the expenses of the Fund. The Advisory Contract and the Administrative
Services Contract provide that if, in any fiscal year, the total expenses of a
Fund (excluding taxes, interest, distribution expenses, brokerage commissions
and other portfolio transaction expenses, other expenditures which are
capitalized in accordance with generally accepted accounting principles and
extraordinary expenses, but including the advisory and administrative services
fee) exceed the expense limitation applicable to that Fund imposed by the
securities regulations of any state, First Fidelity and Furman Selz will pay or
reimburse the Fund in amounts equal to 70% and 30% of the excess. During the
year ended February 28, 1995, there were no payments or reimbursements required
as a result of these expense limitations.
4. Repurchase Agreements. The Fund may enter into repurchase agreements
with government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System or with such other brokers or dealers
that meet the credit guidelines established by the Board of Trustees. The Fund
maintains securities as collateral whose market value, including accrued
interest, will be at least equal to 102% of the dollar amount invested by that
Fund in each agreement, including accrued interest, and that Fund will make
payment for such securities only upon physical delivery or upon evidence of book
entry transfer to the account of the custodian. To the extent that any
repurchase transaction exceeds one business day, the value of
12
FFB FUNDS TRUST
EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FEBRUARY 28, 1995
the collateral is marked-to-market on a daily basis to ensure the adequacy of
the collateral. If the seller defaults and the value of the collateral declines
or if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Fund may be delayed or limited.
5. Capital Share Transactions. The Fund is authorized to issue
1,000,000,000 shares of beneficial interest each with a par value of $.001. For
the years ended February 28, 1995 and February 28, 1994, transactions in shares
of beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28,
1995 1994
------------ ------------
<S> <C> <C>
Shares sold.......................................................... 110,794 137,403
Shares issued in reinvestment of distributions....................... 7,215 60,308
------------ ------------
118,009 197,711
Shares redeemed...................................................... (38,523) (60,280)
------------ ------------
Net increase in shares............................................... 79,486 137,431
=========== ===========
</TABLE>
6. Security Transactions. The Fund's cost of securities purchased and
proceeds from securities sold (other than short-term securities) for the year
ended February 28, 1995 aggregated $7,638,587 and $6,783,625, respectively.
7. Federal Income Tax Status. At February 28, 1995, the Fund had gross
unrealized appreciation and depreciation of $689,193 and $183,733, respectively,
based on cost for Federal income tax purposes. The cost of securities for
Federal income tax purposes is $6,118,710. For the year ended February 28, 1995,
the FFB Equity Fund has a capital loss carryforward for Federal income tax
purposes of $158,308. This amount is available through the year ended February
28, 2003 to reduce distributions of net gains to shareholders.
13
FFB FUNDS TRUST
EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
FEBRUARY 28, FEBRUARY 28,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.............. $10.67 $12.20 $12.73 $12.52
$11.05
------------ ------------ ------------ ------------ ------------
Income from Investment Operations:
Net investment income......................... 0.13 0.12 0.16 0.12 0.21
Net realized and unrealized gain on
securities.................................. 0.23 0.32 0.36 1.74 1.53
------------ ------------ ------------ ------------ ------------
Total from Investment Operations.............. 0.36 0.44 0.52 1.86 1.74
------------ ------------ ------------ ------------ ------------
Less Distributions:
Dividends from net investment income.......... (0.13) (0.24) (0.24) (0.12)
(0.24)
Distributions from capital gains.............. -- (0.99) (0.81) (1.53) (0.03)
Tax return of capital......................... -- (0.74) -- -- --
------------ ------------ ------------ ------------ ------------
Total Distributions........................... (0.13) (1.97) (1.05) (1.65) (0.27)
------------ ------------ ------------ ------------ ------------
Net Asset Value, End of Year.................... $10.90 $10.67 $12.20 $12.73
$12.52
============= ============= =============
============= =============
Total Return (not reflecting sales load)........ 3.42% 3.58% 4.34% 14.90%
16.08%
Ratios/Supplemental Data:
Net Assets, End of Year (in thousands)........ $6,665 $5,679 $4,818 $4,380
$3,973
Ratios of Net Expenses to Average Net
Assets+..................................... 1.12% 2.00% 1.23% 1.50% 1.41%
Ratios of Net Investment Income to Average Net
Assets...................................... 1.27% 0.96% 1.26% 0.93% 1.86%
Portfolio Turnover Rate....................... 124% 265% 452% 496%
377%
</TABLE>
---------------
+ Effect of waivers/reimbursements were 0.75%, 1.25%, 0.75%, 0.75%, and 2.14%,
respectively.
See accompanying notes to financial statements.
14
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of
FFB Equity Fund:
We have audited the accompanying statement of assets and liabilities of FFB
Equity Fund (constituting one of the portfolios of FFB Funds Trust), including
the portfolio of investments, as of February 28, 1995, and the related statement
of operations for the year then ended, and the statements of changes in net
assets and the financial highlights for each of the years in the two-year period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the years in the three-year period
ended February 28, 1993 were audited by other auditors whose reports expressed
unqualified opinions on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
February 28, 1995, by count and by correspondence with custodians and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of FFB
Equity Fund as of February 28, 1995, and the results of its operations for the
year then ended, and the changes in its net assets and the financial highlights
for each of the years in the two-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
April 27, 1995
FFB FUNDS TRUST
EQUITY FUND
TAX STATUS OF DIVIDENDS PAID (UNAUDITED)
The following presents the tax status of distributions paid by the Fund during
the fiscal year ended February 28, 1995. This information is to meet regulatory
requirements and requires no current action on your part. Certain portions of
this were previously reported to you on Form 1099 at the close of the calendar
year 1994.
Income dividends paid to you of $0.13 per share were 11.3% derived from United
States Treasury obligations. Additionally, 100% of the distributions paid during
the fiscal year qualify for the dividends received deduction available to
corporations. You should contact your tax adviser as to the state and local tax
status of the dividends you received.
BOARD OF TRUSTEES
EDMUND A. HAJIM * CHAIRMAN OF THE BOARD AND PRESIDENT;
Chairman of the Board, Furman Selz Incorporated
ROBERT H. DUNKER +* (Retired) Former Executive Vice President, First Fidelity
Bank, N.A., N. J.
ROBERT F. KANE ++ (Retired) Former Vice Chairman, Monroe Systems for
Business,
Inc.
WALTER J. NEPPL +* (Retired) Management Consultant
T. BROCK SAXE ++ President and Director, Tombrock Corporation
+ Member of Audit Committee
++ Member of Nominating Committee
* Interested person of the Trust as that term is defined
in the Investment Company Act of 1940
-------------------------------------------------------------------------------
OFFICERS
EDMUND A. HAJIM Chairman of the Board and President
STEVEN D. BLECHER Executive Vice President
MICHAEL C. PETRYCKI Executive Vice President
JOHN J. PILEGGI Vice President and Treasurer
JOAN V. FIORE Vice President and Secretary
ROBERT A. HERING Vice President
DONALD E. BROSTROM Assistant Treasurer
[THE FFB FUNDS LOGO]
EQUITY FUND
237 Park Avenue, New York, New York 10017
General and Account Information: (800) 437-8790
FIRST FIDELITY BANK, N.A. -- INVESTMENT ADVISER
FFB FUNDS DISTRIBUTOR, INC. -- SPONSOR AND DISTRIBUTOR
FFB FUNDS TRUST (the "Trust") is an open-end, diversified management
investment company which currently consists of twelve separate portfolios with
different investment objectives. FFB Equity Fund (the "Fund") is described in
this Prospectus. The Fund seeks long-term capital appreciation by investing
primarily in equity securities of U.S. corporations. As a secondary objective,
the Fund seeks current income for distribution to shareholders.
Shares of the Fund are offered for sale by FFB Funds Distributor, Inc. (the
"Distributor") as an investment vehicle for institutions, corporations,
fiduciaries and individuals. The Fund is sold with a sales charge or load; the
Fund may pay certain expenses related to the distribution of its shares. Certain
banks, financial institutions and corporations (the "Participating
Organizations") may agree to act as shareholder servicing agents for investors
who maintain accounts at these Participating Organizations and to perform
certain services for the Fund.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
(the "SAI") dated June 30, 1995 containing additional and more detailed
information about the Fund has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. It is
available without charge and can be obtained by writing or calling the Trust at
the address and general information number printed above.
----------------------------
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR INFORMATION ABOUT THE FUND.
----------------------------
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. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE NOT GUARANTEED OR INSURED BY THE UNITED STATES
GOVERNMENT. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT SHARES OF THE FUND ARE
NOT AN OBLIGATION OF OR GUARANTEED BY FIRST FIDELITY BANK OR ITS AFFILIATES. IN
ADDITION, SUCH SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY, AND MAY
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
JUNE 30, 1995
<PAGE>
FUND EXPENSES
The following table illustrates the expenses and fees that a shareholder of
the Fund will incur+. The fees and expenses set forth in the following table are
based on the fiscal year ended February 28, 1995.
<TABLE>
<S> <C>
FEE TABLE
Shareholder Transaction Expenses
Sales Load imposed on Purchases............................................... 4.50%++
Sales Load imposed on Reinvested Dividends.................................... None
Redemption Fees............................................................... None
Exchange Fees................................................................. None
Annual Fund Operating Expenses (as a percentage of average net assets)
Advisory & Administrative Expenses*........................................... 0.00%
12b-1 Fees**.................................................................. 0.03%
Other Expenses................................................................ 1.09%
-----
Total Fund Operating Expenses***.............................................. 1.12%
=====
</TABLE>
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 year............................................................................ $ 56
3 years........................................................................... $ 79
5 years........................................................................... $104
10 years.......................................................................... $175
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
The purpose of this table is to assist the shareholder in understanding the
various costs and expenses that an investor in a fund will bear. For a more
complete description of the Annual Fund Operating Expenses, see "Management of
the Fund".
---------------
+ Participating Organizations may receive shareholder servicing fees for Fund
shares purchased and maintained through Participating Organizations in an
amount not to exceed 0.25% of the Fund's average daily net assets purchased
and maintained through such Participating Organizations. In addition,
customer accounts maintained at Participating Organizations may be assessed
additional direct fees by the Participating Organization as agreed upon by
the customer and Participating Organization at the time of purchase. In
order to avoid such additional direct fees, shareholders may always elect to
purchase shares directly from the Trust through the Distributor. See
"Management of the Fund-Servicing Agreements" and "Purchase of
Shares-Purchases through Customer Accounts".
++ Certain investors will not be subject to the sales charge. See "Purchase of
Shares" herein.
* Advisory and Administrative Expenses were waived and certain Fund expenses
were reimbursed by the Adviser. Ratio before effect of waivers was 0.75%.
** Absent waivers, the 12b-1 Plan fee is calculated at an annual rate not to
exceed 0.50% of the Fund's average daily net assets. Long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charges permitted by the NASD to the extent, if any, the full 12b-1 Plan fee
is charged in the future. "Management of the Fund-Distribution Plan" herein.
*** Had certain Fund expenses not been waived or reimbursed, Total Fund
Operating Expenses would have been 2.34%.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following finanical highlights for a share of beneficial interest
outstanding throughout the year ended February 28, 1995 has been audited by KPMG
Peat Marwick LLP, independent accountants, whose unqualified report thereon is
incorporated by reference in the SAI. The supplementary financial information
for the year ended February 28, 1993 and prior years has been audited by other
auditors. This information should be read in conjunction with the financial
statements and notes thereto which are incorporated by reference in the SAI.
SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
EQUITY FUND
-------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY
28, 1995 28, 1994 28, 993 29, 1992 28, 1991 28, 1990 28, 1989 29, 1988 28, 1987***
-------- -------- -------- -------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $10.67 $12.20 $12.73 $12.52 $11.05 $ 9.87 $ 9.40 $11.97 $ 10.00
-------- -------- -------- -------- -------- -------- -------- -------- -----------
Income from Investment
Operations:
Net investment income**... 0.13 0.12 0.16 0.12 0.21 0.30 0.18 0.21 0.26
Net gain (loss) on
securities (both
realized and
unrealized)............. 0.23 0.32 0.36 1.74 1.53 1.74 0.38 (1.13) 1.71
-------- -------- -------- -------- -------- -------- -------- -------- -----------
Total from Investment
Operations.............. 0.36 0.44 0.52 1.86 1.74 2.04 0.56 (0.92) 1.97
-------- -------- -------- -------- -------- -------- -------- -------- -----------
Less Distributions:
Dividends from net
investment income....... (0.13) (0.24) (0.24) (0.12) (0.24) (0.31) (0.09) (0.45) --
Distributions from capital
gains................... -- (0.99) (0.81) (1.53) (0.03) (0.55) -- (1.20) --
Tax Return of capital..... -- (0.74) -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -----------
Total Distributions....... (0.13) (1.97) (1.05) (1.65) (0.27) (0.86) (0.09) (1.65) --
-------- -------- -------- -------- -------- -------- -------- -------- -----------
Net Asset Value, End of
Period.................... $10.90 $10.67 $12.20 $12.73 $12.52 $11.05 $ 9.87 $ 9.40 $ 11.97
======== ======== ======== ======== ======== ======== ======== ======== ==========
Total Return (not reflecting
sales load)............... 3.42% 3.58% 4.34% 14.90% 16.08% 20.56% 5.99% (7.03)% 19.70%
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands).......... $6,665 $5,679 $4,818 $4,380 $3,973 $1,962 $1,662 $1,748 $ 1,762
Ratio of Expenses to
Average Net Assets+..... 1.12% 2.00% 1.23% 1.50% 1.41% 0.93% 1.53% 1.00% 0.08%*
Ratio of Net Income to
Average Net Assets...... 1.27% 0.96% 1.26% 0.93% 1.86% 2.66% 1.86% 1.93% 2.14%*
Portfolio Turnover Rate... 124% 265% 452% 496% 377% 261% 96% 107% 92%*
</TABLE>
---------------
+ Effect of reimbursements/waivers on above ratios was 0.75%, 1.25%, 0.75%,
0.75%, 2.14%, 1.83%, 2.15%, 4.10%, 3.76%* respectively.
* Annualized.
** Computed based upon weighted average number of shares outstanding throughout
the period.
*** Period from commencement of operations May 7, 1986 through February 28,
1987.
3
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
FFB Equity Fund seeks long-term capital appreciation by investing in a
diversified portfolio of common stocks, preferred stocks, securities convertible
into common stocks (such as convertible preferred stocks and convertible
debentures) and warrants of U.S. corporations. As a secondary objective, the
Fund seeks current income for distribution to shareholders.
The Fund's investment adviser is First Fidelity Bank, National Association,
New Jersey ("First Fidelity" or the "Adviser"). The Adviser selects investments
for the Fund which, in the Adviser's view, have the greatest potential for
long-term capital appreciation. There can be no assurance that the Fund will
achieve its investment objectives. The Fund will change its primary investment
objective of long-term capital appreciation and its secondary objective of
current income only if authorized by a vote of a majority of its outstanding
shares.
