THE FFB LEXICON FUND
CAPITAL APPRECIATION EQUITY FUND
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
September 28
October 2, 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 Capital Appreciation 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 your approval is
sought 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 proposals contained in the accompanying
Prospectus/Proxy Statement provides following the Merger for a provide
for the combination of your Fund with the Evergreen Growth and Income
Fund (the "Evergreen Fund"), a mutual fund advised by Evergreen Asset,
following the Merger. 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"). As of
June 30, 1995, the Capital Appreciation Equity FFB Fund had net assets
of approximately $146.6 million and the Evergreen Fund had approximately
$125.9 million of net assets. If the Reorganization had taken place as
of June 30, 1995, the Evergreen Fund's net assets would have been
approximately $272.5 million. I believe that the combinations
combination will achieve the goal of efficient investment management and
delivery of shareholder services.
Since Assuming the Merger is consummated, it will take place prior <PAGE>
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 The FFB Lexicon Fund are also seeking your
approval is sought of an Interim Investment Advisory Agreement with
Evergreen Asset. 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 Class Y 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 The FFB Lexicon Fund have called a special meeting
of shareholders of the FFB Fund to be held on November 13 21, 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 1-800-833-8974.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED AS
SOON AS POSSIBLE.
Sincerely,
_________________________
David G. Lee, President
The FFB Lexicon Fund
-2- <PAGE>
[SUBJECT TO COMPLETION, AUGUST 25, 1995 PRELIMINARY COPY]
THE FFB LEXICON FUND
CAPITAL APPRECIATION EQUITY FUND
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 13 21, 1995
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of the Capital Appreciation Equity Fund (the "FFB Fund"), a
series of The FFB Lexicon Fund, will be held at the offices of SEI
Financial Management Corporation, 680 East Swedesford Road, Wayne,
Pennsylvania 19087 on November 13, 1995 at 10:00 a.m First Fidelity
Bank, N.A., 123 South Broad Street, 5th Floor, Philadelphia,
Pennsylvania 19109 on November 21, 1995 at 2:00 p.m. for the following
purposes:
1. To consider and act upon approve or disapprove the Agreement and
Plan of Reorganization (the "Plan") dated as of _______________September
19 , 1995, providing for the acquisition of substantially all of the
assets of the FFB Fund by the Evergreen Growth and Income Fund (the
"Evergreen 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 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 approve or disapprove the Interim
Investment Advisory Agreement between the FFB Fund and Evergreen Asset
Management Corp.
3. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.
The Trustees of The FFB Lexicon Fund have fixed the close of
business on September 8, 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
Richard W. Grant
Secretary
September 28 October 2, 1995
-2- <PAGE>
INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and may help to avoid the time and expense involved in
validating your vote if you fail to sign your proxy card(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. (1) ABC Corp.
John Doe, Treasurer
(2) ABC Corp. (2) John Doe, Treasurer
c/o John Doe, Treasurer
(3) ABC Corp. Profit Sharing Plan (3) John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust (1) Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee (2) Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. (1) John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith, Jr. (2) John B. Smith, Jr., Executor
-3- <PAGE>
PROSPECTUS/PROXY STATEMENT DATED SEPTEMBER 25, 1995
Acquisition of Assets of
CAPITAL APPRECIATION EQUITY FUND
OF
THE FFB LEXICON FUND
2 Oliver Street
Boston, Massachusetts 02109
By and in Exchange for Shares of
EVERGREEN GROWTH AND INCOME FUND
2500 Westchester Avenue
Purchase, New York 10577
This Prospectus/Proxy Statement is being furnished to shareholders
of Capital Appreciation Equity Fund (the "FFB Fund"), a series of The
FFB Lexicon Fund, 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, 21, 1995 at 10: 2:00 a.m p.m. Eastern Time, at the
offices of SEI Financial Management Corporation, 680 East Swedesford
Road, Wayne, Pennsylvania 19087 First Fidelity Bank, N.A., 123 South
Broad Street, 5th Floor, Philadelphia, Pennsylvania 19109, and any
adjournments thereof (the "Meeting"). The Plan provides for
substantially all of the assets of the FFB Fund to be acquired by the
Evergreen Growth and Income Fund (the "Evergreen 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 (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 multiplying the shares outstanding of each class of the FFB Fund
to be acquired by the ratio of computed by dividing the net asset value
per share of the Evergreen Fund and each such class of the FFB Fund by
the net asset value per share of the Evergreen 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 Evergreen Asset Management
Corp. (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 <PAGE>
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 Fund and the FFB Fund are combined
together (scheduled for on or about January 19, 1996).
The FFB Lexicon Fund currently consists of the FFB Fund and six
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 Intermediate Government
Securities Fund and the Fixed Income 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 Lexicon Fund. 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.
The Evergreen Fund is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Evergreen Fund seeks to achieve a return composed of
capital appreciation in the value of its shares and current income.
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
for dated August 31, 1994 and 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.
The Prospectuses of the Evergreen Fund dated July 7, 1995, its
Annual 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
-2- <PAGE>
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 December 30, 1994 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
680 East Swedesford Road, Wayne, Pennsylvania 19087 or by calling
toll-free 1-800-833-8974.
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.
-3- <PAGE>
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-ADVISER AND ADMINISTRATOR...........
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................................................
-4-<PAGE>
VOTING INFORMATION CONCERNING THE MEETING.............................
FINANCIAL STATEMENTS AND EXPERTS......................................
LEGAL MATTERS.........................................................
OTHER BUSINESS........................................................
-5- <PAGE>
COMPARISON OF FEES AND EXPENSES
The amounts for Class Y shares of the Evergreen Fund set forth in
the following tables and examples are based on the expenses for the
fiscal year ended December 31, 1995 1994. The amounts for Investor Class
and Institutional Class shares of the FFB Fund set forth in the
following tables and in the examples are estimated based on the
experience of the FFB Fund Investor Class and Institutional Class shares
for the fiscal year ended August 31, 1994, in each case adjusted for
voluntary expense waivers 1995. The FFB Fund Investor Class commenced
operations on May 2, 1995. The amounts for the Evergreen Fund Pro Forma
are based on the combined expenses expected for the twelve months 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 Investor Class and Institutional Class 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.
COMPARISON OF CLASS Y SHARES OF THE EVERGREEN FUND WITH
INVESTOR AND INSTITUTIONAL CLASS SHARES OF THE FFB FUND
<TABLE>
<CAPTION>
FFB FUND EVERGREEN
EVERGREEN INVESTOR INSTITUTIONAL FUND
FUND CLASS CLASS PRO FORMA
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..... 0% 4.50% 0% 0%
Maximum Sales Load
Imposed on Reinvested Dividends
(as a percentage of offering price)... None None None None
Contingent Deferred Sales Charge......... None None None None
Exchange Fee (applies only after 4
exchanges per year)..................... $5 None None $5
Redemption Fees.......................... None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily
net assets)
Management Fees.......................... 1.00% 0.75%(1) 0.75%(1) 1.00%
12b-1 Fees............................... ---- 0.00%(2) --- ----
Other Expenses........................... 0.33% 0.24%(3) 0.24%(3) 0.15%
Annual Fund Operating Expenses........... 1.33% 0.99%(4) 0.99%(4) 1.15%
</TABLE>
-6- <PAGE>
(1) The investment adviser has agreed to voluntarily waive a portion of
its fees. Investor Class shares commenced operations on May 2, 1995.
Advisory fees after voluntary fee waivers of 0.04% were 0.71% for the
fiscal period ended August 31, 1995. Advisory fees after voluntary fee
waivers of 0.20% for the Institutional Class were 0.55% for the fiscal
year ended August 31, 1995. Fee waivers are voluntary and may be
terminated at any time. Absent fee waivers, Advisory Fees would be
0.75%. The Advisory Fee includes amounts paid to the investment adviser
for custody services.
(2) Although the FFB Fund has adopted a 12b-1 Plan for the Investor
Class shares, no payments have been made to date and no payments will be
made for the fiscal year ended August 31, 1995 through January 19, 1996,
the scheduled closing date of the Reorganization. Absent this
agreement, 12b-1 fees would be 0.50%.
(3) Includes administrative expenses of 0.17% of average net assets.
Administrative expenses include amounts paid to the administrator for
transfer agency services.
(4)(4) Without waiver or reimbursement of Fund expenses, Annual Fund
Operating Expenses would be 1.48% net of fee waivers were 0.95% for
Investor Class shares and 0.98% 0.79% for Institutional Class shares for
the period ended August 31, 1995.
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 Investor Class and Institutional
Class shares of the FFB Fund for the periods specified, assuming (i) a
5% annual return, and (ii) redemption at the end of such period.
<TABLE>
<CAPTION>
EVERGREEN FFB FUND EVERGREEN FUND
FUND CLASS Y INVESTOR INSTITUTIONAL CLASS Y SHARES
SHARES CLASS CLASS PRO FORMA
<S> <C> <C> <C> <C>
After 1 year........ $14 $55 $10 $12
After 3 years....... $42 $75 $32 $37
After 5 years....... $73 $97 $55 $63
After 10 years...... $160 $161 $121 $140
</TABLE>
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.
-7- <PAGE>
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 DECEMBER 30, 1994 (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")."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 multiplying the shares outstanding of each class
of the FFB Fund to be acquired by the ratio of computed by dividing the
net asset value per share of the Evergreen Fund and the FFB each such
class of the FFB Fund by the net asset value per share of the Evergreen
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 The FFB Lexicon Fund, 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 THE FFB LEXICON FUND RECOMMENDS APPROVAL
BY SHAREHOLDERS OF THE FFB FUND OF THE PLAN EFFECTING THE
REORGANIZATION.
The Trustees of the Evergreen Fund have also approved the Plan, and
accordingly, the Evergreen Fund's participation in the Reorganization.
Approval of the Reorganization Plan 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."
-8- <PAGE>
Since Assuming the merger (the "Merger") of First Fidelity
Bancorporation ("FFB") with and into a wholly-owned subsidiary of First
Union Corporation ("First Union") is consummated, it 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 the FFB Fund, arrangements
have been made to enter into the Interim Advisory Agreement with
Evergreen Asset Management Corp. 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 The FFB Lexicon Fund 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 to achieve a
-9-<PAGE>
return composed of capital appreciation in the value of its shares and
current income. The Evergreen Fund seeks to achieve its investment
objective by investing in the securities of companies which are
undervalued in the marketplace relative to those companies' assets,
breakup value, earnings or potential earnings growth. The investment
objective of the FFB Fund is long term capital appreciation. In
pursuing this objective, the Fund invests primarily in a diversified
portfolio of common stocks believed by its investment adviser to be
undervalued relative to the market and their historic valuation.
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 the Investor Class and Institutional Class 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
SINCE INCEPTION
1 YEAR 5 YEAR INCEPTION DATE
Evergreen Fund
Class Y shares......... 24.48% 13.36% 12.69% 10/15/86
FFB Fund*
Investor Class shares... N/A N/A 9.64%** 5/2/95
Institutional Class
shares................ 21.51% N/A 9.45% 11/1/91
------------------
* 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.
** Not annualized.
MANAGEMENT OF THE FUNDS
The overall management of the Evergreen Fund and of The FFB Lexicon
Fund is the responsibility of, and is supervised by, their respective
Board of Trustees.
INVESTMENT ADVISERS, SUB-ADVISER AND ADMINISTRATOR
Evergreen Fund. Evergreen Asset Management Corp. ("Evergreen
-10- <PAGE>
Asset") serves as investment adviser to the Evergreen Fund. Evergreen
Asset succeeded on June 30, 1994 to the advisory business of a
corporation with the same name, but under different ownership, which was
organized in 1971. Evergreen Asset, with its predecessors, has served
as investment adviser to the Evergreen Family family of mutual funds
since 1971. Evergreen Asset is a wholly-owned subsidiary of First Union
National Bank of North Carolina ("FUNB"). FUNB is a subsidiary of First
Union, one of the ten largest bank holding companies in the United
States. The Capital Management Group of FUNB and Evergreen Asset manage
the Evergreen family of mutual funds with assets of approximately $8.7
billion as of June 30, 1995. For further information regarding
Evergreen Asset, FUNB and First Union, see "Management of the Funds --
Investment Advisers" in the Prospectus of the Evergreen Fund.
Evergreen Asset manages investments, provides various
administrative services and supervises the daily business affairs of the
Evergreen Fund subject to the authority of the Trustees. Evergreen
Asset is entitled to receive from the Evergreen Fund an annual fee equal
to 1.00% of average daily net assets of the Evergreen Fund on the first
$750 million in assets, 0.9% of average daily net assets on the next
$250 million in assets and 0.8% of average daily net assets in excess of
$1 billion. The fee paid by the Evergreen Fund is higher than the rate
paid by most other investment companies. From time to time Evergreen
Asset may, at its discretion, also reduce or waive its fee or reimburse
the Evergreen Fund for certain of its other expenses in order to reduce
its expense ratio. Evergreen Asset may reduce or cease these voluntary
waivers and reimbursements at any time.
Evergreen Asset has entered into a sub-advisory agreement with
Lieber & Company which provides that Lieber & Company's research
department and staff will furnish Evergreen Asset with information,
investment recommendations, advice and assistance, and will be generally
available for consultation on the Evergreen Fund. Lieber & Company will
be reimbursed by Evergreen Asset in connection with the rendering of
services on the basis of the direct and indirect costs of performing
such services. There is no additional charge to the Evergreen Fund for
the services provided by Lieber & Company. During the term of the
Interim Advisory Agreement described below, Lieber & Company will not
receive any compensation for its services as sub-adviser to the FFB
Fund. The address of both Evergreen Asset and Lieber & Company is 2500
Westchester Avenue, Purchase, New York 10577. Lieber & Company is an
indirect, wholly-owned, subsidiary of First Union.
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 custodian for the FFB Fund.
Fees for custodian services are included in First Fidelity's advisory
fee.
SEI Financial Management Corporation ("SEI"), a wholly-owned
-11- <PAGE>
subsidiary of SEI Corporation, acts as administrator of the FFB Fund.