Under normal conditions, the Fund will invest at least 65% of its total
assets in equity securities. The Fund does not limit the percentage of its
assets that may be invested in any one type of equity security, except that it
will not invest more than 5% of its assets in warrants, and no more than 2% of
the Fund's assets will be invested in warrants that are not listed on a stock
exchange.
Under normal conditions, the Fund may invest up to 35% of its assets (and
for temporary defensive purposes without limit) in U.S. Government securities,
certificates of deposit, bankers' acceptances, commercial paper, repurchase
agreements maturing in seven days or less and debt obligations of U.S. and
foreign corporations (corporate bonds, debentures, notes and other similar
corporate debt instruments) which meet certain ratings criteria. See "Investment
Practices and Restrictions" and "Investment Policies" in the SAI for more
information about these securities. The Fund also may temporarily invest in
these securities to meet redemptions or pending investments. To the extent the
Fund maintains a temporary defensive posture, the Fund's investment objectives
may not be fully achieved.
The Fund may invest up to 10% of its total assets in equity securities
issued by non-U.S. companies, including securities represented by American
Depository Receipts (ADRs). All foreign investments carry, to some degree,
certain risks not generally applicable to investments in the U.S., such as risks
of foreign political and economic instability, adverse movements in exchange
rates, the imposition or tightening of exchange controls and changes in foreign
governmental attitudes toward private investment, including the possibility of
expropriation or nationalization. In anticipation of the foreign currency
requirements of the Fund, the Fund may from time to time engage in forward
foreign currency contracts in an attempt to hedge against variations in the
exchange relationship between the U.S. dollar and the currencies in which the
Fund's foreign securities are quoted. Although these contracts are intended to
minimize the risk of loss from fluctuations in foreign currency values, at the
same time, they tend to limit any potential gain which might result should the
value of the currencies increase during the contract period. See "Investment
Policies" in the SAI for a more complete discussion of the Fund's foreign
securities and currency trading activities.
In an attempt to protect the value of its portfolio securities against
declining securities prices, the Fund may buy put and write (sell) covered call
options on common stocks held in its portfolio. The Fund may also lend its
portfolio securities to increase current income, may borrow money for
extraordinary or emergency purposes and may sell securities short "against the
box". See "Investment Practices and Associated Risks".
4
<PAGE>
The Fund may invest up to 5% of its total assets in "derivatives" including
forward foreign currency contracts, puts and covered call options. See these
"Investment Objectives and Policies" for details of risks related to forward
foreign currency contracts and "Investment Practices and Associated Risks" below
for details on risks related to options.
The Fund has adopted certain fundamental investment policies (i.e.,
policies which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined under "Other Information -- Voting"), as well as
certain investment policies which are not fundamental, and therefore may be
changed by the Board of Trustees without shareholder approval. For a more
complete discussion of all these policies, see "Investment Restrictions" and
"Investment Policies" in the SAI. The Fund's investment objectives and those
investment restrictions specifically identified as such are fundamental policies
of the Fund. The Adviser's discretion to make use of a particular investment
practice or technique described in this Prospectus and in the SAI is, however,
not fundamental.
INVESTMENT PRACTICES AND ASSOCIATED RISKS
SHORT SALES. The Fund may on occasion sell securities short "against the
box". In a short sale, the Fund sells stock which it does not own. However, a
short sale is "against the box" if at all times when the short position is open
the Fund owns an equal amount of the securities or securities convertible into,
or exchangeable without further consideration for, securities of the same issuer
as the securities sold short. Short sales against the box are used to defer
recognition of capital gains or losses. The Fund may be forced to cover a short
sale by purchasing securities in the market at a price higher than that received
from the short sale, in which case it could forego some or all of the gain which
it attempted to defer and instead possibly experience a loss.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
U.S. banks and broker-dealers under which it acquires securities and obtains a
simultaneous commitment from the seller to repurchase the securities at a
specified time and at an agreed upon yield. The agreements will be fully
collateralized and the value of the collateral, including accrued interest,
marked-to-market daily. These agreements may be considered to be loans made by
the purchaser, collateralized by the underlying securities. If the seller should
default on its obligation to repurchase the securities, the Fund may experience
a loss of income from the loaned securities and a decrease in the value of any
collateral maintained, problems in exercising its rights to the underlying
securities and costs and time delays in connection with the disposition of
securities. The Fund may not invest more than 10% of its net assets in
repurchase agreements maturing in more than seven days and in securities for
which market quotations are not readily available. For more information about
repurchase agreements, see "Investment Policies" in the SAI.
OPTIONS ACTIVITIES. The Fund may write (i.e., sell) listed call options
("calls") on common stocks only if the calls are "covered" throughout the life
of the option. A call is "covered" if the Fund owns the optioned securities or
securities convertible into or exchangeable for the optioned securities. When
the Fund writes a call, it receives a premium and gives the purchaser the right
to buy the underlying security at any time during the call period (usually not
more than nine months) at a fixed exercise price (adjustable for changes in the
value of shares due to events such as stock splits and
5
<PAGE>
corporate reorganizations) regardless of market price changes during the call
period. If the price of the security should rise and the call is exercised, the
Fund receives only the exercise price for the security (in addition to the
premium it has received) and foregoes any gain it might have realized from an
increase in the market price of the underlying security over the exercise price.
The Fund also may purchase put options ("puts") on common stocks held in
its portfolio. When the Fund purchases a put, it pays a premium in return for
the right to sell the underlying security at the exercise price at any time
during the option period. If the price of the security should decline, the Fund
may choose to "put" the security at the higher exercise price. If any put is not
exercised or sold, it will become worthless on its expiration date.
The Fund's option positions may be closed out by, for example, (in the case
of written calls) purchasing a call covering the same underlying security and
having the same exercise price and expiration date as a call previously written
by the Fund for which it now wishes to terminate its obligation or (in the case
of purchased puts) by selling the put. If, in the case of written calls, the
Fund is unable to effect a closing purchase transaction, it will not be able to
sell the underlying security until the call previously written by the Fund
expires (or until the call is exercised and the Fund delivers the underlying
security) and thereby may fail to take the best advantage of price movements.
The Fund will realize gains from its options activities only to the extent such
gains are greater than the costs to the Fund of trading options.
As a fundamental policy, the Fund may purchase put options on securities
provided the aggregate premiums paid for all such options held will not exceed
5% of the value of its net assets at the time of purchase. The Fund will write
covered call options with respect to not more than 5% of its net assets.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend its portfolio securities
to unaffiliated broker-dealers to increase current income. As a fundamental
policy, the Fund may lend its portfolio securities to broker-dealers provided:
(1) the loan is secured continuously by collateral consisting of cash, U.S.
Government securities or letters of credit maintained on a daily mark-to-market
basis in an amount at least equal to the current market value of the securities
loaned; (2) the Fund may at any time call the loan and obtain the return of the
securities loaned; (3) the Fund receives any interest or dividends paid on the
loaned securities; and (4) the aggregate market value of securities loaned does
not at any time exceed one-third of the total assets of the Fund.
The Fund will earn income for loaning its securities because cash deposited
as collateral for these loans will be invested in short-term money market
instruments. In connection with the lending securities, the Fund may pay
reasonable finders, administrative and custodial fees. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral.
INVESTMENT RESTRICTIONS
As a fundamental investment policy, the Fund may not invest more than 5% of
its assets in the securities of any one issuer (excluding the U.S. Government,
its agencies and instrumentalities), invest in more than 10% of the outstanding
voting securities of any one issuer or invest more than 25% of its total assets
in the securities of issuers in any one industry.
As a further fundamental policy, the Fund may not borrow money, except that
the Fund may, as a temporary measure for extraordinary or emergency purposes,
borrow from a bank in an amount not in excess of 5% of the Fund's total assets,
or pledge or hypothecate its assets, except that the Fund may
6
<PAGE>
pledge not more than 5% of its total assets to secure such borrowings. The Fund
will not make additional investments at any time during which it has outstanding
borrowings.
MANAGEMENT OF THE FUND
The property, affairs and business of the Fund are managed by the Board of
Trustees. The Trustees elect officers who are charged with the responsibility
for the day-to-day operations of the Fund and the execution of policies
formulated by the Trustees. Detailed information about the Trustees and their
affiliations may be found in the SAI under "Management".
ADVISER
First Fidelity (the "Adviser") serves as the Investment Adviser to the
Fund. The offices of the Adviser are located at 765 Broad Street, Newark, New
Jersey 07102. The Adviser is a national banking association with branches in
Pennsylvania, New York, Maryland and throughout New Jersey. It is a wholly-owned
subsidiary of First Fidelity Incorporated, originally established in 1812,
which, as a result of a reorganization with Fidelcor, Inc., a Pennsylvania bank
holding company, is now a wholly-owned subsidiary of First Fidelity
Bancorporation. First Fidelity Bancorporation, a New Jersey corporation,
provides financial and related services through its subsidiary organizations.
The advisory services of the Adviser are provided through the Asset Management
Group of the Adviser's Trust Division. As of March 31, 1995, the Trust Division
had approximately $16.7 billion of client assets under management. The Adviser
has provided investment advisory services to investment companies since 1986 and
currently acts as Adviser to all Funds within FFB Funds Trust.
Richard C. Vivona, Vice President, Director of Client Services is
responsible for the day-to-day management of the Fund's portfolio. Prior to
joining First Fidelity in 1993, Mr. Vivona was Vice President and Senior
Investment Officer of Wachovia Investment Management in Atlanta for nine years.
Information regarding the investment performance of the Fund is contained
in the Fund's Annual Report dated February 28, 1995, which may be obtained,
without charge, from the Trust.
Pursuant to the Master Advisory Contract (the "Advisory Contract"), First
Fidelity furnishes continuous investment guidance consistent with the Fund's
investment objective and policies and provides administrative assistance in
connection with the operation of the Fund. First Fidelity also acts as Transfer
and Dividend Disbursing Agent and Custodian for the Fund, as described in the
SAI.
First Fidelity intends to receive its customary managing agency account
fees or any other account fees it imposes on accounts of its bank customers with
respect to customer assets invested in the Fund where permitted by applicable
federal, state and local laws; this may result in the receipt by First Fidelity
of customer account fees in addition to advisory fees from the Fund with respect
to assets in certain customer accounts, and a corresponding reduction in the
total yield for the Fund realized by customers who hold Fund shares in regular
accounts with First Fidelity. Neither First Fidelity nor any of its affiliates
nor any of their employees will make loans for the purpose of purchasing or
carrying shares of the Fund or make loans to the Fund. Prospectuses and sales
material for the Fund can be obtained from FFB Funds Distributor, Inc., the
Sponsor and Distributor.
First Fidelity Bancorporation, a bank holding company based in Newark, New
Jersey, and Philadelphia, Pennsylvania and the indirect parent of the Adviser
has recently agreed to merge with First Union Corp., a bank holding company
based in Charlotte, North Carolina. The merger is subject to approval by the
shareholders of both corporations and by federal and state bank regulators. It
is anticipated that the merger will occur before the end of 1995.
7
<PAGE>
SPONSOR AND DISTRIBUTOR
FFB Funds Distributor, Inc. (the "Sponsor" or "FFB Funds Distributor") the
Sponsor and Distributor, has its principal office at 237 Park Avenue, New York,
New York 10017. The Distributor is an affiliate of Furman Selz Incorporated
("Furman Selz").
Pursuant to a Master Distribution Contract (the "Distribution Contract"),
the Distributor is responsible for the distribution of Fund shares. The
Distributor receives no compensation for services rendered to the Fund pursuant
to the Distribution Contract.
ADMINISTRATOR
Pursuant to a Master Administrative Services Contract (the "Administrative
Services Contract"), Furman Selz acts as the Administrator of the Fund and has
its office at 237 Park Avenue, New York, New York 10017. It provides personnel,
office space and all management and administrative services reasonably necessary
for the operation of the Trust and the Fund (such as maintaining the Fund's
books and records, monitoring compliance with all State and Federal laws and
assisting the Trustees in the execution of their duties), other than those
services which are provided by First Fidelity pursuant to the Advisory Contract.
Furman Selz receives from the Fund a monthly fee based on the net assets of the
Fund as compensation for its provision of administrative services to the Fund.
See "Fees and Expenses".
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to
Rule 12b-1 of the Investment Company Act of 1940, as amended, after having
concluded that there is a reasonable likelihood that the Plan will benefit the
Fund and its shareholders. The Plan provides for a monthly payment by the Fund
to the Distributor in such amounts that the Distributor may request for direct
and indirect distribution expenses, subject to periodic Board approval and to an
overall expense limitation. These expenses include the printing and distribution
of prospectuses sent to prospective investors, the preparation, printing and
distribution of sales literature and expenses associated with media
advertisements, telephone services and payments to financial intermediaries for
introducing assets to and retaining assets in the Fund. The Distributor may also
make payments to itself and other broker-dealers or financial intermediaries for
assistance in distributing shares of the Fund and otherwise promoting the sale
of Fund shares. Each such payment is based on the average daily value of the
Fund's net assets during the preceding month and is calculated at an annual rate
not to exceed 0.50%.
The Fund is permitted to pay banks and other depository institutions under
the Plan for performing additional administrative and shareholder servicing
functions. The Fund believes that such services are permissible activities under
present banking laws and regulations and will take appropriate actions (which
should not adversely affect the Fund or its shareholders) in the future to
maintain compliance with applicable laws should any changes occur.
The Plan provides for the Distributor to prepare and submit to the Board of
Trustees on a quarterly basis written reports of all amounts expended pursuant
to the Plan and the purpose for which such expenditures were made. The Plan may
not be amended to increase materially the amount spent for distribution expenses
without approval by a majority of the Fund's outstanding shares and approval of
a majority of the non-interested Trustees.
8
<PAGE>
SERVICING AGREEMENTS
First Fidelity, as Transfer Agent, may enter into agreements (the
"Servicing Agreements") with certain banks, financial institutions and
corporations (the "Participating Organizations") under which each Participating
Organization handles recordkeeping and provides certain administrative services
for its customers who invest in the Fund through accounts maintained at that
Participating Organization. These administrative services may include the
maintenance of account records in the name of each shareholder (reflecting
purchases, redemptions and dividends paid or reinvested), the processing of
dividends, reinvestments, purchase and redemption requests, the preparation and
mailing of periodic account statements, the addressing and mailing of Fund
communications to shareholders (financial reports, proxy information and tax
reports) and other related services. In such cases, the Participating
Organization or one of its nominees will be the shareholder of record as nominee
for its customers and will maintain subaccounts for its customers. Pursuant to a
separate agreement between a Participating Organization and its customers,
customers may grant or may already have granted to a Participating Organization
the power to vote proxies relating to their shares of the Fund. Any customer of
a Participating Organization may become the shareholder of record upon written
request to its Participating Organization or First Fidelity, as Transfer Agent.
Each Participating Organization will receive monthly payments which will be
based upon expenses that the Participating Organization has incurred in the
performance of its services under the Servicing Agreement. The payments will not
exceed, on an annualized basis, an amount equal to 0.25% of the average daily
value during the month of Fund shares in the subaccounts of which the
Participating Organization is record owner as nominee for its customers. Such
payments will be separately negotiated with each Participating Organization and
will vary depending upon such factors as the services provided and the costs
incurred by each Participating Organization. The payments may be more or less
than the fees payable to First Fidelity pursuant to the Agency Agreement for
similar services. Participating Organizations will not be paid any amounts under
the Fund's Distribution Plan (see "Distribution Plan" above); the net assets of
the Fund used for purposes of calculating the maximum amount payable under its
Distribution Plan will, however, include assets of persons who purchase shares
through Participating Organizations.
The payments will be made by the Fund to First Fidelity which will, in
turn, pay the Participating Organizations pursuant to the Servicing Agreements.
First Fidelity will not keep any portion of the payments, and will not receive
any compensation as transfer or dividend disbursing agent with respect to the
subaccounts maintained by Participating Organizations. The Board of Trustees
will review, at least quarterly, the amounts paid and the purposes for which
such expenditures were made pursuant to the Servicing Agreements.
Investors who purchase and redeem shares of the Fund through a customer
account maintained at a Participating Organization may be charged one or more of
the following types of fees as agreed upon by the Participating Organization and
the investor with respect to the customer services provided by the Participating
Organization; account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
those assets).
9
<PAGE>
GLASS-STEAGALL ACT
The Glass-Steagall Act and other applicable laws generally prohibit banks
that are members of the Federal Reserve System from engaging in the business of
underwriting, selling or distributing securities. The Board, based upon advice
from counsel, believes that First Fidelity may perform the services for the Fund
contemplated by its Advisory Contract without violation of the Glass-Steagall
Act or other applicable banking laws or regulations. However, it is possible
that future changes in either Federal or state statutes and regulations
concerning the permissible activities of banks or trust companies, as well as
further judicial or administrative decisions and interpretations of present and
future statutes and regulations, might prevent First Fidelity from continuing to
perform such services for the Fund. If First Fidelity were prohibited from
acting as investment adviser to the Fund, it is expected that the Trustees of
the Trust would recommend to the shareholders of the Fund that they approve the
Fund's entering into a new Advisory Contract with another qualified investment
adviser to be selected by the Trustees.
FEES AND EXPENSES
As compensation for its advisory and management services, First Fidelity is
paid a monthly fee at an annual rate of 0.50% of average daily net assets of the
Fund. For the fiscal year ended February 28, 1995, First Fidelity waived its
advisory and management fee in full. First Fidelity also receives a fee for
serving as Custodian and Transfer Agent for the Fund. See "Custodian, Transfer
Agent and Dividend Disbursing Agent" in the SAI.
As compensation for its administrative services, Furman Selz is paid a
monthly fee at an annual rate of 0.25% (a total of 0.75% when added to the
advisory fee paid to First Fidelity) of average daily net assets of the Fund.
Except for the expenses paid by First Fidelity, the Distributor and Furman
Selz, the Trust bears all costs of its operations, such as legal and accounting
expenses and Trustees' fees and expenses.
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Contract, the Adviser places orders for the
purchase and sale of portfolio investments for the Fund's accounts with brokers
or dealers selected by it in its discretion. In effecting purchases and sales of
portfolio securities for the account of the Fund, the Adviser will seek the best
execution of the Fund's orders. In doing so, the Fund may pay higher commission
rates than the lowest available when the Adviser believes it is reasonable to do
so in light of the value of the brokerage and research services provided by the
broker effecting the transaction. Further, the Fund may allocate brokerage
transactions in a manner that takes into account the sale of its shares, or the
sale of shares of other series of the Trust, in the selection of broker-dealers
to execute portfolio transactions. Brokerage commissions on foreign securities
exchanges are generally fixed, and, therefore, Fund expenses for foreign
securities transactions may be higher than those for comparable transactions on
domestic exchanges. Brokerage may be allocated to Furman Selz to the extent and
in the manner permitted by applicable law, provided that, in the judgment of the
Adviser, the use of Furman Selz is likely to result in an execution at least as
favorable as that of other qualified brokers. In all trades directed to Furman
Selz, the Fund will be charged the most favorable commission rate Furman Selz
charges its unaffiliated customers in similar transactions, and the Fund's
orders will be accorded priority over those received from Furman Selz for its
own account or from any of its directors, officers or employees. The Fund will
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not deal with Furman Selz in any transaction in which Furman Selz acts as
principal and will not deal in over-the-counter securities with Furman Selz
acting as either principal or agent.
The Fund has no restrictions upon portfolio turnover but it is not expected
ordinarily to exceed 125% annually. High portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs which
are borne directly by the Fund, and may result in the recognition of greater
amounts of income and gain which the Fund must distribute in order to maintain
its status as a regulated investment company under Subchapter M of the Internal
Revenue Code, as amended.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share for the purpose of pricing purchase
and redemption orders is determined at 4:15 p.m. (Eastern Standard time) on each
day the New York Stock Exchange is open for trading except for holidays, which
include New Year's Day, Martin Luther King Jr.'s Birthday, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day and Christmas Day. The net asset value per share of the Fund is
computed by dividing the value of the net assets of the Fund (i.e., the value of
the assets less the liabilities) by the total number of shares outstanding. All
expenses, including the advisory and administrative fees, are accrued daily and
taken into account for the purpose of determining the net asset value.
PURCHASE OF SHARES
Shares of the Fund are offered by the Distributor as an investment vehicle
for institutions, corporations, fiduciaries and individuals. Orders for
purchases of shares will be executed at the net asset value per share plus any
applicable sales charge (the "public offering price") next determined after an
order has become effective. The sales charge for purchases of shares of the Fund
may range from 4.50% to 1.00% of the public offering price (which is equal to
4.71% to 1.01% of the net amount invested) with the amount of the sales charge
varying with the size of the purchase made according to the following schedule:
<TABLE>
<CAPTION>
SALES CHARGE AS A AMOUNT OF SALES
PERCENTAGE OF CHARGE REALLOWED
--------------------- TO DEALERS AS A
PUBLIC NET PERCENTAGE OF
OFFERING AMOUNT PUBLIC OFFERING
AMOUNT OF INVESTMENT PRICE INVESTED PRICE
------------------------------------------------------ -------- -------- ----------------
<S> <C> <C> <C>
Less than $100,000.................................... 4.50% 4.71% 4.00%
$100,000 but less than $250,000....................... 3.50% 3.63% 3.00%
$250,000 but less than $500,000....................... 2.60% 2.67% 2.25%
$500,000 but less than $1,000,000..................... 2.00% 2.04% 1.75%
$1,000,000 and over................................... 1.00% 1.01% .90%
</TABLE>
The initial sales load will not apply to shares purchased by (i) accounts
existing before February 24, 1992, (ii) trust, investment management and other
fiduciary accounts managed or administered by the Trust or the Adviser pursuant
to a written agreement, (iii) Furman Selz, the Distributor or any of their
affiliates, (iv) Trustees or Officers of the Fund, (v) directors and officers of
Furman Selz, the Distributor, the Adviser or their affiliates or bona fide
full-time employees of any of the foregoing who have acted as such for not less
than 90 days (including members of their immediate families), (vi) plans for
which a depository institution, which is a client or customer of the Adviser or
Distributor, serves as custodian or trustee, or to any trust or other benefit
plan for such persons so long as such shares are purchased through the
Distributor or (vii) investors purchasing shares through an
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<PAGE>
entity making available various mutual funds pursuant to an agreement with the
Fund other than a Dealer Agreement. The initial sales load also does not apply
to shares sold to representatives of selling brokers and members of their
immediate families.
The Distributor, at its own expense, may from time to time pay a bonus or
other incentive to dealers which employ a registered representative who sells a
minimum dollar amount of the shares of the Fund and/or other Funds distributed
by the Distributor during a specific period of time. Such bonus or other
incentive may take the form of payment for travel expenses, including lodging
incurred in connection with trips taken by qualifying registered representatives
and members of their families to places within or outside the United States or
other bonuses such as gift certificates or the cash equivalent of such bonuses.
The Distributor has established special promotional incentive programs with
First Fidelity Securities Group.
QUANTITY DISCOUNTS IN THE SALES CHARGES
RIGHT OF ACCUMULATION
The schedule of reduced sales charges will be applicable once the
accumulated value of the account has reached $100,000. For this purpose, the
dollar amount of the qualifying concurrent or subsequent purchase is added to
the net asset value of any other shares of the Fund owned at the time by the
investor or his/her spouse and children under the age of 21. The sales charge
imposed on the shares being purchased will then be at the rate applicable to the
aggregate of shares purchased. For example, if the investor held shares of the
Fund valued at $100,000 and purchased an additional $20,000 of Fund shares
(totalling an investment of $120,000), the sales charge for the $20,000 purchase
would be at the next lower sales charge on the schedule (i.e., the sales charge
for purchases over $100,000 but less than $250,000). There can be no assurance
that investors will receive the cumulative discounts to which they may be
entitled unless, at the time of placing their purchase order, the investors or
their dealers make a written request for the discount at the time of the
purchase and provide the account numbers, names and relationship of each person
to the investor, if applicable. The reduced sales charge will be granted subject
to confirmation of the investor's holdings. The cumulative discount program may
be amended or terminated at any time. This particular privilege does not entitle
the investor to any adjustment in the sales charge paid previously on purchases
of shares of the Fund. If the investor knows that he will be making additional
purchases of shares in the future, he may wish to consider executing a Letter of
Intent.
LETTER OF INTENT
The schedule of reduced sales charges is also available to investors who
enter into a written Letter of Intent providing for the purchase, within a
13-month period, of shares of the Fund. Shares of the Fund previously purchased
during a 90-day period prior to the date of receipt by the Distributor of the
Letter of Intent which are still owned by the shareholder may also be included
in determining the applicable reduction, provided the shareholder or the dealer
notifies the Distributor of such prior purchases.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of investments over a 13-month period. Each
investment made during the period will receive the reduced sales commission
applicable to the amount represented by the goal as if it were a single
investment. A number of shares totalling 5% of the dollar amount of the Letter
of Intent will be held in
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<PAGE>
escrow by the Distributor in the name of the shareholder. The initial purchase
under a Letter of Intent must be equal to at least 5% of the stated investment
goal.
The Letter of Intent does not obligate the investor to purchase, or the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the 13-month period, the investor is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. The Distributor is
authorized by the shareholder to liquidate a sufficient number of escrowed
shares to obtain such difference. If the goal is exceeded and purchases pass the
next sales charge level, the sales charge on the entire amount of the purchase
that results in passing that level and on subsequent purchases will be subject
to further reduced sales charges in the same manner as set forth under "Right of
Accumulation," but there will be no retroactive reduction of sales charges on
previous purchases. At any time while a Letter of Intent is in effect, a
shareholder may, by written notice to the Distributor, increase the amount of
the stated goal. In that event, shares purchased during the previous 90-day
period and still owned by the shareholder will be included in determining the
applicable sales charge reduction. The 5% escrow and minimum purchase
requirements will be applicable to the new stated goal. Investors electing to
purchase Fund shares pursuant to a Letter of Intent should carefully read the
application for Letter of Intent which is available from the Distributor. The
Fund may amend or terminate the Letter of Intent program at any time.
The minimum initial investment is $1,000. The minimum subsequent investment
is $100. There are no minimum investment requirements with respect to
investments effected through certain automatic purchase and redemption
arrangements on behalf of customer accounts maintained at Participating
Organizations. The minimum investment requirements may be waived or lowered for
investments effected on a group basis by certain other institutions and their
employees. All funds will be invested in full and fractional shares. The Trust
reserves the right to reject any purchase order.
Orders for shares will be executed at the net asset value per share next
determined after an order has become effective. Orders will become effective
when received in good order by the Fund. If payment is transmitted by wire, the
order will become effective upon receipt of Federal funds. Federal Reserve wire
transmissions may be subject to delays of up to several hours, in which case
execution of an order will be delayed for a like period of time. Payments
transmitted by a bank wire other than the Federal Reserve Wire System may take
longer to be converted into Federal funds. Banks may charge a service fee for
transfers by wire. Checks must be payable in United States dollars and will be
accepted subject to collection at full face value.
PROSPECTIVE INVESTORS WHO WISH TO OBTAIN ADDITIONAL INFORMATION CONCERNING
INVESTMENT PROCEDURES SHOULD CONTACT THE DISTRIBUTOR AT: (800) 437-8790.
DIRECT PURCHASES THROUGH FFB FUNDS DISTRIBUTOR, INC.
PURCHASE BY WIRE
1. Telephone: (800) 437-8790. Give the name(s) in which shares of the Fund
are to be registered, address, social security or tax identification number
(where applicable), dividend payment election, amount to be wired, name of the
wiring bank and name and telephone number of the person to be contacted in
connection with the order. An account number will be assigned.
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<PAGE>
2. Instruct the wiring bank to transmit the specified amount in Federal
funds ($1,000 or more) to:
Investors Fiduciary Trust Company ("IFTC")
Kansas City, MO 64105
ABA Routing Number: 101003621
Acct. No. 7512996
FFB Equity Fund
Account Name(s) (in which to be registered)
Account Number (as assigned by telephone)
3. Fill in a Purchase Application and mail to:
FFB Funds Distributor, Inc.
P.O. Box 4490
Grand Central Station
New York, NY 10163-4490
A COMPLETED PURCHASE APPLICATION MUST BE RECEIVED BY FFB FUNDS DISTRIBUTOR
BEFORE THE EXPEDITED REDEMPTION SERVICE CAN BE USED.
PURCHASE BY MAIL
1. Complete a Purchase Application. Indicate the services to be used.
2. Mail the Purchase Application and a check for $1,000 or more payable to
FFB Equity Fund to FFB Funds Distributor.
ADDITIONAL PURCHASES BY WIRE AND MAIL
Additional purchases of shares may be made by wire by contacting the
Distributor and then by instructing the wiring bank to transmit the amount ($100
or more) of any additional purchase in Federal funds to IFTC along with your
account name and number. Additional purchases may also be made by mail by making
a check ($100 or more) payable to the Fund indicating your account number on the
check and mailing it to FFB Funds Distributor.
AUTOMATIC INVESTMENT PLAN
The Fund provides a convenient method by which an investor can have amounts
sent directly from his or her checking account for investment in the Fund. The
minimum initial and subsequent investment pursuant to this program is $100 per
Fund on a monthly or quarterly basis.
PURCHASE THROUGH CUSTOMER ACCOUNTS
Purchases of shares also may be made through customer accounts maintained
at Participating Organizations including qualified Individual Retirement and
Keogh Plan accounts. Purchases through customer accounts may be subject to
additional procedural requirements and are governed by the terms of the
agreement between the customer and the Participating Organization itself. All
such procedural requirements must, however, be consistent with the Investment
Company Act of 1940. Purchases will be made through a customer account only as
directed by or on behalf of the customer in a direction form executed prior to
the customer's first purchase of shares of the Fund. For example, a customer
with an account at a Participating Organization may instruct the Participating
Organization to invest money in excess of a level agreed upon between the
customer and the Participating
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<PAGE>
Organization to invest money in excess of a level agreed upon between the
customer and the Participating Organization in shares of the Fund periodically
or give other instructions to the Participating Organization within limits
prescribed by that Participating Organization.