SEI provides personnel, office space and all management and
administrative services reasonably necessary for the operation of The
FFB Lexicon Fund and the FFB Fund (such as maintaining the FFB Fund's
books and records, monitoring compliance with various state and Federal
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 SEI are entitled to a monthly
fee at an annual rate of 0.75% and 0.17%, respectively, of the FFB
Fund's average daily net assets. The advisory fee paid by the FFB Fund
is higher than the rate paid by most investment companies. For the
fiscal year ended August 31, 1994 1995, First Fidelity and SEI received
a an aggregate fee equal to 0.32% 0.55% and 0.17%, respectively, of the
FFB Fund's average daily net assets.
PORTFOLIO MANAGEMENT
The portfolio manager of the Evergreen Fund is Edmund H. Nickin,
Jr. C.F.A. Mr. Nickin has served as the Fund's principal manager since
its inception.
DISTRIBUTION OF SHARES
Evergreen Funds Distributor, Inc. ("EFD"), an affiliate of Furman
Selz Incorporated, acts as underwriter of the Evergreen Fund's shares.
EFD distributes the Evergreen Fund shares directly or through
broker-dealers, including an affiliate of FUNB, 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 consummated,
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" in the Evergreen Fund's
Prospectus. Class A, Class B and Class C shares are further described
in a separate Evergreen Fund prospectus.
-12- <PAGE>
SEI Financial Services Company ("SEI Financial"), a wholly-owned
subsidiary of SEI Corporation, acts as underwriter of the FFB Fund's
shares. There are two Classes of shares outstanding, Investor Class and
Institutional Class. Investor Class shares are sold with an initial
sales charge ranging from 4.5% to 1%. Institutional Class shares are
sold without any sales charges. The FFB Fund has adopted for its
Investor Class shares 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 for its Investor Class shares a
distribution plan (the "FFB Plan") pursuant to Rule 12b-1 of the 1940
Act. The FFB Plan provides for a fee payable by the FFB Fund to SEI
Financial at the annual rate of up to 0.50% of the Fund's average daily
net assets. No payments under the FFB Plan have been made to date and
no payments will be made for the fiscal year ended August 31, 1995.
through January 19, 1996, the scheduled closing date for the
Reorganization.
PURCHASE AND REDEMPTION PROCEDURES
Information concerning applicable sales charges, distribution-
related fees and shareholder servicing-related fees are is 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 Class Y shares of the Evergreen Fund and Investor Class
and Institutional Class shares of the FFB Fund is $1,000 ($250 for FFB
Fund IRA accounts). There is no minimum for subsequent purchases of
Evergreen Fund shares. The minimum for subsequent purchases of FFB Fund
Investor Class and Institutional Class shares is $100 ($50 for FFB Fund
IRA accounts). 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 (with respect to its Investor Class
shares) each may involuntarily redeem shareholders' accounts that have
less than $1,000 (less than $250 for FFB Fund IRA accounts) of invested
funds. 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.
-13- <PAGE>
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 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 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
monthly. 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 21, 1995), to have
their dividends and/or distributions reinvested, will have dividends
and/or distributions received from the FFB Evergreen 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 21, 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.
-14-<PAGE>
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. However, the Evergreen Fund uses a "value timing"
approach in purchasing securities (see "Comparison of Investment
Objectives and Policies"). Consequently, an investment in the Evergreen
Fund may involve more risk than other equity funds. There is no
assurance that investment performances 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. The risks involved in this strategy are described in the
"Investment Practices and Restrictions - Options and Futures" section in
the Evergreen Fund's Prospectus.
The Evergreen Fund may also invest up to 5% of its total assets in
securities which are rated below investment grade, commonly known as
junk bonds. Investments in junk bonds are subject to greater risk of
loss of principal and interest.
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 nation's sixth largest bank holding company, with assets of
approximately $118.5 billion based on total assets. 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 27th 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 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 of common stock.
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.
-15- <PAGE>
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 The FFB Lexicon Fund has considered and
approved the Reorganization, including entry by The FFB Lexicon Fund 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 and into a wholly-
owned subsidary of First Union. FFB is the parent company of First
Fidelity, investment adviser to the mutual funds which comprise The FFB
Lexicon Fund. The Merger will cause, as a matter of law, termination of
the investment advisory agreement between each of the First Fidelity
Funds portfolio of The FFB Lexicon Fund 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 First Fidelity and FUNB reviewed with the
Trustees various factors about the Funds and the proposed
Reorganization. There Except as described above in "Risks," 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 at June 30, 1995, had
net assets of approximately $146.6 million. The Evergreen Fund's net
assets at such date were approximately $125.9 million. if If the
Reorganization had taken place as of June 30, 1995, the Evergreen Fund's
net assets would have been approximately $272.5 billion and million.
First Fidelity and FUNB expect that the substantially increased assets
of the Evergreen Fund will result in economies of scale and the delivery
of more efficient investment management and shareholder services.
In addition, assuming that an alternative to the Reorganization
would be to propose that the FFB Fund be separately 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 Funds could result in both funds Funds being
disadvantaged due to an inability to achieve optimum size, performance
-16- <PAGE>
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 The FFB Lexicon Fund 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 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.
During their consideration of the Reorganization, the Trustees met
with FFB Fund counsel and counsel to the Independent Trustees regarding
the legal issues involved. The Trustees of the Evergreen Fund 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.
-17- <PAGE>
THE TRUSTEES OF THE FFB LEXICON FUND 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
multiplying the shares outstanding of each class of the FFB Fund to be
acquired by the ratio of computed by dividing the net asset value per
share of the Evergreen Fund and each Class each such class of the FFB
Fund by the net asset value per share of the Evergreen 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 class will be determined by dividing
assets, less liabilities, in each case attributable to the respective
Class 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' each Fund's
respective portfolio securities. The method of valuation employed will
be consistent with the procedures set forth in the Prospectuses and
Statement of Additional Information of 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 on or prior to the Closing Date (after reductions
for any capital loss carryforward).
As soon after the Closing Date as conveniently practicable, the
-18- <PAGE>
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. In connection with such termination, the
FFB Fund will file with the SEC an application for termination as a
registered investment company.
The consummation of the Reorganization is subject to the conditions
set forth in the Plan, including approval by 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. 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 Lexicon Fund 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 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
-19-<PAGE>
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)(D) 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 recognize a taxable gain or loss equal to the
difference between his or her tax basis in his or her FFB Fund shares
-20-<PAGE>
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.
It is not expected that the securities of the combined portfolio
will be sold in significant amounts in order to comply with the policies
and investment practices of the Evergreen Fund.
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
CLASS Y
FFB FUND SHARES
INVESTOR INSTITUTIONAL EVERGREEN FUND PRO FORMA
CLASS CLASS CLASS Y FOR REOR-
SHARES SHARES SHARES GANIZATION
Net Assets............ $60,762 $154,431,503 $115,496,164 $269,988,429
Shares Outstanding*.. 4,485 11,396,346 6,344,228 14,830,520
Net Asset Value per
Share............... $ 13.55 $ 13.55 $ 18.20 $ 18.20
* Had the Reorganization been consummated on August 31, 1995, the FFB
Fund would have received ________8,486,292 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 8, 1995 (the "Record Date"), there were the
following number of each Class of shares of beneficial interest of the
-21- <PAGE>
FFB Fund outstanding: Investor Class -- ________________4,485;
Institutional Class -- ________________11,436,628.