BY PAYROLL DIRECT DEPOSITS
Investors may set up a payroll direct deposit arrangement for amounts to be
automatically invested in any of the Funds. Participants in the Payroll Direct
Deposit program may make periodic investments of a least $20.00 per pay period.
Contact FFB Funds Distributor, Inc. for more information about Payroll Direct
Deposit.
REDEMPTION OF SHARES
Upon receipt by FFB Funds Distributor of a redemption request in proper
form, shares of the Fund will be redeemed at its next determined net asset
value. See "Determination of Net Asset Value". For the shareholder's
convenience, the Trust has established several different direct redemption
procedures. NO PAYMENT OF PROCEEDS OF A REDEMPTION OF SHARES PURCHASED BY CHECK
WILL BE PERMITTED UNTIL THE CHECK HAS CLEARED, WHICH MAY TAKE UP TO 15 DAYS
AFTER THOSE SHARES HAVE BEEN CREDITED TO THE SHAREHOLDER'S ACCOUNT.
DIRECT REDEMPTION THROUGH FFB FUNDS DISTRIBUTOR
REDEMPTION BY MAIL
1. Write a letter of instruction. Indicate the dollar amount or number of
shares to be redeemed. Refer to the shareholder's Fund account number.
2. Sign the letter in exactly the same way the account is registered. If
there is more than one owner of the shares, all must sign.
3. If shares to be redeemed have a value of $25,000 or more, the
signature(s) must be guaranteed by a commercial bank which is a member of the
Federal Deposit Insurance Corporation, a trust company, a member firm of a
domestic stock exchange or a foreign branch of any of the foregoing or an
approved savings bank or savings and loan association. A signature guarantee by
a non-approved savings bank or a notary public is not acceptable. Further
documentation, such as copies of corporate resolutions and instruments of
authority, may be requested from corporations, administrators, executors,
personal representatives, trustees or custodians to evidence the authority of
the person or entity making the redemption request.
4. If shares to be redeemed are held in certificate form, enclose the
certificate with the letter. Do not sign the certificates and for protection use
registered mail.
5. Mail the letter to FFB Funds Distributor at the address set forth under
"Purchase of Shares".
Checks for redemption proceeds will normally be mailed within seven days to
the shareholder's address of record.
Upon request, the proceeds of a redemption amounting to $1,000 or more will
be sent by wire to the shareholder's predesignated bank account. When proceeds
of a redemption are to be paid to someone other than the shareholder either by
wire or check, the signature(s) on the letter of instruction must be guaranteed
regardless of the amount of the redemption.
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<PAGE>
REDEMPTION BY EXPEDITED REDEMPTION SERVICE
If shares are held in book entry form and the Expedited Redemption Service
has been elected on the Purchase Application on file with FFB Funds Distributor,
redemption of shares may be requested on any day the Fund is open for business
by telephone or letter. (See "Determination of Net Asset Value" for days the
Fund is open.) A signature guarantee is not required.
1. Telephone the request to FFB Funds Distributor at (800) 437-8790, or
2. Mail the request to FFB Funds Distributor at the address set forth
under "Purchase of Shares".
Proceeds of Expedited Redemptions of $1,000 or more will be wired to the
shareholder's bank indicated in the Purchase Application. If an Expedited
Redemption request is received by FFB Funds Distributor by 4:15 p.m. (Eastern
Standard time) on any day the Fund is open for business, the redemption proceeds
will be transmitted to the shareholder's bank the following day. The
shareholder's receiving bank may charge its customers a wire transfer fee for
this service. A check for proceeds of less than $1,000 will be mailed to the
shareholder's address of record.
FFB Funds Distributor employs reasonable procedures to confirm that
instructions communicated by telephone are genuine. If FFB Funds Distributor
fails to employ such reasonable procedures, FFB Funds Distributor may be liable
for any loss, damage or expense arising out of any telephone transactions
purporting to be on a shareholder's behalf. In order to assure the accuracy of
instructions received by telephone, FFB Funds Distributor requires some form of
personal identification prior to acting upon instructions received by telephone,
records telephone instructions and provides written confirmation to investors of
such transactions.
REDEMPTION THROUGH CUSTOMER ACCOUNTS
If the Check Redemption Service has been elected on the Purchase
Application, you will be sent a Check Redemption Signature Card to be completed.
Once the Signature Card is on file with FFB Funds Distributor, Inc., redemptions
of shares may be made by using redemption checks provided by the Fund. There is
no charge by the Fund for this service. Checks must be written for amounts of
$500 or more and may be payable to anyone and negotiated in the normal way. If
more than one shareholder owns the shares in the Fund account, all must sign the
check unless an election has been made to require only one signature on checks
and that election has been filed with FFB Funds Distributor, Inc.
When honoring a redemption check, FFB Funds Distributor, Inc. will cause
the Fund to redeem exactly enough full and fractional shares from a Fund account
to cover the amount of the check. The Check Redemption Service may be terminated
at any time by FFB Funds Distributor, Inc. or the Fund.
SYSTEMATIC WITHDRAWAL PLAN
An owner of $12,000 or more of shares in the Fund may elect to have
periodic redemptions from his or her account to be paid on a monthly, quarterly
or annual basis. The maximum payment per year is 12% of the account value at the
time of the election. The minimum periodic payment is $100. A sufficient number
of shares to make the scheduled redemption will normally be redeemed on the 25th
day of each month. Depending on the size of the payment requested and
fluctuation in the net asset value, if any, of the shares redeemed, redemptions
for the purpose of making such payments may reduce or even exhaust the account.
A shareholder may request that these payments be sent to a
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<PAGE>
predesignated bank or other designated party. Capital gains and dividend
distributions paid to the account will automatically be reinvested at net asset
value on the distribution payment date. The Fund reserves the right to amend the
Systematic Withdrawal Plan on 30 days' notice. The Plan may be terminated at any
time by the shareholder. It should be noted that it may be to a shareholder's
disadvantage to buy shares with a sales charge while concurrently making
systematic redemptions under this Plan.
Amounts paid to shareholders pursuant to the Systematic Withdrawal Plan are
not a return on your investment. Payments to shareholders pursuant to the
Systematic Withdrawal Plan are derived from the redemption of shares in the
shareholder's account and is a taxable transaction on which gain or loss may be
recognized for Federal, state and local income tax purposes.
EXCHANGE PRIVILEGE
Shareholders who have held all or part of their shares in the Fund for at
least fifteen days may exchange shares of the Fund for shares (at their next
determined relative net asset value) of other Funds for which First Fidelity is
the Adviser and FFB Funds Distributor is also the Distributor. Shareholders
should call or write the Distributor for additional information about exchanges
and a copy of the prospectus for any additional Fund into which they wish to
make an exchange before investing. Exchanges may be made by writing FFB Funds
Distributor, Inc., by telephone if the shareholder has elected telephone
exchange privileges on their Purchase Application, or through a Participating
Organization. For shareholders to whom the minimum investment restrictions
apply, the minimum amount which may be exchanged into another Fund in which
shares are not held is $1,000; no partial exchange may be made if, as a result,
such shareholder's interest in the Fund would be reduced to less than $1,000.
There is no service charge for exchanges. Before effecting an exchange,
shareholders should review the Prospectus (and, if applicable, the Prospectus
for any other Fund).
An exchange of shares is taxable as a redemption on which gain or loss may
be recognized for Federal income tax purposes. In the case of transactions
subject to a sales charge, the charge will be assessed on an exchange of shares,
equal to the excess of the sales load applicable to the shares to be acquired,
over the amount of any sales load previously paid on the shares to be exchanged.
See "Federal Taxes" for an explanation of circumstances in which the sales load
paid to acquire shares of the Fund may not be taken into account in determining
gain or loss on the disposition of those shares. The exchange privilege may be
modified or terminated upon 60 days' written notice. See the SAI for further
details.
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a statement for
each shareholder which will be mailed at least once each month. In those cases
where a Participating Organization or its nominee is shareholder of record of
shares purchased for its customer, the Trust has been advised that the statement
may be transmitted to the customer in the discretion of the Participating
Organization. Individual transactions will not be separately reported.
Shareholders can write or call FFB Funds Distributor at (800) 437-8790 (or their
Participating Organization, as the case may be) with any questions relating to
their investments in Fund shares.
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<PAGE>
Participating Organizations or their nominees may be the shareholders of
record as nominee for their customers and may maintain subaccounts for those
customers. Any such customer may become the shareholder of record upon written
request to the Participating Organization or FFB Funds Distributor.
FFB Funds Distributor will transmit promptly to all shareholders of record
copies of all reports to shareholders, proxy statements and other Trust
communications. The Trust's arrangements with FFB Funds Distributor and the
subaccounting arrangements require Participating Organizations to grant
investors who purchase shares through customer accounts the opportunity to vote
their shares by proxy at all shareholder meetings of the Trust. In certain
cases, a customer of a Participating Organization may have given his
Participating Organization the power to vote shares on his behalf. Customers
with accounts at Participating Organizations should consult their Participating
Organization for information concerning their rights to vote shares.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to declare and pay as a dividend substantially all of its
net investment income semi-annually and to distribute any net realized long-term
capital gains at least annually. Dividend and capital gains distributions are
made on a per-share basis. After every distribution, the value of a share
declines by the amount of the distribution. Purchases made shortly before a
distribution include in the purchase price the amount of the distribution which
will be returned to the investor in the form of a taxable dividend or capital
gains distribution.
Dividends will be invested automatically in additional shares of the Fund
at the next determined net asset value credited to the shareholder's account on
the payment date or, at the shareholder's election, paid in cash. For all
investments effected through customer accounts maintained at First Fidelity or
Participating Organizations (see "Purchase of Shares -- Purchase through
Customer Accounts"), dividend payments in cash will be transmitted to the
investor's account through which the shares were purchased or, if a
Participating Organization so specified, to it for crediting to its customer's
account. Dividend checks will be mailed to all other shareholders who elect to
be paid in cash within five business days after the payable date.
Investors who redeem all or a portion of shares of the Fund prior to a
dividend payment date will be entitled to all dividends declared but unpaid on
those shares on the next dividend payment date.
FEDERAL TAXES
The Fund has elected to be treated as a regulated investment company,
qualified as such for its last taxable year and intends to continue to so
qualify by complying with the provisions of the Internal Revenue Code (the
"Code") applicable to regulated investment companies so that it will not be
liable for Federal income tax with respect to amounts distributed to
shareholders in accordance with the timing requirements of the Code. Such
qualification may, however, limit the Fund's ability to engage in certain
transactions, such as those involving options. The Fund intends to distribute
substantially all of its net investment income and net realized capital gains to
its shareholders for each taxable year.
Dividends derived from the Fund's net investment income and the excess of
net short-term capital gain over net long-term capital loss will be taxable to
shareholders at ordinary income rates, whether
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<PAGE>
such dividends are invested in additional shares or received in cash. A portion
of the Fund's dividends will normally qualify for the dividends-received
deductions for corporations. In general, the amount so qualifying will depend
primarily on the portion of the Fund's gross income that is represented by
dividends received by the Fund from stock in domestic corporations held by the
Fund for at least 46 days and not treated as debt financed under the Code. The
dividends-received deductions will be reduced to the extent shares of the Fund
are treated as debt-financed and will be eliminated if such shares are held for
less than 46 days.
Distributions of the excess of net long-term capital gain over the net
short-term capital loss designated by the Fund as capital gains dividends will
be taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held Fund shares, whether invested in additional shares of the
Fund or received in cash. Long-term capital gain distributions do not qualify
for the dividends-received deduction available to corporations.
Amounts not distributed in accordance with a calendar year distribution
requirement are subject to a nondeductible 4% excise tax. To avoid application
of the excise tax, the Fund intends to make its distributions in accordance with
the calendar year distribution requirement. For this purpose, a distribution
will be treated as paid on December 31 of a calendar year if it is declared by
the Fund in October, November or December of that year to shareholders of record
on a date in such a month and paid by the Fund during January of the following
calendar year. Such distributions will be treated as received by shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Shareholders will be notified each year of the amounts of dividends and
distributions, including the amounts (if any) for that year which have been
designated as long-term capital gain distributions. Dividends and distributions
may also be subject to state or local taxes. Investors should consult their tax
advisers for specific information on the tax consequences of particular types of
distributions.
Any loss realized upon the redemption of shares held (or treated as held)
for six months or less will be treated as a long-term capital loss to the extent
of any long-term capital gains dividends received on the redeemed shares. All or
a portion of a loss realized upon the redemption of shares may be disallowed to
the extent shares are purchased (including shares acquired by means of
reinvested dividends) within 30 days before or after such redemption.
The Fund generally will be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from distributions (including redemption)
paid to non-corporate shareholders if (a) the shareholder fails to furnish and
certify his correct taxpayer identification number or social security number,
(b) the Internal Revenue Service (the "IRS") or a broker notifies the Fund or
the shareholder that the shareholder has failed to report properly certain
interest and dividend income to the IRS and to respond to notices to that
effect, or (c) when required to do so, the shareholder fails to certify that he
is not subject to backup withholding.
Applications and purchase orders without a certified taxpayer
identification number may be returned to the investor. The Fund reserves the
right to close by redemption accounts without correct certified taxpayer
identification numbers.
Under certain circumstances, the sales charge incurred in acquiring shares
of the Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of the Fund are
exchanged within 90 days after the date they were purchased and new
19
<PAGE>
shares of the Fund are acquired without a sales charge or at a reduced sales
charge. In that case, the gain or loss recognized on the exchange will be
determined by excluding from the tax basis of the shares exchanged all or a
portion of the sales charge incurred in acquiring those shares. This exclusion
applies to the extent that the otherwise applicable sales load with respect to
the newly acquired shares is reduced as a result of having incurred a sales load
initially. The portion of the sales load affected by this rule will be treated
as a sales load paid for the new shares.
Many of the options transactions and currency trading activities in which
the Fund may engage will result in "straddles" for Federal income tax purposes.
The straddle rules may affect the character of gains or losses realized by the
Fund on straddle positions. In addition, gains or losses realized by the Fund on
straddle positions may be deferred or accelerated under the straddle rules
rather than being taken into account in calculating the taxable income for the
taxable year in which such losses are realized. The Fund may make one or more of
the elections applicable to straddles. If any of the elections are made, the
amount, character and timing of the recognition of gains and losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences of straddle
transactions to the Fund are not entirely clear. In order to insure that it
qualifies as a regulated investment company, the Fund may have to limit the
amount of its straddle activities.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Pursuant to an Agency Agreement, First Fidelity acts as the Fund's Transfer
and Dividend Disbursing Agent and is responsible for maintaining account records
detailing ownership of Fund shares and for crediting income, capital gains and
other changes in share ownership to investors' accounts. First Fidelity is also
the Fund's Custodian. Furman Selz acts as the Fund's Sub-Transfer Agent pursuant
to a Sub-Transfer Agency Agreement.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its total return in advertisements
or reports to shareholders or prospective investors. Quotations of average
annual total return for the Fund will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in the Fund over a
period of 1, 5 and 10 years (up to the life of the Fund). Total return
quotations reflect payment of the maximum sales load on the initial hypothetical
investment and the deduction of a proportional share of Fund expenses (on an
annual basis), and assume that all dividends and distributions are reinvested
when paid.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices so that investors may compare the
Fund's results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an
20
<PAGE>
investment in the Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objective and policies, characteristics and
quality of the portfolio, and the market conditions during a given time period,
and should not be considered as a representation of what may be achieved in the
future. For a description of the method used to calculate total return for the
Fund, see the SAI.
Investors who purchase and redeem shares of the Fund through a customer
account maintained at a Participating Organization may be charged one or more
types of fees as agreed upon by the Participating Organization and the investor
with respect to the customer services provided by the Participating
Organization. Such fees will have the effect of reducing the total return for
those investors.
OTHER INFORMATION
The Trust was organized as a Massachusetts business trust on March 25, 1987
as a successor to FFB Money Trust which was organized on December 4, 1985 and
currently consists of twelve separate portfolios. The Board of Trustees may
establish additional portfolios in the future. The capitalization of FFB Funds
Trust consists of 15,100,000,000 authorized shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Funds are fully paid,
non-assessable and will have no preemptive rights. All shares of the Trust have
equal voting rights and will be voted in the aggregate, and not by class, except
where voting by class is required by law or where the matter involved affects
only one class. For more details concerning the voting rights of shareholders,
see the SAI. As of June 9, 1995, First Fidelity Bank, N.A. owned of record 74.1%
of the Fund's outstanding shares. This bank is not the beneficial owner of
shares of the Fund, but it may have been granted discretionary authority to vote
all or some of those shares, in which case the bank may be in a position to
control the Fund.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
Officers of the Trust for acts or obligations of the Trust which are binding
only on the assets and property of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of Trust property for all loss and expense of any shareholder held
personally liable for the obligations of the Trust. The risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations
and should be considered remote.
21
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<TABLE>
<S> <C> <C>
[THE FFB FUNDS LOGO]
GENERAL AND ACCOUNT INFORMATION: [FFB LOGO] Equity
(800) 437-8790 Fund
-------------------------------
INVESTMENT ADVISER PROSPECTUS
First Fidelity Bank, N.A. JUNE 30, 1995
765 Broad Street
Newark, New Jersey 07102
ADMINISTRATOR
Furman Selz Incorporated
237 Park Avenue
New York, New York 10017
SPONSOR AND DISTRIBUTOR
FFB Funds Distributor, Inc.
237 Park Avenue
New York, New York 10017
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
First Fidelity Bank, N.A.
765 Broad Street,
Newark, New Jersey 07102
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
LEGAL COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
TABLE OF CONTENTS
Fund Expenses............................ 2
Financial Highlights..................... 3
Investment Objectives and Policies....... 4
Investment Practices and Associated
Risks.................................... 5
Investment Restrictions.................. 6
Management of the Fund................... 7
Determination of Net Asset Value......... 11
Purchase of Shares....................... 11
Redemption of Shares..................... 15
Exchange Privilege....................... 17
Account Services......................... 17
Dividends and Distributions.............. 18
Federal Taxes............................ 18
Transfer and Dividend Disbursing Agent
and Custodian............................ 20
Performance Information.................. 20
Other Information........................ 21
-------------------------------------------- Managed by:
No dealer, salesman, or other person has First Fidelity Bank, N.A.
been authorized to give any information or
to make any representations, other than Sponsored and Distributed By:
those contained in the Prospectus, in FFB Funds Distributor, Inc.
connection with the offer contained in this
Prospectus, and, if given or made, such
other information or representations must
not be relied upon as having been authorized
by the Trust, the Distributor or the
Investment Adviser. This Prospectus does not
constitute an offering in any state in which
such offering may not lawfully be made.
FBEQPRO695
</TABLE>
FFB EQUITY FUND
237 Park Avenue, New York, New York 10017
General and Account
Information: (800) 437-8790
STATEMENT OF ADDITIONAL INFORMATION
FFB EQUITY FUND (the "Fund") is a portfolio of FFB Funds Trust
(the "Trust"), an open-end, diversified management investment company. The Fund
seeks long-term capital appreciation by investing primarily in equity securities
of U.S. corporations. As a secondary objective, the Fund seeks current income
for distribution to shareholders.
SHARES OF THE FUND ARE OFFERED FOR SALE BY FFB FUNDS
DISTRIBUTOR, INC. (THE "SPONSOR AND DISTRIBUTOR") AS AN INVESTMENT VEHICLE FOR
INSTITUTIONS, CORPORATIONS, FIDUCIARIES AND INDIVIDUALS. THE FUND IS SOLD
WITHOUT A SALES CHARGE OR LOAD; THE FUND MAY PAY CERTAIN EXPENSES RELATED TO THE
DISTRIBUTION OF ITS SHARES. CERTAIN BANKS, FINANCIAL INSTITUTIONS AND
CORPORATIONS ("PARTICIPATING ORGANIZATIONS") MAY AGREE TO ACT AS SHAREHOLDER
SERVICING AGENTS FOR INVESTORS WHO MAINTAIN ACCOUNTS AT THOSE BANKS AND TO
PERFORM CERTAIN SERVICES FOR THE FUND.
This Statement of Additional Information is not a prospectus
and is only authorized for distribution when preceded or accompanied by the
Fund's Prospectus dated June 30, 1995 (the "Prospectus"). This Statement of
Additional Information contains additional and more detailed information than
that set forth in the Prospectus and should be read in conjunction with the
Prospectus, additional copies of which may be obtained without charge from the
Distributor at 237 Park Avenue, New York, New York 10017 (telephone: (800)
437-8790).
JUNE 30, 1995
-------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
Investment Policies........2 Determination of Net Asset
Investment Restrictions....7 Value....................24
Management.................9 Other Information..........25
Performance Information...14 Principal Shareholders.....26
Portfolio Transactions....15 Custodian, Transfer Agent
Federal Income Taxes......17 and Dividend Disbursing
Exchange Privilege........23 Agent....................26
Redemptions...............23 Servicing Agreements.......27
Independent Accountants....28
Financial Statements.......28
</TABLE>
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INVESTMENT POLICIES
The Fund invests its assets primarily in common stocks,
securities convertible into common stock, preferred stocks and warrants of U.S.
companies, but it is also authorized to invest up to 10% of its assets in common
stock issued by non-U.S. companies, including stocks represented by American
Depository Receipts ("ADR's"). In an attempt to hedge against fluctuations in
foreign currency exchange rates, the Fund may engage in forward foreign currency
transactions. For temporary defensive purposes, the Fund may invest in U.S.
Government securities, certificates of deposit, bankers' acceptances, commercial
paper, repurchase agreements and debt obligations of corporations which meet
certain ratings criteria. In an attempt to hedge the value of its portfolio
securities against declining securities prices, the Fund may buy put and write
(sell) covered call options on common stocks. The Fund may lend its portfolio
securities to increase current income and may borrow money for extraordinary or
emergency purposes. The Fund also may sell securities short "against the box".
The following information supplements the discussion found
under "Investment Objectives and Policies" and "Investment Practices and
Restrictions" in the Prospectus.
U.S. GOVERNMENT SECURITIES. The Fund may invest in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. The U.S. Treasury issues various types of marketable
securities, consisting of bills, notes, bonds and certificates of indebtedness,
which are all direct obligations of the U.S. Government and differ primarily in
the length of their maturity. U.S. Treasury bills, which have a maturity of up
to one year, are the most frequently issued marketable U.S. Government
security. U.S. Government agency and instrumentality obligations are debt
securities issued by U.S. Government-
- 2 -
sponsored enterprises and Federal agencies. Some obligations of agencies, such
as those issued by the Export-Import Bank, are supported by the full faith and
credit of the United States; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the U.S. Treasury; others, such
as those of the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality and others, such as those of the Federal Farm Credit Banks,
only by the credit of the agency or instrumentality issuing the obligation. In
the case of obligations not backed by the full faith and credit of the U.S., the
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment.
BANK OBLIGATIONS. The Fund may invest in obligations of U.S.
banks, savings banks and savings and loan associations (including certificates
of deposit and bankers' acceptances) having total assets at the time of purchase
in excess of $1 billion. The accounts of such institutions must be insured by
either the Savings Association Insurance Fund or the Bank Insurance Fund of the
Federal Deposit Insurance Corporation.
A certificate of deposit is an interest-bearing negotiable
certificate issued by a bank (or savings and loan association) against funds
deposited in the institution. A bankers' acceptance is a short-term draft drawn
on a commercial bank by a borrower, usually in connection with an international
commercial transaction. Although the borrower is liable for payment of the
draft, the bank unconditionally guarantees to pay the draft at its face value on
the maturity date.
COMMERCIAL PAPER. Commercial paper represents short-term
unsecured promissory notes issued in bearer form by bank holding companies,
corporations and finance companies. The commercial paper purchased by the Fund
consists of direct obligations of domestic issuers which, at the time of
investment, are rated "P-1" by Moody's Investors Service, Inc. ("Moody's") or
"A-1" or better by Standard & Poor's Corporation ("S&P"), or securities which,
if not rated, are issued by companies having an outstanding debt issue currently
rated Aa or better by Moody's or AA or better by S&P.
The rating "P-1" is the highest commercial paper rating
assigned by Moody's and the ratings "A-1" and "A-1+" are the highest commercial
paper ratings assigned by S&P.
CORPORATE DEBT OBLIGATIONS. The Fund may invest in corporate
debt obligations (corporate bonds, notes, debentures and similar corporate debt
instruments) of foreign and domestic issuers which at the time of investment are
rated at least Aa by Moody's or AA by S&P.
- 3 -
REPURCHASE AGREEMENTS. The Fund may invest in securities
subject to repurchase agreements with U.S. banks or broker-dealers. In a
repurchase agreement the seller of a security commits itself at the time of the
sale to repurchase that security from the buyer at a mutually agreed upon time
and price. The repurchase price exceeds the sale price, reflecting an agreed
upon interest rate effective for the period the buyer owns the security subject
to repurchase. The agreed upon rate is unrelated to the interest rate on that
security. First Fidelity Bank, National Association, New Jersey ("First
Fidelity" or the "Adviser") will monitor the value of the underlying security at
the time the transaction is entered into and at all times during the term of the
repurchase agreement to insure that the value of the security always equals or
exceeds the repurchase price. In the event of default by the seller under the
repurchase agreement, the Fund may experience a loss of income from the loaned
securities and a decrease in the value of any collateral maintained, problems in
exercising its rights to the underlying securities and costs and time delays in
connection with the disposition of such securities.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend its portfolio
securities to unaffiliated broker-dealers, provided: (i) the loan is secured
continuously by collateral consisting of cash, U.S. Government securities or
letters of credit maintained on a daily marked-to-market basis in an amount at
least equal to 100% of the current market value of the securities loaned; (ii)
the Fund may at any time call the loan and obtain the return of the securities
loaned; (iii) the Fund will receive any interest or dividends paid on the loaned
securities and (iv) the aggregate market value of securities loaned will not at
any time exceed one-third of the total assets of the Fund. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral. In addition, the Fund may experience a loss of
income and a loss from the decline in value of securities loaned should the
borrower default and the Fund encounter delays in perfecting its security
interest in the securities loaned.
The Fund will earn income from loaning its securities because
cash deposited as collateral for these loans will be invested in short-term
money market instruments. In connection with lending securities, the Fund may
pay reasonable finders, administrative and custodial fees.
FOREIGN SECURITIES. The Fund may invest up to 10% of its total
assets in common stocks issued by non-U.S. companies, including stocks
represented by American Depository Receipts ("ADR's"). ADR's are
dollar-denominated receipts issued generally by U.S. banks, which represent the
deposit with the bank of a foreign company's security. Investment in the
securities of foreign issuers may involve risks in addition to those normally
associated with investments in the securities of U.S.
- 4 -
issuers. There may be less publicly available information about foreign issuers
than is available about U.S. issuers and foreign auditing and accounting
practices may differ from U.S. practices. Foreign securities markets may be less
active than U.S. markets, trading may be thin and consequently, securities
prices may be more volatile. Foreign tax liabilities may diminish the return to
the Fund on its foreign investments. Moreover, all foreign investments are
subject to risks of foreign political and economic instability, adverse
movements in foreign exchange rates, difficulties inherent in enforcing a
judgment against a foreign corporation should an issuer default, the imposition
or tightening of exchange controls or other limitations on the repatriation of
foreign capital and changes in foreign governmental attitudes toward private
investment, possibly leading to nationalization, increased taxation, or
confiscation of Fund assets.
USE OF FORWARD CONTRACTS IN FOREIGN CURRENCY TRANSACTIONS. In
connection with the purchase and sale of foreign investments, the Fund may use
forward contracts to purchase or sell an agreed upon amount of a specified
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. Under such an arrangement, concurrently with the entry into a contract
to acquire a foreign security for a specified amount of currency, the Fund would
purchase with U.S. dollars the required amount of foreign currency for delivery
at the settlement date of the purchase; the Fund would enter into similar
forward currency transactions in connection with the sale of foreign securities.
Forward contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. Although such contracts tend to minimize the risk of loss
due to a decline in the value of the subject currency, they tend to limit
commensurately any potential gain which might result should the value of such
currency increase during the contract period.
SHORT SALES. The Fund may sell securities short "against the
box". In a short sale, the Fund sells stock which it does not own. However, a
short sale is "against the box" if at all times when the short position is open
the Fund owns an equal amount of the securities, or securities convertible into,
or exchangeable without further consideration for, securities of the same issue
as the securities sold short. Such a transaction serves to defer a gain or loss
for Federal income tax purposes.
OPTIONS ON SECURITIES. The Fund may write (sell) listed call
options on common stock ("calls") if the calls are "covered" throughout the life
of the option. A call is "covered" if the Fund owns the optioned securities or
securities convertible into or exchangeable for the optioned securities.
- 5 -
When the Fund writes a call, it receives a premium and gives the purchaser the
right to buy the underlying security at any time during the call period (usually
not more than nine months) at a fixed exercise price regardless of market price
changes during the call period. If the call is exercised, the Fund forgoes any
gain from an increase in the market price of the underlying security over the
exercise price.
The Fund may purchase a call on securities only to effect a
"closing purchase transaction", which is the purchase of a call covering the
same underlying security and having the same exercise price and expiration date
as a call previously written by the Fund on which it wishes to terminate its
obligation. If the Fund is unable to effect a closing purchase transaction, it
will not be able to sell the underlying security until the call previously
written by the Fund expires (or until the call is exercised and the Fund
delivers the underlying security). The Fund may be unable to effect a closing
purchase transaction because of unanticipated trading halts, exchange
restrictions or the absence of trading interest in a particular option.
The Fund also may purchase put options ("puts") on common
stocks held in its portfolio. When the Fund purchases a put, it pays a premium
in return for the right to sell the underlying security at the exercise price at
any time during the option period. If any put is not exercised or sold, it will
become worthless on its expiration date.