As of the Record Date, the officers and Trustees of The FFB Lexicon
Fund beneficially owned as a group less than 1% of the outstanding
shares of the FFB Fund. To The FFB Lexicon Fund'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:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER PERCENTAGE TOTAL SHARES
NAME AND ADDRESS CLASS OF SHARES OF CLASS OUTSTANDING
<S> <C> <C> <C> <C>
FFB Savings Growth Equity Fund Institutional 4,118,858 35.98% 35.98%
First Fidelity Bank,
N.A., N.J.
Broad and Walnut Streets
Philadelphia, PA 19109
</TABLE>
* Most of the shares held by First Fidelity are in accounts for the
Bank's fiduciary, agency or custodial customers
As of September 8, 1995, the following number of each Class of the
shares of the Evergreen Fund were outstanding: Class A -- _____________
693,895; Class B -- ___________1,701,500; Class C -- __________78,149
and Class Y -- _____________6,529,253.
As of the Record Date, the officers and Trustees of the Evergreen
Fund beneficially owned as a group an aggregate of 114,115 shares
(1.41%) 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>
PERCENTAGE OF
NUMBER PERCENTAGE TOTAL SHARES
NAME AND ADDRESS CLASS OF SHARES OF CLASS OUTSTANDING
<S> <C> <C> <C> <C>
Charles Schwab & Co. Inc. Y 785,770 12.00% 8.73%
Reinvest Account
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
First Union National Bank/EB/INT Y 468,689 7.16% 5.21%
Cash Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street St.
3rd Floor
CMG 1151
Charlotte, NC 28202-1911
First Union National Bank/EB/INT Y 1,178,073 18.00% 13.09%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street
3rd Floor
CMG 1151
Charlotte, NC 28202-1911
Stephen A. Lieber Y 498,995 7.62% 5.54%
c/o Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
</TABLE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its
entirety by the descriptions of the respective investment objectives,
policies and restrictions set forth in the respective Prospectuses and
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 (formerly known as
the Evergreen Value Timing Fund) is to achieve a return composed of
capital appreciation in the value of its shares and current income. The
Evergreen Fund's investment objective is a fundamental policy which
cannot be changed without shareholder approval. There can be no
assurance that the Fund's investment objective will be achieved.
The Evergreen Fund seeks to achieve its investment objective by
investing in the securities of companies which are undervalued in the
marketplace relative to those companies' assets, breakup value, earnings
or potential earnings growth. These companies are often found among
those which have had a record of financial success but are currently in
disfavor in the marketplace for reasons the Evergreen Fund's investment
adviser perceives as temporary or erroneous. Such investments when
successfully timed are expected to be the means for achieving the
Evergreen Fund's investment objective. This inherently contrarian
approach may require greater reliance upon the analytical and research
capabilities of the Evergreen Fund's investment adviser than an
investment in certain other equity funds. Consequently, an investment
in the Evergreen Fund may involve more risk than other equity funds.
-23-<PAGE>
The Evergreen Fund should not be considered suitable for investors who
are unable or unwilling to assume the risks of loss inherent in such a
program. Nor should the Evergreen Fund be considered a balanced or
complete investment program.
The Evergreen Fund will use the "value timing" approach as a
process for purchasing securities when events indicate that fundamental
investment values are being ignored in the marketplace. Fundamental
investment value is based on one or more of the following: assets --
tangible and intangible (examples of the latter include brand names or
licenses), capitalization of earnings, cash flow or potential earnings
growth. A discrepancy between market valuation and fundamental value
often arises due to the presence of unrecognized assets or business
opportunities, or as a result of incorrectly perceived or short-term
negative factors. Changes in regulations, basic economic or monetary
shifts and legal action (including the initiation of bankruptcy
proceedings) are some of the factors that create these capital
appreciation opportunities. If the securities in which the Evergreen
Fund invests never reach their perceived potential or the valuation of
such securities in the marketplace does not in fact reflect significant
undervaluation, there may be little or no appreciation or a depreciation
in the value of such securities.
The Evergreen Fund will invest primarily in common stocks and
securities convertible into or exchangeable for common stock. It is
anticipated that the Evergreen Fund's investment in these securities
will contribute to the Evergreen Fund's return primarily through capital
appreciation. In addition, the Evergreen Fund will invest in
nonconvertible preferred stocks and debt securities. It is anticipated
that the Evergreen Fund's investments in these securities will also
produce capital appreciation but the current income component of return
will be a more significant factor in their selection. However, the
Evergreen Fund will invest in nonconvertible preferred stock and debt
securities only if the anticipated capital appreciation plus income from
such investments is equivalent to that anticipated from investments in
equity or equity-related securities. The Evergreen Fund may also write
covered call options, engage in short sales of securities (provided the
Fund owns or has the right to acquire the securities sold short) and
invest up to 5% of its total assets in debt securities which are rated
below investment grade, commonly known as "junk bonds"." Investments of
this type are subject to greater risk of loss of principal and interest.
If any security invested in by the Evergreen Fund loses its credit
rating or has its credit rating reduced after the Fund has purchased it,
the Fund is not required to sell or otherwise dispose of the security,
but may consider doing so.
The investment objective of the FFB Fund is long term capital
appreciation. The FFB Fund invests primarily in a diversified portfolio
of common stocks which, in the opinion of the Fund's investment adviser,
are undervalued relative to the market and their historic valuation.
The investment adviser considers common stocks to be appropriate for the
FFB Fund if they have a strong potential for improvement in future
-24- <PAGE>
earnings and appreciation and a medium to high capitalization ($500
million and higher). Under normal conditions at least 75% of the FFB
Fund's assets will be invested in common stocks of the type described
above. The remainder of the FFB Fund's assets may also be invested in
the following: preferred stocks, securities (debt securities, warrants
and preferred stocks) convertible into common stock, covered call
options, U.S. dollar denominated securities of foreign issuers
(including American Depositary Receipts that are traded on exchanges or
listed on NASDAQ), money market securities and repurchase agreements.
The FFB Fund may not invest in "junk bonds." The FFB Fund has not
adopted a policy with respect to the minimum acceptable credit rating
with respect to debt securities, convertible securities and money market
securities. In addition, the FFB Fund has not adopted a formal policy
with respect to the maximum percent of the Fund's assets which may be
invested in foreign securities and American Depositary Receipts. As a
matter of operating policy, the FFB Fund will not invest more than 5% of
its assets in foreign securities and American Depositary Receipts.
The characteristics of each investment policy and the associated
risks are described in the Prospectus and Statement of Additional
Information of 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
The FFB Lexicon Fund and the Evergreen Fund 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 federal law. The FFB Fund is a series of The
FFB Lexicon Fund.