The Fund's custodian, or a securities depository acting for it,
generally acts as escrow agent as to the securities on which the Fund has
purchased puts or written calls, or as to other securities acceptable for such
escrow (cash, government securities or certain higher-grade debt obligations),
so that no margin deposit is required of the Fund. Until the underlying
securities are released from escrow, they cannot be sold by the Fund.
In the event of a shortage of the underlying securities
deliverable on exercise of an option, the Options Clearing Corporation has the
authority to permit other, generally comparable securities to be delivered in
fulfillment of option exercise obligations. If the Options Clearing Corporation
exercises its discretionary authority to allow such other securities to be
delivered, it may also adjust the exercise prices of the affected options by
setting different prices at which otherwise ineligible securities may be
delivered. As an alternative to permitting such substitute deliveries, the
Options Clearing Corporation may impose special exercise settlement procedures.
- 6 -
INVESTMENT RESTRICTIONS
The following investment restrictions restate or are in
addition to those described under "Investment Objectives and Policies" and
"Investment Practices and Restrictions" in the Prospectus. Under the following
restrictions, which may not be changed without the approval of the holders of a
majority of the Fund's outstanding securities, the Fund will not:
1. (a) Invest in the securities of any one issuer (excluding
the U.S. Government, its agencies and
instrumentalities), if immediately thereafter and as
a result of such investment the acquisition cost of
the holdings of the Fund in the securities of such
issuer exceeds 5% of the Fund's total assets, taken
at market value;
(b) Invest in the securities of any single issuer, if
immediately after and as a result of such investment,
the Fund owns more than 10% of the outstanding voting
securities of such issuer; or
(c) Invest more than 25% of its total assets in the
securities of issuers in any one industry.
2. Make investments for the purpose of exercising control of
management.
3. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or
reorganization.
4. Purchase or sell real estate, provided that the Fund may invest
in securities issued by companies which invest in real estate
or interests therein.
5. Purchase securities on margin (except for short-term credit
necessary for clearance of portfolio transactions).
6. Sell securities short, unless at all times when a short
position is open the Fund owns an equal amount of such
securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short.
7. Make loans to other persons (other than loans to broker-dealers
of portfolio securities), provided that for purposes of this
restriction, entering into repurchase agreements, acquiring
corporate debt securities and investing in government
obligations, short-term commercial paper, certificates of
deposit and bankers'
- 7 -
acceptances shall not be deemed to be the making of a loan.
8. Borrow money in amounts in excess of 5% of its total net
assets, taken at market value, and then only from banks as a
temporary measure for extraordinary or emergency purposes.
9. Mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the
Fund except as may be necessary in connection with borrowings
mentioned in (8) above or the writing of covered call options,
and then such mortgaging, pledging or hypothecating may not
exceed 5% of the Fund's total assets, taken at market value.
10. Buy or sell oil, gas or other mineral leases, rights or royalty
contracts or commodities or commodity contracts, other than
foreign currency forward contracts.
11. Write, purchase or sell options or puts, calls, straddles,
spreads or combinations thereof, except that the Fund may (i)
write covered calls and (ii) purchase puts on common stocks.
12. Invest in (i) securities which cannot be readily resold to the
public because of legal or contractual restrictions or for
which no readily available market exists, or (ii) repurchase
agreements maturing in more than seven days, or in (iii)
securities of issuers having a record, together with
predecessors, of less than three years of continuous operation
if, regarding all such securities, more than 10% of its total
net assets would be invested in such securities. However, as
an operating (non-fundamental) policy, which may be changed by
the Board of Trustees without prior shareholder approval, the
Fund will not invest in securities described in (i).
13. Underwrite securities issued by other persons except to the
extent that, in connection with the disposition of its
portfolio investments, it may be deemed to be an underwriter
under Federal securities laws.
If a percentage restriction is adhered to at the time of
investment, a later increase in percentage resulting from a change in values or
assets will not constitute a violation of such restriction.
- 8 -
MANAGEMENT
TRUSTEES AND OFFICERS. The principal occupations of the
Trustees and executive officers of the Trust for at least the past five years
are listed below. The address of each, unless otherwise indicated, is 237 Park
Avenue, New York, New York 10017. Trustees deemed to be "interested persons" of
the Trust for purposes of the Investment Company Act of 1940, as amended, are
indicated by an asterisk.
*EDMUND A. HAJIM, Age 58, Chairman of the Board of Trustees - Chairman of the
Board of Furman Selz Incorporated since 1983; Chairman of the Board and
President of Furman Selz Capital Management, Inc. since 1984; Chairman
of the Board and Chief Executive Officer, Lehman Management Co., Inc.
from 1980 to 1983; Managing Director, Lehman Brothers Kuhn Loeb
incorporated from 1977 to 1983; Chairman of the Board, President and
Director or Trustee of various mutual funds affiliated with Furman Selz
Incorporated.
*ROBERT H. DUNKER, Age 64, Trustee, 303 Washington Boulevard, Sea Girt, New
Jersey 08750 - (Retired); formerly, Executive Vice President, Trust
Administration, First Fidelity Bank, N.A., New Jersey; Director, E.J.
Brooks Co.; Director, Faber-Castell Corp.; Trustee, Hanover Funds, Inc.
(registered investment company); Trustee, IBJ Funds Trust (registered
investment company).
ROBERT F. KANE, Age 70, Trustee, 105 Glenside Avenue, Scotch Plains, New
Jersey 07076 - (Retired); Vice Chairman, Monroe Systems for Business,
Inc. (business systems) from 1984 to 1986; President, Monroe Systems
for Business, a Division of Litton Industries from 1974 to 1986.
BENJAMIN A.LOBEL, Age 51, Trustee, 155 Brentwood Drive, South Orange, New Jersey
07079 - private investor; formerly Executive Vice President, Chief
Financial Officer of The Baxter Group, Inc. (wholesale distributors)
from 1974 to 1992.
*WALTER J. NEPPL, Age 73, Trustee, The Enclave, 5345 Annabel Lane, Plano, Tx
75093 - (Retired); Management Consultant since 1982; Director, Sun
Company, Inc. since 1976; Trustee, Geraldine R. Dodge Foundation since
1975; Vice Chairman of the Board, J.C. Penney Company (retail
merchandising) from 1981 to 1982; President and Chief Operating
Officer, J.C. Penney Company from 1976 to 1981.
T. BROCK SAXE, Age 54, Trustee, 930 Oenoke Ridge, New Canaan, Connecticut
06840 - President of Tombrock Corporation (restaurant organization)
since 1962; Director of New Canaan Bank and Trust Company.
- 9 -
STEVEN D. BLECHER, Age 52, Executive Vice President - Executive
Vice President and Director of the Sponsor since 1983; Vice President,
Secretary and Treasurer of Furman Selz Capital Management, Inc. since
1984.
MICHAEL C. PETRYCKI, Age 52, Executive Vice President - Executive Vice
President of the Sponsor since 1984; First Vice President, Drexel
Burnham Lambert Incorporated from 1983 to 1984.
JOHN V. FIORE, Age 39, Vice President and Secretary - Managing
Director of Furman Selz Incorporated since 1991. Attorney with the
Securities and Exchange Commission from 1986 to 1991.
ROBERT A. HERING, Age 38, Vice President - Managing Director of
the Sponsor since 1986; Assistant Secretary of the Bank of New York
from 1984 to 1986.
JOHN J. PILEGGI, Age 36, Vice President and Treasurer - Senior
Managing Director of the Sponsor since 1984.
DONALD BROSTROM, Age 36, Assistant Treasurer - Director, Fund Services, Furman
Selz Incorporated since 1986.
SHERYL HIRSCHFELD, Age 34, Assistant Secretary - Director, Corporate Secretary
Services Furman Selz Incorporated (since November 1994); formerly
Assistant to the Corporate Secretary and General Counsel at The Dreyfus
Corporation.
Trustees of the Trust not affiliated with Furman Selz receive
from the Trust an annual fee of $6,000 and a fee of $1,000 for each Board of
Trustees and Board committee meeting attended and are reimbursed for all
out-of-pocket expenses relating to attendance at meetings. Trustees who are
affiliated with Furman Selz do not receive compensation from the Trust but are
reimbursed for all out-of-pocket expenses relating to attendance at meetings.
For the year ended February 28, 1995, the Trustees, as a group, received $7,000
from the Fund in their capacity as Trustees of the Fund. The maximum total
compensation (not including expense reimbursements) paid to any one director by
the Fund and all other portfolios of the Trust on a combined basis did not
exceed $15,000. As of June 9, 1995, the Trustees and officers, as a group, owned
less than 1% of the outstanding shares of the Fund.
ADVISER. The Trust retains First Fidelity Bank, National
Association, New Jersey to act as the adviser for the Fund pursuant to a Master
Advisory Contract and Supplement with respect to the Fund ("Advisory
Contract"). First Fidelity also acts as custodian and transfer agent for the
Fund. See "Custodian, Transfer Agent and Dividend Disbursing Agent".
- 10 -
The Adviser is a national banking association which provides
commercial banking and trust business services throughout New Jersey. The
Adviser is a wholly-owned subsidiary of First Fidelity Bancorporation, whose
principal business is providing financial and related services through its
subsidiary organizations. The advisory services of the Adviser are provided
through the Asset Management Group of the Adviser's Trust Division which as of
December 31, 1993 had approximately $15 billion of client assets under
management.
The Advisory Contract provides that First Fidelity will manage
the portfolio of the Fund and will furnish to the Trust investment guidance and
policy direction in connection therewith. Pursuant to the Advisory Contract,
First Fidelity also furnishes to the Trust's Board of Trustees periodic reports
on the investment performance of the Fund.
First Fidelity has also agreed in the Advisory Contract to
provide administrative assistance in connection with the operation of the Trust
and the Fund. Administrative services provided by First Fidelity include, among
other things, (i) data processing, clerical and bookkeeping services required in
connection with maintaining the financial accounts and records for the Trust and
the Fund, (ii) compiling statistical and research data required for the
preparation of reports and statements which are periodically distributed to the
Trust's Officers and Trustees, (iii) handling general shareholder relations with
Fund investors, such as advice as to the status of their accounts, the current
yield and dividends declared to date and assistance with other questions related
to their account and (iv) compiling information required in connection with the
Trust's filings with the Securities and Exchange Commission.
For its services, the Fund pays the Adviser a monthly fee at an
annual rate of 0.50% of the Fund's average daily net assets. For the fiscal
years ended February 28, 1995, February 28, 1994, and February 28, 1993, the
Adviser waived its advisory and management fees of $29,045, $24,078, and
$22,811, respectively, in full.
SPONSOR AND DISTRIBUTOR. Shares of the Fund are offered on a
continuous basis and with a sales charge ranging from 4.50% to 1.00% of the
public offering price through FFB Funds Distributor, Inc., which acts as the
Fund's distributor. The Distributor is not obligated to sell any specific amount
of shares.
ADMINISTRATOR. Pursuant to a Master Administrative Services
Contract and Supplement thereto ("Administrative Services Contract"), Furman
Selz Incorporated ("Furman Selz") (i) provides all management and administrative
services reasonably necessary for the operation of the Trust and the Fund, other
than those services which are provided by First Fidelity pursuant to
- 11 -
the Advisory Contract; (ii) provides the Trust with office space and office
facilities reasonably necessary for the operation of the Trust and the Fund;
(iii) employs or associates with itself such persons as it believes appropriate
to assist it in performing its obligations under the Administrative Services
Contract; (iv) provides the Trust with certain persons satisfactory to the
Trust's Board of Trustees to serve as trustees, officers and employees of the
Trust, including a president, one or more vice presidents, a secretary and a
treasurer; and (v) pays the entire compensation of all of the Trust's officers
and employees and the entire compensation of the Trustees of the Trust who are
affiliated persons of Furman Selz.
For its services to the Fund, Furman Selz receives a monthly
fee at the annual rate of 0.25% of the Fund's average daily net assets. For the
fiscal years ended February 28, 1995, February 28, 1994, and February 28, 1993,
Furman Selz waived its administration fees of $14,522, $12,039 and $11,406,
respectively, in full.
DISTRIBUTION PLAN. The Trustees of the Fund have voted to adopt
a Master Distribution Plan (the "Plan") pursuant to Rule l2b-1 of the Investment
Company Act of 1940 (the "1940 Act") after having concluded that there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
The Plan provides for a monthly payment by the Fund to the Distributor in such
amounts that the Distributor may request or for direct payment by the Fund, for
certain costs incurred under the Plan, subject to periodic Board approval,
provided that each such payment is based on the average daily value of the
Fund's net assets during the preceding month and is calculated at an annual rate
not to exceed 0.50%. (Certain expenses of the Fund may be reduced in accordance
with applicable state expense limitations. See "Fees and Expenses"). The
Distributor will use all amounts received under the Plan for payments to
broker-dealers or financial institutions (but not including banks) for their
assistance in distributing shares of the Fund and otherwise promoting the sale
of Fund shares, including payments in amounts based on the average daily value
of Fund shares owned by shareholders in respect of which the broker-dealer or
financial institution has a distributing relationship. The Distributor may also
use all or any portion of such fees to pay Fund expenses such as the printing
and distribution of prospectuses sent to prospective investors; the preparation,
printing and distribution of sales literature and expenses associated with media
advertisements.
The Plan provides for the Distributor to prepare and submit to
the Board of Trustees on a quarterly basis written reports of all amounts
expended pursuant to the Plan and the purpose for which such expenditures were
made. The Plan provides that it may not be amended to increase materially the
costs which the Fund may bear pursuant to the Plan without shareholder approval
and that other material amendments of the Plan must be
- 12 -
approved by the Board of Trustees, and by the Trustees who neither are
"interested persons" (as defined in the 1940 Act) of the Trust nor have any
direct or indirect financial interest in the operation of the Plan or in any
related agreement, by vote cast in person at a meeting called for the purpose of
considering such amendments. The selection and nomination of the Trustees of the
Trust has been committed to the discretion of the Trustees who are not
"interested persons" of the Trust. The Plan and the related Distribution
Contract between the Trust and the Sponsor have been approved, and are subject
to annual approval, by the Board of Trustees and by the Trustees who neither are
"interested persons" nor have any direct or indirect financial interest in the
operation of the Plan or in the Administrative Services Contract, by vote cast
in person at a meeting called for the purpose of voting on the Plan. The Board
of Trustees and the Trustees who are not "interested persons" and who have no
direct or indirect financial interest in the operation of the Plan or in the
Distribution Contract voted to approve the Plan at a meeting held on March 26,
1987. The Plan was submitted to the shareholders of the Fund and approved at a
special meeting held on June 11, 1987. The Plan is terminable with respect to
the Fund at any time by a vote of a majority of the Trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or in the Administrative Services Contract
or by vote of the holders of a majority of the shares of the Fund. The Board of
Trustees of the Trust approved the continuance of the Plan and the Distribution
Contract with the Sponsor at a meeting of the Board of Trustees on December 8,
1994. For the fiscal years ended February 28, 1995, February 28, 1994, and
February 29, 1993, no payments were made pursuant to the Plan.