CAPITALIZATION
The beneficial interests in the Evergreen Fund are represented by
an unlimited number of transferable shares of beneficial interest with a
$.001 par value per share. The beneficial interests in the FFB Fund are
represented by an unlimited number of transferable shares of beneficial
interest with no 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 in the case of the FFB Fund, each series of
The FFB Lexicon Fund, 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 The FFB Lexicon
-25-<PAGE>
Fund's Trustees or Evergreen Fund'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, in the case of the FFB Fund, which is a series of The FFB Lexicon
Fund, 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 circumstances in which a disclaimer is
inoperative and the series or the trust 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 the Evergreen Fund nor The FFB Lexicon Fund, on behalf of
the FFB Fund or any of its 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% 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 The FFB Lexicon Fund fail or refuse to
call a meeting as required by its Declaration of Trust for a period of
30 days or if the Trustees of the Evergreen Fund fail or refuse to call
a meeting as required by its By-laws after a request in writing by
shareholders holding an aggregate of at least 10% of the shares
outstanding, then shareholders holding said 10% may call and give notice
of such meeting. The Evergreen Fund and The FFB Lexicon Fund 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
-26-<PAGE>
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 the Evergreen Fund 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
By-Laws of the Evergreen Fund provide that present and former Trustees
or officers are generally entitled to indemnification against
liabilities and expenses with respect to claims related to their
position with the Fund unless, in the case of any liability to the Fund
or its shareholders, it shall have been determined that such Trustee or
officer is liable by reason of his or her willful misfeasance, bad
faith, gross negligence or reckless disregard of his or her duties
involved in the conduct of his or her office.
The Declaration of Trust of The FFB Lexicon Fund 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 The FFB
Lexicon Fund, 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 The FFB Lexicon Fund, or, in the event of settlement,
unless there has been a determination that such Trustee or officer has
not 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
-27-<PAGE>
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 Lexicon Fund
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 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 Evergreen Asset instead of First
Fidelity and the length of time each Agreement is in effect. A
description of the Interim Advisory Agreement pursuant to which
Evergreen Asset would become the investment adviser to the FFB Fund, as
well as the services to be provided by Evergreen Asset 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 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
October 18, 1991. As used herein, the Master Advisory Contract is
referred to as the FFB Fund's "Existing Advisory Agreement." At a
meeting of the Board of Trustees of The FFB Lexicon Fund held on August
7, 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 Lexicon Fund, on behalf of the
FFB Fund and subject to shareholder approval of the Interim Advisory
Agreement, to enter into the Interim Advisory Agreement with Evergreen
Asset 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 most
recently approved by shareholders of the Fund on February 23, 1993. The
Existing Advisory Agreement was last approved by the Trustees, including
-28-<PAGE>
a majority of the Independent Trustees, on August 7, 1995.
COMPARISON OF THE INTERIM ADVISORY AGREEMENT AND THE EXISTING ADVISORY
AGREEMENT
Advisory Services. The management and advisory services to be
provided by Evergreen Asset 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 Lexicon Fund's officers
and the Trustees, (iii) handling general 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 Lexicon Fund's filings with the SEC.
SEI currently acts as administrator of the FFB Fund. SEI has its
offices at 680 East Swedesford Road, Wayne, Pennsylvania 19087. If the
Interim Advisory Agreement is approved by shareholders of the FFB Fund,
SEI 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.Administrator. "
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.Administrator."
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
-29-<PAGE>
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 Lexicon Fund; 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 protect or purport to protect First Fidelity against the
liability to The FFB Lexicon Fund 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 Evergreen Asset's liability.
Term. If approved by the shareholders of the FFB Fund, the Interim
Advisory Agreement between the FFB Fund and Evergreen Asset 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
-30-<PAGE>
outstanding voting securities of the FFB Fund (as defined in the 1940
Act) or by a vote of a majority of The FFB Lexicon Fund's entire Board
of Trustees on 60 days' written notice to Evergreen Asset or by
Evergreen Asset on 60 days' written notice to The FFB Lexicon Fund.
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 and in Pennsylvania, Maryland and New
York. 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.
For the fiscal year ended August 31, 1995, First Fidelity received
an aggregate of $ $764,222 in management fees which is equal to an
annual fee of $0. % 0.55% of the FFB Fund's average daily net assets.
Absent voluntary waivers, First Fidelity, for such period, would have
received $ $1,034,736 in management fees (0. %(0.75% of the FFB Fund's
average daily net assets). First Fidelity also acts as custodian for
the FFB Fund for a fee included in the management fee. First Fidelity
will continue to act as the FFB Fund's custodian during the term of the
Interim Advisory Agreement.
The table below shows: (a) total brokerage commissions paid during
the fiscal year ended August 31, 1995; (b) the amount of brokerage
commissions, if any, paid to SEI ESI Securities Company ("ESI"), which
is an "Affiliated Broker" of the FFB Fund as such term is defined in the
1940 Act, (by virtue of its being an affiliate of SEI Financial and
serving as the FFB Fund's administrator) First Fidelity) during that
fiscal year; (c) the percentage that those payments to SEI ESI represent
of aggregate brokerage commissions paid; and (d) the percentage of the
aggregate dollar amount of transactions involving the payment of
commissions effected through SEI ESI.
Percentage Percentage
Commissions Paid To of Aggregate of Dollar
Total SEI ESI Commissions Amount
$ 493,645 $445 0.09% 0.00%
Evergreen Asset. For information about Evergreen Asset, Lieber &
Company, FUNB and First Union, see "Summary-Investment Advisers, Sub-
Adviser and Administrators.Administrator." The name, address and
principal occupation of the principal executive officers and directors
of Evergreen Asset are set forth in Appendix A to this Prospectus/Proxy
Statement.
During the term of the Interim Advisory Agreement, Evergreen Asset
will receive compensation for managing the FFB Fund at the same
effective annual rate ( %)(0.55%) as received by First Fidelity,
pursuant to the Existing Advisory Agreement (net of any waivers).
Evergreen Asset 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 1.00% of the Evergreen Fund's average daily net
assets. For the fiscal year ended December 31, 1994, Evergreen Asset,
received $684,891 in management fees. See "Summary-Investment Advisers,
Sub-Adviser and Administrators. Administrator."
As more fully described in the Statement of Additional Information
of the Evergreen Fund, which is incorporated by reference into this
Prospectus/Proxy Statement, the funds in the Evergreen family of mutual
funds including the Evergreen Fund advised by Evergreen Asset have
entered into an agreement with Lieber & Company authorizing Lieber &
Company to retain compensation for brokerage services. See "Summary-
Investment Advisers, Sub-Adviser and Administrators.Administrator." It
is contemplated that Lieber & Company, a member of the New York and
American Stock Exchanges will, to the extent practicable, provide
brokerage services to the funds advised by Evergreen Asset with respect
to substantially all securities transactions effected on the New York
and American Stock Exchanges. See "Allocation of Brokerage" in the
Evergreen Fund's Statement of Additional Information for information
regarding total brokerage commissions paid by the Evergreen Fund and the
amount and percentage thereof paid to Lieber & Company.
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
-32- <PAGE>
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 December 30, 1994, 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 Copies
of the Prospectus and Statement of Additional Information and the Fund's
Annual Report dated August 31, 1994 and Semi-Annual Report dated
February 28, 1995 are available upon request and without charge by
writing to the FFB Fund at 680 Swedesford Road, Wayne, Pennsylvania
19087 or by calling toll-free 1-800-833-8974.
The Evergreen Fund and The FFB Lexicon Fund 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 The FFB Lexicon Fund
to be used at the Special Meeting of Shareholders to be held at 10: 2:00
a.m. p.m. November 13 21, 1995, at the offices of the FFB Fund, 680
East Swedesford Road, Wayne, Pennsylvania 19087 First Fidelity Bank,
N.A., 123 South Broad Street, 5th Floor, Philadelphia, Pennsylvania
19109 and at any adjournments thereof. This Prospectus/Proxy Statement,
along with a Notice of the Meeting and a proxy card, is are first being
mailed to shareholders on or about September 28 October 2, 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
Plan, FOR the Interim Advisory Agreement and FOR any other matters
deemed appropriate. Proxies that reflect abstentions and "broker
non-votes" (i.e., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or the
-33-<PAGE>
persons entitled to vote or (ii) the broker or nominee does not have
discretionary voting power on a particular matter) will be counted as
shares that are present and entitled to vote for purposes of determining
the presence of a quorum, but will have the effect of being counted as
votes against the Plan and the Interim Advisory Agreement. A proxy may
be revoked at any time on or before the Meeting by written notice to the
Secretary of The FFB Lexicon Fund, 680 East Swedesford Road, Wayne,
Pennsylvania 19087. Unless revoked, all valid proxies will be voted in
accordance with the specifications thereon or, in the absence of such
specifications, FOR approval of the Plan and the Reorganization
contemplated thereby and FOR approval of the Interim Advisory Agreement.
Approval of the Plan will require the affirmative vote of 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 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 The FFB Lexicon
Fund (who will not be paid for their solicitation activities).
Shareholder Communications Corp. ("SCC") 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 SCC 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. SCC has received an opinion of
Dechert Price & Rhoads that addresses the validity, under the applicable
law of the Commonwealth of Massachusetts, of a proxy given orally. The
opinion given by Dechert Price & Rhoads 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 SCC
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 SCC by First Fidelity, then the SCC representative will
explain the process, read the proposals listed on the proxy card and ask
for your instructions on each proposal. The SCC representative,
-34- <PAGE>
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 this
Prospectus/Proxy Statement. Within 72 hours, SCC will send you a letter
or mailgram to confirm your vote and asking you to call SCC 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
Plan are not received by November 13 21, 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 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 Plan will
not be entitled under either Massachusetts law or the Declaration of
Trust of The FFB Lexicon Fund 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.
The FFB Lexicon Fund does not hold annual shareholder meetings. If
the Reorganization Plan 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 The FFB Lexicon Fund at the address set forth on the
cover of this Prospectus/Proxy Statement, 680 East Swedesford Road,
Wayne, Pennsylvania 19087, such that they will be received by The FFB
Lexicon Fund 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
-35- <PAGE>
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 periods indicated
therein have been incorporated by reference into this Prospectus/Proxy
Statement in reliance on the report of Ernst & Young LLP, independent
auditors for the Evergreen Fund, given on the authority of such firm as
experts in accounting and auditing.
The financial statements of the FFB Fund as of August 31, 1994 and
the financial highlights have been incorporated by reference into this
Prospectus/Proxy Statement and have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with
respect thereto, and included herein in reliance upon the authority of
said firm as experts in giving said report.
The audited financial statements of the Evergreen Fund as of December
31, 1994 and the financial highlights for the periods indicated therein
have been incorporated by reference into this Prospectus/Proxy Statement
in reliance on the report of Ernst & Young LLP, independent auditors for
the Evergreen Fund, given on the authority of such firm as experts in
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 The FFB Lexicon Fund 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 THE FFB LEXICON FUND, 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 October 2, 1995
-36- <PAGE>
-37- <PAGE>
APPENDIX A
The name, address and principal occupation of the directors and
principal executive officers of Evergreen Asset Management Corp. are as
follows:
Principal Occupation
Name and Address During Past 5 Years
Directors:
Richard K. Wagoner Executive Vice
First Union National Bank of President and General
North Carolina Fund Officer of First
One First Union Center Union National Bank of
Charlotte, NC 28288 North Carolina
Barbara I. Colvin Senior Vice President
First Union National Bank of of First Union National
North Carolina Bank of North Carolina
One First Union Center
Charlotte, NC 28288
Principal Executive
Officers:
Chairman and Co-Chief
Steven A. Lieber Executive Officer
Nola Maddox Falcone President and Co-Chief
Executive Officer
Theodore J. Israel, Jr. Executive Vice
President
Joseph J. McBrien Senior Vice President
and General Counsel
George R. Gaspari Senior Vice President
and Chief Financial
Officer
Unless otherwise indicated, the address of each person listed above
is Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase,
New York 10577.<PAGE>
VOTE THIS PROXY CARD TODAY
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
................................................................
THE FFB LEXICON FUND - CAPITAL APPRECIATION EQUITY FUND
SPECIAL MEETING OF SHAREHOLDERS -- NOVEMBER 13 21, 1995
The undersigned hereby appoints, and Joseph Ready, Ben L. Jones and
Mark Sipe 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
Capital Appreciation Equity Fund (the "Fund"), which the undersigned is
entitled to vote at a Meeting of Shareholders of the Fund to be held at
680 East Swedesford Road, Wayne, 123 South Broad Street, 5th Floor,
Philadelphia, Pennsylvania 19087 19109 on November 13 21, 1995, at 10:
2:00 a.m p.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 Growth and Income Fund.
[ ] YES [ ] NO [ ] ABSTAIN
2. To approve the proposed Interim Investment Advisory Agreement with
Evergreen Asset Management Corp.
[ ] YES [ ] NO [ ] ABSTAIN
3. To consider and vote upon such other matters as 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. said meeting or any
adjournments thereof. [ ] YES [ ] NO [ ] ABSTAIN
These items are discussed in greater detail in the attached
Prospectus/Proxy Statement. The Board of Trustees of The FFB Lexicon
Fund has fixed the close of business on September 8, 1995, as the record
date for the determination of shareholders entitled to notice of and to
vote at the meeting 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 OF THE PROSPECTUS/PROXY STATEMENT.
Richard W. Grant
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.
-2- <PAGE>
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 19th day of September, 1995, by and between Evergreen Growth and
Income Fund, a Massachusetts business trust (the "Acquiring Fund"), with
its principal place of business at 2500 Westchester Avenue, Purchase, New
York 10577, and The FFB Lexicon Fund (the "FFB Trust"), a Massachusetts
business trust, with respect to its Capital Appreciation Equity Fund
series, with its principal place of business at 2 Oliver Street, Boston,
Massachusetts 02109 (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)(D) 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, $.001 par value per share, 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 either are or constitute
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 Acquiring Fund 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 are
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
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 substantially all of 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 multiplying the shares outstanding of each class
of the Selling Fund by the ratio computed by dividing the net asset value
per share of each such class of the Selling Fund by the net asset value per
share of the Acquiring Fund Shares 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 SEI Financial Management Corporation, 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
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 paragraph 5.7.
1.6 Transfer Taxes. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the
Selling Fund shares on the books of the Selling Fund as of that time shall,
as a condition of such issuance and transfer, be paid by the person to whom
such Acquiring Fund Shares are to be issued and transferred.