FEES AND EXPENSES. As compensation for their advisory,
administrative and management services, First Fidelity and Furman Selz are each
paid a monthly fee at the following annual rates:
<TABLE>
<CAPTION>
Fee Rate
First
Fidelity Furman Selz
-------- -----------
<S> <C> <C>
Portion of average daily
value of net assets of the
Fund ....................... 0.50% 0.25%
</TABLE>
Certain of the states in which shares of the Fund are qualified
for sale impose limitations on the expenses of the Fund. The Advisory Contract
and the Administrative Services Contract provide that if, in any fiscal year,
the total expenses of the Fund (excluding taxes, interest, brokerage commissions
and other portfolio transaction expenses (such as dealer markups), distribution
fees, other expenditures which are capitalized in accordance with generally
accepted accounting principles and extraordinary expenses, but including the
advisory and adminis-
- 13 -
trative services fees) exceed the expense limitations applicable to the Fund
imposed by the securities regulations of any state, First Fidelity and Furman
Selz will reimburse the Fund quarterly in an amount equal to 70% and 30%,
respectively, of that excess. Although there is no certainty that these
limitations will be in effect in the future, the most restrictive of these
limitations on an annual basis with respect to the Fund are currently 2.5% of
the first $30 million of average daily net assets, 2.0% of the next $70 million
of average daily net assets and 1.5% of the remaining average daily net assets.
During the year ended February 28, 1995, there were no payments or
reimbursements required as a result of these expense limitations.
The Advisory Contract and the Administrative Services Contract
will continue in effect with respect to the Fund from year to year provided such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Fund or by the Trust's Board of Trustees
and (ii) by a majority of the Trustees of the Trust who are not parties to such
contracts or "interested persons" (as defined in the 1940 Act) of any such
party. The Contracts were approved initially by the Board of Trustees, including
a majority of the Trustees who are not parties to the Contracts or interested
persons of such parties, at a meeting held on March 26, 1987 and were approved
by shareholders of the Fund at a special meeting held on June 11, 1987. Each
Contract may be terminated with respect to the Trust at any time, without the
payment of any penalty, by a vote of a majority of the outstanding voting
securities of the Trust (as defined in the 1940 Act) or by a vote of a majority
of the Trust's entire Board of Trustees on 60 days' written notice to First
Fidelity, or by First Fidelity on 60 days' written notice to the Fund. The
Advisory Contract provides that it shall terminate automatically in the event of
its assignment (as defined in the 1940 Act).
The Board of Trustees of the Trust approved the continuance of
the Fund's Advisory Contract and Administrative Services Contract at a meeting
of the Board of Trustees on December 8, 1994.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its total return in
advertisements or reports to shareholders or prospective investors. Quotations
of average annual total return for the Fund will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula: P (1 + T)n = ERV (where P = a hypothetical
initial payment of $1,000, T = average annual total return, n = the number of
years, and ERV = the ending redeemable value of the hypothetical $1,000 payment
made at the beginning of the period). All total return figures
- 14 -
reflect payment of the maximum sales load on the initial payment of the
hypothetical investment and the deduction of a proportional share of Fund
expenses on an annual basis, and assume that all dividends and distributions are
reinvested when paid.
The average annual total return for the fiscal year ended
February 28, 1995 was (1.21%). For the five year period ended February 28, 1995,
the average annual total return was 7.34%. For the period May 6, 1986
(commencement of operations) through February 28, 1995, the average annual total
return was 8.50%.
Performance information for the Fund may be compared, in
reports and promotional literature, to: (i) the Standard & Poor's 500 Stock
Index, Dow Jones Industrial Average, or other unmanaged indices so that
investors may compare the Fund's results with those of a group of unmanaged
securities widely recorded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks mutual
funds by overall performance, investment objectives, and assets, or tracked by
other services, companies, publications, or persons who rank mutual funds on
overall performance or other criteria; and (iii) the Consumer Price Index
(measure for inflation) to assess the real rate of return from an investment of
the Fund. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions for administrative and management costs and
expenses.
Performance information for the Fund reflects only the
performance of a hypothetical investment in the Fund during the particular time
period on which the calculations are based. Performance information should be
considered in light of the Fund's investment objectives and policies,
characteristics and quality of the portfolio and the market conditions during
the given time period, and should not be considered as a representation of what
may be achieved in the future.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS. Investment decisions for the Fund and for
the other investment advisory clients of First Fidelity are made with a view to
achieving their respective investment objectives. Investment decisions are the
product of many factors in addition to basic suitability for the particular
client involved. Thus, a particular security may be bought or sold for certain
clients even though it could have been bought or sold for other clients at the
same time. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling the security. In some instances, one client
may sell a particular security to another client. It also sometimes happens that
two or more clients simultaneously purchase or
- 15 -
sell the same security, in which event each day's transactions in such security
are, insofar as possible, averaged as to price and allocated between such
clients in a manner which in First Fidelity's opinion is equitable to each and
in accordance with the amount being purchased or sold by each. There may be
circumstances when purchases or sales of portfolio securities for one or more
clients will have an adverse effect on other clients. Consistent with its policy
of seeking best execution of portfolio transactions, the Fund may place orders
to purchase or sell securities with First Fidelity Brokers, Inc. First Fidelity
Brokers, Inc. will not, however, execute as principal, any transactions for or
with the Fund.
BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock
exchanges and other agency transactions involve the payment by the Fund of
negotiated brokerage commissions. Such commissions vary among different brokers.
Also, a particular broker may charge different commissions according to such
factors as the difficulty and size of the transaction. Transactions in foreign
securities generally involve the payment of fixed brokerage commissions, which
are generally higher than those in the United States. There is generally no
stated commission in the case of securities traded in the over-the-counter
markets, but the price paid by the Fund usually includes an undisclosed dealer
commission or markup. In underwritten offerings, the price paid by the Fund
includes an undisclosed, fixed commission or discount retained by the
underwriter or dealer. For the fiscal years ended February 28, 1995, February
28, 1994, and February 28, 1993 the Fund paid totals of $27,813, $31,000, and
$77,601, in brokerage commissions.
First Fidelity places all orders for the purchase and sale of
portfolio securities for the Fund and buys and sells securities for the Fund
through a substantial number of brokers and dealers. In so doing, First Fidelity
uses its best efforts to obtain for the Fund the most favorable price and
execution available, except to the extent it may be permitted to pay higher
brokerage commissions as described below. In seeking the most favorable price
and execution, First Fidelity, having in mind the Fund's best interests,
considers all factors it deems relevant, including, by way of illustration,
price, the size of the transaction, the nature of the market for the security,
the amount of the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial stability of
the broker-dealer involved and the quality of service rendered by the
broker-dealer in other transactions. The Fund will not deal with Furman Selz in
any transaction in which Furman Selz acts as principal and will not effect
transactions in the over-the-counter market using Furman Selz as either
principal or agent.
It has for many years been a common practice in the investment
advisory business for advisers of investment companies
- 16 -
and other institutional investors to receive research services from
broker-dealers which execute portfolio transactions for the clients of such
advisers. Consistent with this practice, First Fidelity receives research
services from many broker-dealers with which First Fidelity places the Fund's
portfolio transactions. These services, which in some cases may also be
purchased for cash, include such matters as general economic and security market
reviews, industry and company reviews, evaluations of securities and
recommendations as to the purchase and sale of securities. Some of these
services are of value to First Fidelity in advising various of its clients
(including the Fund), although not all of these services are necessarily useful
and of value in managing the Fund. The management fee paid by the Fund is not
reduced because First Fidelity and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of
1934 (the "Act"), First Fidelity may cause the Fund to pay a broker-dealer which
provides "brokerage and research services" (as defined in the Act) to First
Fidelity an amount of disclosed commission for effecting a securities
transaction for the Fund in excess of the commission which another broker-dealer
would have charged for effecting that transaction.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking the most
favorable price and execution available and such other policies as the Trustees
may determine, First Fidelity may consider sales of shares of the Fund as a
factor in the selection of broker-dealers to execute portfolio transactions for
the Fund.
The Fund has no restrictions upon portfolio turnover. For the
fiscal years ended February 28, 1995, February 28, 1994, and February 28, 1993,
the Fund's annual rates of portfolio turnover were 124%, 265% and 452%,
respectively.
FEDERAL INCOME TAXES
The Fund has elected to be treated as a regulated investment
company and qualified as such for its last fiscal year. The Fund intends to
continue to so qualify by complying with the provisions of the Internal Revenue
Code (the "Code") applicable to regulated investment companies so that it will
not be liable for Federal income tax with respect to amounts distributed to
shareholders in accordance with the timing requirements of the Code.
In order to qualify as a regulated investment company for a
taxable year, the Fund must, among other things, (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to loans of stock
or securities and gains from the sale or other disposition of stock or
securities or
- 17 -
foreign currency gains related to investments in stock or securities or other
income (including gains from options or forward contracts) derived with respect
to the business of investing in stock, securities or currency; (b) derive less
than 30% of its gross income from the sale or other disposition of stock or
securities or certain other investments held less than three months (excluding
some amounts included in income as a result of certain hedging transactions);
and (c) diversify its holdings so that, at the end of each quarter of its
taxable year, (i) at least 50% of the market value of the Fund's assets is
represented by cash, cash items, U.S. Government securities, securities of other
regulated investment companies and other securities limited, in the case of
other securities for purposes of this calculation, in respect of any one issuer,
to an amount not greater than 5% of the Fund's assets or 10% of the voting
securities of the issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies). As such, and
by complying with the applicable provisions of the Code, the Fund will not be
subject to Federal income tax on taxable income (including realized capital
gains) which is distributed to shareholders in accordance with the timing
requirements of the Code. Compliance with the "30% test" described in clause (b)
above may, in particular, limit the Fund's ability to engage in some
transactions involving options and short-term trading.
The amount of capital gains, if any, realized in any given year
will result from sales of securities made with a view to the maintenance of a
portfolio believed by the Fund's management to be most likely to attain the
Fund's investment objective. Such sales and any resulting gains or losses, may
therefore vary considerably from year to year. Since at the time of an
investor's purchase of shares, a portion of the per share net asset value by
which the purchase price is determined may be represented by realized or
unrealized appreciation in the Fund's portfolio or undistributed income of the
Fund, subsequent distributions (or portions thereof) on such shares may be
taxable to such investor even if the net asset value of his shares is, as a
result of the distributions, reduced below his cost for such shares and the
distributions (or portions thereof) represent a return of a portion of his
investment.
The Fund is required to report to the IRS all distributions of
dividends and capital gains, as well as the gross proceeds of share redemptions.
The Fund may be required to withhold Federal income tax at a rate of 31%
("backup withholding") from dividends (including capital gain dividends) and the
proceeds of redemptions of shares paid to non-corporate shareholders who have
not furnished the Fund with a correct taxpayer identification number and made
certain required certifications or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. In addition, the
Fund may be
- 18 -
required to withhold Federal income tax at a rate of 31% if it is notified by
the IRS or a broker that the taxpayer identification number is incorrect or that
backup withholding applies because of underreporting of interest or dividend
income.
Distributions of net investment income and net realized capital
gains will be taxable as described in the Prospectus whether made in shares or
in cash. To the extent that such distributions are attributable to qualifying
dividends received by the Fund and designated as dividends derived from domestic
corporations by the Fund, they will be eligible for the dividends-received
deduction available to corporations. In determining amounts of net realized
capital gains to be distributed, any capital loss carryovers from prior years
will be applied against capital gains. Shareholders receiving distributions in
the form of additional shares will have a cost basis for Federal income tax
purposes in each share so received equal to the net asset value of a share of
the Fund on the reinvestment date. Fund distributions will also be included in
individual and corporate shareholders' income on which the alternative minimum
tax may be imposed. Shareholders will be notified annually as to the Federal tax
status of distributions.
Any loss realized upon the redemption of shares held (or
treated as held) for six months or less will be treated as a long-term capital
loss to the extent of any long-term capital gains dividends received on the
redeemed shares. All or a portion of a loss realized upon the redemption of
shares may be disallowed to the extent shares are purchased (including shares
acquired by means of reinvested dividends) within 30 days before or after such
redemption. Exchanges are treated as redemptions for Federal tax purposes.
Different tax treatment, including a penalty on early
distributions, is accorded to accounts maintained as IRAs. Shareholders should
consult their tax advisers for more information.
Gains or losses on sales of stock or securities by the Fund
will ordinarily be long-term capital gains or losses if the stock or securities
have been held by it for more than one year. However, if the Fund writes a
covered call option which has an exercise price below the price of the
underlying stock or security at the time the call is written, or if it acquires
a put option with respect to stock or securities which have been held for less
than the applicable capital gain holding period, the holding period of such
stock or securities will be terminated or suspended for purposes of determining
long-term capital gains treatment and will start again only when the Fund enters
into a closing transaction with respect to such option or when such option
expires.
- 19 -
For purposes of the dividends-received deduction available to
corporations, dividends received by the Fund from taxable domestic corporations
in respect of any share of stock treated as debt-financed under the Code or held
by the Fund for 45 days or less (90 days or less in the case of certain
preferred stock) will not be treated as qualifying dividends. For purposes of
the dividends-received deduction, the holding period of any share of stock will
not include any period during which the Fund has an option or a contractual
obligation to sell, or has granted certain call options with respect to,
substantially identical stock or securities or, under Treasury regulations to be
promulgated, the Fund has diminished its risk of loss by holding one or more
other positions with respect to substantially similar or related property. It is
anticipated that these rules will operate so as to reduce the portion of
distributions paid by the Fund that will be eligible for the dividends-received
deduction available to corporate shareholders of the Fund. The
dividends-received deduction is reduced to the extent the shares of the Fund
with respect to which the dividends are received are treated as debt-financed
under the Code and is eliminated if the shares are deemed to have been held for
less than 46 days.
Corporate shareholders should also note that their basis in
shares of the Fund may be reduced by the untaxed portion (i.e., the portion
qualifying for the dividends-received deduction) of an "extraordinary dividend"
if the shares have not been held for at least two years prior to declaration of
the dividend. Extraordinary dividends are dividends paid during a prescribed
period which equal or exceed 10% of a corporate shareholder's basis in its Fund
shares or which satisfy an alternative test based on the fair market value of
the shares. To the extent dividend payments received by corporate shareholders
of the Fund constitute extraordinary dividends, such shareholders' basis in
their Fund shares will be reduced and any gain realized upon a subsequent
disposition of such shares will therefore be increased. The untaxed portion of
dividends received by such shareholders is also included in adjusted alternative
minimum taxable income in determining shareholders' liability under the
alternative minimum tax.
The Fund is subject to a 4% nondeductible excise tax to the
extent that it fails to distribute to its shareholders during each calendar year
an amount equal to (a) at least 98% of its ordinary investment income (excluding
long-term and short-term capital gain income) for the calendar year; plus (b) at
least 98% of its capital gain net income for the one year period ending on
October 31 of such calendar year; plus (c) any ordinary investment income or
capital gain net income from the preceding calendar year which was neither
distributed to shareholders nor taxed to the Fund during such year. The Fund
intends to distribute to shareholders each year an amount sufficient to avoid
the imposition of such excise tax.
- 20 -
The Fund's use of equalization accounting, if such method of
tax accounting is used for any taxable year, may affect the amount, timing and
character of its distributions to shareholders.