1.7 Reporting Responsibility. Any reporting responsibility of the Selling
Fund is and shall remain the responsibility of the Selling Fund up to and
including the Closing Date and such later date on which the Selling Fund is
terminated.
1.8 Termination. The Selling Fund shall be terminated promptly following
the Closing Date and the making of all distributions pursuant to paragraph
1.4.
ARTICLE II
VALUATION
2.1 Valuation of Assets. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on the New York Stock Exchange on the
Closing Date (such time and date being hereinafter called the "Valuation
Date"), using the valuation procedures set forth in the Acquiring Fund'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 per share of the Acquiring
Fund Shares shall be the net asset value per share computed as of the close
of business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund'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 multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by
dividing the net asset value per share of the Selling Fund attributable to
each of its classes by the net asset value per share of the respective
classes of 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.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 Closing Date. The Closing (the "Closing") shall take place on January
12 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. Supervised Service Company and SEI
Financial Management Corporation, as transfer agents for the Selling Fund
shall each 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 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 August 31, 1994 have
been audited by Arthur Andersen 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 August 31, 1994 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 o 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 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 Massachusetts business trust duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts.;
(b) The Acquiring Fund is registered as an investment company classified as
a management company of the open-end type and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect;
(c) The current 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 the Acquiring Fund'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 Ernst & Young 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 of 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 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.
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 Acquiring Fund'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 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 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 Acquiring Fund'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 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 Acquiring Fund'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 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
Bancorporation has been 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 Morgan, Lewis & Bockius 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
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 Acquiring Fund. Such opinion
shall contain such other assumptions and limitations as shall be in the
opinion of Morgan, Lewis & Bockius appropriate to render the opinions
expressed therein and shall indicate, with respect to matters of
Massachusetts law, that as Morgan, Lewis & Bockius are not admitted to the
bar of Massachusetts, such opinions are based either upon the review of
published statutes, case cases 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.
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:
(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 Arthur Andersen 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 Acquiring
Fund'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 Arthur Andersen LLP in
writing by the Acquiring Fund); and (v) on the basis of limited procedures
agreed upon by the Aquiring 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 Arthur
Andersen 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 Ernst & Young 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 Acquiring Fund 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
Arthur Andersen 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.
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 Notwithstanding 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 contempleted contemplated by this Agreement incurred by
the Acquiring Fund will be borne by FUNB and all expenses of the
transactions contempleted contemplated 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 this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall 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 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.
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 Growth and Income Fund
2500 Westchester Avenue
Purchase, New York 10577
Attention: Joseph J. McBrien, Esq.
or to the Selling Fund
The FFB Lexicon Fund
c/o SEI Financial Management Corporation
680 East Swedesford Road
Wayne, Pennsylvania 19087-1658
Attention: David G. Lee
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 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 Acquiring Fund, 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 Acquiring Fund. 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 Acquiring Fund and signed by authorized
officers of the FFB Trust and the Acquiring Fund, 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 Acquiring Fund
as provided in their Declarations of Trust.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and sealed
this Agreement, all as of the date first written above.
EVERGREEN GROWTH AND INCOME FUND
By:/s/ John J. Pileggi
Name: John J. Pileggi
Title: President
(Seal)
THE FFB LEXICON FUND
on behalf of Capital Appreciation Equity Fund
By:/s/ David G. Lee
Name: David G. Lee
Title: President
Exhibit B
INTERIM INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of December, 1995, by and between The
FFB Lexicon Fund, a Massachusetts business trust (the "Trust"), and
Evergreen Asset Management Corp. (the "Adviser").
WHEREAS, the Trust is an open-end, diversified management
investment company registered under the Investment Company Act of 1940,
as amended, consisting of several series of shares, each having its own
investment policies; and
WHEREAS, the Trust has retained SEI Financial Management
Corporation (the "Administrator") to provide administration of the
Trust's operations, subject to the control of the Board of Trustees;
WHEREAS, the Trust desires to retain the Adviser to render
investment management services with respect to the portfolios listed on
Schedule A hereto and such other portfolios as the Trust and the Adviser
may agree upon (the "Funds"), and the Adviser is willing to render such
services:
NOW, THEREFORE, in consideration of mutual covenants herein
contained, the parties hereto agree as follows:
1. Duties of Adviser. The Trust employs the Adviser to
manage the investment and reinvestment of the assets,
and to continuously review, supervise, and administer
the investment program of the Funds, to determine in its
discretion the securities to be purchased or sold, to
provide the Administrator and the Trust with records
concerning the Adviser's activities which the Trust is
required to maintain, and to render regular reports to
the Administrator and to the Trust's Officers and
Trustees concerning the Adviser's discharge of the
foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities subject
to the control of the Board of Trustees of the Trust and in
compliance with such policies as the Trustees may from time to time
establish, and in compliance with the objectives, policies, and
limitations for each such Fund set forth in the Trust's prospectus
and statement of additional information as amended from time to
time, and applicable laws and regulations.
The Adviser accepts such employment and agrees, at its own expense,
to render the services and to provide the office space, furnishings
and equipment and the personnel required by it to perform the
services on the terms and for the compensation provided herein.
2. Fund Transactions. The Adviser is authorized to select
the brokers or dealers that will execute the purchases
and sales of portfolio securities for the Funds and is
directed to use its best efforts to obtain the best net
results as described in the Trust's prospectus and
statement of additional information from time to time.
The Adviser will promptly communicate to the
Administrator and to the officers and the Trustees of
the Trust such information relating to portfolio
transactions as they may reasonably request.
It is understood that the Adviser will not be deemed to
have acted unlawfully, or to have breached a fiduciary
duty to the Trust or be in breach of any obligation
owing to the Trust under this Agreement, or otherwise,
solely by reason of its having directed a securities
transaction on behalf of the Trust to a broker-dealer in
compliance with the provisions of Section 28(e) of the
Securities Exchange Act of 1934.
3. Compensation of the Adviser. For the services to be
rendered by the Adviser as provided in Sections 1 and 2
of this Agreement as well as Custody Services, the Trust
shall pay to the Adviser compensation at the rate
specified in the Schedule(s) which are attached hereto
and made a part of this Agreement. Such compensation
shall be paid to the Adviser at the end of each month,
and calculated by applying a daily rate, based on the
annual percentage rates as specified in the attached
Schedule(s), to the assets. The fee shall be based on
the average daily net assets for the month involved
(less any assets of such Funds held in non-interest
bearing special deposits with a Federal Reserve Bank).
All rights of compensation under this Agreement for
services performed as of the termination date shall
survive the termination of this Agreement.
4. Excess Expenses. If the expenses for any Fund for any
fiscal year (including fees and other amounts payable to
the Adviser, but excluding interest, taxes, brokerage
costs, litigation, and other extraordinary costs) as
calculated every business day would exceed the expense
limitations imposed on investment companies by any
applicable statute or regulatory authority of any
jurisdiction in which Shares are qualified for offer and
sale, the Adviser shall bear such excess cost.
However, the Adviser will not bear expenses of the Trust
or any Fund which would result in the Trust's inability
to qualify as a regulated investment company under
provisions of the Internal Revenue Code. Payment of
expenses by the Adviser pursuant to this Section 4 shall
be settled on a monthly basis (subject to fiscal year
end reconciliation) by a reduction in the fee payable to
the Adviser for such month pursuant to Section 3 and, if
such reduction shall be insufficient to offset such
expenses, by reimbursing the Trust.
5. Reports. The Trust and the Adviser agree to furnish to
each other, if applicable, current prospectuses, proxy
statements, reports to shareholders, certified copies of
their financial statements, and such other information
with regard to their affairs as each may reasonably
request.
6. Status of Adviser. The services of the Adviser to the
Trust are not to be deemed exclusive, and the Adviser
shall be free to render similar services to others so
long as its services to the Trust are not impaired
thereby. The Adviser shall be deemed to be an
independent contractor and shall, unless otherwise
expressly provided or authorized, have no authority to
act for or represent the Trust in any way or otherwise
be deemed an agent of the Trust.
7. Certain Records. Any records required to be maintained
and preserved pursuant to the provisions of Rule 31a-1
and Rule 31a-2 promulgated under the Investment Company
Act of 1940 (the "1940 Act") which are prepared or
maintained by the Adviser on behalf of the Trust are the
property of the Trust and will be surrendered promptly
to the Trust on request.
8. Limitation of Liability Adviser. The duties of the
Adviser shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be
asserted against the Adviser hereunder. The Adviser
shall not be liable for any error of judgment or mistake
of law or for any loss arising out of any investment or
for any act or omission in carrying out its duties
hereunder, except a loss resulting from willful
misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder,
except as may otherwise be provided under provisions of
applicable state law or Federal securities law which
cannot be waived or modified hereby. (As used in this
Paragraph 8, the term "Adviser" shall include directors,
officers, employees and other corporate agents of the
Adviser as well as that corporation itself).
So long as the Adviser acts in good faith and with due
diligence and without gross negligence, the Trust
assumes full responsibility and shall indemnify the
Adviser and hold it harmless from and against any and
all actions, suits and claims, whether groundless or
otherwise, and from and against any and all losses,
damages, costs, charges, reasonable counsel fees and
disbursements, payments, expenses and liabilities
(including reasonable investigation expenses) arising
directly or indirectly out of any Advisory Service
rendered to the Trust hereunder except to the extent
such indemnification would be prohibited by Federal
securities laws. The indemnity and defense provisions
set forth herein shall indefinitely survive the
termination of this Agreement.
The rights hereunder shall include the right to
reasonable advances of defense expenses in the event of
any pending or threatened litigation with respect to
which indemnification hereunder may ultimately be
merited. In order that the indemnification provision
contained herein shall apply, however, it is understood
that if in any case the Trust may be asked to indemnify
or hold the Adviser harmless, the Trust shall be fully
and prompted advised of all pertinent facts concerning
the situation in question, and it is further understood
that the Adviser will use all reasonable care to
identify and notify the Trust promptly concerning any
situation which presents or appears likely to present
the probability of such a claim for indemnification
against the Trust, but failure to do so in good faith
shall not effect the rights hereunder.
The Adviser may apply to the Trust at any time for
instructions and may consult counsel for the Trust or
its own counsel and with accountants and other experts
with respect to any matter arising in connection with
the Adviser's duties, and the Adviser shall not be
liable or accountable for any action taken or omitted by
it in good faith in accordance with such instruction or
with the opinion of such counsel, accountants or other
experts.
Also, the Adviser shall be protected in acting upon any
document which it reasonably believes to be genuine and
to have been signed or presented by the proper person or
persons. Nor shall the Adviser be held to have notice of
any change of authority of any officers, employee or
agent of the Trust until receipt of written notice
thereof from the Trust.
9. Permissible Interests. Trustees, agents, and
shareholders of the Trust are or may be interested in
the Adviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise;
directors, partners, officers, agents, and shareholders
of the Adviser are or may be interested in the Trust as
Trustees, shareholders or otherwise; and the Adviser (or
any successor) is or may be interested in the Trust as a
shareholder or otherwise. In addition, brokerage
transactions for the Trust may be effected through
affiliates of the Adviser if approved by the Board of
Trustees, subject to the rules and regulations of the
Securities and Exchange Commission ("SEC").
10. Duration and Termination. This Agreement, unless sooner
terminated as provided herein, shall remain in effect
until the earlier of the Closing Date defined in the
Agreements and Plans of Reorganization dated as of
September 19, 1995 approved by shareholders of the
Funds, or two years from date of execution, and
thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least
annually (a) by the vote of a majority of those Trustees
of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at
a meeting called for the purpose of voting on such
approval, and (b) by the Trustees of the Trust or by
vote of a majority of the outstanding voting securities
of each Fund; provided, however, that if the
shareholders of any Fund fail to approve the Agreement
as provided herein, the Adviser may continue to serve
hereunder in the manner and to the extent permitted by
the 1940 Act and rules and regulations thereunder. The
foregoing requirement that continuance of this Agreement
be "specifically approved at least annually" shall be
construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder.
This Agreement may be terminated as to any Fund at any
time, without the payment of any penalty by vote of a
majority of the Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the
Fund on 60 days written notice to the Adviser, or by the
Adviser at any time without the payment of any penalty,
on 90 days written notice to the Trust. This Agreement
will automatically and immediately terminate in the
event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party at any
office of such party.
As used in this Section 10, the terms "assignment",
"interested persons", and a "vote of a majority of the
outstanding voting securities" shall have the respective
meanings set forth in the 1940 Act and the rules and
regulations thereunder; subject to such exemptions as
may be granted by the SEC under said Act.
11. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if
sent by registered or certified mail, postage prepaid,
addressed by the party giving notice to the other party
at the last address furnished by the other party to the
party giving notice: if to the Trust, the Trust
Administrator c/o the Trust Administrator, SEI Financial
Management Corporation, at 680 East Swedesford Road,
Wayne, PA and if to the Adviser at 2500 Westchester
Avenue, Purchase, New York 10577, to the attention of
Steven A. Lieber, Chairman.
12. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute,
rule or otherwise, the remainder of this Agreement shall
not be affected thereby.
13. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of
Massachusetts and the applicable provisions of the 1940
Act. To the extent that the applicable laws of the
Commonwealth of Massachusetts, or any of the provisions
herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees, and are not binding upon any of the Trustees,
officers, or shareholders of the Trust individually but binding only
upon the assets and property of the Trust.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the day and year first written above.
THE FFB LEXICON FUND
By: _________________________
Attest: _____________________
EVERGREEN ASSET MANAGEMENT
CORP.
By: _________________________
Attest: _____________________
<PAGE>
SCHEDULE A
to the
Interim Investment Advisory Agreement
between
The FFB Lexicon Fund
and
Evergreen Asset Management Corp.
Cash Management Fund
Capital Appreciation Equity Fund
Small Company Growth Fund<PAGE>
SCHEDULE B
to the
Interim Investment Advisory Agreement
between
The FFB Lexicon Fund
and
Evergreen Asset Management Corp.
Pursuant to Article 3, the Trust shall pay the Adviser compensation at
an annual rate as follows:
Fund Fee (in basis points)
=================================================================
Cash Management Fund 40
Capital Appreciation Equity Fund 75
Small Company Growth Fund 75