Certain of the options and forward foreign currency exchange
contracts in which the Fund may invest are so-called "section 1256 contracts".
With certain exceptions, gains or losses on section 1256 contracts generally are
considered 60% long-term and 40% short-term capital gains or losses ("60/40").
Also, section 1256 contracts held by the Fund at the end of each taxable year
(and, generally, for purposes of the 4% excise tax, on October 31 of each year)
are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized and the resulting gain or loss is treated
as 60/40 gain or loss.
Generally, the hedging transactions undertaken by the Fund may
result in "straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund. In addition,
losses realized by the Fund on a position that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which such losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the tax consequences to the Fund of hedging transactions are
not entirely clear. The hedging transactions may increase the amount of
short-term capital gain realized by the Fund which is taxed as ordinary income
when distributed to stockholders.
The Fund may make one or more of the elections available under
the Code which are applicable to straddles. If the Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to the election(s) made. The rules applicable under certain of
the elections may operate to accelerate the recognition of gains or losses from
the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the recognition of
gains or losses from the affected straddle positions, the amount which must be
distributed to shareholders, and will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not engage in such hedging transactions.
Certain requirements that must be met under the Code in order
for a Fund to qualify as a regulated investment company may limit the extent to
which a Fund will be able to engage in transactions in options and forward
contracts.
- 21 -
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues interest or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain forward contracts, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of
the security or contract and the date of disposition also are treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"section 988" gains or losses, may increase, decrease, or eliminate the amount
of a Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.
If the Fund invests in shares of an investment company
organized outside of the United States and which is classified under the Code as
a "passive foreign investment company," the Fund (or possibly, the shareholders)
may be subject to U.S. Federal income tax on a portion of an "excess
distribution" from, or of the gain from the sale of part or all of the shares
in, such company. In addition, an interest charge may be imposed with respect to
deferred taxes arising from such distributions or gains.
Because less than 50% of the total assets of the Fund will be
invested in securities of foreign issuers, shareholders of the Fund will not be
able to claim a foreign tax credit (or deduction) for foreign income taxes paid
by the Fund. However, payments of foreign taxes by the Fund will reduce the
amount of income which must be distributed to shareholders as a taxable
dividend. A shareholder which is an IRA or other tax-deferred retirement plan
would not have been able to take advantage of the foreign tax credit (or
deduction) even if it was available to shareholders of the Fund.
The foregoing discussion relates only to Federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
domestic corporations, partnerships, trusts and estates). Distributions by the
Fund also may be subject to state and local taxes, and their treatment under
state and local income tax laws may differ from the Federal income tax
treatment. Shareholders should consult their tax advisers with respect to
particular questions of Federal, state and local taxation. Shareholders who are
not U.S. persons should consult their tax advisers regarding U.S. and foreign
tax consequences of ownership of shares of the Fund, including the likelihood
that distributions to them would be subject to withholding of U.S. tax at a rate
of 30% (or at a lower rate under a tax treaty).
- 22 -
EXCHANGE PRIVILEGE
Shareholders who have held all or part of their shares in the
Fund for at least seven days may exchange those shares for shares (at their
relative asset value) of other funds for which First Fidelity is Adviser and FFB
Funds Distributor, Inc. is the Sponsor and Distributor. Call or write the
Sponsor for prospectuses and further information on these funds and on
exchanges.
Exchanges may be made by writing FFB Funds Distributor, by
telephone if the shareholder has elected telephone exchange privileges on their
Purchase Application, or through a Participating Organization and are limited to
three during every twelve-month period for each shareholder. For shareholders to
whom the minimum investment restrictions apply, the minimum amount which may be
exchanged into one of the funds in which shares are not held is $1,000; no
partial exchange may be made if, as a result, such shareholder's interest in the
fund from which the exchange is made would be reduced to less than $1,000. There
is no service charge for exchanges. Before effecting an exchange, shareholders
should review the Prospectus (and, if applicable, the prospectus for any other
fund). The exchange privilege may be modified or terminated at any time.
Exercise of the exchange privilege is treated as a sale for
Federal income tax purposes and, depending on the circumstances, a short or
long-term capital gain or loss may be realized by the shareholder.
Participating Organizations may impose additional procedural
requirements on exchanges. Any such additional requirements must comply with the
1940 Act. Customers of Participating Organizations should consult their
organization for further details.
REDEMPTIONS
Payment of redemption proceeds may be made in securities,
subject to regulation by some state securities commissions. The Trust may
suspend the right of redemption during any period when (i) trading on the New
York Stock Exchange is restricted or that Exchange is closed, other than
customary weekend and holiday closings, (ii) the Securities and Exchange
Commission has by order permitted such suspension or (iii) an emergency, as
defined by rules of the Securities and Exchange Commission, exists making
disposal of portfolio securities or determination of the value of the net assets
of the Trust not reasonably practicable.
The proceeds of redemption may be more or less than the amount
invested and, therefore, a redemption may result in a gain or loss for Federal
income tax purposes. However, if a shareholder redeems shares which he has held
for less than 36 months, any short-term capital loss realized on the redemption
of such
- 23 -
shares will be disallowed for Federal income tax purposes to the extent of any
tax-exempt distributions which the shareholder has received on the redeemed
shares.
A shareholder's account with the Fund remains open for at least
one year following complete redemption and all costs during the period will be
borne by the Trust. This permits an investor to resume investments in the Fund
during the period in an amount of $100 or more.
To be in a position to eliminate excessive shareholder expense
burdens, the Trust reserves the right to adopt a policy pursuant to which it may
redeem upon not less than 30 days' notice shares of the Fund in an account which
has a value, reduced through redemption, below $500. However, any shareholder
affected by the exercise of this right will be allowed to make additional
investments prior to the date fixed for redemption to avoid liquidation of the
account.
DETERMINATION OF NET ASSET VALUE
As indicated under "Determination of Net Asset Value" in the
Prospectus, the Fund's net asset value per share for the purpose of pricing
purchase and redemption orders is determined at 4:15 P.M. (Eastern time) on each
day the New York Stock Exchange is open for trading with the exception of
certain bank holidays. Net asset value will not be determined on the following
holidays: New Year's Day, Martin Luther King's Birthday, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Columbus Day, Election Day, Veteran's
Day, Thanksgiving Day and Christmas Day. The net asset value per share is
computed by dividing the value of the assets of the Fund, less its liabilities,
by the number of shares of the Fund outstanding.
When the Fund writes an option, an amount equal to the premium
received by the Fund is included in the Fund's Statement of Assets and
Liabilities as an asset and as an equivalent liability. The amount of the
liability will be subsequently market-to-market daily to reflect the current
market value of the option written. The current market value of a written option
is the last sale on the principal exchange on which such option is traded or, in
the absence of a sale, the last offering price.
The premium paid by the Fund for the purchase of a put option
will be deducted from its assets and an equal amount will be included in the
asset section of the Fund's Statement of Assets and Liabilities as an investment
and subsequently adjusted to the current market value of the option. For
example, if the current market value of the option exceeds the premium paid, the
excess would be unrealized appreciation and, conversely, if the premium exceeds
the current market value, such excess would be unrealized depreciation. The
current market value of a purchased
- 24 -
option will be the last sale price on the principal exchange on which the option
is traded or, in the absence of a sale, the last bid price.
The maximum public offering price of a share of the Fund on
February 28, 1995 was $11.41.
OTHER INFORMATION
The Trust was organized as a Massachusetts business trust on
March 25, 1987 as a successor to FFB Money Trust, which was organized on
December 4, 1985. The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest with par
value of $0.001 per share and which may be issued in series or classes. Pursuant
to that authority, the Board of Trustees has authorized the issuance of multiple
series of shares, one of which represents shares in the Fund. The Board of
Trustees may, in the future, authorize the issuance of other series of stock
representing shares of additional investment portfolios. Pending receipt of
regulatory approval by the Securities and Exchange Commission, the Trust may in
the future begin to offer multiple classes of shares within each investment
portfolio.
Generally, all shares of the Fund have equal voting rights and
will be voted in the aggregate, and not by series, except where voting by series
is required by law or where the matter involved affects only one series. The
Trust does not intend to hold annual meetings of shareholders. The Trustees may
call special meetings of shareholders for action by shareholder vote, including
the removal of any or all of the Trustees, as may be required by either the
Declaration of Trust or the Investment Company Act of 1940. The Trustees shall
call a meeting of shareholders for the purpose of voting upon the removal of any
Trustee when requested in writing to do so by the record holders of not less
than 10% of the Trust's outstanding shares. As used in the Prospectus and in
this Statement of Additional Information, the term "majority of the outstanding
voting securities," when referring to the approvals to be obtained from
shareholders in connection with general matters affecting the Fund and all
additional investment portfolios (e.g., election of Trustees and ratification of
independent accountants), means the vote of the lesser of (i) 67% of the Trust's
shares represented at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Trust's outstanding shares. The term "majority," when referring to the
approvals to be obtained from shareholders in connection with matters affecting
the Fund or any other single portfolio (e.g., annual approval of investment
management contracts), means the vote of the lesser of (i) 67% of the shares of
the portfolio represented at a meeting if the holders of more than 50% of the
outstanding shares of the portfolio are present in person or by proxy or (ii)
more than 50% of the outstanding shares of the
- 25 -
portfolio. Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held.
Each share of a portfolio of the Trust represents an equal
proportionate interest in that portfolio with each other share of the same
portfolio and is entitled to such dividends and distributions out of the income
earned on the assets belonging to that portfolio as are declared in the
discretion of the Trust's Board of Trustees. In the event of the liquidation or
dissolution of the Trust, shares of a portfolio are entitled to receive the
assets attributable to that portfolio which are available for distribution, and
a proportionate distribution, based upon the relative net assets of the
portfolios, of any general assets not belonging to a portfolio which are
available for distribution.
Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by the Trust.
PRINCIPAL SHAREHOLDERS
As of June 9, 1995, the following persons owned of record or
beneficially 5% or more of the Fund's shares:
<TABLE>
<CAPTION>
SHARES OWNED PERCENTAGE OWNED
<S> <C> <C>
First Fidelity Bank, N.A. N.J. 689,955 74.1%
c/p Asset Management
Attn: Joanne Monteiro
Broad & Walnut Streets
Philadelphia, PA 19109
</TABLE>
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
First Fidelity has been retained to act as custodian, transfer
agent and dividend disbursing agent for the Fund pursuant to a Master Custodian
Agreement ("Custodian Agreement") and a Master Agency Agreement ("Agency
Agreement"), First Fidelity's address is 765 Broad Street, Newark, New Jersey
07102.
Under the Custodian Agreement, First Fidelity maintains a
custody account or accounts in the name of the Fund; receives and delivers all
assets for the Fund upon purchase and upon sale or maturity; collects and
receives all income and other payments and distributions on account of the
assets of the Fund; pays all expenses of the Fund; receives and pays out cash
for purchases and redemptions of shares of the Fund and pays out cash if
requested for dividends on shares of the Fund; calculates the daily value of the
assets of the Fund; determines the daily net asset value per share, net
investment income and daily dividend rate for the Fund; and maintains records
for the foregoing services. Under the Custodian Agreement, the Trust has agreed
to pay First Fidelity for furnishing custodian services a fee with
- 26 -
respect to the Fund at an annual rate of 1/15th of l% on the first $20 million,
1/30th of l% on the next $80 million and 1/100th of l% on all over $100 million
of average daily net assets plus certain transaction changes and out-of-pocket
expenses. For the fiscal years ended February 28, 1995, February 28, 1994, and
February 28, 1993, First Fidelity received custodial fees and out-of-pocket
expenses of $10,070, $10,665 and $10,327, from the Fund.
Under the Agency Agreement, First Fidelity performs general
transfer agency and dividend disbursing services. It maintains an account in the
name of each shareholder of record in the Fund reflecting purchases,
redemptions, daily dividend accruals and monthly dividend disbursements,
processes purchase and redemption requests, issues and redeems shares of the
Fund, addresses and mails all communications by the Trust to its shareholders,
including financial reports, other reports to shareholders, dividend and
distribution meetings, and maintains records for the foregoing services. Under
the Agency Agreement, the Trust has agreed to pay $15.00 per account and
subaccount (whether maintained by First Fidelity or a correspondent bank of
First Fidelity (which does not include Participating Organizations)) per annum.
In addition, the Trust has agreed to pay First Fidelity certain transaction
charges, wire charges and out-of-pocket expenses incurred by First Fidelity.
Furman Selz also acts as Sub-Transfer Agent and receives a $15.00 annual per
account fee plus reimbursement of out-of-pocket expenses. For the fiscal year
ended February 28, 1993 and the fiscal period March 1, 1993 through October 31,
1993, First Fidelity received $3,783 and $1,885, respectively, in transfer agent
services fees. For the fiscal period November 1, 1993 through February 28, 1994
and the fiscal year ended February 28, 1995, Furman Selz received $1,057 and
$3,148, respectively, in sub-transfer agent services fees.
SERVICING AGREEMENTS
The Agency Agreement further provides that First Fidelity may
enter into agreements (the "Servicing Agreements") with Participating
Organizations (which will perform certain administrative and subaccounting
services for investors who maintain accounts at the Participating Organizations
in lieu of First Fidelity's transfer agency and dividend disbursing services.
Each Participating Organization will receive monthly payments which in some
cases may be based upon expenses that the Participating Organization has
incurred in the performance of its services under the Servicing Agreement. The
payments will not exceed on an annualized basis an amount equal to 0.25% of the
average daily value during the month of Fund shares owned by customers in
subaccounts of which the Participating Organization is record owner as nominee
for its customers. Such payments will be separately negotiated with each
Participating Organization and will vary depending upon such factors as the
services provided
- 27 -
and the costs incurred by each Participating Organization. The payments may be
more or less than the fees payable to First Fidelity for similar services.
The payments will be made by the Fund to First Fidelity which
will, in turn, pay the Participating Organizations pursuant to the Servicing
Agreements. First Fidelity will not keep any portion of the payments, and will
not receive any compensation as transfer or dividend disbursing agent with
respect to the subaccounts maintained by the Participating Organization. The
Board of Trustees will review, at least quarterly, the amounts paid and the
purposes for which such expenditures were made pursuant to the Servicing
Agreements. No fees have been paid by the Fund for the year ended February 28,
1995 pursuant to Servicing Agreements.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP serves as the independent accountants for
the Trust. KPMG Peat Marwick LLP provides audit services, tax return preparation
and assistance and consultation in connection with review of Securities and
Exchange Commission filings. KPMG's address is 345 Park Avenue, New York, New
York 10154.
FINANCIAL STATEMENTS
Financial statements for the Fund as of February 28, 1995 and
for its fiscal year then ended, including notes thereto, and the Report of KPMG
Peat Marwick LLP thereon are incorporated by reference from the Trust's Annual
Report for the year ended February 28, 1995. Additional copies of such Annual
Report may be obtained without charge by calling the Distributor at the number
listed on the front page of this Statement of Additional Information. A copy of
the Annual Report delivered together with this Statement of Additional
Information should be retained for future reference.
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